STATE OF MINNESOTA
IN COURT OF APPEALS
Nevis Lumber, Inc.,
Walker Building Center, et al.,
Filed September 21, 1999
Cass County District Court
File No. C998682
Erick G. Kaardal, Trimble & Associates, Ltd., 11700 Wayzata Boulevard, Minnetonka, MN 55305 (for appellant)
Robert M. Wallner, Rebecca S. Anderson, Fuller, Wallner & Anderson, Ltd., 514 America Avenue Northwest, P.O. Box 880, Bemidji, MN 56619-0880 (for respondents)
Considered and decided by Toussaint, Presiding Chief Judge, Peterson, Judge, and Amundson, Judge.
In this appeal from a judgment denying its claim for specific performance of a purchase agreement, appellant Nevis Lumber, Inc., argues that the district court erred by concluding that the purchase agreement was rescinded by the parties' mutual agreement to abandon it and that the purchase agreement also failed for lack of consideration. We affirm.
The agreement provided that Nevis Lumber would pay $225,000 for the real estate and a noncompete covenant, $100,000 for equipment, and an amount for inventory to be determined according to a formula applied to invoice prices. The formula provided discounts from the inventory price for certain inventory items. On the date the parties signed the purchase agreement, the full invoice value of the inventory on hand was $382,516.20. The scheduled closing date was July 6, 1998.
Before the closing date, a dispute arose between the parties regarding the inventory purchase. Luksik's daughter, Karrin Raue, had made several visits to Walker Building Center, during which she had access to a computer that contained inventory records. During one of those visits, Raue created a report that listed slow-moving inventory, including paint, tools, and cabinetry, with an invoice value of $77,358.73. Raue told Lampert that Nevis Lumber was not planning to purchase certain categories of inventory, including specified brands of paint, tools, and cabinetry.
Cochran called Luksik to discuss the inventory dispute. Cochran testified that:
I said, Wayne [Luksik], I understand there is a substantial amount of inventory that you guys are thinking of not buying, and I've got concerns about that. And he said, well, there is a lot of inventory there that I am concerned about. And I said, Wayne, what formula are you using to determine what you're going to buy and what you are not going to buy. And there was a long pause, and he said, I guess I don't have one. I said, Wayne, how are we - I don't see how we are going to be able to agree on this inventory and his immediate response to me, he said, I guess you are right. I will call John [Valen] and tell him the deal is off.
A short time later, Valen telephoned Cochran and asked what was going on. Cochran testified:
I said, well, the deal is off. If you had talked to Wayne [Luksik] he told you the deal was off. He said that's my understanding. And so I certainly did say the deal was off. I mean Wayne heard me say the deal was off. We had agreed the deal was off.
Cochran then informed Lampert and Jim Griffin, the Walker Building Center manager, that the deal was off.
A few days later, Luksik called Cochran. Cochran testified as follows about their conversation:
[H]e said, he indicated basically what are we going to do, as though we still had an agreement, and in my mind it was done. We had agreed to cancel the deal. I said, Wayne [Luksik], we don't have anything to talk about. I said, you know we cancelled the deal. You guys had a lot of inventory there that you weren't going to buy. He said, yeah, certainly I was up over $70,000.00 and I wasn't done yet.
Luksik instructed Valen to get back the earnest money. Valen went to Alan Roeder, Walker Building Center's attorney, and told him that Nevis Lumber wanted the earnest money back. After consulting with Cochran, Roeder delivered a $1,000 check from the law firm's trust account to Valen, who gave it to Luksik. Shortly after receiving the check, Luksik returned it to Roeder without endorsing it.
Roeder received a letter from Valen that contained a cancellation of the purchase agreement. The letter asked Roeder to have Cochran and Lampert sign the cancellation. The letter also requested return of the earnest money, and at the bottom of the letter, Valen had written, "Earnest money received." Cochran and Lampert were out of town when Roeder attempted to contact them to get the cancellation agreement signed, and neither party signed the agreement.
On about June 22, 1998, Luksik hired a new attorney, Tony Trimble and Associates, to represent Nevis Lumber. Trimble informed the respondents that Nevis Lumber intended to perform the purchase agreement and go through with the closing scheduled for July 6, 1998. On the closing date, Nevis Lumber was ready, willing, and able to perform under the purchase agreement. The respondents maintained that the purchase agreement had been cancelled and refused to sell Walker Building Center to Nevis Lumber.
Nevis Lumber brought this action against the respondents seeking specific performance of the purchase agreement. After a trial, the court found that the purchase agreement was rescinded by the parties' mutual agreement to abandon it and that the purchase agreement also failed for lack of consideration. The court concluded that Nevis Lumber had no rights under the purchase agreement and was not entitled to specific performance or any other remedy, and judgment was entered in favor of respondents.
Specific performance is an equitable remedy addressed to the sound discretion of the trial court. Accordingly, we will not interfere unless the trial court clearly abuses that discretion.
