This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).

STATE OF MINNESOTA

IN COURT OF APPEALS

C5-96-1465

Paul J. Guck, et al.,

Appellants,

vs.

Dave Kahnke,

Respondent.

Filed February 25, 1997

Affirmed in Part, Reversed in Part

Short, Judge

Cass County District Court

File No. CX94312

Wilbert E. Hendricks, Hendricks Law Firm, Third and Barclay Avenue, P.O. Box 90, Pine River, MN 56474 (for appellants)

Victor H. Smith, Smith Law Office, P.O. Box 160, Walker, MN 56484 (for respondent)

Considered and decided by Short, Presiding Judge, Amundson, Judge, and Harten, Judge.

U N P U B L I S H E D O P I N I O N

SHORT, Judge

This case involves allegations of trespass and breach of contract relating to the cutting of trees pursuant to a forest management plan. Paul Guck, Robert Tyra, Brian Guck, Bradley Guck, Robert Grygar, and Richard Grygar (landowners) jointly own 320 acres of forested land in Cass County. One of the landowners, Robert Grygar (Grygar), signed a timber sale contract with Dave Kahnke (logger) to log certain types of timber. The contract prohibited the cutting of oak trees, provided for damages for the cutting of nondesignated timber equal to three times the timber's scale value, and contained an arbitration clause.

After the logger allegedly cut and damaged a number of oak trees, the landowners brought suit against him on a trespass theory, claiming treble damages under Minn. Stat. § 548.05. Finding the landowners were bound by the contract's liquidated damages and arbitration provisions, the trial court granted summary judgment in the logger's favor and dismissed the lawsuit. On appeal, the landowners argue the trial court: (1) erred in finding arbitration, rather than litigation, was the proper dispute resolution process for the allegedly wrongful timber cutting; and (2) abused its discretion by awarding $2,752 in attorney fees and costs to the logger. The logger also moves this court for attorney fees and costs incurred in defending this appeal. We affirm on the merits, but reverse the trial court's award of fees and costs and decline to award any fees or costs on appeal.

D E C I S I O N

On appeal from summary judgment, we determine whether there are any genuine issues of material fact and whether the trial court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990); see Minn. R. Civ. P. 56.03 (setting forth trial court standard for summary judgment). While we view the evidence in the light most favorable to the party opposing the motion, the nonmovant must produce specific facts that create an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986); Grondahl v. Bulluck, 318 N.W.2d 240, 242 (Minn. 1982). Contract interpretation presents questions of law, which are subject to de novo review. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979).

I.

The landowners argue the trial court erred in finding they are bound to arbitrate their claims against the logger because: (1) Grygar's signature did not bind them to the contract; (2) the contract's liquidated damages provision does not provide an exclusive remedy; and (3) the contract's arbitration clause does not apply to this dispute. We disagree.

First, to prove an agent acted on behalf of a principal under the theory of apparent authority, a party must demonstrate: (1) the principal held the agent out as having authority; (2) the person who dealt with the supposed agent had knowledge of this "holding out" at the time of dealing; and (3) the manifestation of apparent authority was by the principal's actions, not the agent's. Truck Crane Serv. Co. v. Barr-Nelson, Inc., 329 N.W.2d 824, 826 (Minn. 1983) (quoting Hockemeyer v. Pooler, 268 Minn. 551, 562, 130 N.W.2d 367, 375 (1964)). A court may also find apparent authority on the basis of ratification when the agent has "regularly exercised some power not expressly given to it and the principal, knowing of the practice, tacitly sanctions its continuance." Vacura v. Haar's Equip., Inc., 364 N.W.2d 387, 391 (Minn. 1985). The record demonstrates that the landowners: (1) participated in discussions that resulted in the decision to log their property; (2) entered into a forest management plan agreement with the Minnesota Department of Natural Resources, which plan listed Grygar as the "contact" person; (3) jointly solicited bids for timber removal; (4) unanimously accepted the logger's bid; (5) knew Grygar signed the timber sale contract on their behalf; (6) received "up front" money collected from the logger; (7) monitored the logger's timber clearing; and (8) never objected to Grygar's representation of them. Given these facts, the trial court correctly determined the landowners are bound to the timber sale contract.

Second, when contracting parties state the consequence of a breach, that remedy is exclusive. See Independent Consol. Sch. Dist. No. 24 v. Carlstrom, 277 Minn. 117, 120-21, 151 N.W.2d 784, 786-87 (1967) (recognizing parties' stipulation of breach remedies in contract, if reasonable and intended as exclusive, is controlling and trumps other remedies). The timber sale contract provides:

Only timber designated in section V shall be cut and removed. Whenever any un-designated trees are cut or needlessly damaged, the Purchaser shall pay for them at a rate of three (3) times their scale value.

The liquidated damages provision clearly provides a specific remedy for any wrongful cutting of timber. There is nothing to suggest the parties were not dealing at arm's length or that the provision created an undue advantage to either. Thus, to the extent the landowners want to dispute a provision of their contract, they must do so pursuant to the contract's arbitration clause. That contractual clause provides:

In case of dispute over the terms of this contract, the final decision shall rest with an arbitration board of three persons, one to be selected by each party to this contract and a third to be selected by the other two members.

The landowners argue this case does not involve a "dispute over the terms of the contract," and insist that the issue is the value of the wrongfully taken timber. We disagree. The parties hold conflicting views as to whether the liquidated damages provision is an "exclusive remedy" and as to what constitutes "undesignated trees." Under these circumstances, the trial court properly dismissed the case in favor of the logger's right to arbitrate.

II.

This court must uphold a trial court's award of attorney fees pursuant to either Minn. Stat. § 549.21 (1996) or Minn. R. Civ. P. 11, unless the trial court abused its discretion in awarding the fees. Uselman v. Uselman, 464 N.W.2d 130, 145 (Minn. 1990). The trial court awarded the logger attorney fees and costs on the basis that "equity and reasonableness dictate a splitting of * * * [Kahnke's] attorney's fees between the parties." There are no findings that the landowners brought this action in bad faith or to delay the proceedings or harass the logger. After a careful review of the record, we conclude the trial court abused its discretion by awarding fees and costs without explanation or factual justification. Therefore, we reverse the award of fees and costs and decline to award any fees or costs on appeal.

Affirmed in part, reversed in part.