Wfnd, LLC v. Fargo Marc, LLC

• Decision Date: 07 May 2007
• Docket Number: No. 20060125.,20060125.
• Citation: 730 N.W.2d 841,2007 ND 67
• Parties: WFND, LLC, Plaintiff, Appellant and Cross-Appellee v. FARGO MARC, LLC, Defendant, Appellee and Cross-Appellant.
• Court: North Dakota Supreme Court

730 N.W.2d 841

2007 ND 67

WFND, LLC, Plaintiff, Appellant and Cross-Appellee v.FARGO MARC, LLC, Defendant, Appellee and Cross-Appellant.

No. 20060125.

Supreme Court of North Dakota.

May 7, 2007.

Roger J. Minch(argued), Serkland Law Firm, Fargo, ND, for plaintiff, appellant and cross-appellee.

Mark R. Hanson(argued) and Kirsti B. Hourigan(on brief), Nilles, Ilvedson, Stroup, Plambeck & Selbo, Ltd., Fargo, ND, for defendant, appellee and cross-appellant.

KAPSNER, Justice.

[¶ 1]WFND, LLC, appealed and Fargo Marc, LLC, cross-appealed from a judgment awarding Fargo Marc $38,700.12 in their dispute over WFND's purchase of Westgate Commons Shopping Center in West Fargo.We affirm the judgment.

I

[¶ 2]IBT Group, LLC, began developing Westgate Commons in February 2001 and entered into a lease with Old Navy, Inc., before IBT transferred all of its interest in the shopping center to Fargo Marc.Westgate Commons was to be completed in phases, and by fall 2001, the first phase was nearly finished and the shopping center had five tenants.

[¶ 3] On November 19, 2002, Fargo Marc agreed to sell Westgate Commons for $12,700,000 to JMC Development, LLC, or its designee, which became WFND before the sale was closed.The real estate purchase agreement contemplated a closing date of January 15, 2003, and provided for a "Holdback Sum" of $1,350,000 pending completion of the second phase of construction and the renting of additional space to business tenants.The purchase agreement required that the seller provide the buyer with copies of the tenant leases and a current "Rent Roll," and required the tenants to deliver estoppel certificates to the buyer.The agreement further provided that "Buyer shall have the further right to inspect, and Seller agrees to make available, at reasonable hours, any and all books, records, tenant files, contracts or other documents and data of Seller pertaining to the ownership, insurance, operation or maintenance of the Property."The agreement allowed the buyer a 30-day "Inspection Period" and was accompanied by a rent roll representing the monthly rent being paid by Westgate Common tenants.The agreement also provided that the seller had the right to convey to Menard, Inc.("Menards"), a water detention pond located on the shopping center property, and the money paid for the property by Menards would be shared equally between Fargo Marc and WFND.

[¶ 4] On January 6, 2003, Fargo Marc and JMC entered into a first amendment to the real estate purchase agreement which extended WFND's inspection period to January 9, 2003, increased the holdback sum to $1,500,000, and altered the terms and conditions required for Fargo Marc to receive payment of the holdback sum.Fargo Marc provided WFND copies of the tenant leases and the tenants provided WFND estoppel certificates.The closing occurred on January 31, 2003.After the closing, WFND sold the detention pond to Menards for $117,240, but refused to split the net sale proceeds with Fargo Marc.

[¶ 5] Approximately seven months after Westgate Commons was sold to WFND, Old Navy discovered that it had been overpaying its rent at the shopping center.The February 16, 2001, lease between IBT and Old Navy required Old Navy to pay rent on about 22,000 square feet of space at $11.90 per square foot for an annual minimum rent of $261,800 payable in 12 monthly installments.On May 30, 2002, IBT had entered into a lease amendment with Old Navy reducing its rent from July 1, 2002, through August 31, 2006, to an annual minimum rent of $241,271.50 calculated at the rate of $10.90 per square foot.Old Navy had continued to pay rent at the rate of $11.90 per square foot until noticing the error.Old Navy then began paying the annual minimum rent at the reduced rate and decreased its monthly payments to account for its over-payment of rent since July 1, 2002.

[¶ 6] WFND subsequently brought this action against Fargo Marc alleging, among other things, breach of contract, misrepresentation, and fraud.The gist of WFND's complaint was that Fargo Marc failed to supply accurate information regarding the amount of rent to be paid by Old Navy, and that if WFND had known the correct amount of rent, it would not have paid as much for Westgate Commons.Fargo Marc counterclaimed, alleging that WFND breached an agreement to share in the proceeds of the detention pond sold by WFND to Menards.Before trial, WFND offered to limit its claim to breach of contract and Fargo Marc did not object, but the district court chose to hear evidence on the tort issues as well.

