Mark Peterson, et al., Appellants, v. Honeywell, Inc., Respondent.
COURT OF APPEALS OF MINNESOTA
February 8, 1994, Filed
NOTICE: [*1] THIS OPINION WILL BE UNPUBLISHED AND MAY NOT BE CITED EXCEPT AS PROVIDED BY MINN. STAT. Sec. 480A.08, SUBD. 3 AS AMENDED.
SUBSEQUENT HISTORY: As Corrcted. Petition for Review Filed March 9, 1994.
Petition for Review Denied April 15, 1994, Reported at: 1994 Minn. LEXIS 291.
PRIOR HISTORY: Appeal from District Court, Hennepin County; District Court
File No. CT9123003. Hon. Daniel H. Mabley, Judge.
PROCEDURAL POSTURE: Appellant homeowners challenged a judgment of the District Court, Hennepin County (Minnesota), which granted summary judgment in favor of respondent installer in the homeowners' action to recover damages for personal injury and property damage allegedly caused by a defective home fire alarm system.
OVERVIEW: The installer upgraded the homeowners' fire alarm system and warranted that the system would be free from defects and promised to repair defective equipment or parts. There was a general warranty disclaimer that the installer was not responsible for any indirect, consequential or incidental damages. The installer conceded that the system was not fully functional after installation as it did not yet relay the alarm signal to the fire department. The homeowners' house was completely destroyed by fire.
The homeowners settled their claim against the installer and their insurer pursued subrogation rights in the homeowners' names. The trial court granted summary judgment for the installer. Affirming, the court held that an exculpatory clause clearly made the homeowners solely responsible for persons and property. Because the homeowners called the fire department almost simultaneously with the sounding of the home alarm, there was no evidence that the inoperative signal relay system proximately caused the resulting harm.
OUTCOME: The court affirmed the trial court's judgment.
COUNSEL: For Mark Peterson, et al., Appellants: Stephen G. Lickteig, Fetterly & Gordon, P.A., Minneapolis, MN.
For Honeywell, Inc., Respondent: Richard J. Nygaard, William J. Egan, Eric J. Magnuson, Rider, Bennett, Egan & Arundell, Minneapolis, MN.
JUDGES: Considered and decided by Short, Presiding Judge, Crippen, Judge and Kalitowski, Judge.
OPINIONBY: GARY L. CRIPPEN
OPINION: UNPUBLISHED OPINION
Appellants Mark Peterson and Barbara Jerich appeal summary judgment for Honeywell, Inc. on their suit to recover damages for personal injury and property damage allegedly caused by a defective home fire alarm system. We affirm.
Appellants signed a "Residential Agreement" with Honeywell to upgrade his home fire alarm by installing several additional fire detection devices and providing monitoring services. The Agreement warranted that the fire alarm system would be free from defects in material and workmanship for a year, and promised to repair defective equipment or parts [*2] during that period. This warranty was followed by a general warranty disclaimer, ending with the declaration that "in no event will Honeywell be responsible for any indirect, consequential or incidental damages."
In addition to the warranty disclaimer, the Agreement included the following exculpatory clause:
Customer agrees that Customer retains the sole responsibility for the life and health of persons in the premises,; [sic] for protecting against property or personal injury losses in the premises for both Customer and others. Customer agrees that Honeywell is not responsible for personal injury or other losses which are alleged to be caused by improper operation, or non-operation of the system, including cases where the system never functions, whether due to defects in the system or Honeywell's acts or omissions in receiving and responding to alarm signals.
Finally, the Agreement expressly limited any liability that did arise on the part of Honeywell to $ 250.
Honeywell installed the upgrades and tested the equipment to ensure that the system was in working order. Honeywell concedes that the system was not fully functional after installation. While the system was set up [*3] to sound an alarm in the event of a fire, it did not yet automatically relay the alarm signal to the local fire department. Honeywell intended to place the system fully in service only after instructing Peterson on how to operate it, so as to minimize the occurrence of false alarms.
