This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF
IN COURT OF APPEALS
A05-1343
Bart Montanari,
Respondent,
Lisa Herda Montanari,
Plaintiff,
vs.
Terence Montpetit,
Appellant,
and
Monties[1]
Resources, L.L.C.,
additional defendant to counterclaim,
Respondent.
Filed July 11, 2006
Affirmed
Peterson, Judge
Washington County District Court
File No. C9-04829
Benjamin S.
Houge, Benjamin S. Houge & Associates,
Michael L. Brutlag, Ryan J. Trucke, Brutlag, Hartmann & Okoneski, P.A., 1100 U.S. Bank Plaza, 200 South Sixth Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Peterson, Presiding Judge; Halbrooks, Judge; and Minge, Judge.
U N P U B L I S H E D O P I N I O N
PETERSON, Judge
On appeal in this business dispute, appellant argues that (1) respondent-buyer defaulted under the contract by selling timber and land without consulting appellant; (2) the district court erred in concluding that contract notice provisions were ambiguous and finding that respondent-buyer was not in default under them; and (3) appellant was entitled to attorney fees under the contract. Respondents argue that this appeal is barred under doctrines of mootness and judicial estoppel. Based on our conclusions that buyer did not default under the contract by selling timber and land and that the district court properly construed the notice provisions, we affirm.
Lisa Herda Montanari (Herda Montanari) and appellant Terence Montpetit each owned a 50% interest in respondent Monties Resources, LLC, a Tennessee limited liability company. On May 30, 2003, respondent Bart Montanari (Montanari) and Montpetit entered into a membership interest purchase agreement under which Montanari purchased Montpetit’s interest in Monties. The purchase agreement incorporates additional documents, including a promissory note and a membership-interest pledge agreement.
A provision in the purchase agreement requires monthly payments. The required payments were late several months in a row. Then, on January 5, 2004, Montpetit’s attorney sent a certified letter to Montanari’s business office providing written notice of default under the purchase agreement due to Montanari’s failure to make the payment that was due January 1, 2004. Montanari testified that he did not actually receive the certified letter providing notice of nonpayment until January 22, 2004. On January 30, 2004, Montanari attempted to tender the January payment, and Montpetit refused to accept it.
The promissory note contains the following default and notice provisions:
7. As used herein, the term “Event of Default” shall mean the occurrence of one or more of the following:
a. The Borrower shall fail to pay any amount required to be paid by the Borrower under this Note within fourteen (14) days after receipt of written notice of non-payment from the Holder; . . . or
c. Without the prior written consent of the Holder, Borrower shall not sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer any of the properties or assets of [Monties] Resources, LLC, a Tennessee limited liability company (the “Company”), or any part thereof, or permit the properties or assets of the Company or any part thereof to be sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise transferred.
8. Upon the occurrence of an Event of Default or at any time thereafter, the outstanding principal balance hereof and accrued interest and all other amounts due hereon shall, at the option of the Holder, become immediately due and payable, without notice or demand.
The purchase agreement contains a contradictory notice provision: “Any notices given under this Agreement will be in writing and sent, by prepaid registered or certified mail, to the respective party at such party’s address . . . . Any notice will be deemed given when mailed.”[2]
In February 2004, Montanari and Herda Montanari commenced this action seeking a declaratory judgment that Montanari was not in default under the purchase agreement.[3] The parties stipulated that payments would be made into court pending the outcome of the case and that it would not prejudice either party. The case was tried to the district court, which concluded that Montanari was not in default. The court ordered that the payments deposited with the court be released to Montpetit and also ordered Montanari to pay Montpetit the proceeds from a 2003 land sale. The court denied Montpetit’s request for attorney fees. Judgment was entered accordingly. This appeal followed.
D E C I S I O N
I.
Montanari argues that this appeal is moot because, following the entry of judgment, Montpetit accepted the payments made to the court pursuant to the parties’ stipulation and the proceeds from the land sale and has resumed accepting the monthly payments due under the promissory note.
