Jerome Cheese Company, a Division of Davisco Foods International, Appellant, vs. Equinox Enterprises, Inc., d/b/a Dairy Specialists, et al., Respondents.

Jerome Cheese Company, a Division of Davisco Foods International, Appellant, vs. Equinox Enterprises, Inc., d/b/a Dairy Specialists, et al., Respondents. A04-1960, Court of Appeals Unpublished, June 28, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1960 Jerome Cheese Company,
a Division of Davisco Foods International,
Appellant,
 
vs.
 
Equinox Enterprises, Inc.,
d/b/a Dairy Specialists, et al.,
Respondents.

 

Filed June 28, 2005

Affirmed

Stoneburner, Judge

 

LeSueur County District Court

File No. C80269

 

Jeff C. Braegelmann, Adina R. Bergstrom, Gislason & Hunter, L.L.P., 2700 South Broadway, Box 458, New Ulm, MN 56073-0458 (for appellant)

 

Charles R. Shreffler, Jr., Mohrman & Kaardal, P.A., Suite 4100, 33 South Sixth Street, Minneapolis, MN 55402 (for respondents)

 

            Considered and decided by Stoneburner, Presiding Judge; Lansing, Judge; and Hudson, Judge.

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Appellant Jerome Cheese Company asserts that the district court clearly erred by finding that the parties entered into a valid brokerage agreement as part of a settlement agreement placed on the record.  Despite the finding, the district court granted appellant's motion to dismiss this action with prejudice under the terms of the settlement agreement, based on its conclusion that any claims under the brokerage agreement are speculative at this time.  We agree that the district court's finding that the parties entered into a valid brokerage agreement is clearly erroneous, but affirm the dismissal on other grounds.

FACTS

 

            Appellant Jerome Cheese Company, a division of Davisco Foods International, Inc., sells food and cheese products.  In January 2002, appellant sued respondent Equinox Enterprises, Inc., d/b/a Dairy Specialists and U.S. Investment LLC, for failure to pay $574,168.61 for products it purchased from appellant.  On February 14, 2002, the parties placed the "outline" of a settlement agreement on the record.  The agreement essentially had two parts.  First, it required respondent to transfer property respondent owned in Texas to appellant and within six months to satisfy and obtain a release of the mortgage on the property.  Second, "it [sic] will be a brokerage arrangement between the parties whereby Davisco or Jerome Cheese will sell what is know [sic] in the trade as off-grade products to customer [sic] of Equinox.  That period of time will be two [or three] years[1] for that arrangement and the profits from that arrangement will be split fifty-fifty between the parties."  The parties agreed that the exact terms of the brokerage agreement were subject to further negotiation between the parties.  When the settlement was placed on the record the parties contemplated that they would be signing a written release and filing a stipulation of dismissal with the court within two weeks.

            Counsel for Jerome Cheese prepared a release and forwarded it to counsel for Equinox but the release was never signed by both parties.  By February 14, 2002, the parties had signed the security interest and the deed to the Texas property.  But satisfaction of the mortgage on the Texas property and the final release became the subjects of protracted litigation and numerous motions that were handled by eight different judges.  In the first round of motions, counsel for Jerome Cheese noted Equinox's failure to sign the release.  Finally, on June 6, 2002, Equinox signed the release but made several changes in the document before signing.  One paragraph in the release drafted by Jerome Cheese that was renumbered by Equinox but not otherwise changed provided:

Jerome Cheese is not in the business of producing ‘off grade' product, however, in the event that Jerome Cheese has said product available and in the event that Equinox has valid customers for said product, then Jerome Cheese agrees to arrange sales of the product through Equinox, with profits split 50/50 between the parties.  This provision is only valid if Equinox is not in default or breach of this agreement.

