Opinion
No. A05-1496.
Filed April 11, 2006.
Appeal from the District Court, Hennepin County, File No. CT04015446.
Thomas B. Hatch, Robins, Kaplan, Miller Ciresi, L.L.P., (for appellants).
Eric J. Magnuson, Rider Bennett, Llp, and John A. McCauley, Venable Llp, (for respondent).
Considered and decided by Willis, Presiding Judge; Shumaker, Judge; and Stoneburner, 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This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION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 challenge judgment on the pleadings on their claim for a premium payment under the terms of secured convertible promissory notes they purchased from respondent. Appellants argue that the district court erroneously concluded that the notes unambiguously precluded their claim. We affirm.
FACTS
Appellants Richard Broms and Mark Ravich, along with about 20 other investors, purchased secured convertible promissory notes from respondent Datakey, Inc. At issue in this lawsuit is the interpretation of a clause governing payment of the notes in the event of an acquisition transaction. Each note provides in relevant part that:
[i]f [Datakey] consummates an Acquisition Transaction prior to . . . the payment or other satisfaction in full by [Datakey] of this Note, . . . then, within three (3) days of such Acquisition Transaction, [Datakey] shall pay the Holder hereof, in complete satisfaction of this Note, an amount equal to all outstanding principal and accrued interest plus such Holder's pro rata share of a premium payment of Five Hundred Thousand Dollars ($500,000), which shall be payable to all Holders, in the aggregate.
(Emphasis added). "Acquisition Transaction" is defined in the notes, in relevant part, as meaning that Datakey "has entered into an agreement which provides for the occurrence of any . . . consolidation or merger to which [Datakey] is a party. . . ."
Prior to satisfaction of the notes, Datakey entered into a merger agreement with SafeNet, Inc. The 70-page agreement provides that Datakey will be purchased by and subsequently merged with a wholly owned subsidiary of SafeNet, and continue its corporate existence under Minnesota laws as a wholly owned subsidiary of SafeNet. The agreement contains several provisions for termination of the merger on certain conditions or by agreement of the parties.
No party asserts that Datakey's continued existence under the agreement affects the premium clause of the notes.
Approximately four days after signing the agreement with SafeNet, Datakey paid appellants and other investors the principal and all interest due on the notes. Appellants, on behalf of themselves and as agents for the other investors, brought this action claiming, in relevant part, that Datakey breached the contract by consummating an acquisition transaction, as defined in the notes, without paying the premium provided for in the notes. Datakey moved for judgment on the pleadings, contending that "consummates an Acquisition Transaction," as used in the notes to trigger payment of the premium, unambiguously refers to fully completing a merger, not simply entering into a merger agreement. The district court agreed and granted judgment on the pleadings on the first count of appellants' complaint. Appellants subsequently dismissed the second count of their complaint so that they could appeal from judgment on the pleadings.
DECISION
Judgment on the pleadings is proper when the dispute centers around the meaning of a contract and the contract language unambiguously entitles the movant to judgment. McReavy v. Zeimes, 215 Minn. 239, 243-45, 9 N.W.2d 924, 926-27 (1943). The facts alleged in the complaint must be taken as true and all reasonable inferences drawn in favor of the nonmoving party. Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553 (Minn. 2003). A court may consider any documents and statements that are incorporated by reference into the pleadings. Marchant Inv. Mgmt. Co. v. St. Anthony W. Neighborhood Org., Inc., 694 N.W.2d 92, 95 (Minn.App. 2005). In this case, the note was not incorporated into the pleadings by reference, but was considered by the district court. The motion, therefore, should have been treated as one for summary judgment. See Minn. R. Civ. P. 12.03 (providing that if on motion for judgment on the pleadings "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment" under rule 56); see also Carlson v. Lilyerd, 449 N.W.2d 185, 187 (Minn.App. 1989) (stating that when district court considers more than the pleadings, an appellate court reviews the decision under the summary-judgment standard), review denied (Minn. Mar. 8, 1990). We therefore review the decision in this case as a summary judgment, determining whether there are any genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). And, as in a motion for judgment on the pleadings, we must consider the evidence in a light most favorable to the nonmoving party. Denelsbeck v. Wells Fargo Co., 666 N.W.2d 339, 345 (Minn. 2003).
