author: LANSING, Judge.

text:
    HOYT PROPERTIES, INC., et al., Appellants, v. PRODUCTION RESOURCE GROUP, L.L.C., et al., Respondents.
    No. A05-1293.
    Court of Appeals of Minnesota.
    June 20, 2006.
    Review Granted Aug. 23, 2006.

      George G. Eck, Andrew Holly, Dorsey & Whitney LLP, Minneapolis, MN, for appellants.
    Thomas H. Boyd, Karl E. Robinson, Winthrop & Weinstine, P.A., Minneapolis, MN, for respondents.
    Considered and decided by LANSING, Presiding Judge; STONEBURNER, Judge; and COLLINS, Judge.

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

   OPINION

LANSING, Judge.

This appeal from summary judgment involves three claims that are grounded on allegations of fraudulent inducement in the settlement of commercial-lease litigation. The lessor, Hoyt Properties, Inc., sued the lessee and its parent company, Production Resource Group, L.L.C. (PRG), for breach of contract, piercing the corporate veil, and rescission of the settlement agreement. The district court granted summary judgment dismissing all three claims and directed immediate entry of final judgment. The district court denied PRG’s motion to dismiss for failure to join an indispensable party but granted its motion to dismiss with prejudice Hoyt’s amended claims for agency liability, fraud, and negligent misrepresentation. We conclude that Hoyt did not fail to join an indispensable party and that the district court did not abuse its discretion by denying PRG’s motion to dismiss on that ground. But we conclude that the district court erred by dismissing Hoyt’s original and amended claims, and we therefore reverse and remand.

FACTS

Hoyt Properties, Inc. and Hoyt/Winnet-ka, L.L.C. (collectively Hoyt), are Minnesota corporations engaged in the real-estate business. Steve Hoyt, an attorney, owns and operates Hoyt. Haas Multiples Environmental Marketing & Design, Inc. (Haas), is a Minnesota corporation active in the trade-show business, and Entolo, Inc., is the successor corporation to Haas. Production Resource Group, L.L.C. (PRG), is Haas/Entolo’s parent corporation. PRG liquidated Haas/Entolo in 2003 but did not dissolve either corporation.

The Lease and the GMAC Agreement

In 2001 Hoyt Properties and Haas entered into a ten-and-one-half-year lease agreement for office and warehouse space. The lease required Haas to pay approximately $10 million dollars in rent over the term of the lease. Before Haas took possession of the property, it assigned all of its rights and duties under the lease to Entolo, Inc. Hoyt Properties later assigned its rights and duties under the lease to Hoyt/Winnetka, L.L.C.

In connection with the lease, Hoyt and GMAC Business Credit, L.L.C., PRG’s and Entolo’s lender, entered into an agreement that limited Hoyt’s interest in any collateral Entolo stored on the leased premises if Entolo should default on the lease. The agreement also recognized that GMAC’s security interest in Entolo’s assets had priority over Hoyt’s interest. Entolo defaulted on the lease in December 2002.

The Settlement Agreement

After Entolo defaulted on the lease, Hoyt filed an eviction action. At the hearing in December 2002, the parties negotiated a settlement agreement that would allow Entolo to occupy a portion of the leased premises for two months in exchange for approximately $104,000 in rent. Although the agreement resolved the issue of occupancy, Hoyt expressly retained the right to sue Entolo for the remaining sums due under the lease.

According to Hoyt’s allegations, during the negotiations, PRG’s attorneys told Hoyt that PRG wanted a release. In response to Hoyt’s inquiry about the reason for the release, PRG’s attorney indicated that PRG did not want to get sued after the fact. Steve Hoyt replied, “Well, that would be piercing the veil ... I don’t know of any reason why [PRG] could be liable, do you?” One of PRG’s attorneys allegedly responded, “There isn’t anything. PRG and Entolo are totally separate.” Steve Hoyt then walked over to his attorney and authorized him to insert a “global” release into the settlement agreement. Steve Hoyt testified in his deposition that he agreed to the release based on the representations of PRG’s attorney.

A few months after Hoyt signed the release, Steve Hoyt learned that Bruce Knight, who was employed by Entolo after the entity acquired Knight’s trade-show-design business, had brought a breach-of-contract action against Entolo and a piercing-the-corporate-veil claim against PRG. Steve Hoyt confirmed that the complaint had been served before Hoyt’s settlement agreement with PRG. The complaint contained detailed allegations of PRG’s control of Entolo’s daily business and financial affairs and further alleged that Entolo had been operated as a mere instrument of PRG.

Steve Hoyt additionally discovered that, to refinance a debt offering on which it had defaulted, PRG entered into two loan agreements with GMAC. The first was a $50 million term loan, to be repaid over time. The second was an $80 million revolving loan. PRG had Entolo sign as a guarantor and pledge its assets to secure the loans. PRG then arranged for the transfer of all Entolo’s cash and accounts receivable to PRG and essentially operated Entolo as a division of PRG.

Current Litigation

Based on the information about PRG’s conduct of Entolo’s operations and the litigation that was pending before the settlement agreement, Hoyt concluded that PRG’s attorney falsely represented that “[t]here isn’t anything [about a veil-piercing claim]” and that PRG and Entolo were “totally separate.” Hoyt brought this action against PRG and Entolo, seeking to rescind the settlement agreement.

Count I of Hoyt’s complaint alleges a claim against Entolo for breach of the lease agreement and a claim against PRG under a piercing-of-the-corporate-veil theory. Because Haas and Entolo, the defaulting lessees, have no assets, Hoyt can only recover for a breach if PRG is directly liable.

Count II of the complaint seeks rescission of the settlement agreement that provides PRG a release from liability. Hoyt alleges that the release is void because it was induced by the representation of PRG’s attorney that “[t]here isn’t anything [to a veil-piercing claim]” and his representation that PRG and Entolo were “totally separate.” Hoyt also offered to tender back the consideration it received under the agreement.

Count III of the complaint alleges fraud in Entolo’s transfer of cash and other assets to PRG after PRG acquired Entolo.

The district court granted Hoyt leave to amend its complaint to add a claim for agency liability (count IV) and a claim for fraud and negligent misrepresentation (count V). In allowing the amendment, the district court reasoned that the new claims were important and not “far off the course of prior discovery and that, although the claims may not ultimately succeed, they were supported by the facts alleged in the complaint.” Hoyt never filed or served the amended complaint.

After the case was removed to federal court and then remanded to state court, PRG filed a motion to dismiss for failure to join GMAC as an indispensable party. The district court denied the motion. PRG then moved for summary judgment on Hoyt’s rescission and veil-piercing claims. The district court granted the motion, concluding that, because the representations by PRG’s counsel to Steve Hoyt constituted a legal opinion rather than a factual representation, Hoyt’s rescission claim was not viable. The district court also concluded that Hoyt did not reasonably rely on counsel’s representation.

Having dismissed Hoyt’s rescission claim, the district court then dismissed Hoyt’s veil-piercing claim, reasoning that the claim was barred by the provision in the settlement agreement releasing PRG from liability. Even though PRG had not moved to dismiss Hoyt’s breach-of-contract claim against Entolo, the district court also dismissed that claim. Finally, the court dismissed the fraudulent-transfer claim. But the court concluded that the amended claims for agency liability, fraud, and negligent misrepresentation remained viable and set them for trial.

The district court then issued an order for the immediate entry of a final judgment of dismissal, noting that there was no just cause for delay. In an apparent effort to facilitate an interlocutory appeal, the court later issued an amended order, dismissing with prejudice and on the merits “[a]ll remaining claims that [Hoyt] did assert or could otherwise have asserted.” Hoyt appeals the summary-judgment dismissal of the original and the amended complaints.

ISSUES

I. In the absence of a motion and the presence of a provision in the settlement agreement expressly reserving Hoyt’s right to sue Entolo for the amounts remaining under the lease, did the district court err by granting summary judgment dismissing Hoyt’s breach-of-contract claim against Entolo?

II. Did the district court err by concluding that the representations of PRG’s attorney were nonactionable statements of opinion on which Hoyt could not have reasonably relied and by granting summary judgment dismissing Hoyt’s claim for rescission of the settlement agreement?

III. Did the district court err by granting summary judgment dismissing Hoyt’s claim to rescind the settlement agreement, based on its determination that the complaint set forth a claim for partial rescission?

IV. Did the district court abuse its discretion by dismissing with prejudice counts IV and V of Hoyt’s amended complaint, when Hoyt had sought dismissal of those claims without prejudice under Minn. R. Civ. P. 41(a), to obtain an appealable final judgment?

V. Did the district court abuse its discretion by denying PRG’s motion to dismiss for failure to join GMAC?

ANALYSIS

I

On appeal from a district court’s decision to grant summary judgment, we consider whether genuine issues of material fact exist and whether the court erred in its application of the law. Offerdahl v. Univ. of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988). We view the evidence in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

Hoyt contends that the district court erred by dismissing its breach-of-contract claim against Entolo. For two reasons, we agree. First, we are unable to find a basis for the district court’s statement that the breach-of-contract claim is barred by the settlement agreement. To the contrary, the settlement agreement specifically reserves Hoyt’s claims against Entolo. Second, PRG did not move for summary judgment on Hoyt’s breach-of-contract claim against Entolo. PRG expressly notes in its motion papers that the motion does not include the breach-of-contract claim against Entolo.

PRG does not dispute that the settlement agreement preserves Hoyt’s right to sue Entolo or that PRG did not move for summary judgment on the breach-of-contract claim against Entolo. Instead, PRG argues that, because Hoyt consistently represented to the district court that its breach-of-contract claim against Entolo was “inextricably intertwined with and contingent upon” its veil-piercing claim against PRG, the dismissal of the claim was the natural consequence of enforcing the release of PRG under the settlement agreement. But the interrelationship of the claims does not provide a basis for dismissal or for granting unrequested relief. And although PRG persuasively argues that Entolo’s lack of assets may prevent Hoyt’s ultimate recovery against Entolo, this argument similarly fails to provide a legal basis for summary judgment dismissing the claim.

