This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







TSM Development, Inc.,






Chicago Title Insurance Co.,




Filed November 22, 2005

Crippen, Judge


Wright County District Court

File No. C7-03-0711



Jeffrey Charles O’Brien, Mansfield, Tanick & Cohen, P.A., 220 South Sixth Street, Suite 1700, Minneapolis, MN 55402 (for appellant)


Steven R. Little, Coleman, Hull & Van Vliet, 8500 Normandale Lake Boulevard, Suite 2110, Bloomington, MN 55437 (for respondent)


            Considered and decided by Dietzen, Presiding Judge, Worke, Judge, and Crippen, Judge.

U N P U B L I S H E D   O P I N I O N


            TSM Development, Inc. appeals from the district court’s denial of its motion to modify its complaint and the court’s summary judgment dismissing claims against Chicago Title Insurance Company.  Because the district court correctly determined that water-line connections were not assessments for which Chicago Title provided coverage, we affirm.


            In 1998, appellant TSM Development, Inc. sold a 16-acre parcel of land in the City of St. Michael to BrightKEYS Building & Development Corporation for development as a residential subdivision.  Both parties acquired title insurance from respondent Chicago Title Insurance incident to the transaction.

            Before the sale transaction, Frankfort Township (which was subsequently annexed by the City of St. Michael) authorized the imposition of a connection fee on all properties served by a trunk water main built by a private company during the development of another subdivision near the TSM property.  As adopted by the city in November 1996 following annexation, the connection fee was to be imposed with the issuance of a building permit for each property served by the trunk line.  Much of the TSM property lies within the benefited area defined by the city’s resolution.

            TSM contracted for water mains to serve the subdivision by connecting to the earlier-installed trunk line.  After the BrightKEYS sale transaction closed and development proceeded, the city informed the buyer that it owed an additional $532 for each of the 164 units built within the benefited area because of the fee for connecting to the trunk line. 

            Under the terms of the BrightKEYS purchase agreement, TSM agreed to pay for the cost of the trunk line extension of city utilities to the property.  In 2002, TSM agreed to pay $75,000 to settle a suit by BrightKEYS that claimed TSM breached its contract to pay for the extension of utilities.  The settlement also provided that TSM would pursue title insurance claims and remit to BrightKEYS any amount recovered up to $177,403 (inclusive of the $75,000), the full amount of BrightKEYS’s claim of damages.

            In February 2003, TSM commenced the present action against the title insurer, alleging that the connection fee was really an assessment entitled to coverage as a lien or encumbrance on the title under TSM’s 1998 lender’s policy.  In October 2004, TSM sought to amend its complaint to also assert an assignee’s claim under BrightKEYS’ owner’s policy.  The district court considered the parties’ competing motions for summary judgment, denied TSM’s motion to amend its complaint, and granted Chicago Title’s motion for summary judgment requesting dismissal of all claims.


            Our review of summary judgment considers whether the district court erred in its application of the law and whether it resolved issues of material fact.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  Construction of an insurance policy involves a question of law.  Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 886-87 (Minn. 1978).  If there is no dispute of material fact, this court independently reviews the district court’s interpretation of the insurance contract.  Zimmerman v. Safeco Ins. Co. of Am., 605 N.W.2d 727, 729 (Minn. 2000).

            The district court concluded that TSM was “not entitled to coverage under any policy or commitment” issued by Chicago Title.  TSM maintains that the trunk-line-connection fee imposed by the city is a tax assessment requiring indemnification as a lien or encumbrance on the title under the policies issued by Chicago Title.  TSM concedes that its appeal is without merit if the connection fee was not an assessment. 

            TSM’s bases its argument on the definition of “assessment” as “a tax, intended to offset the cost of local improvements such as sewer, water and streets, which is selectively imposed upon the beneficiaries.”  Dosedel v. City of Ham Lake, 414 N.W.2d 751, 755 (Minn. App. 1987) (citing Minn. Stat. §§ 429.051, .081 (1984) (providing statutory authority for municipalities to assess improvement costs to properties and for property owners to appeal assessments)).  TSM argues that because the “connection fee” benefited properties in the immediate vicinity and not the general public, it must be considered an assessment as a matter of law.

            Municipalities may impose connection charges to pay for the enlargement of water and sewer facilities as long as those charges are “just and equitable” and “as nearly as possible proportionate to the cost of furnishing the service.”  Minn. Stat. § 444.075, subd. 3 (2004).  Alternatively, a municipality may pay for the extension of its water system by assessing the cost via property taxes levied on benefited property in defined procedures.  Minn. Stat. §§ 429.021, subd. 1(5), .051, .061 and 444.075, subd. 4 (2004).

            TSM has not shown that the city followed procedures provided by law to levy a special assessment.  Minn. Stat. § 429.061, subd. 1 (outlining procedures for calculation, notice, adoption, and collection of special assessments).  Although TSM claims that the city passed a resolution designating the connection fee as a “Trunk Watermain Assessment,”no such resolution appears in the district court record.  Given the city’s express designation of the reimbursement mechanism for the trunk line as a “connection and lateral benefit fee” and its ratification of that fee at a regular meeting of the city council without regard to the statutory levy process, the district court properly refused to construe the fee as a tax assessment covered under Chicago Title’s policies. 

            TSM argues that implied policy coverage for “assessments” is at least ambiguous regarding connection charges that are not imposed under chapter 429, but TSM cites no authority for this argument.  Chicago Title correctly calls attention to Crown Cork & Seal Co., Inc. v. City of Lakeville, 313 N.W.2d 196, 201 (Minn. 1981), which distinguishes a sewer connection charge from a special assessment, and Nordgren v. City of Maplewood, 326 N.W.2d 640, 642 (Minn. 1982), which states that “connection charges are not assessments and may be imposed on top of prior assessments.”  We also observe that Chicago Title’s policies insure against title defects, even if this is interpreted to include all assessments that impair title.  Unlike a municipality’s connection fee approach, which does not affect title, statutory special assessment process has the significant consequence of creating a lien that is an encumbrance on real estate title.  Minn. Stat. § 429.061, subd. 2.  Moreover, we note that TSM’s broad definition of “assessment” acknowledges that it is a tax on property; TSM makes no attempt to explain how a property tax might arise without a levy process that would create a lien on the property. 

            We affirm the district court’s summary judgment with respect to coverage under the policies it issued to TSM and BrightKEYS.  Because the connection fee was not a special assessment, we need not otherwise address interpretation of the Chicago Title policies, the question of whether TSM’s policies were terminated by satisfaction of its mortgage interest, TSM’s claim that it was entitled to coverage as an assignee of BrightKEYS, or TSM’s right to amend its complaint to include a claim under the BrightKEYS policy.


* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.