Joel C. Jack, et al., Respondents, vs. Richard Horman, et al., defendants and third party plaintiffs, Appellants, Corey Loger, et al., Defendants and Third Party Plaintiffs, vs. Rick Ruprecht, et al., third party defendants, Respondents.

Joel C. Jack, et al., Respondents, vs. Richard Horman, et al., defendants and third party plaintiffs, Appellants, Corey Loger, et al., Defendants and Third Party Plaintiffs, vs. Rick Ruprecht, et al., third party defendants, Respondents. A06-362, Court of Appeals Unpublished, January 9, 2007.

This opinion will be unpublished and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

A06-362

 

 

Joel C. Jack, et al.,

Respondents,

 

vs.

 

Richard Horman, et al., defendants and third party plaintiffs,

Appellants,

 

Corey Loger, et al.,

Defendants and Third Party Plaintiffs,

 

vs.

 

Rick Ruprecht, et al., third party defendants,

Respondents.

 

 

Filed January 9, 2007

Affirmed

Lansing, Judge

 

Anoka County District Court

File No. C1-02-0271

 

Felix A. Mannella, Babcock, Neilson, Mannella & Klint, P.L.L.P., 118 East Main Street, Anoka, MN 55303 (for respondents Joel C. Jack, et al.)

 

Joel M. Anderson, 2150 Third Street, Suite 2, White Bear Lake, MN 55110 (for appellants Richard Horman, et al.)

 

David J. McGee, Ryan J. Wood, Thomsen & Nybeck, P.A., 3300 Edinborough Way, Suite 600, Edina, MN 55435 (for respondents Rick Ruprecht, et al.)

 

            Considered and decided by Kalitowski, Presiding Judge; Lansing, Judge; and Dietzen, Judge.

U N P U B L I S H E D   O P I N I O N

LANSING, Judge

            In this appeal from summary judgment dismissing a third-party action arising from a contingent agreement for the purchase of real estate, the sellers argue that they have presented sufficient evidence to create genuine issues of material fact on their claims against their real-estate agent and his employer for breach of contract, tortious interference with contract, and tortious interference with prospective advantage.  We affirm because the sellers have not established any genuine issues of material fact on their third-party action and the district court did not err in its determination on their remaining claims related to sanctions, reconsideration, earnest money, and removal of the assigned judge.

F A C T S

            Richard and Kimberly Horman entered into a contingent purchase agreement with Joel Jack and Laurie Ghizoni (the Jacks) in March 2001 for the sale of the Hormans' Andover home for $385,000.  Under the agreement, the Jacks' obligation to purchase was contingent on the sale of their existing home or proof of their ability to purchase the Hormans' home without selling their existing home.  Both the Hormans and the Jacks were represented by real-estate agent Rick Ruprecht, acting in a dual agency capacity.  Ruprecht was employed by Re/Max Associates Plus, Inc., and we refer to Ruprecht and Re/Max collectively as Re/Max. 

            In early April 2001, the Hormans received an offer from Corey and Dawn Loger for $390,000.  After a series of interactions among the Hormans, the Jacks, the Logers, and Re/Max, the Hormans eventually sold their house to the Logers for $402,285.  The sale to the Logers prompted a whirlwind of claims, counterclaims, and cross-claims.  Except for the claims raised in this appeal, all other litigation relating to the sale has been settled or dismissed.

            In 2002, the district court granted summary judgment to Re/Max on the Hormans' third-party action, which is the subject of this appeal.  For reasons that are not clear, judgment was not entered on this order.  In 2005, the district court ordered entry of the judgment effective November 12, 2002.  The Hormans now appeal the 2002 summary judgment and related determinations that occurred after the summary judgment but before this appeal.

D E C I S I O N

I

            "On appeal from summary judgment, we determine whether there are any genuine issues of material fact and whether a party is entitled to judgment as a matter of law."  Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783, 788 (Minn. 2005).  In assessing the evidence, we take the view most favorable to the party against whom judgment was granted.  Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 n.1 (Minn. 2003).  But if the nonmoving party fails to raise a material issue of fact on any element essential to establishing its case, summary judgment is appropriate.  Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995).

