Opinion
No. C0-02-556
Filed August 27, 2002.
Appeal from the District Court, Hennepin County, File No. CT016823.
Matthew R. McBride, Karl E. Robinson, (for respondent)
David R. Marshall, Crystal M. Ovsak, (for appellants)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellants leased computer equipment from respondent pursuant to a written lease. When appellants tried to end the lease, respondent claimed that appellants were bound by a 36-month extension contained in an assignment that appellants signed. Appellants stopped paying and respondent sued for breach of contract. The district court granted summary judgment in favor of respondent. Because appellants have raised genuine issues of material fact regarding their defense of mutual mistake, we reverse and remand.
FACTS
In October 1993, appellant FFP Partners contracted to lease computer equipment from respondent Winthrop Resources Corporation. In August 1999, FFP Partners wrote to respondent,
FFP Partners, L.P. would like to assign and transfer its interest in its equipment leases with Winthrop Resources to FFP Operating Partners, L.P. In a company reorganization effective December 27, 1997, FFP Partners, L.P. assigned all of its operating assets to FFP Operating Partners, L.P.
FFP Partners did not request a lease extension, nor did the parties discuss extending the terms of the leases. In fact, the record reveals no evidence of negotiation or discussion between the parties regarding the terms of the proposed lease assignment.
The next month, respondent sent FFP Partners a document entitled "Assumption and Assignment of, and Amendment to [FFP Partners' lease schedules and lease agreement]." The document contained the following paragraphs:
This Assumption and Assignment * * * which * * * cause all of right, title and interest in the Equipment listed [on the lease schedules] to transfer from [FFP Partners] to FFP Operating Partners * * * .
* * * *
Lease of the Assigned Equipment . For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor hereby leases to Assignee and Assignee hereby rents from Lessor for $11,195.00 per month, the Assigned Equipment for an initial term of thirty-six (36) months beginning September 1, 1999.
Respondent could not identify who drafted the assignment and acknowledged that the assignment was a form document "drafted some time ago." Respondent stated that it routinely used the document in many transactions, and that the document required little tailoring. Respondent acknowledged that the assignment form often contained extension clauses and that the 36-month-extension provision was not unique to this assignment. Moreover, respondent admitted that the transfer-of-title provision in the assignment was a mistake because FFP Partners had no title to the equipment that it could assign to FFP Operating Partners.
Craig Scott, the vice president of both FFP Partners and FFP Operating Partners, signed the assignment on behalf of both entities. Appellants stated that Scott read the assignment "sufficiently to identify that it accomplished what he had requested from [respondent]" but denied "that Scott read each provision of the document to discover the content and effect of the purported lease extension."
In April 2000, after realizing that the assignment contained the 36-month-extension provision, appellants tried to cancel the lease based on mutual mistake. In April 2001, appellants stopped paying respondent, and in May, respondent sued. In December, the district court granted summary judgment for respondent, finding that only appellants were mistaken as to whether the assignment extended the leases by 36 months. The court ordered appellants to pay respondent $208,746.41 in contract damages, and in March 2002, the court granted respondent's attorney-fee motion, adding $68,645.94 to the award. This appeal followed.
DECISION
On appeal from summary judgment, a reviewing court asks whether (1) there are genuine issues of material fact; and (2) whether the lower courts erred in their application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). "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." DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997) (citation omitted). No genuine issue of material fact exists where the record as a whole could not lead a rational trier of fact to find for the nonmoving party. Id. at 69. But "summary judgment is inappropriate when reasonable persons might draw different conclusions from the evidence presented." Id. (citation omitted). Moreover,
Summary judgment is a "blunt instrument" and should not be employed to determine issues which suggest that questions be answered before the rights of the parties can be fairly passed upon. It should be employed only where it is perfectly clear that no issue of fact is involved, and that it is not desirable nor necessary to inquire into facts which might clarify the application of the law.
Donnay v. Boulware, 275 Minn. 37, 45, 144 N.W.2d 711, 716 (1966) (citation omitted).
Appellants argue that they submitted sufficient evidence of mutual mistake to defeat summary judgment. A contract may be reformed when (1) parties enter a written contract; (2) the writing fails to express the parties' true intention; and (3) the failure is due to the parties' mutual mistake. Leamington Co. v. Nonprofits' Ins. Assoc., 615 N.W.2d 349, 354 (Minn. 2000). Respondent contends that "the [assignment] itself is the only evidence of the parties' true agreement."
When viewing the evidence in the light most favorable to appellants, it is far from clear that only appellants were mistaken as to whether the assignment should contain a 36-month-extension provision. The record contains several pieces of evidence that, when taken together, raise genuine issues of material fact as to whether respondent actually intended to extend the leases by 36 months. First, appellants' letter to respondent requested only a lease assignment and not a lease extension. Second, respondent did not know who drafted the assignment. In fact, the assignment was apparently a computer-generated form document that respondent had used in other transactions and that often contained extension clauses. Respondent even admitted that the 36-month-extension provision in this assignment "could have been born out of another relationship." Third, respondent admitted that the transfer-of-title provision was included by mistake. Finally, no evidence in the record suggests that the parties discussed or negotiated a lease extension in addition to the lease assignment. In sum, respondent did not know the where or why of the disputed clause. Viewing the evidence most favorable to appellants, it would not be unreasonable for a trier of fact to find that the lease extension was a mistake on respondent's part.
Respondent claims that appellants assumed the risk of their mistake by not reading the assignment carefully before signing it. See Gartner v. Eikill, 319 N.W.2d 397, 398 (Minn. 1982) ("In the absence of fraud or misrepresentation, a person who signs a contract may not avoid it on the ground that he did not read it or thought the terms to be different."); see also Beasley v. Medin, 479 N.W.2d 95, 98 (Minn.App. 1992) (stating that a signing party must reasonably investigate its assumptions regarding the facts before entering into a contract). But regardless of how carelessly appellants read the assignment before signing it, if neither party intended to extend the leases by 36 months, that provision of the assignment is voidable based on mutual mistake. See Restatement (Second) of Contracts § 155 cmt. a (1981) ("Reformation is not precluded by the mere fact that the party who seeks it failed to exercise reasonable care in reading the writing * * *.").
Respondent also argues that the title provision, the only undisputed mutual mistake in the contract, is immaterial to the three-year-extension provision because FFP Partners had no title to assign to FFP Operating Partners. But respondent's concession of a mistake with respect to that provision, when considered with the other evidence, suggests that respondent was using a form document from another transaction and could have similarly included the 36-month-extension provision in this assignment by mistake. Moreover, the 36-month extension is clearly a material provision. Appellants may not have signed the assignment if they had known it would extend the leases by three years because the equipment's rental value had depreciated to less than $11,195 per month. Respondent even acknowledged that some of the leased equipment dated back to 1993, which, in the case of computer equipment, often renders it nearly obsolete.
Appellants contend that respondent never put forward any evidence proving that it intended to include the 36-month-extension provision. We agree. Once a defendant has established prima facie evidence of an affirmative defense, the burden shifts to the plaintiff to rebut that evidence. Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988). To defeat respondent's summary-judgment motion, appellants bore the burden of proving only a prima facie case for mutual mistake. Once they did, respondent had to produce some evidence showing that the 36-month-extension provision was intentional. Because respondent introduced no documents, affidavits, deposition testimony, or any other evidence suggesting that it intended to extend the leases by 36 months, the district court erred by granting summary judgment for respondent.