This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Ronald Duy, et al.,
Lake Weed-A-Way, Inc.,
defendants and third party plaintiffs,
Minnesota Shoreline Restoration, Inc.,
third party defendant,
Filed May 17, 2005
Affirmed in part, reversed in part, and remanded
Gordon W. Shumaker, Judge
Crow Wing County District Court
File No. C1-03-0382
Lonny D. Thomas, Jonathan T. Trexler, Thomas & Associates, P.A., 35258 County Road 3, P.O. Box 720, Cross Lake, MN 56442 (for respondents)
Olsen, Henson & Efron, P.A.,
Considered and decided by Shumaker, Presiding Judge; Dietzen, Judge; and Poritsky, Judge.*
GORDON W. SHUMAKER, Judge
Appellants contest the district
court’s grant of summary judgment to resolve a dispute in contract. The district court stated that a noncompete
clause contained in the contract was not ambiguous and that respondents had not
violated the noncompete clause after the sale of their business to
Respondents Ronald Duy, Sr. (Senior) and his wife Rita owned and operated a weed-removal business for lakeshore property owners under the name R & J Weed Removal. They sometimes employed their son Ronald Duy, Jr. (Junior). In March of 2001, the Duys sold the business to a competitor, appellant Lake Weed-A-Way, owned by Gregory and Jessica Cheek. The terms of the contract required the Cheeks to pay a $50,000 down payment and $12,000 monthly payments from April to October for four years. The asset purchase agreement listed the name of the business, client contracts, business records, and certain equipment used in the application of aquatic herbicides.
Section 7.1.4 of the asset purchase agreement also contained a noncompete clause that prevented Senior and Rita from
directly or indirectly, either as a principal, agent, employee, employer, or in any other individual or representative capacity, engaging in the selling and/or soliciting and/or promoting the sale of and/or servicing after sale and/or supervising others in selling and/or soliciting or promoting the sale of those services substantially similar to those services which are being purchased by Buyer.
(Emphasis added.) Section 1.2 of the agreement allowed the Duys to continue offering services for mechanical weed removal. After the sale, Senior and Rita renamed their business Aquatic Plant Management and engaged in retail sales of aquatic herbicides. Junior subsequently started his own company called Minnesota Shoreline Restoration, which at times engaged in the application of aquatic herbicides.
After April of 2002, Lake Weed-A-Way stopped making payments directly to the Duys, placing them instead in an escrow account. In May of 2002, Lake Weed-A-Way sent a cease-and-desist demand to the Duys, including Junior, stating that the Duys were performing aquatic herbicide applications in violation of the noncompete clause. Senior and Rita immediately responded by letter that there had been no violation of the noncompete clause and that Junior, as a nonsignatory to the agreement, could not be held to the terms of the noncompete clause. In August of 2002, Lake Weed-A-Way informed the Duys that it was rescinding the asset purchase agreement because of acts and omissions by the Duys, including the application and retail sale of aquatic herbicides. Lake Weed-A-Way also informed the Duys that no more payments would be placed in escrow.
In February of 2003, the Duys (including Junior and Minnesota Shoreline Restoration) filed the present action in the district court, claiming that Lake Weed-A-Way had breached the asset purchase agreement by failing to tender payments. Lake Weed-A-Way filed a counterclaim alleging breach of contract, fraudulent inducement, and misrepresentation, and added a third-party claim against Junior and Minnesota Shoreline Restoration alleging tortious interference with contract.
In September and October of 2003,
the parties made cross-motions for summary judgment. In January of 2004, the district court issued
its order granting summary judgment in favor of the Duys, and stating that the
sole remaining issue for trial was the Duys’ damages. Following a hearing, the district court
issued an order in June of 2004 awarding damages, costs, and attorney fees to
the Duys but denying their request for declaratory and injunctive relief.
Summary judgment is
appropriate if the pleadings, depositions, other discovery materials, and
supporting affidavits show that there are no disputed material facts and a
party is entitled to judgment as a matter of law.
Lake Weed-A-Way argues that
the district court inappropriately granted summary judgment in favor of the
Duys by resolving disputed material facts.
Lake Weed-A-Way presents
several factual disputes that it claims should have been resolved by a jury to
find whether Lake Weed-A-Way’s obligations under the asset purchase agreement
had been excused or discharged, or that the agreement had been rescinded. “Rescission is the unmaking of a
contract . . . which not only terminates the contract but
abrogates it and undoes it from the beginning.”
Johnny's, Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990)
(citing Abdallah, Inc. v. Martin, 242
The first factual dispute
The district court found this alleged representation not actionable for two reasons. First, the alleged representation referred to a future fact, not a past or present fact. Second, Gregory Cheeks admitted during his deposition that the Duys had never stated to him that Junior “could never be treated or improve to the point where he could at least to some extent perform some applications” and that Junior had told him that his condition could be treated. Lake Weed-A-Way does not dispute the district court’s future-fact analysis, but rather argues that “if the Duys . . . knew that Junior’s condition was subject to improvement . . . they had a duty to tell the whole truth.” However, we hold that the district court properly concluded, in light of the legal standard for rescission because of a misrepresentation, that the alleged misrepresentation would not have been actionable.
