author: SANDSTROM, Justice.

text:
    2004 ND 134
    Brian J. AAMODT, Petitioner and Appellee v. NORTH DAKOTA DEPARTMENT OF TRANSPORTATION, Respondent and Appellant.
    No. 20040056.
    Supreme Court of North Dakota.
    June 30, 2004.

      Ralph A. Vinje, Vinje Law Firm, Bismarck, N.D., for petitioner and appellee.
    Andrew Moraghan, Assistant Attorney General, Office of the Attorney General, Bismarck, N.D., for respondent and appellant.
   SANDSTROM, Justice.

[¶ 1] The North Dakota Department of Transportation appeals from a South Central Judicial District Court judgment reversing an administrative hearing officer’s decision to suspend Brian Aamodt’s driving privileges for 91 days. The Department argues the district court erred in finding that because the arresting officer failed to list in the report and notice form reasonable grounds to believe Aamodt was in physical control of a moving vehicle, the Department had no authority to suspend Aamodt’s driving privileges. The Department also argues probable cause existed to arrest Aamodt for being in actual physical control of a moving vehicle and to believe Aamodt was under the influence of alcohol. We affirm, holding that the provision in N.D.C.C. § 39-20-03.1(3) requiring an officer to issue a certified written report showing reasonable grounds to believe the person was in actual physical control of a motor vehicle while under the influence of alcohol is a basic and mandatory provision.

I

[¶ 2] On October 4, 2003, at approximately 12:44 a.m., Mandan Police Officers Tim Bleth and Kelly Dollinger observed Aamodt and Loren Smith get out of a taxicab and walk toward a white Ford pickup. The officers were in plain clothes in an unmarked vehicle in the parking lot of the Silver Dollar Bar. It appeared to the officers that Aamodt and Smith were intoxicated. The officers observed Aamodt get into the pickup through the driver’s door and start the engine. The officers also observed Smith urinating on the ground near the rear of the pickup, and they approached him. Officer Bleth, observing Aamodt exit the vehicle, approached him and asked for identification.

[¶ 3] While talking with Aamodt, the officer observed his slurred speech, bloodshot eyes, and the odor of alcohol. The officer asked Aamodt to submit to field tests and an S-D2 test, but Aamodt declined. The officer ultimately arrested Aamodt for being in actual physical control of a vehicle while under the influence of alcohol. Aamodt submitted to an Intoxi-lyzer test, and the results showed he had a blood alcohol level of .09 percent. After Aamodt was issued a temporary operator’s permit and was notified of the Department’s intent to suspend his driving privileges, he requested a hearing. A copy of the report and notice form was timely submitted to the Department.

[¶ 4] At the October 23, 2003, administrative hearing, Officer Bleth testified that when he observed Aamodt and Smith in the Silver Dollar parking lot, they appeared to be intoxicated, “because, they walked with a stagger.” When asked to describe exactly what he saw that he would describe as “a stagger,” he. explained that Aamodt and Smith were: “Crossing the feet over. You know, body swaying back and forth.” He also testified there was “lighting in the area because the parking lot is lit up.” Hp was asked how far away he was from Aamodt; however, his response was unclear. He stated, “We were maybe about 75 yards.” He then explained, “Or no, actually it would be a lot closer, because we walked to them.” The officer later testified they were about four times the length of the room away; however, there is nothing in the record to indicate how long the room was.

[¶ 5] The officer testified that after he approached Aamodt, he. asked him how much he had had to drink and Aamodt said he had had a couple of beers.. Aamodt also testified he had two or , three beers that evening and had not eaten. The offh cer testified he asked Aamodt “if he felt that he was all right to drive,” and Aamodt stated he was not going to drive; He testified he asked Aamodt who was going to drive, and Aamodt stated his friend was. He testified that Aamodt said his friend told him just to start the vehicle, and so he did. He testified he asked Aamodt why they did not just take the taxi home, and Aamodt stated again that he was not going to drive.

[¶ 6] The officer testified he told Aam-odt he was in actual physical control of the vehicle and Aamodt stated he did not move the vehicle. The officer testified he told him it did not matter. He explained he then asked Smith how he planned on getting home, and Smith stated he had no plans of driving. ■ He testified that Smith was not able to say who .was going to drive him. He .testified he then asked Aamodt whether he would be willing to perform some field tests, and Aamodt said no. The officer testified that Aamodt said he was not going to drive and felt'he did not have to take any tests. The officer testified, he explained to Aamodt that he was in actual physical control of a motor vehicle, and he asked him again if he would take some field tests. He testified that Aamodt asked to talk to an attorney. The officer testified that he told him he was not under arrest and that-he asked him whether .he would be willing to submit to an S-D2 test. He testified that Aamodt did not submit to the S-D2 test. The officer testified he then told Aamodt he was under arrest for actual physical control of a motor vehicle while under the influence of alcohol.

[¶ 7] Aamodt testified the officer took keys from his pocket after he had been handcuffed and the officer examined them to see whether any would fit the pickup. He testified there were no keys in the pickup’s ignition. The officer testified that when Aamodt exited the vehicle, it was shut off. He testified he took keys out of Aamodt’s pocket when he arrested him, but those keys were not for the pickup. He testified he found the ignition key lying by the pedal when he searched the vehicle incident to arrest.

[¶ 8] The officer testified that after the arrest, he informed Aamodt of the implied-consent law and asked him whether he would be willing to submit to a chemical test. He testified that Aamodt asked to talk to an attorney first.- He testified that Aamodt spoke with an attorney and then stated he would be willing to take any test he wanted. The officer testified that an Intoxilyzer test was then administered.

[¶ 9] At the hearing, Aamodt objected to the hearing, arguing -that because the report turned in by the officer did not show reasonable grounds to believe Aam-odt was in actual physical control of a motor vehicle while under the influence of alcohol, as required by N.D.C.C. § 39-20-03.1(3), the Department could not justify suspending his driving privileges. He argued the language in the statute is mandatory. The hearing officer overruled the objection, and the hearing continued. Aamodt also argued there was no probable cause to arrest. He argued that although' the officer described staggering, it was dark at the time, the officer was far away in another vehicle, and staggering would be inconsistent with a .09 blood-alcohol level. The hearing officer concluded the police officer had a proper basis to approach Aamodt and had reasonable grounds to believe Aamodt was in physical control of a vehicle while under the influence of alcohol. He suspended Aamodt’s driving privileges for 91 days.

[¶ 10] Aamodt appealed the hearing officer’s decision to the district court. On February 17, 2004, the district court entered a judgment reversing the hearing officer’s decision. The district court found the report and notice of the Department’s intent to suspend Aamodt’s driving privileges that was submitted to the director of the Department did not state, as required by lavf, reasonable grounds to believe Aamodt was in actual physical control of a motor vehicle while under the influence of alcohol. In its memorandum opinion the district court explained, “All Officer Bleth checked in the box for the ‘Officer’s Statement of Probable Cause’ was ‘already stopped’ and ‘odor of alcoholic beverage.’ No explanation was submitted on the Report and Notice form by Officer Bleth.” The district court explained that probable cause is a fundamental reason for making an arrest and that failing to “even minimally state the officer’s probable cause” deprived the Department of authority to suspend Aamodt’s driving privileges.

[¶ 11] Aamodt timely requested a hearing under N.D.C.C. § 39-20-05. The hearing officer had jurisdiction under N.D.C.C. § 39-20-05. The notice of appeal from the administrative agency decision to the district court was properly filed within seven days under N.D.C.C. § 39-20-06. The district court had jurisdiction under N.D.C.C. § 39-20-06. The Department filed, under N.D.C.C. § 28-32-49, a timely notice of appeal from the district court judgment. This Court has jurisdiction under N.D. Const, art. VI, § 6, and N.D.C.C. § 28-32^19.

II

[¶ 12] Our review of an administrative suspension of a person’s license is governed by the Administrative Agencies Practice Act, N.D.C.C. ch. 28-32. Dettler v. Sprynczynatyk, 2004 ND 54, ¶ 10, 676 N.W.2d 799. “This Court exercises a limited review in appeals involving drivers’ license suspensions or revocations.” Henderson v. Director, N.D. Department of Transportation, 2002 ND 44, ¶ 6, 640 N.W.2d 714. “On appeal, we review the administrative agency’s decision and give deference to the administrative agency’s findings.” Johnson v. N.D, Department of Transportation, 2004 ND 59, ¶ 8, 676 N.W.2d 807. We will not substitute our judgment for that of the agency or make independent findings. Sonsthagen v. Sprynczynatyk, 2003 ND 90, ¶ 7, 663 N.W.2d 161. We instead' determine only whether a reasoning mind reasonably could have concluded the findings were supported by the weight of the evidence from the entire record. Id.; Power Fuels, Inc. v. Elkin, 283 N.W.2d 214, 220 (N.D.1979). We defer to the hearing officer’s opportunity to judge the credibility of witnesses. Dettler, at ¶ 10. If sound, the district court’s analysis is entitled to respect. Id. “[Wjhether the facts meet the legal standard, rising to the level of probable cause or reasonable and articulable suspicion, is a question of law fully reviewable on appeal.” Id.

[¶ 13] We affirm the agency’s decision unless:

1. The order is not in accordance with the law.
2. The order is in violation of the constitutional rights of the appellant.
3. The provisions of this chapter have not been complied with in the proceedings before the agency.
4. The rules or procedure of the agency have not afforded the appellant a fair hearing.
5. The findings of fact made by the agency are not supported by a preponderance of the evidence.
6. The conclusions of law and order of the agency are not supported by its findings of fact.
7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.
8. The conclusions of law and order of the agency do not sufficiently explain the agency’s rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.

N.D.C.C. § 28-32-46.

HI

[¶ 14] The Department argues the district court erred in concluding the Department had no authority to suspend Aamodt’s driving privileges because the arresting officer failed to list on the report and notice form reasonable grounds to believe Aamodt was in physical control of a moving vehicle. Section 39-20-03.1(3), N.D.C.C., requires the officer to “forward to the director a certified written report ... show[ing] that the officer had reasonable grounds to believe the person had been driving or was in actual physical control of a motor vehicle while [under the influence of alcohol].”

The interpretation of a statute is a question of law. Erickson v. Director, N.D. D.O.T., 507 N.W.2d 537, 539 (N.D.1993). When an appeal involves a conclusion of law by an administrative agency, the agency’s order must be in accordance with the law. Bieber v. N.D. Dept. of Transp. Director, 509 N.W.2d 64, 67 (N.D.1993); N.D.C.C. 28-32-19(1).

