Hennepin County District Court File No. 01-015737
Considered and decided by Toussaint , Presiding Judge, Halbrooks , Judge,
and Huspeni, Judge.*fn1
When the parties to a real estate transaction orally recite the terms of a settlement agreement on the record in open court and expressly assent to be bound by the agreement, the writing and subscription requirements of the statute of frauds, Minn. Stat. § 513.04 (2002), are satisfied.
The opinion of the court was delivered by: Halbrooks, Judge
After reaching a settlement in their real estate transaction, the agreement was read into the record in open court, and all parties expressly assented to its terms. Appellant later refused to honor the agreement, arguing that respondents had breached the agreement by failing to timely tender the first installment payment or, in the alternative, that the agreement was unenforceable under the statute of frauds. Respondents moved to compel settlement, and the district court granted the motion. We affirm.
On February 3, 2003, appellant TNT Properties, Ltd., and respondents Tri-Star Developers, LLC, Homoudi Sabri, Sabri Holding, LLC, Kenneth W. Sorteberg, and LandDevCo Corporation, appeared before the district court to resolve an ongoing dispute over the sale of several commercial properties. After lengthy negotiation, Richard Carlson, counsel for respondents, advised the court that the parties had reached a settlement agreement and wished to orally place it on the record. Respondents' co-counsel, Richard Morris, stated the terms of the agreement as follows:
The purchase price, Your Honor, will be $3,100,000. . . paid by. . . $50,000 in earnest money, $25,000 of which will [be] paid one week from today. The second $25,000 will be paid two weeks from today.
In addition to those two payments, a promissory note will be given executed by myself for $50,000.
In the event that this transaction does not close as and when agreed, the $50,000 earnest money will be forfeited and the promissory will become due and payable.
The closing will occur on or before June 1 of 2003. At the closing, $300,000 will be paid by the purchaser to the seller.. . .
. . . to the extent we don't close on or before June 1, 2003, the penalty is a forfeiture of $50,000 that was paid and the $50,000 note becoming due and payable.
And of course. . . a cancellation of the agreement.
None of the parties objected to Morris's recitation of the terms. Instead, the attorneys and appellant's representatives, Floyd Olson and Ted Olson, engaged in a colloquy with the court, discussing more specific aspects of the agreement.
At the conclusion of the discussion, the court stated, "[Y]ou have entered into an agreement now. And again it is a promise to make a promise, technically, but it's an agreement. It relies upon the good faith of the parties here and satisfies the Court at least at this point." Each of the parties then expressly agreed to be bound by the terms of the agreement. Respondents also agreed to memorialize the agreement in writing and to send copies to appellant along with the first installment payment.
Respondents did not tender payment on February 10. On February 11, after learning that appellant believed that the agreement had been breached, Morris contacted appellant's counsel, Mark Kallenbach. Morris told Kallenbach that the settlement documents were prepared and on schedule for February 12, the date that he believed they and the first installment payment were due. Kallenbach then directed Morris to send the documents and the $25,000 check to him.
Appellant received the settlement documents and the $25,000 check on February 12, but refused to sign the documents and directed Kallenbach to return them. Kallenbach's letter informed respondents that his clients were objecting because (1) the payment was untimely and (2) the settlement documents did "not comport with the settlement agreement stated on the record." But according to Carlson, when he told Kallenbach that "[appellant] well knew that the payments were always due on Wednesdays, [Kallenbach] did not deny [the] statement but only referenced that Mr. Morris stated to the Court that the first earnest money payment was due one week from Monday, February 3, 2003, and his client was basing its refusal to accept the earnest money on that statement."
Nonetheless, on February 17, Carlson sent Kallenbach the second earnest payment. In the attached letter, Carlson acknowledged that he had "inadvertently excluded a provision" from the agreement, but stated that he had "no objection to the inclusion of [the] provision" and noted that his clients were "willing to provide you whatever reasonable documentation you feel is necessary." Carlson's letter also stated that
[a]s you are well aware. . . you agreed that since [Morris] was drafting [the agreement] from memory without a transcript that if there are any items that you wish included we would cooperate in redrafting the Agreement as proposed. You assured Mr. Morris that that was understandable and would not be a problem.
Appellant received the second payment, but again directed Kallenbach to return it to respondents.
Respondents moved to enforce the settlement agreement. The district court recognized that the parties had a "long and somewhat acrimonious history," including "a pattern of contractual compliance problems on the part of [respondents] and an atmosphere of distrust," which may have contributed to appellant's reaction. But the court granted respondent's motion, holding that (1) the settlement agreement was an enforceable purchase agreement, (2) the tender of the first payment less than 48 hours from when it was due was not a material breach, (3) even if the breach were material, appellant would be required to cancel the contract under Minn. Stat. § 559.21 (2002), giving respondents an opportunity to cure, and (4) an agreement entered on the record is a ...