Opinion
No. C7-02-22
Filed June 11, 2002.
Appeal from the District Court, Dakota County, File No. C1018793.
Steve Emery, (for appellants)
Jeffrey R. Ansel, (for respondents)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
On appeal from summary judgment, appellant Steve Emery alleges that (1) the district court erroneously granted summary judgment based on mutual rescission of the contract, accord and satisfaction, and lack of damages; (2) the district court erred by deciding respondent's summary judgment motion regarding respondents Wayne Soojian and Carolyn Mahon without formal motion made by respondents; (3) the district court erred by granting respondents Soojian and Mahon summary judgment; (4) the district court erred by finding that Shirley and Kimberly Emery were not third-party beneficiaries of the contract; and (5) the district court should have required respondents to comply with appellants' requests for discovery. We affirm.
FACTS
On March 13, 2001, Emery entered into a written contract with respondent The Ryland Group, Inc., to purchase a townhouse in a housing development in Apple Valley, Minnesota. Emery paid a $1,000 deposit "for partial payment of materials and labor" and $1,000 in earnest money. The estimated closing date on the home was August 31, 2001. The contract provided that the sale was contingent upon certain performances by Emery, such as application for mortgage financing and disclosure of credit information, and that if any of the contingencies did not happen, "[Ryland] may declare this Agreement of Sale null and void, and retain [Emery's] Earnest Money and any and all Deposits as liquidated damages." The contract was signed by Emery alone, no other individuals were listed as buyers. Emery did notify Ryland that his elderly mother and disabled sister would be living in the house and that he was purchasing the house mainly for their benefit.
Prior to entering the contract, Ryland sales representative Carolyn Mahon made oral representations to Emery that the house would be made of the highest-quality materials and the finest-quality workmanship. The contract stated that Emery could inspect the home while it was under construction, but that he must be accompanied by a representative and that he must have written permission first. Emery attempted to arrange such visits but contends that he was informed by Mahon that he could visit the house on his own because she was too busy to provide visits. Emery visited the home several times before construction was completed and notified Ryland of concerns about the quality of construction. Emery raised the possibility of a lawsuit if the problems were not fixed.
On July 14, 2001, Emery received a letter from Ryland president Wayne Soojian dated July 11, 2001, in which Ryland stated:
This letter provides you with notice that the Agreement of Sale between Ryland and you is terminated and cancelled effective immediately. It is unfortunate that we are required to terminate this Agreement of Sale but your dissatisfaction with the home and difficulty with abiding by the terms of the Agreement of Sale require this cancellation of the Agreement to occur.
Ryland returned Emery's deposit and earnest money in the amount of $2,000 and gave as its reasons for terminating the contract the facts that Emery had inspected the home without written permission and that he had threatened legal action.
Emery had already moved out of his prior home in anticipation of his move. Emery wrote a letter to Ryland dated July 14, 2001, stating:
I received your letter today purporting to cancel my contract with Ryland Homes. I fully expect the home to which is referenced in the contract to be delivered to me on August 30, 2001, as indicated.
On July 23, 2001, Emery contacted his loan officer and cancelled his mortgage application. On July 22, 2001, Emery entered into a purchase agreement to purchase a different house in Farmington. Emery cashed the check sent to him by Ryland in the amount of $2,000 in mid-August, 2001.
The original price of the house under the contract was $167,140, but after options were added, the price of the house was $176,835. Ryland agreed to provide a $5,500 incentive to Emery, $1,500 to be applied to an outright reduction in the price of the house at closing and $4,000 as an accounting function so that closing costs could be part of the mortgage by increasing the price of the house by $4,000 while providing $4,000 as part of the incentive. As of November 26, 2001, the house remained unsold and was listing at a price of $181,860, but promotional discounts on options were being offered in the amount of $10,000.
DECISION I.
