This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
Grace M. Seed and Richard M.C. Glenn, III,
as Trustees of the 3/19/76 Fred M. Seed Trust; et al.,
Astra Genstar Partnership, et al.,
defendants and counterclaimants,
Genstar Land Company, et al.,
Filed April 13, 2004
Reversed and remanded
Hennepin County District Court
File No. CT 01-12316
Joseph W. Anthony, Vincent D. Louwagie, Karlyn Vegoe Boraas, Anthony Ostlund & Baer, P.A., 90 South 7th Street, Suite 3600, Minneapolis, MN 55402 (for appellants)
David F. Herr, Geoffrey P. Jarpe, Kai H. Richter, Maslon Edelman Borman & Brand, LLP, 3300 Wells Fargo Center, 90 South 7th Street, Minneapolis, MN 55402-4140 (for respondents)
Considered and decided by Halbrooks, Presiding Judge, Willis, Judge, and Huspeni, Judge.*
Appellants challenge the district court’s denial of their motion to amend their complaint to assert a reformation claim, arguing that (1) the court improperly applied a Minn. R. Civ. P. 56 standard rather than a Minn. R. Civ. P. 12 standard; (2) the court improperly applied a heightened standard of proof; (3) the record supports amending the complaint; and (4) the court improperly weighed evidence and assessed witness credibility in resolving the motion. We reverse and remand.
Appellants, the Seed family, owners of a considerable amount of land in and around the Twin Cities, developed their land according to specific principles. These principles included a dedication to developing the land slowly to meet the growing demands of the metropolitan area and to develop the land in such a way as to be consistent with good citizenship. Appellants have always regarded real-estate development as a long-term investment for the family and the community.
In 1993, after two years of negotiations, appellants formed a partnership with respondent Dufferin Development Company (Dufferin), to develop land together over a period of many years. Appellants entered into this partnership because they believed that Dufferin shared appellants’ development philosophy. Dufferin and appellants each owned 50% of the partnership. At the time of the partnership agreement, Dufferin was a Minnesota corporation owned by Carleton Land Company (Carleton), which was an affiliate of the publicly owned Canadian conglomerate, Imasco Limited (Imasco). Dufferin informed appellants of this corporate organization, as well as of Carleton and Imasco’s expertise and financial resources, prior to entering into the partnership.
In addition to creating a partnership agreement, Dufferin and appellants created an option agreement, which allowed Dufferin to purchase new tracts of land from appellants for development. As protection for appellants, both the partnership agreement and the option agreement included a change-in-control provision that permitted appellants to withdraw from the partnership under certain circumstances. The relevant portion of the partnership agreement is section 7.3, which states:
If there is a change in the direct ownership of 50% or more of the voting and equity interests in Dufferin before the Partnership exercises all of its Options to the Optioned Parcels (other than transfers of direct ownership interests in Dufferin to Imasco, Limited, or any entities controlled by Imasco, Limited), Sellers are permitted to repurchase their interests in the Optioned Parcels in accordance with the terms of the Option Agreement.
The relevant portion of the option agreement is article 9.13, which states:
If during the Option Period there is a change in the direct ownership of 50% or more of the voting and equity interests in Dufferin (other than transfers of direct ownership interests in Dufferin to Imasco, Limited, or any entities controlled by Imasco, Limited), Sellers may terminate the Option Agreement on the balance of all Property still subject to the Option, but not less than all of such Property, by giving notice to Buyer within 30 days following Seller’s receipt of notice of such change in the ownership of Dufferin. If Sellers give Buyers notice of their election within such 30 days period to terminate the Option on all remaining Property, Sellers shall make Buyout Payments to the Buyer in order to cover all of Buyer’s development costs incurred thereon and to pay for the deemed enhanced value of the Optioned Parcels to the date of Sellers’ notice of termination. The Buyout Payments shall be determined by multiplying the Option Amount with respect to the remaining Property by [certain “Buyout Percentages”].
Both the partnership and option agreements contain merger clauses that provide that the agreements constitute the entire agreement between the parties.