[¶ 7] After a six-day bench trial, the district court ruled that Fargo Marc was liable to WFND for deceit, but not for breach of contract, on the Old Navy rent claim.However, the court found that WFND failed to exercise ordinary care during the inspection period and at other times it reviewed Westgate Commons documents before closing of the sale, because those documents revealed that Old Navy was paying an incorrect amount of rent.The court also found that Old Navy was negligent in failing to decrease its rent payments on July 1, 2002, as allowed under the lease amendment.The court applied the comparative fault statutes, N.D.C.C. §§ 32-03.2-01and32-03.2-02, and apportioned fault between the parties and Old Navy, finding WFND 15 percent at fault, Fargo Marc 70 percent at fault, and Old Navy 15 percent at fault.The court ruled that WFND was liable to Fargo Marc on its claim for one-half of the net proceeds from the sale of the detention pond property to Menards.The court further ruled that both WFND and Fargo Marc were prevailing parties for purposes of assessing costs and disbursements, and after the court offset the amounts owed to each party, including an award to WFND for "net costs," judgment was entered in favor of Fargo Marc for $38,700.12.These appeals followed.

II

[¶ 8] Fargo Marc argues the district court erred in failing to dismiss WFND's fraud or deceit claim after WFND offered to abandon the claim.

[¶ 9] During the pretrial conference, WFND informed the district court that it no longer wanted to present its fraud claim at trial, but would "pursue this cause of action on the basis of . . . just simple breach of contract of a real estate agreement."Fargo Marc did not object.The court denied WFND's request and heard evidence on the tort claims.

[¶ 10] Fargo Marc analyzes WFND's pretrial offer to limit its claims for relief as either a motion to amend the pleadings under N.D.R.Civ.P. 15, or a motion for voluntary dismissal of an action under N.D.R.Civ.P. 41.Under N.D.R.Civ.P. 15(a), at the pretrial conference stage of the proceedings, "a party's pleading may be amended only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires."Under N.D.R.Civ.P. 41(a)(2), at this stage of the proceedings, absent the filing of a stipulation of dismissal signed by all parties who have appeared in the action, "an action may not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court considers proper."A motion to amend a complaint under N.D.R.Civ.P. 15(a) and a motion for voluntary dismissal under N.D.R.Civ.P. 41(a)(2) lie within the sound discretion of the district court and will not be reversed on appeal absent an abuse of discretion.Brandt v. Somerville,2005 ND 35, ¶ 27, 692 N.W.2d 144;Commonwealth Land Title Ins. Co. v. Pugh,555 N.W.2d 576, 578(N.D.1996);see also 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil2d § 1484(1990); 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil2d § 2364(1995).A court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law.City of Bismarck v. Mariner Constr., Inc.,2006 ND 108, ¶ 8, 714 N.W.2d 484.

[¶ 11]We do not view Fargo Marc's failure to object to WFND's request to dismiss the tort claims as tantamount to a stipulation for dismissal, even if no formal stipulation signed by the parties was required.See, e.g., Eitel v. McCool,782 F.2d 1470, 1473(9th Cir.1986)(unqualified oral stipulation of dismissal in open court satisfies F.R. Civ. P. 41(a)(1)(ii));Oswalt v. Scripto, Inc.,616 F.2d 191, 195(5th Cir.1980)(same).Fargo Marc conditioned its acceptance of WFND's proposal on WFND not being allowed to rely on representations that were not specifically identified in the purchase agreement to support the breach of contract claim.WFND disputed Fargo Marc's position.While it may have been unusual for the district court to pass up an opportunity to narrow the issues in the parties' controversy, we cannot say the court abused its discretion in refusing to dismiss WFND's tort claims.

III

[¶ 12] WFND argues the district court erred in finding that Fargo Marc did not breach the parties' purchase agreement.

[¶ 13] A breach of contract is the nonperformance of a contractual duty when it is due.SeeRestatement (Second) of Contracts§ 235(2)(1981);see also NDJI Civil C-50.50 (1995).The elements of a prima facie case for breach of contract are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the breach.United States v. Basin Elec. Power Coop.,248 F.3d 781, 810(8th Cir.2001)(applying North Dakota law);see alsoN.D.C.C. ch. 9-01;N.D.C.C. § 32-03-09;Kuhn v. Marquart,45 N.D. 482, 487, 178 N.W. 428, 429(1920).The burden of proving the elements of a breach of contract is on the party asserting the breach.SeeSlaaten v. Amerada Hess Corp.,459 N.W.2d 765, 769(N.D.1990);Stewart Equip. Co. v. Hilling Constr. Co.,175 N.W.2d 692, 696(N.D.1970);Campbell v. Wishek Pub. Sch. Dist.,150 N.W.2d 840, 843(N.D.1967).Although the interpretation...