Parkside Mobile Estates v. Lee

• Decision Date: 04 August 1978
• Docket Number: No. 47287 and 47298.,47287 and 47298.
• Citation: 270 NW 2d 758
• Parties: PARKSIDE MOBILE ESTATES, etc., et al., Respondents, v. Guy T. LEE, et al., Defendants and Third Party Plaintiffs, Appellants v. CENTRAL OIL INSTALLATION COMPANY, Third Party Defendant.
• Court: Minnesota Supreme Court

270 N.W.2d 758 (1978)

PARKSIDE MOBILE ESTATES, etc., et al., Respondents, v. Guy T. LEE, et al., Defendants and Third Party Plaintiffs, Appellants v. CENTRAL OIL INSTALLATION COMPANY, Third Party Defendant.

Nos. 47287 and 47298.

Supreme Court of Minnesota.

August 4, 1978.

Baudler, Baudler & Maus, Austin, for appellants.

Larkin, Hoffman, Daly & Lindgren and Robert Junghans, Minneapolis, for respondents.

Heard before ROGOSHESKE, KELLY, and IRVINE, JJ., and considered and decided by the court en banc.

PER CURIAM.

This is a discretionary appeal¹ from an order of the district court granting plaintiffs' motion for a new trial on the issue of damages and denying defendants' alternative motions for judgment notwithstanding the verdict or a new trial on all issues. The action involved a claim for damages for breach of an express warranty contained in a purchase agreement for the sale of a mobile home park. We affirm.

On May 4, 1972, defendants Guy T. Lee and Bettie M. Lee entered into a purchase agreement with Inland Realty, Inc., a real estate corporation wholly owned by plaintiffs Earl Richardson, Richard Mathews, and Thomas Richardson, which is responsible for locating property suitable for investment through the sale of limited partnership interests. Defendants agreed to sell and convey a mobile home park located in Olmsted County for a purchase price of $512,000. The terms of the agreement called for a downpayment of $2,500 and a payment of $145,000 on September 1, 1972, the date set for closing. The remainder of the purchase price was to be paid by the buyer, Inland Realty, Inc., assuming and agreeing to pay the balance due on a contract for deed running in favor of defendants. Attached to the agreement was a rider which contained, inter alia, the following provisions:

"4. Warranties by Seller — Seller hereby warrants as follows: The present operation of Parkside Mobile Estates upon the Subject Lands complies in every respect with all applicable zoning, building, licensing, health and subdivision laws, ordinances and regulations of the City of Rochester, County of Olmsted and State of Minnesota. * * * If buyer notifies seller in writing of any violations of any of the foregoing, prior to the date of closing, seller shall take the necessary steps to bring the operation of said Parkside Mobile Estates into compliance with the foregoing. If seller is unable to do so prior to the date of closing, this agreement shall be voidable at the option of buyer.

* * * * * *

"10. Survival of Warranties — All covenants and warranties contained herein shall survive the closing of this transaction."

Defendants signed both the purchase agreement and the rider, as did Earl Richardson on behalf of Inland Realty, Inc.

Prior to the signing of the above agreement, plaintiffs Richard Mathews and Thomas Richardson testified that they, along with Earl Richardson, discussed with defendants their intention to structure the transaction as a limited partnership and that such a partnership would require a securities registration from the Securities Division of the State of Minnesota. Richard Mathews further testified that he informed defendants of their intent because of the time required to obtain a securities registration and that defendants voiced no objections. Defendant Guy Lee testified that neither plaintiffs nor anyone else connected with Inland Realty said anything about purchasing the property for the benefit of a limited partnership.

After the May 4 signing Inland Realty Investments, Inc., instituted a securities registration of a limited partnership in the name of Parkside Mobile Estates, the other named plaintiff in this action. Named as general partners in Parkside Mobile Estates were Inland Realty Investments Inc., and plaintiffs Earl Richardson, Richard Mathews, and Thomas Richardson. Money provided through the sale of limited partnership interests was placed in an escrow account provided by the securities registration.

