Opinion
No. A04-2305.
Filed September 13, 2005.
Appeal from the District Court, Hennepin County, File No. 02-20858.
David G. Hellmuth, Erik F. Hansen, Hellmuth Johnson, Pllc, (for respondent)
Jeffrey H. Olson, Dudley and Smith, P.A., and Karl A. Oliver, (for appellant)
Considered and decided by Kalitowski, Presiding Judge, Shumaker, Judge, and Forsberg, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellants James W. Perkins and Raynelle F. Perkins challenge the decision of a "Consensual Special Magistrate," who determined that they breached a purchase agreement with respondent Nathan Bergeland. Appellants argue that the magistrate erred by determining that the agreement required them to build a new driveway with a 1% grade, by failing to allow appellants to impeach their own witness at trial, and by admitting the testimony of an expert witness and two exhibits regarding the cost of constructing a driveway with a 1% grade. Because the magistrate did not err in his interpretation of the contract and because the magistrate's evidentiary rulings did not prejudice appellants, we affirm.
Based on the parties' "Stipulation for Alternative Trial," the district court entered an order appointing the "Consensual Special Magistrate." The district court's order authorized the magistrate to conduct a trial in this case and to "issue final orders in this matter."
FACTS
In 1988, appellants subdivided their lakeshore property into three separate lots. Respondent agreed to purchase one of the lots, which included an existing home, for $640,000. The parties executed a purchase agreement and an addendum on August 24, 1999; they executed an amendment on August 30 to clarify some of the terms of the purchase.
The addendum to the purchase agreement explicitly stated: "Road Changes that need to occur because of subdividing the land, are the financial responsibility of the Sellers. This includes supplying a partial new driveway, comparable to the existing one at 7012 Willow Creek. Specific enhancements are the responsibility of the Buyer." The amendment to the purchase agreement also referred to a new driveway:
It was stated in the Purchase Agreement that the Sellers will create a partial new driveway for the Buyer. Verbally, it was stated that they, the Sellers, would replace the same amount of driveway space that was being taken away from the Buyer, because of the construction of their new home. It appears from the Plat Map that this amount of space would actually go from the new road to the existing garage. It is also understood that this driveway will be black-top, of normal blacktop thickness, and wide enough to handle one car's average width. Any enhancements such as extra curves to accommodate a tree, or to create an "artist" look, or simply extra parking space, will be the obligation of the Buyer. It has also been represented to the Buyer that the grade is not expected to change. But if retaining walls need to be installed, it is the responsibility of the Seller to do so. * * The Purpose of this Amendment is to simply clarify what was verbally stated, but was not detailed in the written addendum.
After closing, respondent discovered that appellants failed to disclose a developer agreement between appellants and the City of Eden Prairie that was executed on August 3, 1999, and restricted the manner in which the lots could be utilized. The developer agreement included a preliminary plat and grading plan that approved the construction of a shared driveway at a 10% grade to service the lot purchased by respondent. Respondent and his real estate agent both testified that the developer agreement was not disclosed to respondent when he purchased the property.
Respondent sued appellants, alleging that they constructed a shared driveway as contemplated by the developer agreement, but failed to construct a partial new driveway as promised by the parties' purchase agreement, addendum, and amendment. Although respondent's complaint makes a number of other claims against appellants, some of which were upheld by the magistrate, this appeal only involves respondent's claim that appellants breached their agreement regarding construction of a partial new driveway.
In particular, appellants challenge the magistrate's determination that appellants breached the agreement to construct a partial new driveway at a 1% grade and awarding respondent $285,765 in driveway-related damages. Appellants argue that because the amount of damages represents more than 45% of the total sale price, the magistrate's interpretation of the parties' agreement has produced a harsh, absurd, and unreasonable result that was not intended by the parties.
DECISION I.
Interpretation of an unambiguous contract is a question of law, which we review de novo. Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004). "Language in an unambiguous contract is given its plain and ordinary meaning." Id. (quotation omitted). Courts must "read contract terms in the context of the entire contract and will not construe the terms so as to lead to a harsh and unreasonable result." Brookfield Trade Ctr. Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998).
Appellants argue that their agreement with respondent did not obligate them to construct a driveway with a 1% grade. To support their argument, appellants point to the developer agreement with the city, which they assert should be construed to insert an implied term into the parties' contract, allowing the partial new driveway's grade to be 10%. The developer agreement, however, was never disclosed to respondent prior to the execution of the purchase agreement. Respondent was not a party to the developer agreement and had no knowledge of its existence prior to the purchase.