Emery argues that the district court erred in granting Ryland's motion for summary judgment. On appeal from summary judgment, this court must determine if there are any genuine issues of material fact and whether the district court erred in its application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989). This court reviews "the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
Emery contends that he is entitled to damages because Ryland breached the contract by prematurely canceling it. Ryland argues that (1) the contract was mutually rescinded; (2) even if the contract was not mutually rescinded, there was an accord and satisfaction; and (3) even if the contract was not rescinded and there was no accord and satisfaction, Emery incurred no damages.
A. Mutual recission
[T]he parties to a bilateral contract may rescind the contract by mutual consent. Rescission of a contract by agreement or abandonment requires an offer and acceptance or, in other words, the mutual consent of the parties. Mutual rescission requires an intent to rescind on the part of both parties. Mutual assent to rescind a contract, like mutual assent to form one, may be inferred from the attendant circumstances and conduct of the parties. A repudiation of a contract by one party, acquiesced in by the other, is tantamount to a rescission.
Minnesota Ltd., Inc. v. Pub. Utils. Comm'n, 296 Minn. 316, 318-19, 208 N.W.2d 284, 285-86 (1973) (citations omitted). "In determining contractual intent, the question is not what a party may have subjectively intended but what intent his words and acts objectively manifest." Id.at 321, 208 N.W.2d at 287 (citation omitted).
By letter of July 14, 2001, Emery stated that he expected the contract to be performed on August 30, 2001. Emery then signed a purchase agreement to buy a different home on July 22, 2001; cancelled his mortgage application for a mortgage on the Ryland home on July 23, 2001; and cashed the $2,000 check representing a deposit and earnest money in mid-August of 2001. Ryland argues that Emery showed his intent to rescind the contract by these actions. However, mutual abandonment, cancellation or rescission must be clearly expressed, and acts and conduct of the parties to be sufficient must be positive, unequivocal, and inconsistent with the existence of a contract.
Desnick v. Mast, 311 Minn. 356, 365, 249 N.W.2d 878, 884 (1976).
Emery brought suit against Ryland on July 16, 2001, before he cancelled his mortgage application, signed another purchase agreement, and cashed the check. When one party declares an intention to repudiate a contract, the other party is excused from tendering performance, though this is not technically a rescission nor the acceptance of a rescission, since it leaves the contract in existence so far as to sustain an action for damages for its breach.
Ewing v. Von Nieda, 76 F.2d 177, 182 (8th Cir. 1935) (quotation omitted). Therefore,
[w]here one party to a contract renounces it and refuses to perform, the other party may treat the contract as broken and abandon it without demand or tender of performance, and recover as damages the profits he would have received through full performance. Such an abandonment is not a rescission of the contract, but a mere acceptance of the situation which the wrong doing of the other party has brought about.
Id. (quotation omitted). It is clear that by his letter to Ryland, Emery did not evidence any intent to rescind the contract. Instead, he brought an action for damages and treated the contract as ended due to a breach on the part of Ryland. Furthermore, "[w]hether a contract has been rescinded by mutual consent or modified is a question for the jury, unless the evidence is conclusive." Country Club Oil Co. v. Lee, 239 Minn. 148, 154, 58 N.W.2d 247, 251 (1953) (citation omitted). Because the question of mutual rescission of the contract should be reserved for the jury, summary judgment cannot be granted on that basis.
B. Accord and Satisfaction
Ryland argues that, because Emery cashed the check returned to him, an accord and satisfaction was reached between the parties.
An accord and satisfaction acts to discharge a contract or cause of action. It is an executed contract, and may be expressed or implied from circumstances which clearly and unequivocally indicate the intention of the parties.
An enforceable accord and satisfaction arises when a creditor accepts the debtor's offer to provide a different performance.
The critical issue is the intent of the parties. If the parties objectively intended the new promise to constitute full settlement of the original claim, the defense of accord and satisfaction is established.
Ladwig Ladwig, Inc. v. Orlin Ladwig, Inc., 372 N.W.2d 408, 411 (Minn.App. 1985) (citations omitted).
An agreement constituting an accord and satisfaction need not be expressed.