Between the time of the 1993 partnership agreement and 1999, several changes occurred in the ownership of Dufferin, Carleton, and Imasco. Then, in January 2000, British American Tobacco acquired Imasco, and in June of that year, respondent Newland-IHP Ventures (Newland) bought 100% of the Carleton stock. One month later, appellants notified Newland that they believed a transfer of partnership interest had occurred and that they wished to terminate the remaining option agreement.
Appellants brought an action seeking a declaration that the buyout provisions had been triggered by the purchase of the Carleton stock and thereafter moved for summary judgment, or in the alternative, to amend their complaint to add a reformation-of-contract claim. The district court granted appellants’ motion for summary judgment, finding the word “direct” in the phrase “direct ownership” to be ambiguous. The district court concluded that the 2000 sales constituted a change in direct ownership authorizing appellants to exercise their rights under the option agreement. In so doing, the district court determined that appellants’ motion to amend their complaint to allow a claim for reformation of the contract was moot. We reversed on appeal, holding that the word “direct” was unambiguous and that the 2000 sales did not constitute a change in direct ownership, and we remanded for consideration of appellants’ motion to amend the complaint. On remand, the district court denied appellants’ motion. This appeal follows.
Appellants assert that the agreements at issue do not accurately reflect the parties’ true intent, and therefore reformation should be allowed on the basis of mutual mistake or scrivenor’s error. Appellants argue the district court erred when it denied their motion to amend their complaint to add a reformation claim.
After a response has been filed, a party may amend its complaint only with the consent of the adverse party or by leave of the court. Minn. R. Civ. P. 15.01. “The decision to allow a party to amend its complaint after responsive pleading had been made lies within the sound discretion of the [district] court.” Wessin v. Archives Corp., 592 N.W.2d 460, 468 (Minn. 1999). The district court should liberally grant motions to amend when justice requires and doing so will not result in prejudice to the adverse party. Minn. R. Civ. P. 15.01; Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). We review the denial of the motion to amend under an abuse-of-discretion standard. Fabio, 504 N.W.2d at 761.
The factors that primarily determine whether a court should grant leave to amend a complaint are whether the amendment states a claim upon which relief can be granted and whether sufficient evidence exists to support the amendment. 1 David F. Herr & Roger A. Haydock, Minnesota Practice § 15.5 (4th ed. 1998). Appellants argue that the district court erred in analyzing the motion to amend, by applying a Minn. R. Civ. P. 56 (summary judgment) standard instead of a Minn. R. Civ. P. 12 standard. But if a party attempts to amend a complaint later in the proceedings, after significant discovery, and the proposed claim states a cognizable legal claim, the court may look at the evidence to determine whether it supports the claim. Id. In doing so, an amendment may properly be denied when the movant fails to establish evidence to support the new claim. Bib Audio-Video Products v. Herold Mktg. Assoc., Inc., 517 N.W.2d 68, 73 (Minn. App. 1994). If evidence exists to support the claim, but raises a question of fact, the court should evaluate the request to amend the complaint as it would decide a motion for summary judgment. Herr & Haydock, supra, § 15.5. Thereafter, the motion may be properly denied when the claim would not survive summary judgment. See, e.g., Bebo v. Delander, 632 N.W.2d 732, 740 (Minn. App. 2001), review denied (Minn. Oct. 16, 2001).
Here, appellants’ claim for reformation is a cognizable legal claim. Appellants moved to amend their complaint after discovery had closed. Therefore, it was proper for the district court to look at the evidence to determine whether it supports the claim and to evaluate the motion using a summary-judgment analysis. In so doing, however, the district court erred in determining that appellant’s reformation claim would not withstand summary judgment.
Summary judgment is proper if there are no genuine issues of material fact and either party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. A motion for summary judgment is granted when the depositions, answers to interrogatories, admissions on file, and affidavits, if any, demonstrate that “there is no genuine issue of material fact and that either party is entitled to judgment as a matter of law.” Fabio, 504 N.W.2d at 761. The evidence is to be viewed in the light most favorable to the party against whom judgment was granted. Id. Appellants assert that there is a genuine issue of material fact as to the original parties’ intent at the time of contract formation for the provisions at issue, and therefore their claim for reformation based on mutual mistake would survive a summary-judgment motion. We agree.
