This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1994).

STATE OF MINNESOTA

IN COURT OF APPEALS

C4-96-1182

Rebecca A. Gray, et al.,

Appellants,

vs.

Charles Conrad and Arlene L. Conrad,

individually and as Agents for ReMax Realty,

defendants and third-party plaintiffs,

Respondents,

and

Michael Jambor,

individually and d/b/a Coldwell Banker Jambor,

third-party defendant,

Respondent.

Filed November 19, 1996

Affirmed in Part, Reversed in Part, and Remanded

Parker, Judge

Ramsey County District Court

File No. C99410712

Kevin E. Giebel, Giebel & Gilbert, P.L.L.P., 530 Roseville Professional Center, 2233 North Hamline Avenue, St. Paul, MN 55113 (for appellants)

William J. Egan, Laurel K. Lee, Rider, Bennett, Egan & Arundel, L.L.P., 2000 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN 55402 (for respondents Charles and Arlene Conrad)

Joseph W. E. Schmitt, Karl J. Yeager, Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for respondent Michael Jambor)

Considered and decided by Parker, Presiding Judge, Peterson, Judge, and Willis, Judge.

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

PARKER, Judge

Appellants Rebecca Gray and her daughter, Katherine Gray, challenge a trial court order denying their motion for new trial, dismissing their rescission and third-party breach of contract claims, and granting a directed verdict in favor of respondents Charles and Arlene Conrad and Michael Jambor. Concluding that the Grays failed to cooperate in discovery and failed to meet their burden of proof as to the fraud/misrepresentation claims, third party contract claims, and establishing grounds for new trial, the trial court dismissed the Grays' rescission claim at the outset of trial, granted the Conrads' motion for a directed verdict at the close of the evidence, and denied the Grays' motion for a new trial. We affirm in part, reverse in part, and remand.

D E C I S I O N

"Use of [Rule 41.02(a)] is infrequent and is within the sound discretion of the trial court." Bonhiver v. Fugelso, Porter, Simich & Whiteman, Inc., 355 N.W.2d 138,144 (Minn. 1984). "We will reverse an involuntary dismissal under [Rule 41.02(a)] only when the trial court abused its discretion." Id.

1. The Grays contend the trial court abused discretion by dismissing their rescission claim for failure to comply with respondents' discovery requests. They argue that when they failed to allow respondents entry onto the premises for inspection purposes, as a sanction for which the court dismissed their rescission claim, the discovery deadline had long passed without respondents having moved to compel discovery. The Grays claim that because there was no order compelling discovery, the trial judge erred in imposing so drastic a sanction under Rule 37.02(b)(3). The Grays also argue that the court's amended scheduling order, filed August 16, 1995, prevented the parties from extending the discovery period without a motion to the court.

The amended scheduling order required that all discovery, including motions to compel, be presented to the court by November 1, 1995. Therefore, the Grays claim, the parties' informal agreement to allow inspection of the subject property after the discovery deadline date was unenforceable.

Rule 37 of the Minnesota Rules of Civil Procedure provides authority for sanctions against a party who fails to comply with a discovery order. See Minn. R. Civ. P. 37. Rule 37.02(b) provides in part:

If a party * * * fails to obey an order to provide or permit discovery, * * * the court in which the action is pending may make such orders in regard to the failure as are just, and among others * * * [a]n order * * * dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.

Minn. R. Civ. P. 37.02(b)(3). However, an order compelling discovery must contain two elements: (1) a date certain by which time compliance is required; and (2) a warning of potential sanctions for noncompliance. Jadwin v. City of Dayton, 379 N.W.2d 194, 196 (Minn. App. 1985). Sanctions for failure to comply with a discovery order should not be imposed where either of these elements is absent. Sudheimer v. Sudheimer, 372 N.W.2d 792, 795 (Minn. App. 1985). In addition, the moving party must show prejudice before sanctions for failure to comply with the discovery request will be justified. Chicago Greatwestern Office Condominium Ass'n v. Brooks, 427 N.W.2d 728, 732 (Minn. App. 1988). Broad discretion must be left to the trial courts to enforce calendar rules to prevent unnecessary and inexcusable delays, but "[a]n order of dismissal on procedural grounds runs counter to the primary objective of the law to dispose of cases on the merits." Housing & Redevelopment Auth. v. Kotlar, 352 N.W.2d 497, 499 (Minn. App. 1984) (quoting Firoved v. General Motors Corp., 277 Minn. 278, 283-84, 152 N.W.2d 364, 368-69 (1967)). Because dismissal with prejudice is a "drastic form of relief," a case should be dismissed only under exceptional circumstances, namely where there are (1) considerations of willfulness and contempt for the authority of the court; and (2) prejudice to the parties involved. Asmus v. Ourada, 410 N.W.2d 432, 435 (Minn. App. 1987).

