may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
James W. Stevens, et al.,
Mark Stevens, et al.,
Winona County District Court
File No. C4-97-274
Michael D. Bernatz, Libera, Libera, & Bernatz, 125 Center Street, P.O. Box 101, Winona, MN 55987 (for respondent)
Considered and decided by Randall, Presiding Judge, Klaphake, Judge, and Willis, Judge.
Appellants James W. and Sandra A. Stevens argue that respondent Charles J. Olsen's unlawful detainer action should have failed because his notice to cancel a contract for deed between the parties improperly included certain amounts as a condition of cure. They claim that this renders the notice to cancel fatally defective. We affirm.
To help out the Stevenses, whom he considered friends, Olsen went with a financing plan wherein he, on his own credit, obtained a loan in the amount of $201,157. The loan agreement executed between the Stevenses and Olsen required Olsen to apply the loan proceeds to purchase the property from AgriBank for $173,000 and then apply $28,157 to satisfy James Stevens's outstanding promissory notes to the bank. Olsen then sold the real property to the Stevenses by executing a contract for deed for the purchase price of $173,000. The Stevenses also delivered a promissory note and security agreement to Olsen for the additional $28,157.
The contract for deed stated that if the Stevenses defaulted on the promissory note and security agreement, it was also a default under the contract for deed, allowing Olsen "to cancel [the] contract or pursue other remedies hereunder." The promissory note stated that it was secured and executed pursuant to the loan agreement and that it is subject to the provisions of the loan agreement, "including provisions for payment or reimbursement of expenses, indemnification, application of payments, cross-defaults, and remedies." The security agreement provided that it was made pursuant to the loan agreement and contained language identical to the promissory note regarding the payment and reimbursement of expenses, indemnification, cross-defaults, and remedies. The loan agreement was subject to the promissory note, security agreement and all "other documents as may be necessary to grant and evidence the security interests, liens and assignments" provided for in the loan agreement and stated that any default under the contract for deed would be a default under the promissory note and security agreements. The Stevenses also agreed to pay or reimburse Olsen for
all out-of-pocket costs and charges related to this agreement and its closing, or incurred as a result of this agreement, including costs and charges payable to the Bank, reasonable fees of attorneys and accountants, additional income taxes and tax preparation fees, life insurance, and any costs of collecting or enforcing obligations under this agreement.
(Emphasis added.) The Stevenses also agreed to
indemnify and save harmless Olsen from any and all loss, charge, expense, or liability, arising from or related to any default or nonperformance * * * under this agreement or any of the transactions contemplated hereby.
On April 14, 1996, the Stevenses failed to make the first annual payment of $39,158.68 on the contract for deed. The parties unsuccessfully mediated the matter pursuant to the Minnesota's Farmer-Lender Mediation Act. Olsen then brought separate actions to cancel the contract for deed and to enforce his interest under the promissory note. The notice to cancel stated that the reason for default was the Stevenses' failure to make the first annual payment of $39,158.68 due under the contract and to pay real estate taxes, plus accrued penalties, in the amount of $817.26. The notice to cancel also listed as a condition of cure the following amounts that resulted from the default and enforcement action:
Late fee for mortgage to Bank $ 1,566.10
Additional accrued interest on mortgage loan $ 2,322.29
Accrued interest on interim financing $ 1,161.04
Cost of obtaining interim financing $ 211.54
Process server's fee for mediation notice $ 25.00
Attorney fees through September 18, 1996 $ 1,156.00
Total: $ 6,441.97
These amounts, according to the notice to cancel, reflect the proportional cost of the default on the contract for deed.
Olsen also commenced unlawful detainer action against the Stevenses, seeking restitution of the property. Olsen claimed that the Stevenses were no longer entitled to possession of the property because they had failed to cure the default specified in the notice to cancel. The Stevenses countered, arguing that the notice to cancel improperly included certain amounts as a condition to cure the default and that the notice to cancel was, therefore, fatally defective.
The district court found that the Stevenses had defaulted on the contract for deed and the promissory note. The district court further found that Olsen had properly served the Stevenses with notice of default and that the notice of cancellation of contract for deed was properly served, included the amounts necessary to cure the default, and that the Stevenses had failed to cure the default as specified in the notice. The district court ordered judgment for immediate restitution of the property to Olsen.
Olsen's unlawful detainer action is premised on the theory that the Stevenses' right to possession of the property was terminated because the contract for deed was canceled. We must therefore determine whether the contract for deed was properly canceled. See Enga v. Felland, 264 Minn. 67, 70-71, 117 N.W.2d 787, 789-90 (1962) (holding defective cancellation of contract for deed on which plaintiffs' unlawful detainer action was based required reversal of district court's judgment of restitution in unlawful detainer action).
