This opinion will be unpublished and
                  may not be cited except as provided by
               Minn. Stat. § 480A.08, subd. 3 (1994)

                          State of Minnesota
                            in Court of Appeals

     Daniel L. Groetsch, et al.,


Anthony G. Groetsch, et al.,

Filed October 15, 1996
Schumacher, Judge

Stearns County District Court

File No. CX943687

Mark F. Uphus, 310 East Main Street, Melrose, MN 56352 (for Respondents)

John R. Koch, Reichert, Wenner, Koch & Provinzino, P.A., 501 St. Germain,
Post Office Box 1556, St. Cloud, MN 56302 (for Appellants)

Considered and decided by Schumacher, Presiding Judge, Toussaint, Chief
Judge, and Klaphake, Judge.

                        Unpublished Opinion

SCHUMACHER, Judge (Hon. Donald M. Spilseth, District Court Trial

Appellants Anthony G. and Mary Ann Groetsch challenge the trial court's
order and judgment for specific performance of an oral contract with
respondents Daniel L. and Kathleen V. Groetsch. We affirm.

Appellants are the parents of respondent Daniel Groetsch. Respondent
Kathleen Groetsch is Daniel's wife. A few years after graduating from high
school in the mid-1970s, Daniel returned to work on his parents' farm for a
modest salary. He testified that ``the rest was going back into the farm,''
and he thought that some day he would get part of the farm. Daniel
testified that he worked full-time 6 days a week, 14 to 18 hours per day.
On January 1, 1986, Daniel and Anthony entered into an oral agreement to
establish a farming partnership, in which profits and losses were divided
60 percent to Anthony and 40 percent to Daniel.

The farming operation consisted of two farms, which the parties call ``Farm
One'' and ``Farm Two.'' In 1986, appellants decided to structure a gift of
Farm Two to respondents. According to a contract for deed drafted by
appellants' attorney, appellants were to sell Farm Two to respondents for
$100,000, payable in installments of $20,000 down and $20,000 during each
of the next four years. Appellants gave respondents three annual $20,000
``statements of gift'' representing forgiveness of $60,000 on the contract
for deed.

When they signed the contract for deed, respondents were not represented by
an attorney. Daniel testified that he ``glanced'' and ``looked'' at the
contract for deed, but did not read it. He said its purpose was to ``take
care of [appellants'] tax needs.'' He testified that the document was never
intended to be an agreement between the parties about Farm Two. Respondents
were never given a copy of the document.

According to respondents, the parties orally agreed that appellants would
give them Farm Two if respondents continued to work on the farm for five
years, beginning January 1, 1986. Mary Ann testified that it was not her
intention to sell Farm Two to respondents, but rather to give it to them
``if we could live there after we retire.'' Anthony testified that he never
intended that respondents would make payments on the contract for deed. He
said once the contract was signed and all the statements of gift had been
given, respondents would own Farm Two ``if they stayed farming.''

Respondents took possession of the land, buildings, and home located on
Farm Two in 1986 and paid property taxes on it for eight years. They said
they spent 6 to 7 hours each week and $5,462 making numerous improvements
to the property.

In 1992, the parties discussed the sale of the remainder of appellants'
farm to respondents, but when negotiations failed, Daniel withdrew from the
farming operation. Appellants served respondents with a statutory notice of
cancellation of the contract for deed, and respondents initiated this
action. Following a court trial, the trial court concluded that respondents
were entitled to specific performance of the oral agreement providing for
the conveyance of Farm Two.

When the trial court sits without a jury, we review the findings to
determine whether they are clearly erroneous, either without substantial
evidentiary support or based on an erroneous conclusion of law. Reserve
Mining Co. v. State, 310 N.W.2d 487, 490 (Minn. 1981). ``The
construction and effect of a contract are questions of law for the court
*** .'' Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn.

1. Appellants argue that the trial court erred by finding there was an oral
agreement that respondents would receive ownership of Farm Two if they
lived and worked on the farm for five years. We disagree.

To create a binding unilateral contract,
        [t]he offer must be definite in form and must be
        communicated to the offeree. Whether a proposal is
        meant to be an offer for a unilateral contract is
        determined by the outward manifestations of the
        parties, not by their subjective intentions.

Pine River State Bank v. Mettille, 333 N.W.2d 622, 626 (Minn. 1983). One
party's ``mere understanding'' does not constitute a contract. Bardwell
v. Witt, 42 Minn. 468, 471, 44 N.W. 983, 984 (1890).

Although the parties did not testify about the precise occasion when the
offer was made, there is substantial evidence supporting the trial court's
finding. Kathleen testified that appellants said they would give
respondents Farm Two over a five-year period as long as ``Danny was doing
almost all the labor, the extra work.'' Daniel testified that the parties
had an ``agreement that if I had stayed and worked, after five years [Farm
Two] would be mine.''