The
determination of whether a cause of action is moot presents a question of
law. Isaacs
v. Am. Iron & Steel Co., 690 N.W.2d 373, 376 (Minn. App. 2004), review denied (Minn. Apr. 4, 2005). An appeal is moot if an appellate court
cannot provide effectual relief. Chaney v.
Montpetit did not seek to recover only the payments due under the purchase agreement. He also sought the pledged interest in Monties, as provided for in section seven of the pledge agreement, and attorney fees, as provided for in section five of the purchase agreement. These remedies remain available notwithstanding Montpetit’s acceptance of payments; therefore, this appeal is not moot.
Montanari also argues that this appeal is barred by judicial estoppel. The supreme court has expressly declined to recognize the doctrine of judicial estoppel. State v. Profit, 591 N.W.2d 451, 462 (Minn. 1999). Accordingly, we decline to apply it here.
II.
“[T]he primary goal of contract interpretation is to determine and enforce the intent of the parties.” Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003). Whether a contract is ambiguous is a question of law, on which the reviewing court owes no deference to the district court’s determination. Blackburn, Nickels, & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn. App. 1985), review denied (Minn. June 24, 1985). An ambiguous contract is one that, based solely on its plain language, is reasonably susceptible of more than one construction. Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003). If a contract is ambiguous, its meaning is a question of fact, and extrinsic evidence may be considered. City of Va. v. Northland Office Properties Ltd. P’ship, 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991). A district court’s finding of fact will not be overturned unless clearly erroneous. Minn. R. Civ. P. 52.01.
Montpetit argues that timber was Monties’ asset and, therefore, timber sales that occurred without Montpetit’s consent in 2003 and 2004 were events of default under the promissory note. Monties sold $15,354.62 in timber in 2003 and received $244.20 in income from timber sales in 2004. The income derived from the timber sales was used to pay Monties’ ordinary and necessary business expenses.
Section 7.c of the promissory note defines an “event of default” to include the sale of any of Monties’ assets without Montpetit’s prior written consent. The contract is ambiguous in that it does not define the term assets. The dictionary definition of assets is broad enough to include timber owned by Monties. See The American Heritage Dictionary of the English Language III (3rd ed. 1992) (defining asset as a valuable item that is owned and stating that business assets can include cash, stock, inventories, property rights and goodwill).
But a contract
provision is read in the context of the entire contract and interpreted in a
way that gives meaning to all of its provisions while avoiding an
interpretation that would lead to a harsh and absurd result. Brookfield
Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn.
1998). Parties’ intentions are drawn
from the entire instrument, not from isolated clauses. Country
Club Oil Co. v. Lee, 239 Minn. 148, 151, 58 N.W.2d 247, 249 (1953). In construing a contract, courts should
consider the language used in its context and with common sense. Mut.
Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (
The context here is the sale of a business engaged in the ongoing business of selling timber. During the term of the purchase agreement, Monties remained responsible for payment of its expenses. A broad interpretation of the term assets could lead to the harsh and absurd result of leaving Monties without a way of earning income to cover its expenses during the term of the purchase agreement. As the district court found, the purpose of section 7.c was to ensure that Monties’ value was not diminished during the term of the purchase agreement. The evidence in the record does not indicate that a continuation of timber sales was inconsistent with that purpose. The evidence supports the district court’s finding that the parties anticipated that Monties would continue timber sales during the term of the purchase agreement. Specifically, Montanari testified that he and Montpetit discussed section 7.c, and both parties understood that Monties would continue the business of selling timber during the term of the purchase agreement. The district court did not err in finding that the timber sales were not sales of Monties’ assets.
Montpetit argues that a 2004 forced land sale was an event of default under section 7.c. Monties owned a 3/10 interest in a 123-acre parcel of property. On June 12, 2004, the property, including Monties’ interest, was sold pursuant to a Campbell County, Tennessee, Chancery Court order.
