CERS v. SCHMITZ

Full title: Peter Cers, Appellant, vs. Roger Schmitz, Respondent

Court: Minnesota Court of Appeals

Date published: Jan 15, 2002

No. C5-01-882 (Minn. Ct. App. Jan. 15, 2002)

Opinion

No. C5-01-882.

Filed January 15, 2002.

Appeal from the District Court, Hennepin County, File No. CT 99-012938.

Dennis Paul Pelowski, Law Office of Dennis Paul Pelowski, (for appellant)

Timothy C. Matson, Abdo and Abdo, P.A., (for respondent)

Considered and decided by Kalitowski, Presiding Judge, Lansing, Judge, and Hanson, Judge.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).

UNPUBLISHED OPINION

HANSON, Judge

Appellant challenges summary judgment dismissing his fraud and breach of contract claims against respondent. Because there are no genuine issues of fact as to appellant's fraud claim, we affirm the dismissal of that claim. But because parol evidence should have been admitted to address appellant's contract claim, and genuine issues of material fact remain, we reverse and remand on the contract claim. Consequently, we also reverse the award of attorney fees.

FACTS

Appellant Peter Cers hired respondent Roger Schmitz, a videographer, to travel to Latvia with him to obtain footage for a documentary video.

Prior to the trip, Cers obtained the use of a $50,000 Sony Betacam SP broadcast quality video camera designed for use by a single operator. Cers considered several candidates to serve as videographer for his project and spoke with each of them concerning

(a) prior credits for published video documentary work; (b) skill, ability, and experience in direct-cinema techniques (filming live with no script); (c) skill, ability, and experience at operating a video-camera for film projects that did not use a script; and (d) skill, ability, and experience at operating as a one-person film crew with full responsibility for all technical aspects of the production of the film.

Schmitz claimed to have extensive experience operating this type of video camera as a one-person film crew doing direct cinema.

The parties met several times. Due to quality problems with the previous videographer on the project, the parties reviewed the earlier tapes, as well as some of Schmitz's prior works. Schmitz stated that he would not make the same errors as the previous videographer.

Cers claims that the parties' agreement has both written and oral terms. The written terms are contained in a single page drafted by Cers. It memorializes Schmitz's agreement to "work as a videographer and audio person" for a "compensation in full" of "$1,000 (one thousand dollars) in advance, and Roger Schmitz's expenses of: travel, lodging and food." This writing does not contain either an integration clause (one stating that the writing is the final and complete agreement of the parties) or a merger clause (one stating that there are no representations, promises or agreements between the parties except those found in the writing).

The alleged oral terms pertain to Schmitz's duties as videographer and are described in Cers' affidavit as follows:

a. that [Schmitz] would produce recordings that met broadcast quality standards;

b. that [Schmitz] would produce usable broadcast results on the first take;

c. that [Schmitz] was responsible for all technical aspects of the cameral operation.

The alleged oral terms also made Schmitz responsible for videotape playback, including "daily tape playback to examine the recorded tapes for quality of recording."

While the parties were in Latvia, Schmitz shot 56 tapes of 30 minutes each, operating under the direction of Cers. Schmitz regularly reported to Cers that he had reviewed the tapes and found no quality issues. After returning from Latvia, Cers claimed that there were numerous flaws and defects in the videotapes that could not be corrected. Schmitz's own notes from his review of the tapes acknowledge several problems, but he claimed that they could be corrected with existing editing systems.

Cers filed suit for fraud and breach of contract. As to the fraud claim, Cers argues that Schmitz fraudulently stated (1) that he had the ability to operate a Sony Beta camera as a single operator, and (2) that he had the ability to eliminate the errors and flaws of the prior camera operator.¹ As to the breach of contract claim, Cers argues that Schmitz breached two of the oral terms of the agreement: (1) to review the tapes made in Latvia on a daily basis and report any flaws to Cers and (2) to produce broadcast-quality footage.

1 Cers also argues before this court that Schmitz's statements regarding his review of the videotapes while in Latvia were fraudulent. Because this argument was not made before the district court, it is not properly before us and we decline to address it. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that appellate courts generally address only issues presented to and decided by the district court).