2. Appellants contend the trial court's order for specific performance is
erroneous because it recognizes an oral contract that contradicts the
written contract for deed. The trial court determined:
        The evidence further supports the assertion that the
        Contract for Deed in this instance was not a
        contract at all, but was merely created in order to
        meet the tax needs of [appellants]. None of the
        parties ever expected [respondents] to make the
        payments called for in the Contract for Deed
        indeed, the parties were well aware that
        [respondents] would be unable to make the called for

Parol evidence is generally not admissible to vary, contradict, or alter
the terms of a final and integrated written agreement. Hruska v.
Chandler Assocs., Inc., 372 N.W.2d 709, 713 (Minn. 1985). However,
        [i]n determining whether parol evidence is
        admissible, a distinction is drawn between evidence
        tending to show that no contract has ever been made
        and evidence to contradict, vary, or add to the
        terms of a written contract.

Hamilton v. Boyce, 234 Minn. 290, 292, 48 N.W.2d 172, 173-74 (1951). Thus,
        [e]vidence is admissible to show that the parties,
        in effect, never entered into a binding agreement
        because the written agreement was intended as a

Hruska, 372 N.W.2d at 714.

Substantial evidence supports the trial court's finding that the parties
never intended to form a binding contract. Anthony testified that the
purpose of the contract for deed was ``for tax wise.'' Further, he
explicitly acknowledged that he did not intend for the contract for deed to
be enforceable, and he did not intend for respondents to make payments on
the contract. Daniel testified that he never intended for the contract for
deed to be an agreement among the parties regarding Farm Two. Moreover,
respondents never received a copy of the contract, they were not
represented by an attorney, appellants (and their attorney) said the

purpose of the contract was to address their tax concerns, none of the
parties commented on the non-delivery of the final two statements of gift,
and except for one payment made at the direction of an accountant,
respondents did not make and appellants did not request the interest
payments due under the contract.

3. Appellants argue that the oral agreement regarding Farm Two is not
enforceable under the statute of frauds. The statute of frauds requires an
agreement to be in writing if it creates an interest in land or by its
terms cannot be performed within one year. Minn. Stat. §𨹙.01(1),
513.04 (1994).

We conclude that the doctrine of part performance removes this case from
the statute of frauds. See Burke v. Fine, 236 Minn. 52, 55, 51
N.W.2d 818, 820 (1952) (explaining doctrine of part performance). The
supreme court has explained:
        To take a parol grant or gift of land out of the
        statute of frauds, there must be, not only an
        acceptance, a taking of possession under and in
        reliance upon the contract, but such a performance
        in the way of making valuable improvements as would
        make it substantial injustice or fraud to hold the
        grant or gift void under the statute.

Hayes v. Hayes, 126 Minn. 389, 394, 148 N.W. 125, 127 (1914).

It would be a substantial injustice to void the agreement here under the
statute of frauds. In addition to paying property taxes, respondents made
the following improvements: (1) adding fencing, (2) landscaping, (3)
replacing underground water lines, (4) replacing a roof and chimney, (5)
installing a new furnace, (6) adding a new entry to the house's basement,
(7) building and attaching to the house 34 shutters, (8) demolishing and
removing a chicken coop, and (9) painting the house and granary. See
Evenson v. Aamodt, 153 Minn. 14, 16-18, 189 N.W. 584, 585 (1922)
(upholding oral gift of land where farmer gave son possession of farm and
son painted and re-roofed barn, installed cement floor and stone
foundation, rearranged stalls, painted and re-roofed granary, painted and
repaired house, and built or repaired other out buildings and fences);
Hayes, 126 Minn. at 392, 148 N.W. at 126 (upholding oral gift where
son, who possessed farm for 17 years, added to farm by purchasing adjoining
parcels, constructed buildings, paid taxes and insurance, and planted and
harvested crops each year).

4. Appellants argue that respondents were equitably estopped from enforcing
an oral contract that conflicted with the contract for deed because a party
who accepts a transfer of property must accept it according to the terms of
the transfer. See Suske v. Straka, 229 Minn. 408, 417, 39 N.W.2d
745, 751 (1949) (party cannot accept gift and retain benefits of
transaction and at same time repudiate it). Suske is distinguishable,
however, because that transaction involved strictly a gift. See id. at 413,
39 N.W.2d at 749. Here, the transfer of Farm Two was conditioned on
respondents' continuing work on the farm.

5. Appellants contend that because the contract for deed was statutorily
cancelled under Minn. Stat. 𨺇.21 (1994), any right of action arising
from the transaction terminates. See West v. Walker, 181 Minn. 169,
171, 231 N.W. 826, 827 (1930) (neither vendee nor vendor could assert claim
against each other arising out of land transaction after cancellation was
complete); Gatz v. Langenfeld & Sons Constr., 356 N.W.2d 716, 718
(Minn. App. 1984) (once statutory notice served and cancellation effected,
any cause of action based on contract terminates). Here, however,
respondents' claim is not based on the cancelled contract, but on the oral