M.W. Johnson Construction, Inc., Appellant, vs. Progress Land Company, Inc., Respondent.

M.W. Johnson Construction, Inc., Appellant, vs. Progress Land Company, Inc., Respondent. A04-2303, Court of Appeals Unpublished, August 9, 2005.

This opinion will be unpublished and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

A04-2303

 

M.W. Johnson Construction, Inc.,
Appellant,
 
vs.
 
Progress Land Company, Inc.,
Respondent.

 

Filed August 9, 2005

Affirmed in part, reversed in part, and remanded; motion denied

Minge, Judge

 

Dakota County District Court

File No. C6-03-008969

 

 

Dean B. Thomson, Daniel L. Abelson, Fabyanske, Westra & Hart, P.A., 800 LaSalle Avenue, Suite 1900, Minneapolis, MN 55402 (for appellant)

 

Gary A. Van Cleve, Neil S. Davis, Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Wells Fargo Plaza, 7900 Xerxes Avenue South, Minneapolis, MN 55431-1194 (for respondent)

 

            Considered and decided by Peterson, Presiding Judge; Schumacher, Judge; and Minge, Judge.

 U N P U B L I S H E D  O P I N I O N

 

MINGE, Judge

 

Appellant challenges the dismissal by summary judgment of its claims that respondent breached two purchase agreements.  Because both purchase agreements are ambiguous, summary judgment is inappropriate and we reverse and remand.  However, because the record indicates that the city would not grant approval of one of the projects, we affirm the district court's dismissal of appellant's claim that respondent breached the purchase agreement by failing to obtain approval for that project.

FACTS

 

Respondent Progress Land Company, Inc. (Progress) is a land-development company and appellant M.W. Johnson Construction, Inc. (Johnson) builds residential homes.  M. William Johnson is the owner and president of Johnson.  Progress is owned by Warren Israelson.  Johnson had previously purchased several lots from Progress.  This litigation arises out of incompleted purchase arrangements for lots in two housing developments, Meadow Creek and Rosewood.

Meadow Creek (Farmington)

Progress purchased property in Farmington for development of a subdivision to be called Meadow Creek.  On December 4, 2000, the parties entered into a purchase agreement in which Johnson agreed to purchase lots in Meadow Creek.  The dispute centers on the lack of 60-foot wide lots.  

The purchase agreement describes the land as:

PID #:  140130001475

Section 13 TWN 114 Range 20

Of SE ¼

 

This description covers the entire Meadow Creek development.  The exact land to be purchased by Johnson is not identified but is referenced in the following statement of the price:

PURCHASE PRICE:  Buyer shall pay to seller as the purchase price for the property the sum of ($3,825,000.00) Three million eight hundred twenty five thousand dollars and no cents (60 proposed lots with 75 foot frontage (width) at $45,000.00 each and 30 proposed lots with 60 foot frontage (width) at $37,500.00 each).  It is possible that this price could change with addition or deletion of number of buildable lots.  Buyer shall pay the purchase price to Seller as follows:

A.        $25,000.00 Earnest Money upon execution of this agreement.

B.        $25,000.00. Earnest Money upon City of Farmington's Concept Approval being issued.

C.        $80,000.00 additional Earnest Money when Progress Land Company, Inc. begins grading project.

D.        Cash for balance of contract at time city will issue building permits for construction of homes.

 

EARNEST MONEY:  . . .   Earnest Money will be returned to Buyer if for any reason land cannot be developed as proposed to Buyer or this agreement is cancelled by Buyer and Seller.

 

The property being developed as Meadow Creek was originally zoned R-1, single-family residential, which requires lots with a frontage width of 75 feet.  In order to build 60-foot lots, the property would have to be zoned R-2.  The rezoning process generally involves public hearings before the planning commission, a recommendation from the planning commission, and then city council approval.  But the city council provides the ultimate approval, and it can ignore the planning commission's recommendation. 