Absent proof of an express agreement, the court will look to the conduct of the parties. If the parties fully performed their duties pursuant to the alleged accord, the court will presume a satisfaction.
Becker v. F H Rest. Group, Inc., 413 N.W.2d 202, 205 (Minn.App. 1987) (quotation omitted).
Accord and satisfaction may be achieved through the use of a check or other negotiable instrument. Weed v. Comm'r of Revenue, 550 N.W.2d 285, 288 (Minn. 1996). But discharge of a debt through accord and satisfaction will only occur if it is proved that
the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
Id. (alteration in original) (quotation omitted) Minn. Stat. § 336.3-311 (2000).
The check cashed by Emery contained no statement that the instrument was tendered as full satisfaction of any claims Emery had, and the letter accompanying the check merely repudiated the contract but did not conspicuously state that the returned check constituted payment in full satisfaction of any claims Emery might have. Further, Emery's letter to Ryland and the pursuit of an action against Ryland make it clear that he did not intend to agree to an accord and satisfaction of his claims.
If the evidence would allow reasonable persons to draw different conclusions, summary judgment should not be granted. Illinois Farmers Ins. Co. v. Tapemark Co., 273 N.W.2d 630, 633 (Minn. 1978). Because a trier of fact could reach different conclusions regarding Emery's intent to enter an accord and satisfaction with Ryland, summary judgment cannot be granted based on the issue of accord and satisfaction.
C. Damages
Ryland argues that the contract provides that the only measure of damages in case of a termination of the contract is to retain or give back Emery's deposit/earnest money. However, the liquidated-damage clause in the contract provided for liquidated damages to Ryland upon non-performance of certain conditions by Emery. The contract did not provide for or limit damages to Emery in any way in event of a breach on the part of Ryland. Therefore, Emery is entitled to any damages available at law or equity.
In a breach-of-contract action, the damage award is intended to put the non-breaching party in the position he would have been in had the contract been performed. Johnson v. Garages, Etc., Inc . , 367 N.W.2d 85, 86 (Minn.App. 1985). Here, the parties dispute the measure of damages in a breach-of-contract claim.
It is well settled that where one party repudiates the contract, the other party has an election to pursue one of three remedies: (1) To treat the contract as rescinded and avail himself of the remedies which may be based on rescission; (2) to treat the contract as still binding and wait until the time arrives for its performance and then sue and recover under the contract; (3) to treat the renunciation as an immediate breach and sue at once for any damages which he may have sustained.
Greer v. Kooiker, 312 Minn. 499, 512, 253 N.W.2d 133, 142 (1977) (quotation omitted). Because Emery treated Ryland's renunciation as an immediate breach, Emery is entitled to the difference between the purchase price and the market value at the time of the breach. See id. at 513, 253 N.W.2d at 142 (stating damages where vendor breaches contract to convey land is difference between market value and purchase price at time of breach).
We acknowledge Emery's arguments that he may still have retained the right to sue for damages. By the time of the summary judgment motion in this action, the house remained unsold. Emery agreed to pay $176,835 minus a $1,500 incentive towards the purchase price of the house, which means that the purchase price was $175,335. The house was listed at a price of $181,860, minus promotional discounts in the amount of $10,000, bringing the list price to $171,860 on November 26, 2001. Therefore, the house has not appreciated in value but has actually decreased in value since the time of the breach. Even if Emery had tendered full payment for the house and forced Ryland to build the home, he would have only broken even at best and likely would have lost money. Therefore, there is nothing in the record to support a credible claim that the breach resulted in any damages to Emery. The lack of evidence in the record supports the district court's grant of summary judgment on the amount of damages, which is usually a fact question for a jury.
Because we affirm the district court's grant of summary judgment, we need not consider denial of Emery's motion for summary judgment.
II.
