In re Peter James Karwoski, petitioner, Respondent, vs. Beth Kimberly Karwoski, Appellant.

In re Peter James Karwoski, petitioner, Respondent, vs. Beth Kimberly Karwoski, Appellant. A04-1234, Court of Appeals Unpublished, April 26, 2005.

This opinion will be unpublished and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

A04-1234

 

In re Peter James Karwoski, petitioner,

Respondent,

 

vs.

 

Beth Kimberly Karwoski,

Appellant.

 

Filed April 26, 2005

Affirmed

Halbrooks, Judge

 

 

Washington County District Court

File No. F2-93-402

 

James C. Whelpley, James Whelpley & Associates, Chtd., 2151 North Hamline Avenue, Suite 202, Roseville, MN 55113 (for respondent)

 

Gregory J. Schmidt, Gregory J. Schmidt Law Offices, P.A., 510 Spruce Tree Centre, 1600 University Avenue West, St. Paul, MN 55104 (for appellant)

 

 

            Considered and decided by Halbrooks, Presiding Judge; Toussaint, Chief Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

HALBROOKS, Judge

            Appellant challenges the district court's denial of her motion seeking clarification of a buy-out provision in the parties' dissolution judgment.  Appellant argues that the district court erred when it concluded that (1) the term "buy out" means physical tender of the dollar amount, and not simply notice; and (2) appellant did not establish that tendering actual payment to respondent would have been "futile" or "an idle ceremony."  Because the district court did not err by denying appellant's motion, we affirm. 

FACTS

            Appellant Beth Karwoski and respondent Peter Karwoski dissolved their marriage by a judgment and decree filed on June 14, 1993.  The judgment describes the parties' real-property assets at the time, including their homestead held in joint tenancy.  Under the judgment, appellant was awarded "all right, title, interest and equity in and to the homestead . . . subject to a lien in favor of [respondent] in an amount equal to one-half (1/2) of the ‘net proceeds' as defined [in the judgment]."  "Net proceeds" is defined as "the amount remaining after [certain expenses and debts] have been subtracted from the sale price, or appraised value in accordance with [p]aragraph 15 of the findings of fact [of the judgment]."  Paragraph 15 explains that the homestead had a fair market value of $133,000, subject to an outstanding mortgage balance of $68,600.[1]

            At issue here is a provision of the judgment which permits appellant to buy out respondent's lien on the homestead, "[u]pon the happening of . . . (1) [appellant's] remarriage; (2) [appellant's] moving from the premises; (3) [appellant's] death; (4) the youngest child of the parties attaining the age of eighteen (18) years; or (5) satisfaction of first mortgage on the homestead."  When any one of those five conditions have materialized,

[appellant] may buy-out [respondent's] lien on [the] homestead within 60 days or [the] homestead shall be placed on the market for sale at a price and upon terms to be mutually agreed upon by the parties, and the "net proceeds["] from [the] sale shall be divided so that one-half (1/2) of the "net proceeds" is paid to [respondent], thereby satisfying the lien in full.

 

(Emphasis added.)  Both appellant and respondent agreed that the judgment "constitute[d] the complete and final [m]arital [t]ermination [a]greement of the parties."

            In April 2003, appellant moved the district court to clarify paragraph 7 of the judgment and to determine the specific dollar amount of respondent's lien on her homestead.  Appellant further moved the court to declare respondent's lien satisfied or compel "execution and delivery of a deed, satisfaction, or other conveyance to clear title to the property and allow refinancing by [appellant]."  The district court concluded that appellant's motion to determine the dollar amount of respondent's lien and compel its release was premature, explaining that the judgment did not require respondent to cooperate with appellant to satisfy the first mortgage on the property through refinancing.  The court viewed appellant's motion as essentially "a request that the [c]ourt aide [appellant] in triggering a ‘buy out' by paying off the mortgage by declaring the specific dollar amount of [respondent's] lien."  The court then left the parties free to litigate "if [appellant] satisfies the mortgage, and the parties disagree as to the appropriate ‘buy out' amount, or [if appellant] tenders an amount to the [respondent] thereafter, and [respondent] refuses then to release the lien."  The district court's ruling was not appealed. 

            But on September 17, 2003, appellant satisfied the first mortgage on the homestead property, thereby triggering paragraph 7 of the judgment.  By letter dated October 3, appellant's attorney purported to "tender payment in full to [respondent] the amount owed to him for his lien interest in [appellant's] homestead."  Specifically, the letter explained:

[Appellant] hereby tenders to [respondent] the sum of $21,149.00 for his lien interest which represents his share of the "net proceeds" as defined in the [dissolution] decree. 

 

. . . .

 

In the event a properly executed deed is not delivered to [appellant's attorney] by October 15, 2003, then . . . a motion will be necessary to compel execution and delivery of the deed. 

