Daniel L. Groetsch, et al., Respondents, vs. Anthony G. Groetsch, et al., Appellants.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480 A. 08, subd. 3 (1994) State of Minnesota in Court of Appeals C1-96-281 Daniel L. Groetsch, et al., Respondents, vs. Anthony G. Groetsch, et al., Appellants. Filed October 15, 1996 Affirmed Schumacher, Judge Stearns County District Court File No. CX943687 Mark F. Uphus, 310 East Main Street, Melrose, MN 56352 (for Respondents) John R. Koch, Reichert, Wenner, Koch & Provinzino, P.A., 501 St. Germain, Post Office Box 1556, St. Cloud, MN 56302 (for Appellants) Considered and decided by Schumacher, Presiding Judge, Toussaint, Chief Judge, and Klaphake, Judge. Unpublished Opinion SCHUMACHER, Judge (Hon. Donald M. Spilseth, District Court Trial Judge) Appellants Anthony G. and Mary Ann Groetsch challenge the trial court's order and judgment for specific performance of an oral contract with respondents Daniel L. and Kathleen V. Groetsch. We affirm. Facts Appellants are the parents of respondent Daniel Groetsch. Respondent Kathleen Groetsch is Daniel's wife. A few years after graduating from high school in the mid-1970s, Daniel returned to work on his parents' farm for a modest salary. He testified that ``the rest was going back into the farm,'' and he thought that some day he would get part of the farm. Daniel testified that he worked full-time 6 days a week, 14 to 18 hours per day. On January 1, 1986, Daniel and Anthony entered into an oral agreement to establish a farming partnership, in which profits and losses were divided 60 percent to Anthony and 40 percent to Daniel. The farming operation consisted of two farms, which the parties call ``Farm One'' and ``Farm Two.'' In 1986, appellants decided to structure a gift of Farm Two to respondents. According to a contract for deed drafted by appellants' attorney, appellants were to sell Farm Two to respondents for $100,000, payable in installments of $20,000 down and $20,000 during each of the next four years. Appellants gave respondents three annual $20,000 ``statements of gift'' representing forgiveness of $60,000 on the contract for deed. When they signed the contract for deed, respondents were not represented by an attorney. Daniel testified that he ``glanced'' and ``looked'' at the contract for deed, but did not read it. He said its purpose was to ``take care of [appellants'] tax needs.'' He testified that the document was never intended to be an agreement between the parties about Farm Two. Respondents were never given a copy of the document. According to respondents, the parties orally agreed that appellants would give them Farm Two if respondents continued to work on the farm for five years, beginning January 1, 1986. Mary Ann testified that it was not her intention to sell Farm Two to respondents, but rather to give it to them ``if we could live there after we retire.'' Anthony testified that he never intended that respondents would make payments on the contract for deed. He said once the contract was signed and all the statements of gift had been given, respondents would own Farm Two ``if they stayed farming.'' Respondents took possession of the land, buildings, and home located on Farm Two in 1986 and paid property taxes on it for eight years. They said they spent 6 to 7 hours each week and $5,462 making numerous improvements to the property. In 1992, the parties discussed the sale of the remainder of appellants' farm to respondents, but when negotiations failed, Daniel withdrew from the farming operation. Appellants served respondents with a statutory notice of cancellation of the contract for deed, and respondents initiated this action. Following a court trial, the trial court concluded that respondents were entitled to specific performance of the oral agreement providing for the conveyance of Farm Two. Decision When the trial court sits without a jury, we review the findings to determine whether they are clearly erroneous, either without substantial evidentiary support or based on an erroneous conclusion of law. Reserve Mining Co. v. State, 310 N.W.2d 487, 490 (Minn. 1981). ``The construction and effect of a contract are questions of law for the court *** .'' Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). 1. Appellants argue that the trial court erred by finding there was an oral agreement that respondents would receive ownership of Farm Two if they lived and worked on the farm for five years. We disagree. To create a binding unilateral contract, [t]he offer must be definite in form and must be communicated to the offeree. Whether a proposal is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, not by their subjective intentions. Pine River State Bank v. Mettille, 333 N.W.2d 622, 626 (Minn. 1983). One party's ``mere understanding'' does not constitute a contract. Bardwell v. Witt, 42 Minn. 468, 471, 44 N.W. 983, 984 (1890). Although the parties did not testify about the precise occasion when the offer was made, there is substantial evidence supporting the trial court's finding. Kathleen testified that appellants said they would give respondents Farm Two over a five-year period as long as ``Danny was doing almost all the labor, the extra work.'' Daniel testified that the parties had an ``agreement that if I had stayed and worked, after five years [Farm Two] would be mine.'' 2. Appellants contend the trial court's order for specific performance is erroneous because it recognizes an oral contract that contradicts the written contract for deed. The trial court determined: The evidence further supports the assertion that the Contract for Deed in this instance was not a contract at all, but was merely created in order to meet the tax needs of [appellants]. None of the parties ever expected [respondents] to make the payments called for in the Contract for Deed indeed, the parties were well aware that [respondents] would be unable to make the called for payments. Parol evidence is generally not admissible to vary, contradict, or alter the terms of a final and integrated written agreement. Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 713 (Minn. 1985). However, [i]n determining whether parol evidence is admissible, a distinction is drawn between evidence tending to show that no contract has ever been made and evidence to contradict, vary, or add to the terms of a written contract. Hamilton v. Boyce, 234 Minn. 290, 292, 48 N.W.2d 172, 173-74 (1951). Thus, [e]vidence is admissible to show that the parties, in effect, never entered into a binding agreement because the written agreement was intended as a sham. Hruska, 372 N.W.2d at 714. Substantial evidence supports the trial court's finding that the parties never intended to form a binding contract. Anthony testified that the purpose of the contract for deed was ``for tax wise.'' Further, he explicitly acknowledged that he did not intend for the contract for deed to be enforceable, and he did not intend for respondents to make payments on the contract. Daniel testified that he never intended for the contract for deed to be an agreement among the parties regarding Farm Two. Moreover, respondents never received a copy of the contract, they were not represented by an attorney, appellants (and their attorney) said the purpose of the contract was to address their tax concerns, none of the parties commented on the non-delivery of the final two statements of gift, and except for one payment made at the direction of an accountant, respondents did not make and appellants did not request the interest payments due under the contract. 3. Appellants argue that the oral agreement regarding Farm Two is not enforceable under the statute of frauds. The statute of frauds requires an agreement to be in writing if it creates an interest in land or by its terms cannot be performed within one year. Minn. Stat. §𨹙.01(1), 513.04 (1994). We conclude that the doctrine of part performance removes this case from the statute of frauds. See Burke v. Fine, 236 Minn. 52, 55, 51 N.W.2d 818, 820 (1952) (explaining doctrine of part performance). The supreme court has explained: To take a parol grant or gift of land out of the statute of frauds, there must be, not only an acceptance, a taking of possession under and in reliance upon the contract, but such a performance in the way of making valuable improvements as would make it substantial injustice or fraud to hold the grant or gift void under the statute. Hayes v. Hayes, 126 Minn. 389, 394, 148 N.W. 125, 127 (1914). It would be a substantial injustice to void the agreement here under the statute of frauds. In addition to paying property taxes, respondents made the following improvements: (1) adding fencing, (2) landscaping, (3) replacing underground water lines, (4) replacing a roof and chimney, (5) installing a new furnace, (6) adding a new entry to the house's basement, (7) building and attaching to the house 34 shutters, (8) demolishing and removing a chicken coop, and (9) painting the house and granary. See Evenson v. Aamodt, 153 Minn. 14, 16-18, 189 N.W. 584, 585 (1922) (upholding oral gift of land where farmer gave son possession of farm and son painted and re-roofed barn, installed cement floor and stone foundation, rearranged stalls, painted and re-roofed granary, painted and repaired house, and built or repaired other out buildings and fences); Hayes, 126 Minn. at 392, 148 N.W. at 126 (upholding oral gift where son, who possessed farm for 17 years, added to farm by purchasing adjoining parcels, constructed buildings, paid taxes and insurance, and planted and harvested crops each year). 4. Appellants argue that respondents were equitably estopped from enforcing an oral contract that conflicted with the contract for deed because a party who accepts a transfer of property must accept it according to the terms of the transfer. See Suske v. Straka, 229 Minn. 408, 417, 39 N.W.2d 745, 751 (1949) (party cannot accept gift and retain benefits of transaction and at same time repudiate it). Suske is distinguishable, however, because that transaction involved strictly a gift. See id. at 413, 39 N.W.2d at 749. Here, the transfer of Farm Two was conditioned on respondents' continuing work on the farm. 5. Appellants contend that because the contract for deed was statutorily cancelled under Minn. Stat. 𨺇.21 (1994), any right of action arising from the transaction terminates. See West v. Walker, 181 Minn. 169, 171, 231 N.W. 826, 827 (1930) (neither vendee nor vendor could assert claim against each other arising out of land transaction after cancellation was complete); Gatz v. Langenfeld & Sons Constr., 356 N.W.2d 716, 718 (Minn. App. 1984) (once statutory notice served and cancellation effected, any cause of action based on contract terminates). Here, however, respondents' claim is not based on the cancelled contract, but on the oral agreement. Affirmed.