Gary A. Meiners v. Kruckow Companies, LLC, and third party v. Anthony R. Hammell, third party

• Court: Court of Appeals of Minnesota
• Decided: January 5, 2015
• Docket: A14-807
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).

STATE OF MINNESOTA IN COURT OF APPEALS A14-0807

Gary A. Meiners, et al., Respondents,

vs.

Kruckow Companies, LLC, defendant and third party plaintiff, Appellant,

vs. Anthony R. Hammell, et al., third party defendants, Respondents.

Filed January 5, 2015 Affirmed Smith, Judge

Houston County District Court File No. 28-CV-12-739

Robert G. Benner, Dunlap & Seeger, PA, Rochester, Minnesota (for respondents Meiners, et al.)

Paula Duggan Vraa, Patrick H. O’Neill, Jr., Jennifer L. Young, Larson King, LLP, St. Paul, Minnesota (for appellant)

James R. Forsythe, Streater & Murphy, P.A., Winona, Minnesota (for respondents Hammell, et al.)

Considered and decided by Ross, Presiding Judge; Smith, Judge; and Harten,

Judge.*

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. UNPUBLISHED OPINION

SMITH, Judge

We affirm the district court’s grant of summary judgment in favor of respondents

on both their claim for a declaratory judgment and appellant’s reformation counterclaim

because the lease is unambiguous and respondents are entitled to judgment as a matter of

law. We also affirm the district court’s award of attorney fees and costs because we

affirm the grant of summary judgment to respondents.

FACTS

At some point before February 2008, respondent Gary Meiners asked Gary

Kruckow, the chief manager of appellant Kruckow Companies, whether the company

would be interested in purchasing his parents’ homestead, which his parents had lost

through foreclosure so that his parents could continue to live on the property. Kruckow

Companies purchased the homestead and sold the property to Gary Meiners and his wife

on a contract for deed. In exchange, the Meinerses granted Kruckow Companies a right

to quarry and an option to purchase certain other land.

On the same day as the contract for deed was signed, the Meinerses and Kruckow

Companies signed a first-right-of-refusal contract, giving Kruckow Companies the first

right to refuse to purchase other property from the Meinerses. The property was

described as “[t]he NW1/4 of the SW1/4 lying East of the public highway in Section 5,

2 Township 101 North of Range 5 West of the Fifth Principal Meridian, excepting

Highway Right of Way” (Parcel 2).1

On January 22, 2009, the Meinerses and Kruckow Companies signed a quarry-

lease-with-option-to-purchase contract. The Meinerses leased to Kruckow Companies

“[t]he quarry located in the NW1/4 of the SW1/4 lying East of the public highway in

Section 5, Township 101 North of Range 5 West of the Fifth Principal Meridian,

excepting Highway Right of Way. The quarry is the existing hole and all future

reserves.” Under the lease agreement, Kruckow Companies was required to pay the

Meinerses $200.00 per year in rent and $0.25 “per cubic yard of rock removed.” The

option to purchase the quarry also contained the same legal description of the quarry and

the language regarding “future reserves.”

On December 1, 2011, the Meinerses conveyed Parcel 1, the disputed property, to

respondents Anthony and Luan Hammell in a quit claim deed:

The Southeast Quarter of the Northeast Quarter and the Northeast Quarter of the Southeast Quarter of Section 5, Township 101 North, of Range 5 West of the Fifth Principal Meridian.

The East Half of the Northwest Quarter in Section 8, all that part of the Southwest Quarter of the Northwest Quarter of Section 8 lying East of the public highway; the Northwest Quarter of the Northeast Quarter of Section 8; the Southwest Quarter of the Southeast Quarter of Section 5 and the Southeast Quarter of the Southwest Quarter of Section 5, all in Township 101 North of Range 5 West.

1 The tracts of land were identified as Parcel 2 and Parcel 1 in the district court’s order. It is for that reason that we use these descriptions.

3 The Southwest Quarter of the Southeast Quarter of Section 19, Township 102 North, Range 5 West.

The Northwest Quarter of the Southeast Quarter of Section 19, Township 102 North, Range 5 West.

Shortly after this conveyance, Kruckow Companies’ attorney wrote to the Meinerses and

Hammells, expressing Kruckow Companies’ intent to exercise its option to purchase the

quarry land. Kruckow Companies believed that some of the land involved in the quarry

lease may have been conveyed to the Hammells.

All three of the contracts signed by the Meinerses and Kruckow Companies were

drafted by attorney Michael Murphy. According to Gary Kruckow, he told Murphy “that

the [quarry lease] agreement needed to include the right to quarry and option to purchase

land containing future reserves, including the [d]isputed [l]and.” Murphy indicated that

the language, “[t]he quarry is the existing hole and all future reserves,” accomplished

this. Gary Kruckow alleges that both he and Gary Meiners intended for the quarry lease

and option to include Parcel 1. In contrast, Gary Meiners alleges that he never discussed

future reserves with Gary Kruckow.

