Gary Papermaster, Appellant, vs. Wolf & Associates, Defendant, Arlin A. Wolf, individually, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (1998).

IN COURT OF APPEALS

C9-00-82

Gary Papermaster,

Appellant,

vs.

Wolf & Associates,

Defendant,

Arlin A. Wolf, individually,

Respondent.

Washington County District Court

File No. C5982650

Dean B. Thomson, Julie A. Doherty, Dereck R. Brower, Fabyanske, Westra & Hart, P.A., 920 2nd Avenue South, Suite 1100, Minneapolis, MN 55402 (for appellant)

Lawrence J. Field, Thomas F. Nelson, Leonard, Street & Deinard, 150 South 5th Street, Suite 2300, Minneapolis, MN 55402 (for respondent)

            Considered and decided by Toussaint, Chief Judge, Halbrooks, Judge, and Parker, Judge.*

HALBROOKS, Judge

            Appellant challenges the district court's sua sponte grant of summary judgment, dismissing appellant's breach-of-contract claim.  Appellant argues that material facts exist as to whether respondent exercised an option to purchase appellant's shares in a closely held corporation.  Appellant also maintains that the district court, in granting summary judgment, prejudiced appellant's case.  We affirm. 

            In May 1986, Wolf & Associates, Inc. (W&A), a Minnesota corporation, appellant Gary Papermaster, and respondent Arlin Wolf, among others, entered into an agreement for the purchase of capital stock of W&A.  This agreement, in relevant part, governs the disposition of a W&A shareholder's stock in the event a shareholder terminates employment with W&A.  Specifically, paragraph 3.1 of the agreement states that the corporation has the option to purchase the shares or assign that option to the remaining W&A shareholders.  Paragraph 3.2 sets forth how the corporation can exercise its option. 

            By a letter to the corporation dated July 9, 1997, Papermaster voluntarily resigned as an officer and director, effective August 8, 1997.  In that same letter, Papermaster informed W&A that he wished to sell all of his stock pursuant to the terms of the agreement. 

            At a special directors' meeting on August 12, 1997, W&A decided not to exercise its option to repurchase Papermaster's shares.  By correspondence dated September 3, 1997, W&A notified Papermaster that the corporation did not intend to repurchase his shares at that time.  Rather, on October 13, 1997, in accordance with paragraph 3.1 of the agreement, W&A assigned its option to purchase Papermaster's shares to the remaining shareholders, including Wolf. 

            By letter dated October 28, 1997, Wolf offered to purchase Papermaster's shares personally.  No mention was made in the letter of exercising an option under paragraph 3.2, and the proposed purchase price was significantly lower than it would have been under the terms of the agreement.  In a letter dated November 24, 1997, Papermaster informed Wolf of his intent to treat Wolf's October 28, 1997 letter as an offer to purchase Papermaster's shares at the option price as determined by paragraph 6.5, demanded that Wolf set a closing date for the sale, and threatened legal action for noncompliance.  Wolf refused Papermaster's demands. 

            Papermaster sued Wolf and W&A alleging, among other things, fraud, breach of fiduciary duty, and breach of contract.  Following a September 3, 1998 pre-trial conference, the parties entered into a stipulation whereby Papermaster dismissed, without prejudice, all claims but the breach-of-contract claim against Wolf.

            The parties submitted trial briefs on the breach-of-contract issue one week before trial.  On October 11, 1999, the first day of the trial, the trial court indicated that, after reviewing the parties' briefs, it was considering granting summary judgment sua sponte in favor of Wolf.  The trial court then allowed the parties to prepare for and present oral argument.  Following oral argument, and after re-reviewing the parties' trial briefs and the relevant caselaw, the court granted summary judgment in favor of Wolf.  This appeal followed.

D E C I S I O N

I.

            On appeal from summary judgment, this court examines two questions:  (1) whether there are any genuine issues of material fact; and (2) whether the lower court erred in its application of the law.  Cummings v. Koehnen, 568 N.W.2d 418, 420 (Minn. 1997).  "A reviewing court must view evidence in the light most favorable to the party against whom summary judgment was granted."  Vetter v. Security Continental Ins. Co., 567 N.W.2d 516, 520 (Minn. 1997) (citation omitted).  A reviewing court is not bound by and need not give deference to a trial court's decision on a purely legal issue.  Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984). 

