Loppe v. Steiner, A04-2012.

• Decision Date: 19 July 2005
• Docket Number: No. A04-2012.,A04-2012.
• Citation: 699 N.W.2d 342
• Parties: Judy L. LOPPE, f/k/a Judy L. Bethel, Appellant, v. Bradley J. STEINER, Respondent.
• Court: Minnesota Court of Appeals

699 N.W.2d 342

Judy L. LOPPE, f/k/a Judy L. Bethel, Appellant, v. Bradley J. STEINER, Respondent.

No. A04-2012.

Court of Appeals of Minnesota.

July 19, 2005.

John G. Westrick, Westrick & McDowall-Nix, P.L.L.P., St. Paul, MN, for appellant.

Stanford P. Hill, Anne C. Towey, Kelly Putney, Bassford Remele, P.A., Minneapolis, MN, for respondent.

Considered and decided by HALBROOKS, Presiding Judge; LANSING, Judge; and MINGE, Judge.

OPINION

MINGE, Judge.

The parties entered into a purchase agreement for the sale of residential property. Appellant buyer brought an action against respondent seller for specific performance and damages. Appellant challenges the district court's judgment that relied on the unpled defense of abandonment and did not grant appellant's claim for damages. Because the defense of abandonment was implicitly litigated by the parties and appellant does not show surprise or unfairness resulted from its consideration, we affirm the district court's consideration of abandonment. Because the district court's order appears to have only addressed abandonment with respect to the claim for specific performance, we reverse and remand for the district court to determine whether appellant abandoned the purchase agreement with respect to the claim for damages, and if not, what damages are due.

FACTS

Respondent Bradley J. Steiner owned rental property at 614 19th Ave N.E., Minneapolis (property) that is the subject of this dispute. In 1989, appellant Judy L. Loppe began renting an apartment from respondent at a different location, and the parties became romantically involved. In 1996, appellant rented an apartment at the disputed property.

Starting in 1996, the parties executed several instruments transferring interests in the property between them. Initially, respondent gave appellant an unsigned quitclaim deed with an erroneous legal description. Several months later, respondent gave appellant a signed quitclaim deed with the correct legal description, and the parties executed a contract for deed for $52,500 with appellant as buyer and respondent as seller. After appellant failed to make required payments, respondent decided to end the contract, and in 1999, appellant quitclaimed her interest in the property back to respondent. Appellant states that she executed the quitclaim deed because respondent promised that he would refinance the property and then enter into a new contract for deed with her at a lower interest rate.

On April 10, 2001, the parties signed a purchase agreement for the property for a price of $84,500. According to respondent, he set that price based on the property's market value for real estate tax purposes in 2001. The purchase agreement recited that appellant paid $1,000 in earnest money, but appellant testified that respondent told her that she did not have to pay the earnest money until the closing. Also according to the terms of the purchase agreement, appellant agreed to pay $4,000 from her funds at the closing, with the balance of $79,500 being proceeds from a conventional mortgage. Appellant obtained a loan commitment from Wells Fargo Home Mortgage for $80,275. Appellant received the abstract of title and arranged for title examination, an appraisal, and homeowner's insurance. Although the purchase agreement did not list a closing date, it appears that the closing was set for the end of May 2001.¹ The purchase agreement contained a "time is of the essence" clause and a clause requiring that any action for specific performance be brought within six months after a breach.

Respondent testified that appellant called him a day or two before the closing and stated that she wanted to only pay $52,500 for the property. Respondent did not appear at the closing and testified that "the deal was off as far as I was concerned." It appears that appellant was ready and willing to complete the purchase on the closing day. After the closing did not occur, appellant purchased an extension of her mortgage financing to lock in her interest rate. Subsequently, appellant called respondent and asked him to close on the property. During this time, appellant continued to live in an apartment on the property and to pay monthly rent. In 2002, appellant withheld rent for about six months because she wanted respondent to complete the closing. From 2000 to 2003, appellant was listed as the owner for purposes of real estate taxes and the property was classified as her homestead. In June 2003, respondent notified the city assessor that he was the owner and the city billed respondent for back taxes based on fraudulent classification of the property as appellant's homestead.