Murphy stated in his deposition that he represented both the Meinerses and

Kruckow Companies because “they came in and they . . . seemed to be on the same page

as to what they wanted to do.” According to Murphy, the parties discussed the location

of the quarry but did not discuss limiting or expanding the quarry lease to other property.

Murphy acknowledged that he had never visited the quarry and did not know where the

quarry was located. As a result, he “would have no way of knowing” the location of the

future reserves. Murphy explained that he understood “future reserves” to mean “what

4 could be quarried.” The parties did not ask Murphy to add the future-reserves language

to the contract. Instead, he added the language because he did not know the exact

location of the quarry and because his attorney-father had used this language in other

quarry leases. Murphy explained that he would have discussed the language with the

parties when they went through the contract before signing it.

On August 13, 2012, the Meinerses sued Kruckow Companies, requesting a

declaratory judgment regarding the meaning of “future reserves” in the quarry lease and

option to purchase. The Meinerses argued that, according to the legal description, the

quarry lease and option to purchase only involved Parcel 2. The Meinerses also alleged

that Kruckow Companies had breached the quarry lease by failing to pay rent and fees for

the removed rock, and requested an accounting of the balance the Meinerses owed under

the contract for deed and the rock removed from the quarry.

In response, Kruckow Companies requested a declaratory judgment that the quarry

lease included Parcel 1 and reformation of the quarry lease to include this land. Kruckow

Companies brought counterclaims against the Meinerses for promissory estoppel,

equitable estoppel, fraud and intentional misrepresentation, negligent misrepresentation,

and unjust enrichment. Kruckow Companies also brought a third-party complaint against

the Hammells, claiming that some of the land conveyed to them in the quit claim deed

(Parcel 1) was included in the quarry lease and option to purchase. Kruckow Companies

again requested a declaratory judgment and reformation of the quarry lease and alleged

claims for promissory estoppel, equitable estoppel, and unjust enrichment.

5 The Meinerses moved for partial summary judgment on their claim for a

declaratory judgment. The district court granted partial summary judgment to the

Meinerses. The district court concluded that the language in the quarry lease and option

to purchase and in the first right of refusal was unambiguous, stating:

Pursuant to the plain and ordinary meaning of the language in the legal description, the quarry is limited to the existing hole and all future reserves located in Parcel 2. The description does not expand the quarry beyond Parcel 2. It does not describe the quarry as the existing hole and all future reserves outside of Parcel 2. The first sentence in the legal description locates the quarry; the second sentence explains what components make up the quarry within that location.

The district court also concluded that the quarry lease and first right of refusal were

integrated and that the parol-evidence rule prohibited the introduction of extrinsic

evidence regarding the parties’ agreement. Finally, the district court concluded that

Kruckow Companies’ reformation and other counterclaims did not preclude partial

summary judgment.

The Meinerses then moved for attorney fees and costs. The Meinerses argued that

the grant of partial summary judgment resolved their request for a declaratory judgment

and rendered their claims for breach of contract and an accounting moot. Kruckow

Companies filed its own motion for attorney fees and costs, arguing that the Meinerses

were not entitled to fees and costs because they “lost a majority of their claims and

should not be considered the prevailing party in this litigation.”

6 The district court granted the Meinerses’ motion for attorney fees and denied

Kruckow Companies’ motion. The district court found that the Meinerses were the

prevailing party and awarded them $39,251.80 in attorney fees.

On March 19, 2014, the parties stipulated that the Meinerses would dismiss their

breach-of-contract and accounting claims against Kruckow Companies

on the condition that [the Meinerses] agree not to assert such claims or to sue Kruckow [Companies] regarding such claims unless the [district c]ourt’s [o]rder for [p]artial [s]ummary [j]udgment or the judgment upon which it is based is reversed on appeal and this matter is remanded to [the district court] for further proceedings.

The parties also stipulated to the entry of the attorney-fees judgment against Kruckow

Companies for $39,251.80 and stipulated that the partial-summary-judgment order should

be amended to dismiss Kruckow Companies’ claims against the Hammells. The district

court ordered dismissal of the Meinerses’ breach-of-contract and accounting claims and

Kruckow Companies’ claims against the Hammells, and entered judgment against

Kruckow Companies for $39,251.80. According to the parties’ agreement, the district

court stayed enforcement of the attorney-fees judgment pending this appeal by Kruckow.

DECISION

I.