            As a basis for its summary judgment order, the district court concluded that the Hormans failed to establish that they suffered any damages as a result of Re/Max's alleged breach of contract, tortious interference with contract, and tortious interference with prospective advantage.  The Hormans contend, as a matter of law, that they have demonstrated damages for which Re/Max is responsible.

The undisputed evidence in the record results in the following analysis of damages.  The contingent purchase agreement with the Jacks was for $385,000.  The Logers then offered $390,000.  In response to the Hormans' demand, the Jacks offered documentation of the their ability to obtain sufficient financing to remove the contingency.  Based on Re/Max's interpretation of the Hormans' obligation under the contingent purchase agreement, the Hormans accepted the removal of the contingency and agreed to sell their house to the Jacks for the agreed-upon price.  The Hormans then decided to breach that agreement and sell the house to the Logers for $402,285.  After selling to the Logers, the Hormans owed the Jacks about $17,285 in expectation damages for breach of contract.

The evidence does not, however, support a determination that Re/Max caused the full $17,285 in expectation damages.  As the district court noted, the Hormans decided on their own to breach the contract with the Jacks.  But Re/Max's advice did cause the Hormans to turn down the Logers' first offer.  If Re/Max's advice was incorrect, and the Hormans were not obligated to remove the contingency, then the Hormans could have accepted the offer and received $390,000.  Instead, the Hormans received $385,000 after deducting the expectation damages from the final sale price.  As a result, the Hormans have demonstrated that Re/Max's advice may have caused $5,000 in damages.

Although countervailing theories or additional evidence might defeat this argument, we conclude, on the current record, that the Hormans may have established a genuine issue of material fact on damages of $5,000 or less.  Nonetheless, we conclude that summary judgment is proper because the Hormans have failed to establish a legal element essential to their casethat Re/Max incorrectly advised them about the effect of the contingency provision.  See Schweich v. Zeigler, Inc., 463 N.W.2d 722, 728 (Minn. 1990) (holding that appellate court will not reverse correct decision simply because it is based on incorrect reason). 

            The evidence is undisputed that Re/Max advised the Hormans on how to interpret their contingent purchase agreement with the Jacks.  The construction and effect of an unambiguous contract is a question of law, which we review de novo.  Yang, 701 N.W.2d at 788.  Under the contingent purchase agreement, the Jacks agreed to pay $385,000 if they were able to sell their own house.  The Hormans could continue to market their home and could, at any time, give the Jacks forty-eight hours to remove the contingency.  The contingency could be removed in two ways.  First, the Jacks could show that they had sold their home.  Second, the agreement provided that:

In the alternative, the Notice of Intent to Remove Contingency may be accompanied by written proof of the Buyer's ability to consummate this transaction without the sale of the Buyer's property.  Irrespective of such written proof that Buyer may provide, the decision whether to accept or reject Buyer's proof shall be solely that of the Seller.

 

If the Jacks failed to remove the contingency, the Hormans could sell their house to someone else.

            After the Logers offered to purchase the Hormans' house for $390,000, the Hormans then gave the Jacks forty-eight hours to remove the contingency.  The Jacks responded by providing written evidence of their ability to purchase the house without selling their own house.  Based on the Jacks' response, Re/Max advised the Hormans that they were obligated to accept the contingency removal and sell the house to the Jacks.  As a result, the Hormans signed an agreement removing the contingency and, consequently, agreed to sell their house to the Jacks.

            We conclude, as a matter of law, that the Hormans have not established a basis for their claim that Re/Max's advice was incorrect.  We reach this conclusion for two reasons. 

