author: RANDALL, Judge.

text:
    SEMLER CONSTRUCTION, INC., Appellant, v. CITY OF HANOVER, Respondent.
    No. C6-02-2151.
    Court of Appeals of Minnesota.
    Aug. 19, 2003.

      Eric J. Magnuson, Peter Gray, Rider, Bennett, Egan & Arundel, L.L.P., Minneapolis, MN; and David J. Lenhardt, Patrick W. Michenfelder, Gries & Lenhardt, P.L.L.P., St. Michael, MN, for appellant.
    George C. Hoff, Hoff, Barry & Kuderer, P.A., Eden Prairie, MN; and Susan M. Sager, St. Paul, MN, for respondent City of Hanover.
    Joseph G. Springer, Gregory W. Mun-son, Fredrikson & Byron, P.A., Minneapolis, MN; and Miriam Elizabeth Stone, Roseville, MN, for amicus curiae Builders Association of the Twin Cities.
    Considered and decided by KALITOWSKI, Presiding Judge, RANDALL, Judge, and WILLIS, Judge.
   OPINION

RANDALL, Judge.

This is an appeal from a district court decision upholding the city’s denial of final plat approval for a subdivision that had been given preliminary approval. The district court reasoned that a one-year approval period had run and- found that an interim moratorium applied to Semler. The district court granted summary judgment for the city on Semler’s damage claim.

Semler contends the denial was erroneous as a matter of law because (a) it had been given approval of the preliminary plat for an eight-year period; (b) the interim moratorium did not apply; and (c) there are genuine issues of material fact precluding summary judgment on the issue of damages. We reverse and remand.

FACTS

In spring 1999, appellant Semler Construction, a development company, began the process of obtaining approval from respondent City of Hanover for a residential development project known as Crow River Heights East. Its co-developer, Gold Nugget Development, Inc. (not a party to this lawsuit), likewise sought approval for the development of an adjacent property, known as Crow River Heights- West. Through these developments, 462 or 463 residential units would be built.

According to the then-city administrator, there were numerous city council and planning commission meetings concerning the project. At these meetings, concerns were raised by the city and some neighbors as to whether all the lots would be final platted and marketed in a short period of time, and whether the infrastructure (sewer, water, roads, etc.) could accommodate such a large increase in the number of houses in the city. Thus, according to a May 3, 2000, report issued by the city planner, the project was revised to address these concerns and provided for phased development over a seven-year period, with construction of approximately 70 homes per year. Semler went along with the city’s suggestion as to phasing in the 400 plus homes over a period of years.

Shortly thereafter, at its. May 16, 2000, regularly.Scheduled meeting, the city council adopted resolution 05-00-05 and conditionally approved the preliminary plat for the development projects. On July 18, 2000, in ordinance 00-04, the city council rezoned the land that was to be developed from RA-residence-agriculture to RlA-sin-gle-family residence with PD-planned-development overlay. This rezoning conformed to the city’s comprehensive plan, thus allowing the development project to proceed.

On October 17, 2000, the city council adopted resolution 13-00-10, authorizing the city administrator and mayor to execute, in relevant part, a master subdivision-agreement and a subdivision agreement for the first phase of Crow River Heights East with Semler and Gold Nugget for the first phase of the project, consisting of 47 lots. Under the resolution, however, the city noted that it was nonetheless “reserving all rights it has under law to accept, reject, or modify any plat presented to them.” Pursuant to this authority, on November 1, 2000, Semler, Gold Nugget, and the city, as represented by the mayor and city administrator, entered into the master subdivision agreement. It provided, in relevant part, that the preliminary plat would be valid for an eight-year period:

The preliminary plat shall be valid for a period of eight years. If any portion of Crow River Heights East or West shall not be finally platted within eight years, the preliminary plat approval as to the property not finally platted shall terminate. Extensions may be granted at the option and in the discretion of the City. This paragraph shall be deemed an extension in accordance with § 5.02, subdivision 3b, of the City of Hanover subdivision ordinance * * ⅜.

Also on November 1, 2000, the city and Semler entered into the subdivision agreement for the final plat of the first phase of the project, encompassing 47 lots, known as the Crow River Heights East First Addition. On November 21, 2000, the city council adopted resolution 12-00-11, approving the final development plan for the overall Crow River Heights project. It also adopted resolution 13-00-11, approving the final plat of the Crow River Heights East First Addition.

In city elections held in November 2000, a new council member, who had opposed the Crow River Heights project as a private citizen, and a new mayor were elected.

On January 2, 2001, the newly constituted city council held its first meeting of the year. In this meeting, the city council approved interim ordinance 01-01, which established a 12-month moratorium on residential development within the city, under Minn.Stat. § 462.355, subd. 4. On December 18, 2001, the city council adopted interim ordinance 2002-01, which extended the moratorium for an additional 18 months but exempted the Crow River Heights First Addition, which had already received final plat approval.

On January 30, 2002, Semler applied to the city for final plat approval of the next phase of the Crow River Heights project, the Crow River Heights East Second Addition. Semler asserted that the final plat for the Crow River Heights East Second Addition complied with requirements of the approved preliminary plat, the master subdivision agreement, and the approved final development plan.

On March 19, 2002, however, the city council adopted resolution 06-03-02, which denied final plat approval of the Crow River Heights East Second Addition. The stated reasons for the denial were as follows:

The City of Hanover finds the final plat application for Crow River Heights East Second Addition was filed more than one year from the date of preliminary plat approval as provided in the Minnesota Statutes 462.358; and
The final plat application is subject to the restrictions and limitations set forth [in] the Moratorium Ordinance, and is not subject to the exemptions provided in Section 4 of the Moratorium Ordinance.

Semler sued the city in early May 2002 on a variety of claims connected with the denial of its application for final plat approval. It also challenged an assessment it had been charged on the entire project, and it sought monetary damages for the city’s action in stopping its construction activities.

The city removed the case to federal district court, which then remanded the matter back to state court after Semler voluntarily dismissed its federal-law claims. Upon remand, the city moved for summary judgment on all of Semler’s remaining claims, and Semler filed a cross-motion for its claim related to the denial of final plat approval. The district court denied Semler’s motion and granted the city’s motion for summary judgment. This appeal followed.

ISSUES

I. May a city deny final plat approval for development project based on the developer’s failure to seek such approval within a year of preliminary approval under Minn.Stat. § 462.358 (2002) and based on an interim moratorium under Minn. Stat. § 462.355, subd. 4 (2002), where the preliminary plat approval had been given for an eight-year period prior to the enactment of the interim moratorium?

II. Do genuine issues of material fact exist as to Semler’s claims for monetary damages for violation of the city’s duty of good faith and fair dealing?

ANALYSIS

In reviewing summary judgment, the appellate court must determine whether there are genuine issues of material fact and whether the district court erred as a matter of law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990). The interpretation of ordinances is a question of law reviewable de novo. Frank’s Nursery Sales, Inc. v. City of Roseville, 295 N.W.2d 604, 608 (Minn.1980).

A challenge to a city council’s zoning decision is initially reviewed by the district court. Minn.Stat. § 462.361, subd. 1 (2002); City of Hibbing v. Baratto, 620 N.W.2d 58, 59-60 (Minn.App.2000). But the appellate court conducts an independent review of the decision by the city council, without deferring to the district court. Chase v. City of Minneapolis, 401 N.W.2d 408, 412 (Minn.App.1987).

I.

At issue is whether the city proceeded legally when it denied Semler’s application for final plat approval. Resolution of the issue requires an analysis of the statutory scheme for municipal planning along with the city ordinances, and, as well, the relevant statutes.

Under the municipal-planning statutes, municipalities may adopt a comprehensive municipal plan, Minn.Stat. § 462.3535, subd. 1 (2002); zoning ordinances, Minn. Stat. § 462.357, subd. 1 (2002); and subdivision regulations, Minn.Stat. § 462.358, subd. la (2002). Specifically, a municipality may adopt regulations governing the development of subdivisions. Minn.Stat. § 462.358 (2002). These regulations may be comprehensive, addressing “without limitation” such areas as size, location, roads, water supply, and conservation. Minn.Stat. § 462.358, subd. 2a. The municipality may condition approval of the subdivision on such matters as “construction and installation of sewers, streets, electric, gas, drainage, and water facilities.” Id.

The regulations may also require that the proposed subdivision be platted. MinmStat. § 462.358, subd. 3a. Platting means the preparation of a map to be filed of record, “containing all elements and requirements set forth in applicable local regulations adopted pursuant to section 462.358 and chapter 505.” MinmStat. § 462.352, subd. 13 (2002). Thus, the statutes envision that the plat will contain a comprehensive description of the proposed subdivision.

