Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Peder E. Mark,
Burnie J. Trepanier, et al.,
Filed March 17, 1998
Beltrami County District Court
File No. C9961157
Thomas L. D'Albani, 205 Seventh St., P. O. Box 978, Bemidji, MN 56619 (for appellants)
Carl C. Drahos, 1005 Paul Bunyan Dr. NW, P. O. Box 1468, Bemidji, MN 56619 (for respondent)
Considered and decided by Huspeni, Presiding Judge, Schumacher, Judge, and Mulally, Judge.[*]
Appellants challenge the trial court's findings of fact, the rescission of their real estate contract with respondent, and the award of costs and attorney fees to respondent. Because there was no error in the trial court's decisions, we affirm.
Respondent Peder E. Mark is 83 years old. He takes prescription drugs for high blood pressure, suffers occasional forgetfulness, and has a tendency to break down in stressful situations. He was educated until the age of twelve; i.e., until about the sixth grade. He has no wife or children and no immediate family presently living near him. In 1996, he decided to sell his family's 240-acre Beltrami County farm where he had lived his entire life.
On May 18, 1996, appellants Burnie Trepanier and Marlyce Trepanier visited respondent at his farm; the parties had never met except for one possible instance many years before. After rejecting a series of lower offers, respondent agreed to sell the farm to appellants for $70,000, with a $300 down payment. Appellant Marlyce Trepanier prepared a short note that stated "paid down cash $300, balance due $69,700"; it was signed by both parties. On the back of the note, appellants added that respondent must vacate the premises by September 1, 1996. Though the final contract stated that respondent could stay until October 1996, respondent mistakenly believed that he could remain on the farm as long as he wanted.
Between May 18 and May 29, appellants visited respondent every day and developed a relationship with him that included making him dinner, agreeing to write his memoirs, and taking him to social functions. Appellants also convinced respondent to purchase their van; he now asserts that he does not even have a driver's license. Shortly after purchasing the van, respondent was in an accident and "totaled" the vehicle. Appellants handled the insurance claim.
A formal contract for deed was prepared by appellants' attorney, Darrell Carter, and was signed on May 29, 1996. The terms of the contract included a $70,000 purchase price, with a $5,000 down payment, and a balance of $65,000 to be paid at $200 per month with no interest for 27 years. Pursuant to the terms of a separate escrow agreement, appellants were allowed to purchase any 40-acre parcel of the farm for one-sixth of the contract price, including the 40-acre parcel that contained all of the farm buildings and was the only means of access to the other 200 acres. The contract required respondent to pay all real estate taxes for 1996, attorney fees, and the cost of a title opinion. Respondent did not read the contract before signing it.
In September 1996, respondent filed a complaint asking the court to rescind or reform the real estate contract because of undue influence, fraud, and mistake. After a bench trial, the court rescinded the contract and awarded respondent costs and attorney fees. Appellants' motions for amended findings, judgment notwithstanding the verdict, and a new trial were denied.
Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.
Minn. R. Civ. P. 52.01. Appellants present an extensive list of findings of fact that they assert are not supported by the evidence.
First, appellants argue that the court erroneously found that respondent was subject to memory lapses. The record supports this finding, however. Respondent testified that he has recently tended to forget things. In addition, Lori Fillipi, a representative of Northern National Bank, testified that on two occasions respondent had to be reminded that he had a $35,000 certificate of deposit at the bank.
Next, appellants challenge the court's finding that respondent had only "some ability to read." On direct examination, respondent was asked if he could read, and he replied: "Well, poorly." This finding has support in the record and is consistent with someone who was educated only until the age of twelve.
Appellants also challenge the court's finding that respondent's vocational background was farming, arguing that he made his money buying and selling personal property. Respondent testified that his occupation is doing farm work, and though he has bought and sold some personal property, the only real estate transaction he has been involved in was the sale of 80 acres of property for cash. There is no merit in appellants' challenge to this finding.
Appellants also challenge the court's finding that the property had a value of not less than $70,000 with an assessor's estimated market value of $58,000. According to Marlyce Trepanier's testimony, the assessed value of the farm was $59,300. According to appraiser Charles Quistgard's testimony, the value of the farm was $70,000. The court did not err in making its findings according to this testimony.