Citing Knut Co. v. Knutson Constr. Co., 433 N.W.2d 149, 151 (Minn.App.), aff'd, 449 N.W.2d 143 (Minn. 1989), appellants argue that an outside agreement can serve as parol evidence for the interpretation of a contract, even if the agreement is unknown to a contracting party. Knut is wholly distinguishable from the facts here. In Knut, this court was asked to interpret the effect of three documents executed at the time of closing that were part of the transaction. Here, the developer agreement was not disclosed to respondent, was executed several weeks prior to the purchase agreement and its addendum and amendment, and was never referenced or mentioned in any of the documents executed by the parties.
The magistrate's interpretation of the contract is supported by the plain and unambiguous terms of these documents. The addendum specifically states that "[r]oad changes that need to occur because of subdividing the land, are the financial responsibility of [appellants]. This includes supplying a partial new driveway, comparable to the existing one [.]" (Emphasis added.) And the amendment specifically states that "[i]t has also been represented to the Buyer that the grade is not expected to change." Because there was testimony showing that the existing driveway had a grade of 1%, the magistrate did not err in determining that the parties agreed that the new driveway would be constructed at a 1% grade.
Appellants nevertheless insist that this interpretation of their agreement produces a harsh, absurd, and unreasonable result given the extremely high cost of constructing such a driveway. Appellants note that the purchase agreement fails to specify or mention the cost of the partial new driveway or describe the percentage grade of the driveway. The doctrine of unconscionability is designed to protect those with unequal bargaining power, often to avoid enforcement of contracts of adhesion. See Glarner v. Tine Ins. Co., 465 N.W.2d 591, 595-96 (Minn.App. 1991), review denied (Minn. Apr. 18, 1991). Here, the parties reached an arms' length agreement for the sale and purchase of the property; the mere fact that the construction of the driveway has turned out to be more expensive than expected does not make the contract unconscionable.
Appellants further argue that because no evidence was submitted to show that the city would even approve a 1% grade driveway, the contract as interpreted by the magistrate is illegal or void as against public policy. A contract is illegal or void as against public policy if it is "contrary to the terms and policy of an express legislative enactment." McCauley v. Michael, 256 N.W.2d 491, 498 (Minn. 1977). Here, no evidence was presented to establish that a 1% driveway is illegal or contrary to any statute or law; indeed, respondent's expert witness testified that cities regularly approve 1% grade road proposals. And while an affidavit by the city planner suggested that the city might not approve a driveway with a 1% grade on this lot, that does not make the contract illegal. We therefore reject appellants' claim that the contract as interpreted by the magistrate is unenforceable.
II.
Appellants challenge several evidentiary rulings made by the magistrate. This court reviews a factfinder's rulings on evidentiary matters for an abuse of discretion. Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997). "Entitlement to a new trial on the grounds of improper evidentiary rulings rests upon the complaining party's ability to demonstrate prejudicial error." Id. at 46 (quotation omitted).
Appellants first criticize the magistrate's failure to allow them to impeach the city planner, who was their own witness. While we agree that the magistrate erred in ruling that appellants could not impeach their own witness, we nevertheless conclude that this error was harmless because use of this affidavit to impeach this witness still would not entitle appellants to a new trial. See Minn. R. Evid. 607 (stating that party may impeach own witness); Minn. R. Civ. P. 61 (stating that harmless error is not a basis for reversal or new trial). The affidavit, which was executed prior to trial, was part of the record before the magistrate; in it, the city planner stated that appellants' representative had shown him three proposals for driveways with grades of less than 10% and that he told appellants' representative that these proposals would not be approved by the city. At trial, the city planner acknowledged that he did not have "enough information to draw a conclusion" as to whether or not driveway proposals that had never been submitted to the city would be approved. While the affidavit could have been used to impeach the credibility of the city planner, it still would not have established the fact that appellants were trying to prove; i.e., that the city would not allow a driveway to be built on the property with a 1% grade. And even if the affidavit did establish this fact, as already discussed, that would not make the contract illegal on its face or otherwise entitle appellants to a new trial.
III.
Appellants next challenge the magistrate's decision to admit the testimony of an expert witness and two exhibits, which appellants claim were not timely disclosed. If a party knows the substance of the witness's testimony before trial, the party cannot claim surprise or prejudice. Swanson v. Williams, 303 Minn. 433, 435, 228 N.W.2d 860, 862 (1975).
Here, appellants brought a motion in limine to exclude the expert witness and the two exhibits. Appellants had copies of the exhibits, and the magistrate ordered that appellants be allowed to depose the expert witness prior to trial. Because appellants knew the substance of the expert witness's testimony and the contents of the exhibits, they cannot claim prejudice. Thus, any error in the admission of this evidence was harmless. See Minn. R. Civ. P. 61.
We therefore affirm the decision of the magistrate and the award of damages against appellants.