Opinion
No. C2-02-1854.
Filed June 24, 2003.
Appeal from the District Court, Hennepin County, File No. 9518455.
David B. Olsen, Henson Efron, (for respondent)
John M. LeFevre, Jr., Larry M. Wertheim, Mary D. Tietjen, Kennedy Graven, (for appellants)
Considered and decided by Harten, Presiding Judge, Peterson, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
On appeal after a remand by this court, appellants argue in this real-estate dispute that the district court incorrectly concluded that three driveway easements had been terminated. Appellants also challenge the district court's award of attorney fees to respondent. We affirm.
FACTS
The Cedar Riverside Plaza (Plaza), currently owned by appellants Minneapolis Community Development Agency (MCDA) and Riverside Plaza Limited Partnership (Riverside), was originally developed in the early 1970s as "Cedar Square West" by four affiliated companies, Stage I Land Company (Stage I), Cedar Riverside Properties (Properties), Cedar Riverside Land Company (CRLC), and F Building Land Company (F Building), collectively referred to as the "Cedar Riverside entities." At the time of the development, Keith Heller controlled the Cedar Riverside entities. On December 3, 1971, an easement agreement creating the driveway easements at issue in this proceeding (the original agreement) was executed by Keith Heller on behalf of CRLC, Stage I, and Properties. The original agreement created, among other easements not at issue, four driveway easements over portions of the CRLC property for the benefit of the Plaza.
On February 23, 1972, CRLC, Stage I, and Properties entered into an amendment to the original agreement (amended agreement). The amended agreement, which was executed by Keith Heller on behalf of all three entities, modified and deleted some easements, in part, and created two additional driveway easements over portions of the CRLC property for the benefit of the Plaza.
On July 3, 1974, CRLC, Stage I, and Properties entered into an agreement for relocation of easements (relocation agreement). Keith Heller signed the relocation agreement in eight places in his capacity as representative of all three entities. One paragraph in the relocation agreement amended the description of a storage-tank easement in the original agreement by adding land described in an exhibit attached to the relocation agreement. Another paragraph addressed driveway easements as follows:
Exhibit B attached to and made part of the Original Agreement which describes the strips of land subject to the Driveway Easements is amended by substituting in lieu of such original description, the parcel set forth in Exhibit B attached hereto and made a part hereof.
Exhibit B to the original agreement contains the legal descriptions of four separate driveway easements, and Exhibit B to the relocation agreement, which was substituted in lieu of the original Exhibit B, contains the legal description of only one driveway easement, the easement for the McKnight Driveway. In the later Exhibit B, the description of the McKnight Driveway easement was changed to conform to the actual location of the driveway. The relocation agreement was properly recorded.
By assignments in September 1975 and March 1976, the United States Department of Housing and Urban Development (HUD) succeeded to the mortgagees' interests in the Plaza's first five mortgages with National Indorsed Mortgage Corporation and First National Bank of St. Paul, which were subject to the relocation agreement, and became the sole mortgagee of the entire Plaza property. HUD's records contain the relocation agreement. In 1984 and 1985, HUD foreclosed on all five of the mortgages. In the foreclosure proceedings, HUD did not name CRLC or its mortgagee, respondent Crablex, Inc.'s (Crablex) predecessor-in-interest as defendants, and HUD did not raise any question about disputed easements. HUD became fee owner of the Plaza property.
On December 22, 1988, HUD conveyed the entire Plaza property, including the land, buildings, and improvements to MCDA. The following day, Riverside purchased the buildings and other improvements from MCDA and entered into a lease for the land. At the same time, Riverside granted its lender, Chemical Mortgage Company (Chemical), a mortgage encumbering its interest in the Plaza property. Before MCDA and Riverside acquired their interests in the Plaza, they received title opinions from their respective attorneys stating that the "net effect of the Relocation Agreement is to eliminate all driveway easements," except the McKnight driveway. Because the Plaza had no legal access via Sixth Street or Fifteenth Avenue, the attorneys opined that the title was unmarketable.
When HUD transferred the Plaza to MCDA and Riverside, Chemical insisted as a condition of closing that the title insurer insure over the driveway easements, but the title insurer refused to do so without being indemnified. MCDA persuaded HUD to indemnify the title insurer and MCDA, and MCDA, in turn, agreed to indemnify Riverside, in the event that HUD was not able to either amend or reform the relocation agreement or otherwise create new driveway easements. HUD and MCDA also agreed to undertake any actions necessary to re-establish the terminated easements and to indemnify the title insurer in the event that any claim was made as to the three terminated easements. MCDA agreed that it would obtain the driveway easements through eminent domain action, if necessary.
