may not be cited except as provided by
Minn. Stat. §. 480A.08, subd. 3 (1994).
STATE OF MINNESOTA
IN COURT OF APPEALS
Independent School District 441,
Filed December 3, 1996
Marshall County District Court
File No. C7-93-339
Hugh J. Cosgrove, Douglas R. Archibald, Cosgrove, Flynn & Gaskins, P.L.L.P., 2900 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN 55402 (for Respondent)
Eric W. Forsberg, Forsberg Law Office, P.A., 100 South Fifth Street, Minneapolis, MN 55402 (for Respondent)
Joseph F. Lulic, Kevin J. Kennedy, Hanson Lulic & Krall, 920 Second Avenue South, Suite 500, Minneapolis, MN 55402 (for Appellant)
Considered and decided by Harten, Presiding Judge, Schumacher, Judge, and Foley, Judge.
Appellant contends the trial court made various errors at trial, when it ruled on evidence and instructed the jury, and posttrial, when it denied appellant's motion for a new trial. We affirm.
The state fire marshall and fire investigators determined that the coffee maker in the teachers' lounge caused the fire. Appellant Bunn-O-Matic Corporation (Bunn) manufactured the coffee maker.
After exploring options for new construction or repair of the damaged building, the school district elected to salvage what it could and repair the damaged facility. Reconstruction of the school was complete in September 1992. On behalf of the school's insurer, the CIGNA group made numerous payments during reconstruction of the school: $4,923,163 to contractor Kraus-Anderson; $253,799 to the architects; $63,161.17 for demolition and emergency expenses; $1,344,003.22 to the school district for personal property loss; and $31,238.30 for temporary building rental.
The school district sued Bunn for negligence, alleging the defective coffee maker caused the fire. Bunn denied liability; the case proceeded to trial. Several evidentiary rulings are now at issue.
Bunn sought to admit the Uniform Fire Code (UFC) to show that the school district's noncompliance contributed to the fire damage. The state fire marshall testified that he would not have cited the school for UFC violations had he inspected the building before the fire. The trial court excluded all references to the UFC. The trial court admitted the school district's videotape that contained eight experiments of Ordean Anderson scientifically recreating and demonstrating the ignition of the fire. The court allowed high school principal Ron Paggen to testify that the total value of the school's contents on the date of the fire was $1,349,218.71. Bunn attempted to present five different appraisals of the school and its contents, but the trial court excluded them on the basis of hearsay, double hearsay, irrelevance, and improper foundation.
The jury returned a special verdict finding that the coffee maker was defective and was the cause of damages to the school. The jury awarded the school district a total of $6,310,528.72 in damages. The court initially awarded costs and disbursements of $346,984.32 to the school district, but later, on Bunn's motion, amended that award to $34,963.61 in costs and disbursements and $1,126,559.05 in prejudgment interest. The court then entered a total verdict of $7,472,051.38 retroactive to December 22, 1995, the date the original jury verdict was entered into judgment. Bunn moved for a new trial, alleging various errors in the admission and exclusion of evidence and in jury instructions. The trial court denied this motion.
At the heart of Bunn's argument is its claim that the school district violated the UFC by failing to have an automatic sprinkler system in the school building. Bunn's claim invokes two provisions of the main body of the UFC. UFC § 10.306 requires automatic fire-extinguishing systems in buildings such as the school at issue here. Whether section 10.306 actually applies here, however, depends on interpretation of the UFC's "grandfather clause," because the school was built in 1970, before Minnesota adopted the UFC, and had non-conforming, pre-existing conditions that still may be legal under the UFC. The grandfather clause provides:
Existing Conditions. The provisions of this code shall apply to existing conditions as well as to conditions arising after the adoption thereof, except that conditions legally in existence at the adoption of this code and not in strict compliance therewith shall be permitted to continue only if, in the opinion of the chief, they do not constitute a distinct hazard to life or property.
UFC § 1.103(b). The question in this case is whether this grandfather clause applies to a school that has never been inspected by the fire marshall. The construction of a statute is a question of law that this court reviews de novo. Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn. 1985).