Next, appellants challenge the court's determination that respondent did not understand the terms of the contract and that he was not aware of the lack of interest provision. Respondent testified that on the day that he signed the agreement, he did not know about the lack of interest provision and did not know or understand the escrow provision. He also testified that he would not have signed the agreement if he had known those terms.
Appellants also challenge the finding that a reasonable person would not enter into an arms-length transaction where the present value of the deal was so much less than the actual value of the land. Due to the lack of a provision for interest, the present value of the contract was one-half its appraised value. Darrell Carter testified that the standard interest rate on real estate contracts in Bemidji is between eight and ten percent and that the Internal Revenue Service can impute up to five percent interest on a contract for deed that does not provide for interest. The court's finding that a reasonable person would not agree to these terms was not clearly erroneous.
Appellants also challenge the court's determination that the escrow provisions were not ordinary and reasonable. Carter testified that he would not have recommended that a client sign a contract that allows a party to use timber from the land being sold to pay for the contract. Carter's testimony demonstrates that the provision was not ordinary and reasonable.
Appellants challenge the court's determination that a prudent seller would not pay all of the buyer's attorney fees or real estate taxes; however, Carter also testified that property taxes are usually prorated so that the seller pays only the taxes as long as he remains on the property. Since respondent was permitted to stay until October 1, it was not clearly erroneous to find that a prudent person would not continue to pay property taxes on land that he did not live on.
Appellants also challenge the finding that Carter acted as respondent's fiduciary. Carter himself admitted on cross-examination that he considered himself to be the fiduciary for both parties in drafting the escrow provisions. Appellants challenge the court's determination that, even if all the terms of the contract had been disclosed to respondent, he would not have "known, appreciated or understood the document." Considering respondent's advanced years, tendency to forget, and limited education and ability to read, this finding of fact was not clearly erroneous.
Lastly, appellants challenge the court's findings that they had an inclination to exercise undue influence over respondent. Appellants and respondent had no prior relationship before May 18, 1996, when they began visiting him every day, feeding and entertaining him. This, coupled with the tainted nature of the real estate contract, demonstrates an inclination to exercise undue influence.
None of the court's findings of fact is clearly erroneous based on the testimony in the record.
2. Contract rescission
"The question of undue influence is usually one of fact." Appeal of Borstad, 232 Minn. 365, 371, 45 N.W.2d 828, 832 (1951). Findings of fact will not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01.
Where a confidential relationship exists, a showing of opportunity to exercise undue influence, an inclination to do so, and a resulting disposition of property which ignores the natural recipients is usually sufficient to establish undue influence.
Norlander v. Cronk, 300 Minn. 471, 475-76, 221 N.W.2d 108, 112 (1974). The court found that a confidential relationship existed between appellants and respondent because attorney Carter was appellants' agent, and he drafted the agreement for both parties.
The evidence also indicates that appellants had an opportunity to exercise undue influence over respondent. Appellants spent the days between their initial meeting and the signing of the contract making respondent dinner, telling him they would write his memoirs, taking him to social events, and convincing him to buy their van. Because respondent lives alone and has no immediate family near him, these actions demonstrate an opportunity to exercise undue influence.
In addition, many factors indicate the inclination to exercise undue influence. Both the lack of an interest provision in the contract and the terms of the escrow provision demonstrate that the contract was not one that a reasonable person would have entered. Also, respondent's mistaken belief that he could remain on the property as long as he wished further indicates appellants' inclination to exercise undue influence. These terms not only show an inclination to exercise undue influence; they demonstrate actual undue influence. The contract was properly rescinded based on undue influence.
b. Unilateral mistake
Even if undue influence alone were insufficient to justify rescission, the presence of respondent's unilateral mistake would permit rescission. We reject appellants' argument that the court erred in rescinding the contract because "[a] unilateral mistake * * * is not a basis for rescission unless there is ambiguity, fraud, [or] misrepresentation, or where the contract may be rescinded without prejudice to the other party." Speckel v. Perkins, 364 N.W.2d 890, 893 (Minn. App. 1985). "Rescission of a contact for mistake * * * is ordinarily founded upon either mutual mistake of the parties or a mistake by one induced or contributed to by the other." Gethsemane Lutheran Church v. Zacho, 258 Minn. 438, 443-44, 104 N.W.2d 645, 649 (1960).