Flynn v. Sawyer, 272 N.W.2d 904, 910 (Minn. 1978) (citations omitted).
[T]he parties to a bilateral contract may rescind the contract by mutual consent. Rescission of a contract by agreement or abandonment requires an offer and acceptance or, in other words, the mutual consent of the parties. Mutual rescission requires an intent to rescind on the part of both parties. Mutual assent to rescind a contract, like mutual assent to form one, may be inferred from the attendant circumstances and conduct of the parties. A repudiation of a contract by one party, acquiesced in by the other, is tantamount to a rescission.
Minnesota Ltd., Inc. v. Public Utils. Comm'n, 296 Minn. 316, 318-19, 208 N.W.2d 285-86 (1973) (citations omitted). "In determining contractual intent, the question is not what a party may have subjectively intended but what intent his words and acts objectively manifest." Id. at 321, 208 N.W.2d at 287.
Nevis Lumber argues that as a purchaser, it did not abandon the purchase agreement because (1) it did not default under the purchase agreement, (2) a purchaser may make an offer to modify the terms of a purchase agreement without the offer constituting an abandonment of the purchase agreement, and (3) the seven-day period during which it failed to perform before pursuing its rights under the purchase agreement did not establish abandonment.
Nevis Lumber contends that what the trial court characterized as an abandonment--Nevis Lumber's alleged refusal to purchase certain categories of inventory according to the formula in the purchase agreement--was actually an alleged default, and that respondents failed to follow the procedures set forth in the contract to terminate the contract upon the alleged default.
But the trial court did not simply characterize Nevis Lumber's alleged refusal to purchase inventory according to the formula in the purchase agreement as an abandonment. Based on the entire chain of events that followed Nevis Lumber's statement that it did not intend to purchase the entire inventory, the trial court concluded that the parties mutually agreed to abandon the purchase agreement. Nevis Lumber argues that the parties' conduct during this chain of events did not manifest mutual assent to an agreement to terminate the purchase agreement. We disagree.
Luksik told Cochran that he would call Valen and tell him that the deal was off. Luksik then told Valen that the deal was off and instructed him to get back the earnest money. Although neither Cochran nor Lampert signed the cancellation agreement drafted by Valen, apparently because they were out of town, their statements and conduct indicate that they considered the purchase agreement to be cancelled. They returned the earnest money, and Cochran told Valen, Luksik, Lampert, and Griffin that the deal was off. This conduct objectively manifested assent by both parties to rescind the purchase agreement. The evidence amply supports the trial court's conclusion that the parties mutually abandoned the purchase agreement.
In Mathwig v. Ostrand, 132 Minn. 346, 348, 157 N.W. 589, 589 (1916), the supreme court stated:
The plaintiff contends that there cannot be an abandonment since the enactment of the [1913 version of Minn. Stat. § 559.21], providing that the vendor may terminate a contract to convey by the service of a notice as therein provided. The method prescribed by the statute has been held the exclusive method of terminating the contract by the vendor. It is likened to a foreclosure of the vendee's equity of redemption. While this is the exclusive method by which the vendor may terminate the vendee's rights in the contract it does not follow that the vendee may not by abandonment lose his rights. There is in the statute nothing inconsistent with giving full effect to an actual abandonment. The primary purpose of the statute is to prevent the vendor taking advantage, through a provision in the contract, or otherwise, of the vendee's failure to make payments on time or of other defaults and depriving him of his rights in the property without a definite notice of cancellation. It is not its purpose to relieve him of the effect of an abandonment of an unperfected equitable title; and we hold that such title may be lost by abandonment.
Although the statutory notice procedures were not followed, the supreme court upheld the district court's finding of abandonment. Id. at 350, 157 N.W. at 590.
Minn. Stat. § 513.05 (1998) provides:
Every contract * * * for the sale of any lands, or any interest in lands, shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, is in writing and subscribed by the party by whom the lease or sale is to be made, or by the party's lawful agent thereunto authorized in writing; and no such contract, when made by an agent, shall be entitled to record unless the authority of such agent be also recorded.
Nevis Lumber cites no authority applying the statute of frauds to a mutual abandonment of a real estate purchase agreement. Nevis Lumber's position is inconsistent with caselaw applying the doctrine of abandonment by conduct to real estate contracts. See, e.g., In re Application of Berman, 310 Minn. 446, 453, 247 N.W.2d 405, 409 (1976) (contract for deed vendees' failure to actively assert their interest in subject property, coupled with long period of arrearage, justified conclusion of abandonment).
Because the record supports the trial court's conclusion that the purchase agreement was rescinded, Nevis Lumber did not establish the contract by clear, positive, and convincing evidence, and the trial court did not abuse its discretion by denying the request for specific performance. Because the conclusion that the agreement was rescinded independently supports the denial of Nevis Lumber's request for specific performance, we will not address the trial court's separate conclusion that the purchase agreement was not supported by consideration.