Finally, the statutory scheme envisions a two-step process for approval of the subdivision plans, involving preliminary and final plat approval. Minn.Stat. § 462.358, subd. 3b. At first glance, “preliminary” approval would seem to imply a mere “introductory or prefatory” stage of the proceedings. The American Heritage Dictionary 1429 (3d ed.1992) (defining preliminary). For example, a preseason game in the National Football League is truly “preliminary.” Such games are mere preparation for the official season and do not count as official games, do not count in the standings, and have no impact on positioning for post-season play. On the other hand, the statutory definition of “preliminary approval,” however, shows that it is intended to be comprehensive and, in fact, is the most important step in obtaining approval of the subdivision. See Minn. Stat. § 462.352, subd. 16. “Preliminary approval” means

official action taken by a municipality on an application to create a subdivision which establishes the rights and obligations set forth in section 462.358 and the applicable subdivision regulation. In accordance with section 462.358, and unless otherwise specified in the applicable subdivision regulation, preliminary approval may be granted only following the review and approval of a preliminary plat or other map or drawing establishing without limitation the number, layout, and location of lots, tracts, blocks, and parcels to be created, location of streets, roads, utilities and facilities, park and drainage facilities, and lands to be dedicated for public use.

Id. (emphasis added).

Amicus curiae Builders Association of the Twin Cities explained the importance of the preliminary plat:

The significance of receiving preliminary plat approval in the real estate development cannot be overstated. The term “preliminary” approval is misleading because preliminary plat approval establishes the nature, design and scope of a development project and triggers significant activity by both developers and cities. Upon receiving preliminary plat approval, development agreements are signed, grading and infrastructure installation begins, and property mark- ' ing may begin. Those activities are undertaken with the expectation that the entire area encompassed by the preliminary plat will be final platted and developed over time and in accordance with guidelines established in the preliminary plat.

The amicus curiae argument is a correct statement of the legal significance and the importance of preliminary plat approval.

In this case, the city council’s resolution approving the preliminary plat contained extensive findings as to the planned development, including that it was not in conflict with the city’s comprehensive land-use plan, or the intent of the zoning or other city code provisions. The resolution found that the development was feasible, of adequate size, and results in a well-planned system of streets and trails; that it would not excessively burden public facilities and utilities; that it would not have an undue impact on the reasonable enjoyment of neighborhood property; and that it would “substantially enhance the aesthetics and the site and will create a public benefit that is greater than the strict application of the zoning regulations.”

The resolution required Semler’s compliance with numerous conditions and requirements regarding trees, landscaping, architectural designs, sewer, water, drainage, wetland mitigation, and related areas. It also required compliance with park requirements, housing locations, and setbacks, as well as the construction of trails and the creation of homeowner associations to care for common areas. The resolution approving the preliminary plat was comprehensive, extensive, and complete.

As amicus points out, it is of “manifest importance” that the Master Project Agreement and respondent’s resolutions and ordinances work together to implement a public policy of beneficial long-term development. Failing to do so discourages developers from putting their resources into long-range development and land-use planning. This can result in poor utilization of land and insufficient infrastructure.

We now return to the statutory provisions that apply when, as in this case, the developer has obtained preliminary plat approval. After the city grants approval of a preliminary plat, the statute allows the applicant to seek final approval. Minn. Stat. § 462.358, subd. 3b. If the applicant has complied with the conditions and requirements set out in the preliminary approval, the municipality must grant final approval within 60 days. Id. If the municipality fails to act, the application will nonetheless be deemed approved. Id. Thus, the statute places primary emphasis on the preliminary plat approval; once the conditions and requirements therein are satisfied, the plat mechanically receives final approval. See id.

Finally, also of importance in the statutory scheme is the protection provided to the preliminary plat once it is approved. For one year following approval of the preliminary plat, it is exempt from amendments to comprehensive plans or official controls. Id., subd. 3c; see Minn.Stat. § 462.352, subd. 15 (defining official controls as ordinances and regulations affecting zoning, subdivision controls, and codes). Further, the municipality may extend this period of preliminary approval pursuant to its regulations. Minn.Stat. § 462.358, subd. 3c. Also, a new application may not be required if “substantial physical activity and investment has occurred in reasonable reliance on the approved application and the subdivider will suffer substantial financial damage.” Id.

In connection with a subdivision involving planned and staged development, a municipality may by resolution or agreement grant the rights referred to herein for such periods of time longer than two years which it determines to be reasonable and appropriate.

Id. In addition, while the city may place an interim moratorium on development, the moratorium may not apply to development projects that have already received preliminary plat approval. Minn.Stat. § 462.355, subd. 4 (2002).

Applying the law to Semler’s challenge to the city’s denial of its application for final plat approval, Semler’s legal arguments are persuasive. The city based its denial of Semler’s application for final plat approval first on the determination that it “was filed more than one year from the date of preliminary plat approval” as provided in Minn.Stat. § 462.358. Semler argues that because the city extended its approval of the preliminary plat to eight years in the subdivision master agreement, the one-year period does not apply. We agree. In fact, this issue should not even be in dispute.

We first briefly review relevant dates and actions. The city council approved the preliminary plat on May 16, 2000. On October 17, 2000, the city council authorized the city administrator and mayor to execute the master subdivision agreement. Pursuant to this authority, on November 1, 2000, the city administrator and mayor entered into a master subdivision agreement explicitly providing that the “preliminary plat shall be valid for a period of eight years,” and deeming it to be an extension in accordance with the City of Hanover’s subdivision ordinance section 5.02, subdivision 3(b).

The city however, claims this paragraph “does not necessarily” serve to extend the approval period of this preliminary plat to eight years. We will address this argument by examining the relevant statute. A preliminary plat is not subject to any amendments to the comprehensive plan or official control for one year following its approval and a final plat is not subject to such amendments for two years following approval. Minn.Stat. § 462.358, subd. 3c. Pursuant to its regulations, the municipali-. ty may extend this period by agreement with the subdivider. Id. For a subdivision involving planned and staged development, a municipality may by resolution or agreement extend this period longer than two years if it deems it to be reasonable and appropriate. Id. Semler contends that the Crow River Heights project is a textbook example of “planned and staged development,” i.e., a project that contemplates staged development for a period of time extending over several years. Semler is correct.

The city makes several arguments in support of its claim that the extension does not apply. We first review the ordinance under which the extension was granted:

Conditional approval of a preliminary plat shall not constitute approval of the final plat (subdivision plat). Rather it shall be deemed to be an expression of approval to the layout submitted on the preliminary plat, and act as an authorization and guide to proceed with the preparation of the final plat. This approval of the preliminary plat shall be effective for a period of six (6) months, unless an extension is granted by the City Council.

Hanover, Minn., Mun.Code ch. 30, § 5.02, subd. 3(b). The city contends that ordinance 5.02 does not authorize the city council to make an agreement with a sub-divider so as to exempt a preliminary plat from any regulations dealing with either density, lot size, lot layout, dedication, or platting. But Semler does not seek such an exemption. There is no showing that its preliminary plat did not comply with statutory requirements. The city also argues that the language of the ordinance itself expressly provides it is not approval of a final plat but only serves as an “authorization and guide to proceed” with the final plat, giving itself authority to extend approval past the six-month period. It contends that the ordinance does not authorize implementation of MinmStat. § 462.358, subd. 3c. We can only note that the plain language of the ordinance allows allows the city to authorize an extension of the preliminary plat approval, which it did.

Next, the city argues there was no agreement under Minn.Stat. § 462.358, subd. 3c, between the city and Semler setting forth the term of the exemption. The city argues it only authorized the mayor and city administrator to enter into the master subdivision agreement, apparently suggesting that it was not bound by the provision in the master subdivision agreement providing for the eight-year exemption. We do not understand the argument. First, a city has authority to enter into contracts. This statement needs no explanation; it defines itself. “Every contract ⅜ * ⅜ or other written instrument shall be executed on behalf of the city by the mayor and clerk * * * and only pursuant to authority from the council.” Minn. Stat. § 412.201 (2002); see Minn.Stat. § 412.221, subd. 2 (2002) (authorizing council to make contracts).

The extension at issue was specifically authorized by the city. On October 17, 2000, the city council passed resolution 13-00-10 authorizing the city administrator and mayor to enter into the master subdivision agreement. Pursuant to this authority, Semler and the city entered into the master subdivision agreement, binding the city. Paragraph 11 of the agreement explicitly provides that “the preliminary plat shall be valid for a period of eight years.” The city authorized preliminary plat approval to last eight years to allow for the staged development it wanted. The city itself sought the staged development so that its infrastructure would not be overwhelmed by development of the project in a one-year period.

Next, the city cites language in paragraph 8 of the master subdivision agreement, as well as the October 17 authorization to enter the agreement, stating that the city reserved all rights to accept, reject, or modify any plat. We can only state this language does not remotely affect the issue at hand, which is whether the eight-year extension applies. It does.

