Opinion
No. A05-1568.
Filed May 23, 2006.
Appeal from the District Court, Washington County, File No. C7-03-5131.
Chad D. Lemmons, Kelly Fawcett, P.A., (for appellant).
William C. Peper, Peper Law Offices, P.C., (for respondent Great Northern Financial Group).
John G. Westrick (of counsel), Lawrence P. Zielke, Shapiro Nordmeyer, Llp, (for respondent J.P. Morgan Chase Bank).
Jon E. Kingstad, (for respondents Mary Parr, et al.).
Considered and decided by Kalitowski, Presiding Judge; Willis, Judge; and Shumaker, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
In this real-estate dispute, appellant Marlene A. Fearing argues that the district court (1) erred by concluding that the election of remedies doctrine precludes appellant from seeking relief; and (2) clearly erred in finding that the parties intended the quitclaim deed to be an equitable mortgage instead of a deed transferring title. Appellant also contends that she is the third-party beneficiary of the contract for deed and that the court erred in reforming the quitclaim deed. We affirm.
DECISION
On March 2, 2001, Progressive Real Estate, Inc. (Progressive), as seller, and Transaction Real Estate, Inc. (Transaction), as buyer, entered into a purchase agreement for the sale and purchase of property including Lot 13, Block 1, St. Croix Villas (Lot 13). At the closing on May 4, 2001, Progressive and Transaction entered into a contract for deed of the property. Transaction agreed to (1) purchase the property; (2) build Progressive a home on Lot 13; (3) sell the completed home to appellant, the president of Progressive; (4) place a mortgage against Lot 13, not to exceed $200,000; and (5) assign the mortgage to appellant. Progressive and Transaction also executed an agreement that provides that Transaction would give Progressive a quitclaim deed for Lot 13 at closing, and Progressive would agree not to file the quitclaim deed unless Transaction defaulted on its obligations.
On May 9, 2001, Michael Aymar (Aymar), as president of Transaction, executed a quitclaim deed for Lot 13 in favor of appellant as an individual. A year later, a mortgage for $257,000 was placed on Lot 13. Appellant then recorded the quitclaim deed on June 18, 2002, believing that Aymar had breached the contract for deed.
Later in 2002, Aymar, Transaction, and others filed a lawsuit against appellant and Progressive, alleging, among other things, that appellant and Progressive had breached several agreements. Appellant and Progressive then filed an answer and counterclaim, arguing that Transaction breached the contract for deed.
On March 14, 2003, the district court dismissed Aymar and Transaction's complaint and awarded appellant and Progressive a money judgment for $579,807.12. A few months later, appellant filed an amended complaint, seeking to quiet title to the property including Lot 13.
On June 8, 2005, the district court issued an order and determined that (1) appellant's interest in Lot 13 is an equitable mortgage, and therefore, junior to the first mortgage; and (2) the election of remedies doctrine barred appellant's claim because she already received a final money judgment award against Aymar and Transaction.
I.
Appellant argues that the district court erred in determining that the election of remedies doctrine barred her quiet title action. We disagree.
A reviewing court is not bound by and need not give deference to a district court's decision on a purely legal issue. Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003). The doctrine of election of remedies requires that a party adopt one of two or more coexisting and inconsistent remedies. Christensen v. Eggen, 577 N.W.2d 221, 224 (Minn. 1998). The purpose of the doctrine is not to prevent recourse to a potential remedy but to prevent double redress for a single wrong. Id. "Generally, a party is not bound by an election unless he has pursued the chosen course to a determinative conclusion or has procured advantage therefrom, or has thereby subjected his adversary to injury." Kosbau v. Dress, 400 N.W.2d 106, 110 (Minn.App. 1987) (quotation omitted).
As applied to contracts, the election of remedies doctrine requires a plaintiff to choose whether to affirm or disaffirm a contract. Loppe v. Steiner, 699 N.W.2d 342, 349 (Minn.App. 2005). Therefore, once a party elects to cancel a contract, that party may not then recover damages based on a breach of the contract. Covington v. Pritchett, 428 N.W.2d 121, 124 (Minn.App. 1988). Similarly, if a party elects to cancel a contract, that party may not then sue for specific performance of the contract. Kosbau, 400 N.W.2d at 108.
Here, the district court determined that appellant could not cancel the contract for deed or foreclose her equitable note because she received a final damage award for breach of the contract for deed. Appellant argues that she is not asking the court to cancel or enforce the contract for deed. Rather, appellant contends that she is already the fee owner of the property, and therefore she only seeks to quiet title to the property. Appellant asserts that Transaction conveyed the property to her in compliance with the contract for deed when Transaction executed the quitclaim deed. We disagree.
