Opinion
No. C4-01-484.
Filed October 30, 2001.
Appeal from the District Court, Dakota County, File No. C9901479.
Jack Y. Perry, Matthew D. Forsgren, (for respondents Shakopee Gravel, et al.)
Gerald S. Duffy, Wm. Christopher Penwell, Steven Weintraut, (for appellants Mathias Fisher, et al.)
Considered and decided by Halbrooks, Presiding Judge, Kalitowski, Judge, and Klaphake, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellants and respondents, former joint owners of respondent Shakopee Gravel, Inc., settled a number of lawsuits between themselves by entering into a settlement contract outlining their rights and duties in the severance of their business relationship. Appellants argued that two oral agreements, one predating and one postdating the settlement contract, modified the terms of the contract.
Because the settlement contract is a fully integrated, unambiguous contract, we affirm the district court's grant of summary judgment to respondents on this issue. Because appellants' presentation on the letter of credit was not honored, we reverse the award of attorney fees to respondents under Minn. Stat. § 336.5-111(e) (2000).
DECISION I. Contract Interpretation
"On appeal from a grant of summary judgment, we must determine whether any genuine issues of material fact exist and whether the district court erred in its application of the law." Patterson v. Wu Family Corp., 608 N.W.2d 863, 866 (Minn. 2000) (citations omitted). Appellants allege that the district court erred in granting summary judgment on the issue of ownership of the stockpiled inventory because genuine issues of material fact remain as to whether the terms of the settlement contract were modified by other oral agreements.
The interpretation of a contract is a matter of law for the courts to determine de novo. Sterling Capital Advisors, Inc. v. Herzog, 575 N.W.2d 121, 124 (Minn.App. 1998).
The meaning of a contract is to be ascertained from the writing alone, if possible, the duty of the court being to declare the meaning of what is written in the instrument, not what was intended to be written.
Carl Bolander Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974) (quotation omitted). If a contract is fully integrated and unambiguous, parol evidence of previous negotiations is inadmissible to contradict the writing. Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Eng'g Sales, Inc., 436 N.W.2d 121, 123 (Minn.App. 1989), review denied (Minn. Apr. 26, 1989). The prohibition against the use of parol evidence to alter an unambiguous written agreement is a substantive rule. Id.
The questions of whether a contract is ambiguous or whether it fully integrates the agreement of the parties are questions of law for the court. Id. A contract is ambiguous if it is reasonably susceptible to more than one construction. City of Virginia v. Northland Office Props. Ltd. P'ship, 465 N.W.2d 424, 427 (Minn.App. 1991), review denied (Minn. Apr. 18, 1991). In deciding whether a contract is fully integrated, the court determines, in essence, that the contract is incomplete or missing an essential term. Apple Valley Red-E-Mix, 436 N.W.2d at 123-24. In order to integrate the missing terms into a contract,
(1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing * * * [o]r, again, it must not be so clearly connected with the principal transaction as to be part and parcel of it.
Id. at 124 (quotation omitted).
Appellants claim that a conversation between appellant Liza Robson and respondent Bert Noterman, permitting excavation of an additional 400,000 tons of fill sand, altered the written settlement contract between the parties. This argument is flawed for several reasons.
First, the conversation between Robson and Noterman took place prior to execution of the contract. Where the final contract is fully integrated and unambiguous, preliminary oral negotiations are presumed to be "waived, abandoned, and merged into the writing." Lehman v. Stout, 261 Minn. 384, 389-90, 112 N.W.2d 640, 644 (1961) (quotation omitted). "Antecedent and contemporaneous utterances are excluded, not because they are lacking in evidentiary value, but because the law for substantive reasons declares that such matters shall not be shown." Id. at 390, 112 N.W.2d at 644 (quotation omitted).
Second, although parol evidence may be relied upon when a contract is ambiguous or not fully integrated, the settlement contract here is neither. To the contrary, its terms are quite explicit. The 310,000-ton limit includes stockpiled inventory and "material," without limitation as to type, kind, or quality. The oral agreement is precisely within the subject matter of the contract and would contradict the written terms of the contract. The contract also has an integration clause that states that it "supersedes all prior written or oral negotiations or discussions." Appellants cannot now claim that this integration clause should not be given effect; both parties were represented by independent counsel and the contentious history of their relationship leads us to conclude that their negotiations were at arm's length.