The Minnesota Supreme Court recently interpreted this grandfather clause in Alderman's Inc. v. Shanks, 536 N.W.2d 4, 8 (Minn. 1995). Alderman's presented the case where a fire marshall cited certain code violations, yet allowed other violations to stand without citation. The supreme court held that the grandfather clause did not require the fire marshall to find affirmatively that every uncited, nonconforming condition posed a hazard to life or property. Id. at 10. The supreme court further held it is "reasonable to infer that the fire chief has implicitly found that the uncited conditions are not distinct fire hazards." Id.
Bunn interprets the Alderman's decision to require a fire marshall to inspect a property before the grandfather clause may apply. We disagree. The Alderman's court focused on the "reasonableness" of the UFC. Id. at 9-10. The intent of the code is to set rules "for the safeguarding to a reasonable degree of life and property from the hazards of fire." UFC § 1.102(a), cited in Alderman's, 536 N.W.2d at 9 (emphasis added). The court explained:
[W]e do not believe the grandfather clause should be interpreted to require the fire chief to make an affirmative finding that each and every nonconforming condition in a building does not constitute a distinct hazard to life or property. Such an interpretation, we believe, is unreasonable for several reasons. First, it is impractical to put such an onerous burden on a fire official who is most likely already understaffed and overworked, particularly in rural portions of the state. Second, the plain language of the grandfather clause simply does not require the fire chief to manifest his opinion in an affirmative finding.
Alderman's, 536 N.W.2d at 10. Following that rationale, we believe it would be even more burdensome to require the fire marshall to inspect every structure for code violations each time the fire code changes.
The supreme court was mindful "of the potentially devastating economic consequences of a more restrictive application of the grandfather clause and believe such results are precisely what it was meant to avoid." Id. This comment reveals the court's willingness to give the benefit of the doubt to the building owner and allow preexisting conditions to continue until specifically cited by the fire marshall. Indeed, the rationale behind the grandfather clause is that it is "unfair to penalize the regulated party for something begun prior to the enactment of the statute." No Power Line, Inc. v. Minnesota Envtl. Quality Council, 262 N.W.2d 312, 320 (Minn. 1977).
We are not persuaded by Bunn's reliance on Northern Lights Motel, Inc. v. Sweaney, 561 P.2d 1176 (Alaska 1977). In holding that the motel was not exempted by any grandfather clause under the Uniform Building Code, the court reasoned:
[The grandfather clause] places a burden on defendants to show that the state authorities expressly or impliedly accepted the condition of the building. We find no evidence, however, that any state officials inspected the building or issued any opinions, express or implied, that the conditions were not unduly hazardous.
Id. at 1183 (emphasis added). Bunn contends the italicized phrase supports its argument that an inspection is required before the grandfather clause may apply. We need not defer to foreign case law, however, when the supreme court has so recently expressed its rationale behind interpreting the UFC in Alderman's.
Nor are we persuaded by Bunn's argument that the UFC ought to be admitted because valid codes are generally admissible. See Raymond v. Baehr, 282 Minn. 109, 112-13, 163 N.W.2d 51, 53-54 (1968) (reversing and remanding for new trial at which unpublished city building code could be placed into evidence because it was a valid public record). In order to be admissible, the code must be relevant. Minn. R. Evid. 402. The record here reveals that the UFC is not relevant to Bunn's theory that the school was negligent in failing to comply with code and have a sprinkler system; the state fire marshall testified that he would not have cited the school for UFC violations had he inspected the building before the fire. The state fire marshall is the enforcement authority with regard to the UFC. He is the bureau chief who oversees all inspection services and oversees adoption of the code. At the time of the fire, he was the supervisor of the school inspection program. He explained that he viewed the school from a "holistic approach" and concluded that the school was "in compliance within a reasonable interpretation of the [UFC] as applied in Minnesota." The trial court properly excluded any reference to the UFC.
This argument fails, because the UFC imposes no duty on the school district, and Bunn has not presented a common law duty. We recognize that the school district has a duty to exercise reasonable care in maintaining its premises. Fallin v. Maplewood-North St. Paul Dist. No. 622, 362 N.W.2d 318, 321 (Minn. 1985). But, before a landowner may be liable, it must "have either actual or constructive knowledge of the dangerous condition." Otto v. City of St. Paul, 460 N.W.2d 359, 362 (Minn. App. 1990) (citing Restatement (Second) of Torts SSSS 342, 343 (1965)).
