author: RANDALL, Judge.

text:
    STATE of Minnesota, Respondent, v. Malachi KILGORE, Appellant.
    No. C1-02-1490.
    Court of Appeals of Minnesota.
    May 27, 2003.

      Hennepin County District Court, File No. 00017431.
    Mike Hatch, Attorney General, St. Paul, MN, and Amy Klobuehar, Hennepin County Attorney, Michael Richardson, Assistant County Attorney, Minneapolis, MN, for respondent.
    John M. Stuart, State Public Defender, Lawrence W. Pry, Assistant Public Defender, Minneapolis, MN, for appellant.
    Considered and decided by WRIGHT, Presiding Judge, RANDALL, Judge, and SHUMAKER, Judge.
   OPINION

RANDALL, Judge.

In this appeal from the district court’s denial of postconviction relief, appellant argues that he improperly received an upward departure under the sentencing guidelines and, therefore, his sentence should be reduced. We affirm,

FACTS

Appellant shot and killed Larry Arne-berg on January 19, 2000. The grand jury indicted appellant for first-degree murder. After extensive plea negotiations, appellant and the state agreed that appellant would plead guilty to the lesser-included offense of second-degree murder and serve 396 months in prison, a 90-month upward du-rational departure. The salient fact underlying the plea negotiation is as follows: 396 months equals 33 years. On a 33-year sentence for murder in the second degree, a defendant will serve 22 years behind bars and 11 of the 33 years will be served on probation. If a defendant is convicted of murder in the first degree in Minnesota, the sentence is automatic and the sentencing judge has absolutely no discretion. Life imprisonment is the sentence, and since 1989, an inmate must serve 30 years behind bars before even becoming eligible for a parole hearing. Eligibility for a parole hearing carries absolutely no guaranties that the inmate will ever be paroled. A life sentence in Minnesota means a minimum of 30 years behind bars and no guaranties of any release in a person’s lifetime. Appellant and his attorney traded away any possibility that appellant would be found guilty of murder in the first degree and be sentenced to a minimum of 30 years or more behind bars in return for agreeing to accept a sentence of 33 years, as outlined above; meaning, 22 years behind bars and 11 years on probation. That was the bargain. The defendant and the state and the district court understood it perfectly. Appellant got exactly what he wanted and the state got a long enough sentence to satisfy its interests in the administration of justice.

At his guilty plea hearing, appellant testified that the victim loaned him money, which he had not repaid. Appellant testified that the victim was putting pressure on him to repay the money. According to appellant, the victim arranged a meeting with him at an acquaintance’s apartment through co-defendant Jonathan Wood, appellant’s cousin. Wood and appellant decided to take a gun to the meeting and appellant retrieved a gun that he kept in a nearby vacant apartment.

During the meeting, the victim and appellant argued over the debt. Appellant testified that he attempted to repay the debt with jewelry rather than cash, but the victim refused. According to appellant’s testimony, the victim threatened appellant and appellant’s family. Appellant then shot the victim three times in the back, killing him. Appellant then stole the victim’s wallet and briefcase and disposed of the weapon.

The district court imposed the sentence following Kilgore’s guilty plea. Before imposing the sentence, the court stated:

All right, I do accept your waiver of your rights. I believe that they were knowing, intelligent, and voluntarily waived. There is a factual basis here to support a charge of Murder in the Second Degree — Intentional Murder, and so I am prepared to go forward with sentencing as discussed.

The court imposed a 396-month prison term pursuant to the negotiated plea agreement, stating:

I should note for the record that this is an upward durational departure from the sentencing guidelines, and the basis for the departure is the agreement of the parties which was discussed with the Court prior to the entry of the plea.

In April 2002, appellant filed a motion for postconvietion relief seeking to correct his “illegal sentence.” Appellant argues that under Misquadace, since the district court did not put any aggravating factors on the record, he is entitled to the presumptive sentence for intentional murder in the second degree for 306 months. The district court denied his petition. We agree with the district court.

ISSUE

Did the district court properly deny appellant’s motion for postconviction relief?

ANALYSIS

In 1996, the Minnesota Supreme Court stated:

It has long been settled law that courts will honor a defendant’s lawful, ‘intentional relinquishment or abandonment of a known right or privilege’ — such as Miranda rights or the right to a jury trial — we hold that defendants may relinquish their right to be sentenced under the guidelines.

State v. Givens, 544 N.W.2d 774, 777 (Minn.1996) (quoting Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938)).

In 2002, the Minnesota Supreme Court refined Givens to indicate that even when there is a negotiated plea agreement, there must be sufficient aggravating factors on the record to support an upward departure. There, the court stated:

In addition, because this holding establishes a new rule of law, retroactive application is not required. Given the purposes to be served, the extent of reliance by the parties and courts on previous standards, and the effect of retroactivity on the administration of justice, prospective application is appropriate. * * * We limit application of the ruling to this case and to pending and future cases.

State v. Misquadace, 644 N.W.2d 65, 72 (Minn.2002) (citation omitted) (emphasis added). The court, in unambiguous language, stated this refinement was only to be applied prospectively. Misquadace was filed on May 9, 2002. Appellant pleaded guilty on October 3, 2000. Appellant’s time to appeal expired 90 days from October 3. Minn. R.Crim. P. 28.02.

In Misquadace, the court did not explicitly define the phrase “pending and future cases.” This court took up the question of whether a case was pending where the time for appeal had not yet run out. Answering in the affirmative, we said:

Although [appellant] had already been sentenced, the time for a direct appeal had not yet expired when Misquadace was filed. * ⅜ * We believe that [this] appeal falls within the supreme court’s intended meaning of a ‘pending’ case.

State v. Sanchez-Sanchez, 654 N.W.2d 690, 693 (Minn.App.2002). Sanchez was a reasonable interpretation of “pending.” To say that appellant’s case was “pending” when Misquadace was filed stretches pending to unacceptable lengths. His appeal time had expired approximately 16 months earlier.

Here, the district court had Givens in mind when examining appellant’s plea agreement. Based on Givens, the law in effect when appellant was sentenced, the district court’s upward departure, based on appellant’s negotiated his plea agreement, was proper.

This is as it should be. A criminal defendant has the right to try and make as good a deal for himself as he can. There is no danger to any state’s “sentencing schemes” (Minnesota Sentencing Guidelines) by allowing criminal defendants the opportunity to bargain for a settled sentence. No plea agreement by a defendant is any good at all until, first, the state accepts it, and then, lastly and most importantly, the sentencing judge examines it and then accepts it. The seminal case on a criminal defendant’s right to bargain for himself is North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970) (allowing defendant to maintain innocence but agreeing that the jury may convict him based on the facts).

In Alford, a defendant was faced with a first-degree murder indictment in a state with the death penalty. Alford, throughout the pretrial proceedings, always maintained that he was not guilty, but he and his criminal defense attorney acknowledged the strength of the state’s case and the possibility that going through a contested trial could result in a verdict of murder in the first degree and that could result in being executed. Alford and the state reached an agreement whereby the state would drop the charge of murder in the first degree if he would plead guilty to murder in the second degree and accept a lengthy sentence behind bars. Alford wanted to do that to save himself from the possibility of being executed, but insisted on maintaining his innocence. His right to plead guilty while maintaining innocence was rejected at various levels. Ultimately the case went to the United States Supreme Court, wherein the supreme court held that a defendant had an absolute right (assuming the state and the sentencing judge would go along with it) to plead guilty in return for a bargained-for sentence, and avoid the danger of something worse, without admitting to all the facts that would constitute the essential elements of the crime. As part of the holding, the sentencing judge was allowed to examine the evidence the state proposed, and the defendant could concede that, although maintaining his innocence, a jury could look at the state’s evidence and find him guilty. This was a sensible decision. Alford recognized the inalienable right of any defendant, any person, to bargain for his life. Alford did not impinge on any right of the prosecutor (the state) because there would not be any deal unless the state agreed to it.

The Minnesota Supreme Court accepted the logic of Alford in State v. Goulette, wherein the court stated in part: “There are situations where defendant’s decision to plead guilty is a rational decision even though defendant for some reason cannot bring himself to admit his guilt.” State v. Goulette, 258 N.W.2d 758, 761 (Minn.1977).

Givens did nothing but reasonably apply the logic of Alford and Goulette to cases involving charges of less than murder in the first degree. Givens was a well-reasoned, common sense decision.

With the knowledge today among the criminal defense bar that prosecutors will argue aggressively for upward departures in virtually every serious case, it makes sense at times for criminal defendants to bargain for a known upward departure rather than face the unknown of a double, triple or higher upward departure.

Alford/Goulette pleas and negotiated guilty pleas for an upward departure uphold the right of the accused to bargain for a settled sentence. Misquadace changed the rules somewhat surrounding sentencing issues in negotiated plea agreements and insists on something in the record over and above the plea agreement to show that an upward departure is warranted. There, the court stated, “A plea agreement standing alone, however, does not create [aggravating] circumstances in its own right.” Misquadace, 644 N.W.2d at 71. Today, although appellant was sentenced under Givens (pre-Misquadace), and although appellant received the benefit of what appears to be a rational plea agreement, he attempts now to argue for a Misquadace analysis, argues that he is entitled to be resentenced to just a presumptive sentence for intentional murder in the second degree, and further argues that he is entitled to this without exposing himself to the state backing away from the plea agreement and giving appellant a chance to stand trial on the original indictment, murder in the first degree. The district court did not see it that way and neither do we. The district court in the postconviction hearing was satisfied that appellant, assisted by defense counsel, entered an intelligent and voluntary plea to murder in the second degree and accepted a predetermined sentence of 396 months for the express purpose of avoiding a trial on the charge of murder in the first degree. Appellant opted for a bargain and he received the benefit of the bargain. We conclude the postconviction court properly denied appellant’s petition to be resen-tenced.

Today, with Misquadace in effect, it is a must when the prosecution and the defense and the district court settle on a plea agreement involving an upward departure that, on the record, the court recites aggravating factors (using the Minnesota Sentencing Guidelines and caselaw upholding upward durational departures as examples).

Supporting appellant’s rational plea bargain (which he appeals today), permissible under Givens, the facts in appellant’s case are enough to show a verdict of murder in the first degree is possible if appellant were to stand trial as originally charged.