In rescinding the contract based on respondent's unilateral mistake, the court found that:
[Appellants] and/or their agents failed to disclose material facts to [respondent], including the lack of interest and the impact this lack of interest would have upon the value of the contract, who normally pays attorney's fees, the length of this contract, who normally pays real estate taxes, and the elimination of a right to remain at the property.
In its memorandum, the court noted:
Equitable rescission is justified here, as the record includes clear evidence of [respondent's] mistake in entering into this transaction, as well as ample evidence of [appellants'] inducement of and contribution to [respondent's] mistake.
The trial court found, and the evidence indicates, that appellants induced respondent's mistake as to many important aspects of this contract.
Respondent testified that he did not understand that the contract did not include interest and that he did not know that he could not live indefinitely on the farm. Respondent also testified that he was told by appellants that he would be paid in $5,000 monthly installments until the contract was paid off. Further, respondent testified that he did not understand that appellants could pay for any 40-acre tract of land and then assume full ownership of that tract.
Respondent was mistaken as to these important provisions of the contract, and his mistake was induced by appellants' words and actions. Even if the court could not rescind the real estate contract based on undue influence, it could rescind the contract based on respondent's unilateral mistake. See Gethsemane, 258 Minn. at 443-44, 104 N.W.2d at 649.
3. Attorney fees and costs
a. Attorney fees
Appellant argues that the trial court erred in awarding attorney fees to respondent and challenges respondent's request for appellate attorney fees. The statute governing the award of attorney fees, Minn. Stat. § 549.21 (1996), was recently repealed and replaced with Minn. Stat. § 549.211 (Supp. 1997), which became effective on August 1, 1997. Because Minn. Stat. § 549.21 applies to causes of action that arose before August 1, 1997, we use it to examine the award of attorney fees stemming from the trial court action. However, because appellants filed their notice of appeal on August 4, 1997, any award of appellate attorney fees is governed by Minn. Stat. § 549.211.
A decision to award attorney fees will not be reversed absent an abuse of discretion. See Radloff v. First American Nat'l Bank, 470 N.W.2d 154, 156 (Minn. App. 1991), review denied (Minn. July 24, 1991). Attorney fees may be awarded upon a finding that a party acted in bad faith, asserted a claim that was frivolous, or asserted an unfounded position solely to delay the proceedings. Minn. Stat. § 549.21 (1996). A "good faith dispute over the interpretation of a contract * * * is not an appropriate case for the allowance of attorneys' fees." Peters v. Fenner, 294 Minn. 488, 489, 199 N.W.2d 795, 796 (1972).
The trial court in this case held that appellants attempted to enforce a contract that was created through the abuse of a fiduciary relationship and the use of undue influence. This holding does not indicate that the parties were involved in a good-faith contract dispute. Given the court's broad discretion and the circumstances surrounding this case, we affirm the trial court's decision to award attorney fees according to Minn. Stat. § 549.21.
Respondent also seeks appellate attorney fees. According to Minn. Stat. § 549.211, subd. 4, a request for attorney fees must be made separately from all other motions or requests and must describe the specific conduct that violates the statute. In his statement of the case, respondent simply said: "[T]he judgment should be affirmed along with an award of additional appellate attorney fees." Even if we were to find that this constituted a separate motion for attorney fees, respondent failed to explain what aspect of appellant's conduct on appeal violated the statute and warranted attorney fees. As a result, we deny respondent's request for appellate attorney fees.
b. Damage award
Appellants argue that the trial court erred in awarding respondent 9% interest on the value of his property from the contract date until the date that the property is returned to him. "Granting equitable relief is within the sound discretion of the trial court. Only a clear abuse of that discretion will result in a reversal." Nadeau v. County of Ramsey, 277 N.W.2d 520, 524 (Minn. 1979).
By awarding respondent 9% interest from the contract date, the court attempted to put the parties in the same position that they were in before the contract was created. This remedy was a means to reimburse respondent for the use of his farm by appellants according to an invalid contract. Because appellants had the benefit of possession of the farm, the court did not abuse its discretion by requiring them to pay respondent for its use.
[*] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
 Respondent would have been 110 years old at the completion of the contract.