This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-714

 

John McCarty, et al.,
Respondents,

vs.

Carl Buechler, et al.,
Appellants.

 

Filed March 27, 2007

Reversed and remanded

Peterson, Judge

 

Ramsey County District Court

File No. C2-04-5273

 

James R. Bresnahan, Cochrane & Bresnahan, P.A., 287 East Sixth Street, Suite 262, St. Paul, MN  55101 (for respondents)

 

Crystal M. Patterson, David R. Marshall, Fredrikson & Byron, P.A., 200 Sixth Avenue South, Minneapolis, MN  55402 (for appellants)

 

            Considered and decided by Lansing, Presiding Judge; Randall, Judge; and Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

            This appeal is from a judgment that (1) dismisses the parties’ claims and counterclaims, (2) strikes appellants’ motion to enforce a settlement agreement and confirm an arbitration award, and (3) denies respondents’ motion to place the matter on the trial calendar.  Because the district court inappropriately asserted inherent judicial power to construe a term of the parties’ settlement agreement based on its recollection of the settlement negotiations, rather than on evidence submitted by the parties, we reverse and remand.

FACTS

 

            The parties purchased a 40-acre parcel of real estate in Bullhead City, Arizona, and, when a dispute arose regarding the development and disposition of the property, respondents filed a complaint alleging various claims, and appellants answered and filed a counterclaim.  Following a settlement conference, the parties entered a settlement agreement on the record, and the matter was stricken from the trial calendar.  The parties agreed that the percentage of the property that each of the parties owns would be determined by arbitration, appellants would apply to have the property rezoned, and after the property was appraised, appellants could exercise their right to buy out the respondents’ interest.  When describing the agreement to have the property rezoned, counsel for appellants stated:

[Appellants] will make an application for rezoning the property in order to continue development within 90 days, although there has been some discussion that the parties will have to remain somewhat flexible on that, obviously the parties intend to do that as quickly as possible, and hope to do it within 90 days, but if there is some need for flexibility, the parties will work together on that. 

 

            After counsel finished describing the settlement agreement, the district court stated:

            I want to make sure that we - - - all of the elements, all of the terms of the settlement have been fully stated.  The parties do, in fact, have an agreement at this point in time.  What is left to be done are two things; reduce the agreement to writing and then to take care of the details of effectuating the terms of agreement that have already been reached. 

 

The settlement agreement was never reduced to writing, and although the parties and the district court believed that the parties’ claims and counterclaims had been settled, the underlying action was not dismissed.

            An arbitrator issued an award that determined the percentage of the property that each of the parties owns, and the Bullhead City Council changed the property’s zoning classification from commercial to residential park, which is the classification for a mobile-home or recreational-vehicle park.  Appellants obtained an appraisal, which valued the property at $2,200,000, and stated their intent to purchase respondents’ interest in the property and tendered a check.  In reply, respondents claimed that appellants were in breach of the settlement agreement for failing to apply to have the property rezoned to allow single-family-residential development, which would double the property’s value. 

            Appellants filed a motion to enforce the settlement agreement and to confirm the arbitration award under Minn. Stat. § 572.18 (2006).  Respondents then filed a motion to place the action on the trial calendar for trial de novo, alleging that appellants had breached the settlement agreement.  At the hearing on the motions, respondents argued that the settlement agreement required that the property be rezoned for single-family-residential development, and appellants argued that rezoning for recreational-vehicle and manufactured-home use had always been the parties’ intention and that the settlement agreement did not require them to seek zoning for single-family-residential development.  

            Following the hearing on the motions, the district court issued an order dismissing the parties’ claims and counterclaims, denying respondents’ motion to place the action on the trial calendar, and striking appellants’ motion to enforce the settlement agreement and confirm the arbitration award.  Relying on its recollection of the settlement negotiations, the district court determined that although the settlement agreement that was entered into the “record [did] not specifically describe the type of rezoning for which [appellants] were to apply,” “the parties intended and agreed that [appellants] would apply to have the property rezoned as single-family residential” and “that [appellants] would apply to rezone the property as residential park if the city denied the application to rezone the property as single-family residential.”  The district court also determined that “[u]pon reaching their settlement agreement, the parties fully resolved their claims and counterclaims,” and that “[a]lthough the court did not enter an order of dismissal, a dismissal was clearly intended by the parties.”   

            Based on these determinations, the district court ordered that the complaint and counterclaim be dismissed, and in light of these dismissals, denied respondents’ motion to place the matter on the trial calendar and struck appellants’ motion to enforce the settlement agreement and confirm the arbitration award.  Judgment was entered, and this appeal followed.  

