TestResources, Inc. v. Metal Tech Indus.

1

TestResources, Inc., Appellant, v. Metal Tech Industries, Inc., Respondent.

No. A22-1422

Court of Appeals of Minnesota

May 1, 2023

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

Scott County District Court File No. 70-CV-20-6120

Michael H. Frasier, Chad A. Snyder, Rubric Legal LLC Minneapolis, Minnesota (for appellant)

David G. Hellmuth, Ryan M. Theis, Brendan M. Kenny, Hellmuth &Johnson, Edina, Minnesota (for respondent)

Considered and decided by Connolly, Presiding Judge; Jesson, Judge; and Slieter, Judge.

OPINION

SLIETER, JUDGE

In this appeal after a court trial involving a breach-of-contract action, appellant-seller challenges the district court's judgment in favor of respondent-buyer. Because we conclude that the district court acted within its discretion by determining that appellant-seller breached the contract and caused the damages awarded, we affirm.

FACTS

The following facts derive from the court trial. Appellant-seller TestResources Inc. is a company based in Shakopee, Minnesota that builds and sells universal testing machines. These machines test materials by compressing or pulling them under different conditions. Respondent-buyer Metal Tech Industries Inc. is a gasket-materials manufacturer based in Iowa Falls, Iowa. Metal Tech wanted to replace and upgrade its testing equipment, so a representative approached TestResources about building a universal testing machine.

During communications between the companies in 2018, Metal Tech identified 17 tests that it needed the machine to perform. In late October 2018, TestResources sent a document entitled "quote" that outlined components, software, services, and pricing information related to the machine, and included a link to TestResources' terms and conditions. As discussions between the companies about Metal Tech's needs continued, TestResources sent eight updated documents entitled "quote" in November and December 2018.

TestResources shared the ninth version of the quote in late December 2018, updated according to communications between the parties. The quote stated that the machine would be a "turnkey system" and also indicated that final payment was due "Upon Run-Off Acceptance," but did not define the term. In January 2019, Metal Tech issued a purchase order to TestResources for the machine and paid $54,167.50, 50% of the purchase price identified in the quote and now included in Metal Tech's purchase order. The purchase order defined "run-off acceptance" to mean that the machine would not be considered "fully delivered and accepted . . . until tests listed on Exhibit A [were] successfully completed at TestResources['] facility." The purchase order also required a successful second "run-off" test at Metal Tech's facility, using the same criteria in Exhibit A. Representatives from the companies discussed the tests listed in Exhibit A prior to the issuance of the purchase order.

In June 2019, four senior Metal Tech employees traveled to the TestResources facility in Shakopee to observe the machine's performance of the "run-off acceptance" tests identified in TestResources' quote and defined in Metal Tech's purchase order. According to Metal Tech, the machine failed all 17 tests listed in Exhibit A of the purchase order, and Metal Tech employees left the TestResources facility without accepting the machine. TestResources asserts that it "tendered the machine for inspection" in June 2019, but that Metal Tech "refused to take delivery of the machine after inspecting it for three days" and "did not identify any way in which the machine did not conform to the quote when it rejected the machine."

The weeks following the "run-off acceptance" visit involved identifying what improvements to the machine were necessary to meet Metal Tech's requirements. Ultimately, Metal Tech did not take delivery of the machine nor pay the remaining balance of $54,167.50 of the purchase price.

In March 2020, TestResources sued Metal Tech, alleging breach of contract because Metal Tech failed to pay the remaining balance. Metal Tech counterclaimed, alleging that TestResources breached the contract based on the machine's failed performance of the "run-off" testing.

Following a three-day court trial, the district court determined that TestResources did not prove Metal Tech breached the contract. Instead, the district court found that TestResources breached the contract by producing a machine that was not able to successfully conduct "run-off" testing. The district court awarded Metal Tech $138,814.09 in damages.

TestResources filed a motion for a new trial, which the district court denied. TestResources appeals.

