Minnkota Architectural Products Co., Inc., Respondent,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A19-2015

Minnkota Architectural Products Co., Inc.,
Respondent,

vs.

Rice Lake Construction Group,
Appellant.

Filed June 29, 2020
Affirmed
Reilly, Judge

Crow Wing County District Court
File No. 18-CV-19-1549

Michael D. Barrett, Cousineau, Van Bergen, McNee & Malone, P.A., Minnetonka,
Minnesota (for respondent)

Nathan R. Sellers, Fabyanske, Westra, Hart & Thomson, P.A., Minnea polis, Minnesota
(for appellant)

Considered and decided by Reilly, Presiding Judge; Smith, Tracy M., Judge; and
Florey, Judge.
U N P U B L I S H E D O P I N I O N
REILLY, Judge
Respondent-subcontractor brought this breach-of-contract action against appellant-
general-contractor, seeking to recover unpaid retainage. On removal from conciliation
court, a ppellant argues that the district court erred in granting summary judgment to

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respondent because (1) the retainage claim is time -barred under M inn. Stat. § 541.05,
subd. 1(1) (2018); and (2) the claim is a compulsory counterclaim under Minn. R. Civ. P.
13.01 and should have been brought in appellant’s earlier (unsuccessful) breach-of-contract
action against respondent. Because the district court did not err in granting summary
judgment to respondent, we affirm.
FACTS
In August 2009, appellant-general-contractor Rice Lake Construction Gr oup (Rice
Lake) contracted with project owner, the City of St. Peter (St. Peter), to construct a water
treatment plant. Rice Lake subcontracted with respondent -subcontractor Minnkota
Architectural Products Co. Inc. (Minnkota) for roof work on the water treatment plant. The
subcontract agreement provided that:
The Contractor shall, so long as the Sub -Contractor is not in
default hereunder and upon receipt of payment from t he
Owner, promptly pay the Sub-Contractor for such work as the
Engineer shall determi ne he has performed hereunder at the
price set forth below, less 5% thereof as a retainage until final
payment. As is hereafter indicated, the contractor will be
responsible to pay the Sub -Contractor such retainage only
when final payment is received from the project owner yes
(indicate yes or no). If it is agreed that the contractor shall pay
such retainage prior to final payment by the Owner then such
payment to the Sub-Contractor shall be made within N/A days
following final completion, determination o f quantities, and
acceptance by Owner of the performance under this agreement.

In July, August, and September 2010, Rice Lake made payments to Minnkota based
on the subcontract price of $224,644 .1 In November 2010, Rice Lake paid Minnkota the

1 The original subcontract amount was $213,395.00. In February 2010, Rice Lake issued
a change order, increasing the contract amount to $224,644.

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full subcontract price, less 5% retainage, $11,232.20. On July 2, 2012, Minnkota sent Rice
Lake a statement reflecting that the $11,232.20 was due and owing and was 90 days past
due. St. Peter, the project owner, had not made final payment a s of that date; and Rice
Lake did not pay the retainage money owed to Minnkota.
After Minnkota installed the roofs, the water treatment buildings experienced
moisture and condensation problems underneath the r oofs. Minnkota made several
attempts to fix the roofs between 2011 and 2014. But in September 2014, Minnkota
informed Rice Lake that it would no longer attempt to remedy the moisture and
condensation issues. In March 2015, the project engineer issued a field o rder, directing
Rice Lake to perform repair work on the roofs. Rice Lake forwarded the field order to
Minnkota, who declined to do the repair work . Rice Lake hired a replacement
subcontractor to complete repair and replacement work on the roofs.
On November 28, 2016, the St. Peter Director of Public Works recommended that
St. Peter authorize the release of retainage funds to Rice Lake because it completed the
project to design standards. On December 12, 2016, the St. Peter City Council passed and
adopted the “Resolution Accepting Water Systems Improvement Project A s Completed
and Authorizi ng R elease of Project Retainage ” and St. Peter paid Rice Lake the final
payment for the project.
Months before Rice Lake received final payment from St. Peter, in March 2016 ,
Rice Lake sued Minnkota, claiming breach of con tract for failing to perform work in a
good and workmanlike manner when it installed a defective roof. Minnkota included no
counterclaim in its answer to Rice Lake’s complaint. In April 2018, the parties tried the