PRG also argues that, because Hoyt did not bring a rule 60 motion for reinstatement of its claim against Entolo, it may not challenge the dismissal on appeal. We are not persuaded by this argument. PRG cites no authority for the proposition that a rule 60 motion is a prerequisite for an appeal from the summary-judgment dismissal of a claim. Furthermore, Hoyt is not contending that the judgment is invalid for reasons that are remedied by a rule 60 motion. See Minn. R. Civ. P. 60.01, 60.02 (providing for relief from final judgment because of mistake, inadvertence, excusable neglect, newly discovered evidence, or fraud). We therefore conclude that the district court erred by dismissing Hoyt’s breach-of-contract claim against Entolo.

II

Hoyt next argues that the district court erred by dismissing its rescission claim based on a determination that the representations of PRG’s attorney were legal opinions and that, as a matter of law, Hoyt could not have reasonably relied on them. Hoyt argues that, at a minimum, the representations are actionable statements of law that imply knowledge of facts. Hoyt further argues that it reasonably relied on the representations.

Representations

PRG’s attorney allegedly made two representations to Steve Hoyt. First, the attorney stated that “[tjhere isn’t anything [to a veil-piercing claim].” Next, he stated that PRG and Entolo “were totally separate.”

Although abstract statements of law or pure legal opinions are not actionable, statements of law that imply knowledge of facts are actionable. Miller v. Osterlund, 154 Minn. 495, 496, 191 N.W. 919, 919 (1923) (stating that misrepresentation involving legal matter is actionable “if it amounts to an implied assertion that facts exist that justify the conclusion of law which is expressed”); see also Nodak Oil Co. v. Mobil Oil Corp., 533 F.2d 401, 406-07 (8th Cir.1976) (stating that representation about legal effect of facts not disclosed was actionable because it implied facts existed that substantiated statement). Thus the question presented is whether Hoyt has established that the alleged statements asserted or implied knowledge of facts not disclosed or otherwise known to Steve Hoyt.

PRG’s first alleged representation was that “[t]here isn’t anything [to support a veil-piercing claim].” This statement implied knowledge of facts that substantiated the representation. Whether Hoyt had a viable veil-piercing claim depended not on legal abstractions but on whether PRG and Entolo functioned as a single business entity as a matter of fact. The attorney’s response therefore implied that the factual elements necessary to establish the claim did not exist, and Steve Hoyt justifiably interpreted the response as a factual negation of a claim that PRG and Entolo functioned as a single business entity.

Our determination that the attorney’s statement implied knowledge of facts is consistent with precedent. In Miller, for example, the company stated that it had the right to issue insurance in Minnesota. Miller, 154 Minn. at 496, 191 N.W. at 919. The statement turned out to be false, and plaintiff sued for misrepresentation. Id. The supreme court held that although the statement amounted to a legal conclusion, it was actionable because it implied that “the company ha[d] complied with the well-known requirements of our laws” and was therefore able to sell insurance in Minnesota. Id. at 497, 191 N.W. at 919. Like the statement in Miller, the statement of PRG’s attorney that “[t]here isn’t anything [to a veil-piercing claim]” implied that no facts existed that would support such a claim.

Our determination that the attorney’s representation implied knowledge of facts is also supported by the district court’s finding that the statements amounted to an assertion that “PRG and Entolo are separate corporations that have maintained separate boundaries and formalities and, therefore, are not vulnerable to piercing claims.” The representation that PRG and Entolo were separate corporations that functioned with separate structures and with separate boundaries is a direct factual assertion. The district court’s finding is therefore inconsistent with its determination that the representation was a nonactionable statement of opinion.

Finally, the district court’s conclusion that PRG’s attorney had no legal or ethical duty to concede that his client’s adversaries might have a winning claim does not make the attorney’s representation nonac-tionable. The attorney, indeed, had no duty to concede that his client’s adversaries had a winning claim; but once he chose to respond to Steve Hoyt, he had a duty to be truthful. See, e.g., Safeco Ins. Co. of Am. v. Dain Bosworth, Inc., 531 N.W.2d 867, 871 (Minn.App.1995) (stating that party who chooses to speak must speak truthfully, even in absence of duty to speak); see also Klein v. First Edina Nat’l Bank, 293 Minn. 418, 421, 196 N.W.2d 619, 622 (1972) (stating that, when party speaks, party must disclose sufficient information to avoid misleading another). The lack of an ethical duty to concede a claim does not therefore support the district court’s determination that the attorney’s statement that “[t]here isn’t anything [to a veil-piercing claim]” was not actionable.

PRG’s second alleged misrepresentation was its statement that PRG and Entolo are “totally separate.” Hoyt argues that this statement is a purely factual assertion about the relationship between PRG and Entolo. Specifically, Hoyt asserts that the representation may reasonably be interpreted to mean that, as a matter of fact, PRG did not dominate Entolo’s affairs and allowed Entolo to operate as a distinct and separate corporate entity. We agree. Unlike the veil-piercing representation, which makes reference to a legal concept, the representation by PRG’s attorney that PRG and Entolo were “totally separate” is entirely a representation of fact. See Simonsen v. BTH Properties, 410 N.W.2d 458, 461 (Minn.App.1987) (concluding that representation that building was six-unit building when use as six-unit building violated applicable zoning ordinance was actionable as representation of fact), review denied (Minn. Oct. 26, 1987).

For these reasons, we conclude that the district court erred by dismissing Hoyt’s rescission claim based on the court’s determination that the representations of PRG’s attorney were nonactionable statements of opinion.

Reliance

Hoyt next argues that the district court erred by concluding that, as a matter of law, Steve Hoyt unreasonably relied on the representations of the opposing attorney in a negotiating setting and acted unreasonably by not committing the representations to writing. We conclude that whether Hoyt reasonably relied on the attorney’s representations raises a genuine issue of material fact for trial, which precludes summary judgment on Hoyt’s rescission claim.

To state a claim for fraudulent misrepresentation, a party must establish that it reasonably relied on a fraudulent representation. Davis v. Re-Trac Mfg., Corp., 276 Minn. 116, 117, 149 N.W.2d 37, 38-39 (1967). A party’s reliance is reasonable unless the party is on notice that the representation is not to be trusted or knows or has reason to know that the representation is false. Spiess v. Brandt, 230 Minn. 246, 253, 41 N.W.2d 561, 566 (1950) (stating that “in a business transaction the recipient of a fraudulent misrepresentation ... is justified in relying upon its truth, although he might have ascertained its falsity had he made an investigation”); Dan Dobbs, The Law of Torts § 475 (2001). Reliance is generally a question of fact. Nicollet Restoration, Inc. v. City of St. Paul, 533 N.W.2d 845, 848 (Minn.1995); see also Placke v. White-Price Co., 179 Minn. 147, 150, 228 N.W. 554, 555 (1930) (noting that whether experienced businessperson was justified in relying on defendant’s representations was question for jury).

The district court concluded that Steve Hoyt’s reliance was unreasonable as a matter of law because PRG’s attorney was engaged in adversarial negotiations. But an “attorney who makes affirmative misrepresentations to an adversary ... may be liable for fraud.” L & H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 380 (Minn.1989). A party may reasonably rely on representations made by an adverse party, unless the falsity of the representation is obvious. Restatement (Second) of Torts § 541A (stating that “recipient of a fraudulent misrepresentation of fact may be justified in relying upon it although he believes the maker to have an adverse interest in the transaction”), cmt. a (1977) (stating that “recipient [of representation made by adverse party] is entitled to assume that a representation of fact ... is honestly made, unless its falsity is obvious to his senses”).

The district court also concluded that, because Steve Hoyt had extensive business experience, his reliance on this statement would be unreasonable as a matter of law. But an experienced businessperson is entitled to rely on statements by an opposing party to a transaction, unless his or her experience makes the truth or falsity of the representation apparent. Berg v. Xerxes-Southdale Office Bldg. Co., 290 N.W.2d 612, 616 (Minn.1980); Piache, 179 Minn, at 150, 228 N.W. at 555. The current record contains no indication that Steve Hoyt’s business experience made the truth or falsity of the attorney’s representations apparent.

Finally, the district court concluded that Steve Hoyt’s failure to include the representations in the settlement agreement, even though it was his general practice to incorporate all material terms in an agreement, established that he did not reasonably rely on the representations. But under Minnesota law, a fraudulent misrepresentation can void a contract even though the misrepresentation was not included in the contract. Ganley Bros. v. Butler Bros. Bldg. Co., 170 Minn. 373, 375, 212 N.W. 602, 602 (1927) (“A contract resting on [oral] fraud, when under attack, cannot stand. The fact that the contract has been reduced to writing does not change the rule.”); see also Fin. Timing Publ’ns, Inc. v. Compugraphic Corp., 893 F.2d 936, 944 (8th Cir.1990) (stating that party may rely on misrepresentation even if not in contract’s language). Hoyt’s failure to include the attorney’s representations in the settlement agreement does not therefore render its reliance unreasonable as a matter of law.

Ultimately, reliance is a jury question. The record contains testimony from which a jury could reasonably conclude that Steve Hoyt’s reliance was reasonable. Steve Hoyt testified that he agreed to release PRG based on the representations of PRG’s attorney that there was no basis for a veil-piercing claim. He also indicated that he relied on the attorney’s representation on the assumption that attorneys have an ethical obligation to tell the truth. See Minn. R. Prof. Conduct § 4.1 (“In the course of representing a client a lawyer shall not knowingly make a false statement of fact or law.”). A jury could reasonably conclude that because attorneys have a professional duty not to make false assertions, even to adversaries, Steve Hoyt’s reliance was reasonable. See Matsuura v. E.I. du Pont de Nemours & Co., 102 Hawai'i 149, 73 P.3d 687, 703 (2003) (recognizing that attorney’s ethical duty justifies reliance on opposing counsel’s statements). A genuine issue of material fact thus remains for trial, and the district court erred by granting summary judgment dismissing Hoyt’s rescission claim.

Ill

PRG argues that, even if Hoyt has a viable misrepresentation claim, Hoyt’s rescission claim fails because Hoyt sought to rescind only part of the settlement agreement and Minnesota law does not allow partial rescission of a contract.

Under the settlement agreement, Hoyt released PRG from liability. In its complaint, Hoyt alleges that this release was fraudulently induced and seeks an order declaring that paragraph seven, which includes the release provisions, is null and void. Hoyt did not seek to invalidate other parts of the agreement, but it offered to return the consideration it received under the agreement.