Five days after Honeywell had installed the upgraded system, and while it still was not in service, a fire destroyed the appellants' home. The family was awakened by the smell of smoke, but no alarm sounded until several more minutes passed. The family called "911" and fled to safety. Peterson
sustained minor injuries and the house was a total loss.
Computer records maintained by Honeywell indicated that the fire alarm in the Peterson-Jerich house sounded three times within a period of about four minutes. The first alarm sounded approximately one minute before the 911 call was placed. Almost immediately after the third alarm sounded, the
encroaching fire interrupted the alarm circuitry and the system shut down.
The appellants filed suit against Honeywell, asserting causes of action in negligence, strict liability, misrepresentation, and violation of the Uniform Deceptive Trade Practices Act, Minn. Stat. [*4] §§ 325D.43-.48 (1990), the Unlawful Trade Practices Act, Minn. Stat. §§ 325D.09-.16 (1990), and the Prevention of Consumer Fraud Act, Minn. Stat. §§ 325F.68-.70 (1990.)
The appellants subsequently signed a "Settlement Agreement and Release" with Honeywell. The settlement agreement extinguished all claims by Peterson and Jerich against Honeywell but appeared to preserve the subrogation rights of Atlantic Mutual Insurance Company, their fire insurance carrier. Atlantic Mutual continued to pursue this litigation against Honeywell in the appellants' names.
The trial court granted summary judgment on all counts for Honeywell, holding that the exculpatory language in the Residential Agreement protected Honeywell from liability for common law negligence, strict liability, and misrepresentation. The trial court further ruled that, to the extent that the exculpatory language did not protect Honeywell from liability for statutory misrepresentation, Atlantic Mutual had no claim under the Minnesota trade and consumer protection laws because the company was not a "person injured" within the meaning of the private attorney general act. Minn. Stat. § 8.31, subd. 3a (1990).
The appellants challenge [*5] these determinations, except that they do not appeal the judgment for Honeywell on the strict liability claim.
On appeal from summary judgment, the reviewing court must determine whether there are any material issues of fact and whether the trial court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). A material fact is one whose resolution would affect the outcome of the case. Foley v. Allard, 427 N.W.2d 647, 649 (Minn. 1988).
I. Exculpatory Clause
Exculpatory clauses are not favored in the law. Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn. 1982). A clause exonerating a party from liability will be strictly construed against the benefitted party. Id.
The appellants contend that the term "defects in the system" should be strictly construed against Honeywell in such a way that it would apply only to defects in equipment, not to any negligence of Honeywell employees in inspecting, installing, or testing the equipment. But judicial construction
of a contract generally is inappropriate in the absence of ambiguity. n1 Schlobohm, 326 N.W.2d at 923 [*6] (citing Telex Corp. v. Data Prods, Corp., 271 Minn. 288, 294, 135 N.W.2d 681, 686 (1965)). A contract is ambiguous if it is susceptible to more than one meaning based on its language alone.
Metropolitan Sports Facilities Comm'n v. General Mills, Inc., 470 N.W.2d 118, 123 (Minn. 1991); St. Paul Fire & Marine v. National Computer, 490 N.W.2d 626, 631 (Minn. App. 1992) (contract ambiguous where language reasonably subject to more than one interpretation), pet. for rev. denied
(Minn. Nov. 17, 1992). If a contract is unambiguous, then the court should give effect to the plain, ordinary, and popular meaning of its words. Lowry v. Kneeland, 263 Minn. 537, 540, 117 N.W.2d 207, 210 (1962) (citing Tomlyanovich v. Tomlyanovich, 239 Minn. 250, 253, 58 N.W.2d 855, 857 (1953)
(words in contracts must be given meaning they ordinarily convey).
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n1 The appellants contend in their brief that the exculpatory clause was ambiguous. But at oral argument they contended that the exculpatory clause clearly was unrelated to their claims.
