This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
Doua Yang, et al.,
Voyagaire Houseboats, Inc.,
defendant and third party plaintiff,
B.J.M., Inc., defendant and
third party plaintiff,
Doua Yang, et al.,
Third Party Defendants.
Filed September 14, 2004
St. Louis County District Court
File Nos. C8-02-102177, CX-02-102178, C1-02-102179, & C8-02-102180
Patrick J. Sauter, Steven M. Sitek, Paula Duggan Vraa, Rider Bennett, LLP, 333 South Seventh Street, Suite 2000, Minneapolis, MN 55402 (for appellant)
John M. Colosimo, Mitchell J. Brunfelt, Colosimo, Patchin, Kearney, Lindell & Brunfelt, Ltd., 301 Chestnut Street, Virginia, MN 55792 (for respondent Voyagaire Houseboats, Inc.)
H. Jeffrey Peterson, Andrew R. Peterson, Cope & Peterson, Ltd., 415 First Street South, Virginia, MN 55792 (for respondent B.J.M., Inc.)
Considered and decided by Hudson, Presiding Judge; Willis, Judge; and Wright, Judge.
U N P U B L I S H E D O P I N I O N
In this appeal from an order for summary judgment, appellant argues that (1) the claim against respondent Voyagaire is not barred by the exculpatory clause; (2) there are fact issues regarding whether the contract was the product of mutual mistake; and (3) appellant is not required to indemnify respondent Voyagaire. Because appellant’s claims are barred by the exculpatory clause, because the contract is not a product of mutual mistake, and because appellant is required to indemnify respondent Voyagaire, we affirm.
Appellant Lao Xiong is a resident of St. Paul. Respondent Voyagaire Houseboats, Inc. owns and operates a resort on Crane Lake in northern Minnesota, where it leases both lodge rooms and houseboats. Respondent B.J.M. owns the houseboats leased by Voyagaire.
In 2002, Xiong rented a houseboat from Voyagaire for himself and his girlfriend and her family. Voyagaire’s policy required Xiong to pay a deposit after making a reservation and to pay for the rental in full, two months in advance. On June 8, 2002, Xiong and the other members of his party made what Xiong claims was a 450-mile trip from Minneapolis to Crane Lake. Upon arriving, Xiong met with James Janssen, co-owner of Voyagaire, who presented Xiong with a rental contract. Xiong reportedly read the contract and then told Janssen that he did not understand some of the contract’s language. Xiong claims that Janssen said that he “[did not] understand it either” but that a $25 insurance fee would “cover everything that could happen to the boat.” During his deposition, Janssen testified that if Xiong had refused to sign the contract, he would not have rented the boat to Xiong.
Xiong rented the houseboat, and five days into their trip, Xiong and other members of his party became ill. Six of the houseboat’s occupants were taken to the International Falls Hospital, where they were diagnosed with carbon-monoxide poisoning. Shortly thereafter, a Voyagaire employee entered the houseboat and found that the carbon-monoxide detector was unhooked.
On October 2, 2002, Xiong sued Voyagaire and BJM, Inc., alleging that Voyagaire was negligent by (1) advising Xiong’s party that they could run the boat’s generator continuously; (2) failing to warn the party that carbon-monoxide poisoning was a risk if the boat were not properly ventilated; (3) disconnecting the carbon-monoxide detector aboard the boat; and (4) putting the detector’s connection wire behind a drawer where it was not visible. The other members of Xiong’s party also sued Voyagaire, and on November 19, 2002, the district court consolidated the cases.
In July 2003, Voyagaire moved for summary judgment, arguing that Xiong’s claims were barred by the exculpatory and indemnification clauses in the contract that Xiong signed and that the indemnification clause required Xiong to indemnify Voyagaire against the other plaintiffs’ claims. Xiong filed a cross-motion for summary judgment, claiming that the exculpatory and indemnification clauses are unenforceable under the facts of this case and the law.
On October 30, 2003, the district court granted Voyagaire’s motion for summary judgment. The district court issued a clarifying order on December 8, 2003, dismissing Xiong’s claims and requiring Xiong to indemnify Voyagaire, and on December 9, 2003, entered final judgment pursuant to Minn. R. Civ. P. 54.02. This appeal follows.