In October 2003 PRG removed this action to federal court and filed a motion to dismiss. Among other things, PRG sought to dismiss Hoyt’s rescission claim against PRG and Entolo because the complaint sought partial rescission, which Minnesota does not recognize. When appearing in federal court on PRG’s motion to dismiss, Hoyt indicated that it intended to rescind the entire agreement. In its report and recommendation, the federal court acknowledged that the original complaint sought rescission of only paragraph seven of the settlement agreement, but, construing the complaint liberally in the light most favorable to Hoyt, it concluded that Hoyt sought rescission of the entire agreement.

Like the federal court, we conclude that Hoyt’s complaint, liberally construed in the light most favorable to Hoyt, alleges a cause of action for rescission of the entire agreement rather than only paragraph seven. See Home Ins. Co. v. Nat’l Union Fire Ins., 658 N.W.2d 522, 535 (Minn.2003) (stating that “courts are to construe pleadings liberally”); Wells Fargo Home Mortgage, Inc. v. Newton, 646 N.W.2d 888, 899 (Minn.App.2002) (stating that “purpose of the complaint is to advise the defendant as to the nature of the plaintiffs claim” and that “[i]n determining whether a complaint states a claim, the test is whether the facts alleged, liberally construed, entitle plaintiff to any relief’). The district court therefore erred by dismissing Hoyt’s rescission claim on the alternative ground that it was a nonviable claim for partial rescission.

Because the dismissal of Hoyt’s veil-piercing claim was based on the district court’s determination that the claim was barred by the release in the settlement agreement and we conclude that Hoyt’s rescission claim is viable, we also reverse the dismissal of Hoyt’s veil-piercing claim against PRG.

IV

Hoyt next argues that the district court improperly dismissed with prejudice the claims in its amended complaint to facilitate an interlocutory appeal, after Hoyt noted its intent to dismiss those claims without prejudice under Minn. R. Civ. P. 41.01(a) and requested an order directing the entry of final judgment. PRG argues that the dismissal of Hoyt’s claims with prejudice was necessary to satisfy Hoyt’s request for an appealable final judgment.

The district court has wide discretion in determining whether to grant a plaintiffs motion for dismissal. Willard v. Max A. Kohen, Inc., 202 Minn. 626, 628, 279 N.W. 553, 554 (1938). The court also has discretion to determine whether the dismissal should be with prejudice. Falkenstein v. Braufman, 251 Minn. 444, 452, 88 N.W.2d 884, 889 (1958). The district court did not explain the reasons for its dismissal of the amended claims. Because the district court did not address the merits of Hoyt’s amended claims, however, we may reasonably assume that the court accepted PRG’s claim that the dismissal of all claims with prejudice was necessary to obtain an appealable final judgment. This determination is contrary to the rules of civil procedure.

A judgment that adjudicates fewer than all of the claims in an action is immediately appealable if the district court makes an express determination that there is no just reason for delay and expressly directs the entry of judgment. Minn. R. Civ. P. 54.02; First Nat’l Bank of Windom v. Rosenkranz, 430 N.W.2d 267, 268 (Minn.App.1988). The district court has discretion on whether to make the express determination required for immediate review of a partial judgment. Rosenkranz, 430 N.W.2d at 268 (noting that district courts should authorize immediate appeals from partial judgments only when “substantial benefits to the parties in a particular case outweigh the general policy considerations against piecemeal review”). Absent this determination, a partial judgment is not appealable until a final judgment adjudicating all remaining claims in an action is entered. Id.

The district court apparently determined that an immediate appeal from the partial judgment dismissing the original claims of the complaint was appropriate. The court’s amended order for judgment therefore included an express determination that there was no just cause for delay and directed the immediate entry of judgment. The court’s rule 54.02 determination was sufficient to make the partial judgment appealable. Contrary to PRG’s claim, the dismissal of the claims in the amended complaint was not necessary to secure an appealable judgment. If the remaining claims were so intertwined with the dismissed claims that a rule 54.02 determination would have constituted an abuse of discretion, the solution was not to dismiss the remaining claims with prejudice but to wait until entry of a final judgment adjudicating those claims.

Because we can find no legal basis for the dismissal of Hoyt’s remaining claims with prejudice, we conclude that the district court abused its discretion in this dismissal.

Y

PRG argues that, to the extent Hoyt seeks rescission of the entire settlement agreement, its rescission claim must be dismissed for failure to join GMAC as a party to this action. According to PRG, because GMAC was a party to the settlement agreement, it is a necessary and indispensable party in an action for rescission of the settlement agreement.

The district court concluded that GMAC’s joinder was not necessary for a just adjudication of Hoyt’s claims and denied PRG’s motion to dismiss for failure to join. The district court did not abuse its discretion. See Port Auth. v. Harstad, 531 N.W.2d 496, 502 (Minn.App.1995) (stating that denial of motion to dismiss is subject to abuse-of-discretion standard), review denied (Minn. June 14,1995).

An indispensable party is a party “without whom the action could not proceed in equity and good conscience.” Murray v. Harvey Hansen-Lake Nokomis, Inc., 360 N.W.2d 658, 661 (Minn.App.1985). In deciding whether a party is indispensable, a court must balance several factors, including whether it can render an adequate judgment without the absent party and Whether relief can be crafted that would not prejudice the absent party’s rights. See Minn. R. Civ. P. 19.02; Murray, 360 N.W.2d at 661.

A person must be joined in an action if (1) in that person’s absence, complete relief could not be accorded among the existing parties; or (2) the person claims an interest in the subject of the action and is so situated that a disposition of the action in the person’s absence would impede the person’s ability to protect that interest or leave a current party subject to a substantial risk of incurring multiple or inconsistent obligations by reason of the person’s claimed interest. Minn. R. Civ. P. 19.01.

PRG entered into two loan agreements with GMAC. The agreements were secured by Entolo’s assets. In connection with the lease agreement, Hoyt entered into a landlord’s waiver and consent agreement with GMAC, under which Hoyt agreed to honor GMAC’s secured interest in Entolo’s property and recognized that GMAC’s secured interest had priority. Hoyt also released all claims against GMAC in the settlement agreement. In turn, GMAC released the right to cure Entolo’s default and the right to remain on the premises for up to 180 days after Entolo defaulted.

PRG argues that GMAC is a necessary and indispensable party in any action for rescission of the settlement agreement because it was a party to the settlement agreement. PRG cites numerous cases for the proposition that all parties who may be affected by the determination of an action are indispensable and must be joined, particularly when the action is one for rescission of a contract to which the unnamed person is a party. But PRG has not explained why GMAC must become a party to this action — in other words, PRG has not identified what rights or interests of GMAC under the settlement agreement . are implicated by Hoyt’s action such that equity requires that GMAC be joined.

Hoyt, by contrast, convincingly argues that, because GMAC’s rights or obligations under the settlement agreement have long since been fulfilled, nothing can be gained by adding GMAC. First, GMAC agreed in the settlement agreement that Entolo could pay the short-term rent to Hoyt out of the proceeds of the sale of Entolo’s property, in which GMAC had a secured interest. Entolo’s property has been sold and the rent has been paid. No existing GMAC interest is therefore implicated by paragraph one of the agreement.

Second, Hoyt released all claims against' GMAC in the settlement agreement. Because Hoyt has no current claims against GMAC either under the settlement agreement or in connection with this action, PRG’s concern that GMAC might be subject to a lawsuit by Hoyt is unfounded. Furthermore, any judgment could include a release of claims against GMAC.

Finally, in the settlement agreement GMAC released its rights under paragraph six of the waiver and consent agreement in the event Entolo defaulted on the lease, and Hoyt agreed that GMAC would not be liable for any of Entolo’s unperformed obligations under the lease. Because Entolo has long-since defaulted on the lease and left the premises and because the collateral in which GMAC had an interest has long been sold, paragraph six of the waiver and consent agreement no longer provides any obligation or rights to GMAC that might be affected by the rescission of the settlement agreement. Nothing in the agreement therefore requires the joinder of GMAC.

Because Hoyt sought no relief against GMAC and GMAC did not seek to be added as a party, the district court did not abuse its discretion by denying PRG’s motion to dismiss Hoyt’s complaint for failure to join GMAC. ■

DECISION

The district court erred by granting summary judgment dismissing Hoyt’s breach-of-contract, rescission, and veil-piercing claims. In addition, the district court abused its discretion by dismissing Hoyt’s remaining claims with prejudice. But the district court correctly determined that PRG was not entitled to dismissal for failure to join GMAC as a party.

Affirmed in part, reversed in part, and remanded.


source: Caselaw Access Project

author: WILLIS, Judge.

license: Public Domain

text:
    Denise M. SMITH, Appellant, v. Harold J. FLOTTERUD, et al., Respondents.
    No. A05-869.
    Court of Appeals of Minnesota.
    June 20, 2006.

      Daniel J. Moulton, Moulton Law Office, Rochester, MN, for appellant.
    Steven L. Viltoft, Lee La Bore, La Bore, Giuliani, Cosgriff & Viltoft, Ltd., Hopkins, MN; and Matt C. Rockne, Rockne Law Office, Zumbrota, MN, for respondents.
    Considered and decided by KALITOWSKI, Presiding Judge; WILLIS, Judge; and SHUMAKER, Judge.
   OPINION

WILLIS, Judge.

Appellant challenges the district court’s dismissal of her complaint for insufficient service of process. Because the record shows that service was not made knowingly and intentionally and because appellant did not substantially comply with rule 4 of the Minnesota Rules of Civil Procedure, we affirm.

FACTS

On September 30, 1998, appellant Denise M. Smith was involved in a motor-vehicle accident in Rochester with respondent Harold J. Flotterud. Smith attempted to serve a summons and complaint on Flotterud on April 7, 2004, when process server James Little went to what he believed was Harold Flotterud’s address in rural Zumbrota. According to Little, Harold Flotterud’s house appeared to be abandoned. In fact, Harold Flotterud had been living in a nursing home since June 2003.

Little spoke to Valerie Leonard, a woman who lived near Harold Flotterud’s house, to ask if she knew where Harold Flotterud was and told her that he “had some papers to serve on Mr. Flotterud.” Leonard told Little that she knew Flotter-ud’s son and could get “the papers” to him. Little, who subsequently admitted that he had no training as a process server, gave Leonard an envelope with Harold Flotter-ud’s name on it and left. Leonard then dropped off the envelope at the home of Harold Flotterud’s son, handing it to the son’s teenage daughter. The daughter in turn gave the envelope to her mother, who subsequently gave it to her husband, who is Harold Flotterud’s son, Ronald Flotter-ud. The parties stipulate that Ronald Flotterud had power of attorney for his father and had the legal authority to receive service of process on his father’s behalf. Ronald Flotterud gave the summons and complaint to his father’s insurance agent, and the insurance company hired an attorney to represent Harold Flotterud in the suit.