Bunn has not established that the school district knew the lack of sprinklers rendered the building unsafe. The school district had no knowledge of nonconformity with the UFC, because the fire marshall had never inspected the school before the fire occurred. Furthermore, the fact that the fire marshall would not have cited the school for any UFC violations reveals that the lack of sprinklers did not "constitute a distinct hazard to life or property." UFC § 1.103. Without establishing knowledge, Bunn cannot assert the school had a duty to install a sprinkler system to mitigate potential fire damage. See Otto, 460 N.W.2d at 362 (requiring knowledge before party may be liable for negligence). The trial court properly excluded mention of the sprinkler system.
Demonstrations one through four sought to simulate the ignition of the fire. Experiments that simulate the accident must have been conducted under conditions "substantially similar" to the actual conditions of the incident at issue. McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1401 (8th Cir. 1994) (quoting Champeau v. Fruehauf Corp., 814 F.2d 1271, 1278 (8th Cir. 1987)). "The closer the experiment gets to simulating the accident, the more similar the conditions of the experiment must be to the accident conditions." Id. at 1402.
Bunn challenges the video's admissibility because of four alleged differences between the demonstration and the fire. But admissibility "does not depend on perfect identity between actual and experimental conditions." Id. at 1401 (quoting Champeau, 814 F.2d at 1278); see also Johnson v. Engen, 386 N.W.2d 269, 271 (Minn. App. 1986) (party seeking to introduce videotaped demonstrations as proof of incident must show "similarity of conditions" between demonstrations and incident). The differences that Bunn cites helped duplicate conditions in the main switch at the time the fire ignited, according to the school district's theory of the case. The school district contended that a loose connection in or around the switch produced a build-up of copper oxide, which eventually generated heat up to 2,000 degrees fahrenheit, melted the plastic housing, and created gases that ignited and caused the fire. Although Anderson had the coffee maker plugged in during the demonstration, as a normal appliance would be, the state of the coffee maker at the time the fire ignited was not the same as one right out of the box. The defective and malfunctioning parts altered the condition of the coffee maker. Anderson replicated those conditions in his demonstration with substantial similarity to the actual events that occurred. The trial court did not abuse its discretion in admitting the first four videotape demonstrations.
Demonstrations five to eight were scientific experiments, which did not have to be substantially similar to the fire conditions. McKnight, 36 F.3d at 1401 (experiments that demonstrate general scientific principles need not meet substantial similarity test). In these demonstrations, Anderson ran a current through a 10 ohm resistor and ignited a coffee maker. Bunn contends these experiments were a significant departure from how the coffee maker normally operates. But this case did not arise out of the "normal" operation of the coffee maker; a manufacturer's defect caused the fire. Anderson explained that the loose connection near or in the main switch caused the copper oxide to build up and essentially create a resistor there, among the wires, that could reach up to 10 ohms. He hooked up the 10 ohm resistor and removed the plastic housing "[j]ust to demonstrate what that power would do." The trial court properly determined that these experiments were not intended to recreate the fire as it actually started, "but only to demonstrate the scientific principle that electrical heating as opposed to an actual flame could ignite the plastic parts of a coffee maker." The trial court did not abuse its discretion by admitting these videotape experiments.
A. Testimony Regarding Contents of School
Bunn first contends Principal Paggen's testimony regarding the value of the contents of the school was inadmissible due to lack of foundation, because he was not the owner of that property. Bunn argues that only the owner of property may testify to its value, citing Bury v. Bury, 416 N.W.2d 133, 136 (Minn. App. 1987) (owner may testify to property value because he is presumptively acquainted with it). We disagree. The "only basis" for the owner's rule is that the witness has "intimate knowledge" of the property being valued. McClure v. Village of Browns Valley, 143 Minn. 339, 341, 173 N.W. 672, 673 (1919). The valuation opinion of a witness other than the owner of the property is admissible if his knowledge is "the result of observations he has made or has become aware of in the course of his business." Bartl v. City of New Ulm, 245 Minn. 148, 152, 72 N.W.2d 303, 306 (1955). "[A]ny weakness in the foundation for that opinion goes to its weight, not its admissibility." Vreeman v. Davis, 348 N.W.2d 756, 757 (Minn. 1984).