Appellant retrieved a hidden weapon before the meeting. Though the discussion got heated, it was not until the discussion was over and the victim was leaving the scene that appellant shot him in the back. After killing the victim, appellant robbed him, stealing his wallet and briefcase. With these facts and other evidence the state would have, a jury could rationally have found that appellant committed intentional premeditated murder. To this possibility, appellant, not imprudently, chose to plead guilty to second-degree murder and accept a sentence involving a 90-month upward departure, as set out before, giving appellant a settled time behind bars of 22 years rather than a minimum of 30, and no guarantee of release ever in his lifetime.

Appellant made his deal. It was honored. He was most certainly not prejudiced by the voluntary plea agreement he entered into. The district court properly rejected his petition to be resentenced downward to the presumptive sentence of 306 months.

DECISION

Appellant was sentenced pursuant to the terms of his negotiated plea agreement. He received the benefit of his bargain. The bargain alone, at that time, was sufficient to support a modest (approximate 30 percent) upward departure. The new rule announced in Misquadace is not retroactive. Appellant’s case was not pending at the time Misquadace was released. The district court properly denied appellant’s motion to modify his sentence.

Affirmed.

      . "When a plea agreement is made that involves a departure from the presumptive sentence, the court should cite the reasons that underlie the plea agreement or explain the reasons the negotiation was accepted.” Misquadace, 644 N.W.2d at 70 (citing Minn. Sent. Guidelines II.D.04 cmt. (effective August 1, 1998)).


source: Caselaw Access Project

author: MINGE, Judge.

license: Public Domain

text:
    Larry HANSON, as Co-Trustee for the Heirs and Next of Kin of Jenna Hegstrom, Deceased, et al., Appellants, v. STATE FARM INSURANCE COMPANY, Defendant, and Jodi Madsen, as Co-Trustee for the Heirs and Next of Kin of Jenna Hegstrom, Deceased, Respondent.
    No. CX-02-1620.
    Court of Appeals of Minnesota.
    May 27, 2003.

      John E. Mack, Mack & Daby, P.A., New London, MN, for appellant.
    Michael Fargione, Hauer, Fargione, Love, Landy & McEllistrem, P.A., Minneapolis, MN, for respondent.
    Considered and decided by MINGE, Presiding Judge, KALITOWSKI, Judge, and PORITSKY, Judge.

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

   OPINION

MINGE, Judge.

Appellants argue that the district court erred when it determined that a one-third contingent fee arrangement that the trustee entered into before his appointment did not apply to appellant law firm’s representation after the trustee’s appointment. Because we conclude that the trustee’s authority related back to his representative actions prior to his appointment, we hold that the one-third contingent fee agreement is valid, and we reverse.

FACTS

This case concerns attorney fees in a lawsuit filed over the death of 9-year-old Jenna Hegstrom, who was killed in a car accident. Hegstrom’s mother had previously died of cancer, and her father was in jail. On January 11, 2002, Hegstrom’s maternal grandfather, appellant Larry Hanson, retained the appellant law firm of Mack & Daby, P.A., and sought to be appointed trustee for Hegstrom’s next of kin. In retaining Mack & Daby, Hanson signed a contingent fee agreement whereby Mack & Daby would receive one-third of any amount collected in Hanson’s “action against the automobile insurers of the vehicles involved in the death” of Heg-strom. The next day, January 12, 2000, Hanson was appointed trustee for Heg-strom’s next of kin.

On January 18, 2000, Hanson sued Rachel O’Brien for the wrongful death of Jenna Hegstrom. On March 24, 2000, Hanson requested court approval of a proposed settlement whereby O’Brien would pay $80,000 to Hegstrom’s next of kin. At that point in the proceeding, respondent Jodi Madsen, on behalf of Hegstrom’s paternal relatives, objected to the proposed settlement. Madsen also brought a motion to remove Hanson as trustee. Madsen had hired the law firm of Hauer, Fargione, Love, Landy & McEllistrem, P.A. (the Hauer law firm) to handle this removal request.

Before the objections were decided by the district court, trustee Hanson and Madsen agreed to a partial settlement. Under the settlement, Madsen dropped the objection to Hanson as trustee. Hanson and Madsen agreed to serve as co-trustees with the understanding that they would move forward with a claim against State Farm, the underinsured motorist (UIM) carrier. Madsen and Hanson also agreed that the law firms they had each retained would serve as co-counsel in making that claim. On October 28, 2000, Mad-sen and Hanson were appointed co-trustees.

On October 25, 2000, Madsen signed a contingent fee agreement with the Hauer law firm. The agreement provided that Madsen would pay 15% of any amount recovered if the matter was settled before trial and that Madsen would pay 20% of any amount recovered if the matter was tried to a conclusion. Madsen signed the agreement as “Trustee for the heirs and next of kin of Jenna Hegstrom.” Hanson was neither informed of, nor did he sign, the agreement.

• Hanson and Madsen pursued the UIM claim in Dakota County, and a trial was held on March 19 and 20, 2002. Both law firms participated in the trial, and the jury returned a verdict of $223,308.84.

After the verdict in the UIM claim, Hanson sought distribution of the $30,000 wrongful death settlement. The proposed distribution included a distribution of $10,000 to Mack & Daby pursuant to the one-third contingent fee agreement between Mack & Daby and Hanson. Although Madsen objected to the proposed distribution, on June 2, 2002, the Kandi-yohi County district court approved the distribution and awarded Mack & Daby $10,000 in attorney fees.

In June 2002, Mack & Daby sought distribution of the proceeds of the UIM lawsuit. Mack & Daby proposed a distribution whereby it would receive one-sixth of the proceeds, which represented half of its one-third contingent fee contracted for between Hanson and Mack & Daby. Madsen objected to the distribution, and on August 30, 2002, a Dakota County district court determined that the contingent fee agreement between Madsen and the Hauer law firm governed and that the law firms were entitled to a total of 20% of the proceeds, with each law firm receiving 10% of the proceeds.

Hanson and Mack & Daby appeal from the Dakota County order awarding them 10% of the proceeds from the UIM lawsuit and contend that the one-third contingent fee agreement governs the distribution of their proceeds from the UIM lawsuit. No appeal has been taken from the order directing payment of the 10% contingent fee to the Hauer firm.

ISSUE

Did the district court err by determining that the Mack & Daby contingent fee agreement was not valid as to the UIM lawsuit?

ANALYSIS

The issue on appeal is whether the one-third contingent fee agreement is valid as to the proceeds of the UIM lawsuit. Contingent fee agreements are treated as any other contract. Holt v. Swenson, 252 Minn. 510, 514-15, 90 N.W.2d 724, 728 (1958). “The construction and effect of a contract are questions of law for the court.” Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn.1979). 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). Accordingly, our standard of review is de novo.

The Dakota County district court found that the one-third contingent fee agreement was not binding on the heirs and next of kin because it was signed before Hanson was a trustee. Thus, the issue in this case is not whether the contingent fee agreement is unreasonable; the issue is whether appellant Hanson could bind the heirs and next of kin by signing a contingent fee agreement before he was appointed trustee of the heirs and next of kin. Appellants argue that though Hanson signed the one-third contingent fee agreement before he was appointed trustee, as soon as he was appointed trustee, his authority related back to and validated the one-third contingent fee agreement.

The UIM lawsuit in this case was brought under the wrongful death statute, which is found at Minn.Stat. § 573.02 (2002). The title of Chapter 573 of the Minnesota Statutes is “Personal Representatives, Heirs; Actions.” Minn.Stat. Ch. 573 (2002). In Beck v. Groe, the court described a trustee as “acting as the personal representative by virtue of the provisions of § 573.02, the wrongful death act.” Beck v. Groe, 245 Minn. 28, 33, 70 N.W.2d 886, 891 (1955); see also Hachmann v. Mayo Clinic, 150 F.Supp. 468, 469 (D.Minn.1957) (referring to Minn.Stat. § 573.02 and noting “[t]he statute creates an action, arising upon death, which may be maintained by the personal representative of the deceased”). Thus, the Minnesota Supreme Court has characterized the trustee in a wrongful death suit as a personal representative.

The relation back doctrine applies to the authority of a personal representative. In re Estate of Gerhardt, 369 N.W.2d 335, 336 (Minn.App.1985). In Gerhardt, this court noted:

The trial court specifically found that Moore was appointed as personal representative at a hearing on July 5, 1983, and the record supports that finding. Thus, Moore’s duties and powers commenced on that date. Even if her appointment were not effective until she filed her acceptance, her power to perform acts which benefit the estate would relate back to the time of the decedent’s death.

Id. (emphasis added) (citations omitted).

Because a trustee in a wrongful death suit is essentially a personal representative, the authority of the trustee, like the authority of a personal representative, relates back. Thus, subject to court approval for reasonableness and absent some intervening circumstance, Hanson’s authority related back; the one-third contingent fee agreement became binding on the heirs and next of kin as soon as Hanson was appointed trustee.

Appellant law firm recognized that with two law firms involved, the claims for fees could be unreasonable. Indeed, if a one-third contingent fee were paid to Mack & Daby and a 20% contingent fee to Hauer law firm, over 50% of the award would go to pay attorneys; such a result would be overreaching. See Holt, 252 Minn, at 514-15, 90 N.W.2d at 728 (finding that contingent fee agreements are not valid where there is evidence of overreaching). Attorney John Mack testified that he had talked with the Hauer firm about this issue as follows:

[I]t was suggested and agreed to that both of us serve as co-counsel on this matter, and that we share attorney’s fees in the UIM case fifty/fifty.

Mack testified that in the same conversation, the Hauer law firm informed him that it had signed a one-third contingent fee agreement with Madsen. Thus, when Mack & Daby agreed to serve as co-counsel, its intention was to split “fifty/fifty” a one-third contingent fee. Because the one-third contingent fee agreement was valid, and because Mack & Daby agreed to split the contingent fee “fifty/fifty,” Mack & Daby is entitled to one-sixth of the award from the UIM lawsuit.

