Alexei Pachtchenko, Appellant, vs. Alexander Minich, et al., Respondents.

This opinion will be unpublished and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

A04-312

 

Alexei Pachtchenko,

Appellant,

 

vs.

 

Alexander Minich, et al.,

Respondents.

 

Filed December 21, 2004

Affirmed

Kalitowski, Judge

 

Washington County District Court

File No. C7-03-2150

 

John M. Koneck, Brian S. McCool, Fredrikson & Byron, P.A., 200 South Sixth Street, Minneapolis, MN 55402 (for appellant)

 

Thomas R. Hughes, Hughes & Costello, 1230 Landmark Towers, 345 St. Peter Street, St. Paul, MN 55102 (for respondents)

 

            Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Klaphake, Judge.

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

            Appellant Alexei Pachtchenko challenges the district court's December 29, 2003 grant of summary judgment in favor of respondents.  Appellant argues that (1) the district court erred by failing to determine whether appellant defaulted under the contract for deed; (2) appellant's failure to tender the amount stated as due on the notice of cancellation does not constitute a default where the amount stated on the notice was incorrect and he subsequently tendered another amount; (3) the district court erred by failing to determine the exact amount of appellant's default under the contract for deed when appellant attempted to reinstate; and (4) the district court disregarded prejudicial defects in the cancellation notice in concluding that respondents validly canceled the contract for deed.  We affirm.

D E C I S I O N

            The purpose of the statutory cancellation procedure is to give vendees notice of an impending cancellation and a reasonable time to redeem their interest.  Conley v. Downing, 321 N.W.2d 36, 39 (Minn. 1982).  Section 559.21 of the Minnesota Statutes defines the process of canceling a contract for deed.  Subdivision 2a of the statute expressly limits the amount of time a vendee has to redeem their interest in the subject property to 60 days from the date of service of the cancellation notice.  Unless the vendee either complies with the default conditions and pays the costs listed in the cancellation notice, or obtains a court order suspending the cancellation proceedings until its claims or defenses are resolved, a contract for deed is terminated 60 days after notice of cancellation.  Minn. Stat. § 559.21, subds. 3, 4(d) (2000); see also Minn. Stat. § 559.211, subd. 1 (2000) (authorizing the district court to enter an order temporarily restraining or enjoining cancellation proceedings, and allowing vendees an additional 15 days to either cure the default or obtain further injunctive relief after termination of such an order).

            The supreme court has long recognized the finality of statutory cancellation.  See Olson v. N. Pac. Ry. Co., 148 N.W. 67, 68 (Minn. 1914) (holding that a contract vendee attempting to sue for damages caused by the vendor's misrepresentations "has no contract upon which to predicate damages" after cancellation of the contract for deed has occurred); see also In re Butler, 552 N.W.2d 226, 230 (Minn. 1996) (stating that the statutory mechanism for canceling a contract for deed is akin to a statutory strict foreclosure).  After notice and cancellation, all rights between the parties under a contract for deed are terminated.  Butler, 552 N.W.2d at 230.  

            But the contract vendee is not without options during the cancellation period.  The supreme court outlined these options in Butler, where it stated that:

[A] vendee may undertake an action in unjust enrichment if there has been wrongful conduct on the part of the vendor; the vendee has an opportunity to sell the property prior to cancellation to protect his interest; and the vendee may attack any irregularity in the cancellation process.  Minnesota's statutory cancellation procedure provides the vendee the protections of notice, opportunity to cure, and the condition that the vendor strictly adhere to statutory requirements.

 

552 N.W.2d at 235.  And, because of the harsh result that cancellation imposes, the courts strictly construe the cancellation statute to avoid unnecessary forfeitures.  Conley, 321 N.W.2d at 39-40.  Minnesota courts have, however, consistently enforced statutory cancellations in order to preserve the simplicity and finality that cancellation affords.  25 Eileen Roberts, Minnesota Practice § 6.03 (2003). 

I.

