may not be cited except as provided by
Minn. Stat. §480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Filed March 20, 2001
Reversed in part and remanded in part
Hennepin County District Court
File No. CT9721433
Kenneth R. Hertz, Steven J. Nichols, Hertz and Associates, 3853 Central Avenue N.E., Columbia Heights, MN 55421 (for appellant)
Gary K. Wood, 4932 Poppy Lane, Edina, MN 55435 (for respondents)
Considered and decided by Randall, Presiding Judge, Peterson, Judge, and Huspeni, Judge.
U N P U B L I S H E D O P I N I O N
Appellant challenges a judgment awarding attorney fees and costs, and a subsequent order determining the distribution of settlement agreement funds, contending that the district court abused its discretion by imposing sanctions against appellant and by distributing the funds equally between appellant and one respondent. Because appellant’s conduct did not warrant imposition of sanctions, and because the settlement agreement is ambiguous and the intent of the parties must be determined, we reverse in part and remand in part.
Appellant Kenneth Hertz and respondent Chuck Maciosek formed Cedar Associates, a limited liability partnership, and together owned a 50% interest in the entity. Respondent David Espeland owned the remaining 50% interest. Hertz and Espeland formed Norske Associates, a limited liability partnership. They owned equal interests in that entity.
In December 1997, Hertz brought two suits against Espeland; one in which Hertz was the sole plaintiff and one in which he and Maciosek jointly sued Espeland. Both suits alleged that Espeland breached his fiduciary duty, mismanaged the partnership assets, and failed to provide a truthful accounting.
In February 2000, the parties entered into a settlement agreement. Although the Cedar Associates and Norske Associates cases were never formally consolidated, the agreement settled all claims between the parties, including final distribution of the Norske partnership assets. The court dismissed Maciosek’s action shortly before the settlement agreement was read into the record. Despite the court’s ruling, the agreement incorporated Maciosek’s claims.
The settlement agreement provided in part that Espeland, in settlement of all claims against him, would pay $7,500 from his portion of ownership stakes in the Cedar partnership, and that on February 14, 2000, Hertz would distribute to Espeland and Maciosek their specified shares of $8,628.14 in tax abatement checks held in Hertz’s trust account. By February 14, Hertz had not distributed these shares.
On February 25, 2000, Espeland moved the court to compel Hertz’s compliance with the settlement agreement and requested reimbursement for costs, including previously waived costs, and attorney fees incurred in filing the motion. Hertz distributed the tax rebate shares just prior to the hearing on February 25. Nonetheless, the court awarded $763.43 in costs, including costs previously waived in the settlement agreement, and $450 in attorney fees against Hertz in favor of Espeland.
On June 15, 2000, Maciosek requested the court’s intervention in ascertaining the proper method for distributing the $7,500 awarded in the settlement agreement. The court ordered the equal distribution of the settlement funds and awarded $680 in costs to Hertz. This appeal followed.
Espeland, after notifying Hertz of his intent to do so, filed a motion seeking an award of attorney fees and expenses pursuant to Minn. R. Civ. P. 11. Hertz attempted unsuccessfully to reach Espeland’s attorney. Hertz argues that “fair notice must be given before rule 11 sanctions are imposed,” and that his conduct did not warrant the imposition of sanctions.
A reviewing court applies an abuse-of-discretion standard when reviewing a district court’s decision to impose either statutory or rule 11 sanctions. Uselman v. Uselman, 464 N.W.2d 130, 140, 145 (Minn. 1990).
We must consider the propriety of sanctions imposed against Hertz under Minn. R. Civ. P. 11, which “provide[s] relief to parties who are victims of bad pleading and abuse of process.” State Bank v. Fabel, 530 N.W.2d 858, 863 (Minn. App. 1995), review denied (Minn. June 29, 1995). Sanctions for violating rule 11 may include attorney fees and other expenses incurred as a result of the violation.
The district court explained its decision regarding imposition of sanctions as follows:
[Hertz’s] violation of the express terms of the settlement agreement appears to be the result of a willful indifference to the rights of the other parties to the settlement agreement and for no other purpose than to delay payment and deny the other parties the value and benefit of the agreement reached in open court.