Neither of the parties challenge the validity of the Hauer law firm’s contingent fee agreement, nor do they challenge the district court determination that the Hauer law firm is entitled to 10% of the UIM award. Also, no one challenged the reasonableness of either fee arrangement. Accordingly, the ruling of the district court approving the Hauer fee is not affected by this appeal and the one-third fee arrangement for the Mack & Daby law firm is considered reasonable. Since the district court was not asked to address and did not decide if each law firm’s fee was to be paid by the side of the family represented by the trustee who hired that law firm, we do not finally decide that question. However, we do observe that such an allocation of fees for payment from the proceeds of the respective sides of the family appears to be the fairer outcome in this proceeding. We remand this matter for the district court to calculate fees and for further action in accordance with this opinion.

Appellants argue that respondent was collaterally estopped from arguing that the one-third contingent fee agreement was not valid because the Kandiyohi County district court had already enforced that agreement. Because we reverse the Dakota County district court decision, we do not address appellants’ collateral estoppel argument.

DECISION

The district court erred when it determined that because appellant Hanson signed the one-third contingent fee agreement with the Mack & Daby law firm before he was appointed trustee, the fee agreement did not apply in the UIM lawsuit. The fees of the Hauer firm and the further allocation of fees are not before this court.

Reversed and remanded.


author: G. BARRY ANDERSON, Judge.

text:
    STATE of Minnesota, Respondent, v. Casey BORREGO, Appellant.
    No. C8-02-1664.
    Court of Appeals of Minnesota.
    May 27, 2003.

      Mike Hatch, Attorney General, St. Paul, MN, and Boyd Beccue, Kandiyohi County Attorney, Willmar, MN, for Respondent.
    John E. Mack, Mack & Daby, P.A., New London, MN, for Appellant.
    Considered and decided by WILLIS, Presiding Judge, SCHUMACHER, Judge, and G. BARRY ANDERSON, Judge.
   OPINION

G. BARRY ANDERSON, Judge.

Appellant pleaded guilty to one count of fourth-degree possession of a controlled substance. The district court imposed what it believed to be a 30-month presumptive sentence but did not address whether the sentence would be served consecutively or concurrently with appellant’s probationary sentence resulting from his supervised release. After learning from a corrections officer that the sentencing guidelines presumed consecutive sentencing under these circumstances, the district court vacated the original sentence as a downward-durational departure not supported by mitigating factors and therefore an unauthorized sentence pursuant to Minn. R.Crim. P. 27.03. The district court re-sentenced appellant to a 30-month consecutive sentence. Because the original sentence was not unauthorized, we reverse and remand.

FACTS

On May 24, 2002 appellant Casey Borre-go was charged with two counts of a eon-trolled-substance crime in the first degree, in violation of Minn.Stat. § 152.021 (2000); driving after revocation in violation of Minn.Stat. § 171.24 (2000); and possession of drug paraphernalia in violation of Minn. Stat. § 152.092 (2000).

Pursuant to a plea agreement, appellant pleaded guilty to fourth-degree possession of a controlled substance with intent to sell, in violation of Minn.Stat. § 152.024, subd. 2(2) (2000). The state agreed to dismiss all other charges and agreed “not [to] seek an upward departure.” The parties also agreed that because of appellant’s criminal history, the presumptive sentence in this matter was a 30-month prison term. During sentencing, the district court questioned appellant about his understanding of the plea agreement:

Court: Do you understand that you will be going to prison for thirty months for this offense?
Appellant: Yes, sir.
Court: Are you prepared to accept that?
Appellant: Yes, sir.

The district court then accepted appellant’s guilty plea, appellant waived the pre-sentence investigation, and the district court imposed an executed sentence of 30 months. Appellant was also sentenced on an unrelated misdemeanor assault charge. During sentencing, appellant’s supervised release status was not brought to the district court’s attention. The district court did not address whether the new sentence would be served consecutively or concurrently to the previously imposed sentence.

The day following sentencing, appellant’s probation officer informed the court that because appellant was on supervised release when he committed the new offense, the sentencing guidelines presumed that the new sentence would be served consecutively to appellant’s prior sentence. The corrections officer suggested that appellant had, in effect, been given a downward departure that he was not entitled to and asked the district court to address this issue “[i]n the interest of accountability, public safety and adherence” to the sentencing guidelines.

After receiving the correction officer’s letter, the district court scheduled a hearing to review appellant’s sentence. Asserting a mistake of fact, the district court vacated appellant’s sentence and gave him the opportunity to withdraw his plea and proceed to trial. Appellant declined, preferring to appeal, and the district court found that a downward departure was not appropriate. The district court re-sentenced appellant to 30 months in prison to be “served on a consecutive basis with the Defendant’s incarceration for his prior offense.” This appeal followed.

ISSUE

Did the district court err by re-sentencing appellant to consecutive terms pursuant to the sentencing guidelines after previously imposing concurrent prison terms?

ANALYSIS

The district court may, at any time, correct a sentence that is not authorized by law. Minn. R.Crim. P. 27.03, subd. 9. For a sentence to be unauthorized, it must be contrary to law or applicable statutes. State v. Humes, 581 N.W.2d 317, 319-20 (Minn.1998). A district court’s decision to correct an unauthorized sentence will not be reversed on appeal if the district court properly exercised its discretion. State v. Cook, 617 N.W.2d 417, 419 (Minn.App.2000), review denied (Minn. Nov. 21, 2000). Interpretation of a sentencing statute is a question of law which this court reviews de novo. State v. Koperski, 611 N.W.2d 569, 571 (Minn.App.2000). Double jeopardy and due process concerns arise when the person being sentenced develops “a crystallized expectation of finality in his sentence.” State v. Garcia, 582 N.W.2d 879, 881 (Minn.1998).

Appellant argues that the district court did not have the authority to impose consecutive prison terms after previously imposing concurrent terms of incarceration. Although he acknowledges that Minn. R.Crim. P. 27.03, subd. 9, allows the district court to correct, at any time, “a sentence not authorized by law,” appellant argues that even though the district court did not intend to impose what amounted to a downward departure, the original sentence was not an unauthorized sentence.

Appellant argues that State v. Walsh, 456 N.W.2d 442 (Minn.App.1990) is instructive here. In Walsh, the appellant challenged the district court’s decision to impose a more severe sentence after the district court discovered that the sentencing-guidelines worksheet incorrectly stated the appellant’s criminal history. Id. at 443. The state maintained that the mistaken entry of appellant’s criminal history score that led the court to impose a sentence of 30 months, rather than the 49 months called for had his actual criminal history score been known, represented a clerical error subject to correction under Minn. R.Crim. P. 27.03, subd. 8. Id.

The Walsh court observed that both the defense and prosecuting attorney reviewed the guideline sheet prior to sentencing, and, given this screening process, any error in the worksheet was not merely clerical. Id. at 444. Further, noting that the sentencing-guidelines worksheet represented nothing more than a tool, not the sentence itself, the Walsh court held that incorrect information on the worksheet was an error in judgment. Id. at 443. Based on these factors and the appellant’s expectation of finality, this court reinstated the original 30-month sentence. Id. at 444. The Walsh court noted that if what amounted to a downward departure was imposed without proper findings, such a sentence may be grounds for appeal, but not grounds for re-sentencing. Walsh, 456 N.W.2d at 444.

An unauthorized sentence must be contrary to statutory requirements. Humes, 581 N.W.2d at 319. For example, in Garcia, the district court’s imposition of a sentence without the imposition of a conditional-release term as required by Minn. Stat. § 609.346 was held to be unauthorized. Garcia, 582 N.W.2d at 882. Likewise a sentence that did not give an appellant placed on conditional release credit for time the appellant spent on supervised release on an unrelated matter violated Minn.Stat. § 609.346, subd. 5, which requires any supervised release time served be deducted from the conditional-release time served and was therefore unauthorized. Koperski, 611 N.W.2d at 571-3.

Here, appellant is correct in his assertion that the original sentence was not unauthorized. No statute or case law forbids the district court from imposing concurrent sentences in this case. While the sentencing guidelines state that consecutive sentences are presumed, this presumption does not make the sentence unauthorized. The purpose of the sentencing guidelines is simply to “offer a measure of evenhandedness and predictability to defendants” and to ensure their sentences are not based “upon inappropriate grounds such as race, gender, social or economic status.” State v. Givens, 544 N.W.2d 774, 777 (Minn.1996). But neither party has a right to demand that the sentence imposed be in accord with sentencing guidelines. State v. Misquadace, 644 N.W.2d 65, 67 (Minn.2002).

Like Walsh, the district court here was mistaken about appellant’s presumptive sentence. And as in Walsh, the district court unintentionally imposed a sentence that was less than the presumptive sentence. Although appellant’s sentence may represent a downward departure that the district court did not wish to grant, this accidental departure does not mean the sentence is unauthorized by statute. See Walsh, 456 N.W.2d at 444.

Appellant was sentenced and was incarcerated as required by the legally imposed sentence, pursuant to a plea agreement with the state. To allow the district court to correct its error in judgment would violate appellant’s rights to due process. State v. Calmes, 632 N.W.2d 641, 645 (Minn.2001).

Because his original concurrent sentence represents an unintentional, but legally permissible, downward departure, rather than a violation of law, we conclude the district court erred by subsequently imposing consecutive sentences. See Walsh, 456 N.W.2d at 444. We remand this matter to the district court to reinstate the original sentence.

DECISION

A mistaken sentence, effectively .a downward departure unintended by the district court and not supported by mitigating factors, was legally permissible and therefore not unauthorized by law. The district court erred by concluding that the sentence was unauthorized and re-sentencing appellant to serve a 30-month sentence to run consecutively to a previously imposed sentence. We remand this matter to the district court for reinstatement of the original sentence.

Reversed and remanded.


author: LANSING, Judge.

text:
    FIRST NATIONAL BANK OF THE NORTH, Respondent, v. AUTOMOTIVE FINANCE CORPORATION, Appellant, J. Doe I — III, Defendants.
    No. C3-02-1894.
    Court of Appeals of Minnesota.
    May 27, 2003.

      Ralph L. Moore, Stein & Moore, P.A., St. Paul, MN, for respondent.
    Paul L. Ratelle, Michael A. Rosow, Fa-byanske, Westra & Hart, P.A., Minneapolis, MN, for appellant.
    Considered and decided by TOUSSAINT, Chief Judge, LANSING, Judge, and HUSPENI, Judge.

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

   OPINION

LANSING, Judge.

