Opinion
No. C6-02-1078.
Filed March 25, 2003.
Appeal from the District Court, Carver County, File No. C901992.
Thomas B. Olson, Olson, Usset Weingarden, PLLP, (for appellant)
Mark E. Greene, Frank A. Janes, Standke Greene Greenstein, LTD., (for respondents)
Considered and decided by Lansing, Presiding Judge, Klaphake, Judge, and Stoneburner, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Laurent Development Company LLC appeals the district court's denial of its motion for amended findings or a new trial in a declaration of rights under a purchase agreement, and James and Roseann McMahon appeal the district court's denial of attorneys' fees. We affirm the district court's declaration that Laurent cancelled the purchase agreement and that the McMahons' assertion of statutory cancellation proceedings does not obligate them to afford Laurent redemption rights under Minn. Stat. § 559.21 (2000). Because Laurent's termination was contemplated by the agreement and did not constitute a default, we also affirm the courts denial of attorneys' fees to the McMahons.
FACTS
This case involves a dispute over the legal construction and operation of an agreement negotiated between Laurent Development Company and James and Roseanne McMahon for the purchase of the McMahons' approximately thirty-five-acre tract of land in Victoria, Carver County. Laurent is a real estate development company and a licensed real estate brokerage; the McMahons, individual landowners, live on the property and use it to operate a horse-boarding business. Laurent's president, Terry Forbord, has approximately thirty years' experience in real estate development.
A broker from a different real estate firm initially approached the McMahons about selling their property to an anonymous interested buyer. Shortly after the McMahons signed a listing agreement, the broker presented them with a purchase agreement from Laurent offering to pay $45,000 an acre for the property. In March 2000, after further negotiations conducted with assistance from their respective attorneys, Laurent and the McMahons signed a purchase agreement reflecting a total purchase price of approximately $1,500,000.
Because Laurent intended to develop the property, the purchase agreement contained a section allowing the company to terminate the agreement within one year if it determined that it could not obtain the required governmental approvals:
At any time within 365 days after the Agreement Date, Buyer may, by written notice to Seller, either:
terminate this Agreement, because Buyer has determined in good faith (in Buyer's sole discretion) that Buyer cannot within said time period obtain each and every governmental approval necessary for development of the Property according to Buyer's proposed development plan on economic terms and other terms satisfactory to Buyer; or waive Buyer's right to terminate for said reason.
* * * If Buyer terminates under this section, then the Earnest Money shall be refunded to Buyer and neither party shall have any further obligation to the other party.
The purchase agreement also provided that any title objections presented by Laurent would trigger an extension of the contingency period, allowing the McMahons additional time to make the title marketable. Laurent could also extend the contingency period for 120 days to pursue governmental approval for the development if it paid $20,000 to the McMahons. Laurent objected to an aspect of title relating to a pipeline easement, and the McMahons' attorney undertook removal of the objection through a partial release and a new grant for the location of the pipeline easement.
To obtain the required governmental approval, Laurent submitted a sketch plat of the proposed development and other materials to the city of Victoria, also requesting a review of the city's planned-unit-development (PUD) ordinance. Gary Laurent, Chief Executive Officer of Laurent Development Company, attended a Victoria City Council meeting in September 2000 to advocate for the project. The day after the meeting, Laurent wrote to the company's president, Terry Forbord, stating his discouragement with the city's process and noting that "at times it was very clear that the council would never consider changing lot sizes or widths in the direction we would want."
In response to this information, Forbord wrote to the McMahons on November 4, 2000, proposing an amendment to the purchase price of the property. Forbord noted that "[i]n spite of our concerted efforts we have not been successful" in convincing the city of Victoria to amend the PUD ordinance to allow for greater housing density on the property, and that Laurent "needed an increase in density to justify the purchase price." He continued that there was "a host of critical factors that render the current purchase price for the property economically unfeasible." These factors included the city's reluctance to approve enough housing units on the property; the city's 3.6-acre park dedication, not including the pipeline easement; the pipeline easement itself, making about 3.3 acres of land unusable for development and reducing the number of homes that could be built on a strip of land near the north boundary of the property; the demolition costs of removing accessory structures on the property; the requirement to purchase the existing home on the property; and the city's requirement to upgrade Eighty-sixth Street and the increased costs associated with this reconstruction.
Forbord's letter stated that, although Laurent still wanted to buy the property, "[w]e do not know what consolations the seller is willing to make nor which possible points of negotiations are acceptable. So for this proposal we will only deal with the purchase price since this is the easiest and most straightforward. We offer to amend the purchase price to $900,000 and proceed as previously agreed."
