This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1721

 

Ronald Duy, et al.,

Respondents,

 

vs.

 

Lake Weed-A-Way, Inc.,

d/b/a Professional Lake Management,

a Michigan corporation, et al.,

defendants and third party plaintiffs,

Appellants,

 

vs.

 

Minnesota Shoreline Restoration, Inc.,

third party defendant,

Respondent.

 

Filed May 17, 2005

Affirmed in part, reversed in part, and remanded

Gordon W. Shumaker, Judge

 

Crow Wing County District Court

File No. C1-03-0382

 

 

 

Lonny D. Thomas, Jonathan T. Trexler, Thomas & Associates, P.A., 35258 County Road 3, P.O. Box 720, Cross Lake, MN 56442 (for respondents)

 

David Bradley Olsen, Henson & Efron, P.A., Suite 1800, 220 South Sixth Street, Minneapolis, MN 55402-4503 (for appellants)

 

            Considered and decided by Shumaker, Presiding Judge; Dietzen, Judge; and Poritsky, Judge.*

U N P U B L I S H E D   O P I N I O N

GORDON W. SHUMAKER, Judge

Appellants contest the district court’s grant of summary judgment to resolve a dispute in contract.  The district court stated that a noncompete clause contained in the contract was not ambiguous and that respondents had not violated the noncompete clause after the sale of their business to Lake Weed-A-Way.  Appellants also contest the district court’s grant of summary judgment in favor of respondents on appellants’ claims of breach of contract, misrepresentation, and tortious interference with contract.  Respondents contest the district court’s denial of declaratory and equitable relief.  We affirm in part, reverse the grant of summary judgment on the issue of an alleged violation of a noncompete agreement, and remand for further proceedings consistent with this opinion.

FACTS

            Respondents Ronald Duy, Sr. (Senior) and his wife Rita owned and operated a weed-removal business for lakeshore property owners under the name R & J Weed Removal.  They sometimes employed their son Ronald Duy, Jr. (Junior).  In March of 2001, the Duys sold the business to a competitor, appellant Lake Weed-A-Way, owned by Gregory and Jessica Cheek.  The terms of the contract required the Cheeks to pay a $50,000 down payment and $12,000 monthly payments from April to October for four years.  The asset purchase agreement listed the name of the business, client contracts, business records, and certain equipment used in the application of aquatic herbicides. 

Section 7.1.4 of the asset purchase agreement also contained a noncompete clause that prevented Senior and Rita from

directly or indirectly, either as a principal, agent, employee, employer, or in any other individual or representative capacity, engaging in the selling and/or soliciting and/or promoting the sale of and/or servicing after sale and/or supervising others in selling and/or soliciting or promoting the sale of those services substantially similar to those services which are being purchased by Buyer.

 

(Emphasis added.)  Section 1.2 of the agreement allowed the Duys to continue offering services for mechanical weed removal.  After the sale, Senior and Rita renamed their business Aquatic Plant Management and engaged in retail sales of aquatic herbicides.  Junior subsequently started his own company called Minnesota Shoreline Restoration, which at times engaged in the application of aquatic herbicides.

            After April of 2002, Lake Weed-A-Way stopped making payments directly to the Duys, placing them instead in an escrow account.  In May of 2002, Lake Weed-A-Way sent a cease-and-desist demand to the Duys, including Junior, stating that the Duys were performing aquatic herbicide applications in violation of the noncompete clause.  Senior and Rita immediately responded by letter that there had been no violation of the noncompete clause and that Junior, as a nonsignatory to the agreement, could not be held to the terms of the noncompete clause.  In August of 2002, Lake Weed-A-Way informed the Duys that it was rescinding the asset purchase agreement because of acts and omissions by the Duys, including the application and retail sale of aquatic herbicides.  Lake Weed-A-Way also informed the Duys that no more payments would be placed in escrow.

            In February of 2003, the Duys (including Junior and Minnesota Shoreline Restoration) filed the present action in the district court, claiming that Lake Weed-A-Way had breached the asset purchase agreement by failing to tender payments.  Lake Weed-A-Way filed a counterclaim alleging breach of contract, fraudulent inducement, and misrepresentation, and added a third-party claim against Junior and Minnesota Shoreline Restoration alleging tortious interference with contract. 