In 1988 and 1996, MCDA and Riverside commenced proceedings in the Examiner of Titles Office to reform or amend the relocation agreement. The examiner notified MCDA and Riverside that they would be expected to produce evidence that the parties to the relocation agreement did not intend to terminate the three driveway easements. Both proceedings were abandoned.
In 1995, Crablex commenced a mortgage-foreclosure action against CRLC's property adjacent to the Plaza property. MCDA, Riverside, and Chemical were named as defendants because they claimed that the driveway easements over CRLC's property would continue to exist for the benefit of the Plaza following the mortgage foreclosure. Crablex contended that the three driveway easements were terminated in 1974 under the terms of the relocation agreement. Crablex brought a second action in 1996 against MCDA and Riverside seeking trespass damages, which was consolidated with the foreclosure action.
Mellon Mortgage Company succeeded to the interests of Chemical and is a party because it is the mortgagee of the property owned by MCDA and Riverside. All further references to MCDA and Riverside should be assumed to also include Mellon.
In the foreclosure action, the district court ordered the foreclosure on the CRLC mortgage, which was not appealed. The district court also concluded that the relocation agreement clearly and unambiguously terminated the three easements and, therefore, granted summary judgment in favor of Crablex against MCDA and Riverside. MCDA and Riverside appealed the summary judgment, and in Crablex, Inc., v. Cedar Riverside Land Co., No. C9-97-765, 1997 WL 729210 (Minn.App. 1997) ( Crablex I), this court concluded that genuine issues of material fact precluded summary judgment and reversed and remanded for determination of fact issues. Following the remand by this court, both Keith Heller and Richard Buddingh, the only witnesses that any of the parties claimed had knowledge of the intended purpose of the relocation agreement, died. Buddingh was the former area counsel to HUD and had submitted an affidavit but was never deposed. Heller had been deposed three times. Consequently, on remand, all of the evidence was in documentary form, and the parties brought cross-motions for summary judgment. The district court again concluded that the relocation agreement terminated the three driveway easements and granted summary judgment in favor of Crablex.
After a court trial on Crablex's trespass claim, the district court awarded Crablex damages. MCDA and Riverside do not contest the trespass-damages award. The district court also granted Crablex's motion for attorney fees in the amount of $433,362.50 against MCDA and Riverside, jointly and severally. MCDA and Riverside appeal the summary judgment that the driveway easements were terminated and the judgment for attorney fees.
The notice of appeal was filed in the names of CRLC, MCDA, Riverside, Chemical Mortgage Company, and John Doe and Mary Roe. However, the issues raised on appeal only relate to MCDA's, Riverside's, and Chemical Mortgage Company's (now Mellon Mortgage Company's) interests.
DECISION
1. Summary judgment is appropriate when a party fails to make a showing sufficient to establish the existence of an element essential to the party's case. Bersch v. Rgnonti Assocs., 584 N.W.2d 783, 786 (Minn.App. 1998), review denied (Minn. Dec. 15, 1998). On appeal from summary judgment, appellate courts
review whether there are any genuine issues of material fact and whether the district court erred in its application of the law. We view the evidence in the light most favorable to the party against whom summary judgment was granted. We review de novo whether a genuine issue of material fact exists. We also review de novo whether the district court erred in its application of the law.
STAR Centers, Inc. v. Faegre Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002) (citations omitted).
The district court's function on a motion for summary judgment is not to decide issues of fact, but solely to determine whether genuine factual issues exist. We reiterate that the court must not weigh the evidence on a motion for summary judgment. However, when determining whether a genuine issue of material fact for trial exists, the court is not required to ignore its conclusion that a particular piece of evidence may have no probative value, such that reasonable persons could not draw different conclusions from the evidence presented.
DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997) (citations omitted). "[S]ummary judgment may be granted against a nonmoving party whose evidence is `merely colorable,' or `is not significantly probative.'" Id. at 70-71 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2511 (1986)). "[T]he party resisting summary judgment must do more than rest on mere averments." Id. 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 is not sufficiently probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions.
Id.
In Crablex I, this court concluded:
The Original Agreement and the Amended Agreement provide for multiple driveway easements for ingress and egress to the public streets. * * * The effect of the language in the new Exhibit B is inconsistent with the grant of multiple public street access[es] contained in the Original Agreement. This creates an ambiguity with respect to the number of driveway easements that were intended to provide access to the complex.
