This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).







Hennen Construction Co.,





Pilot Land Development,



Filed December 3, 2002


Lansing, Judge


Wright County District Court

File No. C100835



Kyle E. Hart, Theodore V. Roberts, Fabyanske, Westra & Hart, P.A., Suite 1100, 920 Second Avenue South, Minneapolis, MN  55402 (for appellant)


Ernest F. Peake, Justin P. Weinberg, Leonard, O’Brien, Wilford, Spencer & Gale, P.A., Suite 1200, 100 South Fifth Street, Minneapolis, MN  55402 (for respondent)


            Considered and decided by Harten, Presiding Judge, Lansing, Judge, and Randall, Judge.


U N P U B L I S H E D   O P I N I O N




This appeal arises from a dispute between a landowner-developer and a subcontractor over the subcontractor’s reliance on bond provisions in a contract between the landowner-developer and the excavating contractor.  Following remand on a motion to dismiss on the pleadings, the district court granted summary judgment on the subcontractor’s third-party-beneficiary claim and related claims of promissory estoppel, misrepresentation, and unjust enrichment.  Because the project specifications central to all of the subcontractor’s claims allow for modification, including modification of the payment bond specification, we affirm.


            Pilot Land Development, a real estate developer, began to develop plans in 1997 for a golf course and residential lots on land it owned in Wright County.  In December 1997, Pilot released project specifications to general contractors, including land excavators.

Pilot entered into a written contract with D & M of Buffalo in February 1998 to perform grading and excavation work on the project.  The contract between Pilot and     D & M incorporated the project specifications, which required the contractor to provide performance and payment bonds; permitted amendments and change orders, including contract price adjustments; required the contractor, not the landowner, to provide notices; disclaimed any obligation to pay subcontractors; disclaimed responsibility to others for a contractor’s nonperformance; and specifically provided that nothing in the contract documents created an obligation of the owner to pay or to assure the payment of a contractor’s obligation to a subcontractor.

Between March 15 and March 30, 1998, D & M entered into an oral contract with Hennen Construction to provide sanitary sewer, water main, and storm sewer installation.  On March 20, 1998, D & M and the project engineer signed a change order to the contract by which they deducted $12,919.78 from the contract price in exchange for the waiver of the contract’s requirement of performance and payment bonds.  A Pilot representative signed the change order on April 1, 1998.  Hennen maintains that D & M provided no notice of the change order; Pilot agrees that it provided no notice and points to the contract provision that requires the contractor, rather than the owner, to provide notice to subcontractors.

Hennen began work on the project on April 16, 1998, completed its contract obligation to D & M, and sent invoices to D & M totaling $354,224.50.  Hennen received partial payment from D & M, but $131,793.21 remains unpaid.  Hennen learned in January 1999 of the change order waiving the payment bond.  Subsequently, D & M filed for bankruptcy; the amount still owed to Hennen was discharged in the bankruptcy proceeding.  Hennen did not file a mechanics’ lien against the project property.

Hennen sued Pilot for the amount that D & M had not paid, alleging that Hennen was a third-party beneficiary of the contract between Pilot and D & M and that Pilot had breached that contract by failing to keep in place the payment-bond requirement.  The district court, without benefit of the contract or specifications, granted Pilot’s Rule 12 motion to dismiss.  On appeal, this court concluded that the complaint alleging the existence of a contract of which it could be a third-party beneficiary was legally sufficient to maintain an action and reversed and remanded.  Hennen Const. Co. v. Pilot Land Dev., No. C2-00-1543 (Minn. App. Apr. 20, 2001).

On remand, Hennen amended its complaint to assert additional claims for promissory estoppel, negligent and intentional misrepresentation, and unjust enrichment.  Hennen and Pilot brought cross-motions for summary judgment.  The district court, relying on the contract, project specifications, and undisputed facts, granted summary judgment in favor of Pilot on all claims, and this appeal followed.


On appeal from summary judgment, we consider whether there are any genuine issues of material fact and whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  No genuine issue of material fact exists when the record could not lead a rational trier of fact to find for the nonmoving party.  DHL, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).  The party opposing summary judgment must do more than rest on mere averments; a genuine issue for trial must be established by substantial evidence.  Id. at 69-71.  This court views the evidence in the light most favorable to the party against whom summary judgment was granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). 


Hennen first argues that the district court erred in granting summary judgment on its third-party beneficiary claim, maintaining that it was a third-party beneficiary of the contract between Pilot and D & M.  Determining whether to accord third-party-beneficiary status to Hennen under the construction contract requires examination of the contract and the circumstances surrounding it.  See, e.g., Cretex Cos. v. Constr. Leaders, Inc., 342 N.W.2d 135, 137 (Minn. 1984) (analyzing contracts and available bond alternatives to determine whether unpaid materialmen were third-party intended beneficiaries under the relevant bonds).  When this court construes a contract, we give effect to the intention of the parties as expressed in the language contained in the contract as a whole.  Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn. 1997).  A contract should be read in a manner that enforces the entire agreement between the parties.  Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 293, 135 N.W.2d 681, 685 (1965).  The interpretation of a contract presents a question of law, which we review de novo.  Collins v. Minn. School of Bus., Inc., 636 N.W.2d 816, 818 (Minn. App. 2001). 

Under the prevailing rule in Minnesota, a third party may assert a claim on a contract made for that party’s direct benefit.  Buchman Plumbing Co. v. Regents of the Univ. of Minn., 298 Minn. 328, 333, 215 N.W.2d 479, 483 (1974).  To determine third-party-beneficiary status, Minnesota courts use the intended-beneficiary approach outlined in the Restatement (Second) of Contracts § 302 (1979).  Cretex Cos., 342 N.W.2d at 139. According to section 302(1) of the Restatement, “[u]nless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties * * *.”  If recognizing third-party-beneficiary rights is appropriate to effectuate the intention of the parties, and either the duty-owed or the intent-to-benefit test is met, the third party can recover as an intended beneficiary.  Cretex Cos., 342 N.W.2d at 139. 