 

            In a series of motions, Jerome Cheese repeatedly attempted to enforce the provision of the agreement that required Equinox to satisfy the mortgage on the Texas property and otherwise sought to protect itself from what it asserted was Equinox's attempt to divest itself of assets.  In every motion, Jerome Cheese referred to the agreement placed on the record on February 14, 2002, and after Equinox signed the release, included the release signed by Equinox with all of its motions.  In a July 1, 2002 order, the district court held that the parties had entered into a settlement agreement and said the "agreement will be enforced according to its terms" but held that, under the agreement, Equinox had until August 15, 2002, to satisfy the mortgage.  Equinox failed to satisfy the mortgage by August 15, 2002, triggering more motions by Jerome Cheese, several court orders requiring Equinox to "immediately" satisfy the mortgage, and awards of attorney fees and other relief to Jerome Cheese, including an assignment of Equinox's accounts receivable. 

            Ultimately, the mortgage was satisfied, but in the meantime Jerome Cheese had received $13,403.10 that it failed to disclose and that it was not entitled to retain after the mortgage satisfaction issue was resolved.  Equinox, which had not responded in writing to any of Jerome Cheese's previous motions, moved for replevin of these funds.  In response, Jerome Cheese, now unrepresented,[2] asserted for the first time that there was no agreement.  In a summary judgment filed March 13, 2002, requiring Jerome Cheese to refund $13,403.10 to Equinox, the district court rejected Jerome Cheese's argument that there was no agreement, noting that although Equinox had breached the agreement by failing to satisfy the mortgage on August 14, 2002, Jerome Cheese had never repudiated the February 14, 2002 agreement or moved to set it aside, but had repeatedly sought to enforce and put "judicial teeth" into the agreement.

            Apparently emboldened by this success, Equinox moved in June 2004 to enforce the terms of the brokerage agreement contained in the release.  Equinox erroneously stated in its motion that the March 2002 judgment determined that the June 6, 2002 release signed only by Equinox is an enforceable contract.[3] 

            Jerome Cheese responded, asserting that the February 14, 2002 provision for a brokerage agreement was only an agreement to agree, unenforceable as a contract, and because the release was never signed by Jerome Cheese, no valid brokerage agreement exists.  Jerome Cheese moved for dismissal with prejudice because all of the enforceable terms of the February 14, 2002 settlement agreement had been fulfilled.

            The district court acknowledged that when the settlement agreement was put on the record on February 14, 2002, the parties made a record that the brokerage agreement was still open to negotiations, but nonetheless found that the paragraph contained in the release "is a binding brokerage agreement between the parties" because it was drafted by counsel for Jerome Cheese, signed by Equinox, and accurately re-stated language in an earlier letter from Jerome Cheese's counsel to Equinox's counsel purporting to state the final agreement reached by counsel on February 14, 2002.  The district court further found that three conditions precedent trigger the contract: (1) Jerome Cheese has product; (2) Equinox has valid customers; and (3) Equinox did not materially breach the settlement agreement, and stated that because "[t]hese are all questions that might or might not arise

in the future they are not part of this lawsuit." The district court denied Equinox's motion to enforce the brokerage agreement and granted Jerome Cheese's motion to dismiss the lawsuit with prejudice.  This appeal followed.  Equinox has not responded to the appeal.

D E C I S I O N

 

            Jerome Cheese argues that the district court's finding that the brokerage agreement provision in the June 6, 2002 release signed by Equinox constitutes a binding brokerage agreement between the parties is clearly erroneous.  We agree.  The underlying facts on which the district court based this ultimate finding are undisputed: an agreement was placed on the record that contemplated further negotiation of a brokerage agreement; counsel for Jerome Cheese drafted a release that contained a provision for a brokerage agreement in language previously sent to Equinox in a letter from counsel for Jerome Cheese; the release was signed by Equinox with changes to provisions other than the brokerage agreement; and the release was never signed by Jerome Cheese.  Although the existence of a contract is generally an issue for the factfinder, when the record does not support a rational finding that a contract exists, the issue can be decided as a matter of law.  See e.g., Gresser v. Hotzler, 604 N.W.2d 379, 382 (Minn. App. 2000) (permitting summary judgment on issue of existence of contract where record as a whole does not permit finding that contract exists). 

