Commonwealth Land Title Ins. Co. v. Historic Ivy Tower, LLC

• Decision Date: 04 August 2014
• Docket Number: A13-1621
• Court: Minnesota Court of Appeals
• Parties: Commonwealth Land Title Insurance Company, Respondent, v. Historic Ivy Tower, LLC, et al., Appellants.

Commonwealth Land Title Insurance Company, Respondent, v. Historic Ivy Tower, LLC, et al., Appellants.

A13-1621

STATE OF MINNESOTA IN COURT OF APPEALS

August 4, 2014

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).

Affirmed in part, reversed in part, and remanded

Schellhas, Judge

Hennepin County District Court

File No. 27-CV-11-3713

Brian M. Sund, Ryan R. Dreyer, Eric G. Nasstrom, Stacy L. Kabele, Jeffrey R. Underhill, Morrison Sund PLLC, Minnetonka, Minnesota (for respondent)

David F. Herr, Emma Greenman, Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota; and

Stephen J. Foley, Thomas W. Pahl, Aaron M. Ninnemann, Foley & Mansfield, PLLP, Minneapolis, Minnesota (for appellants)

Considered and decided by Schellhas, Presiding Judge; Halbrooks, Judge; and Toussaint, Judge.^*

UNPUBLISHED OPINION

SCHELLHAS, Judge

Appellants argue that the district court erred by (1) granting respondent summary judgment on its breach-of-indemnity claim, (2) denying appellants' motion to dismiss respondent's fraud claim with prejudice, and (3) denying appellants' request for apportionment of damages based on two indemnity agreements. On cross-appeal, respondent argues that the district court miscalculated prejudgment interest. We affirm in part, reverse in part, and remand for a recalculation of prejudgment interest.

FACTS

This dispute arises out of the development of a 136-room hotel (Ivy Tower hotel) and 92 residential condominiums (Ivy Tower residence) in Minneapolis (collectively Ivy project). Appellant Jeffrey Laux was the chief manager of appellants Historic Ivy Tower LLC; Ivy Tower Holdings LLC; Ivy Tower Garage LLC; Historic Ivy Hotel LLC; Ivy Tower Development LLC; and Ivy Tower Minneapolis LLC (Ivy entities). In December 2005, respondent Commonwealth Land Title Insurance Company closed construction loans totaling about $69,000,000 to Ivy Tower Development, Ivy Tower Minneapolis, and Ivy Tower Holdings from Dougherty Funding LLC. Commonwealth issued a policy of title insurance to Dougherty, and Ivy Tower Development agreed to indemnify Commonwealth against loss arising from mechanics' liens or claims in connection with work done or alleged to be done or materials provided or alleged to be provided to the Ivy project. Ivy Tower Development did "not indemnify for any of the above caused by the intentional or negligent acts or omissions of Commonwealth." Commonwealth agreedto act as the disbursing agent for Dougherty and signed two disbursing agreements—one with Ivy Tower Holding and Dougherty for the Ivy Tower hotel and one with Ivy Tower Minneapolis and Dougherty for the Ivy Tower residence.

In 2008, Commonwealth issued four additional title policies, insuring Dougherty against loss or damage incurred because of "[t]he lack of priority of the lien of the Insured Mortgage upon the Title" for listed reasons. Appellants Gary Benson, Laux, and Ivy entities (Ivy parties) gave Commonwealth an indemnity bond in connection with title policies in which Commonwealth insured loan amounts of $38,195,000 and $30,830,000 "plus any additional amounts of owner's and loan policies issued by [Commonwealth], as to condominium units." The 2008 indemnity bond covered Commonwealth's expenses incurred by reason of the omission or deletion of 11 mechanics' liens that totaled more than $2,500,000 million and "any lien, or right to a lien, for services, labor or material heretofore or hereafter furnished imposed by law."

In 2010, Commonwealth sued Ivy parties for breach of the 2005 indemnification agreement and the 2008 indemnification bond, and for fraud, among other things. In response, Ivy parties affirmatively alleged that Commonwealth's alleged damages were caused by the negligence of it or other parties and counterclaimed that Commonwealth negligently "advance[ed] funds without performing its duties and obligations under the Disbursing Agreements," thereby breaching its duty "in administering the funding of the disbursements of the loan and insuring title to the Property." The district court appointed a special master to resolve discovery disputes and hear non-dispositive motions; set November 15, 2011, as a deadline for discovery, subsequently extended to January 15,2012; set December 15, 2011, as a deadline for dispositive and non-dispositive motions with a hearing deadline of January 16, 2012, subsequently extended to January 16, 2012, and February 15, 2012, respectively; and set May 7, 2012, as a trial date, subsequently extended to a range of dates between February 12, 2013, and March 1, 2013.

