This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
Eugene S. McClelland,
Goodhue County District Court
File No. C3-97-931
Paul L. Ratelle, Daniel J. McGarry, Fabyanske, Westra & Hart, P.A., 920 Second Avenue South, Suite 1100, Minneapolis, MN 55402 (for appellant)
Delray L. Sparby, Paul Ihle, Ihle & Sparby, P.A., 312 North Main Avenue, PO Box 574, Thief River Falls, MN 56701 (for respondent)
Considered and decided by Halbrooks, Presiding Judge, Kalitowski, Judge, and Willis, Judge.
Appellant appeals from an order granting respondent’s motion to cancel a purchase agreement and to compel reimbursement of escrow funds. Appellant contends that cancellation of the purchase agreement was improper because it merged into the parties’ contract for deed. Appellant also alleges that respondent waived any opportunity to object to the purchase agreement based on title defects. Because the purchase agreement was the controlling document and respondent did not waive his right to object to the status of title, we affirm.
On September 6, 1996, respondent Kelly DeWulf entered into a “sales agreement” with appellant Eugene McClelland to purchase 1,771 acres of farmland in northern Minnesota from McClelland for $600,000 on a contract for deed. DeWulf refused to close the sale because he claimed that the property was subject to a right of first refusal and that there was a question as to the actual fee owner of the property. On July 9, 1997, McClelland filed a lawsuit, seeking to compel DeWulf to perform on the contract. The lawsuit was settled through the execution of a new and revised purchase agreement on March 2, 1998.
The new purchase agreement contained an integration clause providing that the purchase agreement constituted the entire agreement between the parties and that it could only be amended by a writing signed by both parties. It also contained a title examination provision that read:
Seller shall, immediately upon acceptance of this agreement, submit the abstracts of title for updating to the applicable abstractor. Upon updating, Seller shall within 5 business days, furnish an abstract of title, or a registered property abstract, certified to date to included proper searches * * * . Buyer shall be allowed ten (10) business days after receipt of the abstract of title or registered property abstract either to have Buyer’s attorney examine the title and provide Seller with written objections or, at Buyer’s own expense, to make application for a title insurance policy and notify Seller of the application. Buyer shall have ten (10) business days after receipt of the Commitment for Title Insurance to provide Seller with a copy of the Commitment and written objections. Buyer shall be deemed to have waived any title objections not made within the ten (10) day period above. * * * If notice is given [by the seller that the seller intends to remedy any title objections] but title is not corrected within the time provided for, this Purchase Agreement shall be null and void, at option of Buyer, neither party shall be liable for damages hereunder to the other and earnest money shall be returned to Buyer.
McClelland never provided DeWulf with updated abstracts as required by the purchase agreement. Rather, on April 27, 1998, McClelland obtained a commitment for title insurance for the property. The commitment indicated that the property was subject to a first mortgage dated October 13, 1995, in favor of First Trust National Association securing a $1,375,000 loan.
Following the execution of the purchase agreement and McClelland’s delivery of the commitment for title insurance, the parties negotiated the terms of the contract for deed. On July 14, 1998, McClelland signed the contract for deed and forwarded it to DeWulf for his signature. On July 17, 1998, DeWulf’s attorney wired $42,634 to McClelland’s attorney “to be held in trust until you receive the fully executed Contract for Deed.” DeWulf actually signed the contract for deed and had his signature notarized on July 24, 1998. But he did not return the contract for deed to McClelland. DeWulf claimed that he signed the contract as a matter of convenience, but that he did not intend to have it delivered to McClelland until the title issue was resolved.
Prior to the scheduled closing, all title issues had been resolved with the exception of the mortgage. A review of the correspondence between the parties and the mortgagee indicates that substantial negotiations occurred regarding the resolution of this issue. DeWulf sought to have the mortgage released or to obtain a guaranty from the mortgagee that it would be released immediately after DeWulf made the final payment on the contract for deed.
The issue regarding the outstanding mortgage was never resolved. On August 11, 1998, DeWulf’s attorney wrote to McClelland and purported to declare the purchase agreement null and void based on McClelland’s inability to produce marketable title or assurances sufficient to satisfy DeWulf’s concerns about the outstanding mortgage. McClelland continued to try to resolve the title issue, but he was unable to do so to DeWulf’s satisfaction.