            In September and October of 2003, the parties made cross-motions for summary judgment.  In January of 2004, the district court issued its order granting summary judgment in favor of the Duys, and stating that the sole remaining issue for trial was the Duys’ damages.  Following a hearing, the district court issued an order in June of 2004 awarding damages, costs, and attorney fees to the Duys but denying their request for declaratory and injunctive relief.  Lake Weed-A-Way appeals from the January 2004 and June 2004 orders.  The Duys contest the denial of relief in the June 2004 order.

D E C I S I O N

 

I.

 

Summary judgment is appropriate if the pleadings, depositions, other discovery materials, and supporting affidavits show that there are no disputed material facts and a party is entitled to judgment as a matter of law.  Minn. R. Civ. P. 56.03.  A genuine issue of material fact is one based on substantial evidence; that is, evidence legally sufficient to withstand a directed verdict at trial.  DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997).  The district court must not weigh the evidence or decide issues of fact, but only determine whether genuine factual issues exist.  Id.  The nonmoving party must present enough evidence to show that its theory of the case is “reasonable” rather than “merely possible.”  Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356 (1986)).  We view the evidence in a light most favorable to the nonmoving party.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

Lake Weed-A-Way argues that the district court inappropriately granted summary judgment in favor of the Duys by resolving disputed material facts.  Lake Weed-A-Way contests the district court’s determination that it was presented with no disputed facts which would allow a jury to find in Lake Weed-A-Way’s favor on either its defensive or affirmative claims for relief.

Lake Weed-A-Way presents several factual disputes that it claims should have been resolved by a jury to find whether Lake Weed-A-Way’s obligations under the asset purchase agreement had been excused or discharged, or that the agreement had been rescinded.  “Rescission is the unmaking of a contract . . . which not only terminates the contract but abrogates it and undoes it from the beginning.”  Johnny's, Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990) (citing Abdallah, Inc. v. Martin, 242 Minn. 416, 420, 65 N.W.2d 641, 644 (1954)).  “Rescission is justified by a material breach of contract.”  Id.

The first factual dispute offered by Lake Weed-A-Way concerns its allegation that Senior and Rita during the sales negotiations falsely represented that Junior had a degenerative condition that would keep him from applying aquatic herbicides.  The Cheeks stated during discovery that they would have required Junior to sign a noncompete agreement if they had known of his potential for recovery from the condition.  “The party seeking rescission of a contract based on misrepresentation in the inducement bears the burden of proving by a fair preponderance of the evidence all the elements in its action.”  S. Minn. Mun. Power Agency v. City of St. Peter, 433 N.W.2d 463, 469 (Minn. App. 1988).  The district court held that Lake Weed-A-Way needed to show that the Duys: (1) made a false representation of past or existing material fact; (2) did so with knowledge of its falsity or a disregard for its truth; (3) intended to induce the Cheeks to rely on the statement; and (4) the representation caused the Cheeks to rely on it.  See id. (identifying 11 elements to prove actionable misrepresentation, including relation to “a past or present fact”).

The district court found this alleged representation not actionable for two reasons.  First, the alleged representation referred to a future fact, not a past or present fact.  Second, Gregory Cheeks admitted during his deposition that the Duys had never stated to him that Junior “could never be treated or improve to the point where he could at least to some extent perform some applications” and that Junior had told him that his condition could be treated.  Lake Weed-A-Way does not dispute the district court’s future-fact analysis, but rather argues that “if the Duys . . . knew that Junior’s condition was subject to improvement . . . they had a duty to tell the whole truth.”  However, we hold that the district court properly concluded, in light of the legal standard for rescission because of a misrepresentation, that the alleged misrepresentation would not have been actionable. 