The Meadow Creek development shares a common boundary with another development named Riverbend.  At the same time that the parties entered into the Meadow Creek purchase agreement, the Riverbend developer was seeking to rezone the Riverbend property from R-1 to R-2 PUD so that it could build multi-unit housing and build single-family homes on 60-foot lots.  This proposal would increase housing density, the anticipated population, and the expected level of vehicular traffic.  As a result of community opposition and the conclusion of traffic engineers that 60-foot lots would require a larger street in the area, Riverbend increased the lot width to 75 feet and the Farmington city council approved the Riverbend development.  

The Farmington city planner wrote to Progress urging that the lot size in Meadow Creek be adjusted to match the revised Riverbend development.  The city planner also stated in her deposition that the city was unlikely to rezone Meadow Creek for 60-foot lots because of the recent Riverbend controversy.  Under these circumstances, Progress decided not to further pursue its plan for 60-foot lots in Meadow Creek. 

Progress received approval to develop 75-foot lots and Johnson and Progress closed on the sale of 35 lots with 75 feet of frontage on July 23, 2002.  The parties then closed on the remaining 25 lots with 75 feet of frontage on November 7, 2002.  The record does not indicate whether separate payments were made for each deed.  No further transfer of lots occurred.  The record does not disclose if all the earnest money was paid or if any was refunded. 

Rosewood

            In March 2001, Progress purchased property in Rosemount and began working on concept plans for the Rosewood development.  In September 2001, Progress and Johnson entered into a purchase agreement in which Progress agreed to sell Johnson a portion of the Rosewood development.  The dispute centers on whether Johnson still has a right to buy this property at the contract price. 

The Rosewood purchase agreement contained the following sections:

EARNEST MONEY: . . .  Earnest Money will be returned to Buyer, together with 8% interest per annum, if for any reason land cannot be developed during calendar year 2002, in which event this agreement shall thereupon become null and void, except for the right of first refusal.  Earnest money is non-refundable only in the event Buyer does not perform per the terms of this agreement.

 

. . . . 

 

PLATTING AGENDA CONTINGENCY: Seller and Buyer understand and agree that Seller will proceed with due diligence, time being the essence of this agreement, to complete written approvals for 84 or more lots, to be known as Rosewood 2nd Addition, according to the following proposed platting agenda:

 

preliminary plat and grading permit on or before April 1, 2002.

final plat and grade permit on or before June 1, 2002

 

. . . .

 

In the event the above proposed platting agenda dates are not met, the parties agree that this purchase agreement can be cancelled by mutual consent.  Buyer shall have the right of first refusal if subject property is not completed until the year 2003. 

 

(Emphasis added).  It appears that Progress drafted the earnest money clause and that Johnson requested the last paragraph in the platting-agenda contingency.

Progress submitted a concept plan, the planning commission for the city of Rosemount recommended approval, and the city council approved the concept plan on October 16, 2001.  After the final grading plan was approved, the city council approved the final plats on September 3, 2002.  The cause of the delay was unexplained.  Also on September 3, the city of Rosemount and Progress entered into an agreement, by which Progress would be responsible for surveying and for installing street lights, gas lines, and landscaping, and the city would install the sewer, watermain, storm sewer, streets, and sidewalks.  According to the agreement, Progress had until July 31, 2003, to complete this work.  At this point further delay was caused by problems with a railroad right-of-way.  Johnson admitted that the Rosewood property was not fully developed by the end of 2002.  In the spring of 2003, Progress offered Johnson the option of purchasing its portion of the Rosewood development pursuant to the right of first refusal if Johnson matched a new higher price that another buyer was offering.  Johnson refused.  Following Johnson's refusal, Progress returned the earnest money for the Rosewood purchase agreement, stating that the agreement was null and void.

On July 16, 2003, Johnson commenced the present action against Progress for breach of the Meadow Creek and Rosewood purchase agreements and sought specific performance or, in the alternative, money damages.  Progress answered and filed a counterclaim asserting slander of title.  The parties filed cross-motions for partial summary judgment on the contract claims.  The district court granted Progress's motion for summary judgment dismissing Johnson's claims.  The slander-of-title counterclaim was not considered.  Johnson sought to appeal the partial summary judgment ruling, but this court dismissed on the ground that partial summary judgment is not appealable.  Following a bench trial, the district court entered judgment in favor of Johnson on the slander-of-title counterclaim.  Johnson now appeals the earlier, adverse summary judgment.