This appeal in a replevin action involves a dispute between a consumer lender and a defaulting dealer’s flooring lender over the priority of security interests in three vehicles. The district court determined as a matter of law that the consumer lender’s security interest in each vehicle is superior to the security interest held by the flooring lender. The flooring lender appeals the summary judgment granted the consumer lender, and we affirm.

FACTS

Automotive Finance Corporation (AFC) is a nationwide flooring lender that entered into a financing arrangement with Scott Ferrozzo individually and doing business as Shakopee Used Cars and Trucks (the dealer). Under the terms of the financing arrangement, AFC agreed to lend the dealer $100,000 for the purchase of vehicles for its inventory. In exchange, the dealer granted AFC a security interest in the dealer’s inventory, including all vehicles owned or acquired by the dealer in the future. AFC perfected its security interest by filing a financing statement with the Minnesota Secretary of State, as required by the Uniform Commercial Code. Minn. Stat. § 336.9-310(a) (2002).

The dealer sold three vehicles in its inventory to individual buyers. Each of the buyers financed the purchase through a loan with First National Bank of the North (the bank). The bank secured repayment of the loans by taking a security interest in each of the vehicles, which it duly noted on the certificates of title. See Minn.Stat. § 168A.17, subd. 1 (2002) (prescribing procedures for perfecting security interest in vehicles). The bank appears as the first secured party on the vehicle title.

Shortly after each of the transactions was completed, the dealer defaulted on its loan to AFC, and each of the borrowers defaulted on his loan to the bank. At some point, each borrower “traded in” his vehicle to the dealer in exchange for a new vehicle. Neither the borrowers nor the dealer, however, paid off the loans to the bank. Before the bank could physically repossess the vehicles that secured each loan, AFC repossessed the dealer’s inventory in satisfaction of its financing arrangement with the dealer. The repossessed inventory included the trade-in vehicles that secured the bank’s loans.

The bank brought a replevin action to recover the vehicles. Both the bank and AFC moved for summary judgment, each claiming that its interest was superior. The district court granted the bank’s motion for summary judgment, and AFC now appeals.

ISSUE

Does a consumer lender’s valid security interest, noted on a vehicle’s certificate of title and perfected under Minn.Stat. § 168A.01-.31 (2002), take priority over a flooring lender’s security interest in the inventory of a defaulting dealer?

ANALYSIS

A summary judgment based on application of a statute to undisputed facts is a legal determination that we review de novo. Wiegel v. City of St. Paul, 639 N.W.2d 378, 381 (Minn.2002). To determine whether a statute has been correctly applied, we focus on the words of the statute to “ascertain and effectuate the intention of the legislature.” Minn.Stat. § 645.16 (2002). If the meaning is plain and unambiguous we apply that meaning as a manifestation of legislative intent. Kersten v. Minn. Mut. Life. Ins. Co., 608 N.W.2d 869, 874-75 (Minn.2000). Plain meaning embodies ordinary use of the language in the context of the whole-act structure, applying the usual conventions of grammar and syntax. Occhino v. Grover, 640 N.W.2d 357, 359, review denied (Minn. May 28, 2002). If the meaning of statutory language is not plain, we resolve ambiguity by looking to other factors that evince legislative intent and, when applicable, agency interpretation and extrinsic-source canons. Id. at 360; Minn.Stat. § 645.16 (listing factors for ascertaining legislative intent).

In general, a financing statement must be filed under the Uniform Commercial Code to perfect a security interest. Minn. Stat. § 336.9-310(a) (2002). The code, however, creates specific exceptions from the financing-statement requirements, which include security interests in a vehicle for which a certificate of title is required. Minn.Stat. §§ 336.9-310(a), - 310(b)(3), -311(a)(2) (2002). A security interest in a vehicle for which a certificate of title is required is perfected under chapter 168A and this method of perfecting a security interest in a vehicle subject to the act is exclusive. Minn.Stat. § 168A.22 (2002); CECO Corp. v. United States, 554 F.Supp. 569, 572 (D.Minn.1982).

The function of chapter 168A is to outline a single filing procedure for the notation of ownership and security interests in vehicles on the certificate of title. See Bank N. v. Soule, 420 N.W.2d 598, 602 (Minn.1988) (noting that system of single filing was designed to protect all parties in commercial transactions involving the vehicle); see also Carousel Autos., Inc. v. Gherity, 527 N.W.2d 813, 815 (Minn.1995) (noting that single filing procedure provided “reliable and verifiable” record of motor-vehicle ownership). Under this unified system, parties to a commercial transaction, whether a sale or a security arrangement, may rely with “practical certitude” on the ownership and security interests inscribed on the certificate of title. Soule, 420 N.W.2d at 602. To perfect a security interest in a vehicle that requires a certificate of title, the secured party must note its security interest on the certificate through the perfection rules prescribed in Minn.Stat. § 168A.17 (2002). Unless perfected under the procedures prescribed in sections 168A.01 to .31, or excepted under section 168A.16, a security interest in a vehicle for which a certificate of title is required is not valid. Minn.Stat. § 168A.17, subd. 1.

A dealer who owns a vehicle that is held for sale is exempted from the act and is therefore not required to obtain a certificate of title for that vehicle. Minn.Stat. § 168A.03(2) (2002). Because the dealer is not covered under the motor-vehicle-certification procedures, a security interest in the dealer-held vehicle is perfected through the general Uniform Commercial Code process of filing a financing statement with the Minnesota Secretary of State, rather than through chapter 168A procedures. Minn.Stat. §§ 336.9-310(a), - 311(d) (2002). To provide for the exception from the motor-vehicle-certification procedures, Minn.Stat. § 168A.16(a)(3) states:

(a) Sections 168A.01 to 168A.31 do not apply to or affect ⅜ ⅜ ⅜ ⅜
(3) a security interest in a vehicle created by a manufacturer or dealer who holds the vehicle for sale.

Minn.Stat. § 168A.16(a)(3).

It is this provision on which AFC relies for its argument that its security interest has priority over the bank’s on the three vehicles. AFC claims that when the vehicles were traded in they were once again owned by a dealer who was holding them for sale and thus became subject to its inventory lien. According to this argument, the bank’s security interest, even though preceding the reinstated inventory lien, cannot “apply to or affect” its later lien because of the express language of Minn.Stat. § 168A.16(a)(3). The unstated but necessary implication of AFC’s claim is that a consumer lender’s perfected security interest is always nullified by Minn.Stat. § 168A.16(a)(3) when borrowers trade in their vehicles to a dealer who has granted a security interest in its inventory. We disagree with AFC’s interpretation for several reasons.

AFC’s argument expands the statutory language to provide, in effect, that security interests perfected under sections 168A.01 to 168A.31 do not apply to or affect security interests in vehicles created by dealers who held the vehicles for sale. But that is not what the statute says. Rather the statute states that sections 168A.01 to 168A.81 do not apply to or affect the dealer’s security interest. This language must be read in the context of the whole act.

The plain meaning of “do[es] not apply to or affect,” within the context of the act, is to provide an exception from the certificate-of-title requirements for security interests created by the dealer who holds the vehicle for sale. Consistent with the statutory provision exempting the dealer from obtaining a certificate of title for every vehicle in its inventory and correspondingly noting on each certificate a secured interest in the inventory, the act excepts the dealer’s inventory lien because it is included under the Uniform Commercial Code’s financing statement provisions. Minn.Stat. §§ 336.9-310(a), -311(d). To read section 168A.16(a)(3) in the way that AFC advances would not only contradict the internal structure of the act, but also conflict with its specific provisions, most significantly, the statement that the act is the exclusive means of perfecting a security interest for vehicles covered by the act. Minn.Stat. § 168A.22 Consistent with this exclusivity, the act contains no provision or suggestion that a consumer lender who wishes to maintain a security interest after the vehicle is traded in, must file a UCC financing statement.

Not only does the plain meaning within the context of the act compel this reading of section 168A.16(a)(3), but the meaning also conforms to another principle, fundamental to the Uniform Commercial Code, that a transferee of goods acquires no greater rights than those of his transferor. A security interest can only attach and become enforceable when the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party. Minn.Stat. § 336.9-203(b)(2) (2002). In this case, the “debtor” dealer never received a right to title of the vehicles. At most, the dealer received a right to possess the vehicles because possession is all the bank’s borrowers were entitled to transfer without the bank’s consent. In other words, when the dealer accepted the trade ins from the borrowers, it gained no greater rights than those of the borrowers. See Minn.Stat. § 336.2-403(1) (2002) (purchaser generally acquires only such title as his transferor had); see also Minn.Stat. § 336.9-319(a) (2002) (during consignment of goods, consignee is deemed to have rights and title to goods identical to those the consignor had or had power to transfer).

AFC made a similar argument that its security interest took priority over a consumer lender’s security interest in a federal bankruptcy action involving strikingly similar facts. See In re Kincaid, 218 B.R. 965 (Bankr.W.D.Wash.1998). Based on the language of Washington’s Uniform Commercial Code, AFC argued that a consumer lender’s financing statement became “unperfected” upon trade in of the vehicle, and that a consumer lender needed to file a financing statement to continue its security interest after trade in. Id. at 967. The federal bankruptcy court rejected AFC’s argument, specifically recognizing the importance of the notice filing system in allocating burdens to parties who could best shoulder them. Id. at 968. The bankruptcy court noted that adopting an interpretation similar to the one suggested by AFC would “lead to the result that lenders would have no way to protect themselves against flooring lenders * * * [because] the consumer lenders’ customers could always defeat the consumer lenders’ perfected security interests by trading in or consigning the vehicle to a dealer with a flooring financing statement on file.” Id.

AFC contends that the bank in this case could rely on means other than the certificate-of-title statutes to protect its security interests. For instance, AFC suggests that consumer lenders could assume the burden of monitoring their collateral, just as flooring-plan lenders protect their interests in dealership inventories. This argument, however, fails to recognize the significant difference between monitoring inventories that are located on a single dealership lot and monitoring vehicles located at scattered individual homes. This approach would defeat the code’s purpose of bringing the security interests under a uniform notice-filing system, which alio-cates burdens to those best in a position to shoulder them. AFC similarly suggests that the bank has recourse against its customers and should not take recourse against AFC as an innocent third party. But, again, this argument ignores a basic purpose of the certification system — to protect consumer lenders and reduce unnecessary costs to both consumer lenders and borrowers.