            In this case, the only language both parties agreed to is the settlement agreement placed on the record on February 14, 2002.  The district court in this case specifically held in two orders that the parties reached a binding settlement agreement on February 14, 2002.  On that date, the parties agreed only to continue negotiations for a brokerage agreement.  The district court, in the judgment that is the subject of this appeal, correctly noted that an "agreement to agree" holds "no legal efficacy" in Minnesota.  See Mohrenweiser v. Blomer, 573 N.W.2d 704, 707 (Minn. App. 1998) (holding letter of agreement was an unenforceable agreement to agree in the future), review denied (Minn. Feb. 19, 1998).  It is undisputed that the agreement to negotiate a brokerage agreement contained in the February 14, 2002 settlement agreement is unenforceable.

            Without citing any authority, the district court concluded that the brokerage agreement provision in the release nonetheless constituted a binding agreement.  This conclusion is contrary to basic contract law because Equinox altered the terms of the release prepared by Jerome Foods.  An acceptance that seeks to vary, add to, or qualify the terms of the offer is a counter-offer, which constitutes a rejection of the original offer and puts an end to the negotiation, unless the party who made the original offer objectively assents to the modifications suggested.  Minar v. Skoog, 235 Minn. 262, 265-66, 50 N.W.2d 300, 302 (1951).  Jerome Cheese never accepted the changes made by Equinox, and the release signed by Equinox on June 6, 2002, never became a binding contract between the parties. 

            In this case, the district court erroneously severed the brokerage agreement provision from the release and concluded it was separately offered by Jerome Cheese and accepted by Equinox when Equinox did not alter the terms of that provision.  The mere fact that a contract is organized by numbered provisions and may be divided does not make a contract severable.  See e.g., Bentley v. Edwards, 125 Minn. 179, 183, 146 N.W. 347, 349 (1914) ("The mere fact that the subject of the contract is sold by weight or measure, and the value is ascertained by the price affixed to each pound or yard or bushel of the quantity contracted for, will not be sufficient to render the contract severable.") (quotation omitted).  A contract is severable only when the parties intended to make the contract apportionable and it can be apportioned fairly.  See id. at 184, 146 N.W. at 349; Nat'l Farmers Union Prop. & Cas. Co. v. Anderson, 372 N.W.2d 71, 75 (Minn. App. 1985) (stating that the intent of the parties must be ascertained in determining whether provisions are severable).  When the parties intend the entirety of the contract to be performed, the provisions cannot be enforced separately.  See Bentley,125 Minn. at 183, 146 N.W. at 349; Guercio v. Prod. Automation Corp., 664 N.W.2d 379, 385 (Minn. App. 2003). 

            In this case, the language of the brokerage agreement provision itself clearly ties it to the remainder of the agreement by stating "[t]his provision is only valid if Equinox is not in default or breach of this agreement."  The provisions were not severable, and the district court's finding that the provision could be severed and formed a binding brokerage agreement is clearly erroneous. 

            In addition, the district court clearly erred by finding that the issue of Equinox's breach was not yet before the district court because the district court had previously, in the March 2003 judgment, specifically stated that Equinox breached the agreement by failing to satisfy the mortgage by August 14, 2002.  Therefore, even if this court could accept the finding that a binding brokerage agreement was created by language in the release, it is undisputed that Equinox breached other terms of the settlement agreement, triggering the invalidation clause of the brokerage-agreement provision.

            Because the agreement to agree to a brokerage agreement was unenforceable, or, in the alternative, because Equinox's failure to timely satisfy the mortgage breached the parties' agreement preventing the brokerage-agreement provision in the release from becoming binding, and because all of the enforceable terms of the agreement have been performed, the district court did not err in dismissing the lawsuit with prejudice pursuant to the enforceable terms of the February 14, 2002 settlement agreement.

            Affirmed.

[1] Respondent's counsel said the "term and period of years of the brokerage agreement "is still subject to negotiation.  I think we talked about two or three years," but otherwise said that appellant's counsel had accurately stated the broad terms of the agreement.

[2] The district court noted the prohibition against corporations appearing in district court without counsel, but nonetheless allowed Jerome Cheese to proceed pro se in response to Equinox's motion.

[3] The summary judgment refers only to the February 14, 2002 agreement of the parties and does not mention the release Equinox signed on June 6, 2002.