author: RANDALL, Judge.

text:
    STATE of Minnesota, Respondent, v. Gregory John BUNCE, Appellant.
    No. C0-02-1433.
    Court of Appeals of Minnesota.
    Sept. 30, 2003.

      John M. Stuart, State Public Defender, Theodora Gaitas, Assistant State Public Defender, Minneapolis, MN, for appellant.
    Mike Hatch, Attorney General, James B. Early, Assistant Attorney General, St. Paul, MN, and John Carlson, Pine County Attorney, Pine County Courthouse, Pine City, MN, for respondent.
    Considered and decided by RANDALL, Presiding Judge, HUDSON, Judge, and FORSBERG, Judge .

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

   OPINION

RANDALL, Judge.

On appeal from a conviction for first-degree controlled substance offense (possession of methamphetamine), appellant argues (1) that police, who appeared at appellant’s residence to check on his welfare, did not obtain voluntary consent to search the house; (2) that police, who suspected appellant of using methamphetamine, misrepresented their purpose when they told him they were looking for a shotgun out of concern that he was suicidal; and (3) that police exceeded the scope of appellant’s consent when they lifted a pillow knowing it could not conceal a shotgun. Finally, appellant argues that because there was no inquiry on the record of his understanding that he was waiving his right to a jury trial, appellant is entitled to a new trial. Because appellant did not waive his right to a jury trial, we reverse and remand for a new trial. In the interests of judicial economy, we address the validity of the search. Because we find no error with respect to the search, we affirm the district court on that issue.

FACTS

On September 4, 2001, Pine County Sheriffs Deputy Tom Pitzen received a call from dispatch concerning a suicide threat at appellant Greg Bunce’s residence. The information regarding the threat came from Steve Smith, a deacon at the Pine City Assembly of God Church. Pitzen contacted Smith, who stated that appellant had threatened to kill himself with a shotgun. Smith also told Pitzen that appellant rented a trailer from the Assembly of God Church, and that deacons at the Assembly of God suspected appellant of using and possibly selling methamphetamine from the trailer.

Following the conversation with Smith, Pitzen went to appellant’s house to investigate the situation. Because of the possible threat of a firearm, Pitzen requested backup, and Pine County Deputies Bill Juneau and Lt. Brett Grinde accompanied him to appellant’s residence. The officers knocked on appellant’s door, and eventually appellant answered. Pitzen questioned appellant about the suicide threats for approximately 10 or 15 minutes, and appellant assured the deputies that he was feeling fine and did not even own a shotgun. Despite his assurance, Pitzen asked appellant if they could look in the trailer in order to corroborate his assertion. Pitzen told appellant that he did not have to let them look, but if they were granted permission, the officers would only search areas where a shotgun would fit. Appellant reluctantly agreed and proceeded to show the officers the trailer.

After walking through a few rooms with appellant, the officers reached the bedroom. Pitzen asked if he could check under the bed, and appellant said yes. As he started to bend down to look under the bed, Pitzen noticed an empty baggie. Pit-zen questioned appellant about it; appellant failed to give an explanation. Pitzen resumed bending down to look under the bed, and in the process, he saw another baggie on a shelf in the headboard of the bed, partially obscured by a pillow. According to Pitzen, the baggie contained a substance that looked and felt like methamphetamine. When questioned about the substance, appellant replied that it was frankincense.

The officers left the baggie in the bedroom, and appellant escorted the officers into another room. As he passed by some shelves, Pitzen noticed some rectangular strips of tinfoil, some small baggies, and some razor blades. The items could be used to package methamphetamine. When asked about the items, appellant replied that they were “just stuff.”

The officers concluded that there were no guns in the house, but asked appellant for permission to field-test the substance contained in the baggie. Officer Juneau told appellant that he could refuse to allow the test and that the officers would leave the residence if requested. Appellant failed to address the request to test the suspected methamphetamine, but he did respond that he would rather the officers left. The officers complied, but told appellant that he would have to wait outside while Juneau obtained a search warrant.

The officers obtained a search warrant and proceeded to search the trailer. Although a full search of the trailer failed to turn up the shotgun or any additional drug paraphernalia, the officers arrested appellant for possessing methamphetamine. A complaint was filed charging appellant with two counts of first-degree controlled substance crimes pursuant to Minn.Stat. § 152.021, subd. 1(1) (2000) (sale), and Minn.Stat. § 152.021, subd. 2(1) (2000) (possession). Appellant moved to suppress the evidence, arguing that it had been discovered during an illegal search. The district court denied the motion and the issue of appellant’s guilt was tried to the court on stipulated facts. The court found appellant guilty of possession under Minn.Stat. § 152.021, subd. 2(1), but not guilty of sale under Minn.Stat. § 152.021, subd. 1(1). This appeal followed.

ISSUES
I. Is appellant entitled to a new trial because he never personally waived his right to a jury trial?
II. Should the evidence seized from appellant’s home have been suppressed as fruit of an unlawful search?

ANALYSIS

I.

Appellant argues he is entitled to a new trial because he never personally waived his right to a jury trial before the case was submitted to the trial court on stipulated facts. A defendant proceeding under Lothenbach must personally waive a jury trial in writing or orally upon the record in open court. State v. Sandmoen, 390 N.W.2d 419, 423-24 (Minn.App.1986). Respondent agrees that appellant did not waive a jury trial, and concedes a remand is in order. We reverse and remand the case for a new trial. Nonetheless, in the interests of judicial economy, we will address the validity of the search because of the effect a ruling on that issue will have on the case on remand.

II.

Appellant argues that the evidence seized from his home should be suppressed as fruit of an unlawful search because he did not voluntarily consent to the warrant-less search of his home. When reviewing pretrial orders on motions to suppress evidence, we may independently review the facts and determine, as a matter of law, whether the district court erred by not suppressing the evidence. State v. Harris, 590 N.W.2d 90, 98 (Minn.1999) (citation omitted).

Before conducting a search of a person’s residence, law enforcement must first obtain a warrant. State v. Taylor, 590 N.W.2d 155, 157 (Minn.App.1999). A warrant is not required when voluntary consent to enter is given. Id. When determining whether the consent was voluntary, a court must “examine the totality of the circumstances surrounding the search, including the nature of the encounter, the kind of person the defendant was, and what was said and how it was said.” State v. Dezso, 512 N.W.2d 877, 880 (Minn.1994). The consent was voluntary if a “reasonable person would have felt free to decline the officer’s requests or otherwise terminate the encounter.” Id.

Here, appellant claims his consent was not voluntary because he was intimidated by the officers’ presence, and he felt the officers would not leave until he allowed them to search the house. The record reflects that the officers were quite persistent in their efforts to search appellant’s house. Appellant repeatedly denied the accusations that there was a shotgun in the house, while Pitzen kept reassuring appellant that the officers just wanted to make sure he was correct and that they would only search places where a shotgun may be hidden. Also, the fact that three officers were present at appellant’s residence, all carrying revolvers, tends to add merit to appellant’s claim that he was intimidated and that his consent was not voluntary.

However, although the officers were armed and persistent in their efforts to question appellant, there is no solid evidence that the officers coerced appellant to consent to the search. Officer Pitzen testified that appellant was informed of his rights before the search commenced. Appellant misconstrues Offices Juneau’s testimony as stating that the deputies never informed appellant of his right to refuse the search until after the methamphetamine was discovered. Officer Juneau testified that he never informed appellant of his right to refuse the search. The district court noted that the officers testified appellant was lucid during the search. The district court is in the best position to make credibility determinations, and the district court determined that the police officers’ testimony was more credible than appellant’s testimony. Because the officers were armed and persistent with their requests to search the trailer, the district court could have found intimidation and suppressed the evidence. But, the court found that consent was voluntarily and freely given. It was a judgment call based on the credibility of the witnesses. We conclude the court did not err in its determination.

Appellant also contends that police, who suspected him of using methamphetamine, misrepresented their purpose for conducting the search when they told him they were looking for a shotgun out of concern that he was suicidal. “Misrepresentations about the nature of an investigation may be evidence of coercion.” U.S. v. Turpin, 707 F.2d 332, 334 (8th Cir.1983) (quotation omitted). Tacit misrepresentation of the purpose of a search may even rise to such a level of deception so as to invalidate a search. State v. Schweich, 414 N.W.2d 227, 230 (Minn.App.1987). But, an officer’s failure to tell a defendant that he is suspected of a crime does not invalidate the defendant’s consent to search the house. U.S. v. Turpin, 707 F.2d 332, 335 (8th Cir.1983).

Both Officers Pitzen and Juneau admitted that appellant was a suspected methamphetamine user. Respondent’s contention that the officers’ only concern when they searched appellant’s residence was to check on appellant’s welfare is a stretch, and not credible. Nevertheless, there is no evidence that the officers affirmatively misrepresented their purpose for being on the premises. The officers were responding to a legitimate report that appellant had threatened to kill himself with a shotgun. They wanted to double check appellant’s house to confirm his assertion that there was no shotgun present in the house. Although the police likely had a secondary agenda for searching the premises, the suicide concerns appear genuine. We conclude the officers did not misrepresent their purpose for conducting the search to the point of illegally coercing appellant to consent.

