This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
Tri-State Insurance Company,
Soderstrom’s Sales & Service, Inc.,
Mike Murray, et al.,
Isanti County District Court
File No. C799200
Paul C. Peterson, Lind, Jensen & Sullivan, P.A., 150 South 5th Street, Suite 1700, Minneapolis, MN 55402 (for respondent Tri-State Insurance company)
Douglas G. Sauter, Jason P. Rietz, Douglas G. Sauter & Associates, P.A., 199 Coon Rapids Boulevard, Suite 108, Coon Rapids, MN 55433 (for appellant)
Ned E. Ostenso, Merrigan, Brandt & Ostenso, PLLP, 25 9th Avenue North, PO Box 548, Hopkins, MN 55343 (for respondent Murrays)
Considered and decided by Lansing, Presiding Judge, Anderson, Judge, and Halbrooks, Judge.
Appellant Soderstrom’s Sales & Service, Inc., conducted a septic-tank inspection and issued a certificate of compliance in connection with the sale of a home to respondents Mike and Patty Murray. After the parties discovered the tank was improperly certified by appellant, respondent Tri-State Insurance Company (“Tri-State”), the entity bonding appellant, started an interpleader action against appellant and respondent Murrays. Ultimately, the trial court allowed the Murrays to recover against the bond. Appellant challenges that result alleging that the Murrays do not have a cause of action against the bond. Appellant also argues that the Murrays failed to sustain their burden of proving damages. Because we find that the Murrays’ claim is within the bond’s coverage and that they have proven their damages, we affirm.
Appellant’s owner and president, Mark Soderstrom, is licensed by the Minnesota Pollution Control Agency (MPCA) to conduct inspections of septic systems. As part of its licensing requirements, appellant obtained a bond with Tri‑State. The bond states that Tri-State and appellant are
bound to the Commissioner of the Minnesota Pollution Control Agency-State of Minnesota and any persons aggrieved by reason of the Principal’s failure to faithfully perform the duties, and in all things comply with all laws, ordinances, and rules, pertaining to the Principal’s license * * * and all contracts entered into.
On February 2, 1997, the Murrays entered into an agreement to purchase a home from Carolyn Marcy. In the agreement, Marcy stated that she did not know whether the septic tank complied with state law. Although the agreement was non-contingent, it did contain an addendum that required the Murrays to obtain an insured conventional mortgage. As a prerequisite for obtaining a mortgage, the Murrays were required to have the property’s septic tank inspected. At the Murrays’ request, Marcy’s real estate agent hired appellant to inspect the septic system. On April 2, 1997, Soderstrom inspected the tank using soil borings, and then issued a certificate of compliance. Soderstrom provided a copy of the certificate to Marcy, who gave it to the Murrays prior to the closing.
The Murrays moved into the home in June 1997. Soon after, they noticed a foul smell coming from the back yard. In the spring of 1998, the Murrays contacted the township inspector, Scott Rosvold. He determined that the Murrays’ septic tank was malfunctioning and discharging sewage. Rosvold required the Murrays to repair their tank within 10 days. The contractor hired by the Murrays to repair the system determined that a different type of septic tank needed to be installed because of the type of soil in the area. As a result, the Murrays replaced the drain field system with a mound system, at a cost of $9,522.50.
Subsequently, the Murrays contacted the MPCA to determine whether appellant should have issued a certificate of compliance. On October 12, 1998, Rosvold, Soderstrom, and two inspectors from the MPCA made soil borings in the same location Soderstrom had used in the April 1997 inspection. Rosvold and the MPCA inspectors determined that the septic tank did not comply with Minn. R. 7080.0060 (1999), which requires at least two feet of separation for a drain-field-type system. They concluded that Soderstrom should not have certified the tank because the soil borings showed mottled soil at 18 inches. Appellant did not dispute the findings.