Maher v. N.D. Department of Transportation, 539 N.W.2d 300, 302 (N.D.1995). Reasonable grounds are the same as probable cause. Moran v. N.D. Department of Transportation, 543 N.W.2d 767, 769 (N.D.1996).

[¶ 15] The Department’s authority to suspend a person’s license is given by statute and is dependent upon the terms of the statute. The Department must meet the basic and mandatory provisions of the statute to have authority to suspend a person’s driving privileges. Schwind v. Director, N.D. Department of Transporta tion, 462 N.W.2d 147, 150 (N.D.1990). In this case, the certified written report, which is the Report and Notice Form, stated the probable cause was an “odor of alcoholic beverage.” The Department concedes this is insufficient to show probable cause, but argues that failure to comply with the statutory requirement should not deprive it of authority to suspend Aam-odt’s driving privileges. At issue in this case is whether this provision of the statute is a basic and mandatory provision.

[¶ 16] This Court has previously discussed whether certain provisions in N.D.C.C. § 89-20-03.1 are basic and mandatory provisions that require compliance before the Department is authorized to suspend a person’s driving privileges. In Schwind v. Director, N.D. Department of Transportation, 462 N.W.2d 147, 150 (N.D.1990), and in Samdahl v. N.D. Department of Transportation Director, 518 N.W.2d 714, 717 (N.D.1994), this Court concluded the statutory provisions in question were not mandatory, because requiring compliance would lead to an absurd result.

[¶ 17] In Schwind, this Court held that although section 39-20-03.1, N.D.C.C., requires an officer to forward an operator’s license to the Department, the failure to do so did not destroy the Department’s authority to suspend a violator’s driving privileges. This Court held that a contrary holding would defeat the legislature’s intent to protect the public from potential hazards posed by intoxicated drivers. Schwind, 462 N.W.2d at 150-51.

[¶ 18] Similarly, in Samdahl v. N.D. Department of Transportation Director, 518 N.W.2d 714, 717 (N.D.1994), this Court held that although section 39-20-03.1, N.D.C.C., requires the Department to immediately issue a temporary permit, its failure to have done so for over a month did not deprive it of its authority to suspend a person’s driving privileges. In this case, Samdahl remained in possession of his driver’s license until the temporary permit was issued. Relying on Schwind, this Court concluded that adhering to the letter of the law would produce an absurd result, absent any showing of harm, because N.D.C.C. § 39-20-03.1 was enacted, in part, to help ensure that an individual who violated this chapter would not continue to drive.

[¶ 19] This Court has also held that failure to follow the statutory requirement of issuing a valid temporary permit does not deprive the Department of its authority to suspend a person’s driving privileges. See Sabinash v. Director of the Department of Transportation, 509 N.W.2d 61, 64 (N.D.1993).

[¶ 20] In Bosch v. Moore, 517 N.W.2d 412, 413 (N.D.1994), this Court held that an officer’s failure to submit an Intoxilyzer test record, as required by section 39-20-03.1(3), deprived the Department of its authority to suspend driving privileges. This Court held:

The statute’s command that all tests be forwarded to DOT is basic and mandatory. It precludes the officer’s exercise of choice and requires the transmittal of “all tests.” The legislature has made it the hearing officer’s domain, not the officer’s, to judge the foundational facts for the admissibility of test results and the weight to be given to each of those results.

Id.

[¶ 21] The Department argues this Court should follow Schwind and Samdahl and conclude that the statutory provision at issue is not a basic and mandatory provision. It argues that unlike Bosch, in which the test results were never admitted into evidence, the evidence of probable cause omitted from the report and notice form was provided during the hearing through the officer’s testimony. The Department also argues the provision should not be found mandatory, because the report and notice form is not required to be issued to the arrestee.

[¶ 22] We conclude the statutory provision in question is more like the provision in Bosch than the provisions in Schwind and Samdahl. If the statutory provisions in Schwind and Samdahl are not met, the Department’s authority is not affected by its not taking the license prior to the hearing or by its not issuing a temporary license. These details are not important in determining whether a driver’s license can be suspended, and they are not considered by the Department when making its determination.

[¶ 23] The statutory provision in Bosch, on the other hand, is a predicate to suspending a person’s driving privileges, and it is important to the Department that the provision be followed. When determining whether to suspend a person’s driving privileges, the Department must determine whether there were reasonable grounds to believe the person was driving or was in actual physical control of a vehicle while under the influence of alcohol, whether the person was properly tested, and whether the person’s blood-alcohol level exceeded the legal limit. See N.D.C.C. § 39-20-05. The statutory provision requiring reasonable grounds, like the statutory provision in Bosch concerning test results, involves requirements that are material to the Department’s decision to suspend a person’s driving privileges and are predicates to the Department’s acting.

[¶ 24] Unlike in Schwind and Samdahl, requiring compliance by the officer and the Department in this case does not produce an absurd result in light of the legislature’s intent. Although section 39-20-03.1 was enacted, in part, to help prevent those who had violated the statute from continuing to drive, keeping drunk drivers off the roads was not the only concern. The legislature was concerned that the law not be “slanted too much toward the [agency’s] convenience,” Samdahl v. N.D. Department of Transportation Director, 518 N.W.2d 714, 718 (N.D.1994) (Levine, J., dissenting) (quoting Report of the House Judiciary Committee on S.B. 2373 (March 15, 1983)), and that the officer be able to articulate probable cause before taking a license. The legislature heard testimony about the concern that this bill would punish those who did not need to be punished. Hearing on S.B. 2373 before the House Judiciary Committee, 48th N.D. Legis. Sess. (March 2, 1983) (testimony of Orell Schmitz of the North Dakota Trial Lawyers Association).

[¶ 25] Driving privileges cannot be taken away without some basis. Requiring reasonable grounds before taking away a person’s driving privileges ensures the law is not too slanted in favor of the Department and protects those who should not be punished. Without a finding of probable cause, there is no basis for taking away a person’s driving privileges. Aam-odt was entitled to know what the officer was relying on.

[¶ 26] We conclude the statutory provision at issue is a basic and mandatory provision and therefore the Department had no authority to suspend Aamodt’s driving privileges.

IV

[¶ 27] The Department also argues the hearing officer did not err in finding probable cause existed to arrest Aamodt for being in actual physical control of a moving vehicle while under the influence of alcohol. Because we conclude the statutory provision in section 39-20-03.1(3) is a basic and mandatory provision and the Department had no authority to suspend Aamodt’s driving privileges, we do not need to consider this argument.

V

[¶ 28] We affirm the district court’s decision finding the Department had no authority to suspend Aamodt’s driving privileges.

[¶ 29] GERALD W. VANDE WALLE, C.J., WILLIAM A. NEUMANN, CAROL RONNING KAPSNER, and MARY MUEHLEN MARING, JJ., concur.


source: Caselaw Access Project

author: ZINTER, Justice.

license: Public Domain

text:
    2004 SD 77
    GRYNBERG EXPLORATION CORPORATION, Plaintiff and Appellee, v. Donald PUCKETT, Nancy A. Puckett, Michael Sweeney, Everett Frerichs d/b/a Everett Frerichs Oil & Gas Company, Defendants and Appellants, and W.D. Culwell, Inc., and Eland Energy Inc., Defendants.
    No. 22979.
    Supreme Court of South Dakota.
    Considered on Briefs April 26, 2004.
    Decided June 9, 2004.

      Dwight A. Gubbrud of Bennett, Main <& Gubbrud, Belle Fourche, South Dakota, Attorneys for.plaintiff and appellee.
    Brad A. Schreiber of Day, Morris & Schreiber, Belle Fourche, South Dakota, Attorney for defendants and appellants.

      . Wright Citation no longer exists.

   ZINTER, Justice.

[¶ 1.] Grynberg Exploration Corp., an operator of oil wells, sued alleged interest holders to recover a share of the oil well operating expenses. The trial court ruled that Grynberg was entitled to recover the expenses on theories of contract and quasi-contract. We affirm.

Facts and Procedural History

[¶ 2.] Grynberg Exploration Corp. was the “operator” of oil wells in the East Simms Draw and the North Hollingsworth oil fields in" Fall River County. As the operator, Grynberg was responsible for “managing the ... production of oil and for accounting for profits and expenses on behalf of all of the owners.” Grynberg v. Citation Oil & Gas Corp., 1997 SD 121, ¶ 2, 573 N.W.2d 493, 497. Grynberg sought recovery against Donald Puckett, Nancy Puckett, and Michael Sweeney for oil well operating expenses in the East Simms Draw field. Grynberg’s claim against Everett Frerichs relates to operating expenses in the North Hollingsworth field. Because the legal theories are different in each field, we address the East Simms Draw and the North Hollingsworth claims separately.

East Simms Draw — Pucketts and Sweeney

[¶ 3.] Grynberg, Pucketts, and Sweeney are all successors in interest to prior operators and interest owners in the East Simms Draw field. Citation Oil and Gas Corp. (Citation Oil) originally operated the wells. Wright Citation I Ltd. (Wright Citation), a limited partnership, was an original “non-operator” interest owner. The wells were at all times operated pursuant to a model form operating agreement. That operating agreement provided that interest owners were responsible for their proportionate share of operating expenses.

[¶ 4.] Wright Citation, mortgaged its ownership interest to Citizen ■Fidelity-Bank and Trust Company, which later became PNC Bank, in order to secure a loan to Wright Enterprises. Wright Enterprises subsequently defaulted on the loan,' and PNC Bank sued Wright Enterprises, Wright Citation, and others who had interests in these wells. PNC Bank ultimately obtained a $8.1 million “Agreed Judgment” against the defendants in that litigation. One of those judgment debtors was Thomas Wright, a partner in Wright Citation. At that time, Thomas Wright was married to Michael Sweeney’s daughter. Michael Sweeney and Donald Puckett are siblings.

[¶ 5.] Pucketts and Sweeney apparently desired to assist Thomas Wright in his financial difficulties with PNC Bank. In April 1994; Pucketts and Sweeney paid PNC Bank $85,000 for the Agreed Judgment. In return, Pucketts and Sweeney each received an undivided 50% interest in the East Simms Draw field. The interest included the collateral pledged to the bank by Wright Citation as well as numerous other oil and gas properties. They acquired these interests by an “assignment” from PNC Bank. Those interests were referred to in the assignment as the “Citation Oil Interests,” and they were defined as “[a]ll of the property pledged, assigned and conveyed by Wright Citation [] to PNC Bank pursuant to the Mortgage[.]” (Emphasis added.) In addition to the property acquired under the assignment, Pucketts and Sweeney also assumed “all ... obligations” relating to the oil interests acquired.