The second issue of
material fact relevant to rescission is
To overcome a motion for summary judgment, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 587, 106 S. Ct. at 1356; see also Minn. R. Civ. P. 56.05 (stating that “an adverse party may not rest upon mere the averments or denials of the adverse party’s pleading but must present specific facts showing that there is a genuine issue for trial”). Lake Weed-A-Way’s appellate brief does not point to specific facts that would allow a jury to find concealment on the part of the Duys. Rather, it merely alleges their “deliberate concealment and obfuscation.” Therefore, the district court’s grant of summary judgment with respect to this allegation was appropriate.
Next, Lake Weed-A-Way argues that the district court ignored a genuine issue of material fact regarding the Duys’ appropriation of proprietary designs for herbicide application equipment. Lake Weed-A-Way alleges that while Senior was consulting aboard a Lake Weed-A-Way herbicide-application boat, he learned everything he could about its equipment, design, and processes, and then passed the information to Junior, who created a “virtually identical” system. The district court concluded that, even if this allegation were found to be true, the application systems would not be considered “Confidential Information” under a covenant not to compete executed by the parties in addition the asset purchase agreement.
The relevant paragraph provides that
[a]ll information concerning the Business, including, but not limited to customer lists and pricing information, and all notes, analyses, compilations, studies, or other documents, including any copies or extracts thereof, which contain or otherwise reflect such information is referred to as Confidential Information. [Senior and Rita] agree that neither will use the Confidential Information in any way that is detrimental to or in competition with Buyer, and that such information will be kept confidential . . . .
The district court stated that the spray applicator system was not confidential information because it “did not ‘contain or otherwise reflect’ customer lists or pricing information that Buyers intended to protect.” Lake Weed-A-Way argues that this ruling is erroneous because spray applicator systems, while not specifically identified, fall under the category of “all information concerning the business.”
Both of these interpretations miss the point of the covenant not to compete and its definition of confidential information. That document was executed incident to the sale of the Duys’ business to the Cheeks, and any reference to “the Business” involves the assets purchased by Lake Weed-A-Way from the Duys, not proprietary designs owned by Lake Weed-A-Way prior to the sale. Lake Weed-A-Way has not identified a similar covenant relevant to Senior’s subsequent consultancy. Therefore, summary judgment was appropriate in favor of the Duys.
A fourth issue of material
fact relevant to rescission is whether Lake Weed-A-Way introduced substantial
evidence that the Duys’ actions resulted in Lake Weed-A-Way’s loss of a
particular customer to Junior’s business, Minnesota Shoreline
Restorations. Lake Weed-A-Way argues
that the district court “credited Junior’s testimony” in granting summary
judgment on this issue. The district
court acknowledged that the customer in question stated that
A first example is the
deposed testimony of a former
Lake Weed-A-Way maintains
that the clause is ambiguous because it can and should be read to prevent the
Duys from engaging in the retail sale of aquatic herbicide products, not merely
The district court examined
the noncompete clause in light of the entire asset purchase agreement, and
determined that it was not the parties’ intent to proscribe the Duys from
selling aquatic herbicide products to retail customers. The district court considered
Lake Weed-A-Way maintains
that the asset purchase agreement, read as a whole, does not specifically
exclude the sale of aquatic herbicide products; therefore, one should infer
that the sale of those products is contemplated under the noncompete
clause. But a court should not speculate
so as to alter the unequivocal language of an agreement. Kuhlmann v. Educ. Publishers, 245
The district court relied upon the contract principle expressio unius est exclusio alterius (“the expression of specific things in a contract implies the exclusion of all not expressed”) in finding that the parties’ failure to include any mention of a prohibition on continued product sales required it to construe the noncompete agreement to apply only to services—namely, the application of aquatic herbicides. In light of the plain language of the asset purchase agreement, we affirm with the district court’s conclusion that the noncompete clause of the asset purchase agreement was unambiguous.
The Duys sought declaratory
and injunctive relief following summary judgment based on two separate
noncompete provisions in the asset purchase agreement that safeguarded their
rights in the event of non-payment by Lake Weed-A-Way. The district court agreed that such relief
was authorized by the agreement, but found such relief inappropriate under the
common-law doctrine of election of remedies, which forbids inconsistent
remedies and seeks to prevent double redress of a single wrong. Northwestern State Bank, Osseo v. Foss,
Because the district court’s analysis depended upon its grant of summary judgment in favor of the Duys on their breach-of-contract claim, and because we are reversing that summary judgment, we decline to reach the issue of whether the denial of declaratory and injunctive relief was in error.
Affirmed in part, reversed in part, and remanded.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.