Lund v. Swanson ( 2021 )

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
MARCH 3, 2021
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2021 ND 38James B. Lund, Plaintiff and Appellant
v.
Leland A. Swanson and
Open Road Trucking, LLC, Defendants and Appellees
No. 20200147
Appeal from the District Court of Cass County, East Central Judicial District,
the Honorable John Charles Irby, Judge.
AFFIRMED.
Opinion of the Court by VandeWalle, Justice.
Sean T. Foss (argued) and Sarah A. Aaberg (on brief), Fargo, ND, for plaintiff
and appellant.
Bruce A. Schoenwald (argued) and Randolph E. Stefanson (on brief),
Moorhead, MN, for defendants and appellees.
Lund v. Swanson
No. 20200147
VandeWalle, Justice.
[¶1] James Lund appealed from a judgment entered after the district court
granted summary judgment in favor of Leland Swanson and Open Road
Trucking, LLC (“Open Road”). Lund argues the district court erred in
concluding the statute of frauds barred enforcement of the parties’ settlement
agreement. We affirm, concluding the alleged settlement agreement is invalid
under the statute of frauds.
I
[¶2] Lund and Swanson co-own multiple business entities, including:
(a) Fargo Cargo, LLC and Fargo Logistics, LLC (collectively “Fargo
Cargo”), which operated over-the-road trucking and logistics
companies;
(b) Combined Asset Management, LLC (hereinafter “CAM”), which
owned real property in North Dakota and Florida;
(c) SBC Building Systems, LLC (“SBC”), which manufactured steel
buildings; and
(d) Wedak, LLC (“Wedak”), which owns and operates real estate
developments in North Dakota.
Open Road is a limited liability company with its principal address in Fargo,
North Dakota.
[¶3] Lund has been an adverse party to Swanson and Open Road in a series
of lawsuits, dating back to 2018. Trial in one of the lawsuits was scheduled to
begin December 3, 2019. On the day before trial, December 2, 2019, Lund,
Swanson, Open Road, and their respective counsel met to discuss settling the
lawsuits between them. Swanson and Open Road are represented by the same
attorneys.
1
[¶4] After the meeting, Lund’s attorney, Sean Foss, contacted the district
court to inform it that the parties had resolved the matter scheduled for trial
the following day, and asked the court to “take the trial off the calendar.”
Attorney Foss then sent an email to counsel for Swanson and Open Road, with
the subject line “settlement,” containing his notes regarding the settlement
terms, which included:
1. CAM – All CAM properties transferred to Lee (or his assignee)
except Jim gets CAM oil interests and one-half of Moorhead net
sales proceeds.
2. WeDak – Lee will transfer one-half of his membership interest
(i.e. 20% of the 40% he currently owns) to Jim. Parties intend to
develop open lots in the Ray, ND development owned by Wedak,
with Lee financing the purchase and placement of mobile homes
on those lots.
3. Formal dissolution / termination of the other LLC’s owned
between the two of them (Fargo Cargo, Fargo Logistics, SBC).
4. Dismissal of the pending lawsuits – Fargo Cargo, CAM, Western
State Bank, ORT – Cass County, ORT – Becker County.
5. Global release of all claims.
On December 10, 2019, Swanson and Open Road’s attorney, Randolph
Stefanson, emailed Foss a proposed settlement agreement, which included the
same terms as Foss’s email. Two days later, Foss emailed Swanson and Open
Road’s attorneys a revised version of the proposed settlement agreement.
[¶5] On that same day, December 12, 2019, this Court issued an opinion in
one of the parties’ pending cases, which was on appeal at the time. See Open
Road Trucking, LLC v. Swanson, 2019 ND 295, 936 N.W.2d 72. In that case,
we concluded a “judgment was not satisfied as between Swanson and Lund,
and Open Road was entitled to take an assignment of the judgment from
Swanson to enforce Swanson’s right of contribution from Lund for one-half of
the judgment amount.” Id. at ¶ 26. We reversed the district court’s order
directing entry of satisfaction of the judgment, and remanded for entry of a
2
charging order against Lund’s transferrable interests in specified limited
liability companies. Id. at ¶ 27.
[¶6] Ultimately, no written settlement agreement was signed by the parties.
In January 2020, Lund initiated this action against Swanson and Open Road
to enforce the alleged settlement agreement. The parties filed cross-motions
for summary judgment. After a hearing, the district court denied Lund’s
motion and granted summary judgment in favor of Swanson and Open Road,
concluding the statute of frauds barred enforcement of the settlement
agreement. Lund appealed.