Reformation is available when
(1) there [is] a valid agreement between the parties expressing their real intentions; (2) the written instrument fail[s] to express the real intentions of the parties; and (3) this failure [is] due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.
Nichols v. Shelard Nat’l Bank, 294 N.W.2d 730, 734 (Minn. 1980). In order to demonstrate mutual mistake based on scrivener’s error, “it is necessary that both parties agree as to the content of the document but that somehow through a scrivener’s error the document does not reflect [the parties’] agreement.” Id.
Appellants argue that the district court erred by requiring them to prove their reformation claim by clear and convincing evidence, asserting that while the clear-and-convincing standard is to be applied to the court’s ultimate determination concerning reformation, see Metro Office Parks Co. v. Control Data Corp., 205 N.W.2d 121, 124 (Minn. 1973), that standard does not apply to a motion to amend. Respondents contend the clear-and-convincing standard also applies to the summary-judgment analysis because a district court must “‘view the evidence presented through the prism of the substantive evidentiary burden.’” Swanlund v. Shimano Indus. Corp., 459 N.W.2d 151, 154 (Minn. App. 1990) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505, 2513 (1986)), review denied (Minn. Oct. 5, 1990); see also Chafoulias v. Peterson, 668 N.W.2d 642, 655 (Minn. 2003) (applying clear-and-convincing standard to summary-judgment analysis on claim subject to a heightened burden of proof).
Respondents’ cited cases are distinguishable. Swanlund involved a claim for punitive damages, and Anderson and Chafoulias involved defamation claims. The reasoning for applying a heightened standard at the summary-judgment stage for defamation and punitive-damages claims does not apply equally to a claim for reformation. A heightened standard is appropriate for a defamation claim because such a claim implicates First Amendment and personal-reputation issues, which are highly protected areas in the law. See Jadwin v. Minneapolis Star & Tribune Co., 367 N.W.2d 476, 483 (Minn. 1985). Similarly, a heightened standard is appropriate for a punitive-damages claim because of the intrusive discovery into personal financial information that results from the assertion of such a claim. See Shetka v. Kueppers, Kueppers, Von Feldt & Salmen, 454 N.W.2d 916, 921 (Minn. 1990) (“[A]n individual’s personal financial situation is extremely personal,” and this can “result in an intrusive invasion into this very private area.”).
Respondents rely on an unpublished federal district court decision for the proposition that the clear-and-convincing standard would apply to a reformation claim in a summary-judgment context. See Employers Mut. Cas. Co. v. Wendland & Utz, Ltd., No. CIV 01-46PAMJGL, 2002 WL 989482, at *3 (D. Minn. 2002). But the decision is not precedential, and it lacks persuasive value because both parties in that case agreed that summary judgment was appropriate. Id. Because both parties asked the court to decide the reformation claim as a matter of law, the heightened standard applied, just as it would at trial. By contrast, the summary-judgment analysis is being utilized in this case in the context of a motion to amend the complaint. The parties did not agree that the court should decide the reformation claim on the merits. The motion to amend is subject to a summary-judgment analysis, but the heightened standard does not apply until the claim is decided on the merits.
In addition, the Swanlund/Liberty Lobby analysis urged by respondents is inconsistent with published caselaw in Minnesota specifically addressing reformation claims. The Minnesota Supreme Court has indicated that a heightened standard does not apply to a motion to amend to add a reformation claim. Leamington Co. v. Nonprofits’ Ins. Ass’n, 615 N.W.2d 349, 355 n.4 (Minn. 2000). In Leamington, there was a summary-judgment motion on a reformation claim. The court stated that whether the omission of a party’s name was the result of a mistake or a mutual mistake is a factual determination,
and therefore inappropriate [for determination] on summary judgment. [Plaintiffs have] adduced evidence sufficient to raise a material question of fact as to whether there was a mutual mistake in this case. We make no comment on whether they will be able to prevail on this issue. As we noted earlier, the standard of proof for reformation claims is high. However, [a party] does not have to prove its case to withstand summary judgment; it need only demonstrate “a genuine issue as to any material fact.”