On appeal from summary judgment, this court must ask (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). The district court properly grants a motion for summary judgment when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue of material fact and that either party is entitled to judgment as a matter of law.” Fabio v. Bellomo,504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). On appeal, this court “must view the evidence in the light most favorable to the party against whom the judgment was granted.” Id.
Xiong argues that the district court erred by concluding that his claim against Voyagaire is barred by the exculpatory clause in the rental contract that he signed, which, in relevant part, provides that
Renter __________, his/her family, relatives, heirs, and legal representatives do hereby, waive, discharge and covenant not to sue Voyagaire Houseboats . . . for any loss or damage, or any claim or damage or any injury to any person or persons or property, or any death of any person or persons whether caused by negligence or defect, while such rental equipment is in my possession and/or under my use . . . .
In Minnesota, exculpatory clauses are recognized but will be strictly construed against the benefited party. Schlobohm v. Spa Petite, Inc.,326 N.W.2d 920, 923 (Minn. 1982). The enforceability of an exculpatory clause is reviewed de novo. See Beehner v. Cajun Corp.,636 N.W.2d 821, 827 (Minn. App. 2001). An exculpatory clause “may be unenforceable if (1) it is ambiguous in scope or purports to release a party from liability for intentional, willful, or wanton acts; (2) there was a disparity of bargaining power between the parties to the agreement; or (3) the type of service being offered or provided by the exculpated party is either a public or an essential service.” Id.
Xiong first argues that the exculpatory clause should not be enforced because Voyagaire provides a necessary or public service by renting out sleeping accommodations. A necessary or public service is “a service subject to public regulation or of practical necessity for some members of the public.” Id. at 828 (citing Schlobohm,326 N.W.2d at 925-26). Services subject to public regulation as necessary or public services include common carriers, hospitals and doctors, public utilities, innkeepers, and employers and services involving extra-hazardous activities. Schlobohm,326 N.W.2d at 925. In Schlobohm,the Minnesota Supreme Court held that gym services are not necessary or public services and noted that courts in other jurisdictions have generally held that recreational activities do not involve the public interest. Id. at 926-27.
Xiong argues that the district court erred by determining that the rental of houseboats has a recreational component and is, therefore, not a necessary or public service. Xiong argues that because a houseboat provides sleeping accommodations, Voyagaire’s role is instead analogous to the role of an innkeeper. Xiong further argues that the rental of houseboats is subject to public regulation as a resort and that, therefore, the exculpatory clause is unenforceable. See Minn. Stat. § 157.15, subd. 11 (2002) (defining “resort” as “a building, structure, enclosure, or any part thereof located on, or on property neighboring, any lake . . . held out to the public to be a place where sleeping accommodations are furnished . . . and having for rent five or more cottages, rooms, or enclosures”). We disagree.
First, Minn. Stat. § 157.15, subd. 11, does not mention houseboats in defining a resort. Instead, “houseboat” is defined elsewhere by statute as “a motorboat that has either a pontoon or a flat-bottomed hull configuration, and a permanent enclosed superstructure housing, at a minimum, built-in sleeping, cooking, and toilet facilities.” Minn. Stat. § 103G.245, subd. 4(2) (Supp. 2003). Because the statutory definition of “resort” does not include houseboats and because “houseboat” is elsewhere defined as “a motorboat,” Xiong’s argument that rental of a houseboat is a necessary or public service that should be subject to the same regulations as a resort or hotel fails.
Xiong further argues that recreational activities are “voluntarily selected sports activit[ies] in which the participant maintains individual control and as to which the risks are apparent.” Xiong attempts to distinguish between renting a houseboat and recreational activities such as horseback riding, sky-diving, and membership in a gym, as considered in Beehner, 636 N.W.2d at 827; Malecha v. St. Croix Valley Skydiving Club, Inc., 392 N.W.2d 727, 730 (Minn. App. 1986), review denied (Minn. Oct. 29, 1986); and Schlobohm, 326 N.W.2d at 925-26. Xiong argues that the operation of a boat’s heating, cooling, electrical, and plumbing systems are “not within the knowledge of the average member of the public” and that the risks presented by a boat’s boilers, generators, or electrical systems are not readily apparent, as they are in the case of recreational activities such as skiing or skydiving. Xiong argues that only the owners of the “structures in which the sleeping accommodations are located,” in this case the houseboat, are in a position to know the risks involved. But knowledge of the risks involved in an activity is not a factor in determining if it is a necessary or public service. Rather, courts have repeatedly determined that an activity is not a necessary or public service if it is not “of great importance to the public” or “a practical necessity for some members of the public.” Malecha,392 N.W.2d at 730. Nothing here suggests that renting a houseboat is either an activity of great importance to the public or a practical necessity for some members of the public.
