This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. 480A.08, subd. 3 (2000).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C1-01-1334

 

 

Jeffrey Kietzer,

Appellant,

 

vs.

 

Land O'Lakes,

Respondent.

 

Filed February 19, 2002

Affirmed in part, reversed in part, and remanded

Robert H. Schumacher, Judge

 

Redwood County District Court

File No. C800488

 

 

J. Brian O'Leary, Post Office Box 76, Springfield, MN 56087 (for appellant)

 

Edward Q. Cassidy, Karen M. Charlson, Felhaber, Larson, Fenlon & Vogt, P.A., 2100 Minnesota World Trade Center, 30 East Seventh Street, St. Paul, MN 55101-4901 (for respondent)

 

Considered and decided by Peterson, Presiding Judge, Schumacher, Judge, and Klaphake, Judge.

U N P U B L I S H E D O P I N I O N

ROBERT H. SCHUMACHER, Judge

Appellant Jeffrey Kietzer challenges the district court's grant of summary judgment in favor of respondent Land O'Lakes. Kietzer contends that the nature of his contract with Land O'Lakes does not preclude tort recovery. We affirm in part, reverse in part, and remand.

FACTS

From 1997 to April 2000, Kietzer personally owned and managed a flock of laying hens. The process of owning and operating the flock began in November of 1996, when Scott Waldner, a Land O'Lakes employee, contacted Kietzer to see if he was interested in "putting a flock of birds in." Kietzer expressed interest and Waldner assisted with locating and transporting the birds. Kietzer asked how he could pay for Waldner's help. According to Kietzer, Waldner responded by saying that there was no charge and "as long as you feed Land O'Lakes feed, I'm your consultant for the flock. Any time there's a problem, give me a call."

Waldner told Kietzer that Land O'Lakes could formulate feed for Kietzer and that Land O'Lakes could provide the feed through Meadowland Farmers Coop. Land O'Lakes sells the individual products such as vitamins and feed ingredients that are individually mixed together to serve as feed. Then, Land O'Lakes formulates the feed and Meadowland mixes it. When the flock was put in, Kietzer began to order Land O'Lakes feed. Waldner testified that he personally formulated Kietzer's feed, which was a standard formulation. Kietzer admits that he could have switched brands of feed anytime he wanted to, but he stayed with Land O'Lakes because otherwise he would not have had access to Waldner for consulting purposes.

In early June of 1999, about the same time he received a new shipment of feed, Kietzer noticed that the birds were not eating as much, the feed looked abnormal, and the consistency and color of the bird manure was abnormal. Consequently, Kietzer asked Waldner for advice. Waldner went out to Kietzer's property and looked at the feed. Suspecting a mixing problem, Waldner recommended to Meadowland that it double the mixing time of the feed from two to four minutes. Samples of the feed were also sent to Meadowland for evaluation. The rest of the feed was left for the birds to continue to eat. By the time the test results came back, the load of feed had been completely consumed. The test results showed high levels of protein, phosphorus and calcium, which Waldner attributed to the mixing problem. The nutritional imbalance in the feed caused the birds to lay eggs with poor eggshell quality. This resulted in substantial egg loss. Consequently, Kietzer removed the flock.

Kietzer filed suit against Meadowland and Land O'Lakes alleging breach of contract and negligence. Kietzer subsequently settled his claims against Meadowland. Land O'Lakes then moved for summary judgment on both the breach of contract claim and the negligence claim. The district court granted summary judgment on the negligence claim, but was silent on the breach of contract claim. Kietzer then filed a motion for voluntary dismissal of the breach of contract claim without prejudice. The district court granted the motion. Kietzer now appeals the grant of summary judgment.

D E C I S I O N

1. Summary judgment is properly granted when the pleadings, depositions, affidavits, etc. "show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). On appeal from summary judgment, this court asks two questions: "(1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted). The evidence is viewed in the light most favorable to the party against whom judgment was granted. Fabio, 504 N.W.2d at 761. The application of law to stipulated facts is a question of law, which this court reviews de novo. Morton Bldgs., Inc. v. Comm'r of Revenue, 488 N.W.2d 254, 257 (Minn. 1992). Here, there are no genuine issues of material fact regarding the issue on appeal. See Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60 (Minn. 1976) (material fact is one that will affect result or outcome of case depending on its resolution). Our focus therefore is whether the district court correctly applied the relevant laws to the facts of this case.

A contract is generally referred to as a hybrid contract if it involves both goods and services. Valley Farmers' Elevator v. Lindsay Bros. Co., 398 N.W.2d 553, 556 (Minn. 1987), overruled on other grounds by Hapka v. Paquin Farms, 458 N.W.2d 683 (Minn. 1990). The classification of a hybrid contract is a question of law. Id. The record indicates that there was an oral contract between Kietzer and Waldner providing that as long as Kietzer purchased Land O'Lakes feed, Waldner would act as a consultant free of charge. This contract involves both the sale of goods (feed) and the providing of services (Waldner acting as a consultant), which we conclude constitutes a hybrid contract.

Because this case involves a hybrid contract, we must determine whether the contract is governed by the provisions of the Uniform Commercial Code (U.C.C.). If the contract is governed by the U.C.C., Kietzer potentially cannot proceed with his negligence claim. See Hapka, 458 N.W.2d at 688 (U.C.C. is "complete and independent statutory scheme enacted for the governance of all commercial transactions * * * [and] is intended to displace tort liability"). But see Minn. Stat. 604.10 (2000) (listing circumstances where recovery in tort is allowed despite fact that contract is sale of goods). Instead, Kietzer may have to proceed solely under the U.C.C.'s implied warranty provisions. See O'Laughlin v. Minn. Natural Gas Co., 253 N.W.2d 826, 830-31 (Minn. 1977) (faulty service rendered in conjunction with sale of goods is covered by implied warranties of U.C.C.).