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case to a jury. T he jury found Minnkota did not breach its contract with Rice Lake. T he
district court accepted the jury’s special verdict and issued findings of fact, conclusions of
law, and order for judgment. The district court dismissed the complaint against Minnkota
and concluded that Rice Lake had no right to damages. The district court entered judgment
for Minnkota for taxable costs and disbursements and the judgment was satisfied in
September 2018.
In October 2018, Minnkota commenced the current action in conciliation court
against Rice Lake, claiming $11,232.20 in unpaid retainage under the subcontract. The
conciliation court entered judgment for Minnkota. Rice Lake then filed a demand for
removal from conciliation court to the district court and the parties filed cross-motions for
summary judgment. Rice Lake argued that Minnkota’s claim was time -barred by the
statute of limitations and that it was a compulsory counterclaim that should have been
brought during Rice Lake’s earlier breach -of-contract action. The district court denied
Rice Lake’s motion for summary judgment, granted Minnkota’s motion for summary
judgment, and ordered judgment in Minnkota’s favor in the amount of the unpaid retainage.
The district court determined that Minnkota’s suit was not barred by the statute of
limitations and that its claim was not a compulsory counterclaim that should have been
brought in the prior action. Rice Lake appeals.
D E C I S I O N
“A motion for summary judgment must be granted when the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue of material fact and that either party is entitled to judgment

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as a matter of law.” Cargill Inc. v. Jorgenson Farms, 719 N.W.2d 226, 232 (Minn. App.
2006) (citation omitted). “On appeal from summary judgment, we review whether there
are any genuine issues of material fact and whether the district court erred in its application
of the law.” STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76 (Minn. 2002)
(citation omitted). We review de novo whether the district court erred in its application of
the law. Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170
(Minn. 2010). Because the facts here are not in dispute, the only issue on appeal is whether
the district court erred as a matter of law.
I. Minnkota’s claim is not barred by the statute of limitations.
Rice Lake argues that the district court erred when it determined Minnkota’s breach-
of-contract action for the unpaid retainage is not barred by the statute of limitations. The
statute of limitations for “a contract or other obligation, express or implied ” is six years.
Minn. Stat. § 541.05, subd. 1(1). “The statute of limitations begins to run on a claim when
the cause of action accrues.” Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 832 (Minn.
2011). “A cause of action accrues when all of the eleme nts of the action have occurred,
such that the cause of action could be brought and would survive a motion to dismiss for
failure to state a claim.” Id. A breach-of-contract action “accrues immediately on a breach,
though actual damages resulting therefr om do not occur until afterwards.” Bachertz v.
Hayes-Lucas Lumber Co., 275 N.W.2d 694, 697 (Minn. 1937). “A breach of contract is a
failure, without legal excuse, to perform any promise that forms the whole or part of the
contract.” Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co., 848 N.W.2d 539, 543 (Minn.
2014) (citation omitted).

6
The district court determined that Minnkota’s claim was not barred by the statute of
limitations because “the retainage became available to Rice Lake for distribution” in 2016.
Under the subcontract, Rice Lake had to pay the 5% retainage to Minnkota, “only when
final payment is received from the project owner.” St. Peter, the project owner, did not
authorize release of the project retainage until December 12, 2016, when it passed and
adopted the “Resolution Accepting Water Systems Improvement Project As Completed
and Authorizing Release of Project Retainage.”
Rice Lake contends the district court erred because Minnkota’s breach-of-contract
action accrued when Minnkota sent Rice Lake the statement showing the past-due balance
on the subcontract on July 2, 2012, and Rice Lake failed to pay it in either July or August
2012. Rice Lake relies on Mrozik Constr., Inc. v. Lovering Assocs., Inc., 461 N.W.2d 49
(Minn. App. 1990), arguing that, under that case, the subcontract lacks a condition
precedent. Rice Lake contends that, with no condition precedent, it owed the unpaid
retainage “within a reasonable period of tim e” after the project was completed , when
Minnkota sent Rice Lake the invoice on July 2, 2012, showing the unpaid balance. Thus,
Rice Lake asserts, Minnkota’s cause of action accrued then, making its claim here
untimely. We disagree.
Mrozik is similar to this case in that both cases involve a dispute between a general
contractor and subcontractor over the general contractor’s failure to pay a portion of the
subcontract. But the similarities end there. In Mrozik, the general contractor failed to pay
the subcontractor because the project owner was insolvent and didn’t pay the general
contractor. Id. at 50. There was no dispute that the subcontractor completed the work