A district court shall grant summary judgment “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and that either party is entitled

to a judgment as a matter of law.” Minn. R. Civ. P. 56.03. “We review a district court’s

7 summary judgment decision de novo.” Riverview Muir Doran, LLC v. JADT Dev. Grp.,

LLC, 790 N.W.2d 167, 170 (Minn. 2010). “On appeal from summary judgment, we must

review the record to determine whether there is any genuine issue of material fact and

whether the district court erred in its application of the law.” Dahlin v. Kroening, 796

N.W.2d 503, 504 (Minn. 2011). “We view the evidence in the light most favorable to the

party against whom summary judgment was granted.” STAR Ctrs., Inc. v. Faegre &

Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002). But

there is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party’s case to permit reasonable persons to draw different conclusions.

DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997).

Kruckow Companies first argues that the district court erred by finding that the

quarry lease is unambiguous. “[A] lease is a form of a contract.” Metro. Airports

Comm’n v. Noble, 763 N.W.2d 639, 645 (Minn. 2009). “A contract is ambiguous if its

language is reasonably susceptible to more than one interpretation.” Id. (quotation

omitted). “Unambiguous contract language must be given its plain and ordinary

meaning.” Id. “Where the terms of a contract are clear and unambiguous, there is no

room for construction or interpretation.” Colangelo v. Norwest Mortg., Inc., 598 N.W.2d

14, 18 (Minn. App. 1999) (quotation omitted), review denied (Minn. Oct. 21, 1999).

“The determination of whether a contract is ambiguous is a question of law, but the

8 interpretation of an ambiguous contract is a question of fact for the jury.” Denelsbeck v.

Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003) (citation omitted).

The first right of refusal involved “[t]he NW1/4 of the SW1/4 lying East of the

public highway in Section 5, Township 101 North of Range 5 West of the Fifth Principal

Meridian, excepting Highway Right of Way.” The quarry lease and the option to

purchase involved “[t]he quarry located in the NW1/4 of the SW1/4 lying East of the

public highway in Section 5, Township 101 North of Range 5 West of the Fifth Principal

Meridian, excepting Highway Right of Way. The quarry is the existing hole and all

future reserves.” The legal descriptions of the property involved in these agreements are

identical and concern only Parcel 2. The legal descriptions are not “reasonably

susceptible to more than one interpretation.” See Noble, 763 N.W.2d at 645 (quotation

omitted).

But Kruckow Companies argues that “future reserves” could reasonably be

interpreted as referring either to reserves located in Parcel 2 or to “all future reserves in

the adjacent parcels.” No Minnesota case defines “reserves” or “future reserves.” As a

result, Kruckow Companies cites two foreign cases. In Vt. Marble Co. v. Town of W.

Rutland, the Vermont Supreme Court discussed the value of two quarries, their “proven

and exposed reserve[s],” and their “probable reserves.” 360 A.2d 91, 92-93 (Vt. 1976).

But Vt. Marble Co. does not define or discuss the location of the reserves, and is not

relevant to this appeal. Similarly, in Knox Lime Co. v. Me. State Highway Comm’n, the

Maine Supreme Judicial Court did not define reserves, but stated that the value of the

9 mineral reserves involved in the case was “the value of the limestone.” 230 A.2d 814,

825 (Me. 1967).

Kruckow Companies suggests that these cases define “reserves” as “all available

rock that could be mined.” Even if the foreign cases support that definition, and we do

not believe that they do, this definition does not require the reserves to include adjoining

property. The quarry lease refers to a quarry located in Parcel 2. There is no indication

that “future reserves” includes rock outside of Parcel 2, the only property described in the

lease. As the district court explained, “[t]he first sentence in the legal description locates

the quarry; the second sentence explains what components make up the quarry within that

location.” “Future reserves” cannot reasonably refer to the disputed property outside of

Parcel 2.

Kruckow Companies next argues that the district court erred by refusing to

consider extrinsic evidence of the parties’ agreement to include Parcel 1 in the quarry

lease and option to purchase. The parol-evidence rule precludes evidence of oral

agreements made prior to or contemporaneous with the execution of an integrated and

unambiguous written agreement. Norwest Bank Minn., N.A. v. Midwestern Mach. Co.,

481 N.W.2d 875, 881 (Minn. App. 1992), review denied (Minn. May 15, 1992). Because

the contract is unambiguous, the district court properly refused to consider extrinsic

evidence of the parties’ alleged oral agreement prior to their execution of the written

agreement. See id.

Because the quarry-lease-and-option-to-purchase agreement is unambiguous and

refers only to property in Parcel 2, the district court properly concluded that there was no

10 genuine issue of material fact remaining for trial. See DLH, Inc., 566 N.W.2d at 71

(“[T]here is no genuine issue of material fact for trial when the nonmoving party presents

evidence which merely creates a metaphysical doubt as to a factual issue and which

[does] not . . . permit reasonable persons to draw different conclusions.”). The Meinerses

and the Hammells are entitled to judgment as a matter of law, and we therefore affirm the

district court’s grant of partial summary judgment on the Meinerses’ declaratory-

judgment claim.

