Opinion
No. C1-98-1533.
Filed March 2, 1999.
Appeal from the District Court, Chisago County, File No. C59439.
Gregory G. Galler, (for respondents Tolzman, et al.)
Michael T. Feichtinger, Mark R. Azman, (for respondent Town of Wyoming).
David J. Lenhardt, (for appellants).
Considered and decided by Toussaint, Chief Judge, Willis, Judge, and Holtan, Judge.[*]
[*] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals pursuant to Minn. Const. art. VI, § 10.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellants Richard and Cynthia Anderson challenge the district court's order granting a motion to enforce a settlement agreement. We reverse and remand.
FACTS
Respondents Kenneth A. Tolzman, et al. (homeowners), filed a complaint on February 11, 1994, alleging that the Andersons' use of their property violated the zoning ordinances of both respondent Town of Wyoming (town) and Chisago County (county). The homeowners requested a declaration that the Andersons' warehouse and light industrial uses were in violation of the zoning ordinances and asked for an order permanently enjoining such violations. The court granted the requested relief by an order and injunction dated July 15, 1994.
Following a series of district court orders and two appeals to this court, the parties entered into a settlement agreement on August 30, 1996, and the district court continued the case, pending finalization of the settlement and dismissal of the lawsuit.
The settlement agreement contemplated the rezoning of the Andersons' property by the town and the county. Both the town and county rezoned the Andersons' property, but the Andersons refused to make a payment provided for in the settlement agreement, arguing that the rezoning did not satisfy a condition precedent. The district court granted the homeowners' motion to enforce the settlement agreement, and this appeal followed.
DECISION I. Enforcement of Settlement Agreement
A settlement agreement is contractual in nature. St. Paul Fire Marine Ins. Co. v. National Chiropractic Mut. Ins. Co. , 496 N.W.2d 411, 415 (Minn.App. 1993), review denied (Minn. Apr. 29, 1993). Absent ambiguity, the construction and effect of a contract are questions of law. Trondson v. Janikula , 458 N.W.2d 679, 681 (Minn. 1990). This court need not defer to the district court's decisions on questions of law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n , 358 N.W.2d 639, 642 (Minn. 1984). Additionally, "[c]ontractual language is to be given its plain and ordinary meaning." Reliable Metal, Inc. v. Shakopee Valley Printing, Inc. , 407 N.W.2d 684, 687 (Minn.App. 1987) (citation omitted).
The Andersons claim that the district court erred in granting the homeowners' motion to enforce the settlement agreement. The court concluded that the homeowners had substantially performed, that the Andersons breached the settlement agreement, and that the Andersons were "estopped from demanding enforcement" of certain provisions of the settlement agreement.
A. Condition Precedent
The Andersons argue that the district court erred by enforcing the settlement agreement without requiring satisfaction of a condition precedent to their duty to perform under the settlement agreement. A condition precedent is
one which is to be performed before the agreement of the parties becomes operative. A condition precedent calls for the performance of some act or the happening of some event after the contract is entered into, and upon the performance or happening of which its obligation is made to depend.
National Union Fire Ins. v. Schwing Am., Inc. , 446 N.W.2d 410, 412 (Minn.App. 1989) (stating that party may not enforce contract containing condition precedent unless condition is satisfied) (citation omitted); see also National City Bank v. St. Paul Fire Marine Ins. Co. , 447 N.W.2d 171, 176 (Minn. 1989) (requiring satisfaction of condition precedent before duty to perform under contract arises).
Under the terms of the settlement agreement, the Andersons and the town promised to pay the homeowners a total of $42,000 in return for the homeowners' promise to dismiss the lawsuit with prejudice. But the obligation to pay arises only "[i]f the request for rezoning is approved in all material respects by all applicable government entities within a reasonable time."