Paggen had intimate knowledge of the contents of the high school where he was principal. He based the value of the contents on an inventory that the teachers had prepared of all the classrooms and offices. Cf. McClure, 143 Minn. at 341, 173 N.W. at 673 (court excluded village president's testimony on valuation of bridge for lack of foundation, because he had no "special knowledge" of value). Paggen's opinion was "the result of observations he has made or has become aware of in the course of his business" as principal. Bartl, 245 Minn. at 152, 72 N.W.2d at 306. Even if that foundation was questionable, however, the jury could consider that when weighing the evidence. Vreeman, 348 N.W.2d at 757. The trial court did not abuse its discretion in admitting Paggen's opinion on the value of the contents of the high school.
B. Exclusion of Appraisals
Bunn contends the trial court erred as a matter of law when it excluded three appraisals of the school prepared in 1970, 1974, and 1979 by the firm of Marshall & Stevens to assist the school district in purchasing insurance. Bunn offered them as proof of the value of the school's contents at the time of the fire in 1991, claiming them to be business records admissible under Minn. R. Evid. 803(6), the business record exception to the hearsay rule.
The appraisals do not meet the requirements for admissibility. See National Tea Co. v. Tyler Refrigeration Co., 339 N.W.2d 59, 61 (Minn. 1983) (requiring records be part of regularly conducted business activity, be regular practice of business to make the record, and have foundation through custodian of records or other qualified witness). The school district did not prepare these appraisals; Marshall & Stevens prepared them. Bunn failed to call a qualified witness from Marshall & Stevens who could testify to the specific knowledge of the employee who prepared the appraisals in order to establish the necessary foundation. See Kronebusch v. MVBA Harvestore Sys., 488 N.W.2d 490, 495 (Minn. App. 1992) (holding trial court properly excluded USDA research reports as hearsay, where manufacturer who offered reports failed to call qualified witness to lay foundation about method used to prepare reports), review denied (Minn. Oct. 20, 1992).
We note, however, that the trial court found the testimony of Bunn's real estate appraiser, Gene Foote, to be relevant and admissible. With Foote's testimony, Bunn had the opportunity to present similar, more recent evidence regarding the value of the school's contents for the jury to consider. The trial court did not err in excluding the appraisals.
C. Independent Audit Reports
Bunn claims the trial court erred when it excluded two independent audits that were offered to show that the school district had overvalued the contents of the high school at the time of the fire. We disagree. These audit reports contain double hearsay and do not fall into any exception. See Minn. R. Evid. 805 (hearsay within hearsay may be admissible if each part falls under exception to hearsay rule). Bunn concedes that both reports use information directly out of the 1979 Marshall & Stevens appraisal, an inadmissible document due to lack of proper foundation to qualify for an exception to the hearsay rule. Thus, any inadmissible evidence from the 1979 report is also inadmissible in the 1991 and 1992 audit reports. Bunn has not separated out the tainted evidence from the 1979 report from that which may be admissible in the 1991 and 1992 reports. We note further that much of the evidence in these reports, like the Marshall & Stevens appraisals, was also presented independently through the testimony of Gene Foote.
Bunn also claims the "estimated fire loss" figures in the 1992 report are relevant and admissible as admissions of a party opponent pursuant to Minn. R. Evid. 801(d)(2). Again, we disagree. Bunn did not elicit the name of the declarant who allegedly made these statements against interest. Furthermore, the CPA who helped prepare the audit testified that the numbers he was given are meaningless. "They could give us any number. And when we don't audit that, we don't really care." Based on this record, the trial court properly excluded the independent audits.
Bunn alleges the trial court erroneously failed to instruct the jury that "[t]he mere fact that an incident has happened does not of itself mean that anyone has been negligent." 4 Minnesota Practice, CIVJIG 99 (1986). That instruction is appropriate in negligence cases. Id., cmt. But the school district here alleged strict liability arising out of the defective manufacture of a coffee maker. Strict liability and negligence are distinct theories in manufacturing flaw cases. Bilotta v. Kelley Co., 346 N.W.2d 616, 622 (Minn. 1984).
In manufacturing flaw cases, "the manufacturer's conduct is irrelevant." Id.