In conclusion, the city’s denial of the application for final plat approval based on the determination that the application was filed more than a year after the preliminary plat approval is erroneous as a matter of law. The city agreed, pursuant to authority of Minn.Stat. § 462.358, subd. 3c, and ordinance 5.02, subd. 3(b), to extend the preliminary approval period for this planned and staged development to eight years. The city’s denial on the basis of a “one-year window” to get final approval, on these facts, is erroneous. The city is estopped from arguing the one-year approval period as a matter of law.

The city’s second reason for denying Semler’s application for final approval was its determination that its interim moratorium ordinance applied:

The final plat application is subject to the restrictions and limitations set forth [in] the Moratorium Ordinance, and is not subject to the exemptions provided in Section 4 of the moratorium ordinance.

As part of its comprehensive planning, a municipality may enact a temporary moratorium on development. Minn.Stat. § 462.355, subd. 4. If the municipality is conducting studies to consider amending its comprehensive plan or official controls, the council may adopt an interim ordinance “for the purpose of protecting the planning process and the health, safety and welfare of its citizens.” Id. In such an ordinance, the council may adopt a temporary moratorium to “regulate, restrict or prohibit any use, development, or subdivision within the jurisdiction * * * for a period not to exceed one year from the date it is effective, and may be extended for such additional periods” as deemed necessary, not to exceed 18 months. Id. This moratorium cannot, however, apply to preliminary plat approvals given to a subdivision enacted prior to the effective date of the interim ordinance:

No interim ordinance may halt, delay, or impede a subdivision which has been given preliminary approval prior to the effective date of the interim ordinance.

Id. A moratorium is a valid exercise of a municipality’s police powers. Wedemeyer v. City of Minneapolis, 540 N.W.2d 539, 542 (Minn.App.1995).

To resolve this argument, we must address whether the preliminary plat approval had been given prior to the effective date of the moratorium. On May 16, 2000, the city council approved the preliminary plat. On October 17, 2000, the city council authorized the city administrator and may- or to execute the master subdivision agreement. Pursuant to this authority, on November 1, 2000, the master subdivision agreement was entered into, in which the preliminary plat approval was deemed approved for a period of eight years. On January 2, 2001, the city council adopted the moratorium on development for 12 months and on December 18, 2001, it extended the moratorium another 18 months.

The city argues that it properly enacted the interim ordinance and is proceeding under it because it is conducting a study during its pendency. It cites other steps that it has taken in updating the comprehensive plan. It contends that its ordinance is not arbitrary and capricious as it does not exceed the authority of the city and is a proper and legitimate exercise of the city’s police power. We do not know what that argument means. It does not address the issue of whether preliminary plat approval was given before the moratorium was in effect.

Minn.Stat. § 462.355, subd. 4, provides that no moratorium may impede a subdivision that has been given preliminary approval prior to the effective date of the interim ordinance. The preliminary plat had already been approved at the time the moratorium was adopted. The city’s attempted application of its moratorium to Semler’s plat application is void and of no consequence.

Finally, we address Semler’s argument that the city is equitably estopped from claiming that the preliminary plat has expired or that the moratorium applies to the final plat application. Although the city contends that Semler is raising this issue for the first time on appeal, Semler argued the issue in its memorandum in opposition to the city’s motion for summary judgment, and the district court rejected its argument.

Generally, for equitable estop-pel to apply,

the plaintiff must demonstrate that the defendant, through his language or conduct, induced the plaintiff to rely, in good faith, on this language or conduct to his injury, detriment or prejudice.

Ridgewood Dev. Co. v. State, 294 N.W.2d 288, 292 (Minn.1980) (citations omitted). Further, the government must have engaged in wrongful conduct. Id. at 293. Wrongful conduct requires an affirmative act, rather than inadvertent or mistaken conduct. In re Westling Mfg., Inc., 442 N.W.2d 328, 332 (Minn.App.1989), review denied (Minn. Aug. 25,1989).

Semler contends it is undisputed that the city requested that the Crow River Heights project be developed in phases over several years, due to its concern that it would be unable to absorb a development of the project’s size in a short span of time. To accommodate the city’s concerns, Semler agreed to the phased development, so it sought and obtained a legally binding commitment from the city that the preliminary plat’s approval would remain valid for a period of eight years.

Semler asserts that it committed substantial resources to the project in reliance on the city’s assurance. In addition, Sem-ler contends that it did not contest the significant property assessment called for by the master subdivision agreement, on the assumption that the development had gained preliminary approval. It asserts that after new council members took power within the city’s government, the city reversed its position and attempted to claim that it had the right to reject Sem-ler’s final plat applications for reasons that, as discussed above, were not only “wrongful,” but also illegal. Under these circumstances, Semler argues that the city is equitably estopped from denying Semler’s final plat application. See, e.g., Lucio v. Sch. Bd. of Indep. Sch. Dist. No. 625, 574 N.W.2d 737, 740 (Minn.App.1998) (stating that appellate court decides as a matter of law whether equitable estoppel applies), review denied (Minn. Apr. 30, 1998).

We conclude the record shows that the extension was requested by the city and was for the benefit of the city. The city wanted Semler to agree to it, and Semler did. We find the city is estopped from arguing otherwise.

Finally, we address Semler’s argument that this court should reverse and remand for the district court to issue a writ of mandamus compelling the city to certify final plat approval. Under the statute, the municipality shall certify final plat approval within 60 days if the applicant

has complied with all conditions and requirements of applicable regulations and all conditions and requirements upon which the preliminary approval is expressly conditioned either through performance or the execution of appropriate agreements assuring performance.

Minn.Stat. § 462.358, subd. 3b. If the municipality fails to certify final approval as so required, and if the applicant has complied with all conditions and requirements, the application shall be deemed finally approved. Id.

Semler contends it is undisputed that it has complied with all conditions and requirements of applicable regulations relating to the preliminary plat. But as Semler acknowledged at oral argument, final approval is contingent on meeting all conditions and requirements. This court cannot, on this day, from this record, make the determinations, as this court is not monitoring the day-to-day construction activities of Semler and is not validating any change orders or other requests made by the city.

Thus, our remand on this issue is limited to instructing the district court to reconsider Semler’s application for a final plat approval, and, if it finds substantial compliance with the application conditions, it shall issue a writ compelling the city to certify final approval. The city is instructed that a good-faith review of Semler’s claim that it has complied with all conditions and requirements is part and parcel of this reversal and remand.

II.

The final issue is whether the district court erred in granting summary judgment on Semler’s claims for damages on the basis that the city violated its duty of good faith and fair dealing. Under this doctrine, parties to a contract may not unjustifiably impede the other party from performing its obligations under the contract. In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502 (Minn.1995).

Semler alleges that during the summer of 2001, the city ordered Semler to cease grading work and other activities that Semler was undertaking in connection with the Crow River Heights First Addition, for which it had received both preliminary and final plat approval. We agree that Semler has shown genuine issues of material fact as to whether the city violated its duty of good faith and fair dealing. We conclude the issue of damages remains open.

DECISION

We reverse the district court’s grant of summary judgment and remand for further proceedings.

Reversed and remanded.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of the Welfare of M.A.K., Child.
    No. C9-03-16.
    Court of Appeals of Minnesota.
    Aug. 19, 2003.

      John M. Stuart, State Public Defender, Ann McCaughan, Assistant Public Defender, Minneapolis, MN, for appellant M.A.K.
    Mike Hatch, Attorney General, St. Paul, MN; and Alan L. Mitchell, St. Louis County Attorney, Angela K. Shambour, Assistant County Attorney, Duluth, MN, for respondent.
    Considered and decided by SCHUMACHER, Presiding Judge, RANDALL, Judge, and KALITOWSKI, Judge.
   OPINION

RANDALL, Judge.

Appellant M.A.K. challenges the district court’s refusal to suppress the self-incriminatory statements he made to police dim-ing an in-school interview. Appellant asks this court to reverse the finding that he committed third-degree burglary and the subsequent adjudication of delinquency.

FACTS

On July 31, 2001, police received a report that fourteen-year-old M.A.K. had taken his stepfather’s car without permission, had driven it without a license, and had been in an accident. M.A.K.’s stepfather made the police report based on a message from M.A.K.’s father, with whom M.A.K. had spent the night. On October 10, police officer Janine Pauly and a police intern went to M.A.K.’s school to speak with him about the incident. Although police had the permission of M.A.K.’s stepfather to interview him, they had not spoken with either of his biological parents. M.A.K. was taken from his classroom to the school police liaison office. He was told that he was not under arrest and that his stepfather had given his permission for the interview. M.A.K. was not told that he did not have to talk to police or answer questions and was not given a Miranda warning. During the interview, M.A.K. admitted that he had taken the ear without permission or a license and that he had crashed it. At no time during the interview did M.A.K. ask to leave or to speak with a parent. At the end of the interview, M.A.K. filled out a written statement regarding the incident and was given a hall pass to return to class.

