This opinion will be unpublished and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

A05-2241

 

Carlyle Eckart,

Respondent,

 

vs.

 

Engelking Corporation,

Appellant.

 

Filed September 26, 2006

Affirmed

Willis, Judge

 

St. Louis County District Court

File No. 69-C4-03-603383

 

Robin C. Merritt, Anna C. Mickelson, Hanft Fride, P.A., 1000 U.S. Bank Place, 130 West Superior Street, Duluth, MN  55802-2094 (for respondent)

 

Jacqueline A. Dorsey, Mary L. Hahn, Hvistendahl, Moersch & Dorsey, P.A., 311 South Water Street, P.O. Box 651, Northfield, MN  55057-0651 (for appellant)

 

            Considered and decided by Willis, Presiding Judge; Dietzen, Judge; and Ross, Judge.

 U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

            In this appeal from a judgment awarding respondent the deed to a house in Duluth, appellant argues that the district court erred by finding that there was an enforceable oral contract for deed between the parties, that the oral contract was taken out of the statute of frauds by respondent’s complete performance, and that appellant was estopped from denying the existence of the parties’ oral contract.  Because the record supports the district court’s findings of an oral contract for deed and respondent’s complete performance, we affirm.

FACTS

The dispute here concerns a house in Duluth.  In 1980, respondent Carlyle Eckart began renting the house, and, at some point, Eckart’s girlfriend moved in with him, and eventually she bought the house, subject to a mortgage.  Sometime in the summer of 1995, Eckart learned that his girlfriend had fallen behind on her mortgage payments and that the house was in foreclosure, and he unsuccessfully sought financing to buy the house. 

In January 1996, Eckart asked for assistance from his then-friend Gerald Engelking, an officer of appellant Engelking Corporation.[1]  Eckart and Engelking agreed that Eckart would pay Engelking $6,500, and Engelking would then purchase the house out of foreclosure and sell it to Eckart for the purchase price that Engelking paid, plus any expenses incurred.  The parties agreed that Eckart would pay Engelking $6,500 each year toward the price that Engelking paid to purchase the house.  Eckart claims that these payments were also to be applied to any ownership expenses Engelking incurred; Engelking asserts that Eckart was to pay all ownership expenses, including utilities, property taxes, insurance, and maintenance and repair costs, and that the $6,500 payments were to be applied only to the amount Engelking paid for the house and expenses related to that purchase.  Although Engelking testified that he “expected some return on [his] money,” no rate of interest was agreed on.

On January 26, 1996, Eckart paid Engelking $6,500.  On February 2, 1996, Engelking purchased the house out of foreclosure for $19,141.49.  On January 29, 1997, Eckart paid Engelking an additional $6,500.  In March 1997, Engelking received an insurance check for $6,418.01 for smoke damage at the house.  Eckart repaired the malfunctioning furnace and the smoke damage at his own expense and testified that Engelking agreed to apply the insurance proceeds to the amount Eckart owed to purchase the house. 

In January 1999, Eckart paid Engelking $39,688.73 that Eckart inherited from his father.  Eckart believed that this lump-sum payment and the previous payments completed his agreement with Engelking and that Engelking would give him a deed to the house.  After the lump-sum payment, Eckart had paid Engelking a total of $59,106.74.  But in May 1999, in a letter to Eckart’s son, who had power of attorney for Eckart, Engelking stated that the “purchase price” for the house was then $43,700, that there were “credits against that purchase price” of $37,771.22, and that Eckart still owed $6,337.53.  Eckart made no additional payments to Engelking and continued to live in the house. 

            In September 2003, Engelking served Eckart with a notice of cancellation of contract for deed.  In response, in November 2003, Eckart filed a suit, seeking, inter alia, specific performance of the parties’ oral contract for deed for the Duluth house.  In December 2003, the district court issued a temporary order that found the notice of cancellation to be defective because it failed to specify the amounts claimed to be in default, enjoined Engelking from attempting to terminate the parties’ oral contract, and scheduled a trial on the merits of Eckart’s complaint.  A trial was held in July 2005. 

