Opinion
No. A03-340.
Filed January 16, 2004.
Appeal from the District Court, Pope County, File No. C7-02-296.
James P. Peters, Karna M. Peters, Peters Peters, Plc, (for respondents).
Derek A. Trosvig, Swenson Lervick Syverson Anderson Trosvig Jacobson, P.A., (for appellants).
Considered and decided by Toussaint, Chief 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This opinion will be unpublished and may not be cited except as provided by Minn.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 (2002).
UNPUBLISHED OPINION
Appellants challenge the district court's grant of summary judgment to respondents, arguing that the district court erred by determining that no genuine issues of material fact exist regarding appellants' failure to satisfy a condition precedent in the purchase agreement. Because the district court did not err in its grant of summary judgment, we affirm.
FACTS
In July 2001, respondents Robert and Dineen Mueller listed their Pope County resort property for sale. Later that month, appellants Kirk and Mari Petersen made an offer of $725,000 that included a $1,000 earnest-money deposit. The Muellers made a counter-offer to the Petersens that required a closing date of April 1, 2002. The Petersens accepted the counter-offer and in August 2001, the Petersens and the Muellers signed a purchase agreement.
The Petersens planned to finance the purchase with a bank loan of approximately $600,000 and approximately $125,000 in personal funds. In August 2001, the Petersens obtained a financing proposal for a loan from Stearns Bank of St. Cloud; the loan was subject to the approval and conditions of the Small Business Administration (SBA), which was guaranteeing the loan. The proposal provided for a loan of $600,000 and required the Petersens to contribute $150,000 of equity toward the purchase price. It further provided that the loan was contingent on the "sale and closing of personal residence and rental property with $120,000 net proceeds" and on the Petersens fulfilling certain requirements, such as obtaining a boundary survey. The Petersens were required to close the loan within 90 days after acceptance of the proposal letter. On August 15, 2001, the Petersens accepted the financing proposal. And in October 2001, they obtained the appraisal required by the proposal.
In late August 2001, the parties signed an addendum to the purchase agreement. The addendum provides that the purchase agreement is contingent on the Petersens obtaining financing. It further provides that the Muellers retain the right to continue to market the resort until the Petersens obtain financing and pay the Muellers an additional $24,000 in earnest money.
To obtain the $125,000 in personal funds needed for closing, the Petersens planned to sell their Iowa home. But by the winter of 2001, the Petersens had not sold their home as planned, and they began discussing other financing options with the Muellers. On March 4, 2002, the Petersens sent the Muellers an e-mail, stating that "barring a miracle, it seems unlikely that we will be able to pull off our April 1 closing." In a March 6, 2002 e-mail, the Muellers suggested an amended purchase agreement with a July 15, 2002 closing date and revised financial terms.
On March 13, 2002, after reaching an agreement to sell their home to Kirk Petersen's parents for $170,000, the Petersens sent the Muellers an e-mail proposing a May 1, 2002 closing date. The Petersens explained that this later date was necessary because they could not close on their residence until after April 20, 2002, and still needed to arrange for the required boundary survey and an extension of the SBA loan proposal provided by Stearns Bank. On March 20, 2002, the Muellers' real-estate agent sent the Petersens e-mails stating that the Muellers were unwilling to close in April or May and that "we have a deal without question if we want to close July 15." Later that day, the Petersens e-mailed the Muellers' real-estate agent and told him that they had obtained bank financing in the form of a bridge loan and were intending to close on April 1, 2002.
Because they could not fulfill the requirements for the loan provided by Stearns Bank and SBA by April 1, 2002, the Petersens had contacted First State Bank of Battle Creek, Iowa, regarding a $600,000 "bridge loan." On March 22, 2002, First State Bank sent a letter of interest to the Petersens, stating that the loan was "based on the commitment that you already have from Stearns Bank/SBA . . . [i]f and when the need arises, please feel free to call or write, and we can proceed."
On March 21 and 22, 2002, further e-mails were sent between the Petersens and the Muellers' real-estate agent discussing the April 1, 2002 closing date. On March 23, 2002, the Muellers' real-estate agent e-mailed the Petersens, stating that "Rob IS NOT CLOSING IN APRIL OR MAY PERIOD." The next day, the Muellers' real-estate agent faxed to the Petersens a proposed addendum to the purchase agreement, providing for a July 15, 2002 closing date. The Petersens made some changes and faxed it back to the Muellers' real-estate agent on March 26, 2002. This addendum was never signed.
According to Kirk Petersen's affidavit, he then called the Muellers' real-estate agent to inform him that they would be out of the state until April 2, 2002, unless they needed to stay. Then, according to Petersen, the Muellers' real-estate agent told him that they did not need to stay and that matters could be finalized on their return. The Petersens did not take any further action to sell their residence or to obtain the bridge loan.