1997 WL 729210, at *2.
Based on this conclusion that the language in Exhibit B of the relocation agreement is ambiguous, and on the further conclusion that when a document is ambiguous and construction of the document may depend on extrinsic evidence, construction is a question of fact, this court reversed the initial summary judgment that the relocation agreement unambiguously terminated the three driveway easements and remanded for a determination of fact issues.
The objective of judicial interpretation of disputed provisions of a contract is to ascertain and give effect to the parties' intention. This, the courts, both trial and appellate in cases such as this, seek to accomplish by placing themselves in the position of the parties at the time the agreement was negotiated and executed and, upon consideration of the agreement as a whole and the plain meaning of the language used, viewed in the light of the surrounding circumstances, endeavoring to arrive at what the parties must have reasonably contemplated.
Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 237 N.W.2d 76, 78, (1975) (citations omitted).
On remand, the district court correctly determined that the question before it was whether, by substituting the legal description in the second Exhibit B for the legal description in the first Exhibit B, the parties to the relocation agreement intended "to eliminate the three driveway easements described on the original Exhibit B, but omitted from the substituted Exhibit B." The district court then examined the evidence and concluded:
MCDA, Riverside and Mellon have produced insufficient evidence to support their claim that Keith Heller, Stage I, CRLC and Properties intended by executing the Relocation Agreement only to relocate the McKnight Driveway easement, and to otherwise preserve the remaining three easements described on Exhibit B to the Original Agreement but omitted from the description on Exhibit B to the Relocation Agreement. Therefore, Plaintiff Crablex is entitled to partial summary judgment.
Appellants contend that the district court erred in determining that the relocation agreement terminated the three driveway easements, and they make several arguments why the agreement did not terminate the easements. But in making each of these arguments, appellants fail to cite evidence in the record that is sufficiently probative to permit a reasonable person to conclude that when Heller executed the relocation agreement on behalf of Stage I, CRLC, and Properties, he only intended to change the description of the McKnight Driveway easement to conform to the actual location of the driveway and did not intend to terminate the other driveway easements.
Appellants argue first that because the need to change the McKnight Driveway easement to correspond to the actual location of the driveway was the sole reason for the relocation agreement, the mistake of not including the legal descriptions of the other three easements in Exhibit B of the relocation agreement was, at most, a scrivener's error that, when read in the context of correcting the description of the McKnight Driveway, does not demonstrate an intention to terminate the other three driveway easements.
If the sole reason for the relocation agreement were to change the description of the McKnight Driveway easement, the absence of descriptions of the other driveway easements could be merely a scrivener's error, which would not demonstrate an intention to terminate the other easements. But appellants do not cite evidence that supports their claim that correcting the description of the McKnight Driveway was the sole purpose for the relocation agreement.
It is undisputed that the relocation agreement did more than correct the description of the McKnight Driveway; it expanded a Tank and Tower easement that had been created in the original agreement. And with respect to the driveway easements, Heller testified during his deposition that when he signed the relocation agreement, it was his intent to terminate the three easements.
Heller testified that at the time of the agreement, there were plans for further development, and two of the parcels where the easements were located were to be used in the future development. Heller explained that
there was a desire to get those easements out of the picture so the Cedar Square West mortgages did not need to be rewritten or amended, amended subsequent to development was (sic) built.
Heller also testified that future development would provide access to the parking lot to which the third easement had provided access.
During his October 23, 1996, deposition, Heller was asked:
Do you recall — I guess I'm still trying to figure out whether you, back at the time of July 3rd of 1974, you actually recall sitting there when you signed this agreement, Mr. Heller, and having this specific intent to eliminate these easements that you've talked about, "B," "C" and "D?"
Heller responded, "Yes."
Appellants do not cite any evidence indicating that when the relocation agreement was signed, the future development described by Heller was not planned or that the land where the driveway easements were located would not be affected by the future development as Heller explained. Absent any such evidence, there is no basis to conclude that correcting the description of the McKnight Driveway was the sole purpose for the Relocation agreement, and therefore, that the mistake of not including the legal descriptions of the other three easements in Exhibit B of the relocation agreement was, at most, a scrivener's error.
Appellants next argue that the conduct of the parties to the relocation agreement during the years after the agreement was executed supports an interpretation that the agreement did not terminate the three driveway easements. It is undisputed that after the agreement was executed in 1974, the driveway easements continued to be used for driveway purposes.