On July 1, 2003, respondent initiated an unlawful detainer action to evict appellant from the property for nonpayment of rent. On July 14, 2003, appellant commenced an action claiming that respondent breached the purchase agreement and seeking specific performance or, in the alternative, damages. The parties alleged numerous claims and defenses against each other.

Pursuant to a stipulation, the district court consolidated the actions. Prior to trial, appellant moved to exclude certain affirmative defenses not set forth in respondent's answer. The district court denied the motion and conducted a bench trial. At the time of trial, the property was appraised as having a fair market value of $200,000. On May 19, 2004, the district court entered judgment dismissing appellant's claims with prejudice and ordering her to vacate the property. The district court's original conclusions of law stated in relevant part, "[Appellant's] subsequent demand that the price be reduced to $52,500.00 constituted a counter-offer by [appellant] that served as a rejection of the original purchase agreement. As a matter of law, the purchase agreement terminated at that point and [appellant] could no longer enforce the agreement."

Appellant moved for a new trial or amended findings of fact and conclusions of law. Respondent opposed the motion and urged the district court to conclude that appellant had abandoned the contract by not seeking specific performance within six months. This was the first time that the term "abandonment" was used in the litigation. The district court denied appellant's motion but amended its conclusions of law by deleting the previously quoted language and substituting the following:

[Appellant's] attempt to reduce the contract price to $52,500 and her subsequent failure to initiate a specific performance action within the six (6) months specified by the black letter of the purchase agreement constitute an abandonment of the purchase agreement by [appellant]. [Appellant] has also failed to establish the reasonableness of her failure to exercise her rights pursuant to the black letter of the purchase agreement and, as such, has failed to prove up the elements of her claim for relief.

The district court's attached memorandum also stated that respondent "concedes that [appellant] may be correct that her demand for a $52,500.00 actual purchase price did not constitute a rejection of the purchase agreement."

Appellant filed this appeal challenging the district court's dismissal of her claim for damages.

ISSUES

I. Is abandonment an affirmative defense?

II. Did the parties litigate abandonment by implied consent?

III. Did the district court err in not addressing appellant's claim for damages?

IV. Did appellant so abandon the purchase agreement as to preclude a damages remedy?

ANALYSIS

I.

The first issue is whether respondent's claim that appellant abandoned her interest in the purchase agreement is an affirmative defense that respondent was required to plead in his answer.² Appellant claims that respondent waived the defense because he did not raise it in the pleadings. Minn. R. Civ. P. 8.03 specifies numerous defenses that must be pleaded affirmatively, including estoppel, laches, and waiver. The list is not exclusive and "any other matter constituting an avoidance" must also be pleaded affirmatively. Minn. R. Civ. P. 8.03.

The Minnesota Supreme Court in Snyder v. City of Minneapolis, outlined criteria for determining whether a defense should be considered an affirmative defense. 441 N.W.2d 781, 788 (Minn.1989). In Snyder, the city lost a suit for damages after it unreasonably revoked a building permit. Id. at 783-84. The court of appeals reduced the damage award pursuant to the statutory cap, and the plaintiff appealed, asserting that the limit on municipal liability is an affirmative defense. Id. at 785. The supreme court found that provisions of the Minnesota Rules of Civil Procedure dealing with affirmative defenses are identical with the federal rules and adopted criteria for identifying affirmative defenses set forth by Charles Wright and Arthur Miller in their commentary on the federal rules. Id. at 788. These criteria are surprise and fairness. Id; see 5 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure Civil § 1271 (3d ed.).

The Snyder court stated that surprise is a key factor because "had the defense ... been put forward when it could and should have been, it would have been open to plaintiff to pursue at that time such discovery procedures as he considered appropriate in order to develop the true state of facts." Snyder, 441 N.W.2d at 788 (alteration in original) (quotation omitted). The Snyder court found that the plaintiff was not surprised by the statutory cap on damages because the cap was established in the Minnesota statutes. Id. The court also noted that the statutory cap would not completely bar the claim, which is generally a requirement for finding that a matter is an affirmative defense. Id.

The Snyder court quoted the following from Wright & Miller to explain why the fairness concept is key to requiring that an affirmative defense be specially pleaded: "[A]ll or most of the relevant information on a particular element of a claim is within the control of one party or that one part...