The duty-owed test requires that the performance of the promise will satisfy an obligation of the promisee.  Mears Park Holding Corp. v. Morse/Diesel, Inc., 427 N.W.2d 281, 285 (Minn. App. 1988).  The intent-to-benefit test is satisfied when “the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.”  Id. (quoting Restatement (Second) of Contracts § 302(1)(b)).  The requisite intent must be found in the contract as read in light of all the surrounding circumstances.  Buchman Plumbing, 298 Minn. at 334, 215 N.W.2d at 483.  If no intent to benefit has been shown, the third party is only an incidental beneficiary and cannot enforce the contract.  Id. at 334-35, 215 N.W.2d at 483-84. 

We first consider Hennen’s claims under the duty-owed test.  Under this analysis, Hennen has no colorable claim that the performance of the promise—i.e., obtaining the bond—would satisfy an obligation of the promisee (Pilot) to pay money to the beneficiary (Hennen).  Hennen had its own contract with D & M and received partial payment on that contract before D & M declared bankruptcy.  Pilot, on the other hand, paid D & M directly the full amount owed under its contract with D & M.

The intent-to-benefit analysis yields the same result.  Hennen argues that the requirement of a payment bond in the contract between Pilot and D & M demonstrates the parties’ intent to benefit Hennen by insuring that payment would be made to Hennen in the event of the general contractor’s default.  But the contract read as a whole fails to support Hennen’s claim.  The plain language of the disclaimer in Section 6.06C indicated the parties’ intent that the owner not be obligated to pay any subcontractor directly: 

Nothing in the Contract Documents shall create for the benefit of any such Subcontractor, Supplier, or other individual or entity any contractual relationship between OWNER or ENGINEER and any such Subcontractor, * * * nor shall it create any obligation on the part of OWNER or ENGINEER to pay or to see to the payment of any moneys due any such Subcontractor, Supplier, or other individual or entity except as may otherwise be required by Laws and Regulations. 


See, e.g., Hopper Bros. Quarries v. Merch. Mut. Bonding Co., 255 F.2d 147, 148 (8th Cir. 1958) (applying Iowa and Nebraska law, holding that the payment bond of a subcontractor stating that no right of action accrued on bond for use of any person or corporation other than named contractor, made it clear that bond was not executed for benefit of materialman).

In addition, the precise issue is not whether Hennen can recover on an existing bond, as in Cretex, but whether the parties intended Hennen to be a beneficiary of the contract that Hennen asserts contained a nonwaivable promise to obtain a bond.  The contract between Pilot and D & M gave express authority to the owner and the contractor to execute change orders on contract terms and price, with no mention of rights accruing to the subcontractors.  And, significantly, the contractor, D & M, not the owner, Pilot, was charged with serving all notices under the contract; this would include any notice of change orders served to Hennen as a subcontractor.

The contract, read as a whole, does not support Hennen’s claim that it provides the requisite intent to make Hennen a third-party beneficiary.  We therefore hold that the district court did not err in granting summary judgment on Hennen’s third-party-beneficiary claim.


Hennen also asserts equitable claims for promissory estoppel, fraudulent and negligent misrepresentation, and unjust enrichment.  When an adequate remedy at law exists, a party may not have equitable relief.  ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d 302, 305 (Minn. 1996).  Whether an adequate remedy at law exists is a legal conclusion, subject to de novo review by this court.  Frost-Benco Elec. Ass’n v. Minn. Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984). 

It is undisputed that Hennen had the right to file a mechanic’s lien against the project property to preserve its rights to collect from D & M.  See Minn. Stat. § 514.01 (2000).  Hennen, however, failed to exercise that right.  Therefore, we conclude that the availability of this remedy at law, which Hennen did not pursue, precludes an equitable action for promissory-estoppel.

            Of equal significance, the district court concluded that, viewing the contract as a whole, “there was no promise for Hennen to rely upon.”  The contract specifically disclaimed any basis for a subcontractor’s reliance and prominently allowed for modification, including change orders.  The district court did not err in granting summary judgment on the promissory-estoppel claim.

On its misrepresentation claims, Hennen has failed to allege facts sufficient to establish a legal or equitable duty for Pilot to inform Hennen of the change order.  See, e.g., Witzman v. Lehrman, Lehrman, & Flom, 601 N.W.2d 179, 190 (Minn. 1999) (noting that in order for nondisclosure to constitute fraud, facts that one party is under a legal or equitable obligation to communicate to the other must be suppressed).  The contract expressly provided that Pilot undertook no duties to any subcontractors on the project.  The specifications placed the duty of giving notice squarely on D & M, the party with whom Hennen had signed its own contract.  In fact, the record does not establish that Pilot even knew of Hennen’s existence at the time the change order was signed; Hennen had just negotiated its own oral contract with D & M and did not begin work on the project until two weeks later.

Finally, to establish a claim for unjust enrichment, the claimant must show that the defendant has knowingly received something of value for which the defendant “in equity and good conscience” should pay.  ServiceMaster, 544 N.W.2d at 306 (quotation and citation omitted).  Pilot, who made full payment under its contract with D & M, had no direct contract with Hennen, nor did it mislead Hennen as to the status of a payment bond.  Pilot was not responsible for D & M’s subsequent bankruptcy in which Hennen failed to collect, and Hennen could have filed its own mechanics’ lien against the project to preserve its rights.  Because Pilot did not wrongfully retain the value of Hennen’s work, the district court did not err in granting summary judgment on this claim.