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An examination of the common meanings of the words "defect" and "system" shows no ambiguity as they apply to the agreement of the parties. "Defect" means a shortcoming or flaw. Webster's New Twentieth Century Dictionary 475 (2d ed. 1983). "System" means an arrangement of parts to form a whole, or an orderly way of doing something. Id. at 1853. The agreement provided for both the sale of goods and the provision of services. Together, those goods and services formed the fire alarm "system;" a system designed, installed, tested, and monitored so as to achieve its intended purpose of sounding an alarm in the event of a fire.
In the context of the agreement, a "defect in the system" meant any shortcoming in any combination of goods and services rendered by Honeywell to make the fire alarm system work as intended. The system included the individual equipment components, their layout, installation and testing, and
the monitoring and relaying of alarm signals.
We note further that the exculpatory clause clearly provided that Peterson and Jerich were solely responsible for the protection of property and persons. This sentence was not modified by any limiting circumstances (such as sole [*8] responsibility "for defects in equipment only"). We decline to
apply a narrower meaning than is apparent by the plain meaning of the words. The exculpatory clause deals with malfunctions, and contains the phrase "including cases where the system never functions, whether due to defects in the system or Honeywell's acts or omissions in receiving and responding to
alarm signals." By the use of the word "including," the list of circumstances under which the alarm system might fail was not intended to be exclusive.
The exculpatory clause was not ambiguous and does not warrant the limited construction urged by the appellants.
Finally, the appellants do not challenge the validity of the limitation of liability clause. Even if the exculpatory clause did not protect Honeywell from liability for the failure of the fire alarm system, its liability was limited to $ 250 as provided in the agreement.
At the heart of the appellants' argument that the exculpatory clause does not cover service failures is another serious flaw. The record includes no evidence that this particular system failure was caused by a service or installation failure, rather than an equipment malfunction.
II. Willful or [*9] Wanton Negligence/Misrepresentation
The appellants next argue that even if the purpose and effect of the exculpatory clause was clear on its face, as a matter of public policy it did not protect Honeywell from liability for misrepresentation or for acts of willful and wanton negligence. n2 See Morgan Co. v. Minnesota Mining & Mfg. Co., 310 Minn. 305, 246 N.W.2d 443, 448 (1976) (valid exculpatory clause, covering acts of negligence, not applicable to claims of "willful and wanton negligence, intentional misconduct, and fraud and
misrepresentation"); Otis Elev. Co. v. Don Stodola's Well Drilling Co., 372 N.W.2d 77, 78 (Minn. App. 1985), pet. for rev. denied (Minn. Oct. 11, 1985); Schlobohm, 326 N.W.2d at 923.
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n2 In their brief, the appellants also allege that Honeywell was liable for gross negligence. But in their complaint, the appellants allege wilful and wanton negligence only. An appellate court reviews only issues that were raised before the trial court. In re Welfare of D.S.S., 506 N.W.2d 650, 653
(Minn. App. 1993) (citing Greer v. Kooiker, 312 Minn. 499, 511-12, 253 N.W.2d 133, 142 (1977)).
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Willful and wanton negligence is the failure to exercise ordinary care after discovering a person or property in a position of peril. Bryant v. Northern Pac. Ry., 221 Minn. 577, 585, 23 N.W.2d 174, 179 (1946). It contemplates that the injury to be avoided is not only foreseeable, but impending. Thus a
cause of action for willful and wanton negligence arises where there has been "a reckless disregard of the safety of the person or property of another by failing after and not before discovering the peril to exercise ordinary care to prevent the impending injury." Brannan v. Shertzer, 242 Minn. 277, 280, 64 N.W.2d 755, 757 (1954) (emphasis in the original); see also Spartz v. Krebsbach, 226 Minn. 46, 47, 31 N.W.2d 917, 918 (1948) (willful negligence embraces conduct where infringement of another's right
intended, and where foreseen that the conduct will result in such invasion).
The appellants' allegations that Honeywell failed to adequately inspect,install, and test the fire alarm system do not establish a basis for claims of willful and wanton [*11] negligence, because the appellants were not in peril before the fire began in their home. The appellants presented no facts
showing that, after the fire began, Honeywell either intentionally or negligently failed to act with ordinary care.