DeWulf eventually brought a motion to have the purchase agreement cancelled and to compel McClelland to return the money that had been paid. After a hearing on the motion, the district court granted DeWulf’s motion. This appeal followed.
D E C I S I O N
1. Motion to supplement the record
On January 5, 2000, DeWulf filed a motion in this court seeking to supplement the district court record with three letters not made a part of the record below. An appellate court may not base its decision on matters outside the record on appeal, and may not consider matters that were not produced and received in evidence below. Thiele v. Stich, 425 N.W.2d 580, 582-83 (Minn. 1988). The record consists of “[t]he papers filed in the trial court, the exhibits, and the transcript of the proceedings.” Minn. R. Civ. App. P. 110.01. This court may, however, permit the record to be supplemented with conclusive, uncontroverted documentary evidence offered for the purpose of affirming the district court. In re Livingood, 594 N.W.2d 889, 895-96 (Minn. 1999).
First, we note that the documents are uncontroverted and are being offered for the purpose of affirming the district court’s implicit conclusion that DeWulf never waived his right to object to the terms of the purchase agreement. Second, contrary to McClelland’s contention, the motion in this case was timely. See id. at 896 (noting that litigants seeking to supplement the record must do so in a timely fashion, generally before oral argument). Finally, we agree with DeWulf that these documents are conclusive. Each of the three letters provides clear evidence that DeWulf did not waive his right to receive the updated abstracts as provided for by the purchase agreement. Therefore, we grant DeWulf’s motion to supplement the record.
McClelland contends that the purchase agreement merged into the contract for deed either when the closing funds were wired to his attorney or when DeWulf signed the contract for deed. As a result of the purported operation of the merger doctrine, McClelland contends that the contract for deed is the controlling document rather than the purchase agreement. DeWulf disputes the issue of merger. He contends that although he wired the closing funds and signed the contract for deed, his failure to deliver the signed document precludes the conclusion that merger occurred.
“The merger doctrine generally precludes parties from asserting their rights under a purchase agreement after the deed has been executed and delivered.” Bruggeman v. Jerry’s Enters., Inc., 591 N.W.2d 705, 708 (Minn. 1999). If the merger doctrine applies to this case, DeWulf’s right to review the abstracts and object to the status of title is extinguished by the fact that the contract for deed does not include such a provision. See Peters v. Fenner, 294 Minn. 488, 489, 199 N.W.2d 795, 796 (1972) (indicating that a purchase agreement merges with a later executed contract for deed).
The merger doctrine is not applicable to this case. The contract for deed, which McClelland contends is controlling, is not a valid contract.
[A] written agreement, even though complete and settled in all its terms, does not become binding as a contract until the parties express an intention that it be so.
Pogreba v. O’Brien, 223 Minn. 430, 434, 27 N.W.2d 145, 146 (1947). The record demonstrates that DeWulf did not express an intention for the contract to become binding.
Contrary to McClelland’s contention, the fact that DeWulf wired money to McClelland’s attorney’s trust account in contemplation of closing does not show an express intention to be bound by the contract for deed. A letter that was sent in advance of the funds indicated that the money
must be held in trust until you receive the fully executed contract for deed, which will be delivered to you by my client or his realtor on Monday, July 20.
The fact that the funds were to be held in trust is evidence that, at the time they were sent, DeWulf did not yet intend to be bound by the terms of the contract for deed.
Further, the fact that DeWulf signed the contract for deed does not, in light of all the evidence in this case, provide proof that DeWulf intended to be bound by the contract for deed. DeWulf explains that the contract for deed was signed as a matter of convenience because he was not sure that he would be able to locate a notary when it was time to deliver it. According to DeWulf, the contract for deed was signed in contemplation of the attorneys resolving the title dispute. The evidence supports his contention. DeWulf did not deliver the contract for deed to McClelland’s attorney because the title issue was not resolved. When it was returned several months later, in an attempt by DeWulf to get his money back, he had written the word “void” over his signature. While DeWulf may have desired to complete the sale, the evidence indicates that he never actually intended to complete it until the title issue was resolved. Because the title issue was never resolved, the contract for deed never became an enforceable contract. See id. Since it was not an enforceable contract, the purchase agreement did not merge into it. Absent the operation of the merger doctrine, the purchase agreement remains the controlling document.