            Before considering appellant's specific arguments, we address two threshold issues.  The first is the effect of the district court's May 15, 2003 order on its April 24, 2003 denial of appellant's request for an injunction.  The district court, in the December 2003 summary judgment order that is the subject of this appeal, stated:

While it is true that Judge Carlson subsequently vacated her April 24, 2003 Order and issued a one (1) month Restraining Order, she did so solely to allow [appellant] the opportunity to close the sale of the subject property.  The one (1) month Restraining Order was not a court order enjoining cancellation of the contract until the default could be judicially determined, although it appears that [appellant] has attempted to treat it as such.

 

We agree.  The district court's May 15, 2003 order was not intended to wipe the slate clean, as appellant suggests, and it did not involve a reconsideration of the court's April 24, 2003 findings that support the denial of the injunction. 

            The second threshold issue relates to appellant's arguments that the district court erred by granting summary judgment because issues of material fact remained as to appellant's alleged default, the default amount, and appellant's alleged cure.  Respondent contends that when the district court granted summary judgment in December 2003, it was too late for appellant to challenge whether respondents had properly canceled the contract for deed.  We agree. 

            Appellant's 60-day window to cure the default or obtain an injunction began on February 11, 2003, when he was served with notice of cancellation.  On April 10, 2003, 58 days after service, appellant obtained a temporary injunction delaying cancellation of the contract pending a hearing on the merits.  The district court, on April 24, 2003, denied appellant's request for injunctive relief and dissolved the temporary restraining order. 

            As of April 24, 2003, appellant had 15 days to cure the default or obtain another injunction.  See Minn. Stat. § 559.211, subd. 1 (2002).  On May 2, 2003, appellant filed a motion for amended findings and conclusions of law, in which he attempted to relitigate the issues decided in the district court's April 24, 2003 order.  But at the motion hearing, appellant provided the court with a detailed description of a potential purchaser for the property.  Appellant asserted that the purchase, if allowed to close, would provide sufficient funds to settle the outstanding debt on the contract for deed and provide appellant with approximately $100,000 in equity from the sale.

            In response to appellant's motion, the district court entered an order on May 15, 2003 (dated May 7, 2003), stating that "in balancing the potential harm to [appellant] against the temporary harm to [respondents], a temporary injunction should be issued to enable [appellant] to complete the sale of the premises . . . on or before June 1, 2003."  The proposed sale fell through, and appellant's one-month injunction ended on June 15, 2003.  Appellant then had another 15 days from that date to cure the default or obtain another injunction.  See Minn. Stat. § 559.211, subd. 1 (2002). 

            On June 4, 2003, appellant tendered $89,200 to respondents in an attempt to reinstate the contract for deed.  And on June 5, 2003, appellant attempted to tender an additional $1,554 to respondents to comply with the requirements of the cancellation statute.  See Minn. Stat. § 559.21, subds. (4), (5) (2002) (requiring that vendees pay $250 in attorney fees and 2% of the total amount of the default).  Respondents rejected the entire offer as insufficient. 

            Appellant also wrote to the district court on June 5, 2003, in an attempt to obtain further injunctive relief.  But the district court took no action.  As such, appellant did not obtain further injunctive relief prior to June 29, 2003.  Therefore, the contract for deed was canceled as of June 29, 2003. 

            The cancellation's effect on the district court's December 2003 decision on summary judgment was, as the district court correctly found, outcome determinative.  See Butler, 552 N.W.2d at 230 (stating that statutory cancellation of a contract for deed "results in the vendee's forfeiture of all payments made and restoration of full legal and equitable title in the property to the vendor").  The district court, in December 2003, stated that "[i]f the dispute over the amount in default were to have carried the day for [appellant], it would have been at the prior hearings."  We agree.  While appellant could have appealed the district court's April 24, 2003 order denying injunctive relief, he did not.  By December 2003, when the district court granted respondents' summary judgment motion, the contract had been terminated pursuant to section 559.21.  As such, the issues relating to the question of default and alleged defects in the notice were not material to that court.

II.

            1.         The District Court's Determinations of Default

            Appellant first asserts that the district court erred by granting respondents' summary judgment motion without determining whether appellant actually defaulted on the contract for deed.  We disagree. 