II
[¶7] Our standard of review for summary judgments is well established:
Summary judgment is a procedural device under
N.D.R.Civ.P. 56(c) for promptly resolving a controversy on the
merits without a trial if there are no genuine issues of material
fact or inferences that can reasonably be drawn from undisputed
facts, or if the only issues to be resolved are questions of law. The
party seeking summary judgment must demonstrate there are no
genuine issues of material fact and the case is appropriate for
judgment as a matter of law. In deciding whether the district court
appropriately granted summary judgment, we view the evidence
in the light most favorable to the opposing party, giving that party
the benefit of all favorable inferences which can reasonably be
drawn from the record. A party opposing a motion for summary
judgment cannot simply rely on the pleadings or on unsupported
conclusory allegations. Rather, a party opposing a summary
judgment motion must present competent admissible evidence by
affidavit or other comparable means that raises an issue of
material fact and must, if appropriate, draw the court’s attention
to relevant evidence in the record raising an issue of material fact.
When reasonable persons can reach only one conclusion from the
evidence, a question of fact may become a matter of law for the
court to decide. A district court’s decision on summary judgment is
a question of law that we review de novo on the record.
McDougall v. AgCountry Farm Credit Services, PCA, 2020 ND 6, ¶ 10, 937
N.W.2d 546.
3
III
[¶8] Lund argues: (i) the statute of frauds does not apply to the parties’
settlement agreement; (ii) even if the statute of frauds applies, the parties’
writings satisfied the statute; (iii) the parties’ partial performance of the
settlement agreement removed the agreement from the statute of frauds; and
(iv) application of the statute of frauds would promote an injustice.
A
[¶9] A settlement agreement is a contract between parties, and thus contract
law applies. See Kuperus v. Willson, 2006 ND 12, ¶ 11, 709 N.W.2d 726.
Subsection 9-06-04(3), N.D.C.C., provides in relevant part:
The following contracts are invalid, unless the same or some note
or memorandum thereof is in writing and subscribed by the party
to be charged, or by the party’s agent:
....
3. An agreement . . . for the sale, of real property, or of an
interest therein. Such agreement, if made by an agent of
the party sought to be charged, is invalid unless the
authority of the agent is in writing subscribed by the
party sought to be charged.
[¶10] The district court determined the statute of frauds applied to the parties’
alleged settlement agreement because the terms being negotiated included
“interests in real property.”1 The court concluded that at the December 2, 2019,
settlement meeting the parties “verbally agreed to reach settlement along the
following terms: . . . CAM would transfer all of its real estate properties to
Defendant Swanson except Plaintiff Lund would receive CAM’s oil and gas
interests and one-half of the net sale proceeds from the pending sale of a
residence in Moorhead.” After the meeting, Lund’s attorney emailed Swanson
and Open Road’s attorneys his notes, providing: “All CAM properties
1 The district court also concluded the statute of frauds applied because the agreement included “debt
forgiveness.” See N.D.C.C. § 9-06-04(5).
4
transferred to [Swanson] except [Lund] gets CAM oil interests and one-half of
Moorhead net sales proceeds.” The subsequent proposed settlement agreement
provides: “All of Lund’s member interest in CAM shall be transferred to
Swanson with the exception of CAM’s oil interests and one-half of the net
proceeds in a Moorhead, MN residence currently under contract of sale which
shall be conveyed to Lund.” Because of the inclusion of oil interests, the alleged
settlement agreement included real property interests under N.D.C.C. § 9-06-
04(3). See Rasnic v. ConocoPhillips Co., 2014 ND 181, ¶ 10, 854 N.W.2d 659(“A mineral interest is a real property interest.”).
[¶11] Lund argues in his reply brief that N.D.C.C. § 9-06-04(3) applies only to
the sale of real property, not the transfer of real property. He contends the
settlement agreement “did not contemplate the formal ‘sale’ of real property
and instead negotiated the transfer of real property as part of the settlement.”
Lund does not provide the meaning of “sale” as it appears in subsection 3, nor
does he cite any authority supporting such a narrow interpretation of the
statute of frauds.
[¶12] “The general rule is that contracts for the sale of real property and
transfers of real property interests must be made by an instrument in writing.”