On April 2, 2002, when the Petersens returned, they discovered an e-mail, dated April 1, 2002, from the Muellers' real-estate agent indicating that a July 15, 2002 closing date "works." On April 3, 2002, the Petersens received an e-mail from the Muellers' real-estate agent, indicating that the listing had run out. And on April 11, 2002, the Muellers' real-estate agent mailed a cancellation agreement and a refund to the Petersens of the $1,000 earnest-money deposit. The Petersens refused to sign the cancellation agreement.
The Muellers sued, requesting that the district court declare the purchase agreement void because of the Petersens' failure to fulfill the financing contingency. The Petersens counterclaimed, requesting specific performance of the purchase agreement or, in the alternative, damages. The Muellers moved the district court for summary judgment, which the court granted, declaring the purchase agreement cancelled as a matter of law. This appeal follows.
DECISION
On appeal from summary judgment, this court determines whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Offerdahl v. Univ. of Minn. Hosp. Clinics, 426 N.W.2d 425, 427 (Minn. 1988). No genuine issue of material fact exists when "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (quotation omitted). "[T]he party resisting summary judgment must do more than rest on mere averments." Id. at 71. No genuine issue of material fact exists when the nonmoving party brings forth evidence merely creating a metaphysical doubt concerning a factual issue, and that evidence is not sufficiently probative concerning an essential element of the case so as to permit reasonable persons to draw different conclusions. Id.
I.
In granting the Muellers' summary-judgment motion, the district court determined that the purchase agreement unambiguously required the Petersens and the Muellers both to satisfy certain "conditions precedent" on or before April 1, 2002. A condition precedent is either an act that must be performed or an event that must occur before a contractual right accrues or a contractual duty arises. Carl Bolander Sons Co., Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974). Thus, if the condition does not occur and is not excused, performance of contractual duties need not be rendered. Seman v. First State Bank of Eden Prairie, 394 N.W.2d 557, 560 (Minn. App. 1986). And when the parties to a proposed contract have agreed that the contract is not to be binding until certain conditions are performed, no binding contract will arise until the specified conditions have been performed. 13 R. Lord, Williston on Contracts § 38:7, at 397-98 (4th ed. 2000). If a condition precedent is not satisfied, no contract exists, and no party can be held liable for breach of that contract. 451 Corp. v. Pension Sys. for Policemen Firemen of City of Detroit, 310 N.W.2d 922, 924 (Minn. 1981).
Because the parties' purchase agreement provides that it is contingent on the Petersens obtaining financing, the district court properly described the requirement that the Petersens obtain financing as a "condition precedent." But although the district court and the parties describe the Muellers' duty to furnish an abstract and the Petersens' duty to pay the full purchase price as "conditions precedent," we conclude that they are instead simply contractual obligations of the parties that would come into being if the condition precedent were satisfied.
Because the requirement that the Petersens obtain financing was a condition precedent to the enforceability of the purchase agreement, we examine that issue first. The district court "cancelled" the parties' purchase agreement, having determined that the Petersens were not financially ready and able to buy on or before April 1, 2002, and thus the condition precedent that they obtain financing was not satisfied. The Petersens argue that the district court erred and that genuine issues of material fact exist regarding whether they were financially ready and able to buy on April 1, 2002.
A purchaser is financially ready and able to buy if (1) he has the needed cash in hand, (2) he is personally possessed of assets and a credit rating that enables him with reasonable certainty to command the requisite funds at the required time, or (3) he has definitely arranged to raise the necessary money, or as much thereof as he is unable to supply personally, by obtaining a binding commitment for a loan to him for that purpose by a financially able third party. Jones v. Amoco Oil Co., 483 N.W.2d 718, 722 (Minn. App. 1992), review denied (Minn. May 15, 1992). The district court found that the Petersens were not financially ready and able to buy because they had not completed the sale of their Iowa residence or obtained a binding financing commitment for either the SBA loan or the bridge loan.
Although the Petersens concede that their original financing plan did not materialize, they argue that a genuine issue of material fact exists regarding whether they satisfied the condition precedent by obtaining sufficient other funds to pay the purchase price on April 1, 2002. The Petersens first argue that the district court erred by finding that they did not have the sufficient personal funds to close on April 1, 2002. The Petersens dispute the court's finding that they could not have sold their Iowa residence until April 20, 2002, arguing that they produced evidence showing that their residence could have been sold by April 1, 2002. But the Petersens' failure to obtain a binding financing commitment, rather than their lack of personal funds, appears to be the primary reason that the district court determined that the Petersens had not obtained financing, making it impossible for them to pay the purchase price on or before April 1, 2002.
The Petersens also contend that they were not obligated to provide the Muellers with proof of their financing before April 1, 2002, and that their only duty was to attend the closing with the sufficient funds. But the district court did not find that the Petersens were required to furnish such proof to the Muellers before April 1, 2002. Instead, the district court found that for the Petersens to be considered "financially ready and able buyers" on April 1, 2002, they would have needed a binding financing commitment on that date.