In April 2004, Harold Flotterud served Smith with an answer, in which he raised several defenses, including the insufficiency of service of process. Harold Flotterud never was served with a copy of the summons and complaint at the nursing home. The statute of limitations on Smith’s claims expired on September 30, 2004.

In December 2004, Harold Flotterud moved to dismiss, arguing that Smith failed to obtain personal service on him. The district court subsequently issued an order concluding that “service of process was not accomplished by the giving of the summons to Mrs. Leonard” and reserving a ruling, until an evidentiary hearing could be held, on “the remaining issue of whether service was accomplished by Mrs. Leonard leaving the papers with Ron Flotter-ud’s daughter.” After the evidentiary hearing, the district court granted Harold Flotterud’s motion to dismiss Smith’s complaint, concluding that because Leonard did not know that “the envelope contained papers intended to initiate a lawsuit,” service of process was not made knowingly and intentionally and that, therefore, “service of process was not accomplished.” This appeal follows.

ISSUE

Did the district court err by concluding that there was insufficient service of process?

ANALYSIS

A determination of whether service of process was proper and the interpretation of the rules of civil procedure are both questions of law, which are reviewed de novo. Amdahl v. Stonewall Ins. Co., 484 N.W.2d 811, 814 (Minn.App.1992) (reviewing service-of-process issue), review denied (Minn. July 16, 1992); Barrera v. Muir, 553 N.W.2d 104, 108 (Minn.App.1996) (interpreting rules of civil procedure), review denied (Minn. Oct. 29, 1996).

In Minnesota, a civil action is commenced against an individual when a summons is served “by delivering a copy to the individual personally or by leaving a copy at the individual’s usual place of abode with some person of suitable age and discretion then residing therein.” Minn. R. Civ. P. 3.01(a); Minn. R. Civ. P. 3.02; Minn. R. Civ. P. 4.03(a). Unless otherwise ordered by a district court, the summons may be served by “the sheriff or any other person not less than 18 years of age and not a party to the action.” Minn. R. Civ. P. 4.02. Service of a summons must be done “knowingly and intentionally.” Lee v. Skrukrud, 231 Minn. 203, 204, 42 N.W.2d 544, 545 (1950); State v. Maidi, 520 N.W.2d 414, 417 (Minn.App.1994), aff'd, 537 N.W.2d 280 (Minn.1995). Service of process in a manner not authorized by rule 4 of the rules of civil procedure is ineffective. Tullis v. Federated Mut. Ins. Co., 570 N.W.2d 309, 311 (Minn.1997). Without sufficient service of process, a district court has no jurisdiction over a defendant. Nieszner v. St. Paul Sch. Dist. No. 625, 643 N.W.2d 645, 648 (Minn.App.2002).

Smith argues that the district court “was wrong to require that Leonard’s service be knowingly and intelligently made.” She claims that this “requirement was made by the [Minnesota] Supreme Court [in Lee ] based upon a now repealed service of process statute [Minn.Stat. § 543.03 (1949) ]” and that there is no such requirement in rule 4. The requirement that service be knowingly and intelligently made did not appear explicitly in section 543.03, just as such a requirement does not appear explicitly in rule 4, which in 1952 superseded the statutes governing service of process, including section 543.03.

In Lee, the supreme court concluded that “[t]he service of a summons as authorized by [section] 543.03 and the making of proof thereof in compliance with [section] 543.14, by necessary statutory implication, requires that the act of effecting such service upon a defendant be performed both knoiuingly and intentionally.” 231 Minn. at 204, 42 N.W.2d at 545 (emphasis added). Smith offers no explanation why rule 4, specifically rules 4.02 and 4.06, of the rules of civil procedure, which prescribe who “may make service” and how such service shall be proved and contain language that is the same in all relevant respects to the language in the repealed statutory sections, should be interpreted differently from their statutory predecessors. And this court has required that service be made knowingly and intentionally since rule 4 became effective. See Maidi, 520 N.W.2d at 417 (concluding that summons was served knowingly and intentionally when server was told that she was serving a summons, intended to serve the summons, and acknowledged by a signed affidavit of service that she delivered the summons). The purpose of service of process is to give notice “reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action.” O'Sell v. Peterson, 595 N.W.2d 870, 872 (Minn.App.1999) (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950)). The requirement that service of process be made knowingly and intentionally ensures that service be reasonably calculated to reach the intended party. Therefore, we conclude that rule 4 requires, by implication, that service of process be made knowingly and intentionally.

Smith appears to challenge the district court’s finding that Leonard did not know that she was delivering a summons and complaint to Ronald Flotterud’s house when Smith states in her brief that this court “should be reminded that in Ms. Leonard’s first affidavit it was clear that she understood Mr. Little was a process server and had papers to serve on Harold Flotterud.” A district court’s findings “shall not be set aside unless clearly erroneous.” Minn. R. Civ. P. 52.01. Here, the record shows that nothing on the outside of the envelope that contained the summons and complaint indicated what the envelope contained. And Little testified that it was possible that he had given Leonard the envelope without telling her what was in it. Also, Leonard states in an affidavit that Little “did not tell [her] that [the envelope] contained suit papers,” that she did not open the envelope or know what it contained, that she did not tell Ronald Flotterud’s daughter what the envelope contained, and that she had not intended “to serve a lawsuit upon the Flot-teruds when [she] dropped off the envelope.” Based on this record, we conclude that the evidence supports the district court’s finding that Leonard did not knowingly and intentionally serve the summons on Ronald Flotterud.

In the alternative, Smith argues that despite any deficiency in service resulting from the fact that Leonard did not serve the summons knowingly and intentionally, service of process was still effective because Ronald Flotterud received actual notice of the lawsuit, thereby satisfying due-process requirements. When “the intended recipient receives actual notice of the action, the rules governing such service should be liberally construed ‘to avoid depriving a litigant of his day in court.’ ” Pederson v. Clarkson Lindley Trust, 519 N.W.2d 234, 235 (Minn.App.1994) (quoting Indep. Sch. Dist. No. 273 v. Gross, 291 Minn. 158, 165, 190 N.W.2d 651, 656 (1971)). But actual notice of a lawsuit will not subject a defendant to personal jurisdiction unless the plaintiff substantially complied with rule 4 of the rules of civil procedure. Thiele v. Stich, 425 N.W.2d 580, 584 (Minn.1988) (concluding that service on a receptionist at defendant’s place of business was ineffective because it did not substantially comply with rule 4, even though defendant re ceived actual notice). Service of process “must be reasonably calculated to reach the defendant.” O’Sell, 595 N.W.2d at 872.

Here, the record shows that the summons was not, as required by rule 4.03, served on Harold Flotterud personally or left with a person of suitable age or discretion residing at Harold Flotterud’s usual place of abode, which the district court concluded was the nursing home. Instead, the record shows that when Little found no one at Harold Flotterud’s house, he gave the envelope containing the summons and complaint to an unrelated third party who, without knowing what the envelope contained, agreed to deliver it to Harold Flotterud’s son and gave the envelope to the son’s teenage daughter, who gave it to her mother, who gave it to her husband, Ronald Flotterud, who, it was later discovered, had power of attorney for his father. We conclude that this combination of events that led to Ronald Flotter-ud receiving notice of the lawsuit against Harold Flotterud was not the result of substantial compliance with rule 4 of the rules of civil procedure.

DECISION

Because Leonard did not knowingly and intentionally serve Ronald Flotterud with the summons and because Smith’s attempted service did not substantially comply with rule 4 of the Minnesota Rules of Procedure, the district court did not err by concluding that service of process was insufficient and dismissing the complaint.

Affirmed.

      . Rule 4.02 provides that "the sheriff or any other person not less than 18 years of age and not a party to the action, may make service of a summons,” while repealed section 543.03 provided that "[t]he summons may be served by the sheriff of the county in which the defendant is found, or by an other person not a party to the action.” Rule 4.06 provides that "[s]ervice of summons and other process shall be proved by the certificate of the sheriff or other peace officer making it, [or] by the affidavit of any other person making it,” while repealed section 543.14 provided that "[s]er-vice of summons and other papers shall be proved as follows: (1) If made by the sheriff or other officer thereunto authorized by law, by his certificate; if by any other person, by his affidavit.”


author: WORKE, Judge.

text:
    Steven C. YOUNGQUIST, Trustee for the Next of Kin of Sheryl Lynn Gasner, Appellant, v. WESTERN NATIONAL MUTUAL INSURANCE COMPANY, Respondent.
    No. A05-2362.
    Court of Appeals of Minnesota.
    June 27, 2006.

      Charles James Suk, Beth K. Bussian, Suk Law Firm, Ltd., Rochester, MN, for appellant.
    Julian C. Janes, James T. Martin, Gisla-son, Martin & Varpness, P.A., Edina, MN, for respondent.
    Considered and decided by HUDSON, Presiding Judge; KALITOWSKI, Judge; and WORKE, Judge.
   OPINION

WORKE, Judge.

On appeal from the district court’s denial of posttrial motions, appellant argues that the district court erred when it instructed the jury to determine the present cash value of the loss of future aid, advice, comfort, and companionship that the deceased would have provided rather than the future value of the loss. Because the district court did not materially misstate the law in its instruction to the jury and the instruction was an appropriate exercise of the district court’s discretion, we affirm.

FACTS

Frank Gasner and Herman Eaker were involved in a two-car accident. Sheryl Gas-ner, a passenger in her husband’s vehicle, died as a result of the accident. Eaker was insured under a policy that had a liability limit of $100,000 and a $1,000,000 umbrella policy. Sheryl Gasner was insured under an automobile-insurance policy issued by respondent Western National Mutual Insurance Company. Sheryl Gas-ner’s policy provided underinsured-motorist coverage in the amount of $100,000 per person and $300,000 per accident. Appellant Steven C. Youngquist, trustee for the next of kin of Sheryl Lynn Gasner, settled the claim against Eaker for $900,000. Appellant settled the claim against Frank1 Gasner for $25,000. Appellant then asserted that Eaker had been operating an underinsured vehicle and made a claim for underinsured-motorist benefits. Respondent did not pay appellant underinsured-motorist benefits, asserting that $1,100,000 in coverage was available under Eaker’s liability-insurance policies.

