Opinion
No. C0-02-802.
Filed January 28, 2003.
Appeal from the District Court, Le Sueur County, File No. C201932.
Jane Everson Volz, Minard M. Halverson, Volz Law Firm, Ltd., (for respondent)
Robert M. Greising, Greising Law Offices, P.A., (for appellant)
Considered and decided by Toussaint, Chief Judge, Willis, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Appellant challenges the district court's grant of summary judgment to respondent. Appellant argues that it was justified in withholding a contract payment because of a good-faith dispute regarding whether respondent had complied with the contract terms. Because we conclude that there is a genuine issue of material fact regarding whether there was a good-faith dispute, we reverse and remand.
FACTS
Appellant City of Kilkenny contracted with respondent Contractors Edge, Inc. to perform work on a public construction project. The contract provided that work under the contract would be subject to inspection by the city's engineer. The contract further provided that final payment would be made when the engineer determined that the work was acceptable and Contractors Edge made written application for final payment.
In September 2001, Kevin Newman, the city's engineer, sent to Contractors Edge for signature and return "pay-estimate forms" showing a project completion date of June 27, 2001. Newman had not signed the forms.
When the city had not made final payment by October 2001, Contractors Edge sued, seeking $54,118.39 that the city still owed under the contract. The parties settled in January 2002, and the city agreed to pay the amount that Contractors Edge sought in its complaint. But the settlement agreement reserved the issue of interest and attorney fees under Minnesota's prompt-payment statute, Minn. Stat. § 471.425, subd. 4 (2002).
In March 2002, Contractors Edge moved for summary judgment on the issue of interest and attorney fees. Contractors Edge submitted the affidavit of John W. Brindley II, Contractors Edge's president and sole owner, who asserted that the project was "fully and finally completed on June 27, 2001." The city submitted Newman's affidavit, in which he states that he did not sign the pay-estimate forms, certifying that the project was complete, because of two unresolved items: (1) the monitoring, testing, and reporting of petroleum-contaminated soil and (2) the resolution of inoperable curb stops. Newman's affidavit does not explain why the pay-estimate forms show a project-completion date of June 27, 2001.
At the hearing on Contractors Edge's summary-judgment motion, the city's attorney stated that the city had paid only about $20,000 of the settlement amount. He explained that, although Le Sueur County was not a party to the contract between the city and Contractors Edge, a portion of the funds for the project, and in turn the settlement, were to be paid by the county, and the county had not yet paid its share.
The district court granted summary judgment to Contractors Edge and ordered the city to pay attorney fees and to pay interest from 30 days after June 27, 2001. The court concluded that the city had failed to show that it denied payment based on a good-faith dispute but rather the city refused payment "because the County ha[d] refused to honor its contract with [the city]." This appeal follows.
DECISION
On appeal from summary judgment, a reviewing court asks two questions: (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 reviewing court views the evidence in the light most favorable to the party against whom the judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
The city argues that there was a good-faith dispute regarding Contractors Edge's compliance with the contract terms. Minnesota's prompt-payment statute includes the following:
(a) Except otherwise provided in this section, a municipality shall calculate and pay interest to a vendor if the municipality has not paid the obligation according to the terms of the contract * * *.
* * * *
(c) No interest penalties may accrue against a purchaser who delays payment of a vendor obligation due to a good faith dispute with the vendor regarding the fitness of the product or service, contract compliance, or any defect, error or omission related thereto. If such delay undertaken by the municipality is not in good faith, the vendor may recover costs and attorney's fees.
Minn. Stat. § 471.425, subd. 4 (2002). Although no Minnesota court has interpreted "good faith" under section 471.425, several cases have held that good faith is typically a question of fact. See, e.g., Harlow v. Fitzgerald, 457 U.S. 800, 816, 102 S.Ct. 2727, 2737 (1982) (noting that subjective good faith in context of qualified immunity is fact question for jury); Cokley v. City of Ostego, 623 N.W.2d 625, 630-31 (Minn.App. 2001) (interpreting "good faith" in Minnesota's Whistleblower Act), review denied (Minn. May 15, 2001); Matter v. Nelson, 478 N.W.2d 211, 214-15 (Minn.App. 1991) (addressing good-faith defense to nuisance action).
The district court correctly concluded that any delay in the city's payment of the settlement amount because of the county's refusal to provide its share of the funds is not a good-faith dispute under section 471.425. The dispute between the city and the county is not within the statute's description of the sorts of disputes that can be the basis for non-payment, that is, those "regarding the fitness of the product or service, contract compliance, or any defect, error or omission related thereto." Minn. Stat. § 471.425, subd. 4(c).
But the issue for summary judgment was whether, before the settlement was reached, the city had a good-faith dispute with Contractors Edge about if and when the project was completed and, therefore, payment was due, for the purpose of applying the prompt-payment statute. Citing Newman's pay-estimate forms, Contractors Edge asserts that there could be no good-faith dispute because the city certified the project as complete in June 2001. But Newman states in his affidavit that he believed that the project was not complete in June 2001 and did not sign the forms certifying the project as complete. The district court focused on whether there was a good-faith dispute regarding payment after the underlying litigation was settled in January 2002 and apparently found, without discussion, that the project was completed on June 27, 2001, because it ordered the city to pay interest from 30 days after that date. The district court therefore decided an issue of disputed fact, which is improper in the context of summary judgment. See Nord v. Herreid, 305 N.W.2d 337, 339 (Minn. 1981) (holding that district court is not to resolve fact questions in summary-judgment proceeding). Because it is not apparent from the record if or when the project was completed, there is a question of fact regarding whether the city had a good-faith dispute with Contractors Edge regarding completion of the project and, therefore, an issue regarding when payment was due for the purpose of applying the prompt-payment statute.
Contractors Edge argues that, even conceding that there is a question about whether a good-faith dispute existed, it is not a question of material fact. Contractors Edge cites Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986), for the proposition that only "disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." But whether there was a good-faith dispute regarding payment by the city after June 27, 2001, and before settlement was the very issue that was before the district court. Contractors Edge even framed the issue exactly that way in its memorandum in support of summary judgment before the district court.
Because there is a genuine issue of material fact, the district court erred by granting summary judgment to Contractors Edge. We therefore reverse the district court's summary-judgment order and remand for further proceedings not inconsistent with this opinion.