            On appeal from a summary judgment, this court must determine whether any genuine issues of material fact exist for trial and whether the district court erred in its application of law.  Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988).  We must view the evidence in the light most favorable to the nonmoving party.  Id. 

            Appellant has stated, throughout this litigation, that he made no payments from December 2002 through February 2003, and that he had not made monthly payments according to the contract's terms since its inception.  Further, the district courtin both of its orders prior to the grant of summary judgmentstated that appellant was in default under the contract's terms.

             In the April 24, 2003 order, the district court made the following relevant findings on the issue of default:

(1)  Defendants claim that Plaintiff is in default on the $6,000 monthly payments by $89,100 as of April 1, 2003.  Plaintiff claims that he is in default on the monthly payments a total of $18,200 as of April 1, 2003.

 

(2)  Plaintiff further agrees that his monthly payments were not made pursuant to the contract (ie, $6,000 on the first of each month).

 

(3)  The property was not insured from February 2003 to April 2003.

 

(4)  Plaintiff is clearly in default under the terms of the contract for deed and his cumulative defaults are significant.

 

            The district court also stated, in the May 15, 2003 order, that:

Plaintiff has . . . offered to cure the default on the principal payments due on the contract ($55,000) and pay $6,000 per month for January 2003 through May 2003 ($30,000) as a condition for issuance of the injunction.  Defendants assert that in order to cure the default and reinstate the contract the plaintiff would have to pay a total of $113,200 to cover principal plus interest through May 2003.

 

            In light of appellant's admissions of nonpayment and failure to comply with the terms of the contract, as well as the district court's findings of default in both orders relating to injunctive relief, we conclude that the district court determined that appellant defaulted.  The district court in the April 24, 2003 order did not abuse its discretion in holding that a substantial default had occurred.  And thus, no genuine issue of fact remained on this issue in December 2003, when the district court granted respondents' motion for summary judgment. 

            2.         Oral Modifications of the Contract for Deed

            Appellant also argues that the district court erred by granting summary judgment when material facts were at issue regarding whether the parties orally modified the contract.  We disagree. 

            Appellant claims that the contract was orally modified several times since its inception.  We reject appellant's reliance on Thoe v. Rasmussen, 322 N.W.2d 775 (Minn. 1982), for this proposition.  While holding that oral modifications are possible in certain situations, Thoe did not change the standard for proving such a modificationthat of "clear and convincing evidence."  Id. at 777.  In addition, the vendor in Thoe was dead at the time of the litigation, so no evidence contradicting the agreement was presented to the district court.  Id. at 776-77, 778.  

            Here, respondents submitted an affidavit denying the existence of the oral modification, in response to appellant's affidavit stating that the contract was orally modified.  And the district court, in the April 24, 2003 order, made the following findings:

(1)  Defendants have denied entering into any oral agreements to defer payment of the $15,000 and $40,000 installments until May 31, 2006.

 

(2)  The contract specifically provides that any modification of its terms must be in writing but Plaintiff has produced no written agreements as evidence of modification.

 

Thus, the district court, in April 2003, determined that the "clear and convincing" standard of evidence could not be satisfied.  Therefore, the district court properly held in December 2003 that no genuine issue of material fact remained on this issue.

III.

            Appellant argues that the district court, in the summary judgment order, erred by finding that appellant was required to tender the exact amount stated in the notice of cancellation in order to reinstate the contract for deed and that the district court erred by granting summary judgment without determining the exact amount of default.  But in December 2003, the district court did not find, as appellant claims, that "appellant was required to tender the exact amount stated in the notice of cancellation to reinstate the contract for deed."  Rather, the district court simply recognized that the time for arguments over the amount of default had passed.

            As discussed above, by the time this case reached the summary judgment phase, the contract had already been canceled pursuant to section 559.21.  The district court, in the order granting summary judgment, properly noted that while the parties genuinely dispute the default amount, the dispute  "is not material to the motion presently before this court."  We agree.  In December 2003, appellant's arguments regarding the amount of default and whether a default occurred were no longer material to the district courtthe time for such arguments passed when the cancellation became effective. 

IV.