The parties agreed at oral argument, that under the circumstances of this case, our standard of review is the same whether the motion is considered to have been brought under rule 12.03 or rule 56.
In construing a contract, a court must "give effect to the intention of the parties as expressed in the language they used in drafting the whole contract." Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn. 1997). Whether a contract is ambiguous is a question of law. Id. If the terms of a contract are ambiguous or uncertain, summary judgment is not appropriate. Donnay v. Boulware, 275 Minn. 37, 45, 144 N.W.2d 711, 716 (1966). But if the terms of the contract are unambiguous and may be given their plain and ordinary meaning, summary judgment is appropriate because the construction of the contract is a matter for the court. Denelsbeck, 666 N.W.2d at 346-47. "Because a word has more than one meaning does not mean it is ambiguous. The sense of a word depends on how it is being used; only if more than one meaning applies within that context does ambiguity arise." Bd. of Regents v. Royal Ins. Co. of Am., 517 N.W.2d 888, 892 (Minn. 1994).
Datakey argues that the verb "consummate" is precise and unambiguous and means "to bring to completion," "to bring to the highest point or degree," or "to make perfect," citing Webster's Third International Dictionary of the English Language Unabridged 490 (2002). Appellants do not dispute the precise meaning of consummate, but appellants contend that under the unambiguous terms of the note, an acquisition transaction is "consummated" when an agreement providing for the occurrence of a merger (or other action described in the definition of acquisition transaction) is entered into. Datakey argues that because "Acquisition Transaction" is defined as an agreement that Datakey "has entered into," "consummation" of such an agreement unambiguously means completion of the action provided for in the agreement. We agree.
In the alternative, appellants argue that the language triggering the premium payment is ambiguous, requiring consideration of extrinsic evidence and precluding summary judgment.
The district court relied in part on caselaw to conclude that, as a matter of law, "consummate," as used in the notes, means completion of the proposed merger — not mere execution of the agreement. Appellants argue that the court improperly looked outside the contract to make a finding of fact that the common and accepted meaning of "consummate," in the context of mergers and acquisitions, refers to the ultimate joining of the companies, because extrinsic evidence may be considered only if the writing is ambiguous. See Pioneer Peat, Inc. v. Quality Grassing Servs. Inc., 653 N.W.2d 469, 473 (Minn.App. 2002) (stating that a writing is ambiguous if, "judged by its language alone and without resort to extrinsic evidence, it is reasonably susceptible of more than one meaning"). Although we do not think that it was necessary to look to merger-and-acquisitions case law to determine the plain meaning of this contract, we note that courts frequently look to dictionaries and case law when determining the "plain and ordinary" meaning of a contract term. See, e.g., Bank Midwest, Minn., Iowa, N.A. v. Lipetzky, 674 N.W.2d 176, 179-181, 180 n. 7 (Minn. 2004) (describing the supreme court's consideration of caselaw, statutory definitions, and Black's Law Dictionary to determine plain and unambiguous meaning of "transfer"); see also Brookfield Trade Ctr. Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998) (finding an agreement unambiguous based on plain meaning of language and stating that "our long-established case law mandates this interpretation"); Red White Airway Cab Co. v. Transit Cas. Co., 305 Minn. 353, 356-57, 234 N.W.2d 580, 582 (1975) (stating in context of insurance policy interpretation that the appellants' interpretation "does violence to the plain meaning of the contract language . . . and . . . our case law in the past offers no support for such an interpretation"). There is nothing improper in the district court's reliance on caselaw to determine the plain meaning of "consummate" in this case.
Because this case is resolved by the contract language, we do not reach the argument that the district court improperly based its conclusion, in part, on its determination that the parties cannot have intended for Datakey to have had to pay the premium even if the merger did not ultimately occur. See Carl Bolander Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974). ("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.") (quotation omitted).