This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).





Kerry W. Nelson,

d/b/a Kerry Nelson Construction,

Appellant (C9-97-670),

Respondent (C4-97-1161),


Richard Vogt, et al.,

Respondents (C9-97-670),

Appellants (C4-97-1161).

Filed January 20, 1998

Affirmed in part and reversed in part

Randall, Judge

Douglas County District Court

File No. C295900

Steven J. Drummond, 908 Broadway, P.O. Box 963, Alexandria, MN 56308 (for Nelson)

Thomas A. Jacobson, Swenson, Lervick, Syverson, & Anderson, Ltd., 710 Broadway, P.O. Box 787, Alexandria, MN 56308 (for Vogt)

Considered and decided by Toussaint, Chief Judge, Randall, Judge, and Foley, Judge.**

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



Kerry Nelson brought suit for balance due on construction contract and Richard and Dormayne Vogt counterclaimed. Nelson argues the district court erred in awarding the Vogts damages on their counterclaim; that the court's findings are clearly erroneous; and that the Vogts obtained judgment by means of fraud or misrepresentation. The Vogts appeal, arguing that they should have been allowed costs and disbursements pursuant to Minn. R. Civ. P. 68 and Minn. Stat. § 549.06 (1996) and that they are entitled to attorney fees on appeal. We affirm in part and reverse in part.


Richard and Dormayne Vogt entered into a contract with Kerry Nelson for the construction of a home in rural Douglas County. Under the payment terms, the Vogts were to pay one-third "down," one-third once the house was "shelled," and the balance on completion of the house. The Vogts paid Nelson $23,000 on April 22, 1995, and $19,000 on May 19, 1995, leaving a balance of $29,539.44 remaining on the contract. However, given various additions and credits, the Vogts owed Nelson a balance of $27,745.97. On or about July 22, 1995, Nelson submitted a bill to the Vogts for the remaining balance due.

On August 1, 1995, the parties conducted a "walk-through" of the house. During the "walk-through" a number of defects were brought to Nelson's attention, including problems with the garage footings, siding, and a basement support beam. Following the "walk-through," no payments were made by the Vogts on the remaining balance of the contract price.

On August 30, 1995, Nelson commenced suit against the Vogts for the balance due on the contract. The Vogts counterclaimed, alleging various construction defects, breach of contract, and breach of new home warranties contained in Minn. Stat. ch. 327A (1996). The Vogts timely served Nelson with a Rule 68 Offer of Settlement in the amount of $18,000. Nelson refused the offer, and a bench trial was commenced on November 6, 1996. The district court found Nelson's damages to be $27,745.97. Pursuant to the Vogts' $20,000 counterclaim, the court reduced Nelson's damages to $7,661.97. Nelson challenges the district court's judgment and amended judgment. The Vogts appeal, arguing they were entitled to costs and disbursements at trial and that they are entitled to costs, disbursements, and attorney fees on appeal.


Findings of facts will not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01. Findings that are reasonably supported by the evidence are not clearly erroneous. Citizens State Bank v. Leth, 450 N.W.2d 923, 925 (Minn. App. 1990). This court need

not defer to the lower court's conclusions of law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).

Nelson argues that the district court erred when it awarded the Vogts damages on their counterclaim because the Vogts refused him access to the property to cure or remedy the defects and therefore breached the contract.

In a contract for the construction of a new home, an owner who unreasonably refuses to permit the contractor to complete the project excuses the contractor from performance and breaches the contract. Zobel & Dahl Constr. v. Crotty, 356 N.W.2d 42, 45 (Minn. 1984). The question of whether the homeowner unreasonably hinders completion of the project by conditioning access to the property is a fact issue to be decided by the trier of fact. Id. at 46.

Here, the district court found that after the August 1, 1995, "walk-through" of the house, Nelson made no attempt to correct or cure the numerous defects that were brought to his attention by the Vogts, instead choosing to file this lawsuit three weeks later. There is no evidence in the record that the Vogts refused Nelson access to the property during the period between the "walk-through" and the filing of this suit. Only after Nelson filed suit did the Vogts refuse Nelson entry into their home. We conclude, as did the district court, that the Vogts did not unreasonably deny Nelson access to the property to cure the defects.