            The existence of a contract is generally an issue for the fact-finder.  Morrisette v. Harrison Int'l Corp., 486 N.W.2d 424, 427 (Minn. 1992).  But if the record "taken as a whole could not lead a rational trier of fact to find for the nonmoving party," summary judgment is appropriate.  DHL, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (citation omitted).  Here, the trial court concluded that the October 28, 1997 letter "does not, as a matter of law, constitute a clear, unambiguous attempt to exercise the option according to its terms" and that "[n]owhere in his letter does Wolf suggest a clear intent to exercise his option rights."  A de novo standard of review is used to determine whether the trial court erred in its application of the law.  Homart Dev. Co. v. County of Hennepin, 538 N.W.2d 907, 910 (Minn. 1995). 

            In the exercise of an option to create a contract, an irrevocable offer, like any other offer, must be accepted according to its terms.  Minar v. Skoog, 235 Minn. 262, 265, 50 N.W.2d 300, 302 (1951).  To exercise an option and create a contract, the supreme court has explained that the election must be "clear, unambiguous, and according to and in the manner prescribed by the terms of the option agreement."  Brachmann v. Netzinger, 293 Minn. 405, 407, 196 N.W.2d 616, 618 (1972) (citation omitted).  A proposed acceptance that varies the terms of an offer is a rejection of the offer and is treated as a counteroffer.  Alpha Venture/Vantage Properties v. Creative Carton Corp., 370 N.W.2d 649, 652 (Minn. App. 1985), review denied (Minn. Sept. 19, 1985). 

            After careful review of Wolf's October 28, 1997 letter, the option agreement, and all of the relevant evidence, it is clear that the letter, even when viewed in a light most favorable to Papermaster, does not meet the Brachman standard for exercising an option and forming a contract.  The October 28, 1997 letter was a counteroffer.  The trial court properly found that the option had not been exercised and that no contract was formed.  Summary judgment was, therefore, appropriate. 

II.

            A trial court has the inherent authority to grant summary judgment sua sponte, without notice to either party, when no genuine issues of material fact remain, one of the parties deserves judgment as a matter of law, and the absence of a formal motion creates no prejudice to the party against whom summary judgment is granted.  Modern Heating & Air Conditioning, Inc. v. Loop Belden Porter, 493 N.W.2d 296, 299 (Minn. App. 1992) (citing Del Hayes & Sons, Inc. v. Mitchell, 304 Minn. 275, 280-81, 230 N.W.2d 588, 591-92 (1975)).  The objecting party's burden is to show prejudice resulting from "lack of notice, from procedural irregularities, or from the lack of a meaningful opportunity to oppose summary judgment."  Estate of Riedel by Mirick v. Life Care Retirement Communities, Inc., 505 N.W.2d 78, 81 (Minn. App. 1993) (citation omitted).  This court will not reverse a lower court grant of summary judgment unless the objecting party can show such prejudice.  Septran, Inc. v. Independent Sch. Dist. No. 271, 555 N.W.2d 915, 920 (Minn. App. 1996) (citation omitted), review denied (Minn. Feb. 26, 1997).  Lack of notice is not a ground for reversal if the appellant has not established prejudice.  Patterson v. Wu Family Corp., 594 N.W.2d 540, 551 (Minn. App. 1999), rev'd on other grounds, 608 N.W.2d 863 (Minn. 2000).

Neither party alleged or established that there were any procedural irregularities.  Appellant's argument is essentially that parties typically have 19 days for response to a motion for summary judgment and he was not given sufficient time to prepare in this instance.  See Minn. R. Gen. Pract. 115.03 (providing that moving party's motion papers must be served at least 28 days before hearing and responding party's papers must be served at least 9 days before hearing).  But the parties were scheduled to begin trial and, presumably, came to court fully prepared.  Legal theories were determined, discovery was complete, and witnesses were prepared to testify.  While the trial court's decision to raise this issue sua sponte may have caught counsel off-guard, it was within the court's authority to do so, and counsel were fully prepared for resolution of the breach-of-contract claim.

            The parties submitted trial briefs one week prior to trial.  On the day of trial, the court, after announcing its inclination to grant summary judgment in favor of Wolf, allowed the parties to prepare for and present oral argument.  After argument, the trial court took the matter under advisement in order to review the caselaw cited in the parties' briefs.  Only then did the court grant summary judgment. 

            In short, Papermasterhas not established prejudice as a result of the trial court's procedure.

            Affirmed.  

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.