Finally, appellant argues police exceeded the scope of his consent when they lifted a pillow knowing it could not conceal a shotgun. The scope of a search is limited by the terms of its authorization. Walter v. United States, 447 U.S. 649, 656, 100 S.Ct. 2395, 2401, 65 L.Ed.2d 410 (1980). A search that exceeds the authorized consent is unreasonable and violates the fourth amendment. United States v. Dichiarinte, 445 F.2d 126, 129-31 (7th Cir. 1971). A limited voluntary consent does not authorize “indiscriminate rummagings” into a person’s possessions. State v. Powell, 357 N.W.2d 146, 150 (Minn.App.1984). But, when an officer is lawfully present in the home, evidence may be seized if it is in plain view of the officer. State v. Campbell, 581 N.W.2d 870, 871-72 (Minn.App.1998) (citation omitted).

Here, the key issue concerning the baggie is whether enough of it was in plain sight, which, if it was, the police could go further. There was conflicting testimony as to whether the methamphetamine was in plain view. Officer Pitzen testified that a pillow only partially covered a baggie containing the substance, and that the substance could be seen. In contrast, appellant testified that the substance was completely hidden by the pillow and that Pitzen discovered the substance only after he moved the pillow. Ultimately, the district court is in the best position to determine the credibility of the witnesses, and the district court accepted Pit-zen’s testimony and rejected appellant’s testimony on the “plain view” issue. We cannot conclude the court erred as a matter of law in making this determination.

The district court did not err by denying appellant’s motion to suppress the evidence discovered during the search of his residence.

Respondent argues that even if appellant did not voluntarily consent to the search of his residence, the police were justified in searching for a shotgun in order to protect appellant’s safety and welfare. This court may consider an alternative argument if there are sufficient facts on the record for the appellate court to consider the alternative theory. State v. Grunig, 660 N.W.2d 134 (Minn.2003). Here, there is little support in the record for respondent’s argument that a warrant-less search was justified under the emergency exception. There is no mention of this argument in respondent’s memorandum of law presented to the district court following the omnibus hearing. Respondent did not raise the issue when examining its witnesses. We do not rest our decision on any alternative argument of respondent.

It can be noted that under the emergency exception to the warrant requirement, police are allowed to make a warrantless entry and search of a home when they reasonably believe that a person within is in need of immediate aid. State v. Halla-Poe, 468 N.W.2d 570, 572 (Minn.App.1991) (citations omitted). The need to protect or preserve life or avoid serious injury is justification for what would otherwise be illegal absent an exigency or emergency. Id. But, police do not have the option to go into people’s homes carte blanche whenever they claim they “hear that there is a weapon inside and that someone’s safety may be in question.” Those things can happen. When they do, the state must prove them.

Respondent also contends that the search was justified under the independent source doctrine. Although the issue is essentially moot because we found the search to be valid, it should be noted that in determining whether the independent-source exception applies, the court must consider whether (1) the illegal information affected the judge’s decision to issue the warrant, and (2) the decision to seek the warrant was prompted by the illegal observation. Murray v. United States, 487 U.S. 533, 542-43, 108 S.Ct. 2529, 2536, 101 L.Ed.2d 472 (1988).

Here, the state cannot satisfy either prong of the independent source test set forth in Murray. First, the state failed to show that the information obtained during the initial entry into appellant’s home did not affect the judge’s decision to grant the deputies’ search warrant application. Second, the record does not show that the deputies would have obtained a search warrant without the evidence discovered during the initial search of appellant’s home. Accordingly, respondent’s “independent source doctrine” argument fails.

DECISION

Appellant did not properly waive his right to a jury trial before proceeding with a Lothenbach hearing. We reverse and remand the case for a new trial. In the interests of judicial economy, we address the validity of the warrantless search. We conclude that appellant voluntarily consented to the search of his home, and the district court did not err by refusing to suppress the evidence.

Affirmed in part, reversed in part, and remanded.


source: Caselaw Access Project

author: KALITOWSKI, Judge.

license: Public Domain

text:
    Anthony PARR, et al., Judgment Creditors, Appellants, v. Federico GONZALEZ, Judgment Debtor, Respondent, Zurich American Insurance Company, Garnishee, Respondent.
    No. A03-72.
    Court of Appeals of Minnesota.
    Sept. 30, 2003.

      Lewis A. Remele, Jr., Kevin P. Hickey, Anne C. Towey, Bassford, Lockhart, Truesdell & Briggs, P.A., Minneapolis, MN, for appellants.
    Federico Gonzalez, Fort Worth, TX, pro se respondent.
    Jerome B. Abrams, Lauris Heyerdahl, Abrams & Smith, Minneapolis, MN, for respondent Zurich American Insurance Company.
    Considered and decided by LANSING, Presiding Judge, KALITOWSKI, Judge, and SCHUMACHER, Judge.
   OPINION

KALITOWSKI, Judge.

Appellants Anthony and Tamara Parr challenge the decision by the district court granting summary judgment in favor of respondent Zurich American Insurance Company, arguing that the district court erred by finding as a matter of law that the insurer’s policy with the insured does not provide coverage for appellants’ loss.

FACTS

Appellants entered into a contract with Midwest Cedar Timberoof (Midwest) to replace the roof on their home. Midwest hired Federico Gonzalez as a subcontractor on the project. On April 29, 1999, Zurich American Insurance Company (Zurich) issued a one-year Commercial General Liability (CGL) policy to Gonzalez. Because Gonzalez failed to make the payments on the policy, the policy was canceled on July 31, 1999.

Gonzalez performed work on appellants’ roof on May 1 and 2, 1999, while the CGL policy was still in effect. After Gonzalez finished the work on the roof, appellants noticed that the vent cap on their roof was damaged. Appellants called Terry Kiefer, a salesman from Midwest, and asked Kiefer to replace the damaged vent cap. On May 18, 1999, Kiefer replaced the damaged cap. But the record indicates that Kiefer used the wrong sized cap, which resulted in a blockage of the vent pipe.

In December 1999, appellants discovered large amounts of mold behind the walls, under the floors, and in the attic of their home. This property damage was the result of excess condensation created by the obstructed vent pipe. Appellants were forced to leave the house during the clean up process and lived in temporary housing for nearly a year. Eventually the house had to be completely rebuilt, and appellants moved back into their rebuilt home at the end of 2000.

Appellants brought a cause of action for negligence against Midwest, Kiefer, and Gonzalez. In the amended complaint, appellants claimed that all named defendants were jointly and severally liable for the massive property damage. Gonzalez was personally served with the amended complaint in June 2001. And in September and October 2001, appellants sent letters to Zurich and its agents informing Zurich of the claim against Gonzalez and their intent to seek a default judgment. Zurich then wrote letters to Gonzalez in October and November 2001 requesting his cooperation with the claim. But Gonzalez never contacted Zurich, and Zurich never contacted appellants or appellants’ attorneys seeking information about the claim.

After failing to hear from either Gonzalez or Zurich, appellants brought a motion for a default judgment against Gonzalez. A default judgment was entered against Gonzalez in the amount of $600,000. Subsequently, the district court issued an order allowing appellants to bring a supplemental garnishment complaint against Zurich, finding that appellants had shown probable cause that Zurich could be hable under its policy for the default judgment against Gonzalez.

Zurich has made no attempt to vacate the default judgment. Rather, at the garnishment proceeding, Zurich brought a summary judgment motion denying coverage, arguing that (1) the CGL policy was not triggered by Gonzalez’s actions because any damage to appellants’ home did not occur until after Gonzalez’s policy with Zurich expired in July 1999; and (2) Gonzalez breached the conditions of the coverage by not cooperating and communicating with Zurich about the claim in any way.

Appellants also brought a motion for summary judgment, and on January 23, 2003, the district court issued an order: (1) stating that the default judgment established liability against Gonzalez; (2) rejecting Zurich’s coverage defenses, finding that Zurich’s policy with the insured was triggered when Gonzalez damaged the vent cap in May 1999 and that Zurich failed to show prejudicial effect from Gonzalez’s failure to notify Zurich of the claim; and (3) concluding that the property damage to appellants’ home was caused by Kiefer, not Gonzalez. Because Zurich’s policy did not provide coverage for Kiefer’s actions, the district court granted Zurich’s motion for summary judgment.

ISSUES

1. Did the district court err by finding that the insured did not cause the property damage alleged by appellants in their amended complaint?

2. Did the district court err in rejecting the insurer’s coverage defenses?

ANALYSIS

On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact; and (2) whether the lower court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990). “On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

I.