[¶ 6.] Citation Oil continued as the operator of the wells in the East Simms Draw throughout these transactions. After they acquired their interest from PNC Bank, Pucketts and Sweeney notified Citation Oil of the assignment, and they directed Citation Oil to deduct their share of expenses from their share of oil production revenues. As with its other working interest owners, Citation Oil then began paying Pucketts and Sweeney their proportionate share of the net production revenue (the production revenue remaining after withholding operating expenses). Citation Oil also mailed statements to the working interest owners, disclosing the revenue and expenses for each well.

[¶7.] Citation Oil was eventually removed as operator, see Grynberg, 1997 SD 121, 573 N.W.2d 493, and Grynberg became the new operator of the East Simms Draw field. However, unlike Citation Oil, Grynberg sold the. oil to Texaco Trading & Transportation (Texaco). Under that arrangement, Grynberg did not receive direct payment of oil revenues from Texaco. Rather, Texaco paid the interest owners directly in proportion to each ownership interest. Furthermore, Texaco did not withhold operating expenses. Consequently, all operating expenses were paid by Grynberg, who subsequently billed each working interest owner, including Pucketts and Sweeney, for their monthly share of the operating expenses.

[¶ 8.] In December 1997, operations ceased at the East Simms Draw field because the wells could no longer be operated economically. During the time that Grynberg operated the wells, Texaco paid; Pucketts $12,454.73 and Sweeney $12,473.65 for their share of production revenues. • During the same period, Gryn-berg alleged that Pucketts’ proportionate share of operating expenses was $18,823.18, and Sweeney’s alleged share was $18,821.04. Pucketts and Sweeney, however, refused to pay Grynberg.

[¶ 9.] Consequently, Grynberg sued Pucketts and Sweeney for breach of contract and, in the alternative, breach of quasi-contract. The trial court ruled for Grynberg on both theories, holding that Grynberg was entitled to judgment against Pucketts and Sweeney for those operating expenses, plus interest and attorney’s fees as provided for in the operating agreement.

North Hollingsworth Field — Frerichs

[¶ 10.] The North Hollingsworth field was operated by Grynberg in the same manner as the East Simms Draw. Texaco purchased the oil produced, and it divided the production revenue proportionally among working interest owners. Gryn-berg also paid the operating expenses and billed each working interest owner for their proportionate share of operating expenses.

[¶ 11.] Everett Frerichs, d/b/a Everett Frerichs Oil & Gas Company, owned and operated oil wells in Nebraska, Colorado, Texas, and South Dakota. In June 1996, Frerichs purchased a .143500330 working interest in the North Hollingsworth wells. Frerichs purchased this interest from Providence Energy Joint Venture III, which was a limited partnership managed by Eland Energy Incorporated.

[¶ 12.] Once Grynberg was notified that Frerichs had purchased Providence’s interest, Grynberg began mailing the monthly operating expense statements to Frerichs. However, because Texaco was apparently not notified of the transfer, it continued to make payments to Eland Energy, manager of Providence. From August 1996 until June 1997, Eland Energy received $12,280.26 from Texaco for Fre-richs’ share of production revenue from the North Hollingsworth wells.

[¶ 13.] During that same period, Fre-richs’ share of operating expenses was $21,020. Frerichs was billed monthly, but he did not pay any of the expenses. Fre-richs asserted that he had “wanted out” of the obligation to pay expenses, so he had assigned his interest to Grynberg. Alternatively, Frerichs asserted that if there was a contractual obligation to pay expenses, he received no consideration for the contract. The trial court found otherwise and ruled that Grynberg was entitled to recover Frerichs’ proportionate share of operating expenses.

[¶ 14.] Pucketts, Sweeney, and Fre-richs now appeal, contending that: (1) certain findings of fact were clearly erroneous; (2) certain conclusions of law were erroneous as a matter of law; and, (3) that a portion of an early trial court memorandum opinion denying summary judgment for Grynberg should now be deemed the law of the case. By motion, Grynberg seeks its appellate attorney’s fees.

Analysis and Decision

[¶ 15.] Pucketts, Sweeney, and Frerichs challenge numerous trial court findings of fact and conclusions of law. However, the essence of them challenge is their contention that there was no contract, quasi-contract, or other obligation to pay the operating expenses. We review the trial court’s findings of fact “under a clearly erroneous standard.” Sherburn v. Patterson Farms, Inc., 1999 SD 47, ¶ 4, 593 N.W.2d 414, 416 (citations omitted). “The trial court’s findings will not be disturbed unless the court is ‘firmly and definitely convinced a mistake has been made.’ ” Id. (citation omitted). We review conclusions of law de novo. Id.

Pucketts and Sweeney

[¶ 16.] As previously mentioned, Pucketts and Sweeney assert that “[t]here is no evidence that a contractual relationship existed between Pucketts and Gryn-berg or Sweeney and Grynberg[.]” Puck-etts and Sweeney , base this assertion on the premise that they did not own a “working interest” in the wells. Rather, they assert that their assignment from PNC Bank only conveyed the bank’s security interest. They conclude that because the bank was not obligated to pay expenses under the security interest, neither were they. They also support their position by arguing that they never signed anything obligating them to pay expenses and there was no mutual assent to any alleged contract to pay expenses. We conclude that all of their arguments are misplaced because they fail to acknowledge the nature of the property interest they acquired from PNC Bank.

[¶ 17.] The property interest at issue was acquired by assignment from PNC Bank. After the default on the note to PNC Bank, Wright Citation and the other debtors stipulated to an “Agreed Judgment.” That Agreed Judgment gave PNC Bank explicit authority to “sell any or all of the remaining collateral ” of Wright Citation that was subject to the bank’s security interest.

[¶ 18.] PNC Bank subsequently exercised that right to sell collateral by assigning the “Citation Oil Interests” to Puck-etts and Sweeney. Significantly, the terms of that assignment were not limited to a transfer of a security interest. Rather, the assignment provided that Pucketts and Sweeney “desire to purchase the interests of PNC Bank under the Judgment and under the Mortgage]!]” The interests conveyed under the Agreed Judgment included “any and all interests that PNC Bank may have, if any, in and to the Mortgage, the Citation Oil Interests, and the Judgment]!]” (Emphasis added.) Thus, the assignment transferred collateral (“Citation Oil Interests”), which expressly included Wright Citation’s ownership interest in the oil wells. Moreover, that collateral was transferred free of the bank’s security interest. SDCL 57A-9-504(4). (1988). Most significantly, the assignment specifically imposed the contractual obligation of paying operational expenses. It stated: “Buyers hereby accept any and all such interests and assume all rights and obligations relating, thereto.” (Emphasis added.)

[¶ 19.] As a-result, this assignment was not a mere transfer of a security interest. It was a sale of the “Citation Oil Interests” that was contractually subject to the operating agreement’s obligation to pay a proportionate share of operating expenses. Therefore, the trial court correctly concluded that Pucketts and Sweeney were contractually obligated to pay those expenses.

[¶ 20.] Pucketts and Sweeney, however, argue that an early trial court memorandum opinion denying summary judgment to Grynberg constituted the law of this case. In its denial of summary judgment, the trial court stated, “Pucketts and Sweeney have what PNC Bank had[,] which was a security interest created in July 1988.” From this, Pucketts and Sweeney reassert their argument of having only acquired a “secured interest.” They then contend that this earlier ruling should be deemed the law of this case, superceding the court’s later finding that they owned a working interest in the wells.

[¶ 21.] “The ‘law of the case’ doctrine is intended to afford a measure of finality to litigated issues.” Western States Land & Cattle Co., Inc. v. Lexington Ins. Co., 459 N.W.2d 429, 435 (S.D.1990) (citations omitted) (emphasis added). See also Shaffer v. Honeywell, Inc., 249 N.W.2d 251, 260 (S.D.1976) (stating that there “is a rule of practice and procedure[,] which for policy reasons provides that once an issue is litigated and decided it should remain settled for all subsequent stages of the litigation”). Here, however, the trial court’s memorandum opinion “did not purport to find any facts,” or finally determine the merits of any issue. It simply denied summary judgment. Moreover, the doctrine is usually applied when a question decided on a former appeal is questioned in a second or any subsequent appeal involving any branch of the case. Western States Land & Cattle Co., 459 N.W.2d at 435. Here, there has been no prior appeal from the memorandum decision denying summary judgment. Finally, SDCL 15-6-56(c) provides that a summary judgment is “interlocutory in character.” Therefore:

[A]s a practical matter the application of the rule prior to entry of judgment [should not] inhibit the trial court in correcting what it believed to be an erroneous decision. The rule of the “law of the case” should not be used to perpetuate an erroneous decision at this stage of the proceedings.

Shaffer, 249 N.W.2d at 260.

[¶ 22.] We are not suggesting that the trial court’s earlier ruling was erroneous. We merely believe that, considering these principles, the law of the ease doctrine was inapplicable to the trial court’s earlier memorandum opinion denying summary judgment. Notwithstanding its memorandum decision, the trial court was free to find, after a trial on the merits, that the interest conveyed was more than a security interest.

[¶23.] Pucketts and Sweeney finally assert that there was no “mutual assent” to any contractual obligation to pay expenses. We believe that Pucketts’ and Sweeney’s actions, and those of their attorney, indicate otherwise. Within one month of the assignment, Pucketts’ attorney, acting on behalf of Pucketts and Sweeney, notified Citation Oil of the assignment describing their interest as an “ownership interest.” The attorney also directed Citation Oil to deduct Pucketts’ and Sweeney’s share of expenses from production revenue. Pucketts and Sweeney subsequently paid those expenses as required by the assignment and operating agreement until Grynberg became the operator and began billing Pucketts and Sweeney separately from the revenues. It was only then that they refused to pay their share of operating expenses. This conduct demonstrates contemporaneous mutual assent to the rights and obligations under the assignment • and the operating agreement.

[¶24.] Furthermore, during this time, Pucketts and Sweeney received and accepted the production revenue from Texaco. Having accepted the benefits, they are precluded from repudiating the accompanying obligations. South Dakota law provides that the “voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it so far as the facts are known or ought to be known to the person accepting.” SDCL 53-3-5.

This statute is a declaration of the equity rule which prevents the party benefited from questioning the validity and effectiveness of a matter or transaction insofar as it imposes a liability or obligation upon him. It precludes one who accepts the benefit from repudiating the accompanying obligations. The rule in effect denies the right to assume inconsistent positions and is based on the principle of election and ratification[.]