Appellant filed an underinsured-motorist claim against respondent. The parties disagreed regarding whether the jury should be instructed to adjust an award for the loss of future aid, advice, comfort, and companionship to present cash value. The district court reviewed the jury-instruction guides and spoke to the judicial-advisory service and determined that compensation for loss of future aid, advice, comfort, and companionship should be reduced to present cash value. In determining the amount of future damages, over appellant’s objection, the district court gave the jury the following instruction:

After finding the dollar value of future damages for:
a. Loss of future earnings and services
b. Loss of future aid, advice, comfort, and companionship
you must then find the present cash value of this amount, and award only the present cash value. This is called “adjusting,” and is based on inflation and the fact that invested money earns interest.

The jury found that Eaker’s negligence was a direct cause of the accident. The jury determined that (1) $7,762.69 for funeral expenses; (2) $125,000 for loss of financial support from the date of her death to the present date; (3) $200,000 for aid, comfort, advice, and companionship she would have given from the date of her death to the present date; (4) $400,000 for loss of future financial support; and (5) $250,000 for future aid, comfort, and advice would fairly and adequately compensate Sheryl Gasner’s next of kin. Based on the jury’s verdict, the district court concluded that the total damages for the pecuniary loss suffered by Sheryl Gasner’s next of kin was $975,000, and based on that award, Eaker was not an underinsured motorist. The district court dismissed all claims against respondent with prejudice. Appellant moved for amended findings and for a new trial based on the district court’s instruction to the jury to reduce to present cash value the loss of future aid, advice, comfort, and companionship. The district court denied appellant’s motion for a new trial, and this appeal follows.

ISSUE

Did the district court abuse its discretion by instructing the jury to award the present cash value of damages for loss of future aid, advice, comfort, and companionship?

ANALYSIS

Denying a motion for a new trial on the ground of erroneous jury instruction rests within the district court’s discretion, and we will not reverse absent a clear abuse of that discretion. Paulson v. Lapa, Inc., 450 N.W.2d 374, 378 (Minn.App.1990), review denied (Minn. Mar. 22, 1990). District courts generally have “considerable latitude” in choosing jury instructions. Morlock v. St. Paul Guardian Ins. Co., 650 N.W.2d 154, 159 (Minn.2002). But a court errs if it gives a jury instruction that materially misstates the law. State v. Kuhnau, 622 N.W.2d 552, 556 (Minn.2001). If an erroneous jury instruction destroys the substantial correctness of the charge, causes a miscarriage of justice, or results in substantial prejudice, a new trial is warranted. Lindstrom v. Yellow Taxi Co., 298 Minn. 224, 229, 214 N.W.2d 672, 676 (1974). An error is prejudicial if there is a “reasonable likelihood that the giving of the instruction in question would have had a significant effect on the verdict of the jury.” State v. Glidden, 455 N.W.2d 744, 747 (Minn.1990). If a jury instruction “is erroneous and an appellate court is unable to determine whether the error affected the jury, a new trial should be granted.” Rowe v. Munye, 674 N.W.2d 761, 769 (Minn.App.2004), aff'd, 702 N.W.2d 729 (Minn.2005).

Appellant argues that the district court erred in instructing the jury that the loss of future aid, advice, comfort, and companionship — a particular measure of pecuniary damage in a wrongful-death matter — is susceptible to reduction to present cash value. Under Minn.Stat. § 573.02, subd. 1 (2004), recovery in a wrongful-death action “is the amount the jury deems fair and just in reference to the pecuniary loss resulting from the death[J” The supreme court expanded the concept of “pecuniary loss” to include loss of aid, advice, comfort, and protection. Fussner v. Andert, 261 Minn. 347, 358, 113 N.W.2d 355, 362 (1961). CIVJIG 91.75 states that a jury must “determine an amount of money that will fairly and adequately compensate (claimant)(s) for the losses ... suffered as a result of [the] death.” 4A Minnesota Practice, CIVJIG 91.75 (1999). There are 12 factors for a jury to consider in determining a fair amount: (1) past contributions, (2) life expectancy at the time of death, (3) health, age, habits, talents, and success, (4) occupation, (5) past earnings, (6) likely future earning capacity and prospects of bettering oneself had he or she lived, (7) living expenses, (8) legal obligation to support spouse or next of kin and the likelihood of fulfilling that obligation, (9) reasonable funeral and necessary medical expenses, (10) probability of paying off existing debts, (11) future counsel, guidance, and aid, and (12) future advice, comfort, assistance, and protection. Id.

While some future damages are to be adjusted to present day value, others are not. CIVJIG 90.25 provides instructions for adjusting future damages to present cash value. 4A Minnesota Practice, CIVJIG 90.25 (1999). This instruction provides that damages for loss/reduction of future earning capacity and for future health-care expenses must be adjusted. Id. Damages that are not to be adjusted include (1) future pain, (2) future disability, (3) future emotional distress, and (4) past damages. Id. “In 1985, the legislature enacted a discount statute, [Minn.Stat.] § 604.70. That statute was repealed in 1988, making the discount issue once again subject to judicial decision.” Id. at use note.

Appellant argues that damages for future aid, advice, comfort, and companionship should not be adjusted to present cash value because an award for these damages is equivalent to an award for future pain and suffering, which is not adjusted. Appellant contends that this type of damage award, like an award for future pain and suffering, is a means to compensate the next of kin for their loss, rather than a means of meeting their expenses. Respondent argues that the district court did not abuse its discretion because the district court’s instruction was not a material misstatement of the law.

The district court instructed the jury to adjust the damage award for future aid, advice, comfort, and companionship to present cash value. The district court reasoned that these items were the same as “services.” The district court correctly characterized this loss as a service that will have to be provided by someone else after a death. See e.g. Bolinger v. St. Paul D.R. Co., 36 Minn. 418, 420, 31 N.W. 856, 857 (1887) (stating that the value of the services of the head of a family cannot be limited to the amount of wages and that daily services, attention, and care may be considered by the jury).

Additionally, CIVJIG 90.25 provides a list of damages that are not to be adjusted. The loss of future aid, advice, comfort, and companionship does not fall into any of the excluded categories — future pain, future disability, future emotional distress, and past damages. Most persuasive is the use note to CIVJIG 90.25 that indicates that the issue of discounting an award is subject to judicial decision. The district court did not materially misstate the law in its instruction. See Kuhnau, 622 N.W.2d at 556 (stating that a district court errs when it gives a jury instruction that materially misstates the law). Thus, the district court did not abuse its discretion in denying appellant’s motion for a new trial because it was within the district court’s discretion to instruct the jury to adjust the loss of future aid, advice, comfort, and companionship to present cash value.

DECISION

Because the district court’s jury instruction to adjust the loss of future aid, advice, comfort, and companionship to present cash value was not a material misstatement of the law and was within the district court’s discretion, the district court did not abuse its discretion by denying appellant’s motion for a new trial based on an erroneous jury instruction.

Affii-med.


text:
    David GRANVILLE and Marlyss Granville, as parents and natural guardians of Kailynn Granville, a minor, Respondents (A05-1377), Jacqueline Johnson, as parent and natural guardian of Shanel Andrews, a minor, Respondent (A05-1378), v. MINNEAPOLIS SCHOOL DISTRICT, Special School District No. 1, Appellant.
    Nos. A05-1377, A05-1378.
    Court of Appeals of Minnesota.
    June 27, 2006.

      Erik D. Wilier, Michael L. Weiner, Christopher J. Moreland, Yaeger, Jung-bauer & Barczak, PLC, Minneapolis, MN, for respondents.
    Diane B. Bratvold, Shanda K. Pearson, Rider Bennett, LLP, Minneapolis, MN, for appellant.
    Steven L. Theesfeld, Yost & Baill, LLP, Minneapolis, MN, for amicus curiae Minnesota Trial Lawyers Association.
    Considered and decided by STONEBURNER, Presiding Judge; WILLIS, Judge; and CRIPPEN, Judge.

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

   OPINION

WILLIS, Judge.

Appellant school district challenges an order denying its motion for summary judgment based on its claim of immunity from tort liability under Minn.Stat. § 466.12, subd. 3a (2002), which provides immunity to school districts that are unable to obtain liability insurance for an average rate of $1.50 or less per pupil. The district court, applying both federal and state rational-basis analyses, concluded that the statute’s $1.50 classification is arbitrary in light of current market conditions and “not genuine or relevant to the purpose of the law” and that, therefore, the “operation of the statute ... violates the equal protection guarantees of the federal and state constitutions.” Because the record shows that all school districts in Minnesota may apply for and receive immunity from tort liability under Minn.Stat. § 466.12, subd. 3a, and that, therefore, this statute treats all school districts and their students similarly, we conclude that the $1.50 classification does not violate the Equal Protection Clause of either the United States or Minnesota Constitution.

FACTS

In November 2001, Loring Elementary School students Kailynn Granville and Shanel Andrews were injured when they collided while participating in a game of flashlight tag in a completely dark gymnasium during physical-education class. In June 2002, respondents David and Marlyss Granville and Jacqueline Johnson, the parents of the children, sued appellant Minneapolis Public Schools, Special School District No. 1 (the school district), to recover damages for their children’s personal injuries. The school district moved to dismiss the suit, arguing that it was immune from tort liability under Minn.Stat. § 466.12, subd. 3a (2002), which provides immunity to school districts that are unable to obtain liability insurance for an average rate of $1.50 or less per pupil. Respondents countered that Minn.Stat. § 466.12, subd. 3a, violates the equal-protection clauses of the United States and Minnesota constitutions by creating an unconstitutional racial classification and by depriving students of the fundamental right to seek redress for injuries caused by another. Respondents argued that because the school district’s student population is 45 percent African American and the school district is the only school district in the state to request and receive the certification necessary to claim immunity from tort liability, the application of the statute created a class of African American students who are prevented from exercising their right to sue the school district. In November 2002, the district court granted the school district’s motion to dismiss, applying a rational-basis test to the statute and concluding that it was constitutional.

