Summary
upholding arbitration clause signed by seller's agent
Summary of this case from Siebert v. Amateur Athletic Union of U.S., Inc.Opinion
No. C4-01-629.
Filed September 25, 2001.
Appeal from the District Court, Hennepin County, File No. 00-12430.
Mark W. Lee, Maslon Edelman Borman Brand, LLP, (for appellants)
Daniel R. Kelly, Felhaber, Larson, Fenlon Vogt, (for respondents)
Timothy J. O'Connor, Lind, Jensen, Sullivan Peterson, P.A., (for respondents Coldwell Banker Burnet Realty, et al.)
Charles E. Lundberg, Stanford P. Hill, Truesdell Briggs, P.A., (for respondents Edina Realty, et al.)
Considered and decided by Lansing, Presiding Judge, Harten, Judge, and Willis, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION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, Kevin and Marcia Rehnberg argue that the district court erred in finding that they agreed to arbitrate any disputes arising from their purchase of John and Francine Schranck's home. Because the record establishes that the parties agreed to arbitrate any disputes over the home's physical condition, the district court did not err in granting summary judgment, and we affirm.
FACTS
In August 1997 John and Francine Schranck hired Executive Relocation Corporation (Executive) to help them relocate from Minnesota to Missouri. One of Executive's duties was to help sell the Schrancks' home. Executive gave the Schrancks a "relocation kit" containing documents and instructions telling the Schrancks to contact Executive before accepting any home purchase offers. On August 21 Kevin and Marcia Rehnberg signed a purchase agreement, agreeing to buy the home for $601,500. When the Schrancks received the Rehnbergs' purchase offer, they followed Executive's instructions and requested that Executive handle the home sale.
At the same time that they signed the purchase agreement, the Rehnbergs and their real estate agent signed an arbitration agreement, agreeing to arbitrate any disputes arising over the property's physical condition. The agreement stated that it was separate from the purchase agreement and would be valid only if signed by all the sellers, buyers, and agents. Under the agreement, any claims were to be handled by arbitration and had to be filed within 18 months from the closing date. On August 27, Executive's vice president signed the arbitration agreement as "attorney in fact" for the Schrancks. On August 28, the Schrancks' real estate agent signed the arbitration agreement.
Executive bought the home from the Schrancks on September 11, and, as part of that transaction, the Schrancks agreed to irrevocably appoint Executive as their "attorney-in-fact to make and execute any Sale Contract with a third party purchaser of the Property." On the closing date, September 15, the Rehnbergs bought the home from Executive.
Within a year after buying the home, the Rehnbergs allege they discovered significant problems with the home's physical condition, including a bat infestation and a leaky roof. The Rehnbergs sent a letter to the Schrancks describing the problems in September 1998, less than 18 months after the closing date and within the arbitration period. Although the Schrancks did not remedy the Rehnbergs' complaints, the Rehnbergs did not request arbitration. The Rehnbergs may not have had a copy of the arbitration agreement signed by all parties until after they brought suit; they admit, however, that they signed the agreement.
In February 2000, the Rehnbergs sued the Schrancks and the Schrancks' real estate agent, alleging they intentionally and negligently misrepresented the home's physical condition. The Rehnbergs also sued their own real estate agent, claiming she breached her fiduciary duty in negotiating the purchase and finalizing the sale. The district court granted the Schrancks' and the real estate agents' summary-judgment motions, finding that all parties had agreed to arbitrate any disputes arising from the home's physical condition within 18 months of the closing date, and that the period in which to bring an arbitration claim had lapsed. The Rehnbergs appeal.
DECISION I
The Rehnbergs argue that the district court erred in granting summary judgment because genuine issues of material fact remain for trial. On appeal from summary judgment, this court determines whether the case raises genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted). We are required to view the evidence in the light most favorable to the nonmoving party and resolve any doubts on the existence of an issue of material fact against the moving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). No genuine issue of material fact exists when the record taken as a whole does not provide a basis for a rational trier of fact to find for the nonmoving party. DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).
Although the Rehnbergs concede that Executive acted as the Schrancks' agent and with the Schrancks' authority to arrange for the home sale, they argue that the Schrancks did not authorize Executive to enter into the arbitration agreement.
