Opinion
No. C9-00-1684.
Filed April 24, 2001.
Appeal from the District Court, Hennepin County, File No. CT003221.
Michael A. Stern, Dulce J. Foster, (for respondents)
James B. Lynch, Michael J. Wahoske, Juliann M. Buron, (for appellant)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant agreed to pay respondents approximately $42 million for the outstanding stock of a business pursuant to a comprehensive purchase and sale agreement. The base purchase price was subject to certain post-closing adjustments. At issue here is the adjustment giving appellant the right to seek a reduction of the purchase price by three times the amount, if any, by which the annual expenses were greater than $3,850,000. Although the contract provided that appellant must deliver the calculation to respondents within 45 days after the closing date, appellant delivered the calculation some 35 days late. Respondents objected to the claim as being untimely, as well as on the merits, and they filed a complaint seeking declaratory judgment and an injunction. The district court granted summary judgment in favor of respondents, concluding that appellant waived its right to a reduction in the purchase price by allowing the 45-day deadline to pass. Katz Enterprises appeals, and we reverse and remand.
DECISION
Appellant claims that because the 45-day limit was not material to the contract, the district court erred in granting summary judgment in favor of respondents. When reviewing a grant of summary judgment, the appellate court will determine whether there are any genuine issues of material fact and whether the district court erred in the application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). Where no ambiguity exists, an appellate court will review the issue of the construction of a contract as a matter of law. Stowell v. Cloquet Co-op Credit Union, 557 N.W.2d 567, 571 (Minn. 1997). In interpreting an unambiguous contract, a court seeks "to ascertain and give effect to the intention of the parties" from the language used. Metropolitan Sports Facilities Comm'n v. General Mills, Inc., 470 N.W.2d 118, 122-23 (Minn. 1991) (citation omitted).
A contract is defined as "a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law recognizes as a duty." Baehr v. Penn-O-Tex Oil Corp., 258 Minn. 533, 537, 104 N.W.2d 661, 664 (1960) (footnote omitted). Even if a contract contains a specified date for performance, when the contract does not specify that time is of the essence, a delay will not necessarily invalidate the provision. King v. Stevenson, 445 F.2d 565, 569-70 (7th Cir. 1971).
Respondents contend that the agreement did not provide appellant with an absolute right to obtain an adjustment. Instead, they argue that the contract gave appellant a limited right to seek adjustment only if the calculation yielded an amount in excess of $3,850,000 and appellant delivered the calculation to respondents within 45 days after the closing date. Because appellant delivered the calculation in an untimely manner, they contend the district court properly granted summary judgment in their favor.
Appellant characterizes this argument as an attempt by respondents, in a sophisticated commercial transaction, to gain a $4.5 million windfall merely because appellant made a late filing of the initial calculation of a purchase price adjustment. Appellant contends that the 45-day limit was not material here for a number of reasons. First, although a draft of the agreement prepared by respondents' counsel contained a section titled "time is of the essence," no such section was included in the final agreement. In addition, the contract did not provide any consequences if appellant was tardy in submitting this calculation, even though consequences were provided as to noncompliance with other provisions in the contract. Further, several other provisions recognize that the submission date for some of the final calculations might extend as late as December 31, 1999.
We agree with appellant that the 45-day time limit was not material. See Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Ass'n, 38 F. Supp.2d 1195, 1200 (D.Or. 1999) (rejecting argument that 30-day deadline for submission of appraisal should be enforced, where appraiser submitted a corrected evaluation four days late, no prejudice was shown except for the loss of a potential windfall, and lease agreements did not provide that time was of the essence or a late appraisal would be a nullity).