Id. (quoting Minn. R. Civ. P. 56.03). Because our supreme court has indicated that the heightened evidentiary standard that applies to a reformation claim at trial does not apply when that claim is the subject of a motion for summary judgment, we conclude that the district court should have analyzed the motion to amend with reference to the ordinary standard applicable to summary judgment.
Under the normal summary-judgment standard, no genuine issue of material fact exists “[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.” DLH Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)). “[T]he party resisting summary judgment must do more than rest on mere averments.” Id. at 71. A genuine issue for trial must be established by substantial evidence. Id. at 69-70. “[I]f any doubt exists as to the existence of a genuine issue as to a material fact, the doubt must be resolved in favor of finding that the fact issue exists.” Rathbun v. W.T. Grant Co., 219 N.W.2d 641, 646 (Minn. 1974).
Here, the district court concluded that “if all of testimony proffered by [respondents] as to the intent of the negotiating parties were deemed inadmissible . . . and the testimony proffered by [appellants] were deemed admissible, [appellants] nevertheless fall short of their burden.” When applying the correct standard, we disagree.
Appellants first presented the testimony of James Seed, the person primarily responsible for managing the Seed family’s assets and the president of Astra Projects Inc. James Seed stated that the buyout option was intended to mean that if there were a new owner, unrelated to those familiar to him under the umbrella of Imasco, the provision would be triggered. Seed also stated in his affidavit that the relationship between the developer and Imasco was essential to him.
Appellants also presented evidence that both Peter Gualtieri, president of Midwest Division, Newland Communities and former vice president of Dufferin, and Michael Rogers, Gualtieri’s boss, knew that the identity of management was important to the Seed family and that they believed the provisions at issue were added to the agreements in order to address the Seed family’s concerns. Gualtieri stated that he was of the opinion that from a practical perspective there had been a change of control. In addition, Gualtieri stated that it was his understanding on June 14, 1993, that if there was a change of control of the developer away from Imasco, it would trigger the option buyout rights.
Rogers, in turn, testified as follows:
Q: Is there any question in your mind that the language in section 9.13 of the option agreement was intended to give the land owners the right to buy out the option if there was a change of ownership or control that caused a delinkage with Imasco?
A: There’s no doubt in my mind that it responded to concerns of Jim Seed in the event of any substantive change in the ownership or management that he was becoming a partner to.
Respondents argue that the above evidence should not be considered when analyzing whether the reformation claim would survive summary judgment. Respondents assert it is error to consider extrinsic evidence to reform or modify the terms of an agreement when the agreement is a complete integration and unambiguous. See Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 314 (Minn. 2003). This reading of Alpha, however, is inconsistent with the common-law rule that it is “not necessary as a prerequisite to the reformation of an instrument to conform to the intention of the parties, that the instrument be ambiguous.” Metro Office Parks, 205 N.W.2d at 124. This reading is also at odds with Aronovitch v. Levy, 238 Minn. 237, 246, 56 N.W.2d 570, 576 (1953), which states that the rule prohibiting admission of parol evidence to vary terms of a written contract does not prevent proof of fraud or mistake, and Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979), which states that determining the intent of the parties requires consideration of extrinsic evidence, which involves a fact issue appropriate for jury consideration.
Alpha is distinguishable from the present case because there the court stated that “extrinsic evidence . . . cannot be used to supplement the terms of the [agreement].” Alpha, 664 N.W.2d at 312. Here, appellants are not arguing to supplement the terms, but are arguing to replace the term “direct” with a phrase that encompasses both parties’ original intent. In addition, reading Alpha broadly, as respondents suggest, would severely limit the situations where a reformation claim could be proven. Therefore, the consideration of extrinsic evidence here is appropriate.