Appellants contend that the district court erred in finding that appellants failed to establish that Gonzalez caused the property damage to appellants’ home, and, because of this, appellants argue that the district court erred in determining that Zurich’s policy with Gonzalez does not provide coverage for appellants’ property damage. Because the underlying default judgment established liability against Gonzalez and because the district court rejected Zurich’s coverage defenses, appellants argue that, as a matter of law, Zurich’s policy with Gonzalez must cover appellants’ loss. We agree.

“The entry of a default judgment is equivalent to an admission by the defaulting party to properly pleaded claims and allegations.” State by Humphrey v. Ri-Mel, Inc., 417 N.W.2d 102, 110 (Minn.App.1987), review denied (Minn. Feb. 17, 1988); see also Anderson v. Sundstrom, 307 Minn. 439, 443, 241 N.W.2d 82, 85 (1976) (noting that in a default judgment, facts alleged in the complaint that are essential to the judgment are binding on the parties in subsequent litigation). Here, appellants’ amended complaint states a claim of negligence against Gonzalez. Therefore, in this subsequent garnishment proceeding, Zurich may not raise defenses that go to the merits of the underlying default judgment that established Gonzalez’s negligence. See, e.g., Johnson v. Nat’l Union Fire Ins. Co., 56 Misc.2d 983, 289 N.Y.S.2d 852, 853-54 (Sup.Ct.1968) (holding that while an insurer that refuses to defend the underlying action may raise coverage defenses, the insurer is not permitted to raise defenses that go to the merits of the underlying claim), aff.d, 33 A.D.2d 924, 309 N.Y.S.2d 110 (1970).

Because causation is an element of a prima facie case of negligence, see, e.g., Leubner v. Sterner, 493 N.W.2d 119, 121 (Minn.1992), the issue of causation in this case involves a defense extending to the merits of appellants’ negligence claim in the underlying action. Thus the district court erred in granting Zurich’s motion for summary judgment based on causation. Based on the claims and allegations contained in appellants’ amended complaint, appellants established through the default judgment that Gonzalez’s actions caused the property damage. Because liability was established by the default judgment and was not properly an issue in this garnishment proceeding, the district court’s decision improperly allowed Zurich to attack the merits of the underlying default judgment. We thus conclude as a matter of law that unless Zurich has a valid coverage defense Zurich’s policy provides coverage for appellants’ loss.

II.

In Minnesota, a default judgment entered against the insured does not automatically establish coverage for the claim because critical coverage issues may not be resolved in the actions underlying the insured’s liability for a judgment. Silicone Implant Ins. Coverage Litigation, 652 N.W.2d 46, 57 (Minn.App.2002), aff'd in part, rev’d in part, 667 N.W.2d 405 (Minn.2003); see also Cont’l Ins. Co. v. Bergquist, 400 N.W.2d 199, 202 (Minn.App.1987) (finding that despite the entry of a default judgment against the insured, there was no coverage under the policy in question because all damages claimed by appellants occurred prior to the effective date of the insurance policy). Because it would be improper to impose coverage liability upon an insurer for risks not specifically undertaken by the insurer and not paid for by the insured, an insurer is permitted to raise coverage defenses that were not resolved in the underlying judgment. See, e.g., Shannon v. Great Am. Ins. Co., 276 N.W.2d 77, 78 (Minn.1979); Brown v. State Auto. & Cas. Underwriters, 293 N.W.2d 822, 825 (Minn.1980) (holding that where issue of intent to injure was not necessary or essential issue in previous action, it was nevertheless material fact for litigation in coverage action).

“Insurance coverage issues are questions of law for the court.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992). A reviewing court is not bound by and need not give deference to a district court’s decision on a purely legal issue. Frost-Benco Elec. Ass’n v. Minnesota Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn.1984). General principles of contract interpretation apply to insurance policies. Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn.1998). Unambiguous language must be given its plain and ordinary meaning, and any ambiguity in a policy must be construed in favor of the insured. Henning Nelson Constr. Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn.1986). Policy provisions must be interpreted according to what the insured would have reasonably understood them to mean. Erickson v. Christie, 622 N.W.2d 138, 140 (Minn.App.2001).

Here, Zurich presented two coverage defenses to the district court. First, Zurich argued that its policy was not triggered because the CGL policy states that Zurich will pay for property damage only if the property damage “occurs during the policy period.” The policy clarifies “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Zurich argues that the affidavits presented to the district court show that the mold that resulted from the obstructed vent pipe could not have formed in appellants’ home until after appellants began operating their furnace in the fall of 1999. Because Zurich’s policy with Gonzalez expired in July 1999, Zurich contends that the policy does not provide coverage.

To establish or trigger coverage under an occurrence-based policy, “an insured must demonstrate that damage ‘occurred’ while the policy was in effect.” N. States Power Co. v. Fid. & Cas. Co., 523 N.W.2d 657, 659-60 n. 3 (Minn.1994) (quotation omitted). An occurrence takes place not when the policyholder engages in the wrongful act, “but the time the complaining party was actually damaged.” Singsaas v. Diederich, 307 Minn. 153, 156, 238 N.W.2d 878, 880 (1976). Consequently, if the damage occurs outside of the policy period, the policy does not provide coverage. See id. at 155, 238 N.W.2d at 880-81 (holding that policy did not provide coverage where negligent repair of lift in elevator occurred during policy period, while resulting injury occurred after policy was canceled).

The CGL policy at issue defines “property damage” as

physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it.

Here, the undisputed facts show that the vent cap was damaged by the insured in May 1999, while the insured’s policy with Zurich was still in effect. Thus, during the policy period, Gonzalez’s actions resulted in an “occurrence” that caused “physical injury to tangible property.” Therefore, the policy was triggered because appellants sustained property damage during the policy period as a result of the insured’s actions.

Zurich argues that because the mold may not have developed until after the policy had expired there is no coverage. But when damages arise from discrete and identifiable events that occur within the policy period, the actual-injury trigger theory allows those policies on the risk at the point of initial damage to pay for all the damages that follow. Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 733 (Minn.1997). While Zurich now argues that the initial damage to the vent cap did not cause the massive property damage that resulted from the obstructed vent pipe, causation is a defense that goes to the merits of the underlying claim for negligence. And as previously discussed, Zurich may not raise such a defense since it elected not to defend the underlying claim.

Zurich also argues that the insured’s breach of the notice and cooperation provision of the insurance policy resulted in substantial prejudice to Zurich, thereby excluding coverage. We disagree.

Courts uphold notice and cooperation provisions in insurance contracts because the policy behind the requirement is to give the insurer an opportunity for prompt investigation so as to protect itself against fraudulent or exorbitant claims and, while the matter is fresh in the minds of all, to appraise and determine a disposition by way of settlement or defense. Sterling State Bank v. Virginia Sur. Co., 285 Minn. 348, 354, 173 N.W.2d 342, 346 (1969). But failure to give timely notice is not fatal to an insured’s claim unless the insurer was prejudiced by the delay. Ryan v. ITT Life Ins. Corp., 450 N.W.2d 126, 130 (Minn.1990); Reliance Ins. Co. v. St. Paul Ins. Cos., 307 Minn. 338, 342, 239 N.W.2d 922, 924-25 (1976). It is well-settled that “the insurer has the burden of proving a substantial and material lack of cooperation resulting in substantial prejudice to its position.” Rieschl v. Travelers Ins. Co., 313 N.W.2d 615, 618 (Minn.1981). ‘Whether the insured has breached the cooperation clause contained in an insurance policy is a question of fact.” Id.

The district court properly determined that although Gonzalez, failed to give notice of the suit or cooperate with Zurich in his own defense, Zurich failed to present any evidence raising a material fact question as to whether this substantially prejudiced Zurich’s position. Even though Gonzalez did not notify Zurich of the claim, appellants sent letters that notified Zurich of the claim in both September and October 2001. Appellants also requested responses from Zurich before they proceeded with the default judgment. Thus, appellants’ conduct gave Zurich a reasonable amount of time as a matter of law to investigate the claim before a default judgment was entered. See Reliance, 307 Minn, at 343, 239 N.W.2d at 925 (holding that an 18-month delay between service of complaint and notification of insurer did not defeat liability because the facts had not changed, the investigation would not be more difficult, and the matter had not been reduced to judgment).

Zurich contends that although it was on notice of the claim, without cooperation from Gonzalez it did not have the information necessary to defend the claim. But Zurich presented no evidence that showed that Zurich tried to obtain relevant information about the claim from any sources other than Gonzalez, even though relevant information was available to Zurich based on the investigation and discovery that had already taken place in the case. Further, Zurich could have had access to this information if Zurich had requested it from appellants. Moreover, the record indicates that Zurich only attempted to contact Gonzalez on two occasions, and both of those attempts were through the mail. Zurich never attempted to call or personally communicate with Gonzalez. Because there was no evidence that Zurich acted diligently to either secure Gonzalez’s cooperation or obtain information about the claim, Zurich failed to create a genuine issue of material fact showing that Gonzalez’s lack of cooperation substantially prejudiced its position. See Rieschl, 313 N.W.2d at 618 (stating that “it is incumbent upon the insurer to show that it acted diligently to secure the insured’s cooperation” and noting that the insurer could have obtained relevant information from sources other than the insured).

