Opinion
No. A03-2036.
Filed August 24, 2004.
Appeal from the District Court, Hennepin County, File No. Hc 103702505.
Joan M. Quade, Barna, Guzy Steffen, Ltd., (for appellant).
Ronald J. Riach, Franke Riach, P.A., (for respondent).
Considered and decided by Anderson, Presiding, Judge; Toussaint, Chief Judge; and Peterson, 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This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION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 from summary judgment for respondent-tenant in this unlawful detainer action, appellant-landlord argues that the district court erred by (1) concluding that a letter from landlord's predecessor to the tenant modified the tenant's lease and (2) not addressing tenant's failure to record the alleged lease modification. Because there are genuine issues of material fact regarding the intent of the parties regarding the alleged lease modification and the landlord's actual knowledge of the modification when it assumed the lease, we reverse and remand
FACTS
On January 24, 1995, Larry Frattallone, on behalf of respondent Frattallone's Hardware Stores, Inc., and Dennis Paterka, on behalf of Sage Company, the authorized agent for Elmo Park Apartment Homes d/b/a Marina Center, entered into a ten-year lease to operate a hardware store in approximately 20,000 square feet of the Marina Shopping Center building.
Shortly after the parties executed the lease, Sage Company's commercial-property manager, James Gooley, wrote Frattallone a letter referring to a garage door and fence installation on the property. Frattallone signed the April 14, 1995 letter, acknowledging that the information in the letter was consistent with their "agreement." The letter expressly referred to their conversation the week before regarding the garage door "for the rear of your space" and the fence installation "at the front of your space" and stated that Gooley wanted "to set forth [their] agreement in writing." With regard to the garage door, the landlord agreed to contribute to its cost and begin installing it immediately. The letter also noted with regard to the fence that the landlord did not approve of the chain-link style, but would allow it to be completed reserving the right to inspect it within 30-45 days. The landlord would also contribute to improving the aesthetics if he did not approve of the fence as constructed. Soon after, respondent began occupying, and then continuously occupied until this litigation, the fenced-in outdoor space referred to in the letter.
On April 4, 1999, the parties to the original lease, Paterka and respondent, executed a formal "First Amendment to Lease." The amendment expressly stated that it modified and supplemented the original lease and referred to the specific paragraph to be amended. The amendment deleted the lease-termination option provision contained in the rider to the original January 24 lease.
On February 2, 2002, the original landlord sold the Marina Center to appellant 5th Street Ventures, LLC. All of the leases covering the Marina Shopping Center, including respondent's lease, were assumed by appellant. The Marina Center is registered Torrens property, but the lease was not recorded at the time appellant purchased it.
After appellant purchased the Marina Center, it notified respondent that his use of the "parking lot common area for purposes of storage and seasonal sales is not authorized by the Lease terms." It stated that "[e]ven though the prior Landlord did not object" to the use of the common areas, appellant did not have to allow such use. Eventually, appellant filed an action for unlawful detainer on July 2, 2003. Both parties moved for summary judgment. After the hearing, the court made findings and conclusions and ordered summary judgment for respondent. 5th Street then filed this appeal.
ANALYSIS
On appeal from a summary judgment, the appellate court determines (1) whether any genuine issues of material fact exist and (2) whether the district court erred in its application of the law. Betlach v. Wayzata Condo., 281 N.W.2d 328, 330 (Minn. 1979). A court on summary judgment may not resolve a factual issue, but must only determine whether a fact issue exists. Albright v. Henry, 285 Minn. 452, 464, 174 N.W.2d 106, 113 (1970).
Respondent argues that the 1995 letter and the parties' conduct demonstrate a modification of the original lease. The district court agreed, finding that the 1995 letter formed a completed contract modifying the original lease. Appellant argues that the letter is inadmissible as parol evidence and is unenforceable under the statute of frauds and the Torrens Act, Minn. Stat. ch. 508 (2002).
A lease is a contract, which should be construed according to ordinary rules of contract interpretation. Amoco Oil Co. v. Jones, 467 N.W.2d 357, 360 (Minn.App. 1991). The plain meaning of the lease is the starting point in contract interpretation. See id.