On October 29, police once again went to interview M.A.K. at his school. This time, they were investigating reports that M.A.K. had been involved in burglarizing at least one garage with some other boys. Although police had attempted to contact M.A,K.’s mother, they had not actually spoken with any of his parents before interviewing him. During the interview, M.A.K. admitted that he had been present at the scene of one burglary and that the other boys had taken some beer from a garage.

Juvenile delinquency petitions were filed charging M A.K. with one count of taking a motor vehicle, one count of driving without a license, and one count of third-degree burglary. At contested Rasmussen hearings, M.A.K. moved to suppress the statements he made to police during both the in-school interviews as having been made in custody, without a proper Miranda warning, and involuntarily. These motions were denied after the officers involved in the interviews testified that M.A.K. had been calm and had willingly answered questions. The officers classified the interviews as non-custodial. M.A.K. testified that he had not thought he was free to leave and that he felt he had to answer all of the officers’ questions. Both matters proceeded to trial.

A burglary trial was held July 15, 2002. Officer Kelly Greenwalt testified that she had interviewed M.A.K. regarding a garage burglary. Greenwalt testified that M.A.K. told her he had gone “into” the garage with the other boys and had taken three six-packs of beer from a refrigerator inside. One of M.A.K.’s friends also testified that M.A.K. had gone into the garage and had taken the beer. M.A.K. testified that he told Greenwalt he went “to” the garage, not “into” it, and that he had only carried the beer after the other boys brought it out. The court found that M.A.K. committed third-degree burglary by order dated July 15, 2002.

On November 13, a trial was held on the charges of auto-theft and driving without a license. M.A.K.’s stepfather testified that he received a call from his wife (M.A.K.’s mother) while he was at work, telling him that M.A.K. had taken the car and crashed it and had spent the night at his father’s house. M.A.K.’s mother learned this information from a message M.A.K.’s father left on her answering machine. When his stepfather confronted him later, M.A.K. admitted that he had crashed the car. M.A.K.’s stepfather also revealed that M.A.K. had taken the car without permission on two other occasions. Officer Janine Pauly also testified that, during the in-school interview, M.A.K. admitted he took the car.

The court found that the evidence established beyond a reasonable doubt that M.A.K. had taken the car without permission and had driven it without a license. A dispositional hearing was held immediately for both cases. M.A.K.’s probation officer recommended that he be adjudicated delinquent on both the burglary charge and the auto-theft charge, that he serve nine months of probation, that he be ordered to avoid contact with the other boys involved in the burglary, and that he pay restitution to his victims. M.A.K.’s attorney asked that the court stay adjudication on the auto-theft charge pending M.A.K.’s completion of his probation. M.A.K.’s stepfather and father joined this request, out of concern that two juvenile felony adjudications would give M.A.K. a criminal history point. The district court chose to adjudicate M.A.K. delinquent on the burglary charge only, staying adjudication on the auto-theft and driving without a license charges pending a nine-month period of probation. M.A.K. was also ordered to pay restitution and to stay away from the boys involved in the burglary.

ISSUE

Did the district court err in admitting appellant’s statements to police?

ANALYSIS

I.

When reviewing pretrial orders regarding suppression motions, this court may review the record independently to determine whether the district court erred in not suppressing evidence as a matter of law. State v. Harris, 590 N.W.2d 90, 98 (Minn.1999). If the district court erred, appellant is entitled to a new trial unless the error was harmless beyond a reasonable doubt. State v. Juarez, 572 N.W.2d 286, 291 (Minn.1997). An important factor in analyzing harmless error is whether, without the evidence erroneously admitted, the remaining evidence would be sufficient to compel a finding of guilt beyond a reasonable doubt. Id.

Appellant M.A.K. argues that the district court erred by admitting the statements he made to police during the in-school interviews because: (1) the interviews were custodial and he was not given a Miranda warning; and (2) the statements were not made voluntarily. We agree.

To determine whether a Miranda warning is required, this court must first determine whether the person questioned was in custody at the time. State v. Edrozo, 578 N.W.2d 719, 724 (Minn.1998). First, we consider the general circumstances surrounding the interrogation; and second, we determine whether, in light of the circumstances, a reasonable person would have felt free to leave or otherwise terminate the interrogation. In re Welfare of G.S.P., 610 N.W.2d 651, 657 (Minn.App.2000). We review the factual determination of circumstances under a clearly erroneous standard, but the ultimate determination of custody is subject to independent review. State v. Wiemasz, 584 N.W.2d 1, 3 (Minn.1998).

A number of cases suggest factors to consider when determining whether a juvenile is in custody for Miranda purposes. These include the child’s age, intelligence, education, experience with the law, the warning given, and the presence or absence of the child’s parents. In re Welfare of D.B.X., 638 N.W.2d 449, 453 (Minn.App.2002).

Here we have a 14-year old boy, by all accounts, a child of average intelligence and maturity for his age. Before the October 10 interview, M.A.K. had no experience with the police or with police questioning. M.A.K. was removed from his class and escorted to the school police liaison office without being told why. Upon arrival, he was told he was not under arrest, but was not told that he was free to leave or that he was free to refuse to answer questions. He was not asked if he wished to speak with his parents or return to class. M.A.K. was given a hall pass and allowed to return to class only after police were satisfied with his statements.

Under the circumstances, we cannot say that a reasonable person in M.A.K.’s position would have understood that he was free to leave and did not have to answer any questions. We conclude that M.A.K. was in custody during the in-school interviews, and should have received a full Miranda warning before being questioned. Because he did not receive that warning, the admission of his statements to police regarding both the auto theft and the burglary was error.

Even had M.A.K. not been in custody during the interviews, we do not believe that his statements were made voluntarily, and they should have been suppressed for that reason. A confession is not voluntary if the actions of the police, combined with the circumstances, are so coercive and intimidating that the defendant is unable to make a free-will decision. State v. Jones, 566 N.W.2d 317, 326 (Minn.1997). The actions of police need not be threats or deliberate intimidation to be coercive. State v. Riley, 568 N.W.2d 518, 525 (Minn.1997). Although the police here were not forceful or purposefully intimidating toward M.A.K., combined with the circumstances described above, M.A.K.’s will was almost certainly overcome. M.A.K. did not understand that he was free to leave. He did not know that he could ask to talk to his parents. He was escorted to the school police liaison office, and he could not leave the office without a hall pass, unless he chose to risk school discipline. Under the circumstances, a child like M.A.K. could easily be intimidated into confessing or making incriminating statements against his will. Because M.A.K.’s statements were made involuntarily, while his “will was overborne,” they should have been suppressed, and their admission was error. Riley, 568 N.W.2d at 525.

Having determined that the admission of the statements was error, we must next determine whether that error was harmless beyond a reasonable doubt and whether without them, the evidence could support a finding of guilt. Juarez, 572 N.W.2d at 291.

We first note that appellant does not specifically challenge the finding that he committed the acts of auto theft and driving without a license, presumably because the district court stayed adjudication on those charges. Thus, we leave the stay of adjudication in place. Respondent has asked this court to review the district court’s decision to stay adjudication on the auto-theft charge. Respondent’s request is denied. There is no provision for a cross-appeal by the state in a juvenile’s appeal, and the state did not find one. See Minn. R. Juv. P. 21.03. Moreover, pursuant to Minn. R. Juv. P. 21.04, subd. 1, the state is limited in what delinquency dispositions it may appeal. The rule allows the state to appeal delinquency dispositions only in extended jurisdiction juvenile (EJJ) cases. Id. This court has strictly construed the rule and has determined that the state is not permitted to appeal any other dispositions in non-EJJ cases. In re Welfare of S.H.R., 570 N.W.2d 704, 705 (Minn.App.1997). Because this is not an EJJ case, respondent cannot challenge the stayed adjudication on this charge. We give respondent’s argument no further consideration.

As to the auto theft, M.A.K. confessed to his father and to his stepfather that he had taken his stepfather’s ear. The same night, his father left an answering-machine message at his mother’s home explaining what M.A.K. had done. Even had his statement to police been suppressed, the testimony of his stepfather and the tape of the answering-machine message can support a finding that M.A.K. committed that crime. We conclude the error in admitting M.A.K.’s confession to police was not substantial; the finding of delinquency on the auto-theft charge resulting in a stay of adjudication, is affirmed.