Strom v. Buholz, 73 S.D. 583, 586, 46 N.W.2d 912, 914 (1951) (citations omitted). Consequently, because Pucketts and Sweeney accepted the benefits of the assignment and operating agreement, they are precluded from repudiating the corresponding obligations.

[¶ 25.] We therefore agree with the trial court’s ultimate conclusion that an express contract existed that obligated Puck-etts and Sweeney to pay their pro-rata share of the operating expenses. For these reasons, we need not reach the issue of quasi-contract.

Frerichs

[¶ 26.] Frerichs first argues that any contract to pay expenses that might have existed between his company and Gryn-berg failed for lack of consideration. Frerichs points out that the production payments from this field were being mistakenly held by Eland Energy. Frerichs asserts that because he had not “received” that revenue, he did not receive the benefit of the bargain, and there was no consideration for any contractual obligation to pay expenses.

[¶ 27.] However, failure of consideration is an affirmative defense, and Fre-richs did not plead it in his answer or in his response to Grynberg’s amended complaint. “Under SDCL 15-6-8(e), a party’s pleadings must affirmatively set forth matters constituting an avoidance or affirmative defense. If such an affirmative defense is not pleaded, it is waived.” Wolff v. Secretary of South Dakota Game, Fish and Parks Dept., 1996 SD 23, ¶ 15, 544 N.W.2d 531, 534 (quoting Varga v. Woods, 381 N.W.2d 247, 251 (S.D.1986)). Because Frerichs did not pleád his defense of failure of consideration, it was waived.

[¶ 28.] Even if this issue were not waived, it is undisputed that Texaco mistakenly made Frerichs’s payments to Eland Energy, and those payments were held for Freriehs by Eland Energy. Moreover, during this litigation, the funds were paid to the court to be used to partially satisfy any judgment against Fre-richs. Therefore, even if Freriehs had properly raised this issue, he did receive the benefit of the payments, and there was no failure of consideration.

[¶29.] Frerichs’s second argument is that he “did not pay costs and expenses because he had assigned his interest [back] to Grynberg.” Freriehs alleged that he assigned his interest to Grynberg on August 31, 1996. Therefore, he testified that he did not claim any right, title, or interest to the revenue that had erroneously been received by Eland Energy.

[¶ 30.] The record, however, does not support Frerichs’s claim of a valid assignment. We first note that- the purported assignment contains signature lines for both the assignor (Freriehs) and as-signee (Grynberg). However, Grynberg neither signed nor acknowledged the assignment. Moreover, the purported assignment contains a legal description of real property, but the blank reserved for the description of the oil interests assigned was not completed. Finally, the legal description contained in the alleged assignment does not describe the same land that Freriehs acquired. Therefore, the document itself does not contain all of the essential terms necessary to establish a contract by assignment.

[¶ 31.] Aside from that, it is significant that Bob Pelo, controller for Grynberg, indicated that there was no assignment. He testified that he was responsible for accounting at Grynberg, and he would have been advised if Grynberg had obtained an assignment of Frerichs’s interest. However, to Pelo’s knowledge, Grynberg never received or accepted any assignment of Frerichs’s interest. This testimony is convincing because, despite the fact that he continued to receive billings from Grynberg, Freriehs neither asked Grynberg to stop the billing nor notified Grynberg of a mistake.

[¶ 32.] We give deference to the trial court’s opportunity to judge the credibility of witnesses and to weigh their testimony on such issues of fact. Meldrum v. Novotny, 2002 SD 15, ¶ 18, 640 N.W.2d 460, 463. Considering the evidence presented, the trial court’s finding that there was no assignment was not clearly erroneous.

Grynberg’s Appellate Attorney’s Fees

[¶ 33.] Grynberg submitted a motion for appellate attorney fees. Pursuant to SDCL 15-26A-87.3, appellate attorney fees may be granted “where such fees may be allowable^]” We have interpreted this to mean that appellate attorney fees may be granted “only where such fees are permissible at the trial level.” Hentz v. City of Spearfish, Dept. of Pub. Works, Office of Planning & Zoning, 2002 SD 74, ¶ 13, 648 N.W.2d 338, 342 (citation omitted). At the trial level, SDCL 15-17-38 provides that compensation for attorney fees rendered in civil actions “is left to the agreement, express or implied, of the parties.”

[¶ 34.] There was such an agreement in this case. The operating agreements governing both the East Simms Draw and the North Hollingsworth fields allowed the operator to recover attorney fees from non-operators. Consequently, Grynberg is entitled to recover appellate attorney fees of $5,620, the amount Grynberg submitted in its verified, itemized statement of legal services rendered.

[¶ 35.] Affirmed.

[¶ 36.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP and MEIERHENRY, Justices, concur.

      . The payments Eland Energy received were held in a special account in the name of Everett Frerichs. During this litigation, Grynberg amended its complaint to include claims for interpleader and accounting against Eland Energy. Eland Energy subsequently deposited these payments ($12,-280.26) with the Fall River County Clerk of Courts for the benefit of Frerichs.

      . Although PNC Bank was initially acting as a secured creditor, it ultimately sold collateral (the “Citation Oil Interest”) free of that security interest pursuant to SDCL 57A-9-504(4) (1988). At the time of the assignment, SDCL 57A-9-504(4) provided in part:
      When collateral is disposed of by a secured. party after default, the disposition transfers to a purchaser for value all of the debtor’s rights therein, discharges the security interest under which it is made and any security interest or lien subordinate thereto.
      Because Pucketts and Sweeney were “purchasers for value,” they acquired Wright Citation’s rights and obligations in the "Citation Oil Interest” collateral free of PNC Bank's security interest, which was discharged. Former section 9-504 provided “that disposition by the secured party after default transfers to a purchaser for value all the rights of the debtor in the collateral. In addition, the disposition of the collateral discharges the security interest under which the collateral is sold[.]” 9 William D. Hawkland, Hawkland Uniform Commercial Code Series § 9- ■ 504:11; see also 4 White & Summers, Uniform Commercial Code § 34-10 (4th' ed 1995).

      . It could not have found facts. It was a ruling on summary judgment. See SDCL 15-6-5 6(c).

      . If considered out of context, we acknowledge Pucketts’ and Sweeney's arguments that some of the trial court's findings and conclusions could be construed to be incorrect. However, on whole, they are supported by the record and correct as a matter of law.

      . The record reveals that Frerichs did not assert the defense until the parties submitted proposed findings of fact and conclusions of law after trial. At that late time, Grynberg had no opportunity to litigate this issue.

      . The assignment that Freriehs received involved 200 acres in the North Hollingsworth field. However, the trial court found that the assignment that Freriehs allegedly mailed to Grynberg only described 30 acres in the North Hollingsworth field, and it also contained legal descriptions for 30 acres that are not in the North Hollingsworth field. Fre-richs does not specifically challenge that finding.


author: LARSON, Justice.

text:
    Julie C. THORSON, Appellant, v. LARSON MANUFACTURING COMPANY, INC. and Atlantic Mutual Companies, Appellees.
    No. 03-0328.
    Supreme Court of Iowa.
    May 12, 2004.
    As Amended on Denial of Rehearing July 9, 2004.
    Mark S. Soldat, Des Moines, for appellant.
    Jeffrey W. Lanz of Huber, Book, Córtese, Happe & Lanz, P.L.C., Des Moines, for appellees.
   LARSON, Justice.

Julie Thorson, an employee of Larson Manufacturing Company, Inc., filed workers’ compensation claims against her employer and, as a part of her case, attempted to use a medical report from a Dr. Ban. The hearing deputy excluded the report because it was untimely under a prehear-ing order entered by the workers’ compensation commissioner. On judicial review, the district court affirmed the exclusion of the report except for its possible use on rebuttal. Thorson appealed, claiming the report should have been admitted in her case in chief. The employer and its insurance carrier, Atlantic Mutual Companies, (collectively Atlantic Mutual) cross-appealed, claiming the report was inadmissible for any purpose, including rebuttal. We hold the industrial commissioner erred in excluding the report, reverse the district court, and remand to the commissioner. In view of this disposition, we do not address the cross-appeal issue.

I. Facts and Prior Proceedings.

On June 29, 2000, the industrial commissioner entered a hearing assignment order that included a paragraph entitled “Case Preparation Completion Dates.” Under that paragraph,

[claimant shall complete case preparation, including discovery and responses, 60 days prior to the backup hearing date, or the primary hearing date if the case' is not at the backup time. Defendant(s) shall complete case preparation, including discovery and responses, 30 days thereafter. These completion dates supersede Iowa Rule of Civil Procedure 125(c) [now 1.508(3)]. When admissibility of evidence is disputed, the completion date for case preparation will be enforced under a prejudice standard.

Under the provisions of this “sixty day” order, Thorson was required to “complete [her] case preparation, including discovery and responses,” sixty days before the hearing date. The hearing- date was set for November 21, 2000, so the ease-completion deadline was September 22, 2000. Thor-son did not provide the report by Dr. Ban within that time; in fact, Dr. Ban had not even examined Thorson by the case-completion deadline. The commissioner excluded the Ban report as untimely under this order.

Thorson argues that the sixty-day provb sion of the scheduling order is invalid for several reasons: the provision is ambiguous; it was merely an order, which had never been formally adopted as an agency rule; and it conflicted with a formal agency rule providing a timetable for the exchange of exhibits.

II. The Ambiguity Argument.

Under Thorson’s argument, the lack of definitions in the sixty-day order renders it too ambiguous to be enforced because

it is a “guess” as to whether “preparation” means that all exhibits and witnesses have to be' compiled and prepared 60 days before hearing or whether a party merely has to be prepared enough to “list” what the' “proposed” exhibits will be.

It is true these terms provide little guidance to parties attempting to comply with the sixty-day order, but there are more fundamental problems with the order: first, it conflicts with another provision of the same prehearing order that only requires a party to list exhibits — not to provide the exhibits themselves. That paragraph is entitled “Witness and Exhibit Lists” and sets out specific requirements for the exchange of information in advance of the hearing:

Unless otherwise agreed in writing, a party shall serve a list of proposed witnesses and exhibits to be offered into evidence at hearing upon opposing parties .on. or before the serving party’s case preparation completion date. Additional witnesses or exhibits may be allowed by the presiding deputy only if it is shown that a party is not unfairly surprised by their introduction into evidence.

(Emphasis added.) The juxtaposition of this paragraph and the “sixty day” paragraph in the same order creates confusion about what has to be furnished by the case-completion date — a listing of the exhibits 'and witnesses or delivery of the exhibits themselves. Second, the order fails to clearly override a formal agency rule regarding prehearing production of evidence — an issue we address in Division IV.