Furthermore, AFC’s arguments assume that the three vehicles were properly transferred to the dealer and that its security interest attached to each vehicle. A transfer of a vehicle by an owner, however, is not effective until the owner has complied with section 168A.10. Minn.Stat. § 168A.10, subd. 5 (2002). An owner who validly transfers an interest in a vehicle is required to execute an assignment and warranty of title to the transferee. Id. Although dealers who buy vehicles to hold for resale and who obtain the certificate of title from the owner or secured party are excepted from applying for a new certificate of title, they are not excepted from obtaining the original certificate of title. Minn.Stat. § 168A.11, subd. 1 (2002). AFC’s defaulting dealer could not obtain a certificate of title to any of the vehicles without the consent of the bank as the first secured party. Because the vehicles were apparently improperly transferred to the dealer, Minn.Stat. § 168A.16(a)(3) would not apply because AFC’s security interest in the vehicles did not attach.

Finally, we note that the express terms of the original financing arrangement between AFC and the dealer fail to support AFC’s argument that it possessed a security interest in the three vehicles. Under the financing agreement, AFC held a security interest in the “Collateral” as defined in section 1.4. The covered “Collateral” includes “all Vehicles, vehicle parts, and other inventory now owned or hereafter acquired, including, without limitation, the Purchase Money Inventory, * * * and all additions, accessions, accessories, replacements, and proceeds thereof.” (Emphasis added.) “Vehicles” is a defined term in the financing agreement and it includes “Vehicle[s], the ownership of which is embodied in a Title.” In section 6.7 of the agreement, AFC required the dealer to warrant that it had “made all filings, recordations, and taken all necessary actions (including registration on a certificate of title) which are required to perfect Dealer’s interest with respect to the Collateral.”

By the terms of its own financing agreement, AFC acknowledges that the dealer must hold title to the vehicles on its lot for the vehicles to constitute collateral. Although AFC might have been entitled to the excess proceeds of the sale of the vehicles after the bank’s security interest had been satisfied, AFC’s security interest does not extend to a vehicle for which the dealer itself did not hold title. AFC may choose to pursue other remedies for the dealer’s failure to obtain title to the vehicles which were held for sale on its lot, but it cannot use MinmStat. § 168A.16(a)(3) to defeat the bank’s priority perfected security interest.

DECISION

A consumer lender whose security interest in a vehicle has been perfected under chapter 168A retains that interest when the vehicle becomes inventory of a dealer through a trade in, and Minn.Stat. § 168A.16(a)(3) does not require that the interest be protected by filing a U.C.C. financing statement.

Affirmed.


author: TOUSSAINT, Chief Judge.

text:
    LEAMINGTON CO., Appellant, v. NONPROFITS’ INSURANCE ASSOCIATION, an Interinsurance Exchange, Respondent.
    No. C6-02-1212.
    Court of Appeals of Minnesota.
    May 27, 2003.

      Paul C. Peterson, William Lawrence Davidson, Sara J. Lathrop, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, for appellant.
    Charles J. Noel, Jennifer Lynn Kjos Fackler, Charles J. Noel & Associates, P.A., Eagan, MN, for respondent.
    Considered and decided by TOUSSAINT, Chief Judge, LANSING, Judge, and HUSPENI, Judge.

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

   OPINION

TOUSSAINT, Chief Judge.

This is an appeal from a summary judgment in which the district court applying the comparative fault act, Minn.Stat. 604.01, subd. 5 (2002), held that any damages appellant recovers from its lessee’s property-damage insurer, respondent, must be offset by the amount of its settlement with its lessee for the same damages. Appellant contends that (a) neither the policy nor the comparative fault act supports this result, and instead the common-law collateral-source rule applies and (b) genuine issues of material fact exist as to whether the settlement compensated appellant for the same damages as those it sought to recover from the insurer. Because (a) the common-law collateral-source rule does not apply when a third party is not the source of funds and (b) no factual dispute exists as to which damages the settlement applies, we affirm the district court.

FACTS

Appellant Leamington Co., which owns the Francis Drake Building, leased the property to People Serving People, Inc. (PSP) from 1983 through May 1996 for use as a homeless shelter. During the lease period, the property was damaged by water and by vandalism and destructive acts by PSP’s guests and invitees. Leamington sued PSP for damages.

PSP and Leamington reached a settlement that was read into the district court record in December 1996. The settlement provides in relevant part:

P.S.P., Inc. will tender payment to Leamington Company in the amount of $340,000 by cashier’s check on December 23, 1996, at 10:30 a.m. in Mr. Anderson’s office. That payment is hereby attributed by the parties to the tort waste claim in this litigation.

The settlement further provided that Leamington would “have the exclusive right to pursue and recover on any real property damage insurance claim” to the property.

During the relevant years, PSP had a property-damage insurance policy with respondent Nonprofits’ Insurance Association (NIA). Leamington, as authorized by the settlement, brought an action for property damage against NIA under PSP’s insurance policy. NIA asserted a number of defenses, including the argument that any judgment Leamington obtained should be offset by the $340,000 that PSP paid Leamington, which NIA contended was for the same tort-waste damages for which Leamington sought recovery in the insurance lawsuit.

The district court granted summary judgment to the insurer. In an earlier appeal, the supreme court reversed the summary judgment and remanded for further proceedings. Leamington Co. v. Nonprofits’ Ins. Ass’n., 615 N.W.2d 349, 351 (Minn.2000). On remand, the district court heard and denied additional motions for summary judgment from both parties. In the portion of the decision at issue here, the district court ruled that Leamington’s $340,000 settlement with PSP would be credited against any final settlement or judgment that Leamington obtained from NIA.

The parties ultimately reached a stipulation under which judgment was entered to allow Leamington to seek review of the district court’s decision to offset the settlement amount. The parties agreed that if appellate review resulted in a remand, Leamington reserved its right to seek payment on the insurance policies, with maximum damages of $340,000, and NIA reserved its right to assert other defenses. The district court entered judgment, and this appeal followed.

Leamington moved this court to supplement the record to include pleadings in a separate action involving the same property, which was not before the district court in the present action. This court denied the motion and struck any statements in appellant’s brief that relied on pleadings outside the record.

ISSUES

I. When a property owner seeks damages from the insurer of its lessee who damaged its property, after already having settled with the lessee, is the insurer entitled to offset the amount of that settlement against any liability it has under the policy?

II. Is there a genuine issue of material fact as to whether the settlement amount was for the same damages for which the lessor sought coverage from the lessee’s property insurer?

ANALYSIS

I.

Construction of a statute is a question of law reviewable de novo. Hibbing Educ. Ass’n v. Pub. Employment Relations Bd., 369 N.W.2d 527, 529 (Minn.1985). Similarly, “[t]he interpretation of an insurance policy is a question of law reviewed de novo.” Thommes v. Milwaukee Ins. Co., 641 N.W.2d 877, 879 (Minn.2002) (citation omitted).

Leamington challenges the district court decision ordering the offset of the settlement against any liability NIA had under the policy on several grounds. First, it asserts that because the insurance policy does not provide for an offset or credit for a settlement, NIA is obligated to provide property damage coverage pursuant to the terms of the policy. “Subject to the statutory law of the state, a policy of insurance is within the application of general principles of the law of contracts.” Waseca Mut. Ins. Co. v. Noska, 331 N.W.2d 917, 926 (Minn.1983) (citations omitted). Thus, the lack of a provision regarding an offset in the policy does not preclude an offset if a statute or general rule of law regarding offsets otherwise applies.

Leamington next challenges the district court’s decision that under the comparative fault act, Minn.Stat. § 604.01, subd. 5 (2002), the amount that Leamington recovered from NIA should be offset by the amount of its settlement with PSP. Leam-ington contends that the act is inapplicable to contract actions such as its insurance coverage action against NIA.

The comparative fault act addresses the apportionment of damages if two or more persons are jointly liable. Minn.Stat. § 604.02, subd. 1 (2002). The relevant portion of the section on which the district court relied provides:

All settlements and payments made under subdivisions 2 and S shall be credited against any final settlement or judgment * * *. [T]he court shall first apply the provisions of subdivision 1 and then shall reduce the amount of damages so determined by the amount of the payments previously made to or on behalf of the person entitled to such damages.

Id. § 604.01, subd. 5 (emphasis added). Subdivision 2 addresses settlement for damages resulting from personal injury or death, and subdivision 3 addresses settlement for property damages or economic loss. Id., subds. 2, 3.

Generally, the comparative fault statute is not intended to apply to contract claims. Lesmeister v. Dilly, 330 N.W.2d 95, 101-02 (Minn.1983). The lawsuit at issue here is an action for coverage under an insurance policy, which is analyzed under the law of contracts. Waseca Mut., 331 N.W.2d at 926. Consequently, the comparative fault statute does not apply here.

The district court, however, ruled that subdivision 5 governed and noted that Leamington’s lawsuit against PSP alleged waste, which constitutes fault under Minn. Stat. § 604.01, subd. la. But in addressing this issue, we are not examining Leam-ington’s lawsuit against PSP, but rather Leamington’s lawsuit against NIA, which is an action to determine insurance coverage that is contractual in nature. Waseca Mut., 331 N.W.2d at 926.

In support of its argument that subdivision 5 should apply, NIA cites language from our decision in Oelschlager v. Magnuson, 528 N.W.2d 895, 900 n. 4 (Minn.App.1995), review denied (Minn. Apr. 27, 1995). Oelschlager involved a church member’s personal-injury action based on sexual abuse by a pastor. Id. at 897. One of the issues that the Oelschlager court considered was whether the plaintiffs judgment against the church should be reduced by his Pierringer settlement with a church conference to which the church belonged. Id. at 899-900. In holding that it should, this court cited Minn.Stat. 604.01, subd. 5, and stated that it

clearly states that all settlements made to an injured person must be credited against a final judgment, without reference to the legal theory underlying the judgment or the settlement.

Id. at 900 n. 4. Despite this broad language, we are constrained by the fact that Oelschlager was a personal-injury action. It did not address the issue raised here and does not stand for the proposition that subdivision 5 applies to contract actions. Instead, we look to the rule that the comparative-fault statute does not apply to contract claims. Lesmeister, 330 N.W.2d at 101-02.