Xiong next argues that because there was a disparity in bargaining power, the exculpatory clause should not be enforced. In Minnesota, an exculpatory clause will not be enforced if there is evidence of unequal bargaining power such that one party was under compulsion to sign a contract with an unacceptable provision and was unable to negotiate the elimination of the provision. Schlobohm,326 N.W.2d at 924. Such contracts will be considered contracts of adhesion, which are not bargained for but are instead imposed on the public on a “take it or leave it” basis. Id.
Here, Xiong argues that there was a disparity in bargaining power between Xiong and Voyagaire because (1) he would not have been allowed to rent the boat if he had not signed the contract; (2) the price of the rental had already been paid; (3) the group had traveled “450 miles” to Crane Lake; and (4) the nearest company that also rented houseboats was 65 miles away.
A disparity may exist when a service is “unavailable elsewhere.” Beehner, 636 N.W.2d at 827. In Malecha, the court declined to find a disparity in bargaining power because skydiving services were available elsewhere in the area, despite the fact that the appellant was not provided with a waiver form until just before his jump. 392 N.W.2d at 730. Further, proof that an individual had no opportunity to negotiate the terms of an exculpatory agreement is insufficient to show a disparity of bargaining power. Id. Here, Xiong was under no compulsion to rent the houseboat. The fact that he could not negotiate terms of the contract is insufficient to show a disparity of bargaining power.
Finally, Xiong argues that the exculpatory clause is ambiguous and should not be enforced. An exculpatory clause is ambiguous when it is susceptible to more than one reasonable interpretation. Collins Truck Lines, Inc. v. Metro Waste Control Comm’n,274 N.W.2d 123, 126 (Minn. 1979). Whether the language of a contract is ambiguous is a question of law, which is reviewed de novo. Blattner v. Forster,322 N.W.2d 319, 321 (Minn. 1982). Phrases in a contract should not be taken out of context but rather should be given a meaning in accordance with the obvious purpose of the contract as a whole. Beehner,636 N.W.2d at 827.
Here, Xiong argues that the scope of the exculpatory clause is ambiguous because the phrase “whether caused by negligence or defect, while the rental equipment is in my possession and/or under my use” is subject to two reasonable interpretations. Xiong argues that this language could be read to mean that the renter is liable for (1) injuries resulting from his own negligence after taking possession of the boat or (2) negligence or defects created before he was even in possession of the boat. When read in context, however, the clause is unambiguous and on its face covers all claims that arise from the renter’s possession of the houseboat. Further, in Beehner and Schlobohm, exculpatory clauses with substantially similar language were upheld. Because (1) Voyagaire does not provide a necessary or public service; (2) renting a houseboat is a recreational activity; (3) there was no disparity in bargaining power; and (4) the contract is not ambiguous, we find that the district court did not err by concluding that Xiong’s claim was barred by the contract’s exculpatory clause.
Xiong next argues that the district court erred by concluding that there was no mutual mistake simply because, according to the district court, “the parties claim to have been ignorant of or misunderstood the provisions of the contract.” For a contract to be valid, theparties must have a meeting of the minds regarding essential elements of the contract. Minneapolis Cablesystems v. City of Minneapolis,299 N.W.2d 121, 122 (Minn. 1980). Under the doctrine of mutual mistake, a court may set aside a contractual obligation if, at the time a contract was entered into, both parties shared an erroneous belief relating to the facts. Gartner v. Eikill,319 N.W.2d 397, 398 (Minn. 1982). But in the absence of fraud or misrepresentation, a person who signs a contract may not avoid it on the ground that he did not read it or thought its terms to be different. Id.
Here, there is no evidence that Xiong and Janssen shared an erroneous belief relating to the facts; nor is there any evidence of fraud or misrepresentation. The district court, therefore, did not err by concluding that there was no mutual mistake.