However, the error in admitting M.A.K.’s statements, with respect to the third-degree burglary charge, was substantial, prejudicial, and not harmless beyond a reasonable doubt. Without MA.K.’s statements to police, the state had little evidence to compel a finding that M.A.K. was guilty of burglary. The state presented the testimony of J.E., one of M.A.K.’s alleged accomplices in the burglary. This boy testified at the trial that M.A.K. had gone into the garage with the other boys to steal the beer. As appellant correctly argues, a conviction cannot be had on the uncorroborated testimony of an accomplice. Minn.Stat. § 634.04 (2002). The corroborating evidence must show more than the mere fact that the crime occurred. Id. Here, the state presented no corroborating evidence, either physical or testimonial, other than M.A.K.’s statement to police. The state may or may not have made a case that M.A.K. was a minor in possession of beer. They did not make a case with admissible evidence that he committed burglary.

On the .burglary charge, because the statement should have been suppressed, and because suppression leaves the state only with the uncorroborated testimony of an accomplice, the juvenile adjudication for third-degree burglary is vacated.

DECISION

Because M.A.K. was subjected to custodial interrogations without receiving a Miranda warning, and because his statements during those interrogations were not made voluntarily, the district court erred in admitting those statements as evidence. The finding that M.A.K. committed the crime and the adjudication of delinquency on the burglary charge are not supported by the remaining evidence and are, therefore, reversed and vacated. The district court’s finding that M.A.K. committed the crime and stay of adjudication on the auto-theft charge are affirmed.

Affirmed in part and reversed in part.


author: GORDON W. SHUMAKER, Judge. FORSBERG, Judge

text:
    WANZEK CONSTRUCTION, INC., a North Dakota corporation, Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, A Mutual Company, a Wisconsin corporation, Respondent.
    No. C4-03-165.
    Court of Appeals of Minnesota.
    Aug. 19, 2003.

      Paul T. Meyer, Nicholas L. Klehr, Ham-margren & Meyer, P.A., Minneapolis, MN, for appellant.
    James R. Andreen, Erstad & Reimer, P.A., Minneapolis, MN, for respondent.
    Considered and decided by SHUMAKER, Presiding Judge, WRIGHT, Judge, and FORSBERG, Judge.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

GORDON W. SHUMAKER, Judge.

In this declaratory-judgment action, the district court granted summary judgment to Employers Insurance of Wausau, ruling that its comprehensive general liability insurance policy does not provide coverage for faulty materials manufactured by a supplier of materials who contracted with the insured general contractor because the supplier was not a subcontractor who qualified for an exception to the policy’s business-risk exclusion. The insured appealed, and the insurer sought review of the issue of whether coverage was triggered at all. Because we hold that coverage was triggered and the supplier was a subcontractor, we reverse and remand.

FACTS

When the City of St. Louis Park decided to expand one of its recreational centers to include an outdoor swimming pool and an aquatics center, it hired appellant Wanzek Construction, Inc., (Wanzek) to provide all labor and material for the project.

The architect’s specifications required the installation of precast polymer concrete overflow coping stones to serve as a gutter and water-collection system around the swimming pool’s perimeter. The specifications described the coping stones with exacting detail as to density, strength, size, pattern, and color. Moreover, the specifications set requirements for an acceptable manufacturer of the stones as having

no less than 5 years continuous experience in the fabrication of such units with required polymer materials and must demonstrate evidence of 10 successful deck-level coping installations of similar scope with at least 3 years of service.

Wanzek hired Aquatic Designs, Inc., (Aquatic) to fabricate and furnish the coping stones in accordance with the specifications. In addition, Aquatic was to create shop drawings for the architect’s approval and “provide on-site supervision for 3 days or until Wanzek construction crew is capable of installation.”

Wanzek built the pool and Aquatic manufactured and delivered the coping stones and supervised their installation as required by its contract.

Soon after the city opened the pool for public use, the coping stones began to crack and break under pedestrian traffic, and some pool users were injured. The city demanded that Wanzek do remedial work, as required by its contract. Wanzek in turn made the same demand of Aquatic. Aquatic refused, and Wanzek did the work and billed the city for the cost.

When the city refused to pay for the remedial services, Wanzek demanded arbitration with the city and Aquatic. Then Aquatic filed for bankruptcy, and Wanzek withdrew its arbitration demand and instead made a claim under its own commercial comprehensive general liability (CGL) insurance policy.

Respondent Employers Insurance of Wausau was Wanzek’s CGL insurer. Wau-sau denied coverage, contending that Wan-zek’s claim did not trigger coverage; that this type of insurance is not available to reimburse the cost of remedying defects in workmanship; the subject of the claim was a business risk not covered by liability insurance; and the specific “Damage to Your Work” provision expressly excludes coverage.

Wanzek then brought a declaratory-judgment action against Wausau to determine coverage. Both parties moved for summary judgment.

The district court denied Wanzek’s motion but granted Wausau’s motion. The district court ruled that Wanzek’s claim is of the type covered by the CGL policy and that, even if the business-risk exclusion applies, there is an exception to that exclusion for services supplied by a subcontractor. The court noted that the dispositive issue is whether Aquatic was a subcontractor or merely a materials supplier and concluded that Aquatic was a materials supplier, stating:

Whether Wanzek’s claim is covered under the CGL policy is dependent upon the determination of whether or not Aquatic Designs occupied the role of a subcontractor in its dealings with Wan-zek. * * * [t]his court finds that it did not.

Contending that the district court erred in its conclusion that Aquatic Designs, Inc., was not a subcontractor, Wanzek appealed. Although the district court granted Wau-sau’s motion on the subcontractor issue, it denied the motion on the alternative ground that an insurer is not liable if the insured is not legally obligated to pay damages. Wausau filed a notice of review as to that alternative ground for summary judgment.

ISSUES

1. Does an insurance policy that provides coverage for sums that the insured becomes “legally obligated to pay as damages” cover an insured’s replacement costs of faulty building materials, even though the insured has not been sued, if the insured is contractually obligated to replace such materials without regard to fault?

2. Does the insured meet the policy’s exception to the “damage to your work” exclusion, resulting in the insured having coverage for replacement costs, if the property damage was done by a subcontractor, or is the insured precluded from coverage by the policy’s “damage to your product” exclusion, which incorporates the business-risk doctrine?

3. Is a contractor that contracts with a general contractor to manufacture custom building materials per the general contractor’s projects specifications, to deliver the materials, and to supervise the material’s installation by the general contractor, a subcontractor?

ANALYSIS

On appeal from the grant of a summary judgment, when, as in this case, the material facts are not in dispute, our review is de novo. Scheibel v. Illinois Farmers Ins. Co., 615 N.W.2d 34, 36 (Minn.2000).

The only issues on appeal concern the interpretation of the insurance policy. When there is no factual dispute, we review de novo the district court’s interpretation of the insurance contract. Nat’l City Bank v. St. Paul Fire & Marine Ins. Co., 447 N.W.2d 171,175 (Minn.1989).

We apply “[g]eneral principles of contract interpretation” in construing an insurance policy. Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn.1998). We give the words of a policy then' plain and ordinary meanings. Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn.2001). We consider the policy and its exclusions as a whole, and “the terms will not be so strictly construed as to lead to a harsh and absurd result.” Employers Mut. Liab. Ins. Co. v. Eagles Lodge, 282 Minn. 477, 479-80, 165 N.W.2d 554, 556 (1969).

1. Policy Trigger

Wausau’s first argument is that it wrote for Wanzek a liability policy, and coverage that can be “triggered” only by a third party’s suit claiming damages caused by fault of the insured. Here, Wausau contends, there was no such claim but only the city’s request that Wanzek perform remedial work that it was contractually obligated to perform. Wausau relies on policy language for this conclusion:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.

Wausau urges that the purpose of “third party insurance” is to protect the insured against fault-based claims, and that first-party insurance is the type of coverage intended for the reimbursement Wanzek is seeking.

The language of the provision on which Wausau relies does not require a lawsuit as a condition precedent to coverage; does not require that the underlying “claim” be premised on the insured’s fault; and does not limit the insured’s obligation to pay only tort claims. Whatever the “typical third party insurance case” might be, we are required to determine coverage on the basis of the language the insurer used in the policy.

The language is broad and general enough to pertain to Wanzek’s claim, which involves property damage and an apparent contractual obligation on Wan-zek’s part to repair or pay for the property damage. And nothing in the provision suggests that a lawsuit is necessary to trigger coverage. See, e.g., Minn. Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 177 (Minn.1990) (holding that to construe the policy language “legally obligated to pay as damages” as “coverage only when a third party plaintiff brings a traditional civil lawsuit against the insured seeking monetary compensation for injury to property” would result in construing the policy language too narrowly). Furthermore, to construe the language of the provision to require a lawsuit to trigger coverage would not serve the public-policy goal of encouraging the resolution of disputes without litigation. Cf. Minneapolis Star & Tribune Co. v. Schumacher, 392 N.W.2d 197, 205 (Minn.1986) (providing that “[t]his court has often stated that it favors the settlement of disputed claims without litigation” (citation omitted)).