Nelson claims that the Vogts breached the contract by failing to pay the balance due on the contract upon substantial completion of the home, excusing his performance. We disagree.

In the case of building contracts, the doctrine of substantial performance provides that if a contractor has substantially performed the contract, although there are minor defects in the work, the contractor is entitled to recover the contract price, minus the sum necessary to cure the defects. Sward v. Nash, 230 Minn. 100, 102, 40 N.W.2d 828, 830 (1950). The doctrine does not apply when omissions or departures from the contract are intentional or so substantial as to be incapable of remedy. Id. at 103, 40 N.W.2d at 830. The doctrine also does not apply when the contractor willfully abandons the work. Id. at 103, 40 N.W.2d at 830.

Here, the record establishes that instead of curing the defects brought to his attention during the "walk-through," Nelson filed suit against the Vogts. The record further establishes that between the time of the "walk-through" and the time he filed suit, Nelson had no contact with the Vogts. It appears that Nelson abandoned the work remaining under the contract. Also, the district court found the cost to repair the defects to be $20,084, nearly one-third of the contract price. As such, the defects in the work cannot be considered minor. Under the circumstances, we cannot say that, as a matter of law, the Vogts breached the contract by withholding payment on the balance due on the contract or that Nelson's performance under the contract was excused.

Nelson argues that the district court also erred because it failed to address the issue of mitigation of damages by the Vogts. But, this ignores the fact that the district court specifically stated that it would allow Nelson to "bring in whoever he wishes * * * on the mitigation of damages question only, and that is to what extent could the [Vogts] have taken steps to reduce or eliminate their damages on various items." Nelson did not do so.

Similarly, we reject Nelson's argument that the Vogts failed to mitigate their damages because they did not pursue the warranties available through the material suppliers and drywall contractor. Nelson, as the general contractor, was ultimately responsible for damages that occurred because of defective construction or materials provided by the various subcontractors. See Theissen-Nonnemacher, Inc. v. Dutt, 393 N.W.2d 397, 401 (Minn. App. 1986) (holding that when defective construction occurs, general contractor is subject to liability for damages suffered by contractee as a result of the negligence of independent subcontractor) (quoting Pacific Fire Ins. Co. v. Kenny Boiler & Mfg. Co., 201 Minn. 500, 503, 277 N.W. 226, 228 (1937)).

Nelson also argues that the district court's findings of fact regarding the defects in the garage footings, the siding, and the basement support beam are unsupported by the evidence and, therefore, are clearly erroneous. We disagree.

With regard to garage footings, the Vogts introduced the videotape deposition of Dr. John Russo, their expert witness, and the testimony of Dean Kistler, a home remodeler with nearly 35 years' experience in remodeling homes. Both testified that, contrary to Nelson's testimony, the garage footings were not dug to the appropriate depth. In addition, as part of Russo's videotape deposition, the court was able to see the hole used to examine the depth of the garage footings. The district court was in the best position to judge the credibility of the witnesses and was free to accept or reject the evidence presented by Nelson. See Minn. R. Civ. P. 52.01 (due regard shall be given to opportunity of trial court to judge credibility of witnesses). We note further that although the Vogts were responsible for all excavating, Richard Vogt testified that he excavated the garage footings according to Nelson's planning, direction, and guidance. It is difficult for us to say, as a matter of law, that the Vogts are responsible for the improperly excavated garage footings when they relied on the direction provided by Nelson.

Likewise, Dormayne Vogt, Kistler, and Russo all testified extensively regarding the problems with the siding. The district court was free to accept this testimony and disregard the testimony of the siding company representative offered by Nelson. Id. The district court was also free to reject the opinion of Dr. Frank Yazdani, Nelson's expert witness regarding the structural integrity of the basement support beam, and accept the testimony of Russo. See Bernloehr v. Central Livestock Order Buying Co., 296 Minn. 222, 225, 208 N.W.2d 753, 755 (1973) (holding where expert opinion has factual foundation, jury is free to accept or reject such expert opinion).

A careful review of the record shows that the district court's findings with regard to the garage footings, the defects with the siding, and the structural integrity of the support beam are reasonably supported by evidence in the record and are not clearly erroneous.