Under some circumstances, continued use of a driveway could indicate that there was no intent to terminate a driveway easement. But here, the Cedar-Riverside entities, all controlled by Heller, owned both the property that was burdened by the easements and the property that was benefited by the easements until HUD acquired the Plaza in foreclosure proceedings that began in 1984. Consequently, the driveways could continue to be used even if the easements were terminated, and the continued use does not indicate that Heller did not intend to terminate the easements.
In Crablex I, this court said:
Heller stated that he did not become aware or believe that the Relocation Agreement terminated the easements until sometime in 1986, nearly 12 years after the Relocation Agreement was executed.
1997 WL 729210, at *3. Citing this statement, appellants argue that the current record does not supplement the record in Crablex in a manner that contradicts Heller's statement and that "[t]his undisputed testimony strongly indicates that the Relocation Agreement did not intend to terminate the three other driveway easements." But the deposition testimony that appellants cite as the basis for the statement that this court attributed to Heller in Crablex I does not indicate that Heller did not intend to terminate the easements when he signed the relocation agreement in 1974.
The testimony that appellants cite occurred during Heller's October 17, 1996, deposition. By the time that deposition was taken, the current dispute about whether the relocation agreement terminated the driveway easements had fully developed, with appellants claiming that the agreement did not terminate the easements and respondent claiming that the agreement did terminate the easements.
During the deposition, Heller identified the attorney who drafted the relocation agreement and testified that he did not recall any discussions about what wording to use in the agreement. Heller also testified that he could not recall discussing the relocation agreement with anyone from the day he executed the agreement, July 3, 1974, until 1987, but from 1987 on, he had discussions about the impact of the agreement and what the agreement meant with several people, including Bruce Rasmussen, an attorney. Heller then explained why he believed that the language of the relocation agreement terminated the driveway easements. At that point, the following exchange occurred:
Q.When did you Mr. Heller, when did you reach the belief or conclusion yourself that this [Relocation] Agreement did away with Easements "C" and "D" and part of "E?"
A. I presume I knew that when I signed it.
Q. Well, no, I'm not asking you what you presumed. I'm asking you when did you recall reaching that belief or conclusion?
A. I specifically recall the fall of 1987 when I became concerned about privilege easements.[] And I asked Bruce Rasmussen to study the entire easement situation.
During his May 1, 1996, deposition, Heller testified that after the HUD foreclosure, a conflict about the terminated driveway easements developed, and he became concerned about problems with prescriptive easements and sought legal advice. It appears that the reference to privilege easements was intended to refer to prescriptive easements.
Q. Okay. But what I'm asking is whether you recall having a belief or an opinion yourself at any time before 1987 that the [Relocation] Agreement did away with easements "C" and "D" and part of "E?"
A. I don't recall.
Appellants contend that Heller's answers during this exchange indicate that when Heller signed the relocation agreement, he did not intend to terminate the driveway easements because the answers demonstrate that before 1987, Heller was unaware, and did not believe, that the agreement terminated the easements. Viewed in isolation, the answers could be interpreted in this manner. But when viewed in the context of the discussion during which they were made, Heller's statements do not indicate anything about his intent when he signed the relocation agreement.
Heller made the statements during a discussion about what he believed the language in the relocation agreement meant. Heller was not attempting to explain what the meaning of the agreement was intended to be; he was explaining what he believed the agreement meant, as written. Before 1987, when HUD acquired the property and a dispute arose about whether the relocation agreement terminated the driveway easements, Heller had no reason to consider whether the relocation agreement actually did what he presumed he knew it did when he signed it. But when the dispute arose in 1987, Heller sought counsel to study the entire easement situation, and he had discussions about the impact of the agreement and what the agreement meant with several people, including the attorney. At that point, he acquired a belief or opinion about what the agreement actually did.
Appellants do not cite any evidence that contradicts Heller's description of the circumstances under which his attorney drafted the relocation agreement or the circumstances under which Heller discussed the impact of the agreement and what the agreement meant. The district court was not required to ignore these circumstances when it determined the probative value of the answers that appellants contend prove that Heller did not intend to terminate the driveway easements when he signed the relocation agreement.
In an argument that parses the operative language of the relocation agreement, appellants contend that the agreement was only intended to substitute a new description of the McKnight Driveway for an old description of the McKnight Driveway. The operative language states:
Exhibit B attached to and made part of the Original Agreement which describes the strips of land subject to the Driveway Easements is amended by substituting in lieu of such original description the parcel set forth in Exhibit B attached hereto and made a part hereof.