2. Business Risk

Wausau’s second argument is that coverage is precluded by the “business risk doctrine.” It argues that the risk that workmanship or materials on a construction project might fail is something within the insured’s control and is not covered by a CGL policy.

There is no express “business risk” exclusion in Wausau’s policy, but the concept has been recognized judicially as applying to manageable risks, which are

those risks which management can and should control or reduce to manageable proportions; risks which management cannot effectively avoid because of the nature of the business operations; and risks which relate to the repair or replacement of faulty work or products. These risks are a normal, foreseeable and expected incident of doing business and should be reflected in the price of the product or service rather than as a cost of insurance to be shared by others.

Knutson Constr. Co. v. St. Paul Fire & Marine Ins. Co., 396 N.W.2d 229, 235 (Minn.1986).

Wausau focuses its argument on a particular policy exclusion as reflecting the “business risk” doctrine. Under the “Exclusions” section, the policy states:

This insurance does not apply to
1. Damage to your work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
The policy defines “your work” as
a. [w]ork or operations performed by you or on your behalf; and
b. [mjaterials, parts or equipment furnished in connection with such work or operations.

Under the policy, “your work” also includes “warranties or representations * * * with respect to the fitness, quality, durability, performance or use of ‘your work.’ ”

O’Shaughnessy v. Smuckler Corp. dealt with the identical exclusion. O’Shaughnessy v. Smuckler Corp., 543 N.W.2d 99, 103 (Minn.App.1996), review denied (Minn. Mar. 28, 1996), abrogated on other grounds by Gordon v. Microsoft Corp., 645 N.W.2d 393 (Minn.2002), In O’Shaughnessy, homeowners sued the general contractor who built their house, claiming damages for faulty workmanship. Id. at 101. Because the general contractor was in bankruptcy, the homeowners made a claim against its CGL policy. Id. The insurer brought a declaratory judgment action, seeking a determination that there was no insurance coverage because of the business-risk doctrine as reflected in the express exclusion for “damage to your work.” Id.

On appeal, we held that the “business risk doctrine” was narrowed in the policy by the provision of an exception for “damage to your work” caused by a subcontractor:

The exception to the exclusion, which addresses “property damage” to “your work,” must therefore apply to damages to the insured’s own work that arise out of the work of a subcontractor. Thus, we conclude that the exception at issue was intended to narrow the Business Risk Doctrine ⅜ * ⅜. [T]he Business Risk Doctrine would still apply to work performed by the general contractor and to other deficiencies in a subcontractor’s work that do not constitute “property damage.”

Id. at 104-05.

Thus, O’Shaughnessy, which applies the abstract “business risk doctrine” to concrete insurance policy language, stands for the proposition that there can be coverage under a CGL policy when there is damage to an insured’s work that has been caused by work performed on the insured’s behalf by a subcontractor.

Wanzek argues that the damaged work or work out of which the damage arose was performed by a subcontractor, who fits the exception to the exclusion on which Wausau relies. Wausau contends that Wanzek’s argument is misplaced because Aquatic Designs was a material supplier and not a subcontractor who performed “work” and thus falls within another exclusion for property damage to “your product.” Wausau points out that this exclusion has no exception for a subcontractor. Wausau acknowledges that “[njegligent “work’ performed by subcontractors is covered. The failure of inferior products purchased by the contractor is not covered.” Thus, the issue that the district court found dispositive, and the one we now need to consider, is whether Aquatic Designs was a subcontractor or material supplier. The district court held that Aquatic was a material supplier.

8. Subcontractor vs. Material Supplier

The district court held that Aquatic Designs supplied defective coping stones and that the damages Wanzek incurred “arose out of the manufacture of the coping stones, not out of their installation.” Relying on Sterling Custom Homes Corp. v. Comm’r of Revenue, 891 N.W.2d 523 (Minn.1986), as controlling, the district court found that Aquatic Designs was a material supplier rather than a subcontractor and thus the exception to the business-risk exclusion did not apply.

We do not find Sterling controlling on this issue. That case involved the question of whether Sterling’s sales of prefabricated custom-home component packages to contractors were retail sales and therefore subject to the state sales tax. Sterling claimed the status of contractor or subcontractor who could be taxed only on raw materials and not on the completed product.

The supreme court rejected Sterling’s argument and held that generally material “suppliers are those who sell building materials. Contractors and subcontractors erect and construct the material into a building on site.” Id. at 525 (quoting Duluth Steel Fabricators, Inc. v. Comm’r of Taxation, 306 Minn. 567, 237 N.W.2d 625 (1975)). The court determined that even though Sterling fabricated the building components according to specifications and provided some supervisory services during the builder’s placement of the components, Sterling was a material supplier and subject to the retail sales tax.

In reaching its decision, the supreme court relied on Minn.Stat. § 297A.01, subd. 4 (1982), which provides that sales of building materials are taxable retail sales, and on a specific sales tax rule defining the terms “contractor” and “subcontractor”:

The terms contractor and subcontractor are not applicable to persons who merely sell tangible personal property in the form of building materials, supplies, or equipment to construction contractors, for delivery at the job site without any requirement that they install such tangible personal property.

Minn. R. 8130-1200, subp. 2(C) (2001) (emphasis added).

Thus, for sales-tax purposes, the factor that distinguishes a subcontractor from a material supplier is that the former installs the product while the latter merely supplies the product.

Here we have no statutory, regulatory, or policy definition of subcontractor or material supplier on which to rely, and we are not persuaded that a sales-tax definition should be applied in an insurance-coverage dispute, especially if there are other authoritative definitions on point.

Weyerhaeuser Co. v. Twin City Millwork Co., 291 Minn. 293, 191 N.W.2d 401 (1971) provides more pertinent guidance than does Sterling. Weyerhaeuser began by noting that “each case must hinge on the totality of the surrounding circumstances and none lends itself to hard-and-fast rules which may be inflexibly applied.” Weyerhaeuser at 294-95, 191 N.W.2d at 402. In that case, the general contractor was hired to construct an addition to a university building. Id. at 294, 191 N.W.2d at 402. Nearly half of the contract required the furnishing of doors of “various sizes, finishes, and cores.” Id. at 295, 191 N.W.2d at 402. The general contractor hired Twin City Millwork Co. (TCM) to furnish shop drawings and to obtain the doors. Id. TCM hired Weyer-haeuser to fabricate the doors according to the shop drawings. Id. Weyerhaeuser made the doors and delivered them to the construction site where the general contractor installed them. Id.

The question arose as to whether TCM was a subcontractor rather than a material supplier and thus entitled to protection under the contractor’s bond. Id. at 294, 191 N.W.2d at 402. The surety argued that TCM performed no work at the job site; did not fit the prime contract’s definition of a subcontractor as someone who supplies labor and material at the site; was designated in its contract as a “vendor” and that the contract was for “materials” only; that the doors were standard rather than custom-built items; and that there was evidence that industry practice was to consider persons in TCM’s position as material suppliers rather than subcontractors. Id. at 296, 191 N.W.2d at 403. The supreme court rejected that argument and, quoting from a California case which adopted Minnesota law, determined the distinguishing feature of a subcontractor:

In our opinion the essential feature which constitutes one a subcontractor rather than a materialman is that in the course of performance of the prime contract he constructs a definite, substantial part of the work of improvement in accord with the plans and specifications of such contract, not that he enters upon the job site and does the construction there.

Id. at 300, 191 N.W.2d at 405 (quotation omitted).

The supreme court noted that even though the amount of TCM’s contract was not a substantial portion of the overall project, it was still a significant part of the construction.

The contract called for 1,107 specially made doors, built with a variety of materials and designs. They were not items which were readily available through ordinary building suppliers. * * * The installation by the prime contractor rather than the subcontractor is only one element to be considered and is not decisive.

Id. at 301, 191 N.W.2d at 406 (emphasis added).

There is no contention here that the coping stones were not a significant part of the prime contract. They were required to be manufactured with exacting detail to fit the project, as provided in the specifications, and the manufacturer was required to demonstrate specific experience in the industry. Aquatic qualified, fabricated the coping stones especially for this project, and provided on-site supervision over the installation of the stones.

Although Weyerhaeuser was a contractor’s surety-bond dispute, it is more akin to this case than the sales tax decision in Sterling. Thus, we hold that the district court erred in ruling that Aquatic Designs was a material supplier rather than a subcontractor and that the subcontractor exception to the business-risk exclusion did not apply.

DECISION

Because the district court erred in ruling that the subcontractor exception to the business-risk exclusion in Wanzek’s insurance policy does not apply, and because coverage was triggered, we reverse and remand.

Reversed and remanded.