            Appellant argues that the district court erred by disregarding the prejudicial defects in the notice of cancellation.  Absent a sufficient showing of prejudice, some discrepancies in a notice of cancellation will not render it fatally defective.  See Hoffman v. Halter, 417 N.W.2d 747, 750 (Minn. App. 1988), review denied (Minn. Mar. 18, 1988); see also Conley, 321 N.W.2d at 40 (ruling cancellation notice not defective where it both overstated statutory attorney fees and understated amount due on the contract for deed); Karim v. Werner, 333 N.W.2d 877, 879 (Minn. 1983) (affirming a ruling that an overstatement of the amount of statutory attorney fees in a cancellation notice did not render the notice defective).  This court has also held that failure to state the amount due under the contract is not fatal to a notice of cancellation because the vendee is presumed to know the contract terms and is not prejudiced if the amount is not stated, or is stated incorrectly.  Hoffman, 417 N.W.2d at 750. 

            The key issue here is whether appellant made a showing of prejudice sufficient to render the alleged defects in the notice of cancellation fatally defective.  See id.  We note that appellant stated in submissions throughout this litigation that he informed respondents that "he did not . . . have the funds necessary to perform under the Contract for Deed" in December 2002.  And it is undisputed that, as of December 2002, appellant's business was closed.  Moreover, the district court, in the April 24, 2003 order, found that "[appellant] has made no effort to cure the default or offer security in an amount sufficient to cover the defaults.  He has offered to pay $6,000 per month to the court but there is little reason to believe he will be able or willing to do so given his past payment history."  This finding, and the district court's subsequent, consistent denials of injunctive relief, indicate that the court did not believe appellant was prejudiced by any alleged discrepancy in the default amount so as to warrant injunctive relief.  And on this record, we will not disturb that finding.  See Carl Bolander & Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn. 1993) (holding that "[a] decision on whether to grant a temporary injunction is left to the discretion of the trial court and will not be overturned on review absent a clear abuse of that discretion").   

            While appellant, in a last-ditch effort to stave off statutory cancellation, eventually tendered a lesser amount that he claims to have determined was the amount owed under the statute ($99,457.76), he never offered to cure the full amount of the default as calculated by respondents ($142,815.50).  And by the time appellant finally tendered the lesser amount in June 2003, the district court had already extended the statutory cancellation period to twice its normal duration.  Moreover, appellant was aware, at the time of his tender in June, that the district court had stated in the May 15, 2003 order that "[respondents] assert that in order to cure the default and reinstate the contract [appellant] would have to pay a total of $113,200 to cover principal plus interest through May 2003."                        Thus, the district court properly concluded that appellant was not seeking injunctive relief to judicially determine the exact amount of the default in either the April or the May 2003 hearing.  And the district court properly refused to extend the statutory cancellation period when appellant requested that relief on June 5, 2003.  Because the record supports a conclusion that appellant was not prejudiced by the alleged defects in the notice of cancellation, the district court did not abuse its discretion by denying appellant injunctive relief during the cancellation period.  And thus, the district court correctly found that no material issues of fact remained and summary judgment in favor of the respondents was appropriate.

V.

            Finally, this court has stated that, "until terminated, the terms and conditions of a contract for deed remain in full force and effect."  Boehm's Inc. v. Wachholz, 495 N.W.2d 447, 450 (Minn. App. 1993); see Minn. Stat. § 559.21, subd. 4 (2002).  The record here indicates that appellant breached the contract numerous times during the prolonged period of cancellation.  Appellant failed to maintain insurance on the property, and only agreed to reinstate the insurance pursuant to the district court's May 15, 2003 order.  Appellant also failed to timely pay the property taxes for the subject property, per his obligation under the contract.  Likewise, appellant did not keep current with his monthly payments of $6,000 during the litigation.  And finally, evidence in the record shows that appellant, in another breach of the contract, mortgaged the property with an entity known as Prism Real Estate, Inc.  Appellant's subsequent defaults support our conclusion that the district court did not err in the April 24, 2003 denial of injunctive relief, and the subsequent refusals to revisit that denial.           

            Affirmed.