Article 2 of the U.C.C. applies to transactions in goods. Minn. Stat. 336.2-102 (2000). Goods are defined as all things that are movable at the time of identification to the contract for sale. Minn. Stat. 336.2-105(1) (2000). There is no dispute that the chicken feed is considered goods for purposes of the U.C.C. Because the oral contract involved both the sale of feed and Waldner's consulting services, however, it is not necessarily a "transaction in goods" that falls under Article 2.

The district court found that the contract was indeed subject to the U.C.C.'s provisions because it was predominantly for the sale of goods. Whether a contract is primarily for goods or services is a question of law to which this court may apply de novo review. Valley Farmers' Elevator, 398 N.W.2d at 556. In a hybrid contract that involves both the sale of goods and services, Minnesota courts use the "predominant factor" test in deciding whether the essence of the contract is primarily a sale of goods or the provision of services. Id. If the predominant purpose of the contract is the sale of goods, the U.C.C. governs; if the predominant purpose of the contract is the provision of services, the U.C.C. does not apply. McCarthy Well Co., Inc. v. St. Peter Creamery, Inc., 410 N.W.2d 312, 315 (Minn. 1987). The "predominant factor" test is as follows:

The test for inclusion or exclusion [from the scope of the U.C.C.] is not whether they are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom).

 

Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir. 1974).

Price allocation between goods and labor is also a consideration in "predominant factor" analysis. Valley Farmers Elevator, 398 N.W.2d at 556. Additionally, the rendition of substantial amounts of labor does not necessarily exclude the transaction from the U.C.C. Bonebrake, 499 F.2d at 959; see also Valley Farmers Elevator, 398 N.W.2d at 556 (concluding that sale and construction of three-bin grain storage and aeration system predominantly sale of goods).

Kietzer attempts to side step the predominant factor test by arguing that he was not actually purchasing feed but was purchasing the service of feed formulation and mixing. This argument ignores the fact that Kietzer still had to purchase the feed in order to receive any mixing or formulation services. The dominant characteristic of the oral contract was the sale of feed. Waldner's services would not have been performed absent Kietzer continuing to purchase the feed. Also, the record does not indicate that any part of the price for the feed was attributable to Waldner's consulting services. Further, although the services performed by Waldner were substantial, those services were not independent of the sale. Waldner's services merely helped convert the raw feed ingredients into a viable feed product for Kietzer's flock. This is not enough to convert the sale of feed into a contract for services. The district court did not err by determining that the U.C.C. governed the oral contract.

2. The district court apparently determined that the applicability of the U.C.C. necessarily required dismissal of Kietzer's negligence claim. Although the oral contract is governed by the U.C.C., it is not clear that this conclusion necessarily prevents Kietzer from proceeding with his negligence claim. By pursuing a negligence claim, Kietzer appears to be seeking compensation for economic loss due to the damage to his flock caused by the feed. Whether the economic loss doctrine prevents recovery in tort when a contract is governed by the U.C.C. is a question that courts have long struggled with. Approximately 20 years ago, the Minnesota Supreme Court held that

economic losses that arise out of commercial transactions, except those involving personal injury or damage to other property, are not recoverable under the tort theories of negligence or strict products liability.

 

Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159, 162 (Minn. 1981). In 1990, however, the supreme court overruled Superwood, holding that

the Uniform Commercial Code must control exclusively with respect to damages in a commercial transaction which involves property damage only, and any statement or implication to the contrary in Superwood and its progeny is hereby expressly overruled.

 

Hapka, 458 N.W.2d at 688. In response to Hapka, the Minnesota State Legislature, in 1991, codified the economic loss doctrine by stating:

Economic loss that arises from a sale of goods that is due to damage to tangible property other than the goods sold may be recovered in tort as well as in contract, but economic loss that arises from a sale of goods between parties who are each merchants in goods of the kind is not recoverable in tort.

 

Minn. Stat. 604.10(a). The enactment of section 604.10 has cast doubt on the continuing validity of Hapka. ZumBerge v. N. States Power Co., 481 N.W.2d 103, 107 n.2 (Minn. App. 1992), review denied (Minn. Apr. 29, 1992). In 2000, the legislature further clarified the economic loss doctrine by enacting section 604.101. This section, however, does not apply to the facts of the case. See Minn. Stat. 604.101, subd. 6 (stating that section only applies to sales or leases that occur on or after August 1, 2000).

With the enactment of Minn. Stat. 604.10, courts and litigants are prevented from presuming that the applicability of the U.C.C. to a contract automatically precludes recovery in tort. Indeed, the Eighth Circuit Court of Appeals has interpreted section 604.10 as not applying to hybrid contracts. AKA Distrib. Co. v. Whirlpool Corp., 137 F.3d 1083, 1086 n.3 (8th Cir. 1998) ("[T]hat statute is limited to the sales of goods, whereas we deal here with a different type of Article 2 contract."). Although it may be persuasive authority, Minnesota courts are not required to follow AKA Distrib. Co..

The effect and applicability of section 604.10 was not raised in the district court. We therefore remand this matter to the district court for consideration of the effect and applicability of the statute, which may require further development of the record. See In re Welfare of M.D.O., 462 N.W.2d 370, 374-75 (Minn. 1990) (stating that role of court of appeals is to correct errors, not to find facts); see also Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (appellate courts will generally not consider matters not argued and considered in court below). The district court's order granting summary judgment in favor of Land O'Lakes is reversed, and the matter is remanded to the district court for consideration of the effect and applicability of section 604.10.

Affirmed in part, reversed in part, and remanded.