II.

Kruckow Companies argues that, if the quarry lease is unambiguous, “summary

judgment should still be reversed on the reformation claim.” Kruckow Companies does

not challenge the district court’s decision regarding its other counterclaims.

“Reformation is an equitable remedy that is available when a party seeks to alter

or amend language in a contract so that the contract reflects the parties’ true intent when

they entered into the contract.” SCI Minn. Funeral Servs., Inc. v. Washburn-McReavy

Funeral Corp., 795 N.W.2d 855, 864 (Minn. 2011).

A written instruction can be reformed by a court if the following elements are proved: (1) there was a valid agreement between the parties expressing their real intentions; (2) the written instrument failed to express the real intentions of the parties; and (3) this failure was due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.

11 Nichols v. Shelard Nat’l Bank, 294 N.W.2d 730, 734 (Minn. 1980). The elements of

reformation “must be established by evidence which is clear and consistent, unequivocal

and convincing.” Id.

The district court concluded that Kruckow Companies did not establish a genuine

issue of material fact regarding any of the three elements required for reformation. As a

result, the district court granted summary judgment sua sponte to the Meinerses on the

reformation counterclaim, an action that was permissible. See Del Hayes & Sons, Inc. v.

Mitchell, 304 Minn. 275, 280-81, 230 N.W.2d 588, 591-92 (1975). And Kruckow

Companies does not challenge the district court’s authority to grant summary judgment

on the reformation counterclaim.

Regarding the first and second elements, Kruckow Companies alleges that the

parties agreed to include Parcels 1 and 2 in the quarry lease and option to purchase and

that the written agreement failed to express the parties’ intention. In his affidavit, Gary

Kruckow alleges that he and Gary Meiners agreed that the quarry lease and option to

purchase would include Parcels 1 and 2. Gary Kruckow also alleges that he told Murphy

of this agreement and that Murphy responded that the written agreement accomplished

the parties’ intent to include the disputed land. Viewing the evidence in the light most

favorable to Kruckow Companies, see STAR Ctrs., Inc., 644 N.W.2d at 76-77, Kruckow

Companies appears to have raised genuine issues of material fact regarding the first two

elements required for reformation of the agreement.

But Kruckow Companies has not raised a genuine issue of material fact regarding

the third element required for reformation. The third element requires either a mutual

12 mistake “or a unilateral mistake accompanied by fraud or inequitable conduct by the

other party.” Nichols, 294 N.W.2d at 734. At oral argument before this court, Kruckow

Companies explained that it was only alleging a mutual mistake, not a unilateral mistake

caused by fraud or inequitable conduct on the part of the Meinerses. “[I]n order to have a

mutual mistake, it is necessary that both parties agree as to the content of the document

but that somehow through a scrivener’s error the document does not reflect that

agreement.” Id. Here, there is no mutual mistake and no evidence of a scrivener’s error

because the written agreement reflects the Meinerses’ understanding of the parties’

agreement. See id. According to his affidavit, only Gary Kruckow described the location

of the reserves to Murphy. And only Kruckow Companies alleges that the parties

intended a different agreement than that found in the written agreement. This case

involves only a unilateral mistake on the part of Kruckow Companies, which is “not a

ground for reformation.” See id.; see also SCI Minn. Funeral Servs., Inc., 795 N.W.2d at

866-67 (stating that “any mistake was a unilateral mistake” and that the appellants did not

challenge the district court’s conclusion that there was no evidence of fraud or

inequitable conduct).

III.

“We review the district court’s award of attorney fees or costs for abuse of

discretion.” Brickner v. One Land Dev. Co., 742 N.W.2d 706, 711 (Minn. App. 2007),

review denied (Minn. Mar. 18, 2008). “Recovery of attorney fees must be based on

either a statute or a contract.” Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d

79, 87 (Minn. 2004). The quarry lease provides for the recovery of attorney fees:

13 In the event that any action is filed in relation to this lease agreement, the unsuccessful party in the action shall pay to the successful party, in addition to all the sums that either party may be called upon to pay, a reasonable sum for the successful party’s attorney’s fees and costs.

Kruckow Companies argues that a reversal of the district court on the above issues

requires a reversal of the attorney-fees award. It does not challenge the attorney-fees

award in the event that we affirm the district court’s order. Because we affirm the district

court’s order, we also affirm the award of attorney fees to the Meinerses.2

Affirmed.

2 In their brief, the Meinerses request additional attorney fees incurred on appeal. Because the Meinerses did not submit a motion regarding their request for attorney fees on appeal, we decline to consider their request. See Minn. R. Civ. App. P. 139.06, subd. 1 (“A party seeking attorneys’ fees on appeal shall submit such a request by motion under Rule 127.”).