DECISION

The issue of causation in this garnishment proceeding involves a defense extending to the merits of appellants’ claim in the underlying action. Because the default judgment in the underlying action, which the insurer chose not to defend, established the insured’s liability, the insurer is not permitted to raise such a defense in the garnishment proceeding. In addition, because none of the insurer’s coverage defenses defeat coverage, as a matter of law, the insurer’s policy provides coverage for appellants’ loss. We therefore remand this matter to the district court to allow the garnishment of the policy proceeds to satisfy the judgment against the insured.

Affirmed in part, reversed in part, and remanded.


text:
    In the Matter of the CHILDREN OF Richard WILDEY.
    No. A03-262.
    Court of Appeals of Minnesota.
    Sept. 30, 2003.

      Sherri D. Hawley, Saint Paul, MN, for appellant.
    Thomas Richards, Buffalo, MN, for children.
    Kathleen Heaney, Sherburne County Attorney, Mark J. Miller, Assistant Sher-burne County Attorney, Arden Fritz, Assistant Sherburne County Attorney, Elk River, MN, for respondent.
    Barbara Onken, Sherburne County Government Center, Elk River, MN, guardian ad litem.
    Kris Lund, CR, Sherburne County Government Center, Elk River, MN, court reporter.
    Considered and decided by RANDALL, Presiding Judge, HALBROOKS, Judge, and HUDSON, Judge.
   OPINION

RANDALL, Judge.

On appeal in this termination-of-parental-rights proceeding, appellant-father, who is incarcerated, argues (a) the county failed to make reasonable efforts to reunite the family and the district court’s reliance on In re Welfare of L.A.F., 554 N.W.2d 393 (Minn.1996) to rule that such efforts were not required, misreads the case; (b) the record does not support the determination that father abandoned his children where the county failed to give father the information necessary to contact his children; (c) the record does not support the determination that father failed to abide by the duties of being a parent and the district court’s ruling on this point was improperly based on its determination that termination was in the children’s best interests, rather than on the relevant statutory criteria; (d) the record does not support the determination that the children are neglected and in foster case where father took advantage of the services offered to him; and (e) the record does not show that termination is in the children’s best interests. The district court and the county social services improperly placed too much weight on appellant’s incarceration. Because the best interests of the child are paramount in termination of parental-rights proceedings, we conclude that the district court did not abuse its discretion when it terminated appellant’s parental rights.

FACTS

Appellant Richard Wildey and Kristi Karels are the biological parents of A.A.W., born November 5, 1997, and J.L.W., born May 20, 1996. Appellant and Karels are not and have never been married. Appellant lived with the children and Karels from 1996 (when J.L.W. was born) until early 1999, during which time he assisted in the daily care of the children. In early 1999, appellant was asked to leave the home because of relationship problems between him and Karels. Appellant continued to see the family on weekends and provided some money when needed until he was incarcerated April 6, 2000. Appellant has never been the primary custodian or caregiver for the children, and he last saw his children on March 23, 2000.

Appellant was taken into custody on April 6, 2000, for burglary and for a probation violation for a prior conviction for the sale of methamphetamine. He has been continuously in jail or prison since that date and is currently serving a sentence for a felony burglary offense committed in Eau Claire County, Wisconsin. Appellant has not seen the minor children in at least three years, and has had no direct contact with them since March 2000. His earliest possible release date from prison is October 2005.

On October 5, 2001, the court placed the minor children in foster care due to neglect and methamphetamine use by their mother. On or about November 1, 2001, appellant received a written notification from Sherburne County Social Services of the existence of a child-protection case involving the minor children. This letter informed appellant that: (1) he was entitled to notice of the proceedings and copies of all pleadings; (2) he was entitled to participate in the proceedings; and (3) inquired about Native American heritage. At trial, appellant testified that he received this notification, but never responded, claiming that Karels had assured him she was complying with court orders and that the children would be returned to her care.

On March 26, 2002, Robert LaCroix, a social worker for Sherburne County Social Services, sent a form to appellant in prison requesting that appellant agree to a voluntary termination of parental rights. Shortly thereafter, appellant responded to the letter stating that he needed more time to contact a family member to take care of the children and that he, did not want to “lose” his children. But, despite appellant’s attempts, no relative agreed to care for the children.

Appellant was personally served with a summons and petition to terminate his parental rights to the children on July 19, 2002. The petition included a statement of his rights and responsibilities and indicated the right to court-appointed representation. Appellant claims that he responded to the petition in writing asking for information on how he could contact his children. He also contends that he sent in his application for legal representation. However, no documents were ever received by either Social Services or Court Administration.

At a hearing on August 27, 2002, Karels, the mother, voluntarily agreed to terminate her parental rights. Appellant was found in default due to his non-appearance at the hearing, and his parental rights were terminated. It was later determined that appellant had arranged with his case-manager to be present by telephone for the hearing. The court determined that appellant had been placed on “hold” on a telephone extension in the Sherburne County Court Administration Office and was waiting to participate in the hearing. As a result, the court granted appellant’s motion to vacate the order terminating his parental rights, and set the matter for trial on January 24, 2003.

At trial, appellant testified that while in prison he completed a parenting class and wrote letters to the children’s mother asking about them. Appellant also testified that because the children were too young to read, he drew them pictures, made them birthday cards, and has spoken to the girls on the telephone during his incarceration. He testified that his plan upon release from prison is to get a job, get housing, and “start getting to know his children again.”

The court found that appellant intermittently lived with Karels and the children from the dates of the children’s births through early 1999. The court determined that during this time, neither appellant nor Karels provided food, clothing, shelter, and other care for the children, except to a marginal extent. In addition, the court noted that during this period, appellant occasionally fought with Karels and would leave for long periods of time. The court further noted that appellant has never been the primary custodian or caregiver for the children.

The court found that during his incarceration, appellant did not send any cards or letters directly to the children, nor did he provide any gifts or financial assistance. Consequently, the court determined that appellant failed to exercise reasonable efforts to sustain a relationship with his daughters. Further, the court found that appellant is unable, for the reasonably foreseeable future, to care appropriately for the ongoing physical, mental, and emotional needs of the minor children. The court held that it is in the children’s best interests that they not remain in foster care, but rather be adopted into a family that can provide them with the security and well being to which they are entitled. Thus, the court terminated appellant’s parental rights, and this appeal followed.

ISSUE

Did the district court abuse its discretion when it terminated appellant’s parental rights?

ANALYSIS

On review of a district court’s findings in a termination-of-parental-rights case, this court is “limited to determining whether the findings address the statutory criteria, whether those findings are supported by substantial evidence, and whether they are clearly erroneous.” In re Welfare of D.D.G., 558 N.W.2d 481, 484 (Minn.1997) (citation omitted). This court closely inquires into the sufficiency of the evidence to determine whether the evidence is clear and convincing. In re Welfare of J.M., 574 N.W.2d 717, 724 (Minn.1998). Although this court defers to the district court’s findings, this court exercises great caution in proceedings to terminate parental rights. In re Welfare of A.J.C., 556 N.W.2d 616, 622 (Minn.App.1996), review denied (Minn. Mar. 18, 1997). “The paramount consideration in all proceedings for the termination of parental rights is the best interests of the child.” MinmStat. § 260C.001, subd. 3 (2002).

The legislature has established nine criteria that support termination of parental rights. Minn.Stat. § 260C.301, subd. 1(b) (2002). A district court may terminate parental rights when only one criterion is proven, but the primary consideration in every termination case is the child’s best interests. Minn.Stat. § 260C.301, subds. 1(b), 7. Although a parent’s incarceration alone is not enough to warrant termination of parental rights, the district court may consider the fact of incarceration in conjunction with other evidence supporting the petition for termination. See In re Welfare of A.Y.-J., 558 N.W.2d 757, 761 (Minn.App.1997) (concluding that no error committed in considering father’s incarceration, limited contact with son, and failure to cooperate with social workers), review denied (Minn. Apr. 15, 1997).

Here, the district court concluded that: (1) pursuant to Minn.Stat. § 260C.301, subd. 1(b)(5), reasonable efforts under the court’s direction have failed to correct the conditions leading to A.A.W. and J.L.W.’s out-of-home placement; (2) pursuant to the holding in In re Stoat, 287 Minn. 501, 178 N.W.2d 709 (1970), appellant abandoned his children; (3) pursuant to Minn. Stat. § 260C.301, subd. 1(b)(2), appellant failed to comply with the duties imposed upon him by the parent-child relationship; and (4) pursuant to Minn.Stat. § 260C.301, subd. 1(b)(8), the children are neglected and in foster care.