In this case, after a number of continuances, the trial court issued an amended scheduling order, dated August 16, 1995, that provided in part:

2. All discovery shall be noticed so as to be completed by November 1, 1995. This cut-off date for discovery is also the deadline to bring and hear motions to compel discovery. No motion will be heard unless the parties have conferred and attempt to resolve their differences prior to hearing. The moving parties shall certify to the court in writing, before the time of the hearing, compliance with this rule or any reasons for not complying (Minn. R. Gen. Pract. 115.10). * * *

At the commencement of trial, the Conrads moved the court to dismiss the Grays' rescission claim for failure to comply with their discovery requests. Concluding that the Grays had repeatedly failed to cooperate in the discovery process, the trial court granted the Conrads' motion.

We conclude that the evidence is such that the trial court's dismissal of the Grays' rescission claim was error. Dismissal of a case is a "drastic form of relief" and should be ordered only under the most exceptional circumstances. Asmus, 410 N.W.2d at 435 (willfulness, contempt for the authority of the court, and prejudice to the parties could be considered exceptional circumstances warranting dismissal).

On this record, we do not observe that "exceptional circumstances" existed such as to justify dismissal of the rescission claim. Although the Conrads contend there was an informal "letter" agreement to comply with discovery, we find no such letter in the record to support this assertion. We are not directed to any evidence to show that a motion to compel discovery was requested or ordered by the court. We cannot say that the trial court's August 16, 1995, amended scheduling order constitutes an order to compel discovery, because it fails to set out a specific date for compliance and a warning of potential sanctions for noncompliance. See Jadwin, 379 N.W.2d at 196. The trial court appears to have been confronted with a disagreement as to what happened regarding the parties' discovery requests and with a claim by respondents that an informal agreement for a second inspection of the premises had been violated. However, the trial court made no finding that resolved the factual disagreement or that determined who, if anyone, was at fault. Absent evidence to show that there was a violation of a court order to compel discovery, the trial court's order dismissing the Grays' rescission claim was an abuse of discretion, and the claim must be reinstated.

2. The Grays argue that it was error for the trial court to grant a directed verdict as to their fraudulent misrepresentation claim and Katherine Gray's third-party breach of contract claim. They contend that Rebecca Gray's testimony that "the home had absolutely no value at all to me" provides sufficient evidence of the home's valuation so that the amount of damages could be determined to prove their fraud and misrepresentation claim. The Grays also claim that there was ample evidence of their attempts to remove pet dander, mold, and other irritants from the home which would support a finding of diminution in value of the house from the purchase price.

The Grays also argue that there was ample evidence in the record to support Katherine Gray's third-party breach of contract claim. They contend there was ample evidence to show that Katherine was a foreseeable recipient of the information provided by respondents, as well as a co-purchaser of the property and realty services. They further claim that Rebecca Gray's grant of power of attorney to Katherine Gray made her a co-buyer of the property, thereby precluding the need for her to be named in the purchase agreement. Because substantial evidence supports their claims, the trial court should have allowed these issues to go to the jury and reasonable minds could have reached a result in their favor, and, the Grays argue, the trial court's grant of the motion for a directed verdict was error.

When the trial court grants a motion for a directed verdict, a reviewing court reviews the evidence and its inferences to determine whether the evidence could reasonably sustain a contrary verdict. Northwestern State Bank of Luverne v. Gangestad, 289 N.W.2d 449, 453 (Minn. 1979).

On appeal from a directed verdict, the reviewing court makes an independent assessment of its appropriateness. A motion for a directed verdict presents a question of law for the trial court: whether the evidence is sufficient to present a fact question for the jury to decide.