The second issue of material fact relevant to rescission is Lake Weed-A-Way’s allegation that Senior and Rita intended from the beginning to continue the retail sale of chemicals but hid this fact from the Cheeks.  Lake Weed-A-Way asserts that the Duys concealed this intention by removing the word “products” from the noncompete agreement at the last minute.  The district court found that the evidence before it did not support that assertion, noting that: (1) the Duys’ attorney sent a letter five weeks before closing informing the Cheeks that the agreement—which the Cheeks themselves had adapted from a previous transaction—“needs to be limited only to a portion of the business that deals with herbicide applications and/or treatments”; (2) the Cheeks received the edited agreement six hours before the closing and testified that they did not read it; and (3) the Cheeks did not have an attorney review the document before, during, or after the closing.

To overcome a motion for summary judgment, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.”  Matsushita, 475 U.S. at 587, 106 S. Ct. at 1356; see also Minn. R. Civ. P. 56.05 (stating that “an adverse party may not rest upon mere the averments or denials of the adverse party’s pleading but must present specific facts showing that there is a genuine issue for trial”).  Lake Weed-A-Way’s appellate brief does not point to specific facts that would allow a jury to find concealment on the part of the Duys.  Rather, it merely alleges their “deliberate concealment and obfuscation.”  Therefore, the district court’s grant of summary judgment with respect to this allegation was appropriate.

Next, Lake Weed-A-Way argues that the district court ignored a genuine issue of material fact regarding the Duys’ appropriation of proprietary designs for herbicide application equipment.  Lake Weed-A-Way alleges that while Senior was consulting aboard a Lake Weed-A-Way herbicide-application boat, he learned everything he could about its equipment, design, and processes, and then passed the information to Junior, who created a “virtually identical” system.  The district court concluded that, even if this allegation were found to be true, the application systems would not be considered “Confidential Information” under a covenant not to compete executed by the parties in addition the asset purchase agreement. 

The relevant paragraph provides that

[a]ll information concerning the Business, including, but not limited to customer lists and pricing information, and all notes, analyses, compilations, studies, or other documents, including any copies or extracts thereof, which contain or otherwise reflect such information is referred to as Confidential Information.  [Senior and Rita] agree that neither  will use the Confidential Information in any way that is detrimental to or in competition with Buyer, and that such information will be kept confidential . . . .

 

The district court stated that the spray applicator system was not confidential information because it “did not ‘contain or otherwise reflect’ customer lists or pricing information that Buyers intended to protect.”  Lake Weed-A-Way argues that this ruling is erroneous because spray applicator systems, while not specifically identified, fall under the category of “all information concerning the business.” 

Both of these interpretations miss the point of the covenant not to compete and its definition of confidential information.  That document was executed incident to the sale of the Duys’ business to the Cheeks, and any reference to “the Business” involves the assets purchased by Lake Weed-A-Way from the Duys, not proprietary designs owned by Lake Weed-A-Way prior to the sale.  Lake Weed-A-Way has not identified a similar covenant relevant to Senior’s subsequent consultancy.  Therefore, summary judgment was appropriate in favor of the Duys.

A fourth issue of material fact relevant to rescission is whether Lake Weed-A-Way introduced substantial evidence that the Duys’ actions resulted in Lake Weed-A-Way’s loss of a particular customer to Junior’s business, Minnesota Shoreline Restorations.  Lake Weed-A-Way argues that the district court “credited Junior’s testimony” in granting summary judgment on this issue.  The district court acknowledged that the customer in question stated that Lake Weed-A-Way had failed to respond to his request for a bid, and that Lake Weed-A-Way had “failed to introduce any evidence that can be disputed at trial that [the Duys’] actions resulted in the loss of this account.”  Our review of the record reveals evidence that could support a conclusion that the Duys provided their son with customer information. 

A first example is the deposed testimony of a former Lake Weed-A-Way manager who, after finding out that the account was lost to Minnesota Shoreline Restorations, called Senior to find out what he knew about the company.  The manager said that Senior replied that he had no knowledge of Minnesota Shoreline Restorations.  Another example is Junior’s statement that he compiled his customer solicitation list from a public listing of DNR permits.  Jessica Cheek testified that she cross-referenced the names of those potential customers who could not have been obtained from DNR records and found them all to be former customers of the Duys.  These facts could lead a jury to conclude that the Duys had aided their son in finding potential customers for his chemical-application business, and thus breached the noncompete clause of the asset purchase agreement.  Therefore, the district court intruded upon the role of fact-finder by granting summary judgment on the issue of the Duys’ alleged violation of the noncompete agreement.  