In September 2005, the district court issued an order finding that the parties had entered into an oral agreement regarding the Duluth house and that, as of January 1999, Eckart had paid Engelking substantially more than was due under that agreement.  The district court concluded that the oral agreement is enforceable, despite the statute of frauds, because of Eckart’s complete performance and that, alternatively, Engelking is estopped from denying the existence and enforceability of the parties’ oral agreement.

The district court recognized that, in addition to the purchase price, Engelking incurred other expenses relating to the house.  At trial, Engelking claimed to have paid $13,629 in property taxes; $1,500 for utilities; approximately $1,000 in documented miscellaneous expenses and repairs; approximately $2,000 to $3,000 for repairs of damage caused when pipes at the house froze; and between $1,300 to $1,600 annually for homeowner’s insurance, although only a $400 payment in 1996 was documented.  The district court found that Engelking “incurred expenses in connection with the property including the initial purchase and interest calculated at the statutory rate, in a total amount that was less than or equal to the amount paid by [Eckart] to [Engelking].”  The district court ordered Engelking to execute and deliver the deed to the house to Eckart.  This appeal follows.

D E C I S I O N

I.

Engelking argues that no enforceable oral contract for deed existed between the parties because there was no meeting of the minds as to essential contract terms, such as the purchase price for the property and the interest rate.  Generally, the existence of a contract and the terms of the contract are questions of fact for the district court.  TNT Properties, Ltd. v. Tri-Star Developers LLC, 677 N.W.2d 94, 101 (Minn. App. 2004).  Findings of fact shall not be set aside on appeal unless clearly erroneous.  Minn. R. Civ. P. 52.01.  If there is reasonable evidence tending to support the district court’s findings of fact, this court will not reverse those findings.  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999). 

“A contract requires a meeting of the minds concerning its essential elements.”  Minneapolis Cablesystems v. City of Minneapolis, 299 N.W.2d 121, 122 (Minn. 1980).  A contract does not exist unless the parties have agreed “with reasonable certainty about the same thing and on the same terms.”  Peters v. Mut. Benefit Life Ins. Co., 420 N.W.2d 908, 914 (Minn. App. 1988).  Despite some incompleteness and imperfection of expression, an agreement should be upheld if a court can reasonably determine the parties’ intent by applying the words that the parties used as the parties must have understood them.  Hartung v. Billmeier, 243 Minn. 148, 151, 66 N.W.2d 784, 788 (1954) (interpreting an oral offer).

           

Here, the district court found that

[Eckart] and [Engelking] reached an oral agreement whereby [Engelking] would purchase the property out of foreclosure and sell it to [Eckart].  The agreement called for [Eckart] to make an initial payment to [Engelking] in the amount of $6,500, before [Engelking’s] purchase of the property, and annual payments of $6,500 until the amount paid by [Engelking] had been reimbursed, including any expenses incurred by [Engelking] with respect to the property, unless sooner repaid.

 

The record supports the district court’s finding.  Both Eckart and Engelking testified that it was agreed that Eckart would pay Engelking $6,500, Engelking would purchase the house out of foreclosure, and Engelking would then sell the house to Eckart for the purchase price that Engelking paid for the house.  The parties disagree on who was to be responsible for paying ownership expenses, including property taxes, but the record shows that Engelking paid many of these expenses and included them in the balance that Engelking claimed that Eckart owed.  Although the parties did not agree on a specific dollar amount for the purchase price of the house, the district court found that the parties did agree on how to determine the purchase price of the house at any given time:  Eckart was to reimburse Engelking for Engelking’s expenditures to that date relating to the house. 

The record also shows that Engelking told Eckart that he wanted a return on his investment but that he did not specify an interest rate.  Under Minnesota statutes, the “interest for any legal indebtedness shall be at the rate of $6 upon $100 [6%] for a year, unless a different rate is contracted for in writing.”  Minn. Stat. § 334.01, subd. 1 (2004).  Here, the district court applied the statutory rate of return; therefore, the fact that the parties neglected to specify the rate of return in the oral agreement is not fatal to the formation of a contract.