Section 7.c defines an “event of default” to include Montanari selling or permitting the sale of any properties, or any part thereof, of Monties without the prior written consent of Montpetit. The district court concluded:
[Montanari] did not sell or voluntarily permit the sale of the 3/10 interest in 123 acres [Monties] owned with [a third party]. Therefore, [Montanari] did not default in the terms of the Promissory Note by selling or permitting that property be sold.
We agree with the district court that section 7.c requires a voluntary act by Montanari for an event of default to occur and that Montanari did not voluntarily sell the 123 acres.
III.
Section 7.a of the promissory note states that an “event of default” occurs when “[t]he Borrower shall fail to pay any amount required to be paid by the Borrower under this Note within fourteen (14) days after receipt of written notice of non-payment from the Holder.” Montpetit argues that the term receipt should be construed to mean when notice is mailed. Montpetit cites section 8.9 of the purchase agreement, which states, “Any notices given under this Agreement will be in writing and sent, by prepaid registered or certified mail, to the respective party at such party’s address . . . . Any notice will be deemed given when mailed.”
The use of the term receipt in the promissory note is inconsistent with the notice term in the purchase agreement, thus creating an ambiguity, which makes interpretation a fact question. The district court found:
The Court finds that [Montanari] had 14 days from his actual receipt of the notice of nonpayment to cure the default. Both parties understood that [Montanari] would have 14 days from the date [Montanari] received notice to cure the default, and [Montpetit] essentially conceded that issue at trial. [Montpetit’s] argument is essentially that the phrase “deemed given when mailed” is synonymous with “deemed given and received when mailed.” The term “received” is essentially argued by [Montpetit] to be incorporated into the word “given.” The parties, however, have not given the same meaning to the words “given” and “received” as is evident from the sale documents. While one document may provide that notice is “given” when mailed, the [pledge agreement] provides that notice is deemed both “given” and “received” and they are not synonymous. Thus, [Montanari] had 14 days to cure the default from the date he actually received the notice of default.
During Montpetit’s testimony, he responded affirmatively to the question, “[W]as it your understanding that [Montanari] would have 14 days after he received the mail to cure the default?” In addition to Montpetit’s concession and the documents cited by the district court, Montanari testified:
Q. . . . [D]id you have an understanding of what was meant by received?
A. If they sent me a notice, certified mail, once I received that I had 14 days to recover from the day I received it.
. . . .
Q. And what was your understanding of the meaning of the word “receipt”?
A. Once I received the notice, the certified letter.
Q. That you had it in hand?
A. That’s correct.
Montanari testified that section 7.a of the promissory note was specifically drafted to provide that protection.
The evidence in the record supports the district court’s finding that Montanari had 14 days from his actual receipt of notice to cure the default. We note that this interpretation is consistent with the rule of contract construction that the specific in a writing governs over the general. See Burgi v. Eckes, 354 N.W.2d 514, 519 (Minn. App. 1984) (stating rule).
On January 5, 2004, Carlson sent a certified letter providing written notice of default due to Montanari’s failure to pay the payment due on January 1, 2004. But the evidence supports the district court’s finding that Montanari did not actually receive the certified letter until January 22, 2004. Montanari attempted to tender the January 2004 payment eight days after receiving the certified letter. Accordingly, the district court properly determined that Montanari was not in default under section 7.a.
IV.
Montpetit argues that he is entitled to attorney fees under section five of the purchase agreement, which provides for an award of attorney fees resulting from a party’s breach of the purchase agreement. Because Montanari was not in default, Montpetit is not entitled to attorney fees.
Affirmed.
[1] Two different spellings for this word are used in the documents in the record. This opinion uses the spelling in the official case title.
[2] The pledge agreement contains a third notice provision, which states that “notices . . . required . . . to be given under and pursuant to this Agreement shall be deemed to have been given and received for all purposes forty-eight (48) hours after mailing . . . if sent by registered or certified mail . . . .”
[3] An accounting claim and counterclaim were dismissed at the start of trial.