In oral arguments before this court, appellants urged the court to find that respondents have been unjustly enriched by enforcement of the contract. An unjust enrichment claim can be made when a party knowingly receives something of value that it is not entitled to, and under circumstances that would make it unjust to permit its retention. ServiceMaster of St. Cloud v. GAB Bus., Servs., Inc., 544 N.W.2d 302, 306 (Minn. 1996).
[U]njust enrichment claims do not lie simply because one party benefits from the efforts or obligations of others, but instead it must be shown that a party was unjustly enriched in the sense that the term "unjustly" could mean illegally or unlawfully.
Id. (quotation omitted). Respondents here are merely exercising their rights under the written contract between the parties by enforcing the limit of 310,000 tons.
Appellants seek to bolster their argument by relying on Anderson v. DeLisle, 352 N.W.2d 794 (Minn.App. 1984), review denied (Minn. Nov. 8, 1984). In that case, this court reversed a grant of judgment notwithstanding the verdict and reinstated a jury verdict, concluding that an unjust enrichment claim can be based not only on failure of consideration, fraud, or mistake, but also when it would be morally wrong for one party to enrich himself at the expense of another. Id.at 796. Although Anderson superficially bears some resemblance to the situation here, it is impossible to ignore the differences between the two cases. Unlike the parties in Anderson, the parties here are experienced in business, had a history of litigious relations that would preclude blind trust in each other, and were fully represented by attorneys during the negotiation process.
The district court did not err in granting summary judgment to respondents based on interpretation of the settlement contract.
II. Statutory Fees and Costs
The district court awarded $8,110 in fees and costs to respondents because of a breach of warranty in appellants' presentation on the letter of credit. See Minn. Stat. § 336.5-110(a)(2) (2000). The award of fees and costs is based on Minn. Stat. § 336.5-111(e), which states that the court must award fees and other expenses of litigation to a prevailing party in an action involving that article of the Uniform Commercial Code.
Minn. Stat. § 336.5-110 states:
(a) If its presentation is honored, the beneficiary warrants:
* * *
(2) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.
A presentation is made when the beneficiary, in this case appellants, delivers the appropriate document to the issuer in order to draw on the letter of credit. Minn. Stat. § 336.5-102(a)(12) (2000). "Honor" is defined as
performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor" occurs
(i) upon payment,
(ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or
(iii) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
Minn. Stat. § 336.5-102(a)(8) (2000). Here, "honor" would occur when the bank received the draw document and issued payment as required in the letter of credit. In compliance with Minn. Stat. § 336.5-110(a)(2), the beneficiary warrants that the draw does not violate the agreement of the parties, but this warranty is made only if the presentation is honored. In other words, the warranty is made only if payment is made. Here, because the bank checked with respondents before paying on the letter of credit and then began an interpleader action without paying, appellants' presentation was not honored.
The comment to this section states:
[S]ince the warranties in subsection (a) are not given unless a letter of credit has been honored, no breach of warranty under this subsection can be a defense to dishonor by the issuer.
Minn. Stat. Ann. 336.5-110, official cmt. 1. (West Supp. 2001). Thus, because no warranty is made until the presentation is honored, the issuing bank cannot defend its dishonor or failure to pay by claiming a breach of warranty by the beneficiary.
Respondents argue that because the bank had to deposit $1.7 million into the Scott County Treasurer's Office, payment was indeed made. The payment of $1.7 million, however, was required by the settlement contract and there was no argument by the parties that this sum would have to be paid. The warranty arises only because of the method of payment by letter of credit, rather than direct payment. Further, by its terms the letter of credit expired before the court-ordered deposit to the treasurer's office was made. While this is a narrow interpretation of the parties' contract, letters of credit are strictly construed for compliance with their terms. See LeaseAmerica Corp. v. Norwest Bank Duluth, N.A., 940 F.2d 345, 348 (8th Cir. 1991) (stating that "weight of authority favors a rule requiring strict compliance with the terms of a letter of credit"); Airlines Reporting Corp. v. Norwest Bank, N.A., 529 N.W.2d 449, 452 (Minn.App. 1995) (adopting reasoning of Eighth Circuit in LeaseAmerica and requiring strict compliance standard for letters of credit).
Because appellants' presentation was not honored, no warranties were made. Respondents therefore are not "prevailing parties" entitled to an award of statutory costs and attorney fees under Minn. Stat. § 336.5-111(e).