Respondents appealed to this court, arguing that the district court erred by failing to apply the strict-serutiny standard to the statute. This court affirmed in part, concluding that strict scrutiny did not apply because the statute did not create a racial classification or infringe on a fundamental right, and reversed in part because the record did “not permit the determination of whether Minn.Stat. § 466.12, subd. 3a, passes the rational-basis test.” Granville v. Minneapolis Pub. Sch., Special Sch. Dist. No. 1 (Granville I), 668 N.W.2d 227, 232-35 (Minn.App.2003), review denied (Minn. Nov. 18, 2003). This court stated that there was “insufficient evidence from which the district court [could] determine whether the legislature’s choice of a rate of $1.50 per student [was] arbitrary under current market conditions, as [plaintiffs] assert, or, on the contrary, creates a constitutional classification that is relevant to the statute’s purpose.” Id. at 234r-35. This court remanded for further proceedings, concluding that “[i]n order to decide whether the statute meets the federal and state rational-basis tests, evidence demonstrating whether immunity triggered by the $1.50 per pupil rate permits constitutional operation of the statute is required” and that “[w]ithout such analysis, the district court’s conclusion that the school district [was] entitled to immunity [was] erroneous.” Id. at 235.

In December 2004, the school district moved the district court for summary judgment, arguing again that it was immune from tort liability under Minn.Stat. § 466.12, subd. 3a. Respondents argued that, inter alia, Minn.Stat. § 466.12, subd. 3a, is not rationally related to the legitimate governmental purpose of protecting schools that cannot obtain liability insurance at reasonable market rates. On May 13, 2005, the district court issued an order denying summary judgment and concluding that, inter alia, Minn.Stat. § 466.12, subd. 3a, is unconstitutional under both the federal and state rational-basis tests. The school district appeals.

ISSUE

Does Minn.Stat. § 466.12, subd. 3a (2002), violate the equal-protection clauses of the United States and Minnesota constitutions?

ANALYSIS

A party may appeal immediately from an order that denies an immunity defense. Anderson v. City of Hopkins, 393 N.W.2d 363, 364 (Minn.1986). When reviewing a summary-judgment ruling that denies immunity, this court makes two determinations: (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law. See Thompson v. City of Minneapolis, 707 N.W.2d 669, 673 (Minn.2006). Whether an immunity defense applies is a question of law subject to de novo review. Johnson v. State, 553 N.W.2d 40, 45 (Minn.1996).

The school district claims it has immunity from tort liability under Minn.Stat. § 466.12, subd. 3a (2002), which provides:

Schools shall insure, be liable; conditions. A school district shall procure insurance as provided in section 466.06, meeting the requirements of section 466.04, if it is able to obtain insurance and the cost thereof does not exceed $1.50 per pupil per year for the average number of pupils. If, after a good faith attempt to procure such insurance, a school district is unable to do so, and the commissioner of insurance certifies that such insurance is unobtainable, it shall be subject to the provisions of subdivisions 1 and 2. If the school district fails to make a good faith attempt to procure such insurance and the commissioner of insurance does not certify that such insurance is unobtainable, then in that event section 466.12 shall not apply to such a school district and it shall be subject to all of the other applicable provisions of chapter 466.

It is undisputed that the school district satisfied the requirements for immunity under subdivision 3a by showing that it was unable to obtain liability insurance at an average rate of $1.50 or less per pupil per year and by obtaining a certification of such inability from the commissioner of commerce. See 1983 Minn. Laws ch. 289, § 114, at 1307 (substituting statutory references to “commissioner of insurance” with “commissioner of commerce”). Respondents argue, and the district court concluded, that the $1.50 per pupil classification in the statute is an arbitrary distinction and that immunity triggered by the $1.50 per pupil rate violates the equal-protection guarantees of the federal and state constitutions.

The constitutionality of a statute is a question of law, which is reviewed de novo. Hamilton v. Comm’r of Pub. Safety, 600 N.W.2d 720, 722 (Minn.1999). Minnesota statutes are presumed to be constitutional, and the power to declare a statute unconstitutional is “exercised with extreme caution and only when absolutely necessary.” In re Haggerty, 448 N.W.2d 363, 364 (Minn.1989). The party challenging the constitutionality of a Minnesota statute bears the burden of establishing beyond a reasonable doubt that the statute violates a constitutional provision. Id.

In Granville I, this court determined that the rational-basis standard applies to the determination of whether Minn.Stat. § 466.12, subd. 3a, violates the equal-protection clauses of the United States and Minnesota constitutions. 668 N.W.2d at 234. Both clauses “mandate that all similarly situated individuals shall be treated alike, but only ‘invidious discrimination’ is deemed constitutionally offensive.” Scott v. Minneapolis Police Relief Ass’n, 615 N.W.2d 66, 74 (Minn.2000); see U.S. Const, amend. XIV, § 1; Minn. Const, art. I, § 2. Minnesota courts apply both the federal and state formulations of the rational-basis test when reviewing equal-protection challenges. Scott, 615 N.W.2d at 74. The federal formulation requires that a court determine (1) “whether the challenged classification has a legitimate purpose” and (2) “whether it was reasonable to believe that use of the challenged classification would promote that purpose.” Kolton v. County of Anoka, 645 N.W.2d 403, 411 (Minn.2002) (citing W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 668, 101 S.Ct. 2070, 2083, 68 L.Ed.2d 514 (1981)) (other citation omitted). The Minnesota formulation of the rational-basis test requires that:

(1) The distinctions which separate those included within the classification from those excluded must not be manifestly arbitrary or fanciful but must be genuine and substantial, thereby providing a natural and reasonable basis to justify legislation adapted to peculiar conditions and needs; (2) the classification must be genuine or relevant to the purpose of the law; that is there must be an evident connection between the distinctive needs peculiar to the class and the prescribed remedy; and (3) the purpose of the statute must be one that the state can legitimately attempt to achieve.

State v. Russell, 477 N.W.2d 886, 888 (Minn.1991) (quoting Wegan v. Village of Lexington, 309 N.W.2d 273, 280 (Minn.1981) (quoting Guilliams v. Comm’r of Revenue, 299 N.W.2d 138, 142 (Minn.1980))). The Minnesota formulation is a stricter standard because it requires the state to establish “a reasonable connection between the actual, and not just the theoretical, effect of the challenged classification and the statutory goals.” Id. at 889.

Here, Minn.Stat. § 466.12, subd. 3a, on its face makes a distinction between those school districts that can and those that cannot obtain liability insurance at a rate of $1.50 or less per pupil per year. Those that cannot obtain the $1.50 rate and that receive a certification of such inability from the commissioner of commerce are immune from tort liability. Minn.Stat. § 466.12, subds. 3a, 2 (2002). The legislature has not amended the $1.50 rate since subdivision 3a was enacted in 1969, despite opportunities to do so when it amended section 466.12 in 1973 and in 1974 and repealed the section’s expiration provision in 1996. See 1973 Minn. Laws ch. 123, art. 5, § 7, at 226; 1974 Minn. Laws ch. 472, § 1, at 1189-90; 1996 Minn. Laws ch. 310, § 1, at 187. Respondents’ expert David Lanigan, the former owner of an insurance agency that worked with school districts, stated in an affidavit that “[i]t has likely not been possible for any school in the state to obtain insurance at [a $1.50] rate since the mid-1970’s.” Although the school district is the only district in the state to have sought and obtained immunity under subdivision 3a, the parties agree that the effect of Minn.Stat. § 466.12, subd. 3a, is to allow any Minnesota school district to apply for and receive immunity from tort liability.

Respondents argue that although the $1.50 classification in Minn.Stat. § 466.12, subd. 3a, “presumably served to protect the coffers of high risk schools facing abnormally high insurance premiums,” it is now an arbitrary distinction because it “is not in line with current market condition[s]” and cannot be “rationally aimed to meet the desired goal of protecting schools that cannot get insurance at reasonable market rates.” The school district argues that this court should not analyze the $1.50 classification “under current market conditions” because (1) this court is limited to analyzing whether the $1.50 classification was arbitrary at the time it was enacted (the parties agree it was not); (2) there is no “legal authority for incorporating ‘current market conditions’ into a rational basis analysis”; (3) market conditions are always changing and an analysis that incorporates market conditions would therefore subject subdivision 3a to repeated constitutional challenge; and (4) this court’s reference to current market conditions in Granville I was only an attempt to “frame the parties’ competing arguments for remand” and does not constitute the law of the case.

We conclude that we do not need to decide if the $1.50 classification is arbitrary in light of current market conditions because arbitrary classifications in statutes have been ruled unconstitutional only when such classifications result in similarly situated individuals being treated differently. See, e.g., Glassman v. Miller, 356 N.W.2d 655, 656 (Minn.1984) (holding that statutory notice-of-claim requirement that applied to tort victims of municipalities but not to tort victims of the state violated equal-protection clauses because there was “no rational basis for distinguishing between municipal and state tortfeasors”); Wegan v. Village of Lexington, 309 N.W.2d 273, 280 (Minn.1981) (holding that two provisions of the dramshop act that applied only to those injured by individuals intoxicated from “stronger liquor” violated the equal-protection clauses because there was “no rational basis for distinguishing between persons injured by those intoxicated from drinking 3.2 beer and those intoxicated as a result of consuming stronger liquor”). Here, the $1.50 classification results in all public school districts, and all of their potential student tort victims, being treated alike rather than differently. Again, the parties agree that under subdivision 3a, all Minnesota school districts currently may become immune from tort liability and all students would be prevented from suing school districts for damages resulting from injuries incurred at school. Whether a particular school district has tort immunity depends on whether it decides to seek certification from the commerce commissioner. At oral argument, respondents were unable to identify any individual or group that is treated differently under subdivision 3a. Because the $1.50 classification does not result in the unequal treatment of any individual or group, MinmStat. § 466.12, subd. 3a, does not violate the Equal Protection Clause of either the United States or Minnesota Constitution.

The parties dispute whether school-district immunity is good public policy. And although the supreme court’s exploration of similar policy arguments led it to abrogate common-law immunity for school districts in Spanel v. Mounds View Sch. Dist. No. 621, 264 Minn. 279, 118 N.W.2d 795 (1962), there is no Minnesota caselaw suggesting that a grant by the legislature of school-district immunity from tort liability is unconstitutional. It is the legislature’s responsibility “to balance myriad competing interests and to allocate the State’s resources for the performance of those services important to the health, safety, and welfare of the public.” Lienhard v. State, 431 N.W.2d 861, 867 (Minn.1988). Therefore, it is the responsibility of the legislature and not the judiciary to balance the competing policies reflected in a statute that grants school districts immunity under defined circumstances and to amend the statute as it sees fit. See Minn. Const, art. Ill, § 1 (providing that the “powers of government shall be divided into three distinct departments” and no one department “shall exercise any of the powers properly belonging to either of the others”).