"[W]here contracts relating to the same transaction are put into several instruments they will be read together and each will be construed with reference to the other[s]." Anchor Cas. Co. v. Bird Island Produce, Inc., 249 Minn. 137, 146, 82 N.W.2d 48, 54 (1957). Contract construction and effect are questions of law for the court unless there is ambiguity and construction depends on extrinsic evidence, in which case there is a question of fact for the jury. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66, (Minn. 1979).
Here, Olsen's notice to cancel the contract for deed listed the direct default as the Stevenses' failure to make the first annual payment of $39,158.68 due under the contract, to pay real estates taxes plus accrued penalties in the amount of $817.26, to keep the property insured, and to make the first annual payment due pursuant to the promissory note. The Stevenses do not dispute these amounts. Rather, they argue that Olsen cross-referenced the four instruments in such a way to claim as a condition of cure attorney fees in excess of time allowed by Minn. Stat. § 559.21, subd. 2a(5) (1996). This section provides, in part, that a vendor may collect attorney fees actually expended or incurred. Id. The Stevenses argue that the effect of the cross-references is to incorporate, at most, the amount of attorney fees attributable to the default on the promissory note.
The statutory cancellation procedure is intended to give vendees under a contract for deed notice of an impending cancellation and a reasonable period of time to redeem their interest. Conley v. Downing, 321 N.W.2d 36, 39 (Minn. 1982). Absent a showing of prejudice, a notice of cancellation will not be rendered fatally defective by some discrepancies in it. Hoffman v. Halter, 417 N.W.2d 747, 750 (Minn. App. 1988), review denied (Minn. Mar. 28, 1988).
Reading the four instruments together, as we must, the instruments logically cross-reference in such a way as to provide for reasonable attorney fees even though the contract for deed does not itself provide for attorney fees. The contract for deed specifically incorporates the promissory note and security agreement, which in turn, incorporate the loan agreement. Although the contract for deed does not reference the loan agreement, the later does refer to and mention the contract for deed. Paragraph 8 of the loan agreement expressly provides that the Stevenses will pay all of Olsen's out-of-pocket costs and charges incurred in the event of a default of the agreement, including charges to the bank, reasonable attorney fees, and any costs to collect or enforce obligations under the agreement.
Moreover, Paragraph 9 of the loan agreement expressly provides that the Stevenses shall indemnify Olsen and save him harmless from
any and all loss, charge, expense, or liability, arising from or related to any default or nonperformance * * * under this agreement or any of the transactions contemplated hereby.
The contract for deed was a transaction contemplated by loan agreement because the loan agreement specifically refers to the contract for deed. Therefore, the Stevenses should have known that if they defaulted under the contract for deed, they would be responsible for any attorney fees and other costs and fees associated with collecting and enforcing the rights and obligations under the four instruments. See Conley, 321 N.W.2d at 39 (holding condition that attorney fees be paid is not new and unexpected requirement imposed by vendor on vendee because it is statutory requirement that vendee is presumed to be aware). This interpretation is consistent with the parties' intent that Olsen would not profit from the deal nor suffer any loss, but rather that he would serve only as a middle man to obtain financing for the Stevenses because they could not do so on their own.
Under Minn. Stat. § 559.21, subd. 2a(5), Olsen is entitled to attorney fees actually expended or incurred. Here, the Stevenses have made no showing that the attorney fees claimed as a condition of cure were not actually expended or incurred by Olsen as a result of their default. Absent such a showing, we cannot say that the district court erred in allowing Olsen to claim the amount he did for reasonable attorney fees as a condition for cure.
Even assuming Olsen had misstated the amount of attorney fees due as a condition of cure, such misstatement does not render the notice to cancel fatally defective. A notice of cancellation is not rendered invalid simply because it demands attorney fees in excess of the amount allowed by statute. Conley, 321 N.W.2d at 40. A wrong statement of attorney fees is a minor discrepancy that does not automatically render a notice to cancel ineffective. In Karim v. Werner, 333 N.W.2d 877, 878 (Minn. 1983), the supreme court held that the misstatement of attorney fees did not render a notice to cancel invalid, stating that
[w]e decline to hold that such misstatements render cancellation notices fatally defective. Such a misstatement does not compare with a misstatement of the statutory redemption period, which is an error of different magnitude, and renders a cancellation notice ineffective.
Here, the Stevenses have not shown that the inclusion of the disputed amounts in any way prejudiced their ability to redeem the contract for deed. In point of fact, at no time have the Stevenses attempted to tender any amount due under the contract for deed, including amounts that are undisputed. The Stevenses have not made one payment on the property since at least 1994 when the property was foreclosed on by AgriBank. If the Stevenses had tendered the amounts they concede are owed, but Olsen then rejected that tender because it did not include the disputed amounts, the Stevenses could possibly claim prejudicial error. That is not the case before us. On these facts the Stevenses cannot claim any prejudicial error by the inclusion of the disputed amounts.