D E C I S I O N

 

When deciding a motion for summary judgment, the reviewing court is to determine whether any genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law.  Wartnick v. Moss & Barnett, 490 N.W.2d 108, 112 (Minn. 1992).  The court must review the evidence in the light most favorable to the party against whom judgment is granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  This case involves a question of contract interpretation which is subject to de novo review.  Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn. 1997). 

I.

The first issue is whether the district court erred in ruling that the Meadow Creek purchase agreement was unambiguous and that Progress did not breach the purchase agreement.  Although Johnson argues that the purchase agreement was clear and unambiguous because it required Progress to sell to Johnson 6,300 linear feet, Johnson also argues that in the alternative the Meadow Creek purchase agreement is susceptible to more than one reasonable interpretation and therefore summary judgment was inappropriate. 

"A contract is ambiguous if it is susceptible to more than one interpretation based on its language alone."  Lamb Plumbing & Heating Co. v. Kraus-Anderson of Minneapolis, Inc., 296 N.W.2d 859, 862 (Minn.1980).  "Summary judgment is inappropriate where terms of a contract are at issue and those terms are ambiguous or uncertain."  Bank Midwest, Minnesota, Iowa, N.A. v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004).  The construction of an ambiguous term in a contract becomes a question of fact unless the evidence is conclusive.  Empire State Bank v. Devereaux, 402 N.W.2d 584, 587 (Minn. App. 1987).  "The determination of whether a contract is ambiguous is a question of law and is reviewed de novo."  Bank Midwest, 674 N.W.2d at 179.

The purchase-price section of the Meadow Creek agreement states:

Buyer shall pay to seller as the purchase price for the property the sum of ($3,825,000.00) Three million eight hundred twenty five thousand dollars and no cents (60 proposed lots with 75 foot frontage (width) at $45,000.00 each and 30 proposed lots with 60 foot frontage (width) at $37,500.00 each).  It is possible that this price could change with addition or deletion of number of buildable lots. 

 

The district court ruled that the contract was unambiguous in only requiring Progress to sell 60 lots with 75 feet of frontage and 30 lots with 60 feet of frontage, and that when Progress was unable to develop 60-foot lots, that portion of the agreement was discharged.  Unfortunately, the Meadow Creek contract does not identify actual land to be sold.  Instead, it refers to a parcel number and a quarter section of land.[1]  Then in stating the purchase price, the agreement sets forth a number of 75-foot and 60-foot lots that equals that purchase price, and recognizes the possibility of a price change based on a change in the number of lots.  Johnson claims that the plain reading of the provision requires Progress to deliver 6,300 lineal feet divided between lots that are 75 feet and 60 feet of frontage width.  Johnson bases this claim on the fact that the language contemplates a change in the purchase price and a possible increase or decrease in the number of lots.  According to Johnson the only constant is 6,300 linear feet.  The actual number 6,300 does not appear in the agreement, rather Johnson calculates this number by multiplying out the respective number of lots and sizes.  But the contract does not state that lineal feet is a constant and in fact the language seems to contemplate the possibility that Progress will not be able to sell Johnson all of the lots listed or will sell more lots or will sell a different mix of lots.  Johnson's claim that this provision requires Progress to sell Johnson 6,300 lineal feet is not the plainest reading of the contract.  But given the indefiniteness of the property description, the contract is inherently ambiguous.[2]

Progress argues that Johnson waived this issue because Johnson did not argue it to the district court in the summary judgment proceedings.  However, each party claimed the purchase agreement was unambiguous and that judgment should be entered in its favor.  This clash clearly presented the district court with the issue of ambiguity.  We review a district court's determination that a contract is ambiguous or unambiguous de novo and find that here the district court erred in finding the purchase agreement unambiguous.  See Bank Midwest, 674 N.W.2d at 179. 