1. Reasonable efforts

Appellant argues that there is insufficient evidence to conclude that social services made reasonable efforts to reunite appellant and his children. “Reasonable efforts” as defined in Minn.Stat. § 260.012(b) (2002), means:

the exercise of due diligence by the responsible social services agency to use appropriate and available services to meet the needs of the child and the child’s family in order to prevent removal of the child from the child’s family; or upon removal, services to eliminate the need for removal and reunite the family.

Whether efforts to reunite the family are reasonable “requires consideration of the length of time the county has been involved with the family as well as the quality of effort given.” In re Welfare of M.G., 407 N.W.2d 118, 122 (Minn.App.1987) (citing In re Welfare of 390 N.W.2d 274, 281 (Minn.1986)).

Here, the district court ruled that reasonable efforts failed to correct the conditions leading to the children’s placement outside the parental home. The district court found that (1) the children were under the age of eight; (2) the children have resided outside the parental home under court order for in excess of six months; (3) neither parent has complied with the court’s orders or a reasonable case plan; and (4) appellant has failed to maintain any contact with the children during the duration of their out-of-home placement. In making its decision, the district court relied on Matter of Welfare of L.A.F., 554 N.W.2d 393, 398 (Minn.1996), holding that there is no statutory requirement that Sherburne County Social Services facilitate or attempt to facilitate contact between appellant and the children to aid him in so complying. L.A.F., however, was not determining whether reasonable efforts are required prior to termination, but whether abandonment could be found if social services had not assisted the parent in making contact with the child. Id. at 398.

Minn.Stat. § 260C.301, subd. l(b)(5)(iii) (2002), requires a showing that “the parent or parents have not substantially complied with the court’s orders and a reasonable case plan” before determining reasonable efforts have failed to correct conditions leading to the children’s placement out-of-home. (emphasis added). Here, there is no testimony on the record that indicates any case plan was ever developed. Although it is undisputed that Karels failed to comply with her case plan, the record does not show that appellant was ever offered a reasonable case plan with which to comply. In addition, there is testimony that appellant voluntarily completed a parenting course while incarcerated. Appellant also wrote to the social worker on the case, Robert LaCroix “two times asking him for help [in locating his kids].” Importantly, there is no case law cited that supports the district court’s conclusion that appellant’s incarceration vitiates his ability to comply with any case plan. Case plans for inmates can and have been formed for a long time in Minnesota.

2. Abandonment

The district court concluded that, as a result of the County’s failure to make reasonable efforts to facilitate contact between appellant and his children, the County was not able to use the presumption of abandonment contained in Minn. Stat. § 260C.301, subd. 2, (2002). Notwithstanding this conclusion, the district court held that it is not precluded from finding abandonment, provided the finding is based on clear and convincing evidence. Minn.Stat. § 260C.301, subd. 2(a)(2) (2002); Minn.Stat. § 260C.317, subd. 1 (2002). Appellant contends that there is insufficient evidence to support the district court’s conclusion that he abandoned his children.

Incarceration alone is not sufficient to constitute abandonment. In re Staat at 505, 178 N.W.2d at 712-13. Parental rights may be preserved if a parental relationship existed prior to incarceration, and if the imprisoned parent continued the relationship to the best of his ability while incarcerated through letters, cards, visits, and inquiries into the children’s welfare. Id. at 507, 178 N.W.2d at 713. However, the fact of imprisonment may combine with other factors, such as parental neglect and the withholding of parental affection, to support a finding of abandonment. Matter of Welfare of Walker, 287 N.W.2d 642, 644 (Minn.1979). Abandonment requires: (1) actual desertion of the child, and (2) an intention to forsake the duties of parenthood. In re Stoat at 506, 178 N.W.2d at 713.

Prior to his incarceration, appellant lived with his children for much of their lives. When he was not living with them, he tried, sporadically, to have contact with them. Appellant testified that, while in prison he talked to his children on the telephone, drew them pictures, and corresponded with their mother to learn about their ongoing lives. Appellant testified that he wrote letters to Karels rather than directly to the children because the children were too young to read. Further, appellant testified that his writing is poor and that his cellmates helped rewrite his letters for him. He arranged to be available by telephone for court hearings and mailed letters to the social worker in charge of the case seeking representation of counsel and to help him keep his parental rights. The state did not refute appellant’s testimony that he exchanged drawings and cards with his children until he was prevented from having contact with them by reason of the child protection action.

Despite this testimony, the district court found actual desertion by reason of appellant’s incarceration. On two separate occasions, while appearing to agree that incarceration alone could not be a basis to terminate parental rights, the court contradicted itself by relying on the fact that appellant was incarcerated to support its finding of abandonment. The first instance is the court’s statement that:

[T]here is actual desertion by reason of [appellant’s] incarceration, and [appellant] has not been in direct contact with these children and has not seen them since March 2000, and has made only two inquiries of Sherburne County Social Services as to their status throughout the duration of their out-of-home placement.

This finding of desertion is predicated solely on the fact that appellant is incarcerated. That is wrong as a matter of law.

The second instance concerns the district court’s reasoning that appellant somehow “planned” abandonment. In its memorandum, the court stated that:

[appellant] did intentionally commit crimes, for which he knew that, if caught, the consequence would be arrest and incarceration with consequent abandonment of his children for the duration of the incarceration.

The court somehow found this as an intentional step toward abandonment. Essentially, this analysis implies that at some point before the burglary, appellant methodically considered the possibility that he might be caught and, if caught, might be incarcerated, and if incarcerated, he might be found to have abandoned his children, and then with all those “ifs” plotted out, intentionally went out and committed the crime anyway. This reasoning does not persuade us.

3. Parent-child relationship

Appellant argues that there is insufficient evidence to conclude that he has refused to comply with the duties of being a parent. Minn.Stat. § 260C.301, subd. 1(b)(2) (2002), provides that the court may terminate parental rights if it finds:

[T]hat the parent has substantially, continuously, or repeatedly refused or neglected to comply with the duties imposed upon that parent by the parent and child relationship, including but not limited to providing the child with necessary food, clothing, shelter, education, and other care and control necessary for the child’s physical, mental, or emotional health and development, if the parent is physically and financially able, and either reasonable efforts by the social services agency have failed to correct conditions that formed the basis of the petition or reasonable efforts would be futile and therefore unreasonable.

The statute requires that the parent be 'physically and financially able to provide for the child. Id.

The district court determined that appellant failed to comply with the duties imposed by the parent-child relationship because he only intermittently engaged in parenting prior to being incarcerated and neglected his parental duties by delegating all parenting duties to the children’s mother despite his knowledge of her drug use. Appellant testified that Karels assured him that she would do whatever was necessary to have the children returned to her and that he did not feel her drug use prevented Karels from doing a “good job” as a mother.

However, the trial court did not address the requirement that the parent be physically and financially able to provide for the child. Appellant is incarcerated and not able to physically provide for his children. Additionally, given his limited discretionary income, the record indicates that appellant is not financially able to provide for his children either. As a result, the record indicates that this requirement for the statute has not been met.

4. Neglected and in foster care

Finally appellant argues that there is insufficient evidence to conclude that the minor children are neglected and in foster care. Parental rights may be terminated if the district court finds “that the child is neglected and in foster care.” Minn.Stat. § 260C.301, subd. 1(b)(8).

“Neglected and in foster care” means a child
(a) [w]ho has been placed in foster care by court order; and
(b) [w]hose parents’ circumstances, condition, or conduct are such that the child cannot be returned to them; and
(c) [wjhose parents, despite the availability of needed rehabilitative services, have failed to make reasonable efforts to adjust their circumstances, condition or conduct, or have willfully failed to meet reasonable expectations with regard to visiting the child or providing financial support for the child.

Minn.Stat. § 260C.007, subd. 24 (2002).

Here, the children have been in foster care for approximately one year and eight months. Should appellant’s parental rights be reinstated, this would extend the foster care stay a minimum of another two years and four months. Although Minn. Stat. § 260C.007, subds. 24(a) and (b) (2002) have clearly been satisfied by the facts of this case, the district court did not analyze whether Minn.Stat. § 260C.007, subd. 24(c) (2002) was established by clear and convincing evidence. The record indicates that appellant voluntarily completed a parenting class while in prison and was never approached by social services to establish a case-plan regarding his children. There was no evidence presented with regard to what is a reasonable expectation for visitation and child support when a parent is in prison, and the district court did not make any conclusions regarding what would have been reasonable. Addi-tionaUy, the court did not address whether services could be provided to appellant to allow him to reunify with his children “within an ascertainable period of time.”