Whether contract language is a condition or a promise generally depends on the intent of the parties. 5 Samuel Williston Walter H. E. Jaeger, A Treatise on the Law of Contracts § 663 (3d ed. 1961) (stating that condition is distinguished from promise in that condition creates no right or duty in and of itself but is merely limiting or modifying factor). Here, the parties gave the title "Amended Classification Contingency" to the section of the settlement agreement that creates the Andersons' obligation to pay. Because the Andersons' payment obligation is made contingent on the rezoning of their property by both the town and county in accordance with the settlement agreement's minimum requirements, the contract creates a condition precedent to the Andersons' obligation to pay the homeowners.
To satisfy a condition precedent, the act or event on which an obligation is made to depend must be performed in accordance with the terms of the contract. See Lake Co. v. Molan , 269 Minn. 490, 498-99, 131 N.W.2d 734, 740 (1964) (requiring satisfaction of conditions precedent in manner provided by terms of contract); see also 5 Williston Jaeger, supra , § 675 (stating that, as general rule, conditions precedent "must be exactly fulfilled or no liability can arise on the promise which such conditions qualify") (footnote omitted).
Here, the settlement agreement requires that, at a minimum, the rezoning was to permit five uses, including retail stores and retail service shops/stores. While both the town and county rezoned the Anderson's property, neither new zoning classification expressly permits retail stores or retail service shops/stores. As a result, the Andersons refused to make a payment provided for in the settlement agreement. The district court determined that the rezoning had been substantially performed and concluded that the Andersons were obligated to pay the homeowners.
Substantial performance is the "performance of all the essentials necessary to the full accomplishment" of the purposes of a contract. Material Movers, Inc. v. Hill , 316 N.W.2d 13, 18 (Minn. 1982) (permitting only nonmaterial deviations) (citation omitted). Generally, the duty to perform under construction contracts is satisfied by substantial performance. Id. But see Carlson v. Doran , 252 Minn. 449, 455, 90 N.W.2d 323, 327 (1958) (noting rule's more limited application to non-construction contracts). Strict performance is generally required in the case of a commercial contract. State Bank v. Lauterbach , 198 Minn. 98, 108, 268 N.W. 918, 923 (1936). The Andersons argue that the settlement agreement is akin to a commercial contract and that substantial performance of a condition precedent is insufficient.
But even if the doctrine of substantial performance applied to the settlement agreement at issue, the record does not support the conclusion that the rezoning was substantially performed. See Carlson , 252 Minn. at 455, 90 N.W.2d at 327 (precluding application of substantial performance because of nonperformance of material part of contract). Because rezoning was not effected in accordance with the settlement agreement's minimum requirements, the condition precedent to the Andersons' obligation to pay has not been substantially performed.
B. Andersons' Breach
In Minnesota, "every contract includes an implied covenant of good faith and fair dealing." In re Hennepin County 1986 Recycling Bond Litig. , 540 N.W.2d 494, 502 (Minn. 1995) (requiring that one party not unjustifiably hinder other party's performance of contract) (citations omitted). Similarly, one who frustrates satisfaction of a condition precedent cannot take advantage of that failure. Id.
Under the terms of the settlement agreement, the Andersons were obligated to request rezoning of their property, to provide an irrevocable letter of credit for their share of the payment to the homeowners, and to work in good faith to process the rezoning request. The district court found that the Andersons did not make the rezoning request, allowed the letter of credit to expire, and did not act in good faith. As a result, the district court concluded that the Andersons were "in total breach of the agreement" and could not "insist on complete performance."
Here, the condition precedent could be satisfied only by the approval of the request for rezoning pursuant to the terms of the settlement agreement. The town initiated the rezoning process, but the exact nature of the town's request is unclear. While the Andersons did not assist in the rezoning process, they did not frustrate approval of the request for rezoning. Thus, the Andersons may assert that the condition precedent to their obligation to pay was not satisfied.
C. Estoppel
The Andersons also argue the district court erred in relying on the doctrines of unjust enrichment and promissory estoppel in concluding that the Andersons were "estopped from demanding" performance of the minimum rezoning requirements.
