This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Acky-Minnetonka Limited Partnership,
a Minnesota Limited Partnership,
Filed December 18, 2001
Robert H. Schumacher, Judge
File No. CT014856
Robert Lewis Barrows, 821 Park Terrace, Hopkins, MN 55305 (for respondent)
Considered and decided by Klaphake, Presiding Judge, Schumacher, Judge, and Peterson, Judge.
U N P U B L I S H E D O P I N I O N
ROBERT H. SCHUMACHER, Judge
Appellant Winger Associates, Inc. challenges the district court's grant of summary judgment in favor of respondent Acky-Minnetonka Limited Partnership (Acky). Winger contends that it properly invoked and exercised the renewal clause contained in the lease with Acky and that both parties agreed to the terms of renewal. We affirm.
In early December of 1996, Winger leased from Acky an office/warehouse at 2843-2845 Hedberg Drive in Minnetonka, Minnesota. The lease commenced on January, 1, 1997, and ended on June 30, 2001. The written lease contained the following option to renew:
Provided Tenant is not in default hereunder and has
performed all of its covenants and obligations hereunder, Tenant shall have the
Option to renew the term of this Lease for two (2) additional periods of three
with the terms and conditions to be agreed upon 6 months previous
to expiration at market rates.
Landlord and Tenant will use their best efforts to determine whether or
not they can reach an agreement as to terms for the option period within sixty
(60) days after notice is received from Tenant of its intent to exercise the
(Alterations in original.) The lease also required that Winger give Acky notice of its desire to exercise the renewal option at least five months prior to the lease's expiration.
On December 1, 2000, Winger sent a letter to Acky giving formal notice of Winger's intent to renew the lease in accordance with the renewal option provision. Acky received the notice on December 12, 2000. Under the terms of the lease, the parties then had until February 10, 2001 to agree to the terms of the new lease. Acky responded to Winger's notice with a letter on December 15, 2000 stating the following:
Enclosed with this letter is a draft lease for your review that provides for a renewal of your lease at 2845 Hedberg Drive for a three-year term. Section 39.15 of the current lease specifies a 60 day time period from Landlord's receipt of Tenant's notice for both to determine whether or not the Landlord and Tenant can reach agreement as to a renewal.
The draft lease contained essentially the same provisions as the original lease and also provided for the new monthly rent for the renewal period.
On February 16, 2001, Winger's attorney, Thomas J. White, called Acky to ask if the 60-day period had expired. White was told that period had expired, but upon request Winger was given an extension until February 21, 2001 in which to make a decision regarding the renewal. Winger failed to respond by that date. Consequently, on February 22, 2001, Acky both faxed and mailed Winger a letter which stated the following:
Sixty days passed without word from you regarding the renewal of your lease. Then, in response to a call on your behalf from Mr. Tom White, we agreed to allow you until Wednesday, February 21, 2001 to come to a decision. That deadline has now passed as well without word.
By copy of this letter, we are asking our broker to immediately begin marketing and showing your space. We will contact you during the month of June to discuss the details of your move-out.
In response to the letter, White asked Acky if Winger could renew the lease for only half of the space. Acky refused.
Thereafter, Winger brought a declaratory judgment action against Acky to declare that the lease had been renewed at the new market rates set by Acky. Acky counterclaimed for costs and attorney fees. Acky moved for summary judgment. The district court granted summary judgment in Acky's favor and awarded Acky attorney fees. Winger appeals.
Summary judgment is properly granted when the pleadings, depositions, affidavits, etc. show that there is no genuine issue of material fact and that either party is entitled to judgment as a matter of law. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). On appeal from summary judgment, this court asks two questions: "(1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990) (citation omitted). The evidence is viewed in the light most favorable to the party against whom judgment was granted. Fabio, 504 N.W.2d at 761. The application of law to stipulated facts is a question of law, which this court reviews de novo. Morton Bldgs., Inc. v. Comm'r of Revenue, 488 N.W.2d 254, 257 (Minn. 1992).
Winger contends the lower court erred by granting summary judgment in favor of Acky because the original lease was renewed for a period of three years. Both parties concede that the second sentence of the renewal clause, requiring the parties to agree on the terms of the new lease within 60 days after notice to renew is received, is an agreement to agree and therefore unenforceable. See Ohio Calculating, Inc. v. C.P.T. Corp., 846 F.2d 497, 501 (8th Cir. 1988) (mere agreement to agree not enforceable in Minnesota).