5. Best Interests of the children

The best interests of the child are paramount in a termination-of-parental rights proceeding. Minn.Stat. § 260C.301, subd. 7 (2002). When analyzing the best interests of the child, the court must balance three factors: (1) the child’s interest in preserving the parent-child relationship; (2) the parent’s interest in preserving the parent-child relationship; and (3) any competing interest of the child. In re Welfare of M.P., 542 N.W.2d 71, 75-6 (Minn.App.1996). Both the interests of the parent and child are considered along with the circumstances of the particular case in an effort to determine which of the above factors predominates. Id.

Essentially, this case represents a clash between an incarcerated parent’s rights and statutes designed to give young children some stability in life. Even before his incarceration, appellant’s interaction with his children was limited. Appellant and the children’s mother have never been married. Although appellant intermittently lived with the children and their mother from the dates of the children’s births through early 1999, appellant did not provide food, clothing, shelter, and other care for the children except to a marginal extent. In addition, appellant occasionally fought with the children’s mother and would leave for long periods of time. The record reflects that appellant was aware of the children’s mother’s drug problem, but made no effort to intervene.

Despite the district court’s questionable application of the law on abandonment, we make our decision with the best interests of the minor children in mind. The children’s mother voluntarily terminated her parental rights. The unmarried appellant father still has at least two more years to serve in prison. We have to examine appellant’s opposition to the district court’s decision in the harsh light of glaring reality; the reality being that the children have no parents now and will have to wait at least two years before they might have one. Appellant cannot be barred from contesting the termination of his parental rights because he is incarcerated. Incarceration is a factor, not without weight, but cannot be determinative standing alone. But correspondingly, appellant cannot expect us to view the case as if he were “outside” and available tomorrow to take over day-to-day parenting.

DECISION

Even conceding good faith modest attempts by appellant while in prison to maintain contact with his children, we cannot find, taking into account the best interests of the children, that the district court overstepped the bounds of its discretion when it terminated appellant’s parental rights.

Affirmed.


author: ROBERT H. SCHUMACHER, Judge.

text:
    Jennifer L. ROOTES, Relator, v. WAL-MART ASSOCIATES, INC., Respondent, Commissioner of Employment and Economic Development, Respondent.
    No. A03-233.
    Court of Appeals of Minnesota.
    Sept. 30, 2003.

      Amy B. Mohberg, Central Minnesota Legal Services, St. Cloud, MN, for relator.
    Wal-Mart Associates, Inc., St. Louis, MO, respondent.
    Lee B. Nelson, Philip B. Byrne, Department of Employment and Economic Development, St. Paul, MN, for respondent Commissioner.
    Considered and decided by KALITOWSKI, Presiding Judge; TOUSSAINT, Chief Judge; and SCHUMACHER, Judge.
   OPINION

ROBERT H. SCHUMACHER, Judge.

In this certiorari appeal, relator Jennifer L. Rootes challenges a determination by the commissioner’s representative that she was disqualified from receiving unemployment benefits. The commissioner’s representative found she voluntarily quit her employment with respondent Wal-Mart Associates, Inc. without good reason caused by Wal-Mart. We reverse.

FACTS

Rootes was a grocery department manager for Wal-Mart. She was employed from November 2000 until May 6, 2002. In February 2002, Wal-Mart warned Rootes that she was not adequately performing her duties. Later that spring, Wal-Mart gave Rootes a “D-day,” a paid day off where an employee decides if he or she wants to stay in his or her current position. Rootes chose to retain her position and submitted a plan detailing how she would improve her performance. The plan was accepted, and she was allowed to continue as department manager.

A few months later, Rootes’s supervisor informed her she was not adequately performing her job and would need to decide by the end of her shift whether she would resign or accept a lesser position. Rootes left work without speaking to anyone. The next day, Rootes called in sick. At some point following her weekend off, Rootes decided to quit rather than accept the demotion.

Prior to her decision to quit, Rootes worked Monday through Friday from 7 a.m. to 4 p.m. She was paid $11.13 per hour. Rootes was confident that if she accepted a demotion her pay would be decreased, the hours she worked would change considerably, and she would have to work weekends. Rootes never asked for details regarding the effects of demotion. Wal-Mart concedes it likely would have demoted Rootes to a stocking or cashier position, reducing her wages by $1.75 per hour and requiring her to work a different shift, including weekends.

Rootes sought unemployment benefits. An unemployment law judge determined Rootes quit but was eligible for benefits because she quit for good reason caused by Wal-Mart. On appeal, the commissioner’s representative concluded Rootes did not quit for a good reason caused by Wal-Mart because an average reasonable person would not quit and become unemployed without first confirming the conditions of her new position. Based on this conclusion, the commissioner’s representative determined Rootes was disqualified from receiving unemployment benefits under MinmStat. § 268.095, subd. 1(1) (2002).

ISSUE

Did Rootes quit for good reason caused by her employer?

ANALYSIS

Because it is undisputed Rootes voluntarily quit her job, the dispositive issue is whether Rootes quit for good reason caused by Wal-Mart. This is a question of law we review de novo. Biegner v. Bloomington Chrysler/Plymouth, Inc., 426 N.W.2d 483, 485 (Minn.App.1988).

When an employee voluntarily quits, the employee is entitled to unemployment benefits if the decision to quit is the result of a good reason caused by the employer. Minn.Stat. § 268.095 subd. 1(1) (2002). A good reason to quit is one “directly related to the employment ... for which the employer is responsible” and must be significant enough to “compel an average, reasonable worker to quit and become unemployed rather than remaining in the employment.” Minn.Stat. § 268.095, subd. 3(a)(1), (2) (2002).

What constitutes good reason caused by the employer is defined exclusively by statute. Minn.Stat. § 268.095, subd. 3(f) (2002). The legislature has determined an average, reasonable worker has good reason to quit when faced with substantial adverse changes in wages, hours or other terms of employment. See id., subd. 3(c) (2002) (stating “substantial adverse change in the wages, hours, or other terms of employment by the employer shall be considered a good reason caused by the employer for quitting unless the change occurred because of the applicant’s employment misconduct”) (emphasis added). The rules of statutory construction state “shall” is mandatory. MinmStat. § 645.44 subd. 16 (2002).

Thus, the legislature has unambiguously provided that, absent employee misconduct, an employee may quit for good reason caused by the employer if there was a substantial adverse change in wages, hours or other terms of employment. “When the language of a statute is plain and unambiguous, it ... must be given effect.” Burkstrand v. Burkstrand, 632 N.W.2d 206, 210 (Minn.2001). Here, Wal-Mart and respondent Commissioner of Employment and Economic Development made no claim that Rootes committed employee misconduct. The sole question is whether Rootes’s demotion would have resulted in substantial changes under MinmStat. § 268.095, subd. 3(c).

Substantial is defined as “considerable in importance, value, degree, amount, or extent.” The American Heritage Dictionary 1354 (3d ed.2000). The supreme court, addressing whether an employer’s wage reduction was sufficient to create a lockout and therefore allow employees to collect unemployment benefits, approved of other jurisdictions that found a wage reduction of 20-25% was good cause to quit, but a reduction of less than 15% was not. Sunstar Foods, Inc. v. Uhlendorf, 310 N.W.2d 80, 84 (Minn.1981). Although Sunstar focused on the earlier statutory language “good cause,” that language is similar to “good reason,” and therefore we consider it in interpreting good reason. See Erb v. Comm’r of Econ. Sec., 601 N.W.2d 716, 718 (Minn.App.1999).

This court has found a 19% reduction in wage is a good reason to quit. Danielson Mobil, Inc. v. Johnson, 394 N.W.2d 251, 253 (Minn.App.1986). A 10% reduction in wages, however, is not good reason to quit. Dachel v. Ortho Met, Inc., 528 N.W.2d 268, 270 (Minn.App.1995).

Here, Rootes knew that the demotion would result in reduced wages, changed hours, and weekend shifts. Rootes’s supervisor acknowledged the difference in pay “was very important” to Rootes. Furthermore, while Rootes may not have known the exact amount of the wage reduction, she testified she quit because the wage reduction was amplified by a considerable change in hours. The wage reduction when combined with the change in hours is substantial. We conclude Rootes quit for good reason caused by Wal-Mart pursuant to Minn.Stat. § 268.095, subd. 3(c), and is not disqualified from receiving benefits under MinmStat. § 268.095, subd. 1(1).

Because we hold that Rootes quit for good reason caused by Wal-Mart, we do not address Rootes’s alternative argument that this case should be remanded because the unemployment law judge failed to properly develop the facts.

DECISION

Rootes had good reason to quit caused by Wal-Mart. She is not disqualified from receiving benefits under MinmStat. § 268.095, subd. 1(1) (2002). We reverse the decision of the commissioner’s representative.

Reversed.


author: HUDSON, Judge.

text:
    ILLINOIS FARMERS INSURANCE COMPANY, et al., Respondents, v. GLASS SERVICE COMPANY, INC., et al., Appellants.
    No. A03-109.
    Court of Appeals of Minnesota.
    Sept. 30, 2003.