 

Despite the language used, no monetary payment accompanied the letter.  Receiving no response from respondent, appellant moved the district court to determine the specific dollar amount of respondent's lien in the homestead.  As before, the motion further sought to "[s]atisfy[] [respondent's] lien by [o]rder of the [c]ourt or compel[] execution and delivery of a deed, satisfaction, or other conveyance to clear title to the property."  Appellant requested an order "directing payment of the lien proceeds into a sequestered financial account after deduction of amounts [owed to appellant for other reasons] and a corresponding [o]rder extinguishing [respondent's] lien."

            At the motion hearing, the district court simplified the controversy to the meaning of the term "buy out," questioning whether the term "means sending a letter of intent to send the money with a quitclaim deed or if it means sending the money with the quitclaim deed requiring that [respondent] sign it."[2]  Interpreting the judgment, the court ultimately found that it "unambiguously requires [appellant] to ‘buy-out' [respondent's] interest within 60 days; [and that] the decree contains no language that ‘electing' to do so is sufficient."  The district court intimated that its decision would have been different had appellant forwarded payment to respondent when she satisfied the mortgage.[3]  Ruling for respondent, the court denied appellant's motion as moot, concluding that she "did not buy out [respondent's] lien interest within 60 days of satisfaction of the mortgage by making negotiable tender of payment to [respondent]."  The court also concluded that appellant did not establish that tendering actual payment to respondent would have been futile.  This appeal follows. 

D E C I S I O N

            The present dispute centers around the meaning of the term "buy out" in the judgment and whether appellant's letter to respondent purporting to tender payment constituted such a buy-out.  On appeal, "[b]ecause the interpretation of a written document is a question of law, we do not defer to the district court's interpretation of a stipulated provision in a dissolution decree," but review the stipulation de novo.  Anderson v. Archer, 510 N.W.2d 1, 3 (Minn. App. 1993).  We need not defer to the district court's application of the law when the material facts are not in dispute.  Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989). 

            Appellant first argues that the district court erred by denying as moot her motion to declare respondent's lien satisfied when she did not tender actual payment to respondent, but gave sufficient notice of an intent to tender payment.  Instead, appellant urges that the meaning of the term "buy out" does not require actual tender of funds to respondent, especially when actual tender of funds would have been futile.  We disagree.  It is true that the provision of the dissolution judgment at issue does not define the term "buy out."  Instead, it only states that upon "satisfaction of first mortgage on the homestead,"

[appellant] may buy-out [respondent's] lien on [the] homestead within 60 days or [the] homestead shall be placed on the market for sale at a price and upon terms to be mutually agreed upon by the parties, and the "net proceeds["] from [the] sale shall be divided so that one-half (1/2) of the "net proceeds" is paid to [respondent], thereby satisfying the lien in full.

 

(Emphasis added.) 

            An option to purchase or "buy out" is generally defined as "a continuing offer by the owner of property to sell to another person, upon the latter's election to buy, at a specified price and within a specified timeor a reasonable timein the future."  60 Am. Jur. Proof of Facts 3d 255, 268-69 (2001) (citing cases from various jurisdictions).  "An option to purchase given by the owner . . . imposes no obligation on the optionee to purchase . . . .  The option is merely a continuing offer to sell . . . which is irrevocable until the expiration of the time limit of the option."  Id.at 269 (quoting Catawba Athletics, Inc. v. Newton Car Wash, Inc., 281 S.E.2d 676, 680 (N.C. App. 1981)).  But as a court in Indiana has recently recognized, "[t]he duration and method of exercise of an option is strictly controlled by the agreement that created it.  Generally, the exercise of an option is effective only if it strictly adheres to the terms stipulated in the contract."  Hyperbaric Oxygen Therapy Sys., Inc. v. St. Joseph Med. Ctr. of Fort Wayne, Inc., 683 N.E.2d 243, 249-250 (Ind. App. 1997) (citation and quotation omitted). 

            The Minnesota Supreme Court has addressed the issue of whether a buyer in a real-estate transaction "effectively exercised its option to purchase when it gave unambiguous notice of its willingness and ability to perform within the option period, or whether it was required to tender payment in order to exercise this option."  In re Petition of Hilltop Dev., 342 N.W.2d 344, 346 (Minn. 1984).  In reviewing the authorities on the issue, the supreme court first explained that "[c]ourts generally do not require a buyer to tender payment in order to exercise its option unless the parties clearly express that intent.  If the contract does not require payment prior to exercise, the buyer's unambiguous notice of intent to purchase usually constitutes an effective acceptance of the option."  Id.(citations omitted).  But, on the other hand, "[w]here an option contract requires a buyer to ‘purchase' or ‘buy' property within a specified time, courts generally require the buyer to tender payment in order to accept the offer.  The buyer cannot effectively exercise such an option merely by giving notice of its intent to purchase."  Id.at 347.  Interpreting the contract at issuewhich required both parties to "close" a transaction by a particular datethe Hilltop Dev. court ruled that the contract language at issue specifically "did not require [the buyer] to tender payment in order to exercise its option."  Id.  The court explained that if the party opposing the option had intended to require tender, it could have expressed that intent in the agreement.  Id.  Since it did not, and the buyer "expressed its desire to purchase [the real estate at issue] in unambiguous terms" by way of a letter communication, the court heldunder the parties' particular contractthat such notice constituted an effective exercise of the option in the contract.  Id. 