Emery argues that respondent's motion for summary judgment on the issue of the individual tortious liability of respondents Soojian and Mahon was not properly before the court, citing Minn.R.Gen.Pract. 115.03, which requires a party to give notice of a dispositive motion 28 days before a hearing. The hearing regarding both parties' motions for summary judgment was held on December 21, 2001, and respondents served their motion for summary judgment on all issues on or about December 14, 2001. However, Emery did not object before the district court to the respondent's motion for summary judgment in favor of Soojian and Mahon on the basis of timeliness, and therefore, the issue of timeliness of the motion is waived. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating reviewing court should only consider issues presented and considered by district court).
III.
Emery argues that respondent Mahon acted in her individual capacity to fraudulently induce Emery into the contract by promising a quality of workmanship that she knew would not be delivered. Emery also alleges that respondent Soojian intentionally terminated the contract to avoid liability for the construction defects. Generally, officers and employees are not liable for the torts of the company for which they work. See Morgan v. Eaton's Dude Ranch, 307 Minn. 280, 283, 239 N.W.2d 761, 762 (1976) (stating corporate officer is not liable for torts of the company's employees unless he directed, participated in, or was negligent by failing to learn of and prevent the tort). Emery has not presented any evidence that demonstrates Mahon knew that the quality of workmanship would be poor before the contract was executed. Similarly, Emery has presented no evidence that Soojian committed any torts by intentionally terminating the contract, and Emery has not even stated what specific intentional tort he believes Soojian committed, even in his complaint. Furthermore, Emery failed to explain what further discovery would be needed in order to demonstrate a factual basis for these claims. Therefore, we affirm the district court's grant of summary judgment in favor of respondents Mahon and Soojian.
IV.
Emery argues that Shirley and Kimberly Emery were third-party beneficiaries of the contract. To prevail as third-party beneficiaries, appellants had to produce evidence that the contract was made to benefit them or anyone else in their position. Garner v. Todd , 361 N.W.2d 459, 461 (Minn.App. 1985). "[T]he rights of third-party beneficiaries depend upon, and are measured by, the terms of the contract." Haas v. DaimlerChrysler Corp., 611 N.W.2d 382, 385 (Minn.App. 2000) (quotations omitted), review denied (Minn. Aug. 22, 2000).
There are two means of finding that a third-party beneficiary exists.
[F]irst an "intent to benefit" test, i.e., the contract must express some intent by the parties to benefit the third-party through contractual performance; and second, a "duty owed" test, i.e., that the promisor's performance under the contract must discharge a duty otherwise owed the third party by the promisee.
Sernak v. Krenzen Cadillac, Inc., 415 N.W.2d 92, 94 (Minn.App. 1987) (citing Cretex Cos. v. Constr. Leaders, Inc., 342 N.W.2d 135, 138 (Minn. 1984)). Under the intent-to-benefit test, there must be contract language that expresses some intent by the contracting parties to benefit a third party through contractual performance; otherwise, "a beneficiary is no more than an incidental beneficiary and cannot enforce the contract." Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn.App. 1987) (citation omitted).
Under this definition of the intent-to-benefit test, there is nothing in the record that indicates that the contract was expressly made for Shirley or Kimberly Emery's benefit. Therefore, we affirm the district court's finding of fact and conclusion that Shirley and Kimberly Emery were not third-party beneficiaries under the contract.
V.
Appellant argues the district court should have compelled respondents to comply with discovery. The district court has "wide discretion to issue discovery orders and, absent clear abuse of that discretion, normally its order with respect thereto will not be disturbed." Shetka v. Kueppers, Kueppers, Von Feldt Salmen, 454 N.W.2d 916, 921 (Minn. 1990). But summary judgment should not be granted when an opposing party has been unable to complete relevant discovery through no fault of its own. See Rice v. Perl, 320 N.W.2d 407, 412-13 (Minn. 1982) (recognizing continuances should be liberally granted when party had insufficient time to conduct discovery). Because the record demonstrates that Emery incurred no damages due to any possible breach on behalf of Ryland, we affirm the district court's decision to deny Emery's motion to compel discovery.