      Eric J. Magnuson, John M. Bjorkman, Paula Duggan Vraa, Rider Bennett, LLP, Minneapolis, MN, for respondents Illinois Farmers Insurance Company and Mid-Century Insurance Company.
    Charles J. Lloyd, Matthew P. Lewis, Livgard <& Rabuse, P.L.L.P., Minneapolis, MN, for appellants Glass Service Company, Inc. and Auto Glass Service Center, Inc.
    Considered and decided by RANDALL, Presiding Judge; KALITOWSKI, Judge; and HUDSON, Judge.
   OPINION

HUDSON, Judge.

This is an appeal from summary judgment in a dispute as to the amount that insurers must pay for automobile glass repair and replacement services performed on behalf of the insureds. The companies that performed these repairs challenge the district court determination that they were required to arbitrate the claims and that each claim must be separately arbitrated. The insurers contend in a notice of review that the district court erred in requiring that these individual arbitrations take place before the same panel of three arbitrators. We affirm the decision that the auto glass companies are required to arbitrate these claims and must arbitrate each claim separately. We reverse the decision that the same panel of three arbitrators must adjudicate all of the claims.

FACTS

The insurers, respondents Illinois Farmers Insurance Company and Mid Century Insurance Company, issue automobile insurance policies in Minnesota. The auto glass companies, appellants Glass Service Company, Inc., and its wholly owned subsidiary Auto Glass Service Center, Inc., are engaged in the business of automobile glass repair and replacement. The insureds had policies with the insurers under which the latter covered repair or replacement of damaged automobile glass. All of the policies also contained a mandatory arbitration clause.

The auto glass companies performed automobile glass repair and replacement services for many of the insurers’ policyholders. Rather than obtaining payment directly from their customers, who would then be required to submit the claims to their insurers, the auto glass companies submitted their customers’ bills directly to their insurers.

Pricing in the auto glass replacement business is based primarily on three components: glass, adhesives, and labor. Both the insurers and the auto glass companies agree that pricing for these components is based on a national price-list publication known as the National Auto Glass Specifications (NAGS). NAGS provides a price by part number for each glass part; a price per tube of adhesive; and either a flat or an hourly rate for labor.

Although the auto glass companies and the insurers base their calculations on these undisputed figures, they use different formulas to arrive at the amount that they respectively bill and pay. The insurers’ formula results in a lower amount than the auto glass companies’ formula. Thus, the insurers routinely paid less than the full amount billed by the glass companies. The glass companies, however, rarely, if ever, disputed the individual payments because the discrepancy on any one claim seldom exceeded $500, and could sometimes be as little as $1. It appears from the record that this billing/payment practice between the parties continued for several years.

As a result of these “short” payments from the insurers (i.e., payments for less than the amount billed), the auto glass companies served a demand for arbitration of the claims, which now number more than 5,700 and amount collectively to more than $1 million. The insurers responded by bringing a declaratory judgment action, asserting that any claimed assignment did not include the right to arbitrate or, alternatively, that any right to arbitrate did not include the right to arbitrate the individual claims collectively. The auto glass companies then withdrew their demand for arbitration and asserted a counterclaim for money damages on a breach-of-contract claim. The insurers moved for summary judgment and a declaration that the auto glass companies were required to separately arbitrate each of the assigned claims and for dismissal of the counterclaim. The district court granted summary judgment requiring individual arbitration of the claims, although it authorized the same panel of three arbitrators to determine all of the individual claims. The remaining claims were dismissed without prejudice. The auto glass companies appealed and the insurers filed a notice of review.

ISSUES

I. Did the district court err in holding that the auto glass companies are required to arbitrate the claims?

II. Did the district court err in ordering separate arbitrations for each claim?

III. Did the district court err in requiring that the separate arbitrations take place before the same panel of three arbitrators?

ANALYSIS

“Application of the law to a particular set of facts is a question of law, which we review de novo.” Regenscheid v. Farm Bureau Mut. Ins. Co., 652 N.W.2d 261, 263 (Minn.2002). The district court’s determination of the scope of an arbitration agreement is reviewed de novo. State Farm Mut. Auto. Ins. Co. v. Cincinnati Ins. Co., 666 N.W.2d 334, 336 (Minn.2003).

I

We first address whether the auto glass compames are required to arbitrate their dispute with the insurers. It is undisputed that all of the policies provide, in relevant part, for mandatory arbitration for claims of $5,000 or less. Second, under the No-Fault Act, arbitration is mandatory for claims in the amount of $10,000 or less for comprehensive or collision damage coverage. Minn.Stat. § 65B.525, subd. 1 (2002); Minn. R. No-Fault Arb. 6. “Whether a party has agreed to arbitrate a particular dispute is a matter of contract interpretation, which we review de novo.” Ottman v. Fadden, 575 N.W.2d 593, 595 (Minn.App.1998). Nonetheless, “[a] party can only be required to arbitrate disputes that it contractually agreed to submit to arbitration.” Id.

The auto glass companies make several arguments in support of their position that the claims are not arbitrable. They first contend that the mandatory arbitration provision does not apply to them as assignees of the insureds because they were only assigned the “proceeds” of the various policies, not the rights. Accordingly, the auto glass companies claim the assignments gave them standing to bring an action against the insurers to collect proceeds without being bound by the mandatory arbitration provisions. We disagree.

1. Assignment

“An assignment is a contract between the assignor and assignee.” 6A C.J.S. Assignments § 4 (1975). “A valid assignment generally operates to vest in the assignee the same right, title, or interest that the assignor had in the thing assigned.” State ex rel. Southwell v. Chamberland, 361 N.W.2d 814, 818 (Minn.1985). Further, the assignee takes the assigned chose subject to all the equities and defenses existing between the assignor and the debtors. 6A C.J.S. Assignments § 99. “[WJhere rights are assignable, the various remedies appropriate to their protection and enforcement are open to the assignee.” Id. § 105 (footnote omitted). “A debtor, who has not estopped himself with respect thereto, may generally assert against the assignee all equities or defenses existing or acquired against the assign- or prior to the time that the debtor received notice of the assignment.” Id. §115 (footnote omitted).

We note first that each of the individual policyholders would be contractually and statutorily obligated to arbitrate their individual claims. It is black-letter law that an assignee of a claim takes no other or greater rights than the original assignor and cannot be in a better position than the assignor. Geldert v. Am. Nat’l Bank, 506 N.W.2d 22, 28-29 (Minn.App.1993), review denied (Minn. Nov. 16, 1993). Thus, as assignees, the auto glass companies stand in the shoes of the individual policyholders. Therefore, as the district court correctly determined, the auto glass companies have no greater rights than the policyholders and are obligated to arbitrate their claims. Moreover, the assignments, by their express terms, are all assignments of “any and all claims,” not assignments of proceeds.

In support of their position, however, the auto glass companies cite Reitzner v. State Farm Fire & Cas. Co., 510 N.W.2d 20 (Minn.App.1993). In Reitzner, this court addressed the claim that an assignment violated the prohibition against assigning an insurance policy without the consent of the insurer and was therefore void. Id. at 26. This court stated that the assignment was not an assignment of the policy, but rather “an assignment of the proceeds due under the policy should the claim be successful.” Id Reitzner did not, however, address the issue of whether the assignee can be compelled to arbitrate under the provisions of the insurance policy.

Similarly, the auto glass companies cite In re Estate of Sangren, 504 N.W.2d 786 (Minn.App.1993), review denied (Minn. Oct. 28, 1993), in support of their argument that only the proceeds, and not the rights under the policy, were assigned. There, this court was again addressing the effect of a clause in the policy prohibiting assignment without consent. Id at 790. This court held that the insurers’ failure to assert an objection constitutes a waiver of that right. Id In that context, this court noted, “[fjurther, this was not really an assignment of the policy. Rather, it was an assignment of the proceeds of the policy. A claim for proceeds is more a debt, subject to the ordinary rules of assignment, than a contract right to insurance protection.” Id Like Reitzner, the San-gren court did not address the issue of whether an assignee is bound by arbitration provisions in the policy. Further, Sangren specifically held that “[a]n assign-ee acquires all rights and duties vested in the assignor by virtue of the assignment.” Id Thus, Sangren confirms that an assignment of insurance proceeds is subject to the usual rules of assignment. Accordingly, we conclude that the auto glass companies, as assignees of the insureds, are subject to the mandatory arbitration provision pursuant to the terms of the policies and the No-Fault Act.