III. Lack of Formal Rule Status.

The claimant contends the sixty-day order is not a validly enacted agency rule, •but is only an order of the commissioner. Atlantic Mutual does not contend the sixty-day order is itself a validly enacted rule; it- does, however, contend the order is based on a valid exercise of the scheduling authority granted to the commissioner under a formal rule, Iowa Administrative Code rule 876-4.19, which states:

The workers’ compensation commissioner may provide for a calendar for pre-hearing procedures which may extend to all contested cases or be limited to any type or class of such cases as may be prescribed.

We agree with Thorson that the commissioner’s power to enter scheduling orders is not so extensive as to allow the commissioner, by an order lacking the status of a formally adopted rule, to override a specific agency rule regarding the exchange of hearing exhibits — an issue that we discuss later.

In a related argument, Atlantic Mutual defends the exclusion of the Ban report as being within the commissioner’s discretion. Thorson responds that it is not an issue of discretion because the commissioner’s exclusion of the report in this case was an error of law, and we agree.

IV. Conflict With a Formal Rule.

We conclude the exclusion of the report on the basis of the sixty-day requirement was improper for another reason — it is unclear whether the hearing assignment order changed the deadlines of a specific workers’ compensation rule under which

[e]ach party to a contested ease shall serve all ... medical records and reports concerning the injured worker in the possession of the party upon each opposing party not later than 20 days following filing of an answer or, if not then in possession of a party, within ten days of receipt.

Iowa Admin. Code r. 876-4.17. Although rule 876-4.18 allows the commissioner to change the deadline to exchange medical records or reports by order, the language used by the commissioner in its hearing assignment order clearly fails to notify the parties the hearing assignment order was changing the deadlines established by rule 876-4.17. Iowa Admin. Code r. 876-4.18.

As of the expiration of twenty days following Atlantic Mutual’s answer, Thorson did not have possession of the Ban report. Therefore, the first part of'rule 876-4.17 was inapplicable. The alternative deadline provided by that rule, ten days after receipt of the report, applies instead. Thor-son’s attorney received Dr. Ban’s report and served it on Atlantic Mutual the same day. The requirement of rule 876-4.17 was therefore met. This formal rule controls over the commissioner’s scheduling order, which, as we have noted, fails to change the deadline established by rule 876^.17.'

V. The Interrogatory Issue.

Atlantic Mutual raises another ground for exclusion: Thorson failed to timely supplement her answer to Interrogatory No. 20 inquiring about her medical evidence, as required by Iowa Rule of Civil Procedure 1.508(3). That rule provides in part:

Duty to supplement discovery as to experts. If a party expects to call an expert witness when the identity or the substance of such expert witness’s testimony has not been previously disclosed in response to an appropriate inquiry directly addressed to these matters, or when the substance of an expert’s testimony has been updated, ... such response must be supplemented ... not less than 30 days prior to the beginning of trial except on leave of court.

Atlantic Mutual’s interrogatory had asked whether

[cjlaimant has obtained any medical report, opinion, or rating by any medical expert with respect to claimant’s temporary or permanent disability and, if any, please state what that [rating] is and attach a true copy of same to the Answers to Interrogatories.

On September 17, 2000, Thorson served her response to this interrogatory:

To date, I have not obtained such a report, opinion, or rating, except to the extent that restrictions which appear in the records served pursuant to Rule 876-4.17,1.A.C., may have entitled me to temporary partial benefits or healing period compensation. If I receive such reports, opinions or ratings in the future, they will be served pursuant to Rule 876-4.17,1.A.C.

As of the time Thorson answered Interrogatory’ No. 20, she did not have the report from Dr. Ban; her attorney received the report on October 21, 2000, and served it on Atlantic Mutual the same day. Although Atlantic Mutual complains that Thorson violated rule of civil procedure 1.508(3), Thorson notes that Atlantic Mutual failed to pose an “appropriate inquiry” as required by that rule to discover whether Thorson had consulted an expert. The interrogatory only asked whether any report had been obtained. At the time Thor-son answered the interrogatory, a report had not been obtained, and when that situation changed, Thorson immediately served a copy on Atlantic Mutual.

VI. Conclusion.

The report by Dr. Ban was of critical importance to Atlantic Mutual because it provided the only evidence to support Thorson’s claim of a causal connection with her employment and permanency of her injuries. It was therefore essential that Atlantic Mutual obtain evidence to rebut Dr. Ban’s report. After Atlantic Mutual received the Ban report, virtually on the eve of the hearing, it contacted six medical practitioners to see if an independent medical examination could be conducted. All potential experts declined because of a lack of time. Atlantic Mutual therefore lacked a meaningful opportunity to depose Dr. Ban or find other witnesses to rebut his report. Moreover, the “listing” of Dr. Ban, which Thorson claims was sufficient to give notice to Atlantic Mutual of Dr. Ban’s involvement, was so obscure it could hardly be considered fair notice. Thor-son’s “Exhibit/Witness” list showed, buried among literally hundreds of items listed, this vague reference to Dr. Ban: “Letter, plus response, Soldat to Dr. Ban.”

The district court on judicial review noted:

By delaying the service of Dr. Ban’s report to one day before the defendants’ case preparation completion date and thirty-one days before the hearing, the petitioner limited the ability of the defendants to appropriately respond to the report.... It is precisely that type of gamesmanship which the hearing assignment order is presumably intended to avoid.

Thorson is correct in asserting that, if parties to workers’ compensation cases desire earlier and more detailed information, they must engage in more aggressive discovery or obtain agency rules with more teeth. It is, of course, desirable in the interest of fairness to afford sufficient detail to allow opposing parties to prepare for the hearing. Unfortunately, that did not happen in this case. Nevertheless, we conclude the commissioner erred in excluding the Ban report on the basis of the prehearing order. We therefore reverse and remand to the commissioner for reconsideration of the claim on the record already made, with the addition of the Ban report and any rebuttal evidence that the commissioner allows.

REVERSED AND REMANDED.


author: MAHAN, J.

text:
    EMPLOYERS MUTUAL CASUALTY COMPANY, Plaintiff-Appellee, v. UNITED FIRE & CASUALTY COMPANY, Defendant-Appellant.
    No. 03-0489.
    Court of Appeals of Iowa.
    Feb. 11, 2004.

      August Landis of Whitfield & Eddy, P.L.C., Des Moines, for appellant.
    F. Richard Lyford and Tracy L. Deut-meyer of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellee.
    Heard by HUITINK, P.J., and VOGEL and MAHAN, JJ.
   MAHAN, J.

I. Background Facts & Proceedings

Employers Mutual Casualty Company (EMC) hired Neumann-Kiewit Constructors (Neumann) as the general contractors to construct a high-rise, the EMC Building, in Des Moines, Iowa. Neumann subcontracted with Keith Janning’s Terrazzo & Tile, Inc. (Janning) to install terrazzo on the first two floors, of the building for the price of $147,864. The contract provided Janning was required to furnish a performance and payment bond in the amount of the contract price.

Janning obtained a performance and payment bond from United Fire .& Casualty Company (United Fire) in the amount of $147,864. Janning installed the terrazzo, but it was of substandard quality. Neumann filed suit against Janning and United Fire, as its surety. The parties discussed whether the floor should be entirely replaced or could possibly be repaired.' Janning and United Fire offered the services of DH & Associates (DH) to repair, the terrazzo. DH inspected the floor in August and November 2000, and thought the problem could be fixed.

On February 9, 2001, the parties entered into the “Mutual Releases and Settlement Agreement,” which provided Neu-mann would dismiss its lawsuit. The settlement agreement specified that DH would be retained • under a contract with Janning and United Fire to repair the terrazzo and replace certain panels “to a commercially reasonable finish.” DH was to begin work within 120 days after Neu-mann dismissed its lawsuit. The parties agreed, “Any dispute involving the scope of work or what constitutes a commercially reasonable finish will be resolved by an independent expert to be agreed upon by the parties.” Neumann’s suit was dismissed on March 26, 2001.

Janning and United Fire entered into a contract with DH to repair the terrazzo for $68,389. No provision was made to replace certain panels which had been removed for testing. EMC required an independent expert .to be selected before it would allow DH to begin work. United Fire agreed to the selection of an expert, but pointed out that an expert was not required under the terms of the settlement agreement, because there was at that time no “dispute involving the scope of work or what constitutes a commercially reasonable finish.” The parties agreed upon FEH Associates, Inc. (FEH) to act-as an independent expert.

DH appeared at the EMC Building on July 7, 2001, with the intention of beginning the repair process. EMC employee Donald Klemmé took David Hulee of DH oh a tour or survey of the damage to the terrazzo. . Hulee did not make any repairs because he determined the first floor had deteriorated since he had previously inspected it, and the cost to repair the floor had increased to the point where it would be more effective to replace the floor. DH remained willing to do the work on the second floor. United Fire sought to involve the independent expert, FEH, but EMC would not agree to this procedure.

EMC filed suit against United Fire for breach of contract due to DH’s failure to repair or replace the terrazzo as required by the settlement agreement. United Fire claimed: (1) the parties were mutually mistaken' about DH’s ability to do the work; (2) EMC breached the contract first; (3) if United Fire did breach the contract, this was due to a legal excuse; and (4) its damages should be limited to $147,864, the amount of the bond agreement.

The district court determined that under the settlement agreement United Fire and Janning were jointly liable to provide EMC with a terrazzo floor with a “commercially reasonable finish.” The court found United Fire breached the contract, and it failed to prove any of its defenses. The court determined the total cost of repair and replacement was $847,390, and United Fire should be liable for this amount. United Fire appeals.

II. Standard of Review

Our scope of review in this action is for the correction of errors at law. Iowa R.App. P. 6.4. The findings of fact in a law action are binding upon us if they are supported by substantial evidence. Iowa R.App. P. 6.14(6)(a). Evidence is substantial if a reasonable mind would accept it as adequate to reach the same findings. Frontier Props. Corp. v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992).

III. Mutual Mistake

United Fire claims the settlement agreement is not enforceable because the parties made a mutual mistake regarding DH’s ability to repair the terrazzo. It asserts that at the time of the settlement agreement the parties believed the terrazzo was “very fixable” and that DH was willing to perform the required repair work.