In response, the McMahons proposed a purchase price of $1,000,000 for the land, with the McMahons retaining ownership of their current home on an acceptable-size lot platted in the new subdivision. Forbord replied to their letter, "Thank you for your counteroffer * * * responding to our * * * proposal to adjust the purchase price." He indicated that the "deal * * * still is not economically feasible," but because Laurent had so much time and money invested in the project, it would try to compromise. Accordingly, he wrote, "We will accept your latest offer of $1,000,000. However, under that scenario, we will need to keep the house. * * * I am available to meet with you at any time to discuss the numbers and our proposal." Negotiations then broke down, and the McMahons told their attorney to stop working on the sale of the property.
In March 2001 Laurent notified the McMahons that, pursuant to the purchase agreement, the expiration of the contingency periods had been automatically extended and postponed, pending title clearance by the McMahons. The parties' attorneys continued their correspondence attempting to resolve the pipeline issue. That spring, the city voted to keep the city-wide moratorium on new development in place but excluded the McMahon property from the moratorium, so that it was the only parcel in Victoria that could be developed with direct access to city services.
In May, the McMahons notified Laurent that they needed to know whether and when the company intended to perform and requested that Laurent pay the additional funds contemplated by the purchase agreement as originally signed. The McMahons tendered back the $15,000 earnest money; Laurent rejected the check. The McMahons then filed a statutory notice of cancellation on the grounds that Laurent had failed diligently to pursue approvals from the city, had repudiated the purchase agreement, had failed to pay the consideration necessary to extend the contingency period, and had failed to close.
Laurent brought a declaratory judgment action seeking a declaration that it was not in breach of the purchase agreement and an injunction preventing cancellation. The district court issued a temporary restraining order and scheduled a hearing on the injunction. At the injunction hearing Forbord testified that, although Laurent was willing to pay the original price specified in the purchase agreement, it was not yet ready to close. James McMahon testified that in his mind, "the deal [was] dead," and that he was no longer interested in doing business with Laurent.
Following the hearing, the district court dissolved the temporary restraining order and denied the injunction. The court found that Forbord's November 4, 2000, letter terminated the purchase agreement. The court denied Laurent's posttrial motions, concluded that Minn. Stat. § 559.21 did not apply, declined to apply the doctrine of election of remedies, and denied the McMahons' motion for attorneys' fees and costs. Laurent's and the McMahons' appeals were consolidated for review.
DECISION
The decision whether to grant a new trial lies within the sound discretion of the district court. Halla Nursery, Inc. v. Baumann-Furrie Co., 454 N.W.2d 905, 910 (Minn. 1990). But when the district court's decision is an interpretation of law, rather than an exercise of discretion, a de novo standard of review applies. Id. Fact determinations are reviewed under a clear-error standard, but we independently review the application of law to a given set of facts. Minn.R.Civ.P. 52.01; A. J. Chromy Constr. Co. v. Commercial Mech. Servs., Inc., 260 N.W.2d 579, 582 (Minn. 1977). In reviewing mixed questions of law and fact, we correct "erroneous applications of law, but accord the [district] court discretion in its ultimate conclusions and review such conclusions under an abuse of discretion standard." Rehn v. Fischley, 557 N.W.2d 328, 333 (Minn. 1997).
I
Laurent first challenges the district court's determination that the November 4, 2000, letter terminated the purchase agreement. If the language of a contract is not ambiguous, the construction and effect of the contract presents a legal question for the court. Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn. 1990). "Ambiguity exists [only] when the language of a written document, by itself, is reasonably susceptible to more than one [interpretation]." Id.
The plain language of the purchase agreement is not ambiguous: it allows the single, reasonable interpretation that Laurent could terminate the agreement by written notice to the McMahons if Laurent determined that it could not, within a year, obtain all necessary governmental approvals for the proposed development. See, e.g., Sitterley v. Gray Co., 199 Minn. 475, 477-78, 272 N.W. 387, 388-89 (1937) (upholding plain stipulation in contract providing for its termination). This bargained-for provision reduces economic risk to the developer, who may, under certain conditions, choose to be released from the obligation to buy land that cannot be developed in accordance with project specifications.
In compliance with that provision, as determined by the district court, Laurent gave notice by its letter of November 4, 2000, that it intended to terminate the contract. Notice of contract termination is to be liberally construed. W. Oil Fuel Co. v. Kemp, 245 F.2d 633, 642 (8th Cir. 1957). The letter, closely tracking the contract language, stated that "a host of critical factors," many relating to governmental approval, "render[ed] the current purchase price for the property economically unfeasible" and proposed a new price offer. A proposal to accept on terms varying from those offered operates as a rejection and puts an end to negotiations unless the party who made the original offer renews or properly assents to the modification suggestion. Lake Co. v. Molan, 269 Minn. 490, 497, 131 N.W.2d 734, 739 (1964).