Next, pursuant to Minn. Stat. § 548.14 (1996), Nelson argues that the portion of the judgment awarding damages to the Vogts for alleged defects to the garage footings was procured by fraud because the Vogts knew the garage footings were properly constructed. This section provides that:

Any judgment obtained in a court of record by means of perjury, subornation of perjury, or any fraudulent act, practice, or representation of the prevailing party may be set aside in an action brought for that purpose by the aggrieved party in the same judicial district within three years after the discovery by the aggrieved party of such perjury or fraud.

Minn. Stat. § 548.14. Nelson has misconstrued the language of Minn. Stat. § 548.14. The language of the statute is clear that the aggrieved party to a fraudulently obtained judgment must bring a new and independent action in the same judicial district as the fraudulently obtained judgment. Nelson did not do so. Because this issue was not presented to nor ruled on by the district court, it is not properly before this court. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (holding that issues not presented to nor passed on by lower court are not properly preserved on appeal).

The Vogts argue that they are entitled to costs and disbursements pursuant to Minn. R. Civ. P. 68 and Minn. Stat. § 549.06 (1996), because the amended judgment was not more favorable to Nelson than their Rule 68 offer. We agree.

Initially, Nelson argues that this issue is not properly before the court because the Vogts were required to appeal from the judgment entered on January 6, 1997. Nelson contends that because the district court's determination refusing both parties costs and disbursements remained unchanged in the amended judgment, the Vogts' time to appeal the issue began to run from the January 6, 1997 judgment.

Here, Nelson took appeal from the original judgment of January 6, 1997, and the April 1, 1997 amended judgment. Pursuant to Rule 106 of the Minnesota Rules of Civil Appellate Practice, the Vogts were entitled to seek review of a judgment in the same action that adversely affected them. See Minn. R. Civ. App. P. 106 (respondent may obtain review of a judgment or order entered in same action that may adversely affect him by filing a notice of review with the clerk of appellate courts within 15 days after service of the notice of appeal). Although the Vogts filed their notice of review challenging the decision on costs and disbursements late, they moved for acceptance. Nelson did not oppose the Vogts' motion, and this court ordered the notice accepted. Consequently, Nelson may not now challenge the issue of costs and disbursements as untimely.

The district court refused to award the Vogts costs and disbursements pursuant to Rule 68, concluding that "[b]ecause the Court's award on [Nelson's] claim exceeded the [Vogts'] settlement offer an award of costs and disbursements to the [Vogts] is DENIED." The district court erred in its application of Rule 68.

Minn. R. Civ. P. 68 provides that any time prior to 10 days of trial, any party may serve on an adverse party an offer to allow judgment in the amount and to the effect specified in the offer. Under the rule, "[i]f the judgment finally entered is not more favorable to the offeree than the offer, the offeree must pay the offeror's costs and disbursements." Minn. R. Civ. P. 68. An award of costs and disbursements under Rule 68 is not discretionary. Imperial Developers, Inc. v. Seaboard Sur. Co., 518 N.W.2d 623, 628 (Minn. App. 1994), review denied (Minn. Aug. 24, 1994).

The plain language of Rule 68 states that if the judgment finally entered is not more favorable to the offeree than the offer, then the court must award the offeror his or her costs and disbursements. Nelson was awarded $27,745.97. But after the Vogts' counterclaim was subtracted from this amount, the final judgment entered on behalf of Nelson was $7,661.97. This amount is less than the $18,000 the Vogts offered Nelson to settle his claim. Consequently, the Vogts are entitled to reasonable costs and disbursements pursuant to Rule 68.

Lastly, the Vogts argue that Nelson's appeal is frivolous and that they are entitled to an award of costs, disbursements, and attorney fees on appeal. See Minn. Stat. § 549.211 (Supp. 1997) (providing sanctions for frivolous arguments). While Nelson did not prevail on appeal, we cannot say that his appeal was totally without merit or was instituted for the purposes or delay or harassment. We decline to award costs, disbursements, and attorney fees on appeal. See National Farmers Union Property & Cas. Co. v. Fuel Recovery Co., 432 N.W.2d 788, 792 (Minn. App. 1988), (although appellant did not prevail on any issue, respondent not entitled to attorney fees where claims were not frivolous or without foundation), review denied (Minn. Feb. 10, 1989).

Affirmed in part and reversed in part.