Schmitz denied Cers' claims and filed a motion for summary judgment. Cers opposed the summary judgment motion, presented evidence of the oral terms of the agreement and presented expert opinion that Schmitz was unqualified (based on the numerous errors in the tapes) and that the tapes are not, and cannot be corrected to, broadcast quality.

The district court granted Schmitz's motion for summary judgment, ruling that Cers fraud claim failed because there was no evidence that Schmitz's representations about his qualifications were false, and that Cers' breach of contract claim failed because evidence of the alleged oral terms of the agreement was inadmissible under the parol evidence rule.

Cers filed a Rule 60.02 motion, requesting that the court re-open the judgment based on newly discovered evidence. The district court denied Cers' motion and struck his submissions as outside the record. The court awarded Schmitz $300 in attorney fees as a sanction against Cers for bringing a meritless motion. Cers appeals from both the summary judgment and the judgment awarding attorney's fees.

DECISION

On appeal from summary judgment, appellate courts ask two questions: (1) whether any genuine issues of material fact exist and (2) whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990); see also Minn.R.Civ.P. 56.03.

I

In granting summary judgment in favor of Schmitz on the fraud claim, the district court concluded that Cers was unable to point to any false representation of a past or present fact and that Schmitz's statements were merely opinions or "puffing," which are not actionable. See Dollar Travel Agency, Inc. v. Northwest Airlines, Inc., 354 N.W.2d 880, 883 (Minn.App. 1993) (stating that fraud claims cannot be based on statements of intentions or opinions).

Statements Regarding Qualifications

Cers argues that a reasonable fact-finder could rely on the large number of errors in the videotapes to conclude that Schmitz must have misrepresented his past direct-cinema experience. Cers relies on his expert testimony to show that the errors are so elementary and extensive as to demonstrate the lack of any significant experience. Cers acknowledged at oral argument that he has no direct evidence that any specific statement Schmitz made about his prior experience was false.

We agree with the district court that Schmitz's statements concerning his prior experience cannot be proven false by merely showing a bad result. Because Cers presented no evidence to the contrary, the district court appropriately took as true the evidence presented by Schmitz that he, in fact, had the video experience that he claimed to have had.

Statements Regarding Ability to Avoid Errors

Schmitz argues that any statement he made that he would not repeat the errors of the prior camera operator was, in essence, a representation of a future act. A representation of a future act does not support an action for fraud simply because the act does not take place. Martens v. Minn. Mining Mfg. Co., 616 N.W.2d 732, 747 (Minn. 2000). A representation of a future act will support an action for fraud only if the party did not intend to perform the act at the time the representation was made. Id.

Cers presented no evidence that Schmitz did not intend to perform at the time the alleged statements were made. Therefore, the district court appropriately granted summary judgment in favor of Schmitz on the fraud claim.²

2 Schmitz also argues that Cers' fraud claims are barred by the six-year statute of limitations. Because we affirm the dismissal of the fraud claims on other grounds, we do not reach this issue.

II

In granting summary judgment in favor of Schmitz on the breach of contract claim, the district court concluded that Cers did not allege any ambiguity in the written contract; the parol evidence rule precluded evidence of any oral agreement; and Cers was unable to point to any provision of the written agreement that Schmitz failed to fulfill.

The Parol Evidence Rule

When the parties execute a written contract, parol evidence may still be admissible where the written contract is not completely integrated and the purpose of the parol evidence is not to vary or contradict the writing, but to supplement it. Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Engineering Sales, Inc., 436 N.W.2d 121, 123 (Minn.App. 1989), review denied (Minn. Apr. 26, 1989); Restatement (Second) of Contracts, §§ 213-216 (1981).

This "incomplete contract" exception to the parol evidence rule has been recognized in Minnesota at least since 1893, when Justice Mitchell, in Phoenix Pub. Co., v. Riverside Clothing Co., 54 Minn. 205, 206, 55 N.W. 912 (1893), stated as follows:

The rule forbidding the use of parol evidence to affect a written instrument does not apply to a case where a part only of the dealings between the parties in respect to a particular subject-matter is reduced to writing, except as respects such part. It is always competent to prove by parol the existence of any separate oral agreement as to any matter on which the document is silent, and which is not inconsistent with its terms, if, from the circumstances of the case, the court infers that the parties did not intend the document to be a complete and final statement of the whole of the transaction between them.