Claflin v. Commercial State Bank of Two Harbors, 487 N.W.2d 242, 247 (Minn. App. 1992) (citations omitted), review denied (Minn. Aug. 4, 1992). "A directed verdict should be granted only where, in light of the evidence as a whole, it would be the duty of the trial court to set aside a contrary verdict as manifestly contrary to the evidence or to the law." Id. In considering the motion, the trial court must accept as true the evidence favorable to the adverse party and all reasonable inferences that can be drawn from that evidence, and this court must apply the same standard. Id.

A. Directed Verdict on Fraudulent Misrepresentation Claim

In order to sustain an action for fraudulent misrepresentation:

(1) There must be a representation.

(2) That representation must be false.

(3) It must have to do with a past or present fact.

(4) That fact must be material.

(5) It must be susceptible of knowledge.

(6) The representor must know it to be false * * * .

(7) The representor must intend to have the other person induced to act or justified in acting upon it.

(8) That person must be so induced to act or so justified in acting.

(9) That person's action must be in reliance upon that representation.

(10) That person must suffer damage.

(11) That damage must be attributable to the misrepresentation * * *.

Weise v. Red Owl Stores, Inc., 286 Minn. 199, 202-03, 175 N.W.2d 184, 187 (1970), rev'd on other grounds, State by Humphrey v. Alpine Air Prods., 500 N.W.2d 888, 891 (Minn. 1993). In transactions giving rise to a misrepresentation action, the damages are to be measured by "out-of-pocket" loss. Lowrey v. Dingmann, 251 Minn. 124, 127, 86 N.W.2d 499, 501-02 (1957). "[I]n cases involving fraudulent misrepresentation to a buyer of real estate, the measure of damages is the amount paid less the fair market value of the property." Nave v. Dovolos, 395 N.W.2d 393, 398 n.1 (Minn. App. 1986) (citing Peterson v. Johnston, 254 N.W.2d 360, 362 (Minn. 1977)). Diminution in one's personal enjoyment and use of the property does not constitute a diminution in market value. Alevizos v. Metropolitan Airport Comm'n, 317 N.W.2d 352, 359 (Minn. 1982). However, an owner is competent to express an opinion on the market value of his or her property. Vreeman v. Davis, 348 N.W.2d 756, 757 (Minn. 1984) (citing Jackson v. Buesgens, 290 Minn. 78, 82, 186 N.W.2d 184, 186-87 (1971). But, where an owner is not familiar with the market value of similar property, the owner's opinion "standing alone" is of little probative value. Id. (citing H.P. Droher & Sons v. Toushin, 250 Minn. 490, 501, 85 N.W.2d 273, 281 (1957)).

On review of the elements required to prove fraudulent misrepresentation and the out-of-pocket damages rule, the trial court found that the Grays had presented "absolutely no evidence of the fair market value of the property." The trial court then granted respondents' motions for a directed verdict.

We conclude that the trial court's grant of a directed verdict was required by the state of the record. A property owner may provide credible testimony as to the fair market value of his property, but that opinion must be in terms of the objective standard of market value:

Mr. Friedman: Did you have an opinion that there was a decrease in [the home's] value?

Rebecca Gray: Definitely.

Friedman: And what was your opinion?

Gray: That home had absolutely no value to me at all.

(Emphasis added.)

This testimony amounts to nothing more than a subjective opinion that the home has no value for her purposes. See Alevizos, 317 N.W.2d at 359. Because the fair market value of the property as received must be shown in order to subtract it from the purchase price and show the damages suffered as a consequence of the alleged false representations, Rebecca Gray's subjective opinion fails to address a crucial element of proof of her claim. Furthermore, Rebecca Gray's offer of receipts from expenditures on home repairs as proof of diminution of market value fails to establish a proper foundation for cost of cure of the alleged deficiencies existing at the time of purchase. Absent evidence of the actual fair market value of the real property, we conclude that the trial court's grant of a directed verdict on the fraudulent misrepresentation claim was not error.