D E C I S I O N

 

            Appellants argue that the district court erred in relying on its recollection of the settlement negotiations to construe and add to the settlement agreement.  We agree.   “It is well settled that a compromise and settlement of a lawsuit is contractual in nature and that a full and enforceable settlement requires offer and acceptance so as to constitute a meeting of minds on the essential terms of the agreement.”  Ryan v. Ryan, 292 Minn. 52, 55, 193 N.W.2d 295, 297 (1971).  In the district court, the parties all contended that they had reached a settlement agreement.  But the parties disagreed about the meaning of the term “rezoning” as it was used in the settlement agreement, and their motions were based on their interpretations of “rezoning.”  Therefore, the issues before the district court were whether the parties entered into a full and enforceable settlement agreement, and if they did, what were the essential terms of the agreement.[1]

            “Where there is a dispute as to whether a settlement was reached, it is ordinarily for the [district] court to determine what the facts are.”   Jallen v. Agre, 264 Minn. 369, 373, 119 N.W.2d 739, 743 (1963).  “Whenever a motion is based on facts not appearing of record, the court may hear the matter on affidavits presented by the respective parties, but the court may direct that the matter be heard wholly or partly on oral testimony or depositions.”  Minn. R. Civ. P. 43.05. 

            Along with their motions, the parties submitted memoranda, affidavits, and exhibits, which described the parties’ efforts to reach and implement a settlement agreement.  But instead of evaluating these submissions or directing that the parties’ motions be heard wholly or partly on oral testimony or depositions, the district court decided the motions based on its recollection of the settlement negotiations.  The district court stated that it

has personal knowledge of the terms of the agreement, and a clear and unequivocal recollection of the term in dispute.  The court knows what was intended by the parties when the agreement was stated on the record.  Under such circumstances, the court must, in the exercise of its inherent authority to supervise disputes and their settlement, “speak the truth” by, in effect, amending the record.

 

The district court further stated that “[t]he settlement agreement was negotiated with the assistance of the court,” the court’s “recollection resolves the issue of contractual intent as a matter of law,” and to “conclude that the court’s knowledge, under the usual rules of contract interpretation, should be treated as ‘extrinsic evidence’ and submitted to, and accepted or rejected by, a trier of fact would emasculate the inherent authority of the court.” 

              The supreme court has stated that when good cause is shown, courts have inherent authority to “supply any omission in any proceeding or record.”  Mattfeld v. Nester, 226 Minn. 106, 121, 32 N.W.2d 291, 303 (1948); see Minn. R. Civ. P. 60.01 (clerical mistakes and errors arising from oversight or omission may be corrected by court).  But when deciding the parties’ motions, the district court did not simply correct a clerical mistake or supply an omission from the record created when the parties stated the terms of their settlement agreement to the district court; the district court addressed an issue that was not raised during the earlier proceeding.  The district court determined what the parties had agreed, rather than whether the record reflected what the parties said they had agreed.

            We have found no authority that recognizes a court’s inherent authority to make a factual determination based on its recollection of events that are not reflected in the record, rather than on evidence submitted by the parties.  The district court’s reliance on Clerk of Court’s Comp. v. Lyon County Comm’rs, 308 Minn. 172, 241 N.W.2d 781 (1976), to assert such inherent power is misplaced.  In Lyon County, the supreme court held that the district court’s use of inherent judicial power to set the salary of the clerk of district court directly by order was not appropriate in the face of an express constitutional provision stating that the clerk’s salary be controlled by the legislature.  308 Minn. at 182, 241 N.W.2d at 787.  The supreme court also set forth principles to be used to determine whether an exercise of inherent judicial power is appropriate, and these principles include that inherent judicial power may not be asserted unless established procedures are first exhausted and the exercise of inherent judicial power is necessary to preserve the fundamental judicial function of deciding cases.  Id.at 180-81, 241 N.W.2d at 786. 

            Because the district court asserted inherent judicial power to determine the terms of the parties’ settlement agreement, rather than using the procedure for hearing motions established under Minn. R. Civ. P. 43.05, the assertion of inherent judicial power was not appropriate, and the district court’s construction of the settlement agreement did not provide a basis for dismissing the parties’ claims and counterclaims.  Therefore, we reverse the dismissals and remand for further proceedings under Minn. R. Civ. P. 43.05.  And because the district court’s decisions with respect to respondents’ motion to place the matter on the trial calendar and appellants’ motion to enforce the settlement agreement and confirm the arbitration award were based on the court’s dismissal order, we also reverse those decisions without addressing their merits and remand for further proceedings under Minn. R. Civ. P. 43.05.

            Reversed and remanded.