Generally, whether an agent acted with the principal's authority is a question of fact for a jury to determine. Gulbrandson v. Empire Mut. Ins. Co., 251 Minn. 387, 391, 87 N.W.2d 850, 853 (1958). "Actual authority" is authority that the principal intentionally confers on an agent and the powers incidental to the specific powers granted. Nehring v. Blast, 258 Minn. 193, 199-200, 103 N.W.2d 368, 374 (1960). The principal creates the agent's actual authority by communicating either orally or otherwise to the agent the principal's expectation that the agent is to act on behalf of the principal and subject to the principal's direction. See Harold Gill Reuschlein William A. Gregory, Agency and Partnership § 14, at 34-35 (1979) (describing principal's creation of agent's authority); see also Restatement (Second) of Agency § 7 (1958) (defining "authority" as the agent's power to affect the principal's legal relations by acting in accordance with the principal's manifestations of consent to the agent). A written contract is not required to create actual authority; instead, it may be created by acquiescence. See Vacura v. Haar's Equip., Inc., 364 N.W.2d 387, 391 (Minn. 1985) (finding agent had authority when agent regularly exercised power not expressly given to it and principal tacitly sanctioned the practice). See generally Reuschlein Gregory, supra, § 14, at 35 (describing principal's creation of authority by not objecting to agent's actions).
Actual authority includes both express authority, which the principal directly grants to an agent, and implied authority. Hockemeyer v. Pooler, 268 Minn. 551, 565, 130 N.W.2d 367, 377 (1964). Implied authority includes powers that are directly connected with or essential to carry out the agent's expressly delegated duties. Hornblower Weeks-Hemphill Noyes v. Lazere, 301 Minn. 462, 471, 222 N.W.2d 799, 805 (1974). Restatement, supra, § 50 ("[A]uthority to make a contract is inferred from authority to conduct a transaction, if the making of such a contract is incidental to the transaction, usually accompanies such a transaction, or is reasonably necessary to accomplish it.").
The Rehnbergs argue that Executive lacked authority to sign the arbitration agreement because the Schrancks did not formally appoint Executive as their agent until the Schrancks signed the September 11 agreement, after Executive signed the arbitration agreement as the Schrancks' agent on August 27. The Rehnbergs also point out that the September 11 contract only authorizes Executive to "make and execute any sale contract" with a third-party purchaser and does not specifically authorize Executive to "make and execute" an arbitration agreement as part of the home sale.
But the record reflects the Schrancks' grant of express and implied authority to Executive to act as their agent in executing all documents relating to the home's sale. The Schrancks and an Executive salesperson stated in their affidavits that before August 27, the Schrancks expressly granted "Executive power of attorney * * * to act as [the Schrancks'] agent in executing all documents and contracts related in any way to the sale of [the Schrancks'] Edina home." The Schrancks state that Executive's scope of authority "extended to executing a purchase agreement and any documents associated with a purchase agreement, including an arbitration agreement."
Executive's authority to execute the arbitration agreement is also implied from its undisputed authority to sell the Schrancks' home. While the arbitration agreement was not necessary for the home sale transaction to be completed, the arbitration agreement, as a contract that parties routinely sign at the close of home sales, is directly connected to the home sale.
Even if Executive lacked authority to execute the arbitration agreement on August 27, the Schrancks ratified that unauthorized action by appointing Executive their agent on September 11 and by benefiting from and not objecting to Executive's action on their behalf. If a principal, having full knowledge of all material facts, confirms, approves or sanctions an agent's previous unauthorized act done on behalf of the principal, the principal has ratified the act. Anderson v. First Nat'l Bank of Pine City, 303 Minn. 408, 410, 228 N.W.2d 257, 259 (1975) (citations omitted). By ratifying the act, the principal agrees to be bound by it, even though the act was initially unauthorized. Gran v. City of St. Paul, 274 Minn. 220, 223, 143 N.W.2d 246, 249 (1966).
