Dennis Walz, et al., Respondents, vs. Thomas J. Peplinski, Appellant, John Does I through III, Defendants.

Dennis Walz, et al., Respondents, vs. Thomas J. Peplinski, Appellant, John Does I through III, Defendants. A06-289, Court of Appeals Unpublished, January 16, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-289

 

Dennis Walz, et al.,

Respondents,

 

vs.

 

Thomas J. Peplinski,

Appellant,

 

John Does I through III,

Defendants.

 

Filed January 16, 2007

Affirmed

Shumaker, Judge

 

Kittson County District Court

File No. C5-05-072

 

 

 

Michael L. Jorgenson, Charlson & Jorgenson, P.A., 119 West Second Street, P.O. Box 506, Thief River Falls, MN 56701 (for appellant)

 

Jeffrey W. Hane, Brink, Sobolik, Severson, Malm & Albrecht, P.O. Box 790, Hallock, MN 56728 (for respondents)

 

 

            Considered and decided by Minge, Presiding Judge; Shumaker, Judge; and Hudson, Judge.

 

U N P U B L I S H E D   O P I N I O N

SHUMAKER, Judge

            In this appeal from a judgment awarding respondents specific performance of an agreement for the sale of land, appellant argues that the district court erred as a matter of law in its interpretation of the agreement and ascertainment of the parties' intent.  Because the court did not err, we affirm.

FACTS

We are asked to determine whether the district court erred in ruling that a provision in the parties' real estate lease obligated the lessor to sell at a particular price if the lessees decided to buy the land at the end of the lease term.

The facts adduced during a trial to the court showed that in 1999 respondent Dennis Walz learned that appellant Thomas Peplinski owned a parcel of unused agricultural land in Kittson County that Walz felt would be suitable as a pasture for his cattle.  Walz asked about leasing the land, but Peplinski indicated that he wanted to sell it and would do so for $200 an acre.  Walz said that he did not want to buy at that time, but indicated that if Peplinski was willing to sell it at that price in the future, he would be interested.  Peplinski then agreed to lease the land, and respondent Kevin Walz, Dennis Walz's son, drafted a lease and sent it to Peplinski.

The lease, or "rental agreement," provided for the rental of 240 acres for five years at a rate of $3,500 a year.  The lease twice referred to the purchase of the land.  The second paragraph provided, in part, that "[t]he rent will be based on the 238.1 tillable acres and the purchase price will be based on the 240.0 acres and the county per acre price of $200.00."

The fifth paragraph, which came to be the disputed provision at trial, stated:

There is an option to purchase this land at the county appraisal price of 200.00 dollars per acre times 240.0 acres.  100% of the rent paid goes towards the agreed upon purchase price listed above.  The renters are given 1st chance to purchase this land when the land owner decides to sell at the agreed upon price listed above after the contract has expired on 1 May 2005.

 

The parties signed the lease without changing these provisions on June 8, 2000, and the Walzs took possession and eventually erected a fence and built stock ponds on the land.

Late in 2002, Peplinski asked Dennis Walz if he was ready to buy the property at the price on which the parties agreed and offered to finance the sale by a contract for deed.  Walz agreed to purchase the land, and Peplinski drafted a contract that all parties signed.  Because the contract did not contain a well disclosure, Peplinski was unable to record it.  He then revised the contract so as to include the necessary information and sent the revised contract to the Walzs.  When Peplinski received no response, he contacted Dennis Walz and learned that the Walzs had decided not to buy the land at that time but rather to continue with the lease.  Peplinski then told Dennis Walz to write "void" on the contract and return it.  Walz did so.

In February 2005, Kevin Walz asked Peplinski to extend the lease for a year.  Peplinski did not agree to do so and stated that he was not sure what he would do with the land when the lease expired.

Peplinski listed the property for sale with a broker in March 2005 and sought to sell for between $500 add $700 an acre.  When Peplinski notified the Walzs of his intent to sell, they indicated that they would buy the land for $200 an acre as agreed in the lease.  Contending that he was not obligated to sell at that price, Peplinski refused to do so, and this lawsuit for specific performance of the sale provision in the lease followed.

D E C I S I O N

The district court concluded that the fifth paragraph of the rental agreement contained an ambiguity as to the sale price of the property and resolved that ambiguity against Peplinski by finding that the parties intended the sale price to be $200 an acre.

Peplinski argues that the sale-price ambiguity should have been resolved against the Walzs because Kevin Walz drafted the ambiguous language.  In the alternative, Peplinski contends that, even if there is no ambiguity, the agreement grants to the Walzs only a right of first refusal and not an option to purchase.

"Contract interpretation is a question of law which we review de novo."  Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004) (citation omitted).  The two-fold goal of all contract interpretation is to determine and then to enforce the parties' intent.  Id.  If the contract language is plain, clear, and unambiguous, there is no interpretation necessary and the court's task is to enforce the agreement.  Minneapolis Pub. Hous. Auth. v. Lor, 591 N.W.2d 700, 704 (Minn. 1999).  But when the contract is ambiguous, as the district court found this one to be, the court must first attempt to discover what the agreement was.

In attempting to ascertain the parties' intent in an ambiguous contract, we consider the particular language they used, the contract as a whole, and the circumstances surrounding the making of the contract.  Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278 N.W.2d 81, 88 (Minn. 1979).  When we examine the contract as a whole, we must try to harmonize all provisions if we can do so reasonably.  Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525 (Minn. 1990).