We now address whether the collateral-source rule applies or whether any recovery Leamington obtains from NIA should be offset against the proceeds from Leamington’s settlement with PSP. Under this rule, money or services that a plaintiff receives “in reparation of the injury from a source other than the tortfeasor” will not be “credited against the tortfeasor’s liability” even though they may partially or completely reimburse the plaintiff for damages suffered. Hueper v. Goodrich, 314 N.W.2d 828, 830 (Minn.1982). This rale was based on the Restatement (Second) of Torts, 920A(2) (1979). VanLandschoot v. Walsh, 660 N.W.2d 152, 155 (Minn.App.2003). The common-law collateral source rale has been partially abrogated by statute, under which a tortfeasor in a personal injury action may move the court to limit a plaintiffs recovery by the amount the plaintiff received from a collateral source. Minn. Stat. 548.36, subd. 2 (2002); Imlay v. City of Lake Crystal, 453 N.W.2d 326, 331 (Minn.1990). But the statutory collateral-source rale applies only to cases involving physical injury to the person. Duluth Steam Coop. Ass’n v. Ringsred, 519 N.W.2d 215, 217 (Minn.App.1994). It does not apply to property damage. Id. Therefore, the statutory collateral source rale does not apply to the facts of this case.

The common-law collateral source rale was recently addressed in a case with similar facts. VanLandschoot, 660 N.W.2d 152, 153. There, the property owners’ building was damaged by a fire caused by the negligence of a welder, and they sued this tortfeasor. Id. at 153. The only issue raised in the district court was the amount of damages, on which the court made a finding. Id. The tortfeasor’s insurer had previously paid a sum to the property owners’ insurer, and the tortfeasor moved to deduct this amount from his liability to the property owners. The district court granted the motion. Id. This court then considered the issue on appeal.

In resolving the issue, this court adopted the Restatement (Second) of Torts, 920A(1) (1979). VanLandschoot, Id. at 155. Under that section, the common-law collateral-source rule does not apply to payments made by a tortfeasor or person acting for him. Id.

A payment made by a tortfeasor or by a person acting for him to a person whom he has injured is credited against his tort liability, as are payments made by another who is, or believes he is, subject to the same tort liability.

Restatement (Second) of Torts 920A(1) (emphasis added) (quoted in VanLand-schoot, at 155).

If a tort defendant makes a payment toward his tort liability, it of course has the effect of reducing that liability. This is also true of payments made under an insurance policy that is maintained by the defendant, whether made under a liability provision or without regard to liability * * *. •

Id. cmt. a (emphasis added) (quoted in VanLandschoot, 660 N.W.2d at 155).

In VanLandschoot, this court noted that subsection 1 encouraged potential tortfea-sors to obtain insurance. VanLandschoot, 660 N.W.2d at 155. Further, this court noted that if the common-law collateral-source rule were applied under the circumstances, it would serve to punish the prudent person who obtains liability insurance. Id.

We now apply section 920A(1) of the Restatement and VanLandschoot to the present case. Here, the tortfeasor paid the property owners who had suffered property damage; the property owners then went to the tortfeasor’s insurer to recover the same damages. Thus, like VanLandschoot, the source of the collateral funds was not a third party. But in contrast to VanLandschoot, here the tort-feasor itself, rather than the tortfeasor’s insurer was the source of the collateral funds. Just as funds from a tortfeasor’s insurer may be applied against any recovery from that tortfeasor, so should funds received from the tortfeasor be applied against any recovery from the tortfeasor’s insurer. In this way, the party damaged by the acts of the tortfeasor does not obtain a double recovery from essentially the same source. Therefore, we affirm the district court’s ruling as to the offset, although on different grounds.

II.

The final issue is if there was a genuine issue of material fact as to whether the settlement amount was for the same damages for which Leamington seeks recovery from NIA in the insurance-coverage action. In its order denying summary judgment, the court ruled that “[t]he settlement with PSP and the claims against NIA are for the same tort waste damages.” See Minn. R. Civ. P. 56.04 (noting that even if the case is not fully adjudicated on the summary judgment motion, the court may specify which material facts exist without substantial controversy). On appeal the determination of whether there is a genuine issue of material fact is reviewed de novo. Gunderson v. Harrington, 632 N.W.2d 695, 701 (Minn.2001). A party must “present specific admissible facts showing that there was a genuine issue for trial” to avoid summary judgment. Nicollet Restoration, Inc. v. City of St. Paul, 533 N.W.2d 845, 848 (Minn.1995) (citation omitted).

Leamington contends that a question of material fact exists as to whether the PSP settlement represents the full compensation for Leamington’s waste damages, or whether the settlement compensated Leamington for a variety of claims in addition to waste damages. Leamington had filed claims and counterclaims against PSP for waste, conversion, unpaid rents, and attorney fees. PSP settled Leamington’s claims by paying $340,000 to Leamington. The December 1996 settlement explicitly states “[t]hat payment is hereby attributed by the parties to the tort waste claim in this litigation.” But, Leamington cites a May 1997 letter written by its attorney making the argument that the settlement resolved claims in addition to waste damages. Even assuming this letter is part of the trial court file here, an assertion by the attorney does not constitute a specific admissible fact that can raise a genuine issue of material fact in this case. See Nicollet Restoration, 533 N.W.2d at 848 (holding general assertions insufficient to create fact issue for trial). Consequently, Leam-ington cannot prevail in this argument.

DECISION

The district court decision holding that any damages that Leamington recovers from NIA must be offset by the amount of the settlement between Leamington and PSP is affirmed. There are no genuine issues of material fact as to whether the settlement and the insurance action are for the same damages.

Affirmed.

      . For purposes of this discussion, we assume that the same damages are at issue. Later in this opinion, we discuss and reject Leaming-ton's claim that there are genuine fact issues as to whether the damages are the same.


text:
    SCHWICKERT, INC., Respondent, v. WINNEBAGO SENIORS, LTD., et al., Respondents (C8-02-1972), Appellants (C4-02-2083), v. 11,111, INC., d/b/a Energy Conservation Consultants, Inc., third-party defendant, Respondent (C4-02-2083), AMCO Insurance Company, Inc., Appellant (C8-02-1972), Respondent (C4-02-2083).
    Nos. C8-02-1972, C4-02-2083.
    Court of Appeals of Minnesota.
    May 27, 2003.

      Scott V. Kelly, Farrish Johnson Law Office, Mankato, MN, for respondents Sehwickert, Inc. and Energy Conservation Consultants.
    Paula Duggan Vraa, Rider, Bennett, Egan & Arundel, LLP, Minneapolis, MN, for respondents Winnebago Seniors, Ltd., Minnesota Housing Finance Agency and Thies & Talle Enters., Inc.
    Jon A. Hanson, E. Curtis Roeder, Candy B. Olson, Hanson, Lulic <& Krall, Minneapolis, MN, for appellant AMCO Insurance Company, Inc.
    Considered and decided by TOUSSAINT, Chief Judge, MINGE, Judge, and HUSPENI, Judge.

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

   OPINION

TOUSSAINT, Chief Judge.

These consolidated cases originated as a contractor’s mechanic’s-lien action regarding services for re-roofing an apartment building. The owners of the property then counterclaimed for water damage while the building was being re-roofed and brought a third-party action against both their roofing consultant and their insurer. Shortly before the scheduled trial, the owners accepted, over the insurer’s objections, a Rule 68 settlement offer from the contractor and the consultant, and the district court administrator entered judgment. The remaining parties moved for summary judgment. The court denied the insurer’s motion, granted the other parties’ motions, and certified to this court the question of whether Schmidt v. Clothier applies to a first-party-property insurance dispute outside of the personal-injury context. In addition, the court ruled that the owners were not entitled to attorney fees or prejudgment interest on the Rule 68 settlement offer. We answer the district court’s certified question regarding the applicability of Schmidt in the affirmative, but we reverse and remand with regard to the court’s determination that the Schmidt notice requirements were satisfied.

FACTS

This case arises out of damage to the Garden Court Apartments, which are jointly owned by appellants Winnebago Seniors, Ltd.; the Minnesota Housing Finance Agency; and Thies & Talle Enterprises, Inc. (collectively “the owners”). The property, a three-story apartment building, had a history of roof leakage and was insured through respondent AMCO Insurance Company, Inc. (AMCO).

In 1998, the owners retained respondent 11,111, Inc. d/b/a Energy Conservation Consultants, Inc. (ECC) to evaluate the building’s roof and to prepare plans for a new roof design. ECC determined that the plywood decking was badly deteriorated, and it developed a design to repair the roof. Owners then hired respondent Schwickert, Inc. (Schwickert) for the re-roofing project using ECC’s design. In two separate incidents in October 1998, rainstorms occurred after Schwickert had removed large portions of the roof covering the building’s atrium. Despite Schwic-kert’s efforts to cover the roof, water entered the atrium and caused damage to the building. The owners declined to make full payment to Schwickert and ECC, citing their failure to adequately protect the building from water incursions.

On November 2, 1998, the owners reported the damage from the two rainstorms to AMCO. In February and March of 1999, AMCO investigated the claim and notified ECC and Schwickert of its intent to subrogate against them for the cost to repair the damage from the October 1998 water intrusions. But in July of 1999, AMCO denied coverage for the October 1998 claims, stating that the roof was not damaged by a covered cause of loss and that the damage was caused by negligent workmanship. Consequently, the owners hired another contractor and completed the repairs to the property at their own expense, which they claim totaled almost $1.5 million.

In October 1999, Schwiekert commenced an action against the owners to enforce its mechanic’s lien for unpaid services. The owners answered and counterclaimed, alleging negligence, breach of contract, and breach of warranty. The owners also brought a third-party action against AMCO for its denial of insurance benefits and against ECC for breach of contract, negligent supervision, and negligent design. AMCO answered the third-party complaint, claiming that the loss was excluded from coverage, and initiated a cross-claim against ECC and a Rule 14.01 subrogation claim against Schwiekert. ECC answered the third-party complaint denying liability, counterclaimed for nonpayment of services rendered, and cross-claimed against Schwiekert and AMCO for indemnification.

In early 2002, AMCO moved for summary judgment, arguing that the water damage is excluded from its policy. The owners also moved for summary judgment against EEC and Schwiekert. In March, the district court denied AMCO’s motion. The district court later granted to the owners partial summary judgment against ECC and Schwiekert, concluding that ECC was negligent in its roof design and that Schwickert’s failure to provide site protection constituted a breach of contract.