[Hertz], as an attorney and officer of the Court, is subject to appropriate sanctions for the violation of the agreement pursuant to Rule 11, M.R.C.P. There is no justifiable reason that this matter should be required to be returned to this Court just to get [Hertz] to perform the acts he promised to perform as conditions for the settlement.
Accordingly, the district court found cause for sanctions against Hertz and awarded $765.43 in costs and $450 in attorney fees to Espeland.
Espeland contends that sanctions were appropriate because his motion was in the nature of an order to show cause. Even if we were to construe his motion as such, Hertz would have remedied any contempt or failure by distributing the checks before the hearing, and cured himself of the contempt. There would be no valid basis upon which the trial court could award sanctions. Therefore, we find Espeland’s argument unpersuasive.
We find merit in the challenge raised by Hertz. Rule 11 permits sanctions to be imposed against either a party or attorney, or both, and awards damages that are essentially compensatory in nature. Because deterrence is the goal of rule 11, it is important that a party who seeks protection from bad-faith litigation provide notice of intent to seek sanctions under rule 11. Kellar v. Von Holtum, 605 N.W.2d 696, 701 (Minn. 2000). To achieve the goal of deterrence, before rule 11 sanctions are imposed, “the attorney or party must have fair notice of both the possibility of a sanction and the reason for its proposed imposition.” Uselman, 464 N.W.2d at 143.
Rule 11 imposes sanctions on an attorney when a “pleading, motion or other paper is signed in violation of [the] rule.” The plain language of rule 11 indicates that written documents are the focus of the rule. Here, Hertz’s only reply to the motion to compel compliance was oral. Therefore, it is questionable whether his conduct fell within the scope of rule 11.
Even if we were to assume for the sake of further analysis that Hertz’s conduct fell within the scope of rule 11, its application is improper when a party is given insufficient notice of the possibility that sanctions might be imposed. “[N]otice should be given as early as possible during the proceedings to provide the attorney and party the opportunity to correct future conduct.” Uselman, 464 N.W.2d at 143. Further, Minn. R. Gen. Pract. 115.04(a) requires that a written motion and notice thereof must be served no later than 14 days before the hearing.
Espeland served his motion to enforce the settlement agreement and his notice of intent to seek sanctions on February 23, 2000, just two days before the scheduled hearing. Hertz was given only two days to respond, and to avail himself of the opportunity to comply with the settlement agreement. (He did distribute Espeland’s tax abatement check immediately before the February 25 hearing.) We cannot conclude that the ten-day delay in delivering the check to Espeland is the type of violation contemplated by the drafters of rule 11. A policy of deterrence is not well served by punishing Hertz after he complied with the order of the court. Sanctions were imposed despite the fact that neither a warning nor an opportunity to correct conduct was given prior to the imposition.
The insufficient notice of Espeland’s motion prejudiced Hertz; he was not given any real opportunity to respond to the request for sanctions. The motion papers were unsupported by affidavits or cost figures; affidavits detailing alleged costs and expenses incurred by Espeland due to Hertz’s delay in distributing the tax abatement refunds were received only after the hearing. Hertz had no opportunity to challenge these affidavits nor to cross-examine counsel on their contents. Thus, even if we were to strain to bring Hertz’s conduct within the scope of rule 11, the lack of notice, lack of an opportunity to respond, and the lack of an opportunity to correct future conduct serve to render the district court’s award of sanctions unsupportable. We reverse that award.
II. Distribution of Settlement Funds
Maciosek brought a motion requesting the court’s intervention in ascertaining the proper method for distributing the $7,500. Respondents argue that Hertz should not be able to contest the distribution of the settlement funds because Hertz never objected to this motion. Hertz had no duty to object to Maciosek's motion. Further, Hertz had a right to appeal the resulting decision directly to this court.
A reviewing court reviews an appeal from a decision on a motion to enforce a settlement agreement under an abuse of discretion standard. See Johnson v. St. Paul Ins. Cos., 305 N.W.2d 571, 573 (Minn. 1981) (stating that vacating stipulation of settlement is within discretion of district court, whose action will not be reversed unless arbitrary).
