This opinion will be unpublished and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
Roland McLain, et al.,
Ming Chu, et al.,
Filed July 2, 2002
Hennepin County District Court
File No. 0017240
David Y. Trevor, Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN 55402 (for respondents)
James B. Sheehy, Sheehy Law Office, 247 Third Avenue South, Minneapolis, MN 55402 (for appellant Tam)
Craig D. Greenberg, Huffman, Usem, Saboe, Crawford & Greenberg, P.A., 5101 Olson Memorial Highway, 1000 Water Park Place, Minneapolis, MN 55422 (for appellants Chu, et al.)
Considered and decided by Klaphake, Presiding Judge, Willis, Judge, and Hanson, Judge.
Respondents, Roland McLain and others, brought this action alleging misrepresentation, misappropriation of funds, and other wrongful conduct on the part of appellants, Linda Tam and others. The parties were investors and shareholders in several closely held corporations that owned and operated four restaurants, including two in downtown Minneapolis.
In January 2001, the parties reached a settlement agreement and placed it on the record before the district court. The agreement divided up the parties’ corporate assets and debts. The parties further agreed to appoint attorney Thomas Fraser as a “special master” to “resolve” any disputes over “expenditures” and “the drafting or implementation of this settlement.” After reaching an impasse on several issues, the parties referred those issues to Fraser, who held a hearing and issued a report.
Appellants objected to several of the findings in Fraser’s report. The district court denied appellants’ motion to modify the report, finding that by using the term “resolve,” the parties intended to authorize Fraser to determine disputes and that the “parties did not intend to limit Mr. Fraser’s function to making a recommendation to this Court of proposed findings and conclusions.” The court confirmed and adopted Fraser’s report in its entirety.
In this appeal, appellants argue that the report contradicted the parties’ settlement agreement in several areas and that the district court erred by refusing to hold a hearing on the merits of their objections, as allowed by Minn. R. Civ. P. 53.03(b). Because the district court did not err in its interpretation of the parties’ settlement agreement and in finding that the parties intended to give their agreement finality and confer on Fraser the authority to resolve disputes without further review by the district court, we affirm.
The law favors the settlement of disputed claims. Eggleston v. Keller Drug Co., 265 Minn. 78, 82-83, 120 N.W.2d 305, 307 (1963); Jallen v. Agre, 264 Minn. 369, 373, 119 N.W.2d 739, 743 (1963). It is not essential that a settlement agreement be in writing, but the terms of an agreement should at least be stated to the court on the record. Theis v. Theis, 271 Minn. 199, 205, 135 N.W.2d 740, 745 (1965).
“The settlement of a lawsuit is contractual in nature * * * [and is] subject to all of the other rules of interpretation and enforcement.” Beach v. Anderson, 417 N.W.2d 709, 711 (Minn. App. 1988) (citation omitted), review denied (Minn. Mar. 23, 1988). The issue of whether a contract or settlement is ambiguous presents a legal question for the court. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn. 1982). Ambiguity exists if the language of an agreement on its face is susceptible to more than one interpretation. Lamb Plumbing & Heating Co. v. Kraus-Anderson, Inc., 296 N.W.2d 859, 862 (Minn. 1980). Seemingly plain language may become ambiguous once an attempt is made to perform under the contract. Marso v. Mankato Clinic, Ltd., 278 Minn. 104, 114, 153 N.W.2d 281, 288 (1967).
Here, the parties disagree over the meaning of the term “resolve” as it pertains to the authority conferred on Fraser by the settlement agreement. Appellants argue that the district court erred by treating Fraser’s findings as final, with no opportunity for district court review, and by failing to hold a hearing on the merits of their objections to Fraser’s report, as allowed by Minn. R. Civ. P. 53.05(b). Respondents argue that the parties intended Fraser’s decision to be similar to that of an arbitrator, with no right of review. Because the parties’ agreement is reasonably susceptible to either interpretation, it is ambiguous on this point.
When contract language is ambiguous, the intent of the parties becomes relevant, and a court may consider extrinsic evidence in construing the contract. See Fena v. Wickstrom, 348 N.W.2d 389, 390 (Minn. App. 1984). The meaning of ambiguous language becomes a fact question for the trier of fact. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979).
The district court found that the parties’ intent in allowing Fraser to “resolve” any issues pertaining to the settlement agreement was to confer on him the definitive authority to “determine disputes over the drafting or implementation of their settlement” and that this authority was “not intend[ed] to limit Mr. Fraser’s function to making a recommendation to this Court of proposed findings and conclusions.” This finding is reasonably supported by evidence in the record on the parties’ intent.
First, the proceedings in which the parties placed the settlement on the record support the district court’s findings on the breadth and finality of Fraser’s authority. The transcript of those proceedings demonstrates that the parties were concerned about ending this costly and bitter litigation. The parties fully anticipated that they would have to work out additional details and draft a final document. Nevertheless, they agreed to appoint Fraser as a special master to “resolve” any disputes over “expenditures” and the “drafting or implementation of this settlement.” They specifically chose to use the term “resolve,” rather than “recommend” to describe Fraser’s authority, and they did not characterize Fraser as a “referee” or otherwise mention any right to appeal from Fraser’s decisions under rule 53. To now allow district court review of the merits of Fraser’s decisions would be contrary to the context in which the settlement was entered and would largely defeat the underlying purpose of the settlement.
Second, extrinsic evidence of the parties’ subsequent conduct supports a finding that the parties intended Fraser’s decisions to be final. That evidence includes appellants’ characterization of Fraser, once the parties decided to submit certain issues to him, as an “arbitrator” and of the proceedings before him as “arbitration.” See Hunter, Keith Indus., Inc. v. Piper Capital Mgmt. Inc., 575 N.W.2d 850, 854 (Minn. App. 1998) (arbitration award is final unless the arbitrator acts outside of his authority). At the beginning of the hearing before Fraser, the parties agreed that Fraser had the authority to hear the issues submitted to him and no one questioned the extent of his authority. Neither party requested a transcript, which further suggests that the parties believed Fraser’s decisions would be final and not subject to further review. See Bynum v. Baggett Trans. Co., 228 F.2d 566, 569 (5th Cir. 1956) (when parties have not had testimony transcribed, findings of special master are conclusive and not subject to review). Finally, the issue of a right of review was not raised until after Fraser’s decision was issued and appellants became dissatisfied with some of his findings.
This extrinsic evidence of the parties’ subsequent conduct, along with the circumstances under which the settlement was placed on the record, supports the district court’s finding that the parties intended Fraser’s decisions to be final. We therefore affirm the district court order adopting and confirming Fraser’s report.
Third, the district court ordered that any future disputes be resolved by Fraser. This directive is fully consistent with the parties’ intent in appointing Fraser “to resolve any disputes over the drafting or implementation of this settlement.” Because the drafting and implementation of the settlement is still not complete, the court did not err in referring any additional disputes to Fraser for resolution.
 A recently released opinion from this court emphasizes that parties should specifically designate which dispute resolution procedure is intended. See Buller v. Minn. Lawyers Mut., ___ N.W.2d ___, ___ (Minn. App. June 18, 2002) (noting that parties should be precise when designating which dispute resolution procedure is to govern, because each has different consequences, particularly as to availability of appellate review).