Opinion
No. A04-587.
Filed November 23, 2004.
Appeal from the District Court, Hennepin County, File No. Cj 04-1401.
Josh Jacobson, The Law Office of Josh Jacobson, P.A., (for appellant).
Thomas H. Boyd, Matthew R. McBride, Winthrop Weinstine, P.A., (for respondent).
Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Klaphake, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Under a settlement agreement, appellant, Jonathan Miner, who had guaranteed a loan, agreed to make payments to respondent Delzer Lithograph Company. Appellant executed a confession of judgment in the event of default. After appellant's fourth payment was lost in the mail, respondent sought entry of the judgment, and the district court granted the motion. On appeal from the entry of judgment, appellant argues that the confession of judgment should not have been entered because appellant made payment under the "mailbox rule" and, therefore, no event of default occurred. Because an event of default occurred under the agreement when payment was not received within 30 days of the installment due date, we affirm.
FACTS
Respondent Delzer Lithograph Company (Delzer) is a corporation engaged in the printing business. On or before November 1, 2001, Geographics, Inc. owed Delzer over $1 million for printing — related services. On November 1, 2001, appellant Miner (Miner) executed a guaranty to Delzer for the full and prompt payment of $600,000 of the amount owed by Geographics. In September 2002, Delzer sued Miner in United States District Court alleging breach of the guaranty.
On September 30, 2003, Delzer and Miner elected to settle the United States District Court action by entering into a settlement agreement and release (agreement). Pursuant to the agreement, Miner provided Delzer with a confession of judgment. The amount of the confession was $376,137.33 plus costs, disbursements, and attorney's fees, less the amounts paid by or credited to Miner.
Under the agreement, Miner was to pay a sum of $145,000 (the "settlement payment"). The language of paragraph one entitled "Payment by Miner to Delzer" provides that the "Settlement Payment shall be made according to the following schedule" and lists monthly installment payments of $10,000, to be made on the 24th day of each month through August 24, 2004. Paragraph one further provides:
Each payment set forth [in the Settlement Payment Schedule] must be received in hand by Delzer or its attorney before the close of business on the date said payment is due, or, alternatively, be received by wire in Delzer's bank account before the close of business on the date said payment is due.
Paragraph three of the agreement entitled "Confession of Judgment" provides:
Delzer shall be permitted to file the Confession against Miner only after the occurrence of an Event of Default. . . . For purposes of this Agreement and the Confession, an Event of Default shall be defined as the failure by Miner timely to make the initial payment within five (5) days after its due date or the failure to make any subsequent payment within 30 days after its due date.
The agreement does not provide for any notice of payment receipt to Miner, nor does it provide for an opportunity to cure in the event of default.
Delzer received installment payments for September, October, and November 2003. The next payment was due under the installment schedule on December 24, 2003. Miner signed the check for the December installment payment on January 5, 2004. On January 6, 2004, Laura Wenzel, Miner's accountant, placed the check in a properly posted envelope addressed to Delzer's counsel and mailed the letter that day. Delzer did not receive the December payment and filed the confession of judgment with the Hennepin County District Court on January 29, 2004.
On February 5, 2004, Miner moved to stay entry of the confession, arguing that under the "mailbox rule," the December settlement payment was "made" for purposes of paragraph three when it was deposited in the mail, and therefore no event of default had occurred. Alternatively, Miner argued that the agreement was ambiguous on the issue of what constituted the "making" of a payment, and that it should be strictly construed against Delzer, so as to avoid forfeiture. Delzer argued in opposition that the requirements for "making" of a payment were set forth in paragraph one of the agreement, and Delzer's failure to receive Miner's payment constituted an event of default in paragraph three.
Following a hearing, the district court found that the agreement was not ambiguous because it was not reasonably susceptible to more than one meaning. Under the district court's analysis, paragraph one created a specific method in which payment was to be made. Paragraph three defined the event of default as the failure of Miner to make any subsequent payment 30 days after it was due. Payment for purposes of paragraph three was defined by paragraph one. Therefore, if payment was not received in hand or by wire by the close of business on the 30th day, an event of default occurred. Accordingly, the district court found the mailbox rule inapplicable. The district court issued an order directing that judgment be entered on Delzer's behalf for $321,137.33, plus attorney's fees, as well as costs and disbursements, which represented the amount agreed upon in the confession less payments made by Miner prior to the event of default. Miner appeals from the entry of judgment.
DECISION
Miner argues that the confession of judgment should not have been entered because he timely mailed the December, 2003 payment and, therefore, under the plain meaning of paragraph three, no event of default occurred.
Interpretation of a contract is a question of law. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). All relevant facts in this matter are undisputed, and neither party is arguing that extrinsic evidence is necessary to discern the parties' intent. As such, resolution depends solely on the interpretation of paragraph one and paragraph three of the agreement. Consequently, the district court's judgment is subject to de novo review by the appellate court. Bank Midwest v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004); see also Beach v. Anderson, 417 N.W.2d 709, 711 (Minn.App. 1988) (finding that settlement agreements are subject to the rules of contract interpretation and enforcement), review denied (Minn. Mar. 23, 1988).