Also, the evidence that Honeywell had not placed the fire alarm system in service at the time of the fire was insufficient to withstand summary judgment on the negligence claim. Because appellants called the fire department almost simultaneously with the sounding of the home alarm, there is no evidence that Honeywell's inoperative signal relay system proximately caused the harm that resulted. The trial court did not err in granting judgment for Honeywell on the issue of willful or wanton negligence.
The appellants asserted a claim against Honeywell in negligent misrepresentation only, not fraudulent misrepresentation. Negligent misrepresentation produces liability for pecuniary loss caused by
justifiable reliance upon the information. Florenzano v. Olson, 387 N.W.2d 168, 174 n. 3 (Minn. 1986) (citing Bonhiver v. Graff, 311 Minn. 111, 122, 248 N.W.2d 291, 298-99 (1976)). [*12]
The appellants allege that they relied to their pecuniary loss on two representations made by Honeywell. First, Honeywell advertising and sales personnel stated that their fire alarms worked "at the first whiff of smoke." Second, after Honeywell had installed the system upgrades, Jerich
discussed with a service representative "the fact that the system was up and running."
The appellants had no basis for justifiably relying upon either of the two statements. Because they could not rely upon them, the statements did not cause the pecuniary loss. The Agreement specifically disclaimed any implied warranty of merchantability or fitness for a particular purpose. In
particular, the Agreement stated that Honeywell would not guarantee that the system or service would in every case provide the protection for which it was intended. The trial court did not err in entering judgment for Honeywell on the appellants' misrepresentation claims.
III. Statutory Claims
The appellants' statutory cause of action was founded on allegations of negligent misrepresentation. Neither party has addressed whether claims of statutory misrepresentation require elements of proof separate and distinct from those [*13] under common law. The Consumer protection Act provides
that in order to state a cause of action there must be an "intent that others rely (on false representations) in connection with the sale of any merchandise." Minn. Stat. § 325F.69, subd. 1. The Unlawful Trade Practices Act prohibits conduct that tends to "mislead" consumers. Minn. Stat. §
325D.09. The Uniform Deceptive Trade Practices Act offers remedies otherwise available against "the same conduct under the common law or other statutes."
Minn. Stat. § 325D.45, subd. 3. We conclude the statutory scheme before us makes no attempt to alter the plaintiff's common law burden.
To establish a claim of damages for misrepresentation under the trade and consumer protection statutes, the plaintiff must establish the elements of common law misrepresentation, including justifiable reliance and proximate cause for pecuniary loss. See Nordale, Inc. v. Samsco, Inc., 830 F. Supp. 1263, 1271-72 (D. Minn. 1993) (negligent misrepresentation claim dismissed for want of justifiable reliance; statutory misrepresentation claim dismissed where purchasing decision not caused by reliance on allegedly deceptive practices); [*14] Carlock v. Pillsbury Co., 719 F. Supp. 791, 849-50 (D. Minn. 1989) (statutory cause of action made out by proving elements of negligent misrepresentation) (citing In re Professional Financial Services, 703 F. Supp. 1388, 1397 (D. Minn. 1989)); LeSage v. Norwest Bank Calhoun-Isles, 409 N.W.2d 536, 539 (Minn. App. 1987) (to
establish claims of statutory misrepresentation, plaintiffs must prove "the proper legal nexus between the complained of facts and their alleged monetary losses"); Yost v. Millhouse, 373 N.W.2d 826, 830-31 (Minn. App. 1985) (defendant liable for misrepresentation under Consumer Protection Act
where plaintiff would not have purchased horse but for defendant's assurances that horse was registered). Compare United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 634-35 (Minn. 1982) (tort of disparagement same under common law and under Deceptive Trade Practices Act.)
Because the appellants could not sustain a common law cause of action in negligent misrepresentation, we conclude that neither could they sustain a statutory [*15] cause of action for misrepresentation.
The trial court properly entered judgment for Honeywell on all claims.
Gary L. Crippen
February 1, 1994