In appellant's answer and counterclaim in the 2002 action, appellant stated that she and Progressive sought monetary relief from Aymar, Transaction, and others for a breach of contract because "Transaction no longer holds fee title to Lot 13 and can, therefore, not satisfy the obligations . . . of the Contract for Deed to convey the fee title of said lot to Marlene A. Fearing." Appellant therefore admitted that neither she nor Transaction held fee title to Lot 13 and that she could not receive title to Lot 13. Moreover, appellant's statement is consistent with a mechanic's lien statement that she filed in June 2002 where she also indicated that she did not own the property. Because Transaction could not convey the property as required under the contract for deed, the district court awarded appellant and Progressive a significant monetary damage award for the breach of the contract for deed. Thus, appellant has received her remedy and cannot now bring an action to quiet title to property that she admitted that she does not own. We therefore conclude that the district court did not err by determining that the election of remedies doctrine precluded appellant from bringing this quiet title action.
II.
Appellant also argues that the district court clearly erred in finding that the parties intended to enter into an equitable mortgage. Appellant argues that the parties instead intended that the quitclaim deed would convey fee title. We disagree.
A district court's findings of fact "shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the [district] court to judge the credibility of the witness." Minn. R. Civ. P. 52.01. A finding is clearly erroneous only if it is "manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole." Randall v. N. Milk Prods., Inc., 519 N.W.2d 456, 458 (Minn.App. 1994) (quotation omitted).
Where a deed absolute on its face is in fact given as security, it constitutes an equitable mortgage. Ministers Life Cas. Union v. Franklin Park Towers Corp., 307 Minn. 134, 138, 239 N.W.2d 207, 210 (1976). For example, an equitable mortgage exists when the borrower deeds property to the lender in exchange for a loan. Miller v. Anderson, 394 N.W.2d 279, 283 (Minn.App. 1986). But "a transaction will not be construed as an equitable mortgage unless both parties intended to enter into a mortgage agreement." Id. Courts must consider the "written memorials of the transaction and the attendant facts and circumstances" and ascertain intent at the time of the conveyance. Ministers Life, 307 Minn. at 138, 239 N.W.2d at 210.
Here, the plain language of the real-estate documents establishes that the parties intended the quitclaim deed to serve as security in the transaction. The May 4, 2001 agreement between Progressive, as seller, and Transaction, as buyer, states that "Seller desires security in the event Buyer does not build a townhouse pursuant to said Contract for Deed." See id. (stating that courts place great weight on the written memorials of the transaction and implying that terms such as "security" are evidence of intent to create an equitable mortgage). That agreement further states that Transaction would give Progressive a quitclaim deed for Lot 13, but that Progressive would not file that deed unless Transaction defaulted in its obligation under various provisions of the contract for deed, including the construction provisions. The construction provisions provide that Transaction would build Progressive a house on Lot 13 and that Transaction would sell the house to appellant. Thus, the language of the documents shows that the parties did not intend that Transaction would sell the house to appellant via the quitclaim deed. Instead, Transaction would sell the house to appellant after completing construction. And the quitclaim deed only served as security in the event that Transaction did not build appellant's home according to the terms and conditions in the contract for deed.
In addition, the testimony of several witnesses suggests that the parties intended the quitclaim deed to serve as security in the transaction. Appellant and her attorney testified that the quitclaim deed was not intended to immediately transfer legal title. Appellant's attorney further testified that the purpose of the quitclaim deed was to guarantee performance of the construction provisions of the contract for deed. And Aymar testified that appellant was not to record the quitclaim deed unless he failed to perform.
Finally, appellant's actions suggest that none of the parties intended that the quitclaim deed would immediately convey legal title to Lot 13. Pursuant to the May 4, 2001 agreement, appellant only recorded the quitclaim deed once she believed that Transaction had defaulted in its obligations.
Appellant further argues that the quitclaim deed is not an equitable mortgage because equitable mortgages must involve security on a loan transaction. But "[a] mortgage is a security for something to be paid or performed." Buse v. Page, 32 Minn. 111, 114, 19 N.W. 736, 737 (1884) (emphasis added). See Dennis v. Swanson, 176 Minn. 267, 271, 223 N.W. 288, 290 (1929) (citing Buse while discussing equitable mortgages). Thus, a mortgage may not necessarily involve a monetary loan.
On this record, we conclude that the district court did not clearly err in finding that the parties intended to enter into an equitable mortgage.
III.
Appellant contends that she is a third-party beneficiary of the contract for deed and that the court erred in reforming the deed. But appellant does not explain how this argument affects the outcome here. In addition, the district court did not consider and decide whether appellant is a third-party beneficiary, and therefore, we will not consider it here. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that appellate courts generally do not review issues that the district court has not considered). And finally, we note that the district court order does not indicate that the court reformed the quitclaim deed. We therefore conclude that appellant's reformation argument is without merit.