Progress also claims that when Johnson accepted warranty deeds conveying the 75-foot lots, the rights and obligations of the parties under the purchase agreement merged with those deeds and that the merger doctrine precludes Johnson from suing under the Meadow Creek purchase agreement.  Generally, the merger doctrine prevents a party from asserting rights under a purchase agreement after the deed has been executed and delivered.  Bruggeman v. Jerry's Enters., Inc., 591 N.W.2d 705, 708 (Minn. 1999).  But "the merger doctrine merely creates a presumption of merger, and that presumption can presently be overcome with sufficient evidence to the contrary."  Id. at 710 (emphasis omitted).  This purchase agreement glosses over the topic of closing.  The date is "[t]o be determined."  The parties' course of conduct in conveying the 75-foot lots in two separate deeds indicates that multiple closings were acceptable under the purchase agreement.  Under these circumstances, we conclude that the record does not support the application of the merger doctrine and that the presumption of merger is overcome. 

II.

The second issue is whether the district court erred in ruling that Progress met its duty to obtain approval of the project with 60-foot lots.  The relevant portion of the purchase agreement states the following:

Seller to complete certain work: Seller shall, in a timely manner (subject, however, to acts of God and other causes beyond the control of Seller or Seller's contractors), perform thefollowing at Seller's sole expense:

. . . .

D. Obtain all approvals from city and County for project; record final plat

E. Work with Builder to obtain City approval of building and landscaping plans

 

(Emphasis added).  Johnson claims that the contract unambiguously requires Progress to seek city council approval for rezoning of Meadow Creek and that Progress breached the agreement because it never brought a rezoning motion before the city council.  Although we agree that the language requires Progress to obtain all approvals from the city which would include rezoning, this clause only applies to matters that are within Progress's control.  More narrowly stated, the issue is whether the causes that prevented Progress from obtaining approval for Meadow Creek were beyond Progress's control.

The Meadow Creek property was zoned R-1, which calls for 75-foot lots.  To build on 60-foot lots, Progress would need the property rezoned to R-2 or possibly R-1 PUB.  When the parties entered into the Meadow Creek purchase agreement, it appeared as if Progress would easily obtain approval to rezone the property because the Riverbend development, which bordered Meadow Creek directly to the north, included 60-foot lots and appeared to be proceeding smoothly in gaining approval for similar rezoning.  Approximately a week after the Meadow Creek agreement was signed, residents in the area objected to Riverbend's proposal to rezone the property.  Ultimately, Riverbend abandoned the 60-foot lot plan and dramatically revised its proposal.  Although the city council ultimately approved Riverbend's proposal to rezone the property from R-1 to R-2 PUB, it only did so after the Riverbend developer agreed that all homes would be on 75-foot lots. 

The city planner informed Progress that, based on the changes to the Riverbend development, Meadow Creek would need to be revised to match the Riverbend lot size.  According to the city planner's deposition, it was unlikely that the city council would approve rezoning with 60-foot lots for Meadow Creek because of the community opposition, problems with increased congestion, and opposition from the city planner and the planning commission.  After the city planner notified Progress that the city would likely deny Progress's plan to build on 60-foot lots, Progress proceeded with a plan to only build lots with 75 feet of frontage. 

The problems Progress faced in obtaining rezoning for 60-foot lots were beyond its control.  There is nothing to indicate that Progress did not act in good faith or was not diligent in its attempts to gain city approval for the Meadow Creek project.  The district court ruled that the city of Farmington would not approve the 60-foot lots, that Progress was not required to seek rezoning, and that nothing in the record suggested that Progress was less than diligent in attempting to obtain governmental approvals.  Based on the record, we conclude that the district court did not err in granting summary judgment for Progress on this portion of the purchase agreement. 

III.

 

The third issue is whether the district court erred by granting summary judgment on and dismissing Johnson's claim that it had the right to purchase lots in the Rosewood development.  Progress argued that by its terms the Rosewood purchase agreement was null and void.  The district court granted summary judgment in favor of Progress.  Resolution of this issue requires that we examine the language of the purchase agreement.  In reading a contract, courts strive to ascertain and give effect to the intention of the parties.  Metro. Sports Facilities Comm'n v. Gen. Mills, Inc., 470 N.W.2d 118, 122-23 (Minn. 1991).  Courts also consider the entire contract document and attempt to harmonize all of the contract's clauses.  Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525-26 (Minn. 1990).  "Because of the presumption that the parties intended the language used to have effect, we will attempt to avoid an interpretation of the contract that would render a provision meaningless."  Id.