7
required under the subcontract. Id. Even so, the general contractor argued that it was
excused from paying the subcontractor under the subcontract, which provided that “[a]t all
times the Subcontractor shall be paid to the extent that the Contractor has been paid on the
Subcontractor’s account,” because the subcontract established “payment by the owner to
the general contractor as a condition precedent to payment to the subcontractor.” Id.
Because Minnesota courts had not yet addressed the issue, this court looked to other
jurisdictions. Id. at 51. We explained that the Restat ement (Second) of Contracts, and
other state and federal courts have held that “a subcontract will not be construed as having
payment to the general contractor as a condition precedent to the general contractor’s
payment to the subcontractor, unless the parties e xpress such intent in plain, unequivocal,
and unambiguous language in the subcontract.” Id. We recognized that, as a matter of
policy, the general contractor bears the risk of loss when a project owner fails to pay and
that the risk of loss should not be shifted to the subcontractor “absent unequivocal,
unambiguous language to that effect.” Id. at 51 -52 (citing Restatement (Second) of
Contracts § 227; Thos. J. Dyer Co. v. Bishop Int’l Eng’g Co., 303 F.2d 655 (6th Cir. 1962)).
We concluded that the “part ies’ subcontract did not contain the unambiguous and
unequivocal language necessary to shift the risk of the owner’s insolvency to the
subcontractor,” and declined to construe the contract as creating a condition precedent to
payment. Mrozik, 461 N.W.2d at 52.
In Mrozik we analyzed and answered the question whether a subcontractor is
entitled to payment from a general contractor where their contract conditions that payment
on payment by the project owner to the general contractor and the project owner fails to

8
pay the general contractor. Here, the issue is one of timing, when does the contract require
the general contractor to pay the subcontractor , assuming the project owner makes final
payment to the general contractor . Because the project owner here was not insolvent and
made the final pa yment to the general contractor, the policy considerations at play in
Mrozik do not apply . As a result, we conclude that Mrozik—which did not address a
statute-of-limitations question—does not answer the issue presented here.2
Moreover, even if Mrozik applies and the language in the subcontract did not
“unequivocally express an intent of the parties to establish a condition precedent,” id. at
52, the undisputed facts here include: (1) the solvency of the project owner, (2) Rice Lake’s
unhappiness with Minnkota’s construction of the roof , (3) Rice Lake’s hiring another
subcontractor to fix the roof, (4) Rice Lake’s commencement of a breach-of-contract action
against Minnkota in March 2016 for failing to perform its roofing project in a good and
workmanlike manner, and (5) St. Peter’s acceptance of the project as completed and final
payment of the retainage fee in December 2016. The undisputed facts and terms of the
subcontract do not support a determination that Minnkota’s cause of action for the unpaid
retainage necessarily accrued in July 2012. We discern no error in the district court’s
conclusion that the statute of limitations did not bar Minnkota’s claim. Rice Lake has not
established that the claim accrued more than six years before the action commenced.

2 Rice Lake also relies on MidAmerica Constr. Mgmt., Inc. v. MasTec N.A., Inc., 436 F.3d
1257 (10th Cir. 2006) and Tymeless Flooring, Inc. v. Rotolo Consultants, Inc. , 172 So.3d
145 (La. App. 4 Cir. 2015) to discuss the differences between “pay-when-paid” and “pay-
if-paid” clauses and the policy considerations we addressed before in Mrozik. Neither of
these cases are precedential. Because we decline to apply our holding in Mrozik to the
facts presented here, we conclude these cases are not helpful.

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II. Minnkota’s claim is not barred as a compulsory counterclaim.
Rice Lake also contends that Minnkota’s breach -of-contract action is barred as a
compulsory counterclaim under Minn. R. Civ. P. 13.01 because it should have been
brought during Rice Lake’s previous March 2016 breach -of-contract action against
Minnkota. Minn. R. Civ. P. 13.01 provides that the pleadings “shall state as a counterclaim
any claim which at the time of serving the pleading the pleader has against any opposing
party, if it arises out of the transaction that is the subject matter of the opposing party’s
claim.” This rule “contemplates that a counterclaim is compulsory only if the claim is ripe,
i.e., if the claim is mature in the sense that a cause of action exists for which a lawsuit may
properly be commenced and pursued.” Leiendecker v. Asian Women United of Minn., 731
N.W.2d 836, 841 (Minn. App. 2007), review denied (Minn. Aug. 7, 2007).
Rice Lake argu es that Minnkota’s retainage claim is a compulsory counterclaim
because Minnkota’s “present action arises out of the transaction that [wa]s the subject
matter of”’ Rice Lake’s complaint in the first district court action and the “very ills the
Compulsory Counterclaim Rule is de signed to prevent were occasioned here” given the
length of the previous litigation. The district court determined that it would have been
“improper and premature” for Minnkota to bring an action for the recovery of the retainage
funds on March 2, 2016, because Rice Lake could not access the retainage funds until at
least December 2016.
A counterclaim is compulsory only if it is ripe when the pleadings are served. Id.
Rice Lake does not address whether Minnkota’s cause of action for the unpaid retainage
was ripe when the original action was filed in March 2016 and appears not to challenge the

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district court’s conclusion that Minnkota’s claim was not ripe at that time. Thus, Rice Lake
has not proven as a matter of law that Minnkota’s claim was ripe in March 2016. Based
on the subcontract language and the undisputed facts, w e discern no error in the d istrict
court’s determination.
Affirmed.