Peplinski appears to treat the principle that an ambiguous contract is to be construed against the drafter as an absolute.  We decline to accept that approach because even though that principle is generally applied, it "does not . . . ineluctably lead to the conclusion that the drafter is to lose."  Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 67 (Minn. 1979).  "The fundamental approach to construing contracts is to allow the intent of the parties to prevail."  Id.at 66.  Thus, when words in a contract are ambiguous, their intended meaning weighs against the meaning proposed by the party who was responsible for the ambiguity, unless, using all the rules and guidelines of contract interpretation, the court can plausibly identify the parties' intent, irrespective of who the drafter was.

The history of the relationship of the parties to the rental agreement shows that, until the very end of the lease, they never talked about or wrote about any purchase price other than $200 an acre.  Nor did they by their conduct imply that there would ever be a different sale price, that is until Peplinski listed the property with a real estate broker.

When we read the rental agreement as a whole, we note that there is no ambiguity in the second paragraph when it states that "[t]he rent will be based on the 238.1 tillable acres and the purchase price will be based on the 240.0 acres and the county per acre price of $200.00."  Nor is there ambiguity in the first sentence of the fifth paragraph which indicates that "[t]here is a option to purchase this land at the county appraisal price of 200.00 dollars per acre times 240.0 acres."  And the final sentence of the fifth paragraph is clear when it refers to the "agreed upon price listed above . . . ."  The ambiguity occurs in the words, "when the land owner decides to sell at the agreed upon price . . . ."  But the ambiguity occurs only through interpreting "when" as a condition, that is, as "if," rather than as a time-of-sale term.  This forced ambiguity then is allowed to negate the other clear price terms, to destroy the harmony of the contract as a whole, and to contradict the surrounding circumstances of the making of the contract and the parties' historical relationship to one another relative to the contract.

Furthermore, the court is to presume that the parties intend all the language of the contract to have effect, and the court must avoid interpreting the contract in such a manner as to render a provision meaningless.  Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn. 1995).  Reading the word "when" as a contingency term renders meaningless any right to buy at the price repeatedly mentioned in discussions and in the rental agreement.  In other words, although the contract purports to confer on the Walzs the right to buy the land at $200 an acre, applying Peplinski's approach, there is no such right at all; rather, the Walzs may buy the property at that price only if Peplinski decides to sell at that price.  And he may or may not do so at his discretion and without obligation to exercise that discretion in favor of the $200 price.  Under that approach, the "right" to purchase at the fixed price is illusory.

The law tolerates some incompleteness and imperfection of expression in contracts, and the courts must uphold an agreement despite such shortcomings if the court can reasonably locate the parties' intent by viewing the words as the parties must have understood them.  Hartung v. Billmeier, 243 Minn. 148, 151, 66 N.W.2d 784, 788 (1954).  The most plausible conclusion is that reached by the district court, namely, that the parties understood that any sale of the land by Peplinski to the Walzs at the end of the lease term would be for a price of $200 an acre.  Any other conclusion requires us to disregard some significant aspect of the panoply of proper considerations, whether that be the consistent usage of the $200 price term, the failure to ever mention any other price, the several clear words about price in the rental agreement, or the harmony achieved when the district court's reading is applied.  Thus, we are persuaded that the parties intended precisely what the district court concluded. 

Peplinski's alternative argument also fails.  He argues that, despite any resolution of the ambiguity, the correct interpretation is that he conferred upon the Walzs only a right of first refusal.  As he correctly explains in his brief, a right of first refusal simply gives the holder of such right the first opportunity to buy property after a bona fide offer is made by a qualified third-party buyer.  Dyrdal v Golden Nuggets, Inc., 689 N.W.2d 779, 784 (Minn. 2004).  The significance of a right of first refusal in this case is that Peplinski controls the sale price and is not obligated to offer the property to third parties at $200 an acre.

Not only was it the intent of the parties that Peplinski be bound to the $200 price, as we have explained above, but we are also not persuaded that the parties had within their understanding, contemplation, or intent the technical legal concepts of "option" and "right of first refusal."  There is no evidence that any of the parties was trained or had experience in real estate law or the terminology of real estate sales. The language they used is not restricted to specialized legal concepts.  "Option" is a term of common usage, as well as a technical legal term.  And the phrase "1st chance to purchase" does not reflect the phraseology of a "right of first refusal" and can reasonably be taken to mean simply that the Walzs are given the first chance to buy the property at the agreed price of $200 an acre.  If they decide not to do so, Peplinski's obligation to them is ended and he can do whatever he chooses with the property.  Unless it appears that words are used in a technical way or are intended to have some special meaning, language in a contract is to be given its plain and ordinary meaning.  Turner, 276 N.W.2d at 67.  Considering all of the reasons we have discussed to demonstrate that the district court correctly ascertained the parties' intent, we are also persuaded that the parties did not intend the technical legal meanings Peplinski urges.

From Peplinki's point of view, the district court's interpretation produces a harsh result because the value of the land has increased substantially.  But courts are not free to remake contracts for parties but rather must enforce the contract the parties intended, "even if the result is harsh."  Lor, 591 N.W.2d at 704.

Affirmed.