In March 2012, both Commonwealth and Ivy parties moved for partial summary judgment. Commonwealth sought (1) judgment on Ivy parties' liability for breach of the 2005 indemnity agreement and the 2008 indemnity bond and (2) dismissal of Ivy parties' counterclaims, intending to try the issue of damages and its fraud claim. Ivy parties opposed Commonwealth's motion, arguing that the 2008 indemnity bond was ambiguous and bound Laux and Benson to pay "only a pro-rata share of the condominiums that were actually closed, and not on the entire project itself." Ivy parties moved for dismissal of Commonwealth's fraud claim.¹

The district court granted Commonwealth summary judgment on its breach-of-indemnity claim, concluding that Ivy parties breached the 2008 indemnity bond by failing to indemnify Commonwealth or satisfy the mechanics' liens; dismissed Ivy parties' counterclaims; denied Ivy parties' partial-summary-judgment motion, rejecting their argument that the 2008 indemnity bond was ambiguous; declined to consider Ivy parties' newly raised negligence theories; and denied Ivy parties' motion to dismiss Commonwealth's fraud claim, reserving for trial the issue of damages on the breach-of-indemnity claim and Commonwealth's fraud claim.

On February 25, 2013, before the commencement of trial, subject to their arguments that the district court previously rejected, Ivy parties conceded that Commonwealth's breach-of-indemnity damages were $6,334,576.79, and Commonwealth agreed that it would pursue its fraud claim against only Benson. Ivy parties moved to dismiss the fraud claim with prejudice under the election-of-remedies doctrine. Commonwealth objected, arguing that if the court dismissed the fraud claim with prejudice and an appellate court remanded the judgment on its breach-of-indemnity claim, Commonwealth would be unable to prove separate damages for each claim. Commonwealth proposed that the court direct entry of judgment in the amount of $6,334,576.79 under Minn. R. Civ. P. 54.02 and hold the fraud claim against Benson "in abeyance." Commonwealth's counsel stated, "Just to be clear, so there is no funny stuff here, on the record, I will be bringing a Motion to Dismiss Without Prejudice [the fraudclaim] in the future." And Ivy parties replied, "That's fine." The court agreed to hold the fraud claim against Benson in abeyance, denied Ivy parties' request to reopen the record to hear their motion, and ordered entry of judgment in the amount of $6,334,576.79 against Ivy parties jointly and severally. The district court administrator entered judgment on April 4.²

Commonwealth moved to amend the judgment to include prejudgment interest in the amount of $2,163,068.16, accruing from July 13, 2009, when Commonwealth claimed to have provided Ivy parties written notice of its claim. Over Ivy parties' objection, the district court awarded Commonwealth $593,263 in prejudgment interest, applying "the [common-law] ascertainability rule." Upon Commonwealth's request, the district court subsequently dismissed Commonwealth's fraud claim against Benson without prejudice, and the district court administrator entered judgment on August 12, 2013.

This appeal and cross-appeal follow.

DECISION

I. The district court did not err by granting Commonwealth summary judgment on its breach-of-indemnity claim.

Appellate courts "review de novo a district court's grant of summary judgment. We view the evidence in the light most favorable to the party against whom summary judgment was granted to determine whether there are any genuine issues of material factand whether the district court correctly applied the law." Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn. 2014). "The moving party has the burden of showing an absence of factual issues before summary judgment can be granted." Anderson v. State, Dep't of Natural Res., 693 N.W.2d 181, 191 (Minn. 2005).

The 2005 indemnity agreement relieved Ivy Tower Development of its duty to indemnify Commonwealth for specified expenses incurred by Commonwealth due to its "intentional or negligent acts or omissions." In answering Commonwealth's complaint, Ivy parties asserted affirmative defenses and counterclaims. They claimed that Commonwealth negligently "advance[d] funds without performing its duties and obligations under the Disbursing Agreements," thereby breaching its duty "in administering the funding of the disbursements of the loan and insuring title to the Property." (Emphasis added.) Ivy parties are precluded from recovering on that basis because "negligent breach of contract[ is] a cause of action not recognized in this state." Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 424 (Minn. 1987) (citing Lesmeister v. Dilly, 330 N.W.2d 95, 102 (Minn. 1983)); see also Glorvigen v. Cirrus Design Corp., 816 N.W.2d 572, 584 (Minn. 2012) ("[W]hen a contract provides the only source of duties between the parties, Minnesota law does not permit the breach of those duties to support a cause of action in negligence." (quotation omitted) (citing Lesmeister, 330 N.W.2d at 102)); Wild v. Rarig, 302 Minn. 419, 440, 234 N.W.2d 775, 789 (1975) ("[W]hen a plaintiff seeks to recover damages for an alleged breach of contract he is limited to damages flowing only from such breach except in exceptional cases where the defendant's breach of contract constitutes or is accompanied by an independent...