McClelland contends that to the extent that either the purchase agreement or the contract for deed permitted DeWulf to object to the status of title, DeWulf waived this right. Waiver is generally “a question of fact for the jury.” Chin v. Zoet, 418 N.W.2d 191, 195 (Minn. App. 1988). But “[w]hen only one inference can be drawn from the facts, the question becomes one of law.” Id. To establish waiver, it must be shown that the waiving party “had full knowledge of the facts, had full knowledge of his legal rights, and intended to relinquish these rights.” Freitag v. Wolf, 303 Minn. 139, 142, 226 N.W.2d 868, 870 (1975).
The purchase agreement requires McClelland to provide updated abstracts. Rather than providing the abstracts, he obtained a commitment for title insurance. By dismissing McClelland’s argument regarding waiver, the district court implicitly concluded that, as a matter of law, DeWulf did not waive his right to receive and review the abstracts. Under the terms of the purchase agreement, the right to review the abstracts is coupled with the right to object to the status of title.
The commitment for title insurance did identify the senior mortgage that existed on the property. But on May 11, 1998, shortly after receiving the commitment, DeWulf’s attorney sent a letter to McClelland’s attorney noting that the commitment for title insurance “does not comply with the provision of the partially completed purchase agreement requiring an updated abstract.” Additionally, the June 11, 1998 letter to McClelland’s attorney from the attorney handling the title review for DeWulf stated:
It is our understanding that the purchase agreement called for an abstract of title, continued to date, to be provided the buyer. To date, we have not seen that abstract.
Until such time as we are able to obtain an abstract, we must object to the title.
A June 26, 1998 letter stated that DeWulf had “commenced title review on that basis [the commitment for title insurance] without waiving any requirement for the abstract.” In a letter dated June 30, 1998, DeWulf’s attorney indicated that his client would be willing to close on the contract for deed “subject to our right to review the abstract of title.” Again, on August 11, 1998, within the letter seeking to terminate the purchase agreement, DeWulf’s attorney indicated that McClelland still had not provided the abstracts.
Although the parties continued to negotiate and proceed toward closing in the absence of the abstracts, DeWulf never waived his right to review the abstracts. The record supports the district court’s conclusion that DeWulf did not intend to relinquish his right under the purchase agreement to review the abstracts and object to title. See id. Our review of the record convinces us that this is the only inference that can be drawn from the record and that waiver did not occur as a matter of law. See Chin, 418 N.W.2d at 195.
4. Objection to title
The purchase agreement provided DeWulf with an opportunity to object to the status of title after reviewing the abstracts. It also permitted him to declare the purchase agreement null and void if any title issues could not be resolved. We note that the contemplated contract for deed changed DeWulf’s ability to object to the status of title, but, as discussed above, the contract for deed never became an enforceable contract.
A clear title is one that is free from any encumbrances and is marketable. Blacks Law Dictionary 1493 (7th ed. 1999). The concept of marketable title is well settled.
Whether a title is marketable — i.e., a title that is free from reasonable doubt — must be tested from the prospective purchaser’s standpoint, and not from the viewpoint either of the seller or of the court.
Lucas v. Independent Sch. Dist. No. 284, 433 N.W.2d 94, 97 (Minn. 1988). In this case, McClelland did not have clear and marketable title at the time the parties were seeking to close on the contract for deed. A senior mortgage existed on the property that could have resulted in DeWulf losing the property if the loan secured by the mortgage went into default. At a minimum, there was a reasonable doubt from DeWulf’s standpoint that the property was free and clear of encumbrances. See id.
Under the terms of the purchase agreement, DeWulf had the right to make objections to the status of title within ten days of receiving the updated abstracts. Those abstracts were never provided to DeWulf, and, therefore, the ten-day time limit never started to run. Nonetheless, DeWulf provided written objections to the status of title on June 11, 1998, and again on June 30, 1998. McClelland did not resolve this title dispute to DeWulf’s satisfaction. Therefore, under the terms of the purchase agreement, DeWulf was entitled to declare it null and void and have his money returned.
Affirmed; motion granted.