Likewise, this exception allows the use of parol evidence to prove that the writing was not the final integration of the parties' agreement. Apple Valley Red-E Mix, Inc., 436 N.W.2d at 124.

The dissent relies on a quotation from Taylor v. More, 195 Minn. 448, 453, 263 N.W. 537, 539-540 (1935), to the effect that the separate oral agreement "must not be so clearly connected with the principal transaction as to be part and parcel of it." This statement was an incidental portion of a larger quotation in Taylor from the New York decision in Mitchell v. Lath, 160 N.E. 646, 647 (1928), which discussed the rules for determining whether the parties intended a writing to be integrated. Read in isolation, the quoted statement eliminates the incomplete-contract exception in virtually all cases because any separate oral agreement that was, in Justice Mitchell's words, "part only of the dealings between the parties in respect to a particular subject matter," would, by definition, be "part and parcel" of the "principal" transaction.

Because Minnesota has long recognized the incomplete-contract exception, and continues to do so in recent cases, we conclude that the quoted statement from the Mitchell decision must be read in the context of the broader rules for determining whether a writing is completely integrated. In that context, the statement is simply another way of saying that the separate oral terms must not contradict express or implied provisions of the writing, and must not be ones that the parties would be expected to have included in the writing. If read more broadly, the quoted statement does not represent Minnesota law.

The question of whether a written contract is completely integrated is an issue of law for the court. Id. at 123. The determination of whether a written document is a complete integration of the terms of the parties' contract

is not made solely by an inspection of the writing itself, important as that is, for the writing must be read in light of the situation of the parties, the subject matter and purposes of the transaction and like attendant circumstances.

Bussard v. College of St. Thomas, Inc., 294 Minn. 215, 224, 200 N.W.2d 155, 161 (1972). It requires a common-sense reading. Id. at 225, 200 N.W.2d at 161.

In light of the circumstances presented, where (1) neither party was represented by counsel; (2) the written portion of the agreement deals solely with financial terms; (3) the alleged oral terms of the agreement do not vary, but supplement, the written terms; (4) the parties' intended negotiations focused primarily on the alleged oral terms; and (5) the written portion of the agreement does not contain either an integration or a merger clause, we conclude that the district court erred in holding that the parol evidence rule precluded proof of the alleged oral terms.³

3 It should be emphasized that Cers bases his breach-of-contract claim on what are alleged to be express terms, albeit oral, of the agreement between the parties. Cers has not alleged nor argued any claim for implied warranties, which have traditionally been rejected by our courts in cases involving "professional" services. See, e.g., City of Mounts View v. Walijarvi, 263 N.W.2d 420, 423-24 (Minn. 1978) (declining to "extend the implied warranty/strict liability doctrine to cover vendors of professional services"). Likewise, Cers has not alleged or argued any claim for professional negligence.

Genuine Issues of Material Fact

The question then becomes whether Cers made a sufficient showing of the alleged oral terms of the agreement to preclude summary judgment. See id. at 226, 200 N.W.2d at 162. Cers did not rest on the allegations of his complaint, but submitted his affidavit describing the alleged oral terms of the agreement reached with Schmitz. Schmitz testified in his deposition that he understood he was hired to obtain broadcast quality footage — one of the alleged oral terms. Because Cers presented sufficient evidence of the oral terms of the agreement to create a fact issue on their existence, and Cers presented sufficient evidence of the poor quality of the videotapes to create a fact issue on the breach of those oral terms, the district court erred in granting summary judgment dismissing the breach of contract claim.

Schmitz counters that summary judgment should be affirmed on grounds not reached by the district court, that Cers failed to plead a breach of an oral agreement and that any claim of breach of an oral agreement must fail for lack of separate consideration.

The rules of procedure state: "All pleadings shall be so construed as to do substantial justice." Minn.R.Civ.P. 8.06. Minnesota courts have interpreted this to mean that pleadings are to be liberally construed. See, e.g., Basich v. Bd. of Pensions, 493 N.W.2d at 293, 295 (Minn.App. 1992) (stating that courts construe pleadings liberally and focus on substance rather than form).