The McMahons responded with a counteroffer, reflecting their understanding that the purchase agreement was no longer in force. In a subsequent letter, Laurent purported to accept the McMahons' counteroffer but reiterated that "[the development] is still not economically feasible" and proposed that Laurent keep the McMahons' house. This letter operated as a rejection and further counteroffer. Because the record does not reflect that the McMahons positively accepted this further offer, we cannot conclude that a new contract was formed between the parties. See Gresser v. Hotzler, 604 N.W.2d 379, 383 (Minn.App. 2000) (concluding that proposed changes to purchase agreement were part of series of counteroffers, rather than positive manifestations of acceptance).
The formation of a contract is judged by the objective conduct of the parties, rather than their subjective intent. Cederstrand v. Lutheran Bhd., 263 Minn. 520, 532, 117 N.W.2d 213, 221 (1962). The objective conduct of the parties comports with the conclusion that their agreement terminated in November 2000 and that subsequent negotiations failed to produce a new contract. Thus, the district court did not err in concluding that the parties were no longer bound contractually to each other after the termination letter.
II
Laurent also challenges the district court's conclusion that Minn. Stat. § 559.21 (2000) does not apply. Specifically, Laurent argues that the McMahons' choice to initiate statutory cancellation proceedings obligated them to allow Laurent to cure the alleged default and reinstate the purchase agreement.
Under Minn. Stat. § 559.21, subd. 2a (2000), "[i]f a default occurs in the conditions of a contract for the conveyance of real estate * * * that gives the seller a right to terminate" the contract, the seller may terminate the contract by serving notice specifying the conditions in default. The buyer then, within the applicable statutory period, must comply with the conditions of default to maintain the contract in force. See id. The provisions of Minn. Stat. § 559.21 only apply, however, to "a contract where both parties are bound by its terms." Romain v. Pebble Creek Partners, 310 N.W.2d 118, 122 (Minn. 1981); see also Jones v. Amoco Oil Co., 483 N.W.2d 718, 724 (Minn.App. 1992) (holding that when contract was nullified by its own terms, vendor was not required to follow procedures of contract-for-deed cancellation statute), review denied (Minn. May 15, 1992). In Romain, the Minnesota Supreme Court held that a purchase agreement was not finally binding on both parties when they failed to reach agreement on the essential term of security for a note in the interim period before closing. Romain, 310 N.W.2d at 122. Because the parties failed to agree on a contingency on which the contract depended, the purchase agreement became null and void, and notice under Minn. Stat. § 559.21 was not needed to terminate the purchaser's interest. Id. at 123; s ee also Liebsch v. Abbott, 265 Minn. 447, 454-55, 122 N.W.2d 578, 583-84 (1963) (holding that Minn. Stat. § 559.21 did not apply because contract performance was contingent on buyer obtaining a mortgage loan). Similarly, in this case, when Laurent terminated the contract by sending the November 4, 2000, letter and a new agreement was never reached, the parties were no longer bound to each other, and consequently notice of termination under Minn. Stat. § 559.21 was unnecessary to terminate Laurent's interest as a purchaser. Because the contract had terminated before the sellers' attempt to cancel it under Minn. Stat. § 559.21, Laurent's attempt to redeem under that statute must fail.
Likewise, the doctrine of election of remedies does not apply in this case because the McMahons did not first obtain a judgment for damages under the purchase agreement and then attempt to cancel the contract, seeking double recovery. See First Nat'l. Bank v. Flynn, 190 Minn. 102, 107, 250 N.W. 806, 808 (1933) (noting that vendor is bound by election of remedies doctrine if an action has been pursed to a determinative conclusion, if the vendor has procured advantage from his or her actions, or if the vendor has been subjected to injury).
III
Finally, the McMahons appeal the district court's denial of their motion for attorneys' fees. A court generally may not award attorneys' fees absent a specific contractual provision or statutory authority. Kallok v. Medtronic, Inc., 573 N.W.2d 356, 363 (Minn. 1998). We will not reverse a district court's decision on attorneys' fees absent an abuse of discretion. Carlson v. Mut. Serv. Cas. Ins. Co., 527 N.W.2d 580, 584 (Minn.App. 1985), review denied (Minn. Apr. 27, 1995).
The McMahons contend that the district court abused its discretion in not awarding them attorneys' fees pursuant to the purchase agreement, which provided that a defaulting party under the contract pay all reasonable expenses, including attorneys' fees, incurred by the other party in enforcing the agreement. Laurent's notice of termination, however, did not constitute a default. It was, instead, a choice available to Laurent under the agreement. Therefore, the provision for the payment of attorneys' fees in the event of default does not apply, and the district court did not abuse its discretion in declining to order attorneys' fees.