For a contract to be valid, the parties must express mutual assent to the terms of the contract. Heartland Express, Inc. v. Terry, 631 N.W.2d 260, 268 (Iowa 2001). If there is a misunderstanding as to the object of the agreement, no meeting of the mind occurs, and there is no contract. Schaer v. Webster County, 644 N.W.2d 327, 338 (Iowa 2002). The misunderstanding must be reasonable under the circumstances of the case. Id. A unilateral mistake by one party will not release that party from its obligations under the contract. State v. Unisys Corp., 637 N.W.2d 142, 150 (Iowa 2001).

The language of the settlement agreement shows the parties did not believe the problems with the terrazzo could be completely fixed by repair work alone. The agreement provided DH would engage in “replacement of panels where samples removed ....” In addition:

It is understood that DH may subcontract out certain work; that is, the replacement of the panels where samples were taken out of the first and second floor, and any other panels that are deemed necessary to replace in order to achieve the commercially reasonable finish as provided herein.

We conclude the district court did not err by ruling United Fire had failed to show the contract was unenforceable due to mutual mistake.

TV. Breach of Contract by EMC

United Fire contends EMC is not entitled to relief because it failed to perform under the terms of the contract. A party who seeks recovery on a contract has the burden to plead and prove the contract and its performance. Roland A Wilson & Assocs. v. Forty-O-Grand Corp., 246 N.W.2d 922, 925 (Iowa 1976) (citing Heaberlin v. Heaberlin, 255 Iowa 403, 406-07, 122 N.W.2d 841, 843 (1963)).

United Fire points out that the contract provides, “Any dispute involving the scope of work or what constitutes a commercially reasonable finish will be resolved by an independent expert'to be agreed upon by the parties.” United Fire believes the present dispute involves the scope of DH’s work, and should have been submitted to the independent expert, FEH.

On this issue the district court found:

When DH walked off the job and failed to repair or replace the floor as required by the agreement, this was not a dispute involving the scope of work to be resolved by the independent expert, it was a breach of [United Fire’s] obligation under the agreement to repair and replace the floor to a commercially reasonable finish.

We find no error in the district court’s conclusion that there was no “dispute involving the scope of work ...” to be performed. DH simply failed to perform any work under the agreement.

V. Breach of Contract by United Fire

United Fire claims there is insufficient evidence to show that it breached' the terms of the settlement agreement. A party breaches a contract when, without legal excuse, it fails to perform any promise which forms a whole or a part of the contract. Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).

The settlement agreement provided DH would be retained by Janning and United Fire to “repair the terrazzo floor installed by Janning, including but not limited to cracking, spalling, delamination, bleed-over, and replacement of panels where samples removed, to a commercially reasonable finish.” The district court found:

DH never agreed to do what [United Fire] needed it to do in order to fulfill [United . Fire’s] obligations under the Mediation Agreement. As a result, [United Fire] failed to provide EMC with a contractor that would repair and replace the floor, and thus breached its obligations under the Mediation Agreement.

We determine the district court did not err in concluding United Fire breached the settlement agreement.

VI. Legal Excuse

United Fire asserts that even if it is found to have breached the contract, it had a legal excuse. It states performance under the contract became impracticable because of a supervening event, which was the deterioration of the condition of the terrazzo to the point it was no longer repairable.

Our supreme court has noted:

Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.

American Soil Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd., 586 N.W.2d 325, 330 (Iowa 1998) (quoting Restatement (Second) of Contracts § 261 (1981)). Under this rule, a party may be relieved of its duty under a contract if performance has unexpectedly become impracticable as a result of a supervening event. Id. United Fire also claims there was a supervening frustration of purpose. See Mel Frank Tool & Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802, 806 (Iowa 1998) (quoting Restatement (Second) of Contracts § 265).

As the district court noted, at the time of the settlement agreement, • all of the parties were aware the terrazzo was in poor condition and needed to be repaired or replaced. The court did not err by concluding United Fire cannot now claim the poor condition of the floor was an unexpected supervening event, or that it frustrated the purpose of the contract.

VII. Limitation of Liability

Finally, United Fire asserts that its liability to EMC should be limited to the amount of the performance and payment bond, which is $147,864. It points out that under the terms of the bond agreement, it would never be liable for more than the amount of the performance and payment bond. United Fire claims the settlement agreement did not create a new obligation, but was merely a mechanism by which it performed its obligations under the bond agreement.

Under the terms of the bond agreement, United Fire was the surety and Neumann and EMC were both listed as obligees. However, only United Fire, Janning, and Neumann signed the bond agreement. The bond agreement provided:

In no event shall the Surety be liable in the aggregate to both Obigees for more than the penalty of its Performance and Payment Bond, nor shall it be liable except for a single payment for each single breach or default. At the Surety’s election, any payment due to either obligee may be made by its check issued jointly to both.

Under a performance bond, a surety generally has two options if the principal defaults: (1) undertake the completion of the principal’s work itself; or (2) pay the obligee the amount of the bond. Granite Computer Leasing Corp. v. Travelers Indem. Co., 894 F.2d 547, 551 (2d Cir.1990); see also First Fed. State Bank v. Town of Malvern, 270 N.W.2d 818, 819 (Iowa 1978) (noting surety had completed the project after principal defaulted); Winnebago County State Bank v. Davidson, 186 Iowa 532, 534, 172 N.W. 449, 450 (1919) (same).

At the time Neumann brought suit against Janning, United Fire could have submitted the amount of the bond and walked away from the agreement. If it had done so, its liability would have been limited by the penal limits of the bond. See Fellows v. Errington, 186 Iowa 322, 327, 170 N.W. 545, 547 (1919). When the surety refuses to perform the contract after the principal defaults, “the surety is liable to the owner for the damages caused by the contractor’s default but only up to the penal sum of the bond.” In re Technology for Energy Corp., 123 B.R. 979, 982 (Bkrtcy.E.D.Tenn.1991).

While a surety contract will be strictly construed according to its terms, a surety may agree to modify the contract, and extend its liability. Andrew v. Austin, 213 Iowa 963, 967, 232 N.W. 79, 81 (1930). When a surety assumes the performance of the contract, the surety becomes subro-gated to the rights of the principal, and necessarily becomes subject to the principal’s liabilities. State v. Cornwall, 102 Or. 220, 201 P. 1072, 1077 (1921) (citing Ausplund v. Aetna Indem. Co., 47 Or. 10, 81 P. 577, 580 (1905)). Other courts have noted:

One who is in reality a surety may contract as a principal. He may waive the rights which the law throws around a surety, for such a waiver has nothing in it offensive to the law; and the surety does waive such rights when he in terms contracts and agrees to be bound as the principal.

Caron v. Andrew, 133 Cal.App.2d 402, 284 P.2d 544, 550 (1955) (quoting Beers v. Wolf, 116 Mo. 179, 22 S.W. 620, 621 (1893)).

When a surety takes over performance of a contract, the surety’s liability is no longer limited by the amount of the bond. Technology for Energy, 123 B.R. at 983. We note:

Ordinarily, a surety on a bond is not liable beyond the penalty named therein. However, this limitation may be varied by the contract, by bad faith on the part of the surety, or by statute; and where a surety assumes the role of the principal and completes the contract, the surety is liable to pay sums in excess of the penal sum.

72 C.J.S. Principal & Surety § 75, at 223-24 (1987) (footnotes omitted); see also Federal Sur. Co. v. Lalonde, 31 F.2d 673, 674 (9th Cir.1929) (finding surety who took over work from contractor may be liable in excess of penalty bond); Caron, 284 P.2d at 550 (finding surety became liable for the costs of completing the project “without reference to the amount for which it had signed as surety”); International Fid. Ins. Co. v. Wilson, 387 Mass. 841, 443 N.E.2d 1308, 1314 (1983) (“Where a surety company assumes the role of the principal and completes the contract, it is liable to pay sums in excess of the penal sum.”); Copeland Sand & Gravel, Inc. v. Insurance Co. of N. Am., 40 Or.App. 831, 596 P.2d 623, 625 (1979), rev’d on other grounds 288 Or. 325, 607 P.2d 718 (1980) (finding the penal sum does not limit the liability of a surety that takes over performance of a contract).

In the present case, after Janning’s default, United Fire took the option of taking over Janning’s performance under the contract. By taking over the contract, United Fire waived its protections as a surety and agreed to be bound as the principal. See Cornwall, 201 P. at 1077. When United Fire assumed the role of the principal, it became liable to pay sums in excess of the amount of the bond. See International Fid. Ins. Co., 443 N.E.2d at 1314.

Furthermore, the settlement agreement in this case specifically provided:

It is understood that this Agreement and the DH contract referenced in paragraph 1 above run to EMC as a third-party beneficiary,’ but [Neumann] and EMC retain the right to bring an action against Janning, [United Fire], or both, if Janning and [United Fire] breach any part of this Agreement, or if DH fails to complete the work described in paragraph 1 above within a reasonable amount of time after beginning its work. As between [United Fire] and Janning only, nothing in this Agreement shall be construed as a novation or waiver of any of the provisions of the written General Indemnity Agreement between them.

(Emphasis added.)

In addition, by providing that “between [United Fire] and Janning only” there had been no waiver of the bond agreement, the settlement agreement implies that there has been a waiver as to other parties. Waiver is the voluntary or intentional relinquishment of a known right. Scheetz v. IMT Ins. Co., 324 N.W.2d 302, 304 (Iowa 1982). A waiver can be either express or implied. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Federated Mut. Ins. Co., 596 N.W.2d 546, 552 (Iowa 1999).

We determine that as to EMC, the district court did not err in concluding that United Fire, as Janning’s surety, may be responsible for the full amount of the damages caused by the breach of contract.

We affirm the decision of the district court.

AFFIRMED.

      . Terrazzo is "flooring of small chips of marble set in cement and polished.” Webster’s New World Dictionary 1468 (2d ed.1976). It has also been defined as "a mosaic flooring made by embedding small pieces of marble or granite in freshly placed mortar and after hardening, grinding and polishing.” Webster’s Third New International Dictionary 2360 (2002).

      . The parties to the settlement agreement were‘EMC, Neumann, Janning, United Fire, and the building architects, Brooks Borg & Skiles.


author: ANDERSON, RUSSELL A., Justice.

text:
    MINNESOTA AUTOMATIC MERCHANDISING COUNCIL, et al., Appellants, v. Daniel A. SALOMONE, as Commissioner of the Minnesota Department of Revenue, et al., Respondents.
    No. C0-03-65.
    Supreme Court of Minnesota.
    June 24, 2004.

