Johanns v. Minnesota Mobile Storage, Inc.

• Court: Minnesota Court of Appeals
• Writing for the Court: Hudson
• Citation: Johanns v. Minnesota Mobile Storage, Inc., 720 N.W.2d 5 (Minn. App. 2006)
• Decision Date: 15 August 2006
• Docket Number: No. A05-1578.,A05-1578.
• Parties: Craig JOHANNS, et al., Respondents, v. MINNESOTA MOBILE STORAGE, INC., Appellant.

720 N.W.2d 5

Craig JOHANNS, et al., Respondents, v. MINNESOTA MOBILE STORAGE, INC., Appellant.

No. A05-1578.

Court of Appeals of Minnesota.

August 15, 2006.

COPYRIGHT MATERIAL OMITTED

Alex W. Russell, Evening & Weekend Law Offices, St. Paul, MN, for respondents.

Brian A. Wood, William L. Davidson, Sarah Morris, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, for appellant.

Considered and decided by HUDSON, Presiding Judge; WRIGHT, Judge; and WORKE, Judge.

OPINION

HUDSON, Judge.

On appeal from a district court decision after a jury's determination of damages on a special verdict, appellant self-storage facility argues that the district court erred in failing to enforce the unambiguous damage limitation in the parties' rental agreement under the Minnesota Liens on Personal Property in Self-Service Storage Act, Minn.Stat. §§ 514.970-.979 (2004). In a notice of review, respondents contend that in the event this court holds in appellant's favor on those arguments, the matter must be remanded so that the district court can determine whether the exculpatory clause is unenforceable because of appellant's willful violation of law. Respondents also contend that the district court's grant of summary judgment on several other claims was erroneous. Because (a) the parties' rental agreement is an unambiguous, valid partial exculpatory contract; (b) the language of the act is unambiguous and permits rental agreements that provide limited liability for, but not total exemption from, damages caused by the owner's negligence; (c) the district court did not reach the issue of whether the owner's acts were intentional, which would make the exculpatory clause unenforceable due to a willful violation of law; and (d) respondents failed to present specific legal arguments to support their claim that the district court erred in granting summary judgment on several other claims, we reverse and remand.

FACTS

Respondents were moving and needed to temporarily store some of their personal property. After seeing a television commercial for PODS, self-contained storage units that could be brought to the customer's address for packing and then transported to a warehouse for storage, respondent Craig Johanns called the 800 number listed in the advertisement. He arranged to lease a unit and gave the operator his current address, telephone number, and credit card information. As he later learned, he had spoken with an employee of PODS, Inc. Appellant is a franchisee of PODS, which does the accounting, builds the storage units, and provides supplies for its franchisees. On November 10, 2001, the storage unit was delivered to respondents' house. Respondent Mary Johanns signed a rental agreement with appellant to lease the unit for $196.97 per month, and paid for the first month by check. The agreement addressed the owner's liability for negligence, limited damages that respondents could recover for negligence to $5,000, and, among other provisions, included an exception to the exculpatory provision for willful violations of law. Respondents packed the unit, and appellant brought the unit to its storage facility in late November 2001.

Neither PODS nor appellant received any further payments from respondents. Appellant, who had a statutory lien under Minn.Stat. § 514.972 (2004) against the personal property stored in the facility for unpaid rent, eventually enforced the lien and sold respondents' property at an auction for $1,305.

When respondents learned of the sale, they sued appellant on a variety of claims. The district court granted summary judgment on most of the claims, but allowed the breach-of-contract and bailment claims to proceed to trial. At the trial, the parties presented evidence, in relevant part, regarding the circumstances concerning the respondents' failure to make payments, notices allegedly sent to respondents, and the auction. Craig Johanns believed that their payments were being automatically made by credit card. Neither Craig nor Mary Johanns recalled receiving any correspondence from appellant or PODS after the storage unit was picked up until March 2002, when Craig received a letter informing him that the storage unit containing their belongings had been sold at auction on February 21, 2002.

Jacqelin Consentino, the vice president of legal-risk management at PODS, testified that PODS had complied with all statutory requirements in Minnesota to enforce the lien against respondents. On cross-examination, however, a number of discrepancies and problems of proof were revealed.