In its analysis, the supreme court cited favorably to an early decision of the Arkansas Supreme Court, Indiana & Arkansas Lumber & Mfg. Co. v. Pharr, 102 S.W. 686 (Ark. 1907).  The court summarized the Arkansas decision as follows:

[T]he seller granted an option to purchase which stated that "the entire deal is to be closed within 60 days."  Within this period the buyer informed the seller by letter that it would "close the option" on the sixty-first day if the deeds were approved by its attorney.  The option period ran without further action by the buyer.  The Arkansas court refused to award specific performance on these facts.  The court held that this language required the buyer both to give notice and to stand ready to perform the contract within the option period.  The seller was not in default until the buyer did so.  The buyer's letters had not effectively exercised the option.  Its letters failed to show that it was either ready or willing to perform within the time allotted to it. 

 

Hilltop Dev., 342 N.W.2d at 347 (citation omitted) (emphasis added).  The Minnesota Supreme Court then fashioned the following rule from the Pharr case, "[W]here an option requires the parties to close the transaction upon exercise by the buyer, or in any event by a specified date, the option lapses unless the buyer gives notice of its intent to perform and stands ready to do so within the option period."  Id.(emphasis added). 

Applying that rule here, and under the terms of the judgment, appellant had 60 days to buy out respondent's lien in the homestead once the underlying mortgage became satisfied on September 17, 2003.  She claims to have done this by her letter of October 3, 2003.  But payment did not accompany the notice.  Moreover, no definitive indication was given that appellant was ready to make payment to respondent within the 60-day time period contemplated by the judgment.  As in Pharr, appellant's letter of October 3, "failed to show that [she] was either ready or willing to perform within the time allotted to [her]."  Hilltop Dev., 342 N.W.2d at 347; see also Balder v. Haley, 441 N.W.2d 539, 542 (Minn. App. 1989) ("An essential characteristic of tender is the unconditional nature of the offer to pay."), review denied (Minn. July 27, 1989).  The communication assumed that respondent would execute the quitclaim deed before actual tender of any payment.  Appellant therefore could not have "effectively exercise[d] such an option merely by giving notice of [her] intent to purchase."  Hilltop Dev., 342 N.W.2d at 347.  Under these facts it would be unreasonable for appellant to be able to buy out respondent's interest in the homestead without actual tender of payment.  Had appellant actually tendered payment, as the district court intimated, there would have likely been a dispute over the amount of that payment since the value of the property has increased substantially in the decade since execution of the judgment and decree.  In sum, these facts do not support an effective exercise of the option contemplated in the judgment. 

Appellant further argues that respondent's refusal to accept the buy-out sum offered by appellantallegedly tendered by the October 3 letterwould have made actual tender futile.  It is accepted legal principle that when facts are presented showing that a tender would have been refused, "tender is unnecessary where it would be an idle ceremony."  Morgan v. Ibberson, 215 Minn. 293, 295, 10 N.W.2d 222, 223 (1943); see also Country Club Oil Co. v. Lee, 239 Minn. 148, 155, 58 N.W.2d 247, 251 (1953) (concluding that tender was futile where party refused to complete real-estate transaction and sold the property to another).  But appellant has not presented facts proving refusal, and it would be mere speculation to conclude otherwise. 

            Affirmed.

[1] In 2003, respondent claimed that the homestead had a market value in excess of $219,400.

[2]Responding to the court's question as to what would have happened had appellant tendered a check in the full amount of the lien, respondent's counsel answered, "[respondent] would have had a very serious problem.  He would have had to either accept the money or he would have had to bring his own motion to litigate the amount involved."  Respondent questioned the fairness of the $21,149 buy-out price, calculated based on the estimated value of the home in 1993, $133,000.  As counsel explained, the dollar amount is not at issue here and apparently only would have been had appellant tendered a monetary amount along with the October 3, 2003 letter. 

 

[3] The court explained the various scenarios possible here:

 

If [respondent] had received and then cashed the check, it is clear he would have accepted [appellant's] tender.  If [respondent] cashed the check, and refused to sign the deed, [appellant] could have brought this on for a motion to compel, or for appointment of a referee to sign the deed.  If he refused to accept the check, and sign the deed, likewise she could have brought this present motion which would have been successful, because she would have tendered payment.