Cers' complaint alleges that "[p]ursuant to the Agreement, Defendant was obligated, among other things, to obtain useable (sic) video and audio recordings for Plaintiff." Construed liberally, this allegation includes the oral terms of the agreement. See Wilson v. Ramacher, 352 N.W.2d 389, 394-95 (Minn. 1984) (holding that, at a summary judgment stage, it was enough that plaintiff's complaint set out the requisite facts even though he failed to supply "the proper label for the remedy he seeks"); see also Hutton v. Bosiger, 366 N.W.2d 358, 360 (Minn.App. 1985), review denied (Minn. June 27, 1985) (stating that courts are to liberally construe pleadings even when the plaintiff misconceives the nature of the claim). Certainly Schmitz was on notice that Cers intended to rely on Schmitz's oral agreement to produce broadcast-quality footage. Moreover, any deficiencies in Cers complaint could be addressed in a motion to amend, which is to be freely granted. See Minn.R.Civ.P. 15.01.

It was not necessary for Cers to show consideration for the oral terms of the agreement, separate from that supporting the written terms. See, e.g., Asbestos Prods., Inc. v. Healy Mech. Contractors, Inc., 306 Minn. 74, 76, 235 N.W.2d 807, 809 (1975) (stating when parties agree to modify an executory contract, "the consideration from the original contract attaches to and supports the modified contract"). As summarized by Professor Corbin:

There are plenty of decisions that additional terms and provisions can be proved by parol evidence, thereby showing that the written document in court is not a complete integration. This is true, even though it is clear that the additional terms form a part of one contractual transaction along with the writing. It is not necessary that an additional promise shall have its own separate consideration, or that the additional terms shall be sufficient, quite apart from the document, to constitute a valid contract.

3 Arthur L. Corbin, Corbin on Contracts, § 583 (1960) (footnote omitted).

III

Cers also appeals the award to Schmitz of $300 in attorney fees. Whether to award fees and costs under Minn. Stat. § 549.211 and Rule 11 is within the district court's discretion. See Radloff v. First Am. Nat'l Bank, 470 N.W.2d 154, 156 (Minn.App. 1991), review denied (Minn. July 24, 1991) (applying abuse of discretion standard to award of attorney fees under Minn. Stat. § 549.21 and rule 11). Both rule 11 and Minn. Stat. § 549.211 state:

When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this [rule/section] and explain the basis for the sanction imposed.

Minn. Stat. § 549.211, subd. 5(c) (2000); Minn.R.Civ.P. 11.03(c). Further, both the rule and the statute require that a party be given notice and an opportunity to respond to any request for sanctions. See Minn. Stat. § 549.211, subd. 4 (2000); Minn.R.Civ.P. 11.03(a).

The district court did not make the requisite findings and there has been no showing that notice was given. Moreover, given this court's decision to reverse the dismissal of the breach of contract claim, there is no basis for awarding Schmitz sanctions against Cers. The award of attorney fees to Schmitz is therefore reversed.

Affirmed in part, reversed in part, and remanded.

KALITOWSKI, Judge (concurring in part, dissenting in part)

I respectfully dissent from that part of the majority opinion that reverses the district court's dismissal of appellant's breach of contract claim.

The undisputed facts indicate that the parties entered into a written agreement, drafted by appellant, whereby respondent agreed to work as a videographer and audio person for appellant's project in Latvia for $1,000 plus expenses. More than six years later appellant sued respondent claiming a breach of the written agreement. Only later, when questioned during a deposition, did appellant claim that respondent allegedly breached, not the written agreement, but a "verbal understanding" the parties had regarding specific quality requirements for respondent's work.

But to assert an oral agreement separate from a written contract, appellant must establish that the agreement is "one that parties would not ordinarily be expected to embody in the writing[.]" Taylor v. More, 195 Minn. 448, 453, 263 N.W. 537, 539 (1935). As the supreme court further explained, the separate agreement "must not be so clearly connected with the principal transaction as to be part and parcel of it." Id. at 453, 263 N.W. at 539-40.

Here, the terms of the alleged oral agreement all benefited appellant. And the record indicates appellant has considerable experience in this line of work. Thus, if appellant had wanted the terms of the "verbal understanding" to rise to the level of an enforceable contract, he would, and should, have included those terms in the parties' written agreement.