Based on the record, the district court did not err by finding that the parties entered into an oral agreement for the sale of the Duluth house and that the agreement included all of the necessary terms.

II.

 

            Engelking argues that the district court erred by finding that the parties’ oral agreement for Eckart’s purchase of the Duluth house “was removed from the purview of the Statute of Frauds.”  Under the statute of frauds, a conveyance of real property or an agreement to convey real property is invalid unless it is reduced to writing.  Minn. Stat. § 513.04 (2004).  But even partial performance of an oral contract removes it from the statute of frauds.  Burke v. Fine, 236 Minn. 52, 55, 51 N.W.2d 818, 820 (1952).  When a “plaintiff shows that his acts of part performance in reliance upon the contract have so altered his position that he will incur unjust and irreparable injury in the event that defendant is permitted to rely on the statute of frauds, equity requires that the contract be specifically enforced.”  Id. (describing “fraud theory” of part-performance doctrine).  Or when “the relationship of the parties, as shown by their acts rather than by the alleged contract, cannot reasonably be explained except by reference to some contract between them, the oral contract is taken out of the statute of frauds and may be specifically enforced.”  Id. (describing “unequivocal reference theory” of part-performance doctrine).  The doctrine of part performance applies when a person takes possession of property and makes valuable improvements to it.  Bouten v. Richard Miller Homes, Inc., 321 N.W.2d 895, 900 (Minn. 1982).

Here, the district court found that (1) “as of January 1999, when [Eckart] made the [lump-sum] payment, [Eckart] had paid substantially more than was due under the parties’ oral agreement”; (2) Eckart’s payments to Engelking “were made in reliance of [Engelking’s] promise to provide a deed for the property upon completion of the payment obligations of the oral agreement”; (3) Eckart lived in the house in reliance on the oral agreement; and (4) Eckart made improvements and repairs to the house in reliance on the oral agreement.  Based on these findings, the district court concluded that the parties’ oral agreement was “taken out of the Statute of Frauds, Minn. Stat. § 551.04, by reason of [Eckart’s] complete performance.” 

A.        Complete Performance

Engelking argues that the district court’s finding of complete performance is error because Eckart did not prove at trial that he was living in the house in reliance on the parties’ oral agreement or that Eckart made any substantial improvements to the house.  Engelking argues that because Eckart “had been living in the [p]roperty since 1980” as a renter, he “could not show that his [continued] possession of the premises was in reliance on the parties’ alleged oral contract.”  See Nybladh v. Peoples State Bank of Warren, 247 Minn. 88, 95, 76 N.W.2d 492, 498 (1956) (providing that “possession must be unequivocally referable to the oral contract, mere continuance of a preexisting possession under a different title is not by itself sufficient.”).  Engelking also argues that Eckart provided no documentary evidence of how much he spent on alleged improvements or repairs to the house. 

Whether acts constituting partial performance “are unequivocally referable to a vendor-vendee relationship under an oral contract is a question of fact to be determined by the trier of fact.”  Johnson v. Quaal, 250 Minn. 154, 158, 83 N.W.2d 796, 799 (1957).  Here, the record supports the district court’s findings.  The record shows that Eckart lived in the house and made significant payments to Engelking based on the parties’ agreement that the payments would be applied to the purchase price of the house.  And Engelking testified that he did not consider Eckart’s payments to be rent when Engelking received them.  Also, Eckart testified that he maintained insurance on the house, that he built a storage building on the property, that he repaired the driveway, and that he repaired the furnace and the smoke damage caused by the furnace’s malfunction, all at his own expense.  Although there is no documentary evidence, the district court clearly found Eckart’s testimony to be credible, and this court defers to the credibility determinations of the district court.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). 