DECISION

"On appeal from judgment following a court trial, this court reviews whether the district court's findings were clearly erroneous and whether the district court erred as a matter of law." In re Distrib. of Atty's Fees, 855 N.W.2d 760, 761 (Minn.App. 2014) aff'd, 870 N.W.2d 755 (Minn. 2015). To conclude that findings of fact are clearly erroneous, we must be "left with a definite and firm conviction that a mistake has been committed." In re Commitment of Kenney, 963 N.W.2d 214, 221 (Minn. 2021) (quotation omitted).

TestResources argues that the district court erred by ruling in favor of Metal Tech on its breach-of-contract counterclaim. TestResources challenges the district court's determinations that (1) Metal Tech's purchase order, instead of TestResources' quote, constituted an offer and, thus, the terms of the contract; (2) TestResources breached the contract with Metal Tech; and (3) Metal Tech was damaged in the amount of $138,814.09.

As a threshold matter, we need not resolve whether TestResources' quote or Metal Tech's purchase order constituted an offer which was accepted and, thus, contains the relevant contract terms. Both documents stated that payment and acceptance of the machine were contingent on "run-off acceptance." The quote left the term undefined but the purchase order provided an explicit description. And it was that term that the district court determined TestResources breached.

We conclude that the district court did not err by relying on the definition of "run-off acceptance" included in Metal Tech's purchase order. Communications between the parties from 2018, as well as the trial testimony, indicate that the parties intended "run-off acceptance" to be defined by the tests listed in Metal Tech's purchase order. As a result, we need not determine whether TestResources' quote or Metal Tech's purchase order constitutes the contract terms because both contain the contract term relevant to this appeal: "run-off acceptance."

I. The district court did not err by determining that TestResources breached the contract.

"The elements of a breach of contract claim are (1) formation of a contract, (2) performance by plaintiff of any conditions precedent to [their] right to demand performance by the defendant, and (3) breach of the contract by defendant." Lyon Fin. Servs., Inc. v. Ill. Paper &Copier Co., 848 N.W.2d 539, 543 (Minn. 2014) (quotation omitted). "A breach of contract is a failure, without legal excuse, to perform any promise that forms the whole or part of the contract." Id. Neither party disputes that a contract was formed; they dispute the controlling terms and whether those terms were breached. Therefore, we review the third element.

Because the third element presents a fact question, we review the district court's factual findings for clear error. See Rasmussen v. Two Harbors Fish Co., 832 N.W.2d 790, 797 (Minn. 2013) (analyzing whether appeal presented question of law or fact). In determining whether a finding of fact is clearly erroneous, we view the evidence in the light most favorable to the district court's findings and examine the record to see if there is reasonable evidence to support the district court's findings. Kenney, 963 N.W.2d at 221. We also defer to the district court's credibility findings. Minn. R. Civ. P. 52.01; Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).

TestResources argues that the district court erred because (1) it did not identify the "necessary" terms in TestResources' quote that it found were included within Metal Tech's purchase order and (2) it relied on inadmissible evidence of a breach. We address each argument in turn.

As we have already noted, the district court correctly determined that both documents (the quote and the purchase order) required successful completion of "run-off" testing. Hence, the relevant "necessary" term was identified. The district court determined that TestResources breached the contract because "the machine was incapable of performing the tasks it was commissioned for and was therefore defective" as demonstrated by its "fail[ure] to successfully administer the 17 tests" identified in Exhibit A as the "run-off" testing required pursuant to the contract.

These findings are supported by the record. During the court trial a Metal Tech representative testified that during Metal Tech's June 2019 visit to inspect the machine, none of the tests listed in Exhibit A were successfully completed because "[e]ach test had an issue of some sort," such as missing or broken equipment and necessary but unavailable supplies. Although one TestResources representative testified that the testing "went pretty well" and that the machine was ready to ship after the inspection, the district court did not find that testimony credible. Instead, it found that testimony from Metal Tech employees "provided detailed and consistent recollection of the events." We defer to the district court's credibility findings. Minn. R. Civ. P. 52.01; Sefkow, 427 N.W.2d at 210. And in an appeal from a court trial, we do...