Respondents argue that the evidence presented is insufficient to prove that both parties intended that the buyout option be triggered. While we make no comment on whether appellants will eventually be able to prevail on this issue, we conclude that the evidence presented is sufficient to present a genuine issue as to whether the term “direct” was intended by the original parties to encompass the acquisition at issue, therefore triggering appellants’ buyout option. Because we conclude that the district court erred in its summary-judgment analysis and determine that appellants’ claim could survive summary judgment, we also conclude the district court abused its discretion in denying appellants’ motion to amend their complaint solely on that basis.
Furthermore, even if the evidence would not have been sufficient to survive summary judgment, the district court’s decision still merits reversal. The court’s function at the summary-judgment stage is to determine whether there are genuine issues of material fact; weighing conflicting evidence is inappropriate. Fairview Hosp. & Health Care Serv. v. St. Paul Fire & Marine Ins. Co., 535 N.W.2d 337, 341 (Minn. 1995). In addition, it is inappropriate to make assessments of witness credibility on summary judgment. Smith v. Woodwind Homes, Inc., 605 N.W.2d 418, 423 (Minn. App. 2000).
While respondents assert that the district court did not err because it did not base its decision on any weighed evidence, when the district court explained why appellants did not meet their burden, it did weigh the evidence in reaching its conclusion. For example, the district court stated the following:
For nearly ten years, nobody said that the written instruments did not correctly reflect what the parties had agreed to. During this time many experienced business people and business attorneys had ample reason and time to look at the contract language. They looked at it during the negotiations of the instruments, during the process of finalizing and signing the instruments, after word of the sale to [Newland], and during the two-year pendency of this litigation. That nobody ever said that it did not reflect what both sides agreed to strongly suggests that throughout all of these occasions, nobody who looked at the instruments believed that they did not accurately reflect the parties’ agreements.
Furthermore, the contract went through many drafts by expert lawyers. The word “direct” was added in one of the middle drafts. . . . Someone deliberately added the word “direct,” and both sides acceded in keeping the word in the contract.
These facts fall short of [appellants’] . . . burden.
The district court on another occasion weighed the statements from Gualtieri and Rogers against the testimony of James Nelson, the developer’s attorney who represented Dufferin and its parent and affiliated corporations in negotiating the agreements.
In addition, the district court assessed witness credibility. The district court discounted deposition testimony by pointing out that the statements were from “eight-, nine-, or ten-year-old memories.” The district court also assessed Gualtieri’s credibility when it stated, “the testimony of Gualtieri is weakened by the fact that he does not recall certain exchanges of contract language, he is not sure who drafted each phrase, he did not, himself, participate in the negotiation of every phase, and his testimony is contradicted by that of others.”
Furthermore, while respondents contend that reformation is not proper here because it would prejudice Newland’s rights as a bona fide purchaser, the record reflects that Newland acquired its interest in Carleton with knowledge that appellants considered their buyout rights triggered by Newland’s purchase. In addition, Gualtieri, an employee of both Dufferin and Newland, testified that he believed the provisions covered situations where a link was broken between appellants and Imasco. Therefore, Newland was on notice of a problem.
Because the district court weighed competing evidence and used that analysis in determining whether appellants met their burden and because the district court improperly assessed witness credibility, the district court committed reversible error. Because we reverse and remand on the above grounds, we do not address appellants’ further arguments as to district court error.
Reversed and remanded.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 Appellants are the heirs of Fred Seed, who died in 1979.
 The partnership was originally named the Dufferin/Seed Partnership, but later changed its name to Astra/Genstar Partnership and became an LLP.
 After several drafts, the language at issue in the agreements changed from “change in shareholder control” to “change in direct ownership.”
 Dufferin changed its name to Genstar Land Company, Midwest, LLP. Carleton changed its name to Genstar Land Company, LLC. For purposes of clarity, the original names of the entities are used throughout this opinion.
 Newland is part of a corporate conglomerate controlled by Newland Communities, LLC.
 Appellants also assert the district court ignored this court’s finding of possible grounds for reformation. This argument is without merit. This court made no conclusions as to the grounds for reformation; we only recognized that there was an alternative motion on record that had not been addressed by the district court.