      Eric J. Magnuson (# 66412), Peter Gray (#25809X), Rider Bennett, LLP, Minneapolis, MN, for Appellant.
    Mike Hatch, Office of the Attorney General, James W. Neher (# 77379), St. Paul, MN, for Respondent.
    Kevin Walli (# 183866), Fryberger, Buchanan, Smith et al.,- St. Paul, MN, for Amicus Curiae Minnesota Milk Producers Association.
    Patryk J. Dr'escher (#293842), Nicole L. Druckrey (# 0332355), Halleland Lewis Nilan et al., Minneapolis, MN, for Amicus Curiae The National Automatic Merchandising Association.
   OPINION

ANDERSON, RUSSELL A., Justice.

The issue for resolution in this case is whether the taxation of sales of food through vending machines violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution or the Uniformity Clause of the Minnesota Constitution. We conclude that it does not.

The Minnesota Automatic Merchandising Council (MAMC) is a nonprofit membership organization made up of corporations, individuals and partnerships that operate and supply vending machines. MSY Enterprises, d/b/a Apple Automatic Food Service (Apple), a member of MAMC, is a Minnesota corporation that operates and maintains 550 vending machines located in Minnesota. . MAMC members are engaged in the business of selling food products through vending machines located in Minnesota. Examples of these food products include prepackaged sandwiches and muffins, bottled water, cookies, potato chips, corn chips and other chips, milk, fruit juice, pastry products, Ramen soup, microwaveable and popped popcorn, pretzels, soups and stews such as chili, boxed entrées such as boxed lasagna, Slim Fast, granola bars and breakfast bars. Apple’s vending machines are located in a variety of settings, including office buildings, manufacturing plants, shopping areas and car dealerships. In Minneton-ka, there are two sites where Apple’s vending machines are located in an office building near a cafeteria that sells some of the same items that are sold through Apple’s vending machines.

MAMC and Apple commenced a declaratory judgment action in Ramsey County District Court against the state, the Commissioner of Revenue and the Department of Revenue, challenging the constitutionality of the 2001 amendments to the state’s sales and use tax laws as they apply to the sales of food products through vending machines. MAMC and Apple contended that the imposition of a sales tax on vending machine food sales while exempting sales of food by various other retailers under the 2001 amendments contravened the equal protection guarantees of the federal constitution and the uniformity guarantees of the state constitution. On cross-motions, the district court granted summary judgment for the state, concluding that the taxation on vending machine food sales violated neither the federal nor the state constitution. The court of appeals affirmed. Minnesota Automatic Merch. Council v. Smith, 667 N.W.2d 159, 160 (Minn.2003). We granted further review.

I.

Minnesota’s sales tax is imposed on gross receipts from “retail sales.” Minn. Stat. § 297A.62, subd. 1 (2002). Retail sales are generally defined as sales for any purpose other than resale. Minn.Stat. § 297.A61, subd. 4(a) (2002). Prior to the 2001 statutory amendments at issue in this case, sales of prepared food or meals and sales of food through vending machines were taxed. Minn.Stat. § 297A.61, subd. 3(d)(1) (2000) (food or drinks prepared by retailer for immediate consumption on retailer’s premises); id. subd. 3(d)(2) (2000) (food or drinks prepared by retailer for immediate consumption on or off retailer’s premises); id., subd. 3(d)(7) (2000) (all food from vending machines). Sales of food products were exempt. Minn.Stat. § 297A.67, subd. 2 (2000).

For sales of food made after December 31, 2001, sales of prepared food and sales of food through vending machines are taxed. Act of June 30, 2001, ch. 5, art. 12, § 8, 2001 Minn. Laws 1st Spec. Sess. 1670-71 (codified at Minn.Stat. § 297A.61, subd. 3(d) (2002)). Prepared food means food sold with eating utensils, food sold in a heated state or heated by the seller or a mixture of food ingredients for sale as a single item. Act of June 30, 2001, ch. 5, art. 12, § 8, 2001 Minn. Laws 1st Spec. Sess. 1682-83 (codified at Minn.Stat. § 297A.61, subd. 31 (2002)). Sales of food and food ingredients are exempt. Act of June 30, 2001, ch. 5, art. 12, § 8, 2001 Minn. Laws 1st Spec. Sess. 1687 (codified at 297A.67, subd. 2 (2002)).

The 2001 amendments relating to the taxation on food sales were a part of the legislature’s adoption of the Uniform Sales and Use Tax Administration Act (Uniform Act) proposed by the Multi-State Streamlined Sales Tax Project. Act of June 30, 2001, ch. 5, art. 12, § 84, 2001 Minn. Laws 1st Spec. Sess. 1718 (codified at Minn.Stat. § 297A.995 (2002)). The purpose of the Uniform Act is to “simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance.” Minn.Stat. § 297A.995, subd. 3 (2002). The adoption of the Uniform Act allows the state to enter into the Streamlined Sales and Use Tax Agreement that sets out uniform definitions for the administration of states’ sales and use tax laws. Minn.Stat. § 297A.995, subd. 4 (2002).

U.

The Equal Protection Clause of the Fourteenth Amendment to the United States Constitution provides that “[n]o State shall * * * deny to any person within its jurisdiction the equal protection of the laws.” U.S. Const, amend XIV, §' 1. The Uniformity Clause of the Minnesota Constitution provides that “[tjaxes shall be uniform upon the same class of subjects and shall be levied and collected for public purposes[.]” Minn. Const, art. X, § 1. The scope of protection afforded under these two provisions is identical. Lutheran Bhd. Research Corp. v. Comm’r of Revenue, 656 N.W.2d 375, 382 (Minn.2003) (citing Kuiters v. County of Freeborn, 430 N.W.2d 461, 463 (Minn.1988)).

Resolution of the constitutional issues raised in this case are governed by well established principles. Every presumption is invoked in favor of the constitutionality of a statute. Scott v. Minneapolis Police Relief Ass’n, 615 N.W.2d 66, 73 (Minn.2000) (citing Miller Brewing Co. v. State, 284 N.W.2d 353, 356 (Minn.1979)). The power of this court to declare a statute unconstitutional “is to be exercised only when absolutely necessary, and then with extreme caution.” Wegan v. Village of Lexington, 309 N.W.2d 273, 279 (Minn.1981) (quoting Schwartz v. Talmo, 295 Minn. 356, 363, 205 N.W.2d 318, 323, appeal dismissed, 414 U.S. 803, 94 S.Ct. 130, 38 L.Ed.2d 39 (1973)). A statute will not be declared unconstitutional unless the party challenging it demonstrates beyond a reasonable doubt that the statute violates some constitutional provision. Miller Brewing, 284 N.W.2d at 356 (citing Head v. Special Sch. Dist. No. 1, 288 Minn. 496, 505, 182 N.W.2d 887, 893 (1970)).

The test to determine the constitutionality of statutory classifications includes three primary elements:

(1) The distinctions which separate those included within the classification from those excluded must not be manifestly arbitrary of 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; (3) the purpose of the statute must be one that the state can legitimately attempt to achieve.

Lutheran Bhd., 656 N.W.2d at 382 (Minn.2003) (quoting Miller Brewing, 284 N.W.2d at 356; see also Schwartz v. Talmo, 295 Minn. 356, 362, 205 N.W.2d 318, 322 (1973)). In that “taxation policy is peculiarly a legislative function, involving political give-and-take, the courts are very-deferential in their review of tax legislation.” Walker v. Zuehlke, 642 N.W.2d 745, 751 (Minn.2002) (citing Metro. Sports Facilities Comm’n v. County of Hennepin, 478 N.W.2d 487, 489 (Minn.1991)). A statutory tax classification will be sustained as having a'rational basis if “any conceivable state of facts supports it.” Rio Vista Non-Profit Housing Corp. v. County of Ramsey, 335 N.W.2d 242, 245-46 (Minn.1983).

III.

MAMC and Apple contend that the disparate tax treatment of similar prepackaged food items based on whether the item was purchased from a vending machine or a convenience store constitutes an arbitrary classification. The intent behind the legislation on the taxation of certain foods was to tax food purchased at a restaurant as “luxuries” but to exempt food purchased at a grocery store as “necessities.” Associated Food Servs., Inc. v. Comm’r of Taxation, 298 Minn. 277, 282, 216 N.W.2d 253, 256 (1974). In Associated Food we rejected the similarity-of-products test urged by MAMC and other vending machine operators, holding that the test for taxability was whether a vending machine, in its method of merchandising and the consumer market it served, was more like a grocery, store or more like a restaurant.

If similarity of product is the test, restaurants could not be taxed either, without violating the equal protection clause, despite the legislative determination, acknowledged by all parties, that going to a restaurant is a taxable luxury and purchasing food at a grocery store is a nontaxable necessity. While grocery stores and vending machines do sell some of the same products, this factor alone does not necessarily make them part of the same class for sales-tax purposes. Rather, the test should be whether a vending machine, in its method of merchandising and the consumer market it serves, is more like a grocery store or a restaurant.

Associated Food, 298 Minn, at 282, 216 N.W.2d at 256. We went on to say that the method of merchandising provided a reasonable distinction between food retailers that sell taxable food and those that sell exempt food even though retailers of both groups were capable of selling the same products.

[Tjhere is a reasonable distinction which divides the two groups [those that sell taxable food and those that sell exempt food] — method of merchandising. By examining a retailer’s method of merchandising, one can tell whether that retailer performs the function of a grocer or restaurant. This secondary classification made on the basis of method of merchandising helps accomplish the legislative purpose of taxing food only when sold as a luxury and, consequently, avoiding a regressive tax on necessities.

Associated Food, 298 Minn, at 284, 216 N.W.2d at 257.

In Associated Food, in examining the method of merchandising of vending machine operators, we concluded that vending machines were more like restaurants. The self-service, coin-operated vending machines were located generally in offices, industrial facilities and commercial buildings; and the record reflected that vending machine operators considered themselves to be a part of the fast-food service industry. Such locations and services permitted “the inference that vending machines are situated so as to supply consumers With' refreshment where they work. Thus, their major competition is the coffee shop or snack bar' — not the grocery store.” Id. at 283, 216 N.W.2d at 257.

Here, in applying the Associated Food method-of-merchandising and consumer-market-served test, the lower courts concluded that the sales tax on vending machine sales under the 2001 tax scheme was neither a denial of equal protection nor of uniformity. MAMO and Apple assert that the “necessity/later vs. luxury/immediate consumption dichotomy” that was articulated in Associated Foods has been discarded by the 2001 amendments since coffee shops and snack bars can now sell certain food items “tax exempt.” The state counters that the amendments to the tax statutes do not make any material changes to the classification of food sales for sales tax purposes because vending machine sales were, and continue to be, subject to sales tax. The state points out that distinctions are stjll in place because the sale of “prepared foods” by restaurants and sales of food through vending machines are both treated as taxable sales of food made for immediate consumption and that the sale of food and food ingredients by grocery stores are treated as tax-exempt sales of food for later consumption.