            First, the contingent purchase agreement provides that the Hormans had to accept the contingency removal unless they believed that the Jacks would be unable to complete the purchase.  Although the contract gave the Hormans sole discretion, it did not give them unlimited discretion.  The Hormans had to exercise their discretion to determine whether the Jacks had established that they could complete the purchase.  The Hormans therefore had to accept the contingency removal if they were subjectively satisfied that Jacks could purchase the house without first selling their own house.  See 451 Corp. v. Pension Sys. for Policemen and Firemen, 310 N.W.2d 922, 925 (Minn. 1981) (noting that approval power must be exercised "in a reasonable manner, in good faith and with honest intent").  Because the contract gave the Hormans sole discretion, they were not held to the higher standard of reasonable satisfaction, but they were held to a subjective standard as provided by the contract.  Cf. Restatement (Second) of Contracts § 228 (noting preference for reasonable satisfaction conditions).  

            Second, under Minnesota law, every contract includes an implied covenant of good faith and fair dealing.  In re Hennepin County 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502 (Minn. 1995); Restatement (Second) of Contracts § 205.  Although the contingent purchase agreement gave the Hormans discretion to decide whether to accept the Jacks' written proof, the Hormans had an obligation to exercise that discretion in good faith.  At a minimum, this would require the Hormans to accept the contingency removal unless they had a subjective belief that the Jacks would be unable to complete the purchase.

            Under the terms of the contingent purchase agreement, the Hormans were therefore required to accept the contingency removal.  There is no evidence that the Jacks could not pay for the house or that the Hormans had any doubt about the Jacks' ability to complete the purchase.  Instead, based on the evidence presented, a reasonable jury would have to conclude that the Hormans wanted more money, an earlier closing date, or acted on a reason unrelated to whether the Jacks were able to pay.  Nothing in the record suggests any subjective belief or concern about the Jacks' ability to pay.  Therefore the Hormans have not demonstrated that Re/Max incorrectly advised them that they had to accept the contingency removal.  As a matter of law, the Hormans have failed to provide evidence that could satisfy this element that underlies their third-party cause of action.

            Because Re/Max correctly advised the Hormans about their obligations under the contingent purchase agreement, Re/Max did not breach its exclusive sales contract with the Hormans.  Similarly, Re/Max did not improperly interfere with the Hormans' relationship with the Logers.  Therefore, the Hormans have failed to establish a genuine issue of material fact on their claims for breach of contract, tortious interference with contract, and tortious interference with prospective advantage, and summary judgment was appropriate.

            We note that the Hormans contend that the legal ground for these claims is established because Re/Max has conceded that its advice was incorrect.  We disagree.  The interpretation of unambiguous contracts presents a question of law.  Although Re/Max has incorrectly argued that the contract should be interpreted by the jury, this argument does not amount to a concession of the legal issue.  Because we review summary judgment decisions and contract interpretation de novo, we affirm the district court's summary judgment decision on the absence of a legal ground for liability rather than an absence of damage. 

II

            The Hormans also raise arguments about the removal of a district court judge and the denial of their motion for reconsideration.  Both of these issues relate to the district court's original grant of summary judgment against the Hormans.  Because we conclude that summary judgment was appropriately granted, the reconsideration and removal issues are moot.  See Kahn v. Griffin, 701 N.W.2d 815, 821 (Minn. 2005) (noting that cases will generally be dismissed as moot if courts are unable to grant effectual relief).

III

            The Jacks, on June 6, 2005, moved to have their earnest money released by Re/Max.  Re/Max had retained the earnest money from the 2001 purchase agreement in escrow.  Re/Max refused to release it without the Hormans' consent and the Hormans asserted that they were entitled to it.  In response, the Jacks moved for sanctions against the Hormans and their attorney.

            The district court found that, under the 2001 purchase agreement, the Jacks were entitled to the earnest money because the Hormans had breached the agreement.  In addition, the court found that the Hormans' claim that they were entitled to the money in escrow had no basis in fact or law.  Based on the Jacks' properly filed motion for sanctions under Minn. R. Civ. P. 11, the district court ordered $500 as a sanction against the Hormans' attorney. 

            In the district court and on appeal, the Hormans' attorney has presented no basis for concluding that the Hormans were entitled to the earnest money.  The Hormans' brief contains a vague, but inapplicable, argument about accord and satisfaction.  The district court therefore did not abuse its discretion when it released the earnest money to the Jacks and granted the sanctions.

            Affirmed.