FORSBERG, Judge

(concurring in part, dissenting in part).

I concur with the majority opinion, but I respectfully dissent regarding the subcontractor issue. I believe Sterling Custom Homes Corp. v. Comm’r of Revenue, 391 N.W.2d 523 (Minn.1986), is on point and controlling. In Sterling, the supreme court defined the term “subcontractor.”

The terms contractor and subcontractor are not applicable to persons who merely sell tangible personal property in the form of budding materials, supplies, or equipment to construction contractors, for delivery at the job site without any requirement that they install such tangible personal property.

Id. at 524 (quoting Minn. R. 8130.1200, subp. 2(C) (1985)). Based on this limiting definition, the court held that Sterling was not a subcontractor because it only manufactured and delivered the building materials to the builder, but did not construct and install these custom home packages at the building site. Id. at 525.

Here, Aquatic Designs only delivered to Wanzek Construction the coping stones that it had manufactured, but did not install these coping stones at the budding site. Its act of supervising the installation did not tilt the scales so that Aquatic became a subcontractor. Its conduct is comparable to that of Sterling’s driver, who laid out the materials in the order that they were to be instaded. Under the binding Sterling precedent, this means that Aquatic is solely considered a materials supplier, not a subcontractor.

Although the majority concludes that cases involving mechanics’ liens, such as Weyerhaeuser Co. v. Twin City Millwork Co., 291 Minn. 293, 191 N.W.2d 401 (1971), are more analogous to this insurance case, I believe that the supreme court’s more recent definition of the term “subcontractor” must be controding. In addition, even though Sterling addressed a retail sales tax issue, I believe its subcontractor definition should be more broadly applied than to just tax cases. Thus, I would conclude that Aquatic was not a subcontractor and that Employer’s Insurance of Wausau’s policy did not cover Wanzek’s replacement costs.


author: MINGE, Judge.

text:
    David LINDBERG, Respondent, v. Michael C. FASCHING, M.D., Appellant.
    No. C7-03-242.
    Court of Appeals of Minnesota.
    Aug. 19, 2003.

      Karl L. Cambronne, Jeffrey D. Bores, Becky L. Erickson, Chestnut & Cam-bronne, P.A., Minneapolis, MN, for respondent.
    David F. Herr, Geoffrey P. Jarpe, Kai H. Richter, Maslon, Edelman, Borman & Brand, LLP, Minneapolis, MN, for appellant.
    Considered and decided by STONEBURNER, Presiding Judge, HARTEN, Judge, and MINGE, Judge.
   OPINION

MINGE, Judge.

Appellant challenges a summary judgment determination that an easement over his land is valid despite the lack of a filed notice of the easement, which is required by the Marketable Title Act. The district court found that because of the scope of the easement, and because respondent and his predecessors had used the easement, they had had adequate possession of the premises to meet the exception to the filed-notice requirement of the Marketable Title Act. Because there is a genuine issue of material fact whether the use of the easement constituted “possession” within the requisite 40-year period and whether the easement had been abandoned, we reverse the grant of summary judgment and remand for trial.

FACTS

Appellant Michael Fasching and respondent David Lindberg own adjoining properties on Lake Minnetonka. The properties are not registered Torrens properties. In the early part of the 20th century, prior owners of the properties executed an agreement that established an easement but incorrectly described its location. On October 14, 1950, the parties’ predecessors in title signed an easement agreement that corrected the earlier agreement and provided that each landowner received a “perpetual right of way for road purposes” over a ten foot strip of the other’s property. The agreement was recorded on December 26, 1950, and it provides each landowner with access to parts of Lake Minnetonka that the other landowner’s property borders. In this case, only that part of the agreement that grants Lind-berg rights over Fasching’s property is at issue.

In February 2002, Lindberg brought suit asserting his easement rights, alleging that Fasching “placed objects on the easement property — including several trees, a fence, and small boulders — that illegally interfere with [Lindberg’s] reasonable use of the easement,” and seeking removal of the same.

Both parties moved for summary judgment. Fasching argued that the Marketable Title Act, Minn.Stat. § 541.023, subd. 1 (2002), barred enforcement of the easement because the easement agreement was more than 40 years old, and neither Lindberg nor his predecessors ever filed the statutory notice required by the Act. Fasching also argued that Lindberg had abandoned the easement according to common-law principles of abandonment.

Lindberg testified that he knew of the easement when he bought the property, that he used the easement to access the lake, and that he walked on the easement “an average of five or six times” in a given year. Lindberg asserted that he used the easement year-round for walking, riding his snowmobile, and riding on a sled. Lindberg also testified that before Fasch-ing bought his property, Lindberg “regularly used the easement, without problems”; that at one point, a corner of the easement had been covered with blacktop, but that Fasching had ripped out the blacktop; that the rest of the easement has always been covered with grass and dirt; that there has never been gravel over the easement; that although a maple tree is growing within the easement, he “can go around this tree and still use the easement”; that the tree apparently pre-dates the easement agreement; and that as of November 2002, there was brush growing in the easement.

Scott Prochnow, a previous owner of Lindberg’s property, asserted that he used the easement by walking across it to access the lake for swimming, windsurfing, and going back and forth from his boat to his house. Prochnow also reported that he used the easement during the winter months for cross-country skiing.

Fasching testified that although he was aware of the recorded easement agreement when he bought his property, he did not know whether the easement was valid and that at the time he purchased his property, he concluded that the easement had never been used because of the maple tree, brush, debris, and two stumps in the middle it. Fasching continued that he never asked Lindberg whether he had ever used or was using the easement and that although he knew Lindberg had driven his snowmobile over the easement on at least one occasion, the large maple tree in the easement made it impossible to drive a snowmobile and stay within the boundaries of the easement.

The district court granted summary judgment in favor of Lindberg. The court concluded that although Lindberg had not filed the requisite notice under the Marketable Title Act, the possession exception of the Act applied. The district court also concluded that Lindberg and his predecessors did not abandon the easement according to the common law because there was no evidence of an intent to abandon the easement.

ISSUES
1. Did the district court err by granting summary judgment that Lind-berg’s claimed easement met the possession exception in the Marketable Title Act?
2. Did the district court err by granting summary judgment that Lind-berg did not abandon the easement according to the common law?

ANALYSIS

The district court should grant summary judgment when there is no genuine issue of material fact and either party is entitled to a judgment as a matter of law. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993). On appeal from summary judgment, this court asks two questions: (1) whether there are any genuine issues of material fact, and (2) whether the lower court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).

We view the evidence in the light most favorable to the party against whom summary judgment was granted. Fabio, 504 N.W.2d at 761. Even though an appellate court may disagree with the trial court’s analysis of some issues, summary judgment will be affirmed if it can be sustained on any grounds. Myers v. Price, 463 N.W.2d 773, 775 (Minn.App.1990), review denied (Minn. Feb. 4, 1991). When the district court grants summary judgment based on the application of a statute to undisputed facts, the result is a legal conclusion, which we review de novo. Lefio v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn.1998).

I.

We first address Fasching’s argument that summary judgment should not be granted in favor of Lindberg because Lindberg’s easement was extinguished by operation of the Marketable Title Act. The Marketable Title Act provides, in part:

As against a claim of title based upon a source of title, which source has then been of record at least 40 years, no action affecting the possession or title of any real estate shall be commenced * * * to enforce any right, claim interest, incumbrance or lien founded upon any instrument event or transaction which was executed or occurred more than 40 years prior to the commencement of such action, unless within 40 years after such execution or occurrence there has been recorded * * * a notice * * * setting forth [the basis for the claim],

Minn.Stat. § 541.023, subd. 1 (2002). The purpose of notice is to confirm the continuation of an interest in property and to eliminate stale claims that clutter the title. Wichelman v. Messner, 250 Minn. 88, 98, 83 N.W.2d 800, 812 (1957). According to the statute, “[a]ny claimant * * * barred by the provisions of this section shall be conclusively presumed to have abandoned” all interests created. Minn.Stat. § 541.023, subd. 5 (2002). The provisions of the statute, however, do not apply to “bar the rights of any person * * * in possession of real estate.” Id., subd. 6 (2002).

Fasching argues that an easement, by definition, is incapable of possession by the easement holder. For support, Fasching relies on the absence of any reported decision finding that an easement holder’s possession of an easement is sufficient under the Marketable Title Act. But neither this court nor the Minnesota Supreme Court has concluded that it is impossible for an easement holder to be in possession of the easement as required by the Act. Instead, easement controversies have been discussed in a fashion that assumes that in appropriate circumstances, use of an easement would constitute “possession” under the statute. We do not accept Fasching’s argument that an easement is impossible of possession.