Respondents raised due-process arguments for the first time at oral argument. Because these arguments were not made in respondents’ brief, we will not consider them. See Peterson v. BASF Corp., 711 N.W.2d 470, 482 (Minn.2006) (stating that “failure to address an issue in brief constitutes waiver of that issue”).

DECISION

Because the application of the $1.50 classification in Minn.Stat. § 466.12, subd. 3a, results in similarly situated individuals being treated similarly, the statute does not violate the Equal Protection Clause of either the United States or Minnesota Constitution.

Reversed.


author: RANDALL, Judge.

text:
    Duane F. NELSON, et al., Appellants, v. SHORT-ELLIOT-HENDRICKSON, INCORPORATED, Respondent, City of Stillwater, Respondent.
    No. A05-1740.
    Court of Appeals of Minnesota.
    June 27, 2006.

      Jamie R. Pierce, Thomas G. Wallrich, Cyrenthia D. Jordan, Mansfield, Tanick & Cohen, P.A., Minneapolis, MN, for appellant.

      Stephen F. Buterin, Mark J. Heley, Coleman, Hull & Van Vliet, P.L.L.P., Minneapolis, MN, for respondent Short-Elliot-Hendrickson, Incorporated.
    Elisa Martha Hatlevig, James Golem-beck, Patrick S. Collins, Jardine, Logan, & O’Brien, P.L.L.P., Lake Elmo, MN, for respondent City of Stillwater.
    Considered and decided by LANSING, Presiding Judge, RANDALL, Judge, and WILLIS, Judge.
   OPINION

RANDALL, Judge.

This is an appeal from summary judgment in a drainage-related dispute. Appellant-property owners argue (a) the district court erred in ruling that a prior action by appellants against the city is a basis for applying res judicata in this action where, they argue, part of the basis of the current action occurred after the ruling in the prior ease and the claims are distinct; (b) fact issues exist regarding whether the city failed to maintain the easement in question; (c) the city is liable for damages caused by its failure to maintain the easement; (d) the district court mischaracterized the drainage-related hole on appellants’ property as an improvement to real property, and hence erred in concluding appellants’ suit against the project designer is barred by the statute of limitations in Minn.Stat. § 541.051, subd. 1(a) (2002); (e) fact issues exist regarding appellants’ injury and hence summary judgment was inappropriate; and (f) the city’s notice of review regarding the alternative theories for the relief it sought is premature because the district court did not address those theories. We affirm.

FACTS

Since 1968, appellants Duane and Margaret Nelson have been owners of a parcel of land adjacent to Lily Lake (lake) located in the City of Stillwater (Stillwater), respondent. When purchased by appellants, the property was encumbered by an easement in favor of Stillwater for the purpose of maintaining storm-sewer outlets to the lake.

As a result of increased nutrient pollution in the lake, Stillwater employed Short Elliot Hendrickson, Inc. (SEHI), respondent, to conduct a feasibility study of the lake to find ways to improve its water quality. After consideration of various suggestions by SEHI, and based on the recommendations of an engineering firm, Stillwater opted to implement a plan referred to as the “Northwest Storm Water Diversion and Treatment System” (plan). A public hearing was held and Stillwater voted to adopt the plan.

The purpose of the plan was to reduce the amount of nutrients and sediment flowing into the lake, thereby improving its water quality. The plan required that an above-ground sedimentation pond be built to capture harmful nutrients and sediment before entering the lake. The plan placed the sedimentation pond on Stillwater’s easement located on appellants’ property. SEHI designed and constructed the sedimentation pond which was completed in December 1999.

In October 2000, appellants brought suit against Stillwater alleging temporary taking damages, nuisance, and trespass damages in the form of loss of reasonable use and occupation of their property. Both Stillwater and appellants brought motions for partial summary judgment. Appellants argued that the sedimentation pond and its accompanying structures exceeded the scope of Stillwater’s easement and were not permissible uses under the easement. Stillwater argued that the pond and its structures were a reasonable use of the dominant estate and fell within the scope and purpose of the easement. The district court granted Stillwater’s motion for partial summary judgment, dismissing appellants’ claim for inverse condemnation, finding that the sedimentation pond was an essential component of the storm-sewer water quality treatment program and within the scope and purpose of the easement.

Stillwater sought dismissal of appellants’ remaining claims of nuisance and trespass. Appellants moved the district court to amend its findings regarding the nature of the sedimentation pond and its impact on their property. Appellants argued that the pond was not merely an improvement to Stillwater’s storm sewer system, but that the pond was a holding pond or catch basin that was not permitted under the terms of the easement. The district court rejected appellants’ argument and granted Stillwater’s motion to dismiss appellants’ nuisance and trespass claims.

In September 2003, appellants again brought suit against Stillwater and SEHI. Appellants alleged that Stillwater failed to maintain its easement and that SEHI was negligent in failing to adequately examine the impact of the plan and designing the sedimentation pond. SEHI and Stillwater both moved the district court for summary judgment dismissing appellants’ claims. SEHI argued that the two-year statute of limitations governing improvements to real property set forth in Minn.Stat. § 541.051 (2002) barred appellants’ claim, that appellants failed to comply with the strict affidavit requirements of Minn.Stat. § 544.42 (2002), and that the doctrine of res judicata barred appellants’ claim. Stillwater argued that appellants’ claims were untimely and barred by the doctrine of res judicata, that it was entitled to discretionary immunity, and that appellants failed to present evidence establishing the elements of causation and damages necessary to support their claims of negligence.

The district court granted the summary judgment motion of SEHI and Stillwater, dismissing appellants’ complaint. In granting SEHI’s motion, the district court found that the sedimentation pond was an integrated component of the storm-sewer system and an improvement to real property under Minn.Stat. § 541.051. Thus, the district court dismissed appellants’ claims as untimely under the statute, concluding that appellants first discovered any claimed injury from the sedimentation pond in 2002. The district court did not consider SEHI’s other arguments. As to Stillwater’s motion, the district court found that the doctrine of res judicata barred appellants’ claims and did not consider any remaining defenses. This appeal followed.

Appellants argue the following: (1) the district court erred in ruling that the prior action by appellants a,gainst Stillwater is a basis for applying res judicata in this action. Appellants claim part of the basis of the current action occurred after the ruling in the prior case and the claims are distinct; (2) the district court mischarac-terized the drainage-related hole on appellants’ property as an improvement to real property, and hence erred in concluding appellants’ suit against SEHI is barred by the statute of limitations in Minn.Stat. § 541.051, subd. 1(a); (3) genuine issues of material fact exist regarding their injuries and therefore summary judgment in favor of respondents was not proper; and (4) Stillwater’s notice of review regarding the alternative theories for the relief it sought is premature because the district court did not address those theories.

ISSUE
I. Did the district court err by ruling that res judicata barred appellants’ claim against Stillwater?
II. Did the district court err by ruling that the sedimentation pond on appellants’ property was an improvement to real property under to Minn.Stat. § 541.051, subd. 1(a) (2002)?
III. May this court review alternative theories raised by respondents when the district court did not base its order on the alternative theories?

ANALYSIS

I.

Appellants argue that their previous suit against Stillwater, premised on whether Stillwater had the right to construct the sedimentation pond and drainage hole on their property, is distinct and separate from their present claim alleging that Still-water failed to maintain its easement. We affirm the district court’s conclusion that res judicata bars appellants’ new claims.

The doctrine of res judicata is designed to prevent the relitigation of causes of action already determined in a prior action. Beutz v. A.O. Smith Harvestore Prods., Inc., 431 N.W.2d 528, 531 (Minn.1988). A subsequent claim is barred under the doctrine of res judicata when: (1) the earlier claim involved the same claim for relief; (2) the earlier claim involved the same parties or their privies; (3) there was a final judgment on the merits; and (4) the estopped party had a full and fair opportunity to litigate the matter. State v. Joseph, 636 N.W.2d 322, 327 (Minn.2001). All four prongs must be met in order for res judicata to apply. See id. at 327-29. The applicability of res judicata is a question of law, which this court reviews de novo. Id. at 326.

Appellants’ second claim against Stillwa-ter involved identical parties and there was a final judgment on the merits. We now consider whether the earlier claim involved the same claim for relief, and if appellants had a full and fair opportunity to litigate the present matter.

Appellants argue that the causes of action are different in the two claims and do not involve the same claim for relief. Res judicata involves circumstances that give rise to a claim and precludes a second claim for the same cause of action “not only as to every matter which was actually litigated, but also as to every matter which might have been litigated therein.” Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn.2004) (quotation omitted). To determine if appellants’ second claim is barred under res judicata, we focus on whether the second claim arises out of the same set of factual circumstances as the first claim. Id. When determining whether two suits involve the same claims, we inquire whether both claims arise from the “same operative nucleus of facts.” Nitz v. Nitz, 456 N.W.2d 450, 451 (Minn.App.1990) (quotation omitted).

We conclude that both claims arose out of the “same operative nucleus of facts.” Both claims arise from: (a) appellants’ ownership of specific property; (b) Stillwa-ter’s easement on the property; (c) the building and installing of storm-water pipes, two large manholes, and a holding pond on appellants’ property; and (d) alleged damages as a result of Stillwater’s responsibilities. Appellants now seek compensation for damages sustained as a result of an alleged inadequate plan.