Also after the May 4 signing but before the September 1 closing date, defendants received a letter from Richard Peter, Public Health Sanitarian for Olmsted County Health Department. The letter stated that recent tests of the private well supplying water to the mobile home park revealed nitrate nitrogen in the water at levels above the natural nitrate nitrogen content for the area. The letter went on to state that such elevated levels of nitrate nitrogen may be of sewage origin, and that the water analysis "indicates that the water is obtained from unsafe geological formations already contaminated through direct or indirect discharge of sewage or other wastes. It is obvious that the municipal water supply should be extended to serve all of the trailer court or drilling of a new well must be undertaken."

Upon receipt of Richard Peter's letter, which was dated July 26, 1972, defendant Guy Lee started to get estimates both for hooking up to city water and digging a new well, but didn't follow through on the estimates. On July 19, 1972, plaintiff Earl Richardson, on behalf of Inland Realty, Inc., sent defendants a letter requesting an extension of the closing "due to the delay in the Securities Registration of Parkside Mobile Estates * * *." Defendants agreed to an extension and signed an addendum to the purchase agreement to that effect on July 31, 1972. At no time prior to closing did defendant Guy Lee tell any of the plaintiffs about the subject matter of Richard Peter's letter.

At the September 29, 1972 closing, plaintiffs gave defendants two checks drawn on an Inland Realty, Inc., account as required by the purchase agreement. Defendants in return gave plaintiffs a quit claim deed and an assignment of the contract for deed running in favor of defendants. The documents transferred defendants' ownership interest to plaintiff Parkside Mobile Estates, a limited partnership.²

Approximately two weeks after closing plaintiff Earl Richardson was notified by letter from the Olmsted County Health Department that the park's water supply was unsafe. Richardson further testified that plaintiffs changed to the city water supply as a result of the health department's letter at a cost of $19,222.89.

The trial court by special verdict submitted, inter alia, the following questions to the jury:

"(1) Was the water supply unsafe, unsanitary and unpotable when the title was transferred on September 29, 1972, to Parkside Mobile Estates by Lee\'s?

"(2) Was the purchase agreement of May 4, 1972 assigned to plaintiff Parkside by Inland Realty, Inc.?

"(3) What damage did plaintiff Parkside sustain in connecting to a new source of water as a direct result of a breach of contract?

The jury answered the first two questions in the affirmative and found that plaintiffs had sustained $3,250 in damages. The trial court ordered judgment in that amount against defendants. Plaintiffs then filed alternative motions for additur or a new trial on the issue of damages only. Defendants filed alternative motions for judgment notwithstanding the verdict or a new trial on all issues. The trial court granted plaintiffs' motion for a new trial on the issue of damages and denied defendants' alternative motions. Defendants appeal from that order.

The issues presented are the following: (1) Whether defendants are entitled to judgment notwithstanding the verdict on the grounds that there was no evidence to support the jury's findings either that the warranty was breached or that the purchase agreement was assigned, or that there was no evidence to support an award of damages in any amount; (2) whether the warranty was actionable; and (3) whether, because of certain alleged errors and irregularities occurring at trial, the trial court erred in failing to grant defendants' motion for a new trial on all issues.

1. The standard for determining the propriety of an order denying judgment notwithstanding the verdict is whether there is any competent evidence reasonably tending to sustain the verdict.³ Seidl v. Trollhaugen, Inc., 305 Minn. 506, 232 N.W.2d 236 (1975). In Seidl we elaborated on the standard with the following:

"A motion for judgment notwithstanding the verdict admits every inference reasonably to be drawn from the evidence as well as the credibility of the testimony for the adverse party. Unless we are able to determine that the evidence is practically conclusive against the verdict, or that reasonable minds could reach but one conclusion against the verdict, the trial court\'s order denying the motion for judgment notwithstanding the verdict should stand. Brown v. Arthur Schuster, Inc., 300 Minn. 106, 217 N.W.2d 850 (1974)."

Applying this standard to the facts which follow we must conclude that there was sufficient competent evidence to support the jury's finding that the warranty was breached.

The warranty in question warranted, inter alia, that the operation of the mobile home park complied with applicable health laws, ordinances, and regulations of the City of Rochester, County of Olmsted, and the State of Minnesota. The Olmsted County Board of Health by reference adopted the standards promulgated by the Minnesota Department of Health, which requires that, "an adequate supply of water of safe, sanitary and potable quality shall be provided in each mobile home park * * *." Minn.Reg. MHD 187(e). The language of the regulation was the basis for question number (1) of the special verdict form.

The principal evidence bearing on the issue was a letter sent defendants by...