The following are the relevant portions of the Rosewood agreement:

EARNEST MONEY: . . .  Earnest Money will be returned to Buyer, together with 8% interest per annum, if for any reason land cannot be developed during calendar year 2002, in which event this agreement shall thereupon become null and void, except for the right of first refusal.

 

. . . .

 

PLATING AGENDA CONTINGENCY:

 

. . . .

 

In the event the above proposed platting agenda dates are not met, the parties agree that this purchase agreement can be cancelled by mutual consent.  Buyer shall have the right of first refusal if subject property is not completed until the year 2003. 

 

At first glance, the two provisions appear contradictory because the earnest money clause states that the contract is null and void if the "land cannot be developed" during 2002.  The platting contingency states that if the platting dates are not met, the purchase agreement can be cancelled by "mutual consent" and that the buyer shall have the right of first refusal if the "property is not completed" until the year 2003.  The contract does not resolve the inconsistencies between an automatic termination and cancellation by mutual consent.  In addition, the contract does not define the phrases "land cannot be developed" or "property is not completed," and it is not clear what the parties meant by these words. 

Progress argues that the two right of first refusal clauses are consistent.  Both apply if certain acts are not done in 2002.  If the phrases "land cannot be developed" and "subject property is not completed" are read as meaning the same thing, the two rights of first refusal are triggered by the same event.  Since the record is clear that some development work spilled into 2003, this reconciliation of the grants of the right of first refusal would support Progress's claim that the contract became "null and void" by its terms.  Under this view, cancellation by mutual consent only applies to the failure to meet certain deadlines in the first half of 2002.  However, we note that the district court did not consider the platting contingency and relied solely on the earnest money clause in finding that "the Rosewood Agreement became null and void when the property was not developed by the end of 2002." 

Johnson argues that the only logical meaning of the Rosewood agreement, which reconciles the two clauses, is that 2002 is the deadline for determining whether the land can be developed.  Johnson claims that although the project was behind schedule, the land had reached the developable stage by the fall of 2002.  Johnson does not explain why this clause grants a right of first refusal if the property is not completed until 2003. 

We conclude that a careful, objective reading of the contract does not lead to any single, clear meaning of this purchase agreement; it is ambiguous.  Since Johnson's interpretation is a reasonable alternative, the meaning of the contract is a factual issue, and the district court erred in granting summary judgment.

Both parties rely on the maxim that contracts are construed against the drafter to argue that the contracts should be construed against the other party.  See Colangelo v. Norwest Mortgage, Inc., 598 N.W.2d 14, 17-18 (Minn. App. 1999), review denied (Minn. Oct. 21, 1999).  The record is conflicting as to the drafting of the agreement; this is a part of the factual issue for the finder of fact to resolve on remand. 

Finally, Progress has moved to strike everything in the record following the initial summary judgment determination.  Progress argues that the record closed when the district court granted respondent partial summary judgment.  We did not consider the contested portions of the record in deciding this appeal, and therefore do not reach Progress's motion to strike those items from the record.  At trial, all relevant evidence could be considered.

Affirmed in part, reversed in part, and remanded; motion denied.

[1] The land description appears to be an assessor's tax-parcel number for the entire specified quarter section.  The copy of the plat in the record appears to cover that quarter section.  The plat contained about 315 lots at the concept stage.  From the record it does not appear that the parties ever identified which lots were covered by the purchase agreement.  Because the lots are not of uniform depth, because some are not rectangular, and because some are on ponds and parks, they are presumably not of equal desirability.

[2] The purchase agreement provides for payment of earnest money in installments when the City of Farmington issues "Concept Approval" and Progress begins the grading of the development, for return of the earnest money if the "land cannot be developed as proposed to [Johnson]," and for payment of the balance of the purchase price when the "city will issue building permits."  The record does not indicate whether there was compliance with these provisions.  How these contract provisions have been handled might shed light on the parties' intentions or the inadequacies and ambiguities of the contract.