[T]he defect is proved by focusing on the condition of the product. [CIVJIG 118] consumer expectation instructions, which focus only on the condition of the product, are appropriate for this type of case.
Id. The instruction for strict liability in manufacturing flaw cases, CIVJIG 118, provides that a product is defective if it presents a danger during its common use by an ordinary consumer, and the defect may be the result of manufacturing. 4 Minnesota Practice, CIVJIG 118 (1986).
The significant difference [between strict liability and negligence] is that under strict liability the jury need not infer from the circumstantial evidence that defendant was negligent in order to impose liability. It is sufficient that the evidence establishes that the manufacturer placed a dangerously defective product on the market, * * *.
Lee v. Crookston Coca-Cola Bottling Co., 290 Minn. 321, 332, 188 N.W.2d 426, 434 (1971). Consequently, CIVJIG 99, which focuses on the possibility of sheer accident and the absence of negligence, has no place in this case.
To recover, the school district bore the burden of proving the product was in a defective condition, the defect existed when the product left the manufacturer's control, and the defect was the proximate cause of the injury. Lee, 290 Minn. at 329, 188 N.W.2d at 432. The trial court instructed the jury on these elements of strict liability as well as on manufacturing flaws (CIVJIG 118), causation (CIVJIG 116), and defective products (CIVJIG 115). These instructions provided the jury with an accurate statement of the law on the school district's strict liability/manufacturing flaw claim. See Cobb v. Aetna Life Ins. Co., 274 N.W.2d 911, 916 (Minn. 1979) (so long as jury charge as a whole conveys correct statement of law, charge will stand). The trial court did not abuse its discretion when it omitted CIVJIG 99 from the jury instructions.
B. Calculation of Damages
In challenging the jury instruction on calculation of damages, Bunn first argues that the law requires the school to accept the least amount of damages from either the change in property value or the cost of repairs. We disagree. When, as here, property is damaged, but not totally destroyed, the injured party may select its measure of damages. Restatement (Second) of Torts § 927 (1979) (claimant may recover under either theory); 4 Minnesota Practice, CIVJIG 185 cmt. The claimant chooses its measure of damages by the type of evidence it produces. See Hart v. North Side Firestone Dealer, Inc., 235 Minn. 96, 98, 49 N.W.2d 587, 588 (1951) (where car owner presented evidence of replacement costs to rebuild engine that shop had seriously damaged, car owner was entitled to measure of damages equal to cost of replacement). Only when a party chooses to present evidence of both change in value and cost of repair is the measure of damages the lesser of the two. In re Commodore Hotel Fire & Explosion Cases, 324 N.W.2d 245, 248-49 (Minn. 1982); Rinkel v. Lee's Plumbing & Heating Co., 257 Minn. 14, 20, 99 N.W.2d 779, 783 (1959).
Bunn acknowledges that the school district chose to present evidence relating only to the costs of reconstruction and repair. Bunn's appraiser testified that the school had a market value of $1.9 million at the time of the fire; that evidence served to impeach the school district's claim to damages for reconstruction. See CIVJIG 185 cmt. (opposing party's presentation of evidence regarding other measure of damages is for impeachment purposes and does not affect claimant's election of measure of damages). Given that the school district selected the cost of reconstruction as its measure of damages and proved its loss with witnesses and documentation, the jury instructions on the measure of damages were consistent with the law and the evidence introduced at trial. See Plate v. St. Mary's Help of Christians Church, 520 N.W.2d 17, 21 (Minn. App. 1994) (party is entitled to jury instruction if evidence supports it and instruction comports with governing law), review denied (Minn. Oct. 14, 1994).
Bunn next contends the trial court instructed the jury on a method of measuring damages (option D) that is contrary to Minnesota law. The trial court adopted language from a Massachusetts supreme court decision, which held that replacement or restoration costs may constitute the measure of damages if diminution in market value is unavailable or insufficient. Trinity Church v. John Hancock Mut. Life Ins. Co., 502 N.E.2d 532, 535-36 (Mass. 1987). Bunn claims this measure would lead to overcompensating the claimant, but we consider that rule of law no more lenient than the court's decision to allow parties to receive both repair and lost value damages when one amount alone does not adequately compensate them. Rinkel, 257 Minn. at 20, 99 N.W.2d at 783 (where repairs did not fully restore building, owner was entitled to remaining diminution in value; court capped total damages at lesser of two measurements of damage).