(Emphasis added.)
Appellants argue that this language could not also have been intended to terminate the easements for the three other driveways because the language speaks of substituting a parcel in lieu of a description, and if the parcel was substituted for the original McKnight Driveway and three other driveways, the agreement would have to speak of substituting a parcel in lieu of descriptions (plural), rather than a description (singular).
Appellants' argument presents a possible interpretation of the language in the relocation agreement, but another possible interpretation is that after stating that the original Exhibit B contains language that describes the four strips of land subject to driveway easements, the relocation agreement then refers to the original Exhibit B as a description of the four strips of land. Although the original Exhibit B describes four strips of land, the exhibit is a single document and, therefore, the document itself may be referred to as a description of the strips of land.
However, it is not necessary to determine the meaning of the relocation agreement solely by examining the language of the agreement because the district court's ultimate decision was not based solely on the language of the agreement. In interpreting the relocation agreement, the district court considered the language of the agreement in the light of the surrounding circumstances and concluded that appellants did not produce sufficient evidence to support their interpretation of the agreement. This conclusion is not based on a determination that the language of the agreement cannot be interpreted to mean what appellants contend that it means; it is based on a determination that the evidence in the record does not permit a reasonable person to conclude that the parties to the agreement intended the language of the agreement to mean what appellants contend that it means.
Finally, appellants argue that the title of the relocation agreement and the recitals in the agreement, which speak in terms of relocating easements and say nothing about terminating easements, make it clear that there was no intent to terminate the three driveway easements. Appellants acknowledge that the owners of the parcels burdened by the easements had the power to terminate the easements, but they argue that the recitals indicate only intent to relocate and that terminating the easements is inconsistent with that intent.
Like appellants' previous argument, this argument presents a possible interpretation of the language in the relocation agreement. But also like the previous argument, this argument does not consider another possible interpretation of the language of the agreement. Appellants' argument is based on the premise that relocating easements is necessarily something different from terminating easements. But it is not apparent why the effect of substituting an exhibit that contains a description of one easement for a document that describes four easements can be described only as terminating three easements and cannot be described as relocating three easements to the same location as the fourth easement. The effect is the same, three easements are eliminated; but the process could be described as terminating the easements or relocating them. Consequently, the title of the relocation agreement and the recitals in the agreement are of little probative value when attempting to determine Heller's, Stage I's, Properties, or CRLC's intent on July 3, 1974, regarding the effect of the relocation agreement.
The district court did not err in concluding that appellants' did not produce sufficient evidence that Heller's intent at the time of signing the relocation agreement was to do anything other than terminate the three driveway easements. Therefore, we affirm the district court's grant of partial summary judgment.
2. Appellants contend that regardless of this court's determination on the summary judgment issue, the district court's award of attorneys' fees was not permitted as a matter of law under (1) Minn. Stat. § 549.21, subd. 2 (1994), Minn.R.Civ.P. 11 (1994); (2) Minn.R.Civ.P. 37.03; and (3) Minn. Stat. § 508.70 (2002)). Alternatively, appellants argue that the district court abused its discretion in awarding attorney fees in the amount of $433,362.50.
Crablex commenced this action in 1995. The statute regarding sanctions in effect at that time was § 549.21, subd. 2 (1994). In Douglas v. Schuette, 607 N.W.2d 142, 148 (Minn.App. 2000), review denied (Minn. May 16, 2000), this court stated:
The 1997 amendments replaced Minn. Stat. § 549.21 with a provision [section 549.211] having a similar purpose but a different procedure. The new provision is effective only for causes of action arising on or after August 1, 1997. Here, the suit producing the sanctions at issue was filed in 1996. Therefore, the district court's use of the old provision (Minn. Stat. § 549.21), rather than the new provision (Minn. Stat. § 549.211) to determine the propriety of awarding sanctions was not erroneous.
Therefore, the analysis will proceed under the 1994 version. The same is applicable for the 1994 version of Rule 11.
