Community Housing Corporation of America, Inc., a Delaware corporation, Respondent, vs. Alternative Building Concepts, Inc., a Texas corporation, Appellant, Shelter Corporation, Defendant, and Shelter Corporation, Cross-Claim Plaintiff, vs. Honey Creek Kiwi, LLC, a Texas limited liability company, et al., Cross-Claim Defendants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-657

 

Community Housing Corporation of America, Inc.,

a Delaware corporation,

Respondent,

 

vs.

 

Alternative Building Concepts, Inc.,

a Texas corporation,

Appellant,

 

Shelter Corporation,

Defendant,

and Shelter Corporation,

Cross-Claim Plaintiff,

 

vs.

 

Honey Creek Kiwi, LLC,

a Texas limited liability company, et al.,

Cross-Claim Defendants.

 

 

Filed December 23, 2003

Reversed and remanded Toussaint, Chief Judge

 

Hennepin County District Court

File No. CT 01-18658

 

William Z. Pentelovitch, Elizabeth Snyder Poeschl, Maslon Edelman Borman & Brand, LLP, 3300 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota 55402 (for respondent)

 

Mark A. Solheim, David M. Wilk, Larson King LLP, Wells Fargo Place, Suite 2800, 30 East Seventh Street, St. Paul, Minnesota 55101 (for appellant)

 

            Considered and decided by Peterson, Presiding Judge; Toussaint, Chief Judge; and Harten, Judge.

U N P U B L I S H E D   O P I N I O N

TOUSSAINT, Chief Judge

Appellant Alternative Building Concepts, Inc. challenges the district court's entry of summary judgment for respondent Community Housing Corporation of America, Inc., based on the court's conclusion that a "letter agreement" constituted a legally binding agreement.  Because we conclude the letter agreement is ambiguous, we reverse and remand.

FACTS

Appellant Alternative Building Concepts, Inc. (ABC) is a non-profit organization that provides affordable housing through tax-exempt financing.  Respondent Community Housing Corporation of America, Inc. (CHC) is a non-profit corporation whose mission is to create and maintain quality affordable housing.  Shelter Corporation (Shelter) provides CHC with administrative, referral, and management services, and worked with CHC on a residential rental project in Dallas, Texas called the Honey Creek Apartment Complex (Honey Creek).

             On October 6, 1998, CHC signed a purchase agreement to acquire Honey Creek from a real estate investment trust for $20,000,000.  CHC negotiated a management agreement with Shelter and worked with Shelter and Municipal Mortgage & Equity LLC to procure tax-exempt financing for the Honey Creek purchase.  Eventually, CHC learned that it would not be able to obtain Community Housing Development Organization status (CHDO) in time for the closing on Honey Creek.  A non-profit with CHDO status is exempt from property taxes on properties it uses for non-profit purposes. 

CHC and Shelter began trying to find another way to finance the project.  CHC contends that it decided to arrange a "bridge" loan and to find a CHDO-certified Texas organization that could take title to Honey Creek and be CHC's economic partner in the property.  In the spring of 1999, Shelter's Jay Jensen called Carol Eade from ABC, to inquire whether CHDO-certified ABC was interested in purchasing Honey Creek and to discuss different possible ownership arrangements: (1) outright ownership of Honey Creek by ABC or (2) a joint venture involving ownership by ABC and CHC. 

Shortly after Shelter's Jensen proposed the possible arrangements, Eade had a dinner meeting with Garrett Carlson Sr. (Carlson Sr.) and his son Garret Carlson Jr. (Carlson Jr.) to discuss Honey Creek.  Carlson Sr. attended as a CHC board member and Carlson Jr. was there as agent for both CHC and Shelter.   The Carlsons explained that CHC had been denied CHDO status.  Eade and the Carlsons discussed joint ownership of Honey Creek, where CHDO-certified ABC would share ownership and economic benefits with either Shelter or CHC. 

On April 19, 1999, Carlson Jr. sent Eade a letter, entitled "Letter Agreement," setting forth "Shelter's understanding with respect to a joint venture agreement by and between" Shelter, CHC, and ABC.  The letter described certain actions necessary for ABC to secure financing for Honey Creek; another entity called CHC Honey Creek, LLC (CHC Honey Creek) would pay Shelter a 1% financing fee for its work on the project; and CHC would withdraw as the sole member of CHC Honey Creek, so that ABC could be admitted as the sole member of CHC Honey Creek.  The letter also states CHC would be re-admitted as an additional member of CHC Honey Creek after CHC obtained CHDO certification, provided that this readmission would not complicate the issuance of tax-exempt bonds, jeopardize the tax exempt status of ABC, or jeopardize the CHDO status of ABC.  The letter stated that ABC and CHC would share economic benefits, stating:

It is the intention to divide the economic benefits of the project 50% to ABC and 50% to CHC whether by agreement between the two or because both are members of CHC Honey Creek, LLC.  Economic benefit is intended to cover annual cash flow, principal amortization and any residuals upon refinancing and/or sale.

 

The letter concluded with an invitation for Eade to sign the letter if it "captured the spirit appropriately" from the dinner meeting.  Eade signed the letter.

When ABC took action allegedly inconsistent with the terms of this letter, CHC initiated this declaratory judgment action, seeking a declaration that the letter agreement is a valid and binding contract between CHC and ABC, and that CHC is entitled to one-half of the economic benefits from Honey Creek pursuant to the agreement.  After a hearing on the parties' cross motions for summary judgment the district court entered judgment for CHC. 

D E C I S I O N

On appeal from summary judgment, this court examines whether there are any genuine issues of material fact and whether the lower court erred in its application of the law.  Cummings v. Koehnen, 568 N.W.2d 418, 420 (Minn. 1997).  On appeal from a grant of summary judgment, this court reviews questions of law de novo.  Christensen v. Eggen, 577 N.W.2d 221, 224 (Minn. 1998).

The dispositive issue on this appeal is whether the April 19 "letter agreement" was ambiguous.  Whether a contract is ambiguous is a legal question reviewed de novo.  Untiedt v. Grand Labs., Inc., 552 N.W.2d 571, 574 (Minn. App. 1996), review denied (Minn. Oct. 15, 1996). 

A contract is ambiguous if the written document, "by itself, is reasonably susceptible to more than one meaning."  Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn. 1990).  When ambiguity exists, interpretation of a contract is a question of fact and extrinsic evidence may be considered.  City of Virginia v. Northland Office Props., Ltd., 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991).  The existence of such questions of fact renders summary judgment improper.  Id.

Here, viewing the facts in the light most favorable to ABC, the letter purports to be Shelter's "understanding" of a conversation that occurred over dinner, and merely summarized, in Carlson's own words, "the spirit" of the conversation.  The letter concludes by asking ABC to sign one copy of the letter "[i]f I have captured the spirit appropriately at our dinner meeting on Tuesday."  Capturing "the spirit" of a conversation is reasonably susceptible to more than one meaning and suggests that the conversation did not result in an agreement on definite terms.  Furthermore, the letter outlines possible steps necessary for the parties to reach a position to execute a contract.  The letter envisioned the parties dividing "economic benefit," and defines "economic benefit" as "annual cash flow, principal amortization and any residuals upon refinancing and/or sale," but does not explain (1) who will determine "cash flow" or when that determination will occur; (2) what constitutes "principal" and how it will be amortized, or (3) what makes up the post-refinancing and/or sale "residuals." 

Because we conclude that the letter is ambiguous as a matter of law, we remand for resolution of the fact issues material to a determination of the existence and terms of an agreement.

Reversed and remanded.