In order to close, the Petersens planned to finance the purchase with approximately $600,000 from a bridge loan. The Petersens argue that, based on their correspondence with First State Bank of Battle Creek, Iowa, they had obtained a binding commitment for that loan. The Petersens argue that, therefore, they were financially ready and able to buy on April 1, 2002.
But the correspondence from First State Bank does not show a definite and binding commitment to provide financing on or before April 1, 2002. In the March 22, 2002 letter to the Petersens, First State Bank wrote, "we would be interested in providing a bridge loan to enable you to close on April 1, if the need arises. This of course is based on the commitment that you already have from Stearns Bank/SBA . . . [i]f and when the need arises, please feel free to call or write, and we can proceed." First, the letter from First State Bank merely expresses an interest in providing a bridge loan and clearly indicates that additional steps would need to be taken to complete the loan process. Second, the bank states in its letter that the bridge loan is based on the commitment that the Petersens had for the SBA loan from Stearns Bank; however, because they had not completed all of the SBA loan's prerequisites, the Petersens did not have a definite and binding commitment for an SBA loan. Based on the lack of a definite and binding financing commitment, we agree with the district court that no genuine issues of material fact exist regarding the Petersens' failure to obtain financing that would have allowed them to pay the purchase price on April 1, 2002. And because the district court did not err in determining that the condition precedent was not satisfied, we conclude that the Muellers' duty to furnish an abstract and the Petersens' duty to pay the full purchase price did not become enforceable obligations.
But we nevertheless find that the district court did not err in finding that the Muellers were "ready, willing, and able to satisfy" their obligation of furnishing an abstract showing good, marketable title on or before April 1, 2002. The Petersens argue that the district court erred in its determination and contend that a genuine issue of material fact exists regarding whether the Muellers could have satisfied their obligation "in a timely manner." And they further contend that the Muellers did not "furnish" the abstract, as required by the purchase agreement, because they did not deliver it to the Petersens or notify them that it was available. But the purchase agreement simply requires the Muellers to furnish an abstract showing good, marketable title "on or before April 1, 2002." Therefore, because the record indicates that the Muellers had possession of an updated abstract showing marketable title on April 1, 2002, the district court did not err in concluding that the Muellers could have fulfilled their obligation on this date had the closing occurred and that no genuine issue of material fact exists on this issue.
II.
The Petersens argue that a genuine issue of material fact exists regarding whether the Muellers committed an anticipatory breach of the purchase agreement by failing to "timely deliver" the abstract and by "unequivocally telling" the Petersens that they would not close on April 1, 2002. An anticipatory breach occurs "[w]here a party to an executory contract places itself in a position where it cannot perform the contract, or where the party otherwise prevents performance of the contract." Space Center, Inc. v. 451 Corp., 298 N.W.2d 443, 450 (Minn. 1980). Because we have determined that the purchase agreement did not require the Muellers to furnish the abstract ten days before the closing date and that they were "ready, willing, and able to satisfy" this obligation on April 1, 2002, we reject the Petersens' assertion that the Muellers' failure to "timely deliver" the abstract was an anticipatory breach.
The Petersens argued in the district court that, based on the e-mails they received from the Muellers' real-estate agent, genuine issues of material fact exist regarding who refused to close and why the closing did not take place. Although the Petersens asserted the Muellers "repudiated" the April 1, 2002 closing date based on a "clear and unequivocal" e-mail sent by their real-estate agent, the Petersens did not raise in the district court the theory of anticipatory breach; they provided no legal analysis of what constitutes an anticipatory breach or what its effect would be in this case, and they cited no authority on the issue. Further, because the district court did not address the Petersens' anticipatory-breach argument in its order, we conclude that the Petersens did not sufficiently raise the argument in the district court so as to preserve it on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (holding that a reviewing court must generally consider "only those issues that the record shows were presented and considered by the trial court in deciding the matter before it"); see also Antonson v. Ekvall, 289 Minn. 536, 539, 186 N.W.2d 187, 189 (1971) (upholding district court's denial of new trial motion based on legal theory that had not been raised at an earlier stage of the action; although pleadings were general enough to have possibly made a claim based on ejectment theory, complaint contained no language that would alert anyone to a claim based on ejectment theory, and plaintiff did not present ejectment theory to court during trial).
III.
The Petersens also argue that the doctrine of promissory estoppel should be applied to prevent the Muellers from arguing that the Petersens were not willing or able to close in April 1, 2002. But the Petersens also did not present this argument below. Therefore, we conclude that arguments based on a theory of promissory estoppel are not properly before us. See Thiele, 425 N.W.2d at 582.
IV.
The Muellers argue that this court should find the purchase agreement void because the Petersens did not satisfy an express condition of the agreement that "[b]oth earnest money receipted for and proposed sale subject to owner's approval." It is not necessary to address this argument because we have already determined that the district court should be affirmed on other grounds.