The primary goal of contract interpretation is to determine and enforce the intent of the parties. Turner, 276 N.W.2d at 66. "[T]he language must be given its plain and ordinary meaning and will be enforced by the courts even if the results are harsh." Lipetzky, 674 N.W.2d at 179 (quoting Denelsbeck v. Wells Fargo Co., 666 N.W.2d 339, 346-47 (Minn. 2003) (quotation omitted)). The meaning of terms is determined within the context of the document as a whole and not in isolation. Republic Nat'l Life Ins. Co. v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn. 1979). Accordingly, courts are required to harmonize all provisions if possible and to avoid a construction that would render one or more provisions meaningless. Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn. 1995).
Minnesota courts have not addressed the level of scrutiny applied to instruments authorizing confession of judgment. The prevailing rule at common law is that while the rules ordinarily governing the interpretation of written contracts are generally applied, the instruments are subject to strict construction against the benefiting party. 46 Am. Jur. 2d Judgments § 242 (1994). Accordingly, all reasonable doubt concerning the plain meaning of the agreement should be resolved in Miner's favor. See State v. Colvin, 645 N.W.2d 449, 452 (Minn. 2002) (outlining application of strict construction in penal statutes). But, strict construction does not mandate the narrowest possible interpretation. State v. Zacher, 504 N.W.2d 468, 473 (Minn. 1993).
Miner argues that the parties did not intend, and the plain meaning of the language does not compel, an interpretation that defines the term "make" in paragraph three of the agreement by reference to paragraph one. Paragraph one provides that "[p]ayment shall be made" according to the installment schedule, and that each payment must be received either in hand or by wire at the close of business on its due date. Paragraph three provides that "an Event of Default shall be defined as the failure by Miner timely to make . . . any subsequent payment within 30 days after its due date."
Under Miner's interpretation, "made" in paragraph one refers to the installment payment schedule and, for a payment to be timely for purposes of that payment schedule, it must be received on or before the listed due date. The parties did not incorporate a receipt requirement into paragraph three, however, where "make" refers to payment made after the due date. Therefore, because the method of making payment is undefined in paragraph three, the plain meaning of the text in paragraph three incorporates a common law variant of the mailbox rule providing that payments under a contract are "made" if properly mailed in sufficient time to reach the recipient before their due date. See Beinhauer v. Aetna Cas. and Sur. Co., 893 F.2d 782 (5th Cir. 1990). By mailing the check within 30 days after the installment due date, Miner failed to adhere to the settlement payment schedule in paragraph one. But according to Miner, Delzer was not authorized to file the confession because, under the mailbox rule, Miner met the separate deadline for the "making" of payment in paragraph three and no event of default occurred.
Miner's interpretation cannot be reconciled with the plain language of the paragraphs, particularly, when interpreted within the context of the entire agreement. By isolating "make" in paragraph three from its context, Miner renders the receipt requirement of paragraph one superfluous. Paragraph one is entitled "Payment by Miner" and precisely defines the method of payment: payments are not "made" until they are received. Paragraph three establishes the consequences — the confession of judgment — for failure to adhere to the settlement payment schedule in paragraph one. If the precision in paragraph one was not intended to apply to paragraph three, then the only consequence to Miner — should Delzer not receive payment by the installment due date — is an additional thirty days to make payment in whatever form Miner elects. Given the amount of money implicated by an event of default, it is not reasonable to impute to rational parties an intent to leave "make" in paragraph three so loosely defined.
Additionally, Miner's interpretation creates unnecessary internal inconsistencies in the agreement. According to Miner, Delzer must receive the payment to credit Miner for the December installment payment in paragraph one, but need not receive the payment to credit Miner for the same December installment payment in paragraph three. The receipt requirement attaches to the installment. It does not disappear simply because the installment is past due. Miner correctly asserts that use of the same word in different provisions of one document does not necessarily compel attributing the same meaning to the word in both provisions. See Cherokee Nation v. Georgia, 30 U.S. 1, 19 (1831) (noting that identical words found in different parts of the same document may not have the same meaning). But, here the only difference between the agreement's use of "made" in paragraph one and "make" in paragraph three is that the former uses the passive voice while the latter uses the active. The phrase "[t]he Settlement payment shall be made" in paragraph one is another way of saying "Miner shall make the payment," or the language used in paragraph three. While the parties could have, and perhaps should have, demonstrated their intentions by repeating the receipt requirement in paragraph three, the omission of "receive" in paragraph three does not obscure the plain meaning.
Accordingly, even given the requirement that the agreement be strictly construed, the two paragraphs have only one reasonable meaning: Miner commits an event of default if any settlement payment is not (1) actually received in hand by Delzer within 30 days of its scheduled due date; or (2) actually received by wire within 30 days of its scheduled due date. Miner had the opportunity to negotiate during the settlement for notice of non-receipt or an opportunity to cure, but, instead elected to have a 30-day grace period before an event of default. Because Delzer did not receive Miner's December installment payment within 30 days of its scheduled due date, an event of default occurred. Therefore, the district court did not err by entering the confession of judgment. Because payment for purposes of paragraph three is specifically defined, there is no need to determine whether the mailbox rule is appropriately applied in this context.