On April 30, 2002, ECC and Schwiekert submitted to the owners a Rule 68 joint offer of judgment in the amount of $650,000, including “costs disbursements, interest, and attorneys fees to date” in exchange for dismissal of ECC’s and Schwickert’s claims against owners. The owners did not accept this offer. On May 3, 2002, twelve days before the scheduled trial, Schwiekert and ECC made a second Rule 68 settlement offer to the owners, increasing the amount to $800,000. Unlike the first offer, the second offer was silent regarding costs, disbursements, interest, and attorney fees, and it expressly expired ten days after service. On May 6, the owners, interested in the offer, orally invited AMCO to substitute its draft for $800,000 to preserve the subrogation rights recognized by Schmidt v. Clothier, 338 N.W.2d 256 (Minn.1983). The next day, AMCO faxed a letter to the owners contending, among other things, that Schmidt applies only to no-fault cases, not to property-damage disputes; even if Schmidt were applicable, AMCO argued that it was entitled to 30 days’ notice to consider whether it would substitute its draft.

The same day as AMCO’s fax, May 7, the owners accepted the second offer over AMCO’s objection, and the district court administrator entered the $800,000 judgment against Schwiekert and ECC. Responding to AMCO’s objection of lack of sufficient notice, the district court found that AMCO did not request additional time to consider the joint offer.

AMCO subsequently moved for summary judgment, arguing that despite the judgment against ECC and Schwiekert, it still retained a viable cross-claim against ECC and a viable Rule 14.01 claim against Schwiekert. ECC and Schwiekert made cross-motions for summary judgment, contending that any claims against them were resolved by the Rule 68 offer and judgment. In addition, the owners moved for costs, disbursements, prejudgment interest, and attorney fees against ECC and Schwiekert.

On November 4, 2002, the district court denied AMCO’s motion for summary judgment, concluding that (1) the principles in Schmidt apply to this action; (2) AMCO had sufficient notice of the offer of judgment; (3) AMCO was given the opportunity to substitute its draft for $800,000, but it chose not to do so; (4) AMCO waived its subrogation rights against ECC and Sehwickert by failing to substitute its draft; and (5) the owners’ acceptance of the offer of judgment did not release AMCO from its contractual obligations to the owners. The district court certified as important and doubtful the question of whether the principles of Schmidt v. Clothier apply in a first-party property-insurance dispute outside of the personal-injury context.

The district court also (1) granted ECC’s and Schwickert’s motions to dismiss AMCO’s claims against them, (2) awarded the owners’ costs and disbursements against Sehwickert and ECC but denied them prejudgment interest and attorney fees on the $800,000 judgment, and (3) ordered entry of final partial judgment under Minn. R. Civ. P. 54.02.

AMCO now appeals from (1) the denial of its summary-judgment motion regarding Schmidt’s applicability and (2) the grant of summary judgment dismissing its claims against Sehwickert and ECC. The owners seek review of the denial of their motion for attorney fees and prejudgment interest.

ISSUES

I. Do the principles in Schmidt v. Clothier apply to first-party property insurance disputes outside of the personal-injury context?

II. If Schmidt applies, did the owners properly follow its provisions?

III. Did the district court err by denying the owners attorney fees and prejudgment interest on the Rule 68 judgment?

ANALYSIS

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. Minn. Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn.1984). Although certain factual determinations here are currently unresolved, the issues raised on appeal are purely legal and are reviewed de novo.

I.

The question of whether Schmidt v. Clothier, 338 N.W.2d 256 (Minn.1983), applies to first-party property-insurance disputes outside of the personal-injury context is a matter of first impression. In the past, Schmidt has only been applied to cases involving uninsured and underin-sured motorists. See e.g., Malmin v. Minn. Mut. Fire & Cas. Co., 552 N.W.2d 723, 724 (Minn.1996) (underinsured motorists); Employer’s Mut. Cos.v. Nordstrom, 495 N.W.2d 855, 855-56 (Minn.1993) (same); Ruddy v. State Farm Mut. Auto. Ins. Co., 596 N.W.2d 679 (Minn.App.1999) (uninsured motorists), review denied (Minn. Sept. 28, 1999). Here, we encounter an action for recovery of damage to property.

In Schmidt, a consolidated case, the tortfeasors made settlement offers to underinsured motorists, and the underin-surers were given notice of the offers, but the underinsurers refused to substitute drafts to preserve their subrogation rights. 338 N.W.2d at 259-60. The supreme court held that between the tortfeasor and the insurer, the balance of equities falls with the insurer. Id. at 262-63. An underin-surer must be provided 30 days’ notice to consider and assess the settlement offer and to determine whether it wants to preserve its subrogation rights. Id. at 263. If it wishes to do so, an insurer must substitute its draft for the settlement amount within that time; if the insurer does not substitute its draft within that time, it fails to preserve its subrogation rights. Id.

AMCO argues that Schmidt was meant to apply only to underinsured- or uninsured-motorist cases without any dispute as to coverage or liability, and because AMCO disputes coverage, Schmidt is inap-posite here. AMCO also makes the policy argument that if Schmidt is held to apply, an insurer in AMCO’s position would be forced to choose between (a) agreeing to substitute its payment, thereby abandoning its causation defense against owners, or (b) declining payment substitution, thereby eliminating its subrogation rights against the alleged tortfeasors. AMCO further contends that if this court adopts Schmidt, a tortfeasor with substantial liability will be able to present the insured with offers substantially less than its liability and extinguish the first-party insurer’s subrogation rights, giving the insured inequitable leverage over the insurer.

We disagree with AMCO’s analysis and policy arguments. Each of these arguments contemplates the same predicaments faced by insurers in the underin-sured-or uninsured-motorist eases currently governed by Schmidt v. Clothier. The Schmidt court considered similar arguments when it established the policy that we now apply. Id. at 262 (rejecting argument that potential destruction of an insurer’s subrogation rights precludes insured’s recovery of underinsurance benefits). To the extent that the tortfeasor has “inequitable leverage” in that situation, the supreme court has balanced these equities and has concluded that an insured and a tortfeasor are permitted to settle, so long as the insured provides the insurer with the proper procedural safeguards. We see no compelling reason to alter the policy merely because this case is brought in the context of property damage.

Finally, AMCO argues that if the settlement agreement is upheld, the owners may be able to obtain double recovery for the same damages through both the settlement and through a potential future recovery from AMCO because the offer does not delineate what the $800,000 settlement is meant to cover. But the issue of double recovery is not ripe because the jury in a prospective trial would have the task of determining coverage and the allocation of damages.

The owners contend that because AMCO has denied coverage throughout the litigation, it cannot now attempt to assert its potential subrogation rights. See, e.g., Stephens v. State Farm Mut. Auto. Ins. Co., 508 F.2d 1863, 1366 (5th Cir.1975) (stating that insurer should not be allowed to deny liability yet insist that insured honor its contractual commitment to obtain consent to settle); Sexton v. Cont’l Cas. Co., 816 P.2d 1135, 1138 (Okla.1991) (holding that insurer may not complain of lack of consent to settlement that comes after insurer’s denial of coverage). The above eases focus on the insurer’s attempted contractual enforcement of provisions found in the policy; they do not consider the practice and principles espoused by Schmidt v. Clothier. This is not a matter of whether AMCO may enforce the subrogation requirements outlined in the policy, but it is instead a determination of whether the principles under Schmidt require the insured to provide the insurer with notice and an opportunity to retain its subrogation rights. Further, the application of Schmidt is not precluded by the presence or absence of particular conduct during the course of litigation.

It is true that if an insurer breaches its duty to defend, leaving “the entire control and conduct of the litigation” with the insured, the insured can protect itself by reaching a reasonable, good-faith settlement with the tortfeasors without notice to the third-party liability insurer. Browns dale Coop. Ass’n v. Home Ins. Co., 473 N.W.2d 339, 341-42 (Minn.App.1991), review denied (Minn. Sept. 25, 1991). Unlike Brownsdale, however, AMCO has not left the owners with the entire control and conduct of the litigation but has remained an active participant throughout the litigation. In fact, AMCO’s participation here was further ensured by the district court’s denial of its summary-judgment motion regarding policy coverage. Brownsdale also noted that a reasonable party would have reached the settlement amount, id. at 342, where the record here contains no finding that an $800,000 settlement on a $1.5 million claim is reasonable. Further, Brownsdale did not include the additional claims against the insurer that are present here. The owners in this case could receive an additional sum in their claim against AMCO. For these reasons, Brownsdale is inapposite here.

Because we see no compelling reason why Schmidt v. Clothier should not extend to first-party insurer disputes involving damage to property, we answer the certified question in the affirmative.

II.

Having held that Schmidt applies here, we must now determine whether the owners properly followed the procedure set out in that case. Schmidt requires that an insurer receive a 30-day written notice to consider whether it will substitute its draft and preserve its subrogation rights against the tortfeasor. Schmidt, 338 N.W.2d at 263; see Liberty Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 463 N.W.2d 750, 753 (Minn.1990).

Schwickert and ECC made their second Rule 68 offer to the owners on May 3, and the offer stated that it would expire ten days after that date, or on May 13. On May 6, nine days before the scheduled trial, AMCO was orally notified of the settlement offer. AMCO responded in writing the next day, and the owners accepted the tortfeasors’ offer later that day. Also on May 7, the same day of AMCO’s written response, the district court issued its order for judgment.

The district court found that AMCO manifested its intent not to substitute its draft on May 7, 2002, and that AMCO “did not request additional time to consider or assess the implications of the joint Offer of Judgment.” We do not read the 30-day rule of Schmidt to be rendered unnecessary by an insurer’s indication that it is unlikely to substitute its draft. Further, AMCO’s letter noted the required 30-day notice period under Schmidt, and it objected to the rushed circumstances under which it was compelled to respond.

The owners again argue that AMCO’s consistent denial of liability waived the 30-day-written-notice requirement. But we have found no such exemption to this Schmidt requirement. The purpose of the 30-day period is not only to give notice of the facts and merits of the case, but it is also to assess the settlement agreement and its effects:

In that time [the insurer] could evaluate relevant factors, such as the amount of the settlement, the amount of liability insurance remaining, if any, the amount of assets held by the tortfeasor and the likelihood of their recovery via subrogation, the total amount of the insured’s damages, and the expenses and risks of litigating the insured’s cause of action.