In Caroga Realty Co. v. Tapper, the Minnesota Supreme Court concluded that possession of the easement in question did not rise to the level required by the Marketable Title Act. Caroga Realty Co. v. Tapper, 274 Minn. 164,178-79,143 N.W.2d 215, 225-26 (1966). The court held that the level of possession required by the Marketable Title Act is possession that is “so notorious as to be considered adverse possession.” Id. at 179, 143 N.W.2d at 226. The court noted that possession under the Act must be

actual, open, visible, and exclusive possession inconsistent with the title of the apparent owner by the record. The possession must be clear, unequivocal, and unambiguous. It is insufficient if equivocal, temporary, or occasional. It must be of a character which would put a prudent person upon inquiry.

Id.

Ten years after Caroga, in Township of Sterling v. Griffin, the Minnesota Supreme Court held that a township was not in possession of a claimed town road within the meaning of the Act. Township of Sterling v. Griffin, 309 Minn. 230, 237-38, 244 N.W.2d 129, 134 (1976). In Sterling, the court defined possession under the Act as use that is sufficient to provide notice of the possessor’s interest in the property. Id. at 236, 244 N.W.2d at 133. The court also addressed easements and noted that in determining whether a party was in possession of an easement, “due regard must be given to the nature of the easement.” Id. (citation omitted). But, the court added, possession cannot “fall below that which will put a prudent person on inquiry.” Id.

There are no reported decisions after Sterling that discuss the apparent tension between the Caroga requirement of use that constitutes adverse possession and the Sterling principle that the degree of possession required depends on the nature of the easement. But the cases before Sterling and Caroga suggest that the court was leaning toward a more relaxed definition of “possession” for easements.

In Farmers’ State Bank v. Cunningham, the issue before the court was whether a party had notice that someone other than the record owner had an interest in a piece of property. Farmers’ State Bank v. Cunningham, 182 Minn. 244, 234 N.W. 320 (1931). In discussing the rule that “possession of real estate is constructive notice of the title of the possessor,” the court noted that

[s]ueh possession, in order to be sufficient to constitute notice, must be an actual, open, visible, and exclusive possession inconsistent with the title of the apparent owner by the record. The possession must be clear, unequivocal, and unambiguous. It is insufficient if equivocal, temporary, or occasional. It must be of a character which would put a prudent person upon inquiry.

Id. at 246, 234 N.W. at 321. However, the court in Farmers’ State Bank went on to state:

The sufficiency of the facts depend upon a variety of circumstances. The extent and character of the property, and the uses to which it may be put, are obviously matters of considerable importance in determining whether or not the occupancy of it is sufficient to put a purchaser upon inquiry.

Id. This language is consistent with the cautionary language from Sterling and supports a more flexible standard for possession of an easement under the Marketable Title Act.

In United Parking Stations, the court stated that possession

obviously means actual occupancy or use of part of all of the real property * * * right-of-way easements which are manifested by actual use or “occupancy” (consistent with the nature of the easement created) are protected even if the requirement of filing notice is not met.

United Parking Stations v. Calvary Temple, 257 Minn. 273, 276, 101 N.W.2d 208, 210 (1960) (emphasis added) (quotation omitted). This approach, like the approach in Farmers’ State Bank, is also consistent with the easement standard in Sterling.

Mindful of the language from Farmers’ State Bank and United Parking, and mindful that Sterling was decided after Caroga, we conclude that the Marketable Title Act possession standard for easements is a more flexible possession standard than the standard urged by Fasehing and that due regard must be given to the nature of the easement. After all, occasional-use easements do not prevent all use of the easement premises by the owner of the servient estate. Such easements are by definition less than fee title. It would be illogical to insist that possession sufficient to protect such easements be the same intensity of possession as required to establish or maintain fee title or an intensively used easement like a road. However, the use must be sufficiently obvious so that a prudent person would be put on inquiry regarding the existence of the easement.

The easement was created by express grant, and its original scope is dependent “entirely upon the construction of the terms of the” easement agreement. Larson v. Amundson, 414 N.W.2d 413, 417 (Minn.App.1987) (citation omitted). The express grant creating the easement is a contract; that contractual easement must be defined. Where a contract is ambiguous, the interpretation of the contract is a question of fact, and extrinsic evidence may be considered. City of Virginia v. Northland Office Prop. Ltd. P’ship, 465 N.W.2d 424, 427 (Minn.App.1991), review denied (Minn. Apr. 18, 1991). The initial determination as to whether a contract is ambiguous is a question of law. Black-burn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn.App.1985), review denied (Minn. June 24, 1985). A contract is ambiguous if it is reasonably susceptible of more than one meaning. Id. at 644.

Here, the easement agreement is for a “perpetual right of way for road purposes.” The easement agreement gives no indication as to what constitutes “road purposes.” The easement agreement does not say whether the right of way may be used as an unimproved road or whether an actual road has to be constructed. As used here, the phrase “road purposes” is ambiguous, and the interpretation of the phrase is therefore a genuine issue of material fact.

The nature and extent of the use of the easement premises since 1950 is unclear, but important because possession or use is a substitute for filed notice. In evaluating possession and use, the critical timeframe is the end of the 40-year period. Two questions are presented: First, what was the scope or nature of the easement? Second, giving due regard to the nature of the easement, was the use sufficient to provide notice to the owner of the servient tract of the existence of the easement? The most detailed testimony of use is by Lindberg. Although his use was almost entirely after the 40-year period in which the possessory use must have occurred, some of Lindberg’s use was before the expiration of the 40-year period, and all of the use by Prochnow (Lindberg’s predecessor in title) occurred before the end of the 40-year period. Although their use was uncontradicted by Fasehing, without a determination of factual questions as to the nature and use of the easement, summary judgment was premature and was not proper.

A factual determination is needed as to whether the use of the easement would constitute adequate notice to put a prudent person on notice of Lindberg’s claim of possession. One obvious problem in this evaluation is that when a modest easement is claimed, its use may not be adequate to give a prudent person warning of its existence. However, the trier of fact should not be too demanding of the use required of a more limited easement that has been a matter of record and should expect the prudent person to be quicker to make inquiry of the easement. The trier of fact should consider whether the use of the limited easement would place the prudent owner or prudent purchaser on inquiry.

II.

Next we address Fasching’s argument that even if the easement was not extinguished by the Marketable Title Act, Lindberg should not have been granted summary judgment because Lindberg abandoned the easement according to the common law of easements.

“A claim of abandonment can be upheld only where nonuse is accompanied by affirmative and unequivocal acts indicative of an intent to abandon and is inconsistent with the continued use of the easement.” Richards Asphalt Co. v. Bunge Corp., 399 N.W.2d 188, 192 (Minn.App.1987) (citations omitted). Whether an easement has been abandoned is generally a question of fact. Simms v. William Simms Hardware, Inc., 216 Minn. 283, 293, 12 N.W.2d 783 (1943).

Fasching argues that the district court erred by finding that there was “no evidence of an intent to abandon the easement.” Fasehing’s argument is premised on the scope of the easement and the purpose of the easement. Fasching contends that because there was never actually a paved roadway on the easement, there was an intent to abandon the easement. In his memorandum in support of summary judgment, Lindberg noted that whether the easement had been abandoned was a question of fact, but that it was nonetheless appropriate for the district court to decide the issue because:

[I]n this case, the parties do not dispute that the easement has been used. Instead, Fasching argues that Lindberg’s failure to use the easement as a road to drive a car to get somewhere other than the lakeshore constitutes nonuse according to the language of the easement. Under these circumstances, the court can determine whether Lindberg may continue to use the easement to access the North Arm of Lake Minnetonka.

Thus, Fasching argues that not paving the easement and not turning the easement into an actual “road” is inconsistent with the terms of the easement agreement, but Lindberg argues that his use of the easement is consistent with the terms set forth in the easement agreement.

Whether Lindberg abandoned the easement by nonuse is dependent on the scope of the easement. The interpretation of the ambiguous phrase “road purposes” will affect whether or not Lindberg abandoned the easement. As we have already determined, the interpretation of that phrase is a genuine issue of material fact. Neither party is entitled to summary judgment on this issue.

DECISION

Whether an easement holder’s use and occupancy of an easement rises to the level of possession required by the Marketable Title Act depends on the nature of the easement and whether its use gave adequate notice of its existence and put the prudent person on inquiry. Because there are genuine issues of material fact as to the nature and scope of the easement in this case and whether the use would put a prudent person on inquiry, we reverse the district court’s grant of summary judgment and remand this case for trial.

Reversed and remanded.

      . This approach is consistent with the Minnesota Title Standards, which state that for purposes of the Marketable Title Act, possession of an easement occurs when actual use or occupancy of the easement is consistent with the nature of the easement. Minn. State Bar Ass'n, Minnesota Standards for Title Examinations Standard No. 61 n. 2 (12th ed.2003).