B. Directed Verdict on Third-party Breach of Contract Claim

Minnesota courts utilize the approach outlined in Restatement (Second) of Contracts § 302 (1979) to determine who may assert a third-party beneficiary claim. Cretex Cos., Inc. v. Construction Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984). Thus, a third-party beneficiary may recover as an intended beneficiary if recognition of third-party beneficiary rights is appropriate and either the duty-owed or intent-to-benefit test is met. Id. The duty-owed test is satisfied if "the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary." Restatement (Second) of Contracts § 302(1)(a). The intent-to-benefit test is satisfied if "the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance." Restatement (Second) of Contracts § 302(1)(b). Where a contract is unambiguous on its face, parol evidence will not be allowed to alter the plain meaning of the contract terms. Norwest Bank Minn. N.A. v. Midwestern Mach. Co., 481 N.W.2d 875, 881 (Minn. App. 1992), review denied (Minn. May 15, 1992).

The trial court found that the terms "buyer" and "seller" in the purchase agreement were unambiguous. Thus, the trial court concluded that parol evidence would not be admitted to assist in interpretation of the terms. On the four corners of the agreement, the trial court concluded, there was no expressed intent to benefit Katherine Gray. The court then dismissed her third-party claims.

Katherine Gray was not named in the purchase agreement. Nor are the terms "buyer" and "seller" ambiguous. We are directed to no evidence to support the assertion that Katherine Gray was a party to or an intended beneficiary of the contract. We cannot agree, therefore, that a jury could find that respondents breached contractual duties with regard to Katherine Gray.

Even viewing the evidence, as we must, in a light most favorable to the Grays, we hold that the Grays have not provided evidence to support a claim for fraudulent misrepresentation or to support the third-party claim for breach of contract. We conclude, therefore, that the trial court did not err in granting respondents' motions for a directed verdict as to these claims.

3. "On appeal from a denial of a motion for a new trial, the verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in the light most favorable to the verdict." ZumBerge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992), review denied (Minn. Apr. 29, 1992).

The Grays argue that the trial court erred in dismissing their motion for reconsideration and for a new trial. They contend that the trial court's grant of a directed verdict at the close of trial on December 6, 1995, did not conclude litigation, because the trial court later filed an order for entry of judgment dated February 5, 1995. The Grays argue that the directed verdict did not constitute a general verdict, which would trigger running of time in which to move for a new trial. Furthermore, they contend that because respondents failed to serve notice of filing of the trial court's order, the time to move for new trial never ran and their motion for new trial was not untimely.

Ordinarily, the decision to grant a new trial lies within the sound discretion of the trial court and will not be disturbed absent a clear abuse of that discretion.

Halla Nursery v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990) (citation omitted). Where the trial court exercised no discretion, but instead based its order upon an error of law, however, a de novo standard of review applies. Id.

Minn. R. Civ. P. 59.03 provides:

A notice of motion for new trial shall be served within 15 days after a general verdict or service of notice by a party of the filing of the decision or order; and the motion shall be heard within 30 days after such general verdict or notice of filing, unless the time for hearing be extended by the court within the 30 day period for good cause shown.

"[A] general verdict does not look toward a further decision or order by the trial judge prior to the time that it is an effective conclusion to the litigation." Lundeen v. Renteria, 302 Minn. 142, 145, 224 N.W.2d 132, 134 (1974) (holding that where judgment on directed verdict was not promptly entered, plaintiff's motion for new trial was technically untimely under Rule 59.03).

Whether the directed verdict * * * be characterized as a general verdict, or merely as a decision by the court to deny all relief to plaintiff, it seems clear under the local practice that the judge did not have in contemplation any subsequent judicial act of pronouncing judgment in a more formal manner.

Id.

In denying the Grays' motion for a new trial, the trial court noted that the entry of a directed verdict on the record at the close of trial on December 6, 1995, "effectively ended all litigation between the parties." Therefore, the court concluded, the December 6 directed verdict resolved all issues and "may be equated with a general verdict."

On this record, we cannot say that the trial court's denial of the Grays' motion for a new trial was error. The grant of a directed verdict, entered on the record on December 6, 1995, ended all litigation between the parties. Although the order for entry of judgment was not issued until February 5, 1996, and the judgment entered on February 7, we conclude that all litigation between the parties was ended on the record at the close of the Grays' case on December 6, 1995. The evidence shows that the Grays failed to move for a new trial until March 27, 1996. We hold, therefore, that technically under Rule 59.03, the Grays' motion for a new trial was untimely. Of course, since we have found no error in that directed verdict, denial of the motion for a new trial must also be affirmed on the merits.

Affirmed in part, reversed in part, and remanded for trial of the claim for rescission.