Bunn also claims with certainty that the jury calculated the damage award by following option D. Again, we disagree. In answering the special verdict, the jury was instructed to consider "all of the evidence by whomever produced." Thus, the jury considered all the evidence of market value that Bunn presented at trial as well as the school district's evidence regarding costs to repair and reconstruct. In reaching a verdict, the jury's primary function was to weigh the credibility of that evidence. Shastid v. Shue, 247 Minn. 314, 329, 77 N.W.2d 273, 283 (1956). The jury awarded the school district the exact amount of damages it claimed for repair and reconstruction: $5,240,123.17. Those figures are well supported in the record. In calculating damages, the jury very well may have followed option B, which allowed for full recovery of costs of reasonable repairs to return the property to the condition it was in before the fire. We cannot say with all certainty that the jury used option D to calculate those damages.
The trial court acted within its discretion in instructing the jury.
What amount of money will fairly and reasonably compensate [the school district] for the property damage to Marshall County Central High School from the fire of November 7, 1991?
The trial court's actions were within the proper exercise of its discretion. See Hill v. Okay Constr. Co., 312 Minn. 324, 340, 252 N.W.2d 107, 118 (1977) (composing special verdict form rests in trial court's discretion); Minn. R. Civ. P. 49.01. The trial court aptly noted that Bunn's proposed special verdict questions would have, in effect, forced the school district to proceed under a diminution in value theory and forego its ability to elect the measure of damages. Even without the specific valuation question, the jury still considered the evidence Bunn introduced and weighed the credibility of all the witnesses and the evidence before rendering the verdict. The special verdict was not improper.
The notice of claim that CIGNA sent Bunn fits those specifications of notice. CIGNA informed Bunn that the claim arose "out of a fire occurring on or about November 7, 1991 in Newfolden, Minnesota"; the fire destroyed the high school, but damages were undetermined at that time; and "[t]he cause of this fire was a Bunn-O-Matic coffee maker, home model, manufactured by your corporation and in use at the High School." CIGNA advised Bunn that it would make a "formal demand against your company" once it had final damage figures. This letter made Bunn "aware" of the school district's damages and invoked Bunn's "affirmative duty to inquire." Id.
Bunn also claims the letter was not adequate notice under section 549.09, because it lacked a specific amount of damages. The court does not require an exact figure, but focuses on "whether [the defendant] could have determined the amount of its potential liability from a generally recognized objective standard of measurement." Solid Gold Realty, Inc. v. Mondry, 399 N.W.2d 681, 684 (Minn. App. 1987) (interpreting the predecessor to section 549.09) (quoting ICC Leasing Corp. v. Midwestern Mach. Co. 257 N.W.2d 551, 556 (Minn. 1977)). Here, Bunn was aware of the claim against it and the extent of damages: the destruction of the school. From this information, Bunn could have determined its potential liability.
Lastly, Bunn contends the school district's claim did not accrue until it commenced this action, because it had not incurred any expenses at the time it sent the letter in December 1991. Again, we disagree. The school district lost an entire high school facility and its contents. It had to demolish the building and reconstruct in the middle of the school year and relocate all of its classes. These events cost the school district money as well as time and energy. That CIGNA covered the claim does not eliminate the fact that the school district went through turmoil, financial and otherwise, as a result of the fire.
The award of prejudgment interest was appropriate from January 1, 1992, to December 22, 1995, the date of entry of judgment.
In reviewing this case and reaching our decision, we were aided immeasurably by the careful presentation and analysis of issues in the memoranda of the trial court.
[ ]* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
[ ]1 In 1974, the Minnesota Legislature provided statutory authority to adopt a uniform fire code. Minn. Stat. § 299F.011 (1974). In 1975, the fire marshall adopted the UFC and incorporated it by reference into the Minnesota Fire Code. Alderman's Inc. v. Shanks, 536 N.W.2d 4, 7 n.3 (Minn. 1995).
[ ]2 The parties agree that this section could apply to the school, because it exceeds the 1,500 square foot requirement. See UFC § 10.306(b).