Settlements are greatly favored and will not be set aside lightly. Beach v. Anderson, 417 N.W.2d 709, 711-12 (Minn. App. 1988), review denied (Minn. Mar. 23, 1988). A settlement agreement is contractual in nature and subject to the principles of contract law. Id. at 711. Absent ambiguity, the construction and effect of a contract are questions of law. Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn. 1990). Whether a contract is ambiguous, that is, reasonably susceptible to more than one construction, is a question of law, and the reviewing court owes no deference to the district court’s determination. Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643-44 (Minn. App. 1985), review denied (Minn. June 24, 1985). If a court determines a contract to be ambiguous, its interpretation is then a question of fact, and extrinsic evidence may be considered. City of Virginia v. Northland Office Properties Ltd. P'ship, 465 N.W.2d 424, 427 (Minn. App. 1991) (citation omitted), review denied (Minn. Apr. 18, 1991).
Courts interpret a contract as a whole and attempt to harmonize all the provisions of a contract. Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525 (Minn. 1990) (citation omitted). The intent of the parties should be ascertained by examining the plain language of the contract. Amoco Oil Co. v. Jones, 467 N.W.2d 357, 360 (Minn. App. 1991). The unequivocal language of a contract will not be altered based on speculation of an unexpressed intent of the parties. Metropolitan Sports Facilities Comm’n v. General Mills, Inc., 470 N.W.2d 118, 123 (Minn. 1991). See also Minnesota Ltd., Inc. v. Public Utils. Comm’n, 296 Minn. 316, 321, 208 N.W.2d 284, 287 (1973) (stating that “[i]n determining contractual intent, the question is not what a party may have subjectively intended but what intent his words and acts objectively manifest”).
Ambiguity exists when the language of a document, by itself, and without use of parol evidence, is reasonably susceptible to more than one meaning. Trondson, 458 N.W.2d at 681; ICC Leasing Corp. v. Midwestern Mach. Co., 257 N.W.2d 551, 554 (Minn. 1977). Ambiguity does not exist simply because the contract is drafted awkwardly or requires careful reading. Nordby v. Atlantic Mut. Ins. Co., 329 N.W.2d 820, 823 (Minn. 1983).
At issue is the interpretation of the following language:
The parties have agreed that as and for a complete dismissal of all claims against each other arising out of the management of Cedar Associates, to distribute that money at the present time in a manner in which [Espeland] will contribute $7500 of his portion of the distribution in order to satisfy all claims.
Hertz essentially argues that the provision of the settlement agreement referencing the distribution of the $7,500 is ambiguous since the agreement
did not specify whether [the] $7,500 should be split equally between [Hertz] and [Maciosek], whether the funds should be split in proportion to the respective ownership interests of [Hertz] and [Maciosek] in Cedar Associates, or whether the $7,500 should be divided between the two cases before the trial court—one of which did not include [Maciosek] as a party.
Because the language of the settlement agreement does not specify how the $7,500 is to be divided, it is possible that the parties intended to divide the money other than equally. Accordingly, the plain language of the agreement detailing the distribution of the $7,500 is subject to more than one reasonable interpretation, and the provision in question is ambiguous. Because the meaning of the provision and the parties’ intent cannot be determined by reviewing the language of the agreement, extrinsic evidence will be necessary to answer these questions. We reverse and remand to enable the district court to receive evidence to determine the appropriate distribution of the $7,500.
Reversed in part and remanded in part.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 Hertz explained later that the tax rebate checks were old, and he was not certain that they would be honored; that he wrote the distribution checks immediately after the settlement agreement was reached, but held them to assure the rebate checks “cleared” the bank.
 Hertz stated at the June 15, 2000 hearing on the distribution of the $7,500 settlement that he had paid Espeland’s attorney the court-ordered $450 in fees. At that hearing he challenged the award of $765.43 in costs. In his appeal of the sanction judgment, however, Hertz challenges the very applicability of rule 11 to his conduct. Therefore, our decision that imposition of rule 11 sanctions was improper encompasses the full amount assessed against him under that rule.