The parties, however, disagree on the effect the unenforceable provision has on the remainder of the clause. The lease contained a severability clause that provides as follows: "[F]inal determination by a court that any provision of this Lease is invalid shall not affect the validity of any other provision." Acky argues that because the renewal clause contains an agreement to agree, the entire clause is unenforceable; therefore Winger had no option to renew the lease. Winger conversely argues that only the last sentence of the clause is unenforceable; therefore the language regarding the option to renew still remains.
The original lease was not renewed regardless of whether or not the first sentence remains a part of the renewal clause. Despite Winger's attempt to characterize its lease option as an option to extend, the language of the lease clearly shows it was an option to renew. The legal distinction between an extension and a renewal of a lease is that an extension merely continues the original lease, while a renewal requires a new lease. Tilleny v. Knoblauch, 73 Minn. 108, 113, 75 N.W. 1039, 1041 (1898). "If any contractual term for the additional period must be negotiated or determined," the new period is a renewal and the statute of frauds requires a new lease. Med-Care Assocs., Inc. v. Noot, 329 N.W.2d 549, 551 (Minn. 1983).
Assuming that Winger still had an option to renew, the terms of the renewal provision required that the lease be renewed at market rate. Thus, the parties still at minimum had to agree on the new rent. Winger argues that the parties agreed on the rent rate prior to expiration of the lease.
A binding contract is formed if there is an offer, an acceptance, and consideration. Cederstrand v. Lutheran Bhd., 263 Minn. 520, 529-32, 117 N.W.2d 213, 219-21 (1962). An offer must be reasonably definite in form and must be communicated. Pine River State Bank v. Mettille, 333 N.W.2d 622, 626 (Minn. 1983). Before a binding contract will result, an acceptance must assent to the exact terms of the offer. Markmann v. H.A. Bruntjen Co., 249 Minn. 281, 286, 81 N.W.2d 858, 862 (1957).
When Winger gave notice of its intent to renew, Acky responded by providing Winger with a draft lease that contained language regarding the required rent amount for the new term. There is no dispute that this constituted an offer. Acceptance of an offer is governed by the mirror image rule:
An acceptance, to be valid and to give rise to a binding contract, must be made in unequivocal and positive terms which comply exactly with the requirements of the offer. If the acceptance seeks to vary, add to, or qualify the terms of the offer, it is not positive and unequivocal, and constitutes a rejection of the offer and a counteroffer. A valid acceptance must not only embrace the terms of the offer with exactitude, but it must be unequivocally expressive of an intent to create thereby, without more, a contract.
Minar v. Skoog, 235 Minn. 262, 265-66, 50 N.W.2d 300, 302 (1951) (citations omitted).
The original lease provided that time was of the essence. Winger, however, did not respond to Acky's proposed lease until Winger contacted Acky approximately two months later to ask if the renewal period had expired. Even then Winger did not communicate an acceptance, but instead had its attorney ask Acky for more time. Acky granted Winger's request for more time, yet Winger did not respond with an acceptance. Acky, having not heard a response from Winger, sent a letter to Winger confirming that it did not have a response and stating that Acky would begin to market and show Winger's space. Again there was no acceptance by Winger but only a request asking if the lease could be for half of the space. Acky declined.
Winger now states that it finds the new lease acceptable and has provided an affidavit stating that it will sign the proposed lease. Winger, however, rejected the offer of the proposed lease by making a counter-offer to lease only half of the space. Once rejected, an offer is terminated and cannot subsequently be accepted without ratification by the other party. Nodland v. Chirpich, 307 Minn. 360, 364, 240 N.W.2d 513, 515 (1976). There is no indication that Acky is willing to ratify this after-the-fact acceptance.
Despite Winger's arguments to the contrary, the mirror image rule applies to the facts of this case. Even if the mirror image rule did not apply, the lease still was not renewed. Both the original lease and the proposed renewal lease contained a clause stating that the lease did not become binding until the landlord had signed and delivered the lease to the tenant. There is no dispute that the parties did not comply with this requirement.