IN COURT OF APPEALS
Craig Johanns, et al.,
Minnesota Mobile Storage, Inc.,
Filed August 15, 2006
Reversed and remanded
Scott County District Court
File No. 04-09678
Alex W. Russell,
Evening & Weekend Law Offices,
Brian A. Wood, William L. Davidson, Sarah Morris, Lind, Jensen, Sullivan & Peterson, P.A., 150 South Fifth Street, Suite 1700, Minneapolis, Minnesota 55402 (for appellant)
Considered and decided by Hudson, Presiding Judge; Wright, Judge; and Worke, Judge.
S Y L L A B U S
1. An unambiguous exculpatory provision limiting liability in a rental agreement for a self-storage facility is enforceable unless the damages are caused by the facility owner’s willful violation of law.
2. Under the Minnesota Liens on Personal Property in Self-Service Storage Act, Minn. Stat. §§ 514.970–.979 (2004), a rental agreement between a self-storage facility owner and an occupant may limit but may not totally exempt liability for damages caused by the owner’s negligence.
O P I N I O N
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.
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
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.
III. Did the district court err in granting summary judgment on respondents’ other claims?
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. 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 (
Interpretation of a written contract
is a question of law reviewed de novo. Alpha Real Estate Co. of
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
(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 for intentional, willful, or wanton acts; further, paragraph 6 does not specifically exclude liability for intentional acts. They argue that the agreement illegally limits all claims and, at the very least, contradicts itself.
Our review of paragraph 6 and the remainder of the rental agreement reveals no ambiguity as to the limit of appellant’s liability; under its plain language, appellant’s liability for negligence is limited to $5,000. Further, this paragraph explicitly provides an exception for “fraud, willful injury, or willful violation of law.” Willful acts include intentional acts. See Black’s Law Dictionary 1593 (7th ed. 1999) (defining “willful” as “voluntary and intentional”). Therefore, respondents’ claim that the contract improperly releases the benefited party from liability fails; the argument that the rental agreement should not be enforced due to ambiguity or improper scope of the exculpatory clause has no merit.
Next, we address whether enforcement of the exculpatory clause will contravene public policy. Schlobohm, 326 N.W.2d at 923. On this issue, a two-prong test is applied.
Before enforcing an exculpatory clause, both prongs of the test are examined, to-wit: (1) whether there was a disparity of bargaining power between the parties (in terms of a compulsion to sign a contract containing an unacceptable provision and the lack of ability to negotiate elimination of the unacceptable provision) . . . and (2) the types of services being offered or provided (taking into consideration whether it is a public or essential service).
Respondents contend that because
self-storage companies may foreclose on the lien and auction property without
the involvement of the sheriff, they are performing public duties for which
exculpatory clauses are not appropriate.
Finally, we address respondents’ argument that, in the event this court upholds the validity of the partial exculpatory clause, this appeal must be remanded to the district court to resolve the issue of whether the clause is unenforceable because appellant acted intentionally. The district court found that appellant failed to comply with Minn. Stat. § 514.973 (2004), and appellant does not challenge this determination. But the court also stated that appellant arguably acted intentionally in selling respondents’ property but did not make a definitive finding. Appellant contends that there is no evidence it acted intentionally and further asserts that because it did not proceed under the exculpatory clause, respondents’ argument is irrelevant.
As discussed above, the section of
the rental agreement that is in dispute limits appellant’s liability for
damages to $5,000, “unless the Loss is directly caused by Lessor’s fraud,
willful injury or willful violation of law.”
This exception is consistent with the rule of law that a party may not
release itself from liability for wanton and willful conduct. Beehner
v. Cragun Corp., 636 N.W.2d 821, 829 (Minn. App. 2001), review denied (
The exculpatory clause provides an
exception for, among other things, loss that is directly caused by appellant’s
willful violation of law. Here,
respondents asserted that appellant’s failure to follow
Appellant contends that there is no evidence it acted willfully. But the district court stated that “[a]rguably [appellant] acted intentionally in selling [respondents’] property.” Our review of the record demonstrates that the evidence presented a fact issue that must be resolved by the district court.
As discussed above, an owner may
enforce its lien using the procedures set out in Minn. Stat. § 336.7–210 (2004). Under this provision, appellant was required
to give notice to respondents, including “an itemized statement of the claim, a
description of the goods subject to the lien, a demand for payment within a
specified time not less than ten days after receipt of the notification, and a
conspicuous statement that unless the claim is paid within that time the goods
will be advertised for sale and sold by auction at a specified time and place.”
Respondents testified that they did not receive any such notice, even though the PODS attorney testified that respondents had provided PODS with their new address. The PODS attorney was unable to find its copy of the notice allegedly sent to respondents and noted that the company has been archiving and shredding old documents. Computer records did not show that the notice of default had been sent, although they indicated a notice of auction had been sent.
Next, after the expiration of the
ten-day period in the notice of default, the owner must publish an
advertisement of sale once a week for two consecutive weeks, which “must
include a description of the goods, the name of the person on whose account the
goods are being held, and the time and place of the sale. The sale must take place at least 15 days
after the first publication.”