An award of attorney fees under Minn. Stat. § 549.21 may be based on a finding of bad faith. Uselman v. Uselman, 464 N.W.2d 130, 140 (Minn. 1990). "As the existence of bad faith is an issue of fact, the trial court is in the best position to make this determination." Id. (citations omitted). Rule 11 authorizes an award of attorney fees upon violation of the attorney's affirmative duty to investigate the factual and legal bases of a claim to verify that it is well-grounded factually, warranted by existing law or a good-faith argument for modifying the law, and asserted for proper purposes. Id. at 142. This court will not reverse a district court's award of attorney fees under Minn. Stat. § 549.21 or rule 11 absent an abuse of discretion. Id. at 140-41, 145.
Appellants argue that, as a matter of law, Crablex is not entitled to an award of attorney fees under either Minn. Stat. § 549.21 or Minn.R.Civ.P. 11 because, in Crablex I, this court reversed a grant of summary judgment against appellants. The supreme court has stated that "[a] party who survives [summary judgment] with the major claims intact should not be subject to sanctions after trial predicated on these surviving claims." Uselman, 464 N.W.2d at 144 (emphasis added). But this case differs from Uselman in one very significant way. Unlike Uselman, the trial that occurred in this case was not predicated on any claim made by appellants that survived summary judgment. The trial was predicated on a claim by Crablex for trespass damages stemming from use of the driveways after the easements were terminated.
Appellants asserted a claim that was directly contrary to the claim for trespass damages. Appellants claimed that the relocation agreement relocated the McKnight Driveway easement, but did not terminate the three other driveway easements. The district court rejected this claim when it granted Crablex's first motion for summary judgment based on its determination that by substituting a document that described one driveway easement for a document that described four driveway easements, the relocation agreement unambiguously terminated three driveway easements. Because the district court determined that the relocation agreement was unambiguous, it did not consider any extrinsic evidence to determine the construction and effect of the agreement.
In Crablex I, this court reversed the summary judgment, citing Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979), which states:
The construction and effect of a contract are questions of law for the court, but where there is ambiguity and construction depends upon extrinsic evidence and a writing, there is a question of fact for the jury.
This court concluded in Crablex I that because the relocation agreement is ambiguous and construction may depend on extrinsic evidence, there were questions of fact for the jury. 1997 WL 729210, at * 2-3. Having reached this conclusion, this court should have simply remanded to permit the district court to consider the construction of the relocation agreement in light of the extrinsic evidence. The extrinsic evidence was not relevant to this court's determination that the relocation agreement is ambiguous. See Lamb Plumbing Heating Co. v. Kraus-Anderson, 296 N.W.2d 859, 862 (Minn. 1980) ("A contract is ambiguous if it is susceptible to more than one interpretation based on its language alone."); Metro Office Parks Co. v. Control Data Corp., 295 Minn. 348, 351, 205 N.W.2d 121, 123 (1973) ("A writing is ambiguous if, judged by its language alone and without resort to parol evidence, it is reasonably susceptible of more than one meaning.") Instead, this court commented about some of the extrinsic evidence and speculated about what the evidence might prove with respect to the construction of the relocation agreement. Crablex I, 1997 WL 729210, at *3-4 . Appellants cite this court's comments to support their argument that their claims survived summary judgment.
But, although it is true that following Crablex I, appellants' claim was intact, their claim never went to trial. This court's comments in Crablex I about the extrinsic evidence presenting a question of fact for the jury were made before the district court considered the extrinsic evidence. And each time that this court commented about what the extrinsic evidence might prove, it emphasized that it was not reaching any other conclusion than that the extrinsic evidence presented questions of fact that must be left to the trier of fact. Id.
In one respect, the claim that appellants made in the district court before Crablex I was not intact following Crablex I. In the memorandum that accompanied the district court's order granting the first summary judgment, the court stated that both parties "contend that they are entitled to summary judgment in their favor based upon the plain language of Exhibit B to the Relocation Agreement," which indicates that before Crablex I, both Crablex and appellants contended that the relocation agreement was unambiguous. This court's determination that the agreement is ambiguous rejected both arguments that the agreement is unambiguous.
Upon remand by this court, the district court considered the extrinsic evidence for the first time and concluded that it was not sufficient to create a genuine issue of material fact regarding appellants' claim that when Heller executed the relocation agreement, it was his intention and the intention of Stage I, CRLC, and Properties to relocate the McKnight Driveway easement and to otherwise preserve the other three driveway easements. Consequently, the district court granted Crablex summary judgment a second time; appellants' claim did not survive summary judgment, and the trial that ultimately occurred was not predicated on appellants' claim.