Tri-State filed an interpleader complaint, arguing that appellant’s actions may expose it to multiple liability. Pursuant to Minn. R. Civ. P. 67.02, Tri-State asked the trial court to determine its liability and whether the Murrays’ damages fell within the bond’s coverage. Appellant moved for summary judgment, arguing that because the Murrays were not an “aggrieved party” under the terms of the bond, they were not entitled to relief. Summary judgment was denied because the trial court found that the question involved a genuine issue of material fact.
A bench trial was held. Both parties’ expert witnesses testified that the soil conditions in October 1998 would have been about the same in April 1997. The trial court found in favor of the Murrays, holding appellant liable under two theories. First, the court held that the Murrays were third-party beneficiaries of an oral contract between appellant and Marcy, and second, the court determined that the Murrays were an “aggrieved party” under the terms of the bond. The trial court found that, given the fact that appellant was hired by Marcy’s real estate agent to inspect the system, it was reasonable for appellant to recognize that the test findings would have third-party implications. Further, the trial court determined that replacing the septic tank was a foreseeable consequence of appellant’s breach of its duty “to perform the inspection in a workmanlike manner.” This appeal follows.
D E C I S I O N
Appellant claims that because Minn. Stat. ch. 115 (2000), which requires septic-tank inspectors to be bonded, does not authorize a private cause of action by a homeowner against a septic tank inspector, the Murrays cannot make a claim against the bond. When a bond is mandated by statute, its coverage is construed in light of that statute’s purpose “unless violence would be done to the language of the bond by such construction.” Metro Milwaukee Auto Auction v. Coulson, 604 N.W.2d 111, 114 (Minn. App. 2000) (quoting Combs v. Jackson, 69 Minn. 336, 337, 72 N.W. 565, 566 (1897)), review denied (Minn. Mar. 14, 2000). “[T]he express language of the bond will prevail over inconsistent statutory provisions unless the purposes of the statute would be frustrated.” Westbrook State Bank v. Aetna Cas. and Sur. Co., 437 N.W.2d 738, 740-41 (Minn. App. 1989) (quotation omitted).
Here, appellant’s bond was created pursuant to Minn. Stat. § 115.56, subd. 2(e), which provides:
Licenses may be issued only upon successful completion of the required examination and submission of proof of sufficient experience, proof of general liability insurance, and a corporate surety bond in the amount of at least $10,000.
See also Minn. R. 7080.0710, subp. 1 (1999). The general purpose of Minn. Stat. ch. 115 is “to prevent, reduce, and eliminate water pollution and to plan for the preservation of water resources.” Minn. Stat. § 115.063. Appellant argues that in light of this broad public purpose, the bond’s coverage cannot apply to wholly private claims. See McNamara v. McLean, 531 N.W.2d 911, 916 n.2 (Minn. App. 1995) (noting that when a statute has such a general public purpose, courts may refrain from using it to establish a private duty for tort liability). Under appellant’s interpretation, only the general public may bring a claim “in regard to the purity of our waters,” not “home buyers for the warranty of the future performance of their septic system.” Thus, appellant finds the trial court’s interpretation of “an aggrieved party” to be legally erroneous.
Appellant attempts to construe the bond in a manner that would ignore what its terms plainly state. The plain language of the bond includes “any persons aggrieved by reason of the Principal’s failure to faithfully perform the duties.” In addition, the person covered by the bond must “comply with all the * * * rules, pertaining to [his] license.” Neither the bond nor the statute defines an “aggrieved” party. But we note that similar statutory language has been interpreted as a person who is “injuriously or adversely affected” by another’s action or conduct when such action or conduct “operates on his rights of property or bears directly upon his personal interest.” In re Black,522 N.W.2d 352, 355 (Minn. App. 1994) (quoting In re Getsug, 290 Minn. 110, 114, 186 N.W.2d 686, 689 (1971)) (interpreting “aggrieved party” as used in Minnesota Administrative Procedure Act, Minn. Stat. § 14.63 (1992)), review denied (Minn. Nov. 29, 1994); see In re Implementation of Utility Energy Conservation Imp. Programs, 368 N.W.2d 308, 311 (Minn. App. 1985) (using similar interpretation for hearings before the Minnesota Public Utilities Commission conducted pursuant to Minn. Stat. § 216B.52 (1984)). The Murrays fit within this reading of an aggrieved party and the bond’s coverage, because their injury is directly related to and adversely affected by appellant’s improper certification of a non-compliant septic tank.