A jury answered two questions on a special verdict form and determined in relevant part that respondents' damages were $67,750. The district court then resolved most of the remaining issues. It ruled as a matter of law that appellant failed to show that it complied with the procedures for enforcing the lien pursuant to Minn.Stat. § 514.973 (2004). Next, it determined that the $5,000 limit of damages in the contract was invalid under Minn.Stat. §§ 514.976, subd. 4, 514.978 (2004) and awarded damages of $67,750 as found by the jury. Finally, it noted, but did not resolve, the issue of whether appellant acted intentionally such that the exculpatory clause could not be enforced by appellant. This appeal follows.

ISSUES

I. Is a provision in a rental agreement for self-service storage that limits damages to $5,000 an unambiguous, valid exculpatory clause, and, if so, is the clause unenforceable due to willful violation of law?

II. Does Minn.Stat. § 514.975 (2004) bar a rental agreement that provides limited liability for, but not total exemption from, damages due to the negligence of the owner of the self-service storage facility?

III. Did the district court err in granting summary judgment on respondents' other claims?

ANALYSIS

I

The first issue we address concerns the parties' rental agreement in which respondents initialed a provision acknowledging that appellant's liability is limited to $5,000.¹ The district court, although focusing on the statutory analysis addressed in the second section of this opinion, stated in a footnote in its order that appellant arguably acted intentionally in selling respondents' property, which would render the exculpatory clause unenforceable. Appellant argues that the exculpatory provision is valid, while respondents contend that the contract paragraph at issue, as well as the rental agreement as a whole, is ambiguous and is not a valid exculpatory clause. Further, respondents contend that if the provision is deemed valid, the matter must be remanded to allow the district court to rule on whether appellant acted intentionally, rendering the exculpatory clause unenforceable.

We first address the validity of the exculpatory provision. "[P]arties to a contract may, without violation of public policy, protect themselves against liability resulting from their own negligence." Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 922-23 (Minn.1982) (footnote omitted). The supreme court has "recognized the validity of exculpatory clauses in certain circumstances [although] they are not favored in the law." Id. at 923. They are "strictly construed against the benefited party." Id. "If the clause is either ambiguous in scope or purports to release the benefited party from liability for intentional, willful or wanton acts, it will not be enforced." Id.

Interpretation of a written contract is a question of law reviewed de novo. Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 311 (Minn.2003). "[C]ourts are to ascertain and give effect to the intent of the parties." Republic Nat'l Life Ins. Co. v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn.1979). Whether a contract is ambiguous is a question of law. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn.1982). A contract is ambiguous if it is reasonably susceptible to more than one meaning. Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn.1990). If so, courts may use extrinsic evidence to construe the contract. Blattner, 322 N.W.2d at 321.

The provisions of paragraph 6, labeled "Limitation of Lessor's Liability; Indemnity," which contains the $5,000 limitation at issue here, provides as follows:

Lessor and Lessor's Agents will have no responsibility to Tenant or to any other person for any loss, liability claim, expense, damage to property or injury to persons ("Loss") from any cause, including, without limitation, Lessor and Lessor's Agents active or passive acts, omissions, negligence or conversion, unless the Loss is directly caused by Lessor's fraud, willful injury or willful violation of law. Tenant shall indemnify and hold Lessor and Lessor's Agents harmless from any loss incurred by Lessor or Lessor's Agents in any way arising out of Tenant's use of the Unit or Project. Tenant agrees that Lessor's and Lessor's Agents total responsibility for any Loss from any cause whatsoever will not exceed a total of $5,000. By placing Initials Here —, Tenant acknowledges that he understands and agrees to the provisions of this paragraph. Regardless of anything stated in this Section 6 to the contrary and as required by Minnesota Statute Section 514.976 [sic], Lessor is not exempt from liability for damage to Tenant's personal property caused by Lessor's negligence.

(Emphasis added.) One of the respondents initialed the paragraph.

Appellant contends that the damage limitation, read as a whole and in the context of the entire contract, indicates the intent of the parties to limit damages for negligence to $5,000 and is not susceptible to more than this one reasonable interpretation. Respondents contend that the language of the contract is ambiguous because, in some places, it is completely exculpatory, while in paragraph 6, there is a liability limit of $5,000. Further, they note that paragraph 6 refers to an incorrect statutory section. Finally, some sections of the contract do not include an exclusion from the release of liability...