Here, the basic terms of the original lease are not in dispute. Respondent leased 20,000 square feet of the Marina Center building for a hardware store and continued to do so for about seven years. The lease also contained an integration or merger clause that made the original lease the entire agreement but also allowed the parties to modify the lease by a writing signed by the party against whom enforcement is sought. Additional provisions in the lease allowed the lessor to decide how the common areas, including the parking lot, would be designated and used, although it allowed the lessee, with written approval of the lessor, to extend awnings and "other projections," erect signs, and similar objects off of the building. Thus, the original lease contemplated modifications in "a writing" signed by the lessor or other changes accompanied by "written approval" of the lessor.
Unless a subsequent agreement is a complete substitution for the original lease by the parties, a "modified agreement combines original and new terms, which together constitute one entire contract." 4 Caroline N. Brown, Corbin on Contracts § 13.1, at 108 (Joseph M. Perillo, ed., rev. ed. 1997). Parol evidence is admissible to explain the parties' conduct subsequent to the written agreement. Alexander v. Holmberg, 410 N.W.2d 900, 901 (Minn.App. 1987).
The record contains the original lease, the 1995 letter, the 1999 amendment, and affidavits regarding the parties' intent and conduct. It is undisputed that respondent occupied the exterior fenced-in space for more than seven years. Larry and Tom Frattallone's affidavits state that the original lessor agreed to lease respondent the exterior space that it occupied at the time appellant assumed the lease. The original lessor's agent submitted an affidavit to the same effect. There is also a signed letter setting out an understanding regarding a garage door and the fencing. In contrast, appellant submits the later-executed formal "First Amendment" to the lease to demonstrate that had the parties intended to modify the original lease by changing the leased premises, the parties would have formally amended the lease. These facts create a genuine issue of material fact of whether the lease was modified by agreement of the parties and what the terms of the extant lease are.
Appellant also invokes the statute of frauds to avoid the alleged modification. It argues that the only "writing," the 1995 letter, is insufficient to take the modified agreement out of the statute. The statute of frauds applies to leases for longer than one year, requiring that they be in writing, evidenced by "some note or memorandum" of the parties' contract, "expressing the consideration," and signed by the lessor's lawful agent. Minn. Stat. § 513.05 (2002). By statute, however, courts also retain the equitable power to compel specific performance of "agreements" where there has been part performance. Minn. Stat. § 513.06 (2002). Because there is a genuine issue of material fact as to the parties' intent and, therefore, the terms of their agreement, it is premature to determine whether the writing was sufficient under the statute or whether part performance takes the agreement out of the statute. It should be noted, however, that once the parties' intent is determined, the court should not invalidate, due to lack of indefiniteness, a writing that reasonably expresses the intent of the parties. Hartung v. Billmeier, 243 Minn. 148, 151, 66 N.W.2d 784, 788 (1954).
At the summary-judgment hearing, appellant also argued it had no notice of a lease covering the exterior space. Appellant conceded that it had purchased the shopping center knowing that the original lease was not recorded and knowing that respondent was in possession of the exterior space. The district court made no findings or conclusions regarding recordation or actual notice of any of the documents.
This court may take judicial notice of public documents even when they are not made part of the record below. See United Power Ass'n v. C.I.R., 483 N.W.2d 74, 77 n. 3 (Minn. 1992) (taking judicial notice of solid-waste burning permit issued to party). Evidence of Torrens registration alone, however, does not determine the effect of the 1995 letter on the original lease. After the court determines the intent of the parties and the terms of the lease, it can address the issue of appellant's actual knowledge of the leasehold on its land See In re Juran, 178 Minn. 55, 60, 226 N.W. 201, 202 (1929) (actual knowledge required); In re Petition of Willmus, 568 N.W.2d 722, 725 (Minn.App. 1997) (applying Juran), review denied (Minn. Oct. 21, 1997). If appellant had actual knowledge of an unrecorded lease at the time of purchase, it cannot later seek the protection of the Torrens statute as a good-faith purchaser with no notice.