may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Richard F. Galbraith, M.D.,
The Minneapolis Clinic of Neurology, Ltd.,
Filed April 29, 1997
Toussaint, Chief Judge
Hennepin County District Court
File No. 958515
Karl L. Cambronne, Jeffrey D. Bores, Chestnut & Brooks, P.A., 3700 Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, MN 55402 (for appellant)
George A. Koeck, Bianca Zick, Matthew E. Klein, Dorsey & Whitney LLP, 220 South Sixth Street, Suite 1300, Minneapolis, MN 55402-1498 (for respondent)
Considered and decided by Kalitowski, Presiding Judge, Toussaint, Chief Judge, and Mansur, Judge.[*]
Appellant Richard F. Galbraith, M.D., argues that the trial court erred by (1) concluding there was no contract between Galbraith and respondent Minneapolis Clinic of Neurology, Ltd. (the Clinic), (2) relying on parol evidence to interpret the agreement, and (3) concluding the Clinic did not breach the agreement. Because the trial court properly found that neither the Clinic's unilateral compensation policy nor the memorandum memorializing that policy created a contract, we affirm. We need not address the interpretation and breach issues due to our determination that no contract was formed.
In 1992, Galbraith contends he and the Clinic agreed to a compensation contract. Galbraith and Dr. James Allen, president of the Clinic, discussed Galbraith's proposal that he receive 17% of the Clinic's overall profits. Based on Galbraith's assurances that he would maintain his workload until retirement, Allen wrote a letter to the Clinic's board of directors recommending Galbraith's compensation as follows:
1) 17% guarantee through the end of the next fiscal year beginning June 1, 1993.
2) 16% guarantee from June 1, 1994 through May 31, 1995.
3) 15% guarantee from June 1, 1995 to May 31, 1996.
4) No further guarantee after that time as Dr. Galbraith will have reached the age of 65 and may be considering retirement or a reduced level of activity at that point.
The board of directors approved Allen's proposal.
Shortly after the board of directors approved Galbraith's new compensation structure, Galbraith contacted Mr. Ellis "Bud" Olson, the Clinic's administrative director, and asked him to commit the board of directors' action to writing. Olson drafted a memo reflecting the board's action regarding Galbraith's compensation and sent it to Galbraith for his approval. Neither the board of directors nor Allen gave Olson the authority to prepare this memorandum.
The trial court found that the board's action amounted to a unilateral compensation policy rather than a contract. Likewise, the trial court found that Olson's memorandum was not a binding contract; rather, it was merely a memorialization of the board's compensation policy.
Galbraith alleges the trial court erred by concluding the board's unilateral compensation policy did not create a contract. Galbraith argues the trial court inappropriately relied on Caton v. Board of Educ. of City of Minneapolis, 213 Minn. 165, 166-67, 6 N.W.2d 266, 268 (1942), for the proposition that "[a] statement of policy issued by an administrative board does not create any contractual rights."
Galbraith alleges Caton is not applicable to this case because (1) Caton addressed the contractual effect of a local government body's resolution; here the Clinic is not a local government body, and (2) the plaintiff in Caton had no signed agreement, whereas here Galbraith and the Clinic extensively negotiated Galbraith's guaranteed compensation and reduced it to a signed writing. Galbraith's attempt to distinguish Caton is unpersuasive. First, in Caton the court did not base its opinion on the fact a local government body was issuing the policy statement. Second, the facts in Caton do not reveal whether and to what extent the plaintiff negotiated with the school board. For the aforementioned reasons we conclude that the trial court's reliance on Caton was proper.
Galbraith argues the trial court erred in determining that the board's compensation decision was "unilateral." If a contract is unilateral, the offeree is not bound to perform at all, and the offerer is not bound to perform until performance by the offeree; but upon the performance by the offeree, the proposal of the offerer is converted into a binding promise. Ellsworth v. Southern Minn. Ry. Extention Co., 31 Minn. 543, 18 N.W. 822 (1884). The existence of a contract must be determined on the basis of the evidence presented and the surrounding circumstances. Western Insulation Services, Inc. v. Central National Ins. Co. of Omaha, 460 N.W.2d 355, 358 (Minn. App. 1990). In order to find a contract there must be a meeting of minds concerning the contract's basic elements. Minneapolis Cablesystems v. City of Minneapolis, 299 N.W.2d 121, 122 (Minn. 1980. Furthermore, the parties' outward manifestations, not subjective intentions, must indicate that a contract was formed. Bergstedt, Wahlberg, Bergstedt v. Rothchild, 302 Minn. 476, 479, 225 N.W.2d 261, 263 (Minn. 1975).
In furtherance of his argument Galbraith notes that the compensation package resulted from a series of negotiations between him and the board which culminated in the signed agreement that was presented to him in memorandum form. Galbraith maintains that when he signed the memorandum and returned it to Olson, the requisite acceptance occurred and a binding contract was formed. This argument cannot withstand scrutiny.
The board never "offered" Galbraith the compensation package through Olson's memorandum. It was at Galbraith's initiative, not the board's, that this memorandum was prepared. Moreover, the board never authorized the preparation of the memorandum and indeed never saw the memorandum before Galbraith signed it. Also, because Olson had no authority to bind the board, and therefore the Clinic, the trial court properly found that the board's decision was "unilateral" and not a binding contract.
Appellant argues the memorandum on its own was a binding contract. This argument is without merit, primarily because the record establishes that the Clinic did not intend for the memorandum to function as a contract. In addition, neither the board nor the shareholders approved of the memorandum and Olson had no authority to contractually bind the Clinic. Although Galbraith may have subjectively intended that the memorandum serve as a contract, it is the parties' objective manifestations that determine whether a contract exists. Bergstedt, 225 N.W.2d at 263.
Galbraith argues the memorandum must be construed as a contract because it unambiguously provides Galbraith with a "guarantee" that he will receive a percentage of the EMG profit margins. Galbraith relies primarily upon the existence of the unambiguous "guarantee" language included in the memorandum, as well as the holding in Carl Bolander & Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974) (stating that where the language of a contract is plain and unambiguous, the contract's meaning should be determined pursuant to the parties' plainly expressed intent without construction). This is not persuasive.
Galbraith's interpretation of the memorandum as a contract based on the word "guarantee" renders a significant portion of the memorandum meaningless and fails to give effect to the whole memorandum. Such determinations must be avoided by courts. See Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 526 (Minn. 1990) (holding that the court must avoid interpretation of a contract that renders a provision meaningless and must construe a contract as a whole and attempt to harmonize all clauses of the contract). More specifically, the memorandum provides that the purpose of the stipend is to compensate Galbraith for his EMG Lab directorship duties. Galbraith's proposed interpretation, on the other hand, would entitle him to the EMG stipend regardless of whether he was performing his directorship duties or practicing medicine at the Clinic. Such a construction is directly in conflict with the Clinic's plainly expressed intent not to "guarantee" Galbraith a stipend unconditionally. Allen's concern that Galbraith maintain his workload until retirement lends support to that fact.
Because Galbraith's reading severely limits the intended meaning of the document, we hold that the trial court correctly concluded that the memorandum drafted by Olson was merely a memorialization of the board's unilateral policy decision and not a contract. As a result of our finding that no contract exists between the parties, we need not reach Galbraith's arguments pertaining to interpretation and breach.
[ ]* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.