The 2001 amendments replaced prior statutory language describing taxable food as “food prepared for immediate consumption” with the term “prepared food,” while food sold through vending machines remained subject to taxation. Act of June 30, 2001, ch. 5, art. 12, § 8, 2001 Minn. Laws. 1st Spec. Sess. 1671 (codified at MinmStat. § 297A.61, subd. 3(d) (2002)). The 2001 amendments for exempt food replaced the previous list of exempt food products. Id. As the lower courts concluded, the general classification of food retailers into two groups for purposes of taxation by taxing restaurant-type food sales but not grocery-type food sales has not changed; and the distinction which divides the two groups, method of merchandising, is likewise unchanged. The distinction is genuine and substantial and serves the legislative purpose of taxing food when sold as a luxury and avoiding a regressive tax on necessities, thus satisfying the first two Miller Brewing elements for determining the constitutionality of statutory classifications. As for the third element, the purpose of the statute is one which the state can legitimately attempt to achieve— avoidance of a regressive tax. See Associated Food, 298 Minn. at 284, 216 N.W.2d at 257.

It is true, as MAMC and Apple assert, that with the exception of soft drinks and candy, under the 2001 amendments food is generally exempt from sales tax unless it is sold as “prepared food” whether by a restaurant or by a grocery store or sold through a vending machine. But the operative distinction for tax classification purposes is not between vending machine food sales and all other food sales. Rather, the distinction .remains between grocery-type food sales and restaurant-type food sales. That a grocery store, whose main line of business is the sale of tax-exempt food, may function as a restaurant in the. sale of taxable prepared food and that a restaurant, whose main line of business is the sale of taxable prepared food, may function as a grocery store in the sale of tax-exempt grocery food, does not realign in any significant way the general distinction based on method of merchandising and consumer market served for sales tax purposes.

As the record in this case reflects, vending machine operators typically provide a bank of vending machines in locations such as office buildings and manufacturing plants where they are used by employees who are eating lunch or on a break. The vending machines are self-service, dispensing' an item selected by the purchaser upon the insertion of currency. Such locations and services reflect that the machines are situated to supply consumers with immediate refreshment in places of employment and the like. Their competitors are still more likely to be restaurants, coffee shops or snack bars rather than grocery stores. Associated Food, 298 Minn. at 283, 216 N.W.2d at 257. It is also worth bearing in mind that where the 2001 amendments to MinmStat. § 297A had as their purpose to “simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance,” Minn. Stat. § 297A.995, subd. 3 (2002), it is unlikely that the legislature intended to alter the existing general- classification of food retailers.

We have upheld many classifications in tax statutes against the challenge that they violate the Equal Protection Clause and the Uniformity Clause. See Ruberto v. County of Washington, 572 N.W.2d 293, 299 (Minn.1997) (upholding a statutory process that determined payback taxes by taking into account whether the property had any nonagricultural characteristics); Lund v. Hennepin County, 403 N.W.2d 617, 620 (Minn.1987) (upholding distinction between owners and renters in property tax classification); Erie Mining Co. v. Comm’r of Revenue, 343 N.W.2d 261, 269 (Minn.1984) (upholding two classifications of taconite property taxpayers); Hegenes v. State, 328 N.W.2d at 719, 722-23 (Minn.1983) (upholding as constitutional the classification of nonhomestead residential properties for purposes of real estate taxation into those of three units or less and those properties with four or more units); Petition of U.S. Steel Corp., 324 N.W.2d 638, 641-43 (Minn.1982) .(upholding the retroactive assessment of taxes on iron ore for six-year period as constitutional); Guilliams v. Comm’r of Revenue, 299 N.W.2d 138, 142-44 (Minn.1980) (determining that the farm loss modification law was constitutional); Miller Brewing, 284 N.W.2d at 356-59 (allowing a 50 percent credit allowed against excise tax imposed on barrels of malt beverages produced by brewers with production facilities in the state).

We have stated that that “[e]ven if the classification scheme is imperfectly related to the legislature’s objectives, imperfection is not a constitutional defect.” Westling v. County of Mille Lacs, 581 N.W.2d 815, 822 (Minn.1998). We also held that “any legitimate purpose cán support [a] tax.” Erie Mining Co., 343 N.W.2d at 268 (emphasis in original). ■ As we explained recently in Walker v. Zuehlke,

No .scheme of taxation, whether the tax is imposed on property, income, or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the Equal Protection Clause.

642 N.W.2d at 751 (quoting San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 40-41, 93 S.Ct. 1278, 36 L.Ed.2d 16 (1973)).

Of necessity, lines must be drawn for tax classification. For constitutional purposes, absolute equality and uniformity in taxation are not required. As Justice Holmes observed:

When a legal distinction is determined, as no one doubts that it may be, between night and day, childhood and maturity, or any other extremes, a point has to be fixed or a line has to be drawn, or gradually picked out by successive decisions, to mark where the change takes place. Looked at by itself without regard to the necessity behind it the line or point seems arbitrary. It might as well or nearly as well be a little more to one side or the other. But when it is seen that a line or point there must be, and that there is no mathematical or logical way of fixing it precisely, the decision of the Legislature must be accepted unless we can say that it is very wide of any reasonable mark..

Louisville Gas & Elec. Co. v. Coleman, 277 U.S. 32, 41, 48 S.Ct. 423, 72 L.Ed. 770 (1928) (Holmes, J., dissenting).

We conclude that the line drawn by the legislature between retailers who sell taxable food and those that sell exempt food is not “wide of any reasonable mark” and is based on distinctions which are genuine and have a rational basis. We therefore hold that the imposition of a sales tax on sales of food through vending machines does not violate the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution or the Uniformity Clause of the Minnesota Constitution.

Affirmed.

      . Minnesota Statutes section 297A.61, subd. 3(d) (2000) provided:
      Sale and purchase include the furnishing, preparing, or serving for a consideration of food or drinks. Notwithstanding section 297A.67 subdivision 2, taxable food or drinks include, but are not limited to, the following:
      (1) food or drinks sold by the retailer for immediate consumption on the retailer’s premises. Food and drinks sold within a building or grounds that require an admission charge for entrance are presumed to be sold for consumption on the premises;
      (2) food or drinks prepared by the retailer for immediate consumption either on or off the retailer’s premises. For purposes of this subdivision, “food or drinks prepared for immediate consumption” means any food product upon which an act of preparation including, but not limited to, cooking, mixing, sandwich making, blending, heating, or pouring has been performed by the retailer so the food product may be immediately consumed by the purchaser;
      (3) ice cream, ice milk, frozen yogurt products, or frozen novelties sold in single or individual servings including, but not limited to, cones, sundaes, and snow cones;
      (4) soft drinks and other beverages, including all carbonated and noncarbonated beverages or drinks sold in liquid form, but not including beverages or drinks which contain milk or milk products, beverages or drinks containing 15 or more percent fruit juice, and noncarbonated and noneffervescent bottled water sold in individual containers of one-half gallon or more in size;
      (5) gum, candy, and candy products;
      (6) ice;
      (7) all food sold from vending machines;
      (8) all food for immediate consumption sold from concession stands and vehicles;
      (9) party trays;
      (10) all meals and single servings of packaged snack food sold in restaurants and bars; and
      (11) bakery products that sure:
      (i) prepared by the retailer for consumption on the retailer’s premises;
      (ii) sold at a place that charges admission;
      (iii) sold from vending machines; or
      (iv) sold in single or individual servings from concession stands, vehicles, bars, and restaurants.
      For purposes of this paragraph, "single or individual servings” does not include products when sold in bulk containers or bulk packaging.
      For purposes of this paragraph, "premises” means the total space and facilities, including buildings, grounds, and parking lots that are made available or that are available for use by the retailer or customer for the purpose of sale or consumption of prepared food and drinks. The premises of a caterer is the place where the catered food or drinks are served.

      . Minnesota Statutes section 297A.67, subd. 2 (2000) provided:
      Food products including, but not limited to, cereal and cereal products, butter, cheese, milk and milk products, oleomargarine, meat and meat products, fish and fish products, eggs and eggs products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products, coffee and coffee substitutes, tea, and cocoa and cocoa products are exempt.

      . Minnesota Statutes section 297A.61, subd. 3(d) (2002) provides:
      Sale and purchase include the preparing for a consideration of food. Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited to, the following:
      (1) prepared food sold by the retailer;
      (2) soft drinks;
      (3) candy; and
      (4) all food sold through vending machines.

      . Minnesota Statutes section 297A.61, subd. 31 (2002) provides:
      "Prepared food" means food that meets either of the following conditions:
      (1) the food is sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws; or
      (2) the food is sold in a heated state or heated by the seller or two or more food ingredients are mixed or combined by the seller for sale as a single item, except for:
      (i) bakery items, including, but not limited to, bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas;
      (ii) ready-to-eat meal and seafood in an unheated state sold by weight;
      (iii) eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in chapter 3, part 401.11 of its food code so as to prevent food borne illnesses; or
      (iv) food that is only sliced, repackaged, or pasteurized by the seller.

      . Minnesota Statutes section 297A.67, subd. 2 (2002) provides:
      Food and food ingredients are exempt. For purposes of this subdivision, "food” and "food ingredients” mean substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. Food and food ingredients exempt under this subdivision do not include candy, soft drinks, food sold through vending machines, and prepared foods. Food and food ingredients do not include alcoholic beverages, dietary supplements, and tobacco. For purposes of this subdivision, "alcoholic beverages” means beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume. For purposes of this subdivision, "tobacco” means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco. For purposes of this subdivision, "dietary supplements” means any product, other than tobacco, intended to supplement the diet that:
      (1) contains one or more of the following dietary ingredients:
      (1) a vitamin;
      (ii) a mineral;
      (iii) an herb or other botanical;
      (iv) an amino acid;
      (v) a dietary substance for use by humans to supplement the diet by increasing the total dietary intake; and
      (vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient described in items (i) to (v);
      (2) is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
      (3) is required to be labeled as a dietary supplement, identifiable by the supplement facts box found on the label and as required pursuant to Code of Federal Regulations, title 21, section 101.36.

      . The Uniform Act provides for uniform rules and definitions, including uniform sourcing rules for determination of the location of taxable transactions. Minn.Stat. § 297A.995, subd. 6 (2002).