2. Waiver

Next, the auto glass companies contend that the insurers waived any right to arbitration by filing the lawsuit. We first address whether waiver is applicable to the No-Fault Act’s mandatory arbitration requirements. Whether an issue must be arbitrated raises an issue of subject matter jurisdiction, which is a question of law reviewed de novo. Olson v. Am. Fam. Mut. Ins. Co., 636 N.W.2d 598, 601 (Minn.App.2001). The No-Fault Act requires mandatory arbitration of certain no-fault insurance claims for comprehensive or collision-damage coverage. Id. at 601-02; Minn.Stat. § 65B.525, subd. 1 (2002); Minn. R. No Fault Arb. 6. It is well established that subject matter jurisdiction may not be waived. Marzitelli v. City of Little Canada, 582 N.W.2d 904, 907 (Minn.1998). Thus, irrespective of what the insurers did or did not do concerning the arbitrability of this dispute, because arbitration is mandatory under the No-Fault Act and cannot be waived, this claim fails.

3. Judicial estoppel

The auto glass companies also argue that the insurers are estopped by their own actions from demanding arbitration under the theory of judicial estoppel.

Judicial estoppel prevents a party from contradicting previous declarations made during the same or later proceedings, if the change in position would adversely affect the proceeding or constitute a fraud on the court. Bauer v. Blackduck Ambulance Ass’n., 614 N.W.2d 747, 749 (Minn.App.2000). Here, in response to the auto glass companies’ original demand to arbitrate the dispute, the insurers commenced a declaratory judgment action seeking to block the arbitration or, alternatively, to block collective arbitration of the individual claims. In their subsequent summary judgment motion, however, the insurers changed their position and argued that the auto glass companies are required to arbitrate this dispute pursuant to the terms of the policies.

We note that both parties have “adjusted” their positions on arbitrability as the ever-changing procedural posture of this case dictated. In any event, Minnesota courts have declined to expressly recognize the theory of judicial estoppel. State v. Profit, 591 N.W.2d 451, 462 (Minn.1999) (addressing claim in criminal trial that state was judicially estopped from claiming evidence was irrelevant). We decline to recognize it here.

4. Statutory maximum under the No-Fault Act

Finally, the auto glass companies argue that their claims are not subject to mandatory arbitration because the dispute involves an amount in excess of $1 million, which far exceeds the statutory maximum of $10,000 for arbitrable claims. See Minn. Stat. § 65B.525, subd. 1 (2002); Minn. R. No-Fault Arb. 6 (providing that claim subject to no-fault arbitration must be $10,000 or less). It is undisputed that most of the individual claims are less than $1,200, and, if considered individually, would be subject to mandatory arbitration. If consolidated, however, the claims are in excess of $1 million. The district court ruled that because the auto glass companies stand in the shoes of the assignors, giving the auto glass companies the same rights as each assignor individually, each claim must be separately arbitrated pursuant to the terms of the individual policies.

The auto glass companies, however, argue that the supreme court has defined the term “claim” in the mandatory arbitration statute as “the amount that the claimant is asking for.” Brown v. Allstate Ins. Co., 481 N.W.2d 17, 19 (Minn.1992) (emphasis added). They contend that, here, they are the claimants and they seek a total amount that exceeds $1 million. Further, they assert that the individual components of a claim may not be split and that they may not bring successive lawsuits involving the same set of facts. See Hauser v. Mealey, 263 N.W.2d 803, 807 (Minn.1978) (addressing the doctrine of merger and bar). Otherwise, they assert that a multiplicity of lawsuits and wasteful litigation would result.

We recognize that the claims arise from similar incidents involving windshields in need of repair or replacement, and in each instance the auto glass companies performed the needed service. Likewise, we recognize the obvious economies of scale realized by consolidating these claims, especially given their common genesis in the proper application of the NAGS pricing formula. But we cannot ignore the fact that ultimately, these are disputes between individual policyholders and their respective insurance companies. The fact that the claims were all assigned to the same auto glass companies does not transform them into a single claim for purposes of determining whether the claims exceeded the maximum amount for mandatory arbitration. We cannot change the jurisdictional mandates of the statute. Accordingly, we conclude that the district court properly determined that each claim must be addressed separately for purposes of determining whether the claim exceeds the statutory maximum of $10,000 of the No-Fault Act.

II

Next, we address the auto glass companies’ challenge to the district court order that the claims must be individually arbitrated.

The auto glass companies first assert that, if the district court lacked subject matter jurisdiction over the dispute because it concluded arbitration was mandatory, then it likewise lacks jurisdiction to direct how the arbitration should be conducted. But addressing the scope of a claim to determine whether it is subject to arbitration is a question of law reviewable by the appellate court. See Brown, 481 N.W.2d at 18-19 (addressing whether claimant may reduce portion of claim to obtain arbitration). Consequently, the district court properly ruled on the issue.

Next, the auto glass companies argue that whether the individual claims can be arbitrated collectively or must be arbitrated separately is a question of arbi-trability, which the arbitrators must decide. See City of Brooklyn Center v. Minn. Teamsters Pub. & Law Enforcement Employees Union, 271 N.W.2d 315, 318 (Minn.1978) (holding arbitrator decides issues if parties clearly intend to arbitrate provision or if arbitrability is reasonably debatable; if provision not arbitrable, court may protect party from being compelled to arbitrate). But here, as in Brown, the district court was asked to decide an issue of law as to the nature of the claim. See 481 N.W.2d at 19. Consequently, the district court properly resolved the issue.

Finally, the auto glass companies argue that even if the district court had jurisdiction to order some 5,700 separate proceedings, its decision to do so was plain error. They argue that arbitration is supposed to be an efficient and inexpensive mechanism by which disputes are resolved, and the proceeding that the district court ordered was neither. They note that the arbitration agreements in the policies do not prohibit consolidated proceedings, and they contend that the state encourages consolidation of judicial proceedings whenever appropriate. Grover-Dimond Assoc. v. Am. Arbitration Assoc., 297 Minn. 324, 329-30, 211 N.W.2d 787, 790 (Minn.1973). Appellant’s heavy reliance on Grover-Dimond, however, is unwarranted because Grover-Dimond was decided before the Eighth Circuit decision in Baesler v. Cont’l Grain Co., 900 F.2d 1193, 1195 (8th Cir.1990), which unequivocally held that, under the Federal Arbitration Act (“FAA”), a district court is without power to consolidate arbitration proceedings absent express language in an arbitration agreement authorizing consolidation of arbitration. Id. Of course, here, the arbitration agreements are governed by Minnesota’s Uniform Arbitration Act (“MUAA”) and not the FAA; but the two statutes are consistent. See Minn. Stat. § 572.08 (2000); 9 U.S.C. § 2 (2000); Alexander v. Minn. Vikings Football Club LLC, 649 N.W.2d 464, 466 (Minn.Ct.App.2002), review denied (Minn. Oct. 29, 2002).

The auto glass companies present a compelling case for consolidation because of the unique, formulaic fashion by which auto glass claims are handled within the auto glass replacement industry. But neither the policies nor the No-Fault Act provide for consolidated arbitration of individual claims. Baesler, 900 F.2d at 1195. Thus, while we recognize that judicial economy is sacrificed by not consolidating these claims, we have no authority to write exceptions into the mandatory arbitration provisions of the No-Fault Act or consolidate arbitration proceedings absent express language in the policies’ arbitration provisions authorizing us to do so. If the legislature wishes to amend the act or if the supreme court wishes to amend the rules to specifically provide for consolidation, either may do so.

Ill

Finally, the insurers challenge, by notice of review, the district court determination that for purposes of judicial economy and the orderly and efficient administration of justice, each individual claim must be adjudicated individually before the same three arbitrators chosen under the insurance policy. The insurers contend that this ruling is erroneous because use of the same panel of arbitrators is contrary to the express terras of the policies and inconsistent with the supreme court’s arbitration rules under the No-Fault Act. We agree. Under the arbitration clauses, for each individual claim, the parties to that claim are entitled to select an arbitrator, and the two arbitrators selected are required to select the third arbitrator. Thus, the rules for selecting an arbitrator do not provide for the same set of arbitrators to consider each of the individual claims. See Minn. R. No-Fault Arb. 8. Consequently, the district court erred in adopting a procedure under which the same set of arbitrators would consider each individual claim.

In summary, we recognize that arbitration is meant to be an efficient and relatively inexpensive way of resolving disputes. Unfortunately, these proceedings will be neither, because the resolution of this appeal leads to a cumbersome procedure. But this appears to be a case which the parties should be able to settle, and we strongly urge them to do so.

DECISION

We affirm the district courts decision that the claims must be arbitrated individually pursuant to the mandatory arbitration provisions of Minn.Stat. 65B.525, subd. 1 (2002), and the respective policies. We reverse the district courts decision that the same panel of three arbitrators must adjudicate each individual claim.

Affirmed in part, reversed in part.

      . Some customers explicitly assigned their claims against their insurers to the auto glass companies, while others did not. Although the insurers discuss the assignments, they do not explicitly challenge their validity in this appeal.

      . There is little dispute as to pricing on the fourth component, which consists of miscellaneous parts such as moldings and clips.

      . The fact that the maximum amount of a claim subject to arbitration differs under the policy and state law is not at issue here.