Xiong argues that the district court erred by concluding that Xiong was required to indemnify Voyagaire for any claims or liabilities arising from Xiong’s use of the houseboat. Agreements seeking to indemnify a party for losses resulting from the party’s own negligence are not favored in Minnesota. See Braegelmann v. Horizon Development Co., 371 N.W.2d 644, 646 (Minn. App. 1985), review denied (Minn. Oct. 11, 1985). Indemnification clauses will be strictly construed against the party seeking indemnification. Id.
Here, the language at issue provides that the “Renter shall indemnify and hold harmless Owner from and against all claims, actions, proceedings, damage and liabilities, arising from or connected with Renter’s possession, use and return of the boat, or arising at any time during the term of this rental.” Xiong first argues that there was no specific language in the contract alerting Xiong that he had agreed to indemnify Voyagaire. He claims that there must be an express provision in the contract if a party is to be indemnified “for liability occasioned by its own negligence; such an obligation will not be found by implication.” See Farmington Plumbing & Heating Co.,281 N.W.2d 838, 842 (Minn. 1979); Katzner v. Kelleher Constr.,545 N.W.2d 378, 381 (Minn. 1996) (stating that Farmington was superseded by Minn. Stat. § 337.02 (1994)). But the cases and statute relied on by Xiong deal with indemnification clauses only in the context of building and construction contracts. In indemnification-clause cases involving other types of contracts, this court has stated that “the contract need not expressly refer to negligence . . . if the language of the contract necessarily includes claims of the indemnitor’s negligence.” Bogatzki v. Hoffman,430 N.W.2d 841, 845 (Minn. App. 1988), review denied (Minn. Dec. 21, 1988) (reviewing an indemnification clause in a case of accidental death on an employer’s premises). The test is whether the language is so broad that it necessarily applies to negligence claims. Id. (citing Osgood v. Medical, Inc.,415 N.W.2d 896, 902 (Minn. App. 1987), review denied (Minn. Feb. 12, 1988)). In Bogatzki,the lease provision at issue stated that the indemnitee would be indemnified from claims of personal injury, wrongful death, and property damage. Id. The court found that because personal injury and wrongful-death claims usually are based, at least in part, in negligence claims, inclusion of the term “negligence” was unnecessary. Id.
Here, the language used refers to “all claims, actions, proceedings, damage and liabilities, arising from or connected with Renter’s possession, use and return of the boat.” Under the test set forth in Bogatzki, the language is sufficiently broad so as to include negligence claims.
Xiong next argues that even if the contract language is sufficient, Voyagaire is not entitled to indemnification because the scope of the indemnity clause does not extend to the negligence claims in this lawsuit; specifically, nothing in the contract requires indemnification by Xiong for negligence by Voyagaire that occurred before Xiong took possession of the houseboat. Xiong argues that the plain language of the contract shows Voyagaire’s intent to seek indemnification only for losses caused by the renter while the renter was in control of the houseboat. But the contract clearly provides that “Renter shall indemnify and hold harmless Owner from and against all claims, actions, proceedings, damage and liabilities . . . arising at any time during the term of this rental.” The plain language of the contract shows Voyagaire’s intent to seek indemnification for any claim arising during the rental period. Regardless of the cause, the events on which Xiong’s claim is based occurred during the rental period. The contract provides indemnification for any claims arising during the rental period, including, therefore, a claim of negligence on the part of Voyagaire. Because Xiong was in possession of the houseboat when the events occurred that gave rise to the claims here, his argument is without merit.
Xiong argues finally that even if the indemnification clause is sufficiently clear and sufficiently broad in scope, it should be void on public-policy grounds. As support, Xiong cites Lake Cable Partners v. Interstate Power Co., 563 N.W.2d 81, 87 (Minn. App. 1997), review denied (Minn. July 10, 1997). But in Lake Cable Partners, this court, for public-policy reasons, found that an indemnification clause requiring indemnification of conduct that would support an award for punitive damages was unenforceable. Id. The indemnity clause in that case was upheld as it related to negligence claims. Id. And the same opinion cites caselaw supporting the proposition that a party “may properly bargain for indemnity for his own negligence.” Id. at 85 (quotation omitted). The complaint here alleges negligence by Voyagaire.
Because the indemnification clause is sufficiently clear, sufficiently broad, and is not void on public-policy grounds, the district court did not err by concluding that Xiong must indemnify Voyagaire for any claims arising out of Xiong’s use of the boat.