The Rehnbergs argue that because the September 11 agreement does not explicitly ratify Executive's unauthorized act, the Schrancks have never ratified Executive's unauthorized act. But a principal ratifies an unauthorized act by any conduct manifesting consent, and that consent need not be formalized in a written agreement. Restatement, supra, § 93(1) cmt. a. Instead, a principal ratifies an agent's unauthorized act by accepting and retaining the benefits and profits of the unauthorized act. Knaus Truck Lines, Inc. v. Donaldson, 235 Minn. 453, 456, 51 N.W.2d 99, 101 (1952) (citation omitted); Centennial Ins. Co. v. Zylberberg, 422 N.W.2d 18, 21 (Minn.App. 1988) (stating that a principal cannot accept benefits of an agent's unauthorized conduct and later deny liability because conduct was unauthorized). Because the Schrancks have benefited from Executive's entering into the arbitration agreement and have never repudiated that action, they have ratified Executive's action.
Second, the Rehnbergs point out that the principal must ratify an act before the third party withdraws from that act. See Restatement, supra, § 88. They argue that because the Schrancks did not ratify Executive's actions before the Rehnbergs' withdrawal, the Schrancks have not ratified Executive's actions. This argument fails as well. The Schrancks ratified Executive's actions by accepting the benefits of Executive's actions and failing to repudiate those benefits before the Rehnbergs attempted to withdraw from the arbitration agreement.
The record conclusively establishes that the parties agreed to arbitrate the underlying dispute in this case. On this record, the district court correctly concluded that genuine issues of material fact do not exist and properly granted the Schrancks' summary judgment motion.
II
The Rehnbergs also argue that the district court erred in granting summary judgment to their real estate agent, Judy Reickoff. The Rehnbergs contend that their breach-of-fiduciary-duty claim against Reickoff is not a claim that the parties agreed to arbitrate.
This court independently interprets an arbitration agreement, examining the language of the agreement to determine what issues the parties intended to arbitrate . Michael-Curry Co. v. Knutson S'holders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989). The arbitration agreement states that it relates to disputes arising from the physical condition of the home, including fraud, misrepresentation, warranty and negligence claims.
In their complaint, the Rehnbergs allege that Reickoff violated her fiduciary duties of good faith and loyalty while negotiating the purchase of their home and finalizing the sale. Specifically, the Rehnbergs allege that Reickoff did not obtain warranties for construction work that the Schrancks had completed before selling the home and failed to advise the Rehnbergs not to buy the property without the warranties. The Rehnbergs claim that the home's kitchen was remodeled negligently and that they are unable to request that the remodeling company remedy the defects because they have no warranty. This complaint relates to the home's physical condition and is thus a claim that the parties agreed to arbitrate. See, e.g., Heyer v. Moldenhauer, 538 N.W.2d 714, 717 (Minn.App. 1995) (finding claim that landfill negatively affected buyers' property value was a claim relating to property's physical condition and was thus subject to arbitration under the parties' agreement); Welch v. Buller, 481 N.W.2d 856, 859-60 (Minn.App. 1992) (finding claim that sellers failed to disclose material facts about home's water-supply condition was subject to arbitration under the parties' agreement because claim related to property's physical condition), review denied (Minn. May 15, 1992). The district court did not err in granting Reickoff's summary-judgment motion.
III
Finally, the Rehnbergs argue that the district court should have allowed them to conduct additional discovery before granting the Schrancks' and the real estate agents' summary judgment motions. The Rehnbergs did not make a formal motion under Minn.R.Civ.P. 56.06 for a discovery continuance.
District courts have discretion in determining whether to continue a summary-judgment motion for discovery. Rice v. Perl, 320 N.W.2d 407, 412 (Minn. 1982). In this case, additional discovery would not have helped the Rehnbergs find a material fact that would help them survive summary judgment. See McCormick v. Custom Pools, Inc., 376 N.W.2d 471, 477 (Minn.App. 1985) (holding that additional discovery was unnecessary because it would not have aided the district court in determining the existence of any material facts), review denied (Minn. Dec. 30, 1985).
The Rehnbergs have not identified any additional evidence to discover relating to the home's condition other than evidence about the Schrancks' alleged misrepresentations. The Schrancks disclosed the arbitration agreement, the purchase agreement, and the agreement they entered into with Executive. Those documents were sufficient for the district court to determine that the parties had agreed to arbitrate and that because the parties had agreed to arbitrate, continuing discovery would be fruitless.