Appellants argue that their first claim of inverse condemnation required different evidence to sustain in comparison to their second claim for breach of duty to maintain or negligence in failing to act to maintain the water quality storm-sewer project. Although there may be instances where different claims as a result of a cause of action need to be supported by different evidence, this is not the case here. In their first claim involving inverse condemnation, appellants sought damages for nuisance. Although under a different theory, appellants’ negligence theory under their second claim would involve the same or similar evidence as their nuisance theory under their first claim. Under their nuisance theory, appellants alleged that they sustained damages “in the amount of the reasonable value and use and occupation” of their property as a result of Stillwater’s actions. Under their negligence theory, appellants allege that they are “no longer able to utilize” their property and that its value has “suffered a diminution” as a result of Stillwater’s actions. Under both theories, appellants claim to have suffered damages. To prevail on their claims, appellants would need to present evidence showing how they are unable to use their property and how their property has diminished in value. It is reasonable to conclude that under both claims, similar, if not identical, evidence would have to be presented. Appellants are using different theories to bring a similar claim to avoid res judicata. See Nitz, 456 N.W.2d at 452; see also Antonson v. Ekvall, 295 Minn. 558, 559, 204 N.W.2d 446, 446-47 (1973) (where the factual setting was the same in a former tort action, the plaintiff was barred from litigating the same basic claims under a contract action).

Appellants could have brought their negligence claim in their first complaint. Appellants testified that they were aware of the cause of their injuries as a result of alleged negligence in December 1999 and certainly by the summer of 2000, prior to the commencement of their first claim. Appellants had the opportunity to litigate the matter.

SEHI argues that res judicata also prevents appellants from bringing suit against it. Because the district court did not make findings or rule on this issue, we do not review it.

II.

The district court found that “[i]t appears well settled and clearly held that storm sewer systems qualify as improvements to real property” under Minn.Stat. § 541.051. The district court also found the sedimentation pond, is “undeniably an integrated component of the city storm sewer system, designed to catch and treat run-off from the sewers before it can reach the lake.” The district court concluded that because appellants had first discovered their injury arising from the alleged defective condition of the pond more than two years prior to commencement of their claim, their action was time barred under the statute. Appellants argue that the pond and structures associated with the pond do not constitute “actual improvement to their real property.”

Improvement to Beal Property

Minn.Stat. § 541.051, subd. 1(a) states:

... no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of the injury, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury or, in the case of an action for contribution or indemnity, accrual of the cause of action, nor, in any event shall such a cause of action accrue more than ten years after substantial completion of the construction. Date of substantial completion shall be determined by the date when construction is sufficiently completed so that the owner or the owner’s representative can occupy or use the improvement for the intended purpose.

We conclude the district court properly found that the sedimentation pond and its structures are improvements to real property for purposes of MinmStat. § 541.051.

This court uses a common sense approach when determining whether something is an improvement to real property for purposes of the statute of limitations. Williams v. Tweed, 520 N.W.2d 515, 518 (Minn.App.1994), review denied (Minn. Oct. 27, 1994). While statutes that limit damages based on improvements to real property are construed strictly, court, nonetheless, give effect to the plain meaning of the statute’s words without resort to technical legal constructions of its terms. Kline v. Doughboy Recreational Mfg. Co., 495 N.W.2d 435, 439 (Minn.App.1993). The sedimentation pond benefits the land.

Appellants’ position is centered on the argument that the sedimentation pond “has not enhanced the capital value” of their real property but has instead “diminished the value” of their real property. Citing to this court’s decision in Taney v. Indep. Sch. Dist. No. 621, appellants argue that the Minnesota Supreme Court has defined an improvement as “a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repair.” 673 N.W.2d 497, 504 (Minn.App.2004) (quotation omitted), review denied (Minn. Mar. 30, 2004). Enhancement of monetary values, although a factor, is not essential. See Kline, 495 N.W.2d at 439; Thorp v. Price Bros. Co., 441 N.W.2d 817, 820 (Minn.App.1989), review denied (Minn. Aug. 15, 1989).

Appellants also cite this court’s decision in Johnson v. Steele-Waseca Co-op. Elec. where this court concluded that a pole installed on a farmer’s property by the electric company to properly distribute power to the farmer, did not constitute an improvement to real property. 469 N.W.2d 517, 519-20 (Minn.App.1991), review denied (Minn. July 24, 1991).

In Johnson, an electric company installed equipment onto a farmer’s barn and a pole located on the farmer’s property. Id. at 518. The purpose of the equipment on the pole was to bring power to the barn. Id. As a result of stray voltage, the farmers’ cows’ milk production was affected. Id. The farmer brought suit against the electric company for injuries as a result of its equipment. Id. The electric company argued that under Minn.Stat. § 541.051 the equipment and pole were improvements to real property and therefore, the farmer’s suit was time barred. Id.

In our decision, we ruled that the equipment installed onto the farmer’s barn was an improvement to real property because it added value to the farmer’s barn. Id. at 519. However, this court determined that the pole and pendant equipment, both owned and used by the electric company to distribute electric power, was not an improvement to the farmer’s real property. Id. This court further reasoned that the pole “stands independently on appellants’ property and serves the distribution purposes of the cooperative. This equipment enables [the electric company] to increase its electric service to [the farm]. Rather than being an improvement to [the farmer’s] property, this equipment is an addition to [the electric company’s] distribution system.” Id.

Based on Johnson, appellant argues that the sedimentation pond is an addition to Stillwater’s system to control water quality, just like the pole was an addition to the electric company’s distribution of service. On the other hand, respondent argues that the courts have consistently held that storm-sewer systems are an improvement to real property. See, e.g., Ocel v. City of Eagan, 402 N.W.2d 531, 534 (Minn.1987); Capitol Supply Co. v. City of St. Paul, 316 N.W.2d 554, 555 (Minn.1982); Nolan and Nolan v. City of Eagan, 673 N.W.2d 487, 496 (Minn.App.2003), review denied (Minn. Mar. 16, 2004); Matter v. Nelson, 478 N.W.2d 211, 213 (Minn.App.1991).

First, the decision in Johnson is distinguishable in regards to SEHI. In Johnson, this court noted that the electric company “owns and has maintained continuous control” over the pole. 469 N.W.2d at 520. This court stated:

Minn.Stat. § 541.051 limits the time to bring an action in order to protect from suits those who install or create the improvement and then surrender control of it. We do not interpret Minn.Stat. § 541.051 to shelter from liability an electric power company that installs and maintains control of an electric pole and transformer, especially when the purpose is to distribute power. Minn.Stat. § 541.051 does not protect the installer/owner from its own ongoing negligence.

Id. (emphasis added).

Per the language of Johnson, SEHI never “maintained control” of the pond or was the owner of the pond responsible for its “own ongoing negligence.” SEHI surrendered control of the pond to Stillwater. In their brief, appellants state that if the sedimentation pond is “determined to be an improvement under [Minn.Stat. § 541.051], [it] is an improvement possessed by [Stillwater].” In fact, appellants do not allege any ongoing negligence by SEHI, only by Stillwater.

We conclude that the pond was an improvement to real property. Although the sedimentation pond may or may not have increased the dollar value of appellants’ property, it improved the quality and betterment of Lily Lake by improving its water quality. Its construction involved the expenditure of labor and money, and it was designed to make Lily Lake more useful and valuable. As the district court found, the pond was an “integrated component of the city storm sewer system.” Presumably, the pond increased the value of appellants’ lakeside property by improving the quality of Lily Lake and making water recreation more feasible.

Discovery of Injuries

Because we conclude that the sedimentation pond is an improvement to real property, appellants’ claims for negligence against SEHI are barred by Minn.Stat. § 541.051, subd. 1(a), appellants did not bring their claim within two years of discovery of their injuries.

Minn.Stat. § 541.051, subd. 1(a) states:

no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal ... arising out of the defective and unsafe condition of an improvement to real property ... shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury....

The statute further instructs “a cause of action accrues upon discovery of the injury....” Minn.Stat. § 541.051, subd. 1(b). Because appellants discovered their injury more than two years before they filed their lawsuit, their negligence claims under subdivision 1(a) are untimely.

Appellants testified that they began to experience problems with the sedimentation pond in the summer of 2000, three years before they filed suit. Mr. Nelson testified that prior to the pond being built, he used his physics book and determined that the pond was not big enough. Mr. Nelson noticed the sedimentation pond smelled like a cesspool right after the pond was completed. He also testified that he noticed dead fish and muskrats in the pond “all years” meaning every year since the pond was built. Mr. Nelson testified that his former son-in-law, a geotechnical engineer, whose work involved storm-water sewer systems, opined that the pond was inadequate both before it was built and immediately after. Mrs. Nelson also testified that she first noticed a mosquito problem and foul smells in the spring and summer of 2000.

There is an abundance of testimony from both appellants showing that they first became aware of problems in December 1999, and by the summer of 2000. The present suit did not commence until September 2003. Under Minn.Stat. § 541.051, subd. 1(a), appellants’ claims against SEHI are untimely.

III.

The district court dismissed claims against Stillwater based on res judicata although Stillwater presented alternative theories. Stillwater advanced alternative independent theories including statute of limitations pursuant to Minn.Stat. § 541.051 and municipal statutory immunity pursuant to Minn.Stat. § 466.03 (2002). The district court considered these grounds but in view of the case for dismissal based on res judicata and in the interest of judicial economy, the district court found it unnecessary to issue a written analysis on these theories.

The district court dismissed claims against SEHI based on Minn.Stat. § 541.051 although SEHI presented alternative theories. The district court failed to make a written analysis on alternative theories because, “of the conclusive statute of limitations issue.” On appeal, SEHI argues that this court should also affirm the district court’s decision because appellants failed to serve an affidavit of expert of review within 60 days after receiving SEHI’s demand for expert certification.

Appellants argue that because the district court did not make a determination on respondents’ alternative theories, this court may not review claims based on the alternative theories. This court can, if it needs to, affirm summary judgment on alternative theories presented but not ruled on at the district court level. See, e.g., Winkler v. Magnuson, 539 N.W.2d 821, 827 (Minn.App.1995), review denied (Minn. Feb. 13, 1996); Myers Through Myers v. Price, 463 N.W.2d 773, 775 (Minn.App.1990), review denied (Minn. Feb. 4, 1991). However, because our conclusion is the same as the district court on the issues the district court considered, we choose not to analyze alternate theories raised to the district court but not ruled upon.

DECISION

Appellants’ allegations against Stillwater are barred by res judicata. Appellants’ claim involves the same claim for relief as their prior claim, involves the same parties, a final judgment on the merits was made in their prior claim, and appellants had a full and fair opportunity to litigate the matter in their prior claim. Appellants realized their damages prior to their first claim and should have litigated the theories raised in this claim in their prior claim.

The sedimentation pond is an improvement to real property; thus, appellants’ claim against SEHI is barred by the statute of limitations under Minn.Stat. § 541.051, subd. 1(a).

Affirmed.