In addition, testimony and evidence indicated PODS tried to contact respondents by telephone several times, but the listed numbers had been disconnected. As the district court noted, on December 21, 2001, respondent talked to PODS to create a new PIN number. One minute later PODS placed a past-due call to respondent to notify respondents that their account was past due, but, inexplicably, was unable to make the call because the number had been disconnected. Further, there was disputed testimony regarding whether appellant was supposed to bill respondents’ credit card rather than waiting for respondents’ monthly check to arrive.
From the disputed evidence, we agree with the district court that there is at least a fact question as to whether PODS engaged in willful conduct that would make the exculpatory clause and its $5,000 limitation unenforceable.
Appellant also contends that the issue is irrelevant because it is not asserting the exculpatory defense on appeal. But appellant is clearly relying on the exculpatory provision that provides it is liable only for $5,000 in damages. As discussed above, this exculpatory provision is valid because, among other things, it does not purport to release appellant from liability for willful injury. Thus, appellant’s argument has no merit.
The next issue addressed is the
interpretation of the Minnesota Liens on Personal Property in Self-Service Storage
Act, Minn. Stat. §§ 514.970–.979 (2004).
Specifically, we must resolve the validity of the parties’ rental
agreement under the act, and whether it may partially limit, but not totally exempt,
the owner’s liability for damages caused by its negligence. A self-storage facility is real property
“designed and used only for renting or leasing individual storage space in [a]
facility” where the occupants have access to the facility only to store and
remove their personal property.
The act requires that the rental
agreement disclose the owner’s lien rights in the event the occupant does not
pay rent, as well as “the extent and the limits of insurance carried by the
owner covering the occupant’s personal property stored in the leased
Statutory interpretation is a
question of law reviewed de novo. Pietsch v.
The district court recognized that the self-service storage law was silent as to whether damages could be partially exempted. It noted that Minn. Stat. § 514.975 prohibits an owner from exempting itself from its own negligence and that appellant may have acted negligently in enforcing its lien. The court ruled that permitting the owner to limit damages would modify the law and eviscerate its purpose of carefully regulating foreclosure of the lien under the act to vindicate the due-process rights of the consumer.
In resolving the issue, we initially consider the plain language of the statute. Appellant argues that the plain language of the statute does not prohibit the parties from voluntarily agreeing to limit damages, while respondents contend the language is ambiguous and does not resolve the issue, and that the statutory prohibition includes partial exemption from liability.
The statute does not define
“exempt.” See Minn. Stat. § 514.971 (providing definitions for some
terms used in act). But as appellant
argues, when the legislature sought to preclude contract provisions that partially
limit the extent of liability, it has done so explicitly. For example, Minn. Stat. § 300.64, subd.
4 (2004), provides that “the certificate [of incorporation] shall not eliminate
or limit the liability of a director” for listed acts and omissions.
Again, we must rely on the plain language of the statue, which prohibits an agreement from exempting an owner from liability for negligence. Had the legislature intended to prohibit the agreements from partially exempting or limiting an owner’s liability, it would have done so. Consequently, we conclude that the parties’ agreement to limit damages to $5,000 is consistent with section 514.975 because it does not release or exempt appellant from all liability, but simply partially exempts its potential exposure to $5,000. Further, knowing that appellant’s liability was limited, respondents could have purchased property insurance covering any claimed value in excess of $5,000 but chose not to do so. While the district court in a footnote found it doubtful that this type of insurance would provide coverage in these circumstances, without a policy before the court, the issue of whether insurance would cover the present situation cannot be resolved. See, e.g., Lathers v. U-Haul Co. of La., 875 So.2d 839, 842 (La. App. 5 Cir. 2004) (addressing whether insurance covering contents of storage unit insured loss, but concluding exclusion for theft loss not evidenced by visible signs of forced entry applied and no coverage available), writ denied, 883 So.2d 1059 (La. 2004).
This ruling is consistent with the
fact that the owner of the self-storage unit is not an insurer of the goods
stored there. A paragraph initialed by
one of the respondents states that tenant agrees that if the aggregate value of
the property exceeds $5,000, the tenant will show proof of insurance. Further, it provides that the tenant agrees
that the space is not suitable for storage of heirlooms or irreplaceable
property. Another paragraph, although
not initialed by respondents, states that property is stored at the tenant’s
risk, that it is the tenant’s sole responsibility to obtain insurance, that the
lessor will not obtain insurance for the contents, and that the tenant may
obtain insurance from the lessor. See
In conclusion, because the plain language of the statute prohibits an agreement totally exempting liability, but does not prohibit a partial exemption from liability, a rental agreement may partially exempt the liability of the owner for negligence, although it may not totally exempt it.
Finally, in the alternative,
respondents raise several issues. Respondents
have waived their challenge to dismissal of these claims by failing to
specifically present legal argument or authority to support their contention
that the district court improperly dismissed them. See
D E C I S I O N
The decision of the district court ruling that neither the statute nor the rental agreement allow a partial exemption for appellant from liability for damages caused by negligence is reversed, and the matter is remanded for a determination of whether respondents’ loss was directly caused by appellant’s intentional acts.
Reversed and remanded.
 Appellant does not challenge the district court’s determination that it failed to comply with Minn. Stat. § 514.973 (2004) in enforcing its lien or the jury’s determination as to the value of the respondents’ property that had been stored with appellant.