Appellants also argue that neither Minn.R.Civ.P. 11 nor Minn. Stat. § 549.21 can be a basis for fees because notice requirements were not satisfied. The district court correctly noted that neither the rule nor the statute that apply in this action contains specific language requiring notice, but concluded that even if notice is a requirement, the requirement was met because it was undisputed that since 1997, Crablex's counsel made it clear to appellants that payment of attorney fees would be a condition to any settlement and because on September 15, 1999, Crablex's counsel submitted to the court a demand for attorney fees in connection with a settlement conference. The settlement demand submitted to the court demanded $350,000 for attorney fees incurred to date "in recognition of fact that property was acquired by [appellants] with knowledge of title defects and no settlement offer made until 9/10/99." Although this notice was given after Crablex had incurred substantial attorney fees, the supreme court explained in Kellar v. Von Holtum, 605 N.W.2d 696, 702 (Minn. 2000), that " Uselman makes clear that sanctions may be imposed for violations that occur before notice is given."
Under Uselman, before a court may impose a rule-11 sanction on an attorney or party, "the attorney or party must have fair notice of both the possibility of a sanction and the reason for its proposed imposition." 464 N.W.2d at 143 (citation omitted). Also, "a party intending to seek sanctions should notify the court and other parties with specificity of that intention." Id.
We agree with the district court that the September 15, 1999, settlement demand put appellants and the court on notice that Crablex intended to seek attorney fees based on its claim that appellants knew about the title defects caused by the termination of the driveway easements even before they purchased the property, but they purchased the property anyway, and then asserted in the mortgage-foreclosure proceeding that the easements had not been terminated. The settlement demand gave appellants fair notice of the possibility of a sanction and the reason for the sanction. See Faribo Oil Co. v. Tatge Oil Co., Inc., 501 N.W.2d 699, 702 (Minn.App. 1993) (without specific recitation of danger of sanctions, level of warning was appropriate where pretrial observations by court regarding necessity to produce evidence to support claim made it evident to parties that, absent such evidence, claims were without merit and claimants risked going forward with frivolous claim), review denied (Minn. Aug. 24, 1993); Rumachik v. Rumachik, 494 N.W.2d 68, 71 (Minn.App. 1992) (sufficient notice where respondent notified appellant and referee in writing before hearing "that she would seek an award of attorney fees incurred in responding to appellant's `frivolous' motion."), review denied (Minn. Feb. 25, 1993); Radloff v. First Am. Nat'l Bank, 470 N.W.2d 154, 159 (Minn.App. 1991) (concluding "summary judgment orders, along with numerous other orders denying relief * * *, were ample warning to alert [sanctioned parties] that they could be subject to sanctions"), review denied (Minn. July 24, 1991). And the record demonstrates that Crablex's reason for seeking a sanction was valid.
Before appellants asserted their claim that the relocation agreement did not terminate the three driveway easements, appellants' own attorneys had advised appellants that the relocation agreement terminated the easements. Based on this advice, appellants negotiated an indemnification agreement under which HUD agreed to indemnify the title-insurance company and MCDA, and MCDA, in turn, agreed to indemnify Riverside in the event that the relocation agreement could not be either amended or reformed. MCDA also agreed that it would obtain the easements through an eminent domain action, if necessary. In 1988, appellants commenced reformation proceedings in the Examiner of Titles Office to have the relocation agreement reformed. But when the examiner of titles directed them to produce evidence to support their claim that the parties to the relocation agreement did not intend to terminate the disputed easements, appellants failed to produce any evidence. As the district court found, these activities, which all occurred before Crablex began its foreclosure action, demonstrate that appellants "were fully aware of the title defects, yet purchased the property and then proceeded to make claims and defenses they knew they could not support."
Appellants also argue that in determining that they acted in bad faith, the district court improperly relied on the eminent-domain proceedings that they either commenced or threatened to commence to acquire driveway easements. Appellants contend that relying on the eminent-domain proceedings as grounds for the award of attorney fees was improper because the bad faith complained of must occur with respect to the litigation itself, and not with respect to the underlying cause of action or any other matter outside the courtroom. See Bank of Elbow Lake v. First State Bank, 439 N.W.2d 53, 56 (Minn.App. 1989) ("Section 549.21 is applicable only where the bad faith occurs with respect to the litigation itself, not with respect to the underlying cause of action."), review denied (Minn. May 2, 1989). But the district court did not rely on the eminent-domain proceedings as grounds for the attorney-fee award; the court considered the eminent-domain proceedings only as evidence that appellants acted in bad faith when they asserted in the foreclosure proceeding that the easements that they sought to acquire through eminent domain had not been terminated.
