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Schipper Construction, Inc. v. American Crystal Sugar Co.

December 16, 2008


Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Steven E. McCullough, Judge.

The opinion of the court was delivered by: Crothers, Justice


[¶1] Schipper Construction, Inc. ("Schipper"), appeals from a judgment awarding it $68,106.66 from American Crystal Sugar Company ("American") and dismissing on summary judgment Schipper's quantum meruit claim based on a rescission at law of contracts against American for additional compensation for work performed. We conclude the district court did not err in granting summary judgment dismissal because Schipper failed to raise a genuine issue of material fact that it gave American notice of rescission, one of the prerequisites for maintaining a rescission action. We affirm.


[¶2] American is a sugar beet processing company. In 1998 and 1999, American used a bidding process to hire Schipper, an earth moving company, to perform maintenance work and dirt moving for dikes in two large ponds at American's Drayton plant. For the "Condenser Pond," the parties contracted that Schipper would provide "up to" 67,000 cubic yards of dirt at $3.25 per cubic yard to build up the dikes. The contract for the "Mud Pond" called for the same pricing as the Condenser Pond, but Schipper was to provide "up to" 85,600 cubic yards of dirt to build up the dikes.

[¶3] After completing the Condenser Pond, Schipper submitted to American a request for payment of $146,250 for 45,000 cubic yards of dirt. American paid the amount, but subsequently learned Schipper had moved only 30,315 cubic yards of dirt. Schipper sent American invoices for moving 50,000 cubic yards of dirt for the Mud Pond, but American subsequently learned Schipper had moved only 39,600 cubic yards of dirt. American determined it owed Schipper $45,601.63, which accounted for the amounts already paid to Schipper for the Mud Pond and the overpayment for the Condenser Pond. In February 2001, Schipper sent a final billing to American requesting $208,963.49 based on the time and materials spent on the projects. American refused to pay.

[¶4] In October 2005, Schipper sued American seeking the money it claimed was owing for the work completed on the projects. Schipper ultimately sought compensation based on theories of breach of contract and, in the alternative, quantum meruit following a rescission at law of the contracts. The district court granted partial summary judgment dismissing the quantum meruit claim and rejected Schipper's construction of the contracts, but concluded Schipper was entitled to be reimbursed on a cost-per-unit basis and conducted a trial on damages. Following the trial, the court awarded Schipper $45,601.63 plus prejudgment interest and costs. The court ruled summary judgment was appropriate on the quantum meruit action because Schipper had failed to meet the prerequisites for a claim of rescission at law. The court concluded Schipper produced no evidence it had rescinded the contracts or acted promptly to rescind.


[¶5] Schipper argues the district court erred in ruling as a matter of law that it failed to satisfy the prerequisites for rescission at law of a contract.

[¶6] We summarized the principles governing appellate review of summary judgments in Alerus Fin., N.A. v. Western State Bank, 2008 ND 104, ¶¶ 16-17, 750 N.W.2d 412:

"Summary judgment under N.D.R.Civ.P. 56(c) is a procedural device for the prompt and expeditious disposition of any action without a trial `if either litigant is entitled to judgment as a matter of law and if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving factual disputes will not alter the result.' Duemeland v. Norback, 2003 ND 1, ¶ 8, 655 N.W.2d 76 (citing Wahl v. Country Mut. Ins. Co., 2002 ND 42, ¶ 6, 640 N.W.2d 689). Whether the district court properly granted a summary judgment motion `is a question of law that we review de novo on the record.' Trinity Hosps. v. Mattson, 2006 ND 231, ¶ 10, 723 N.W.2d 684.

"`The party moving for summary judgment must show . . . no genuine issues of material fact [exist] and the case is appropriate for judgment as a matter of law.' Id. `In determining whether summary judgment was appropriately granted, we . . . view the evidence in the light most favorable to the party opposing the motion,' giving that party `the benefit of all favorable inferences which can reasonably be drawn from the record.' Hasper v. Center Mut. Ins. Co., 2006 ND 220, ¶ 5, 723 N.W.2d 409. However, `[u]nder N.D.R.Civ.P. 56, if the movant meets its initial burden of showing the absence of a genuine issue of material fact, the party opposing the motion may not rest on mere allegations or denials in the pleadings, but must present competent admissible evidence by affidavit or other comparable means to show the existence of a genuine issue of material fact.' Riemers v. Grand Forks Herald, 2004 ND 192, ¶ 4, 688 N.W.2d 167."

[¶7] A plaintiff may rescind a contract by bringing "a claim in equity to cancel the contract under N.D.C.C. § 32-04-21" or by bringing "an action at law based upon an election to rescind and offer to restore under N.D.C.C. § 9-09-04." Murphy v. Murphy, 1999 ND 118, ¶ 13, 595 N.W.2d 571. Schipper sought legal, rather than equitable, rescission of the two contracts. A plaintiff who brings an action at law to rescind a contract must strictly comply with the requirements of N.D.C.C. § 9-09- 04 by giving the defendant notice of the rescission and by promptly making an offer to restore the preceding status quo. See Industrial Comm'n v. Noack, 2006 ND 195, ¶ 16, 721 N.W.2d 698; Murphy, at ¶ 13. Section 9-09-04, N.D.C.C., provides:

"Rescission, when not effected by consent or pursuant to sections 9-08-08 and 9-08-09, can be accomplished only by the use, on the part of the party rescinding, of reasonable ...

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