Williston Co-op. Credit Union v. Fossum, 459 N.W.2d 548, 551 (N.D. 1990)
(emphasis added) (citing N.D.C.C. §§ 9-06-04, 47-10-01). Section 47-10-01,
N.D.C.C., provides in relevant part, “An estate in real property . . . can be
transferred only by operation of law or by an instrument in writing, subscribed
by the party disposing of the same or by the party’s agent thereunto authorized
by writing.” (Emphasis added.) Thus, section 47-10-01 would seem to defeat
Lund’s argument. However, it is unclear whether Lund is arguing the
settlement agreement actually transferred the real property or if it was an
agreement to transfer the property, contemplating the execution of a deed. To
the extent Lund argues the settlement agreement is not the instrument of
transfer but merely an agreement to transfer the real property in the future
through a deed, which would presumably satisfy N.D.C.C. § 47-10-01, we must
review whether the agreement was for the sale of real property under N.D.C.C.
§ 9-06-04(3).
5
[¶13] Issues regarding interpretation and application of statutes are questions
of law and are fully reviewable on appeal. Johnston Land Co., LLC v. Sorenson,
2018 ND 183, ¶ 10, 915 N.W.2d 664. Our standards for interpreting a statute
are well established:
Our primary goal in statutory construction is to ascertain the
intent of the legislature, and we first look to the plain language of
the statute and give each word of the statute its ordinary meaning.
When the wording of the statute is clear and free of all ambiguity,
the letter of it is not to be disregarded under the pretext of
pursuing its spirit. If, however, the statute is ambiguous or if
adherence to the strict letter of the statute would lead to an absurd
or ludicrous result, a court may resort to extrinsic aids, such as
legislative history, to interpret the statute. A statute is ambiguous
if it [is] susceptible to meanings that are different, but rational. We
presume the legislature did not intend an absurd or ludicrous
result or unjust consequences, and we construe statutes in a
practical manner, giving consideration to the context of the
statutes and the purpose for which they were enacted.
Riemers v. Jaeger, 2018 ND 192, ¶ 11, 916 N.W.2d 113 (citations omitted).
Words in a statute are given their plain, ordinary, and commonly understood
meaning, unless defined by statute or unless a contrary intention plainly
appears. N.D.C.C. § 1-02-02.
[¶14] The word “sale” as it appears in N.D.C.C. § 9-06-04(3) is not defined by
statute. “When the meaning of a word in a statute is doubtful, it is appropriate
to refer to related legislation to determine the sense in which the word was
employed in the particular statute.” Coldwell Banker-First Realty, Inc. v.
Meide & Sons, Inc., 422 N.W.2d 375, 380 (N.D. 1988) (citing Grabow v. Bergeth,
229 N.W. 282, Syl. 3 (N.D. 1930)). The Uniform Commercial Code—Sales (ch.
41-02) provides a definition of “sale” as applies to that chapter: “‘Sale’ consists
in the passing of title from the seller to the buyer for a price.” N.D.C.C. § 41-
02-06(1)(d).
[¶15] What is now N.D.C.C. § 9-06-04(3) has been a part of the territorial and
state law since 1877. See Revised Codes of the Territory of Dakota, Civil Code
§ 920 (1877); Petroleum Exchange v. Poynter, 64 N.W.2d 718, 726 (N.D. 1954).
6
The 1877 Civil Code defined “sale,” but in a different “part”2 than subsection
3.3 The Civil Code § 981 defined “sale” as “a contract by which, for a pecuniary
consideration, called a price, one transfers to another an interest in property.”
The first edition of Black’s Law Dictionary defined “price” as “[t]he
consideration (usually in money) given for the purchase of a thing.” Black’s
Law Dictionary 935 (1st ed. 1891). The annotation to the definition states:
It is true that “price” generally means the sum of money
which an article is sold for; but this is simply because property is
generally sold for money, not because the word has necessarily
such a restricted meaning. Among writers on political economy,
who use terms with philosophical accuracy, the word “price” is not
always or even generally used as denoting the moneyed equivalent
of property sold. They generally treat and regard price as the
equivalent or compensation, in whatever form received, for
property sold. The Latin word from which “price” is derived
sometimes means “reward,” “value,” “estimation,” “equivalent.”
Id. Bouvier’s Law Dictionary defined “price” as “[t]he consideration in money
given for the purchase of a thing” and noted:
The third quality of a price is that it consists in money, to be
paid down, or at a future time; for if it be of any thing else it will
no longer be a price, nor the contract a sale, but exchange or barter.
Bouvier, A Law Dictionary 457 (15th ed. 1883). Both dictionaries defined
“pecuniary” similarly, as relating to money. Id. at 397; Black’s Law Dictionary,
at 882. Because the definition of “price” varied as to whether the consideration
given for the purchase of a thing needed to be in money, the dictionary
definition of “price” is not helpful in resolving the question of whether the
settlement agreement included the sale of real property.