Because the record supports the district court's findings that appellants' claims did not survive summary judgment, that appellants received notice that Crablex intended to seek attorney fees as a sanction, and that appellants made claims and defenses that they knew they could not support, the district court's determination that appellants litigated in bad faith is not clearly erroneous, and the district court did not abuse its discretion by awarding Crablex attorney fees as a sanction.
3. Appellants argue that even if an attorney-fee award were warranted, the amount awarded was an abuse of the district court's discretion. Appellants do not contend that any of the fees awarded were not incurred in connection with the litigation or were not at reasonable hourly rates; they contend that the fees were not causally related to the claimed bad faith.
Appellants argue that the district court was incorrect when it concluded that but for appellants' claim that they owned easement interests superior to Crablex's interest in the foreclosed property, the foreclosure action would not have been necessary. They contend that regardless of the easements, a foreclosure action was necessary for Crablex to foreclose its mortgage. Therefore, they conclude, fees incurred before and as part of a normal foreclosure and quiet-title action should not be awarded.
Although it is true that Crablex needed to pursue a foreclosure proceeding in some form to foreclose its mortgage, CRLC, the entity whose mortgage was being foreclosed, did not contest the foreclosure. Appellants' claim that their interest in the foreclosed property is superior to Crablex's interest turned what began as a straightforward foreclosure proceeding into litigation that lasted several years. The district court did not abuse its discretion by failing to determine the fees that Crablex would have incurred if it had been able to pursue a foreclosure proceeding different from the proceeding it actually pursued when appellants asserted their interest in the foreclosed property.
Appellants argue that no fees should be awarded for the period through Crablex I because they prevailed in that aspect of the litigation. But, as we have already discussed, the outcome in Crablex I does not demonstrate that appellants' easement claim was meritorious. The district court's fee award was based on its conclusion that appellants asserted an easement claim that they never had evidence to support. Although the district court reached this conclusion after Crablex I, appellants lacked the necessary evidence when they asserted their claim before Crablex I. The district court did not abuse its discretion by awarding fees for the period before Crablex I.
Appellants claim that (1) no fees should be permitted for Crablex's unsuccessful prosecution of its motion for punitive damages; and (2) because the district court did not find that appellants opposed Crablex's motion for attorney fees in bad faith, the fees Crablex incurred asserting that motion are not justified. But because appellants make no arguments and cite no authority in support of either of these claims, they are waived. See Schoepke v. Alexander Smith Sons Carpet Co., 290 Minn. 518, 519-20, 187 N.W.2d 1333, 135 (1971) ("An assignment of error based on mere assertion and not supported by any argument or authorities in appellant's brief is waived and will not be considered on appeal unless prejudicial error is obvious on mere inspection.").
Appellants argue that fees incurred in connection with the trial of trespass damages should not be allowed because the district court did not find that appellants acted in bad faith in connection with the damages trial. Appellants contend that even if they had conceded the issue of the easement termination at the outset, Crablex would still have incurred attorney fees in trying damages. But, like appellants' claim that because Crablex had to pursue a foreclosure action, it should not be awarded fees incurred before and as part of a normal foreclosure action, this claim would require the district court to determine the difference between the fees Crablex incurred in the damages trial that actually occurred and the fees it would have incurred if appellants had conceded the easement-termination issue at the outset and the damages trial had been different. The district court did not abuse its discretion by failing to make this hypothetical determination.
Finally, appellants argue that because the attorney-fee award is much larger than other fee awards made under either Minn. Stat. § 549.21 or Minn.R.Civ.P. 11, the award should be reduced to an amount comparable to prior awards. But appellants do not explain why it was an abuse of discretion for the district court to not consider the fee awards made in other cases when deciding what amount to award in this case. Appellants do not dispute that Crablex incurred the fees awarded, and although the amount awarded is large, the conduct for which the fees were awarded was egregious, and the resulting litigation was extensive. After being advised by their own attorneys that the easements were terminated and acting on this advice to avoid the financial consequences of the termination, appellants persisted in asserting a claim that the easements were not terminated.
Because we conclude that the district court did not abuse its discretion by awarding attorney fees in the amount of $433,362.50 as a sanction under Minn. Stat. § 549.21 or Minn.R.Civ.P. 11, we will not address the district court's alternative bases for the award, Minn.R.Civ.P. 37.03 and Minn. Stat. § 508.70.