Unjust enrichment does not apply where there is a valid contract. See Sharp v. Laubersheimer , 347 N.W.2d 268, 271 (Minn. 1984) (stating that compensation under quasi-contract or unjust enrichment theory is contrary to law where there is express contract); see also Breza v. Thaldorf , 276 Minn. 180, 183, 149 N.W.2d 276, 279 (1967) (precluding recovery in quantum meruit where there is proof of express contract). Similarly, promissory estoppel does not apply where a contract exists in fact. See Del Hayes Sons, Inc. v. Mitchell , 304 Minn. 275, 283, 230 N.W.2d 588, 593 (1975) (applying Restatement of Contracts § 90 (1932)).
Because no party challenges the validity of the settlement agreement here, the district court erred in relying on the doctrines of unjust enrichment and promissory estoppel to support its conclusion that the Andersons were estopped from demanding performance of the minimum rezoning requirements.
II. Evidentiary Hearing
The Andersons claim that the district court erred in failing to hold an evidentiary hearing on the homeowners' motion to enforce the settlement agreement. They contend that, where there is a dispute regarding the terms of a settlement agreement, the court must hold an evidentiary hearing. The Andersons rely on Haghighi v. Russian-American Broad. Co. , 577 N.W.2d 927, 929 (Minn. 1998) (citing Sheng v. Starkey Lab., Inc. , 53 F.3d 192, 194 (8th Cir. 1995) (requiring evidentiary hearing when there is substantial dispute concerning existence or terms of settlement agreement)).
But Haghighi does not stand for the principle that an evidentiary hearing is required whenever there is a substantial dispute concerning the terms of a settlement agreement. Id. (noting only that, pursuant to Sheng , federal district court scheduled evidentiary hearing in case involving question certified to supreme court). And, in any event, neither this court nor the district court is bound by Sheng . See Northpointe Plaza v. City of Rochester , 457 N.W.2d 398, 403 (Minn.App. 1990) (recognizing that, with regard to federal decisions, state courts are bound only by decisions of United States Supreme Court), aff'd , 465 N.W.2d 686 (Minn. 1991).
Furthermore, the supreme court has noted that
"[a] party is not entitled, as a matter of right, to have a motion involving an issue of fact heard and tried on the oral testimony of witnesses."
Saturnini v. Saturnini , 260 Minn. 494, 496, 110 N.W.2d 480, 482 (1961) (quoting Strom v. Montana Cent. Ry. Co. , 81 Minn. 346, 349, 84 N.W. 46, 47 (1900)). When "a motion is based on facts not appearing of record, the court may hear the matter on affidavits presented by the respective parties." Minn.R.Civ.P. 43.05 (noting that matter may also be heard on oral testimony). Rule 43.05 authorizes the district court, "in its discretion, to decide any motion solely upon affidavit[s]." Saturnini , 260 Minn. at 497, 110 N.W.2d at 482 (interpreting Minn.R.Civ.P. 43.05).
Here, the parties submitted affidavits to the district court. In fact, appellant Richard Anderson submitted a 12-page affidavit with 13 attached exhibits. There is nothing to suggest that the district court rejected any of the Andersons' submissions. Thus, the district court did not err in failing to hold an evidentiary hearing on the homeowners' motion to enforce the settlement agreement.
III. Motion to Strike
Respondents move to strike portions of the Andersons' reply brief on the ground that they refer to matters outside the record on appeal. See Minn.R.Civ.App.P. 110.01 (describing composition of record on appeal). Specifically, respondents object to references to discussions with a member of the town board and to discussions among the parties concerning the Andersons' participation in settlement negotiations. Evidence of these discussions is not part of the record on appeal, and all references to the discussions in the Andersons' reply brief are stricken. We have not considered those portions of the Andersons' reply brief in reaching our decision on the merits.
Because a condition precedent to the Andersons' obligation to make a payment to the homeowners was not satisfied, the district court erred in granting the homeowners' motion to enforce the settlement agreement. We reverse and remand for further proceedings consistent with this opinion.