II.

 

Lake Weed-A-Way argues that the district court erred by construing as unambiguous the noncompete clause of the asset purchase agreement.  Whether a contract is reasonably susceptible to more than one interpretation is a question of law, and we owe no deference to the district court’s determination of ambiguity.  Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643-44 (Minn. App. 1985), review denied (Minn. June 24, 1985).  “The interpretation of a contract is a question of law if no ambiguity exists, but if ambiguous, it is a question of fact and extrinsic evidence may be considered.”  City of Virginia v. Northland Office Props. Ltd. P’ship, 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991).

Lake Weed-A-Way maintains that the clause is ambiguous because it can and should be read to prevent the Duys from engaging in the retail sale of aquatic herbicide products, not merely their application.  Lake Weed-A-Way contends that, read as a whole, the asset purchase agreement confirms its argument.  See Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 293, 135 N.W.2d 681, 685 (1965) (stating that “[t]he intention of the parties must be gathered from the entire instrument and not from isolated clauses” (quoting Country Club Oil Co. v. Lee, 239 Minn. 148, 152, 58 N.W.2d 247, 249 (1953)).

The district court examined the noncompete clause in light of the entire asset purchase agreement, and determined that it was not the parties’ intent to proscribe the Duys from selling aquatic herbicide products to retail customers.  The district court considered Lake Weed-A-Way’s claim that section 1.2 of the asset purchase agreement, read in conjunction with the noncompete clause (section 7.1.4), prohibits the Duys from continuing to engage in sales.  Section 1.2 provides that mechanical removal of weeds and affiliated equipment were “specifically excluded” from the transaction.  The noncompete clause states that the Duys were not allowed to sell, or solicit or promote the sale “of those services substantially similar to those services which are being purchased by Buyer.”  (Emphasis added.)

Lake Weed-A-Way maintains that the asset purchase agreement, read as a whole, does not specifically exclude the sale of aquatic herbicide products; therefore, one should infer that the sale of those products is contemplated under the noncompete clause.  But a court should not speculate so as to alter the unequivocal language of an agreement.  Kuhlmann v. Educ. Publishers, 245 Minn. 171, 176, 71 N.W.2d 889, 893 (1955).  And if the terms of an agreement—in the present example, “services”—are not specifically defined, they must be given their plain, ordinary, and popular meaning.  Smith v. St. Paul Fire & Marine Ins. Co., 353 N.W.2d 130, 132 (Minn. 1984).

The district court relied upon the contract principle expressio unius est exclusio alterius (“the expression of specific things in a contract implies the exclusion of all not expressed”) in finding that the parties’ failure to include any mention of a prohibition on continued product sales required it to construe the noncompete agreement to apply only to services—namely, the application of aquatic herbicides.  In light of the plain language of the asset purchase agreement, we affirm with the district court’s conclusion that the noncompete clause of the asset purchase agreement was unambiguous.

III.

 

The Duys sought declaratory and injunctive relief following summary judgment based on two separate noncompete provisions in the asset purchase agreement that safeguarded their rights in the event of non-payment by Lake Weed-A-Way.  The district court agreed that such relief was authorized by the agreement, but found such relief inappropriate under the common-law doctrine of election of remedies, which forbids inconsistent remedies and seeks to prevent double redress of a single wrong.  Northwestern State Bank, Osseo v. Foss, 293 Minn. 171, 177, 197 N.W.2d 662, 666 (1972).

Because the district court’s analysis depended upon its grant of summary judgment in favor of the Duys on their breach-of-contract claim, and because we are reversing that summary judgment, we decline to reach the issue of whether the denial of declaratory and injunctive relief was in error. 

Affirmed in part, reversed in part, and remanded.