B.        Ability to Complete Contract Within One Year

Engelking also argues that the parties’ oral agreement is subject to the statute of frauds because it “could not have been completed within one year.”  Engelking cites Block v. Rahman, No. A03-269, 2003 WL 22784502, at *2 (Minn. App. Nov. 25, 2003), in which this court held that “[a]lthough the doctrine of part performance removes a contract for the sale of land from the purview of Minn. Stat. § 513.04 [(requiring that a conveyance of real property be in writing)], part performance does not excuse an oral contract from the one-year time limit of Minn. Stat. § 513.01 [(requiring that a contract that cannot be completed within one year from its making be in writing)].”[2] 

The district court concluded that the parties’ oral agreement could be performed within one year.  The statute of frauds has no application if an oral contract, by its terms, can be performed within one year, although the contract runs for an indefinite time.  Bannitz v. Hardware Mut. Cas. Co. of Stevens Point, Wis., 219 Minn. 235, 240, 17 N.W.2d 372, 374 (1945).  Here, no definite time was fixed by the parties for payment to Engelking of the full purchase price of the house.  Although the parties agreed that Eckart would make annual payments of $6,500 until he paid Engelking in full, their agreement did not bar Eckart from paying the total amount owed to Engelking within one year after the agreement.  Because the parties’ agreement could be completed within one year, section 513.01 does not require that it be in writing.

C.        Specific Performance

Engelking argues that Eckart is not entitled to specific performance or any other equitable relief.  When there is partial performance of an oral contract, a district court may exercise its power of equity by ordering specific performance as the district court did here.  See Minn. Stat. § 513.06 (2004) (noting that statute of frauds does not limit court’s equitable power to order specific performance).  To establish the right to specific performance of an oral contract to convey real estate, the contract

(a) must be established by clear, positive and convincing evidence; (b) it must have been made for an adequate consideration and upon terms which are otherwise fair and reasonable; (c) it must have been induced without sharp practice, misrepresentation, or mistake; (d) its enforcement must not cause unreasonable or disproportionate hardship or loss to the defendants or to third persons; and (e) it must have been performed in such a manner and by the rendering of services of such a nature or under such circumstances that the beneficiary cannot be properly compensated in damages.

 

Johnson v. Johnson, 272 Minn. 284, 292, 137 N.W.2d 840, 847 (1965). Specific performance is an equitable remedy that may be ordered within the sound discretion of the district court.  Lilyerd v. Carlson, 499 N.W.2d 803, 811 (Minn. 1993).  When real property is involved, specific performance is a proper remedy, even if other remedies would be adequate.  Schumacher v. Ihrke, 469 N.W.2d 329, 335 (Minn. App. 1991) (citing Shaughnessy v. Eidsmo, 222 Minn. 141, 150, 23 N.W.2d 362, 368 (1946)). 

            Engelking argues that “the alleged contract was not established by clear, positive or convincing evidence.”  But the district court found that the parties had entered into an oral agreement, and we have concluded that the record supports the district court’s finding.  Engelking makes no argument that any of the other factors required to establish a right to specific performance is lacking here.

Engelking also argues that the district court should have denied Eckart’s request for equitable relief because Eckart has “unclean hands.”  The “doctrine of unclean hands ‘will be invoked only against a party whose conduct has been unconscionable by reason of a bad motive, or where the result induced by his conduct will be unconscionable.’”  Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 450 (Minn. App. 2001) (quoting Creative Comm’ns Consult., Inc. v. Gaylord, 403 N.W.2d 654, 658 (Minn. App. 1987)).  “Unclean hands” requires more than “improper purpose” or recklessness; the doctrine requires illegal or unconscionable conduct or a showing of bad faith.  Id.  Because the record shows that Eckart did not secure the oral agreement for the purchase of the Duluth house through illegal or unconscionable conduct and that the conduct on the part of Eckart that Engelking points to involved third parties, we conclude that Eckart did not make his claim to the district court with “unclean hands” and that, therefore, the district court did not abuse its discretion by concluding that Eckart was entitled to specific performance of the parties’ oral contract for the house.

Because we affirm the district court on the ground of complete performance we do not reach Engelking’s arguments against the district court’s alternative estoppel grounds for awarding Eckart the property in question.

            Affirmed.