Schmidt, 338 N.W.2d at 263.

If the insured does not provide its insurer with the required 30-day written notice, the insured bears the burden of proving the absence of prejudice to the insurer. Am. Family Mut. Ins. Co. v. Baumann, 459 N.W.2d 923, 927 (Minn.1990). In particular, the Baumann court stated:

Absent the required 30-day written notice, release of the tortfeasor shall be deemed prejudicial to the underinsurer. That presumption of prejudice shall be rebuttable, but the burden of demonstrating by a preponderance of the evidence the absence of prejudice shall be borne by the insured. An insured’s failure to sustain that burden of proving a lack of prejudice to the insurer shall result in forfeiture.

Id. (emphasis added).

Under these facts, owners have failed to demonstrate the requisite absence of prejudice to AMCO, which was only given one day’s oral notice 12 days before the scheduled trial. One day’s time is insufficient for an insurer to evaluate the settlement amount, likelihood of recovery, and the other risks inherent in substituting its draft.

The owners attempt to distinguish Bau-mann by contending that the purpose of the notice is to provide insurers with time to evaluate the case, whereas AMCO had participated in two years of litigation prior to the offer and was sufficiently informed to make a decision whether to substitute its draft. We have found no legal support for this interpretation of the rationale for the 30-day notice period. Schmidt and its progeny do not distinguish cases where the insurer is familiar with the facts from those in which an insurer has been recently notified of the dispute. Rather, Schmidt explicitly provides that the notice is meant to give the insurer time to consider the amount of settlement, the amount of liability remaining under the policy, and the expenses and risks of continued litigation — all of which are present whether the insurer has just been notified of the lawsuit or the insurer has participated in the suit from its initiation.

We hold that the owners failed to properly follow the Schmidt requirements and have not sustained their burden of proving that the one-day oral notice of the settlement offer resulted in a lack of prejudice to AMCO. Because we hold that the insufficient notice to AMCO renders the Rule 68 settlement and judgment ineffective, ECC and Schwickert remain parties to the action. Consequently, AMCO retains viable claims against both ECC and Schwic-kert.

III.

Although we hold that the owners’ failure to give AMCO proper notice of the Rule 68 offer makes the settlement and resultant judgment ineffective, we nevertheless reach, for purposes of review, the issue of whether the district court erred in denying the owners’ motion for attorney fees and prejudgment interest on the $800,000 judgment. An appellate court will review legal determinations regarding Rule 68 offers of judgment de novo. Collins v. Minn. Sch. of Bus., Inc., 655 N.W.2d 320, 324 (Minn.2003).

Attorney Fees

Rule 68 offers of judgment are construed under ordinary principles of contract law. Id. at 328. “Rule 68 alone does not entitle a party who otherwise is not entitled to attorney fees to recover attorney fees as part of costs and the disbursements.” Id. at 325. The owners instead base their claim on the following extrinsic evidence: (1) the first, rejected offer of judgment and (2) the indemnification language of the owners’ initial contract for services with Schwickert.

The owners’ claim for attorney fees is directed only to Schwickert and not to the joint offeror, ECC. The district court denied the owners’ motion for attorney fees, reasoning that because the second, accepted offer did not expressly include attorney fees, and because the claims under the contract for services merged with the contract for settlement under Rule 68, the court could not add the missing term to the offer. See Stinson v. Clark Equip. Co., 473 N.W.2d 333, 335-36 (Minn.App.1991) (affirming district court’s conclusion that absent evidence to the contrary, court would not add a term to Rule 68 offer), review denied (Minn. Sept. 13, 1991); see also Bucko v. First Minn. Sav. Bank, 471 N.W.2d 95, 98 (Minn.1991) (holding that “costs” under Rule 68 do not include attorney fees).

The district court properly concluded that it may not add a missing term to the contract formed by the acceptance of the offer of judgment. The owners argue that they are not asking the court to add a missing term, but to interpret the first offer as a “course of dealing” between the parties. We do not agree that a solitary Rule 68 settlement offer that was later rejected by the offeree is a “course of dealing” under any construction of the term. Further, a court “must give greater weight to the parties’ express language than any prior course of dealing.” Anoka-Hennepin Educ. Ass’n v. Anoka-Hennepin Indep. Sch. Dist. No. 11, 305 N.W.2d 326, 330 (Minn.1981). The accepted offer was silent as to attorney fees and was free from ambiguity. The owners conceded before the district court that the second offer was not ambiguous, but that it was “clear and unambiguous on its face.” A court interpreting a non-UCC contract may only look to extrinsic evidence when ambiguity is present. See Novus Equities Corp. v. EM-TY P’ship, 381 N.W.2d 426, 430 (Minn.1986). And it is not the court’s role to “speculate or to create uncertainty about the effect of Rule 68 offers of judgment when they are free from ambiguity.” Farmer’s State Bank of Darwin v. Sunsher, 631 N.W.2d 796, 801 (Minn.2001).

The owners next argue that if Schwickert had intended to include attorney fees in the second offer, it should have clearly stated this intention. See Collins v. Minn. Sch. of Bus., Inc., 636 N.W.2d 816, 818-19 (Minn.App.2001), aff'd, 655 N.W.2d 320 (Minn. Jan.16, 2003). If a drafter of a Rule 68 offer does not clearly state its intention to include attorney fees within the judgment amount, an offeree who sues under a statute allowing attorney fees would be entitled to such fees. Collins, 655 N.W.2d 320, 330 (Minn.2003).

In Collins, the plaintiffs accepted a Rule 68 offer of judgment for $200,000, “together with any costs and disbursements allowed by the District Court.” 655 N.W.2d at 322. Plaintiffs later moved for attorney fees under the private attorney general statute. Id.; Minn.Stat. § 8.31, subd. 3a (2002) (providing for recovery of attorney fees where person injured under specific laws). The district court denied plaintiffs motion for attorney fees, and the primary issue on appeal was

whether costs and disbursements in an accepted Rule 68 offer can include attorney fees when the statute underlying the cause of action includes attorney fees in its definition of costs and disbursements.

Collins, 655 N.W.2d at 326 (emphasis added).

But, the instant facts are distinguishable from those in Collins. While the Collins claim was based on a statute specifically allowing attorney fees, the current claim does not involve such a statute. Because this case involves no statute providing for attorney fees, the district court properly held that Collins does not compel it to make such award.

We now turn to the owners and Schwic-kert’s original contract for services, which the owners contend should be considered as extrinsic evidence providing for attorney fees. The contract permits recovery of attorney fees resulting from Schwic-kert’s negligence. We agree with the district court’s conclusion that the owners’ claim for attorney fees under the contract was a substantive claim that was merged with, and ultimately resolved by, the owners’ acceptance of the offer of judgment. Accordingly, the owners may not later revive their claim for attorney fees under the guise of “costs.”

A district court may not award attorney fees based on Rule 68 alone. Because the prior, rejected offer does not constitute a “course of dealing” between the parties; because no statute permits attorney fees in this matter; and because claims under the contract for services merged with the offer for judgment, the district court did not err by denying owners’ motion for attorney fees.

Prejudgment Interest

The district court also denied the owners’ motion for prejudgment interest against both Schwickert and ECC, again reasoning that it could not add terms to the contract. The owners argue that the statute permitting prejudgment interest only requires that the claimed losses be “pecuniary damages” and does not require that the claim be “readily ascertainable.” See Minn.Stat. § 549.09, subd. 1(b) (2002). But the statute does not apply here because the parties’ Rule 68 offer does not delineate the types of damages it includes, making prejudgment interest indeterminable. Stinson, 473 N.W.2d at 336.

We hold that the district court permissibly declined to award prejudgment interest on the judgment because the owners’ damages were not “readily ascertainable by computation.” See Summit Court, Inc. v. N. States Power Co., 354 N.W.2d 13, 16 (Minn.1984) (stating that plaintiff is entitled to prejudgment interest “where the damages were readily ascertainable by computation or reference to generally recognized standards such as market value”). The multiple claims and parties in this litigation would make it difficult to determine which damages were attributable to which parties and in what amount, precluding a “readily ascertainable” assessment of damages. See Stinson, 473 N.W.2d at 336 (holding that because the Rule 68 offer did not differentiate between types of damages, amount of prejudgment interest was indeterminable); see also N. Petrochemical Co. v. Thorsen & Thorshov, Inc., 297 Minn. 118, 132, 211 N.W.2d 159, 169 (Minn.1973) (affirming denial of prejudgment interest where neither the amount nor the apportionment of damages was readily ascertainable).

The owners argue that legislation passed after Summit Court altered that decision’s analysis, no longer requiring damages to be “readily ascertainable.” See 1984 Minn. Laws ch. 399, § 1 (amending statute regarding prejudgment interest) (codified in Minn.Stat. § 549.09, subd. 1(b) (2003)). But this court rejected an identical argument in Wenzel v. Mathies, 542 N.W.2d 634, 644 (Minn.App.1996), review denied (Minn. Mar. 28, 1996). In that case, this court recognized that neither the 1984 amendment nor subsequent case law changes the requirement that damages be “readily ascertainable.” Id.

The owners next argue that even if damages must be “readily ascertainable,” the fixed amount of Schwickert and ECC’s offer of judgment ($800,000) provides a sufficient figure from which prejudgment interest can be determined. Cf. Summit Court, Inc., 354 N.W.2d at 16 (prejudgment interest allowed where parties stipulated to fixed amount of costs). This argument runs counter to this court’s prior holding in Stinson that prejudgment interest could not be added to a judgment even though the settlement amount was the fixed figure of “$240,000, plus costs and disbursements.” 473 N.W.2d at 335-36.

Consequently, the district court properly relied on the text of the agreement itself, without considering the rejected offer and prior contract for services, when it denied the owners’ motions for attorney fees and prejudgment interest.

DECISION

We affirm the district court’s determination that the practice and principles outlined in Schmidt v. Clothier apply to first-party property-insurance disputes. But we reverse the court’s determination that the owners complied with the Schmidt notice requirements, we reverse the court’s dismissal of AMCO’s claims against ECC and Schwickert, and we remand for further proceedings consistent with this opinion.

Certified question answered in the affirmative, affirmed in part, reversed in part, and remanded.