We do not believe that this plain-meaning construction of the bond’s coverage does violence to the statute. Unlike other statutorily-imposed bonding requirements, Minn. Stat. § 115.56, subd. 2(e), offers no limiting or explanatory language to guide a court on a bond’s coverage. For example, Minn. Stat. § 168.27, subd. 24 (2000), conditions motor-vehicle-dealership bonds on “the faithful performance by the licensee of the obligations imposed by the laws of this state.” The statute limits claimants against the bond to the state and “any transferor, seller, or purchaser of a motor vehicle for any monetary loss caused by failure of the licensee to meet the obligations enumerated above.” Id. Similarly, bonds for liquor stores under Minn. Stat. § 340A.301, subd. 4 (2000), are “conditioned on the licensee obeying all laws governing the business and paying when due all taxes, fees, penalties and other charges.” Thus, these statutes contain explicit language limiting a bond’s coverage. See, e.g., State v. United States Fidelity & Guaranty Co., 226 N.W.2d 322, 323-24 (Minn. 1975) (finding that state could not recover unpaid taxes against a liquor store’s bond required by Minn. Stat. § 340.12 (1974) because the statute limited the bond’s coverage to claims relating to the sale of liquor and did not include laws of general application); United Fire & Cas. Co. v. First Federal Sav. Bank, 460 N.W.2d 94, 97 (Minn. App. 1990) (finding that banks may not make a claim against a motor-vehicle-dealer bond because Minn. Stat. § 168.27, subd. 24 (1988), limits the bond’s coverage to transferors, sellers, and purchasers).
Moreover, we believe that this construction is in harmony with the statute’s purpose. Recognizing that privately-owned septic systems have an effect on the purity of Minnesota’s water, the legislature provided for an extensive licensing program for septic-system inspectors and allowed the MPCA commissioner to take action against inspectors for “incompetence, negligence, or inappropriate conduct in the performance of [his or her] duties.” Minn. Stat. § 115.56, subd. 3(a)(2). The purpose of the bond is to provide for the environmental consequences of improper inspections. That purpose is promoted by recognizing liability under the bond to persons who relied upon an improper certification. Therefore, we find that the trial court did not err in construing the terms of the bond to include the Murrays.
Appellant maintains it had no duty to guarantee the septic tank’s future performance. But it is undisputed that, at the time of the 1997 inspection, the tank did not conform with Minn. R. 7080.0060 (1999). Thus, appellant should not have certified the septic tank. The Murrays, therefore, are aggrieved persons within the terms of the bond because appellant’s failure is the cause of the Murrays’ damages. The Murrays’ injury flows from the certification, not necessarily the tank’s performance. Moreover, the results of the 1998 inspection determined that the tank was non-compliant when Soderstrom initially inspected it.
Because we find that the Murrays can make a claim as an “aggrieved person” under the terms of the bond, we do not need to reach the trial court’s alternative third-party-beneficiary theory of liability.
Appellant argues that the Murrays failed to prove damages because they did not provide any evidence demonstrating that the value of their property was diminished. Further, appellant argues that the Murrays’ damages were unforeseeable. This court reviews damage awards under an abuse-of-discretion standard. Holiday Recreational Indus. v. Manheim Servs. Corp., 599 N.W.2d 179, 183 (Minn. App. 1999).
Here, we do not believe the trial court abused its discretion by using the cost of replacing the defective sewage system as a measure of damages. The Murrays’ system was defective and did not comply with state law, and it was not possible for them to repair the tank. Installation of the more expensive mound-type system was necessitated by the type of soil in the area. This result—being required to bring a non-compliant septic tank into compliance—is not an unforeseeable consequence of an improper certification. Therefore, we find that the trial court did not abuse its discretion.