2 The Revised Codes of the Territory of Dakota (1877) were divided by: code, division, part, title,
chapter, article, section.
3 Both appeared in Division Third (titled “Obligations”) of the Civil Code, but subsection 3 was in part
2 (“Contracts”), whereas the sale definition was in part 4 (“Obligations arising from particular
transactions”).
7
[¶16] Our case law, however, demonstrates we have broadly construed
subsection 3. See Jones v. Barnett, 2000 ND 207, ¶ 13, 619 N.W.2d 490 (holding
alleged verbal agreements that grantor would retain property interest in the
form of “wandering rights” and in prohibiting the sale of the land, made in
consideration of conveyance of grantor’s one-half interest in the land, were
invalid under the statute of frauds); Mertz v. Arendt, 1997 ND 113, ¶ 8, 564
N.W.2d 294 (parol gift of real property brought outside of statute of frauds
through partial performance); Hagen v. Schluchter, 126 N.W.2d 899, 902 (N.D.
1964) (“An agreement to devise real property is in effect a contract to sell real
estate and is included within the scope of subsection 4 [now subsection 3].”);
Heuer v. Heuer, 253 N.W. 856, 859 (N.D. 1934) (stating that “[t]here is no good
reason why a gift should not be subject to the same rules as a sale, and the
cases so hold” in applying the part performance exception to the statute of
frauds).
[¶17] California has a nearly identical statute of frauds provision to subsection
3.4 See Cal. Civ. Code § 1624(a)(3). It has also broadly construed its statute of
frauds’ provision on agreements for the sale of real property. See Anson v.
Townsend, 15 P. 49, 50 (Cal. 1887) (stating “parol gifts will be enforced under
like circumstances and conditions as parol sales” in voiding the gift of real
property under the statute of frauds); Denio v. Brennecke, 45 P.2d 229, 231
(Cal. Dist. Ct. App. 1935) (concluding oral agreement to transfer oil rights for
legal services came within the statute of frauds’ provision governing
agreements for the sale of real property); Keeler v. Murphy, 3 P.2d 950, 952
(Cal. Dist. Ct. App. 1931) (“Almost universally where the question has arisen
it has been held that an exchange is a purchase or sale within the meaning of
the statute of frauds. Thus an exchange of real property for personal property
is within the statute covering sales of real property.”). Other jurisdictions have
similarly construed “sale” to mean more than land exchanged for money. See,
e.g., Waddle v. Elrod, 367 S.W.3d 217, 224 (Tenn. 2012) (stating that in
4California’s provision has remained the same since 1874, minus grammatical changes. See 1873-74
Cal. Stat. Am. 241-42. “California court decisions construing Field Code sections, while not binding,
are entitled to respectful consideration, and may be ‘persuasive and should not be ignored.’” Glatt v.
Bank of Kirkwood Plaza, 383 N.W.2d 473, 476 n.4 (N.D. 1986).
8
Tennessee’s statute of frauds “[t]he word ‘sale,’ used in the statutory phrase
‘contract for the sale of lands, tenements, or hereditaments,’ has long been
broadly interpreted to mean any alienation of real property, including even a
donation of realty”); Beckmann v. Mepham, 70 S.W. 1094, 1095 (Mo. Ct. App.
1902) (“A contract for the exchange of land for land or for other things than
money has been held to fall within the statute of frauds (Rev. St. 1899, § 3418),
because within the reason and spirit of the language thereof as a sale of land.”).
[¶18] We hold that an agreement to transfer oil interests for valuable
consideration is an agreement for the sale of real property, or of an interest
therein, under N.D.C.C. § 9-06-04(3). Our case law demonstrates such,
California’s (and other jurisdictions’) case law is persuasive on the issue, and
to hold otherwise would lead to an absurd or ludicrous result or unjust
consequences. Accordingly, the statute of frauds applies to the alleged
settlement agreement.
B
[¶19] Lund contends that even if the statute of frauds applied, such was
satisfied by a signed writing. Specifically, Lund claims the writing requirement
was satisfied by Stefanson’s December 10, 2019 email, which included the
proposed settlement agreement as an email attachment, and the signing
requirement was satisfied by Stefanson’s signature block included at the end
of the email. Lund asserts Stefanson had express authority from his clients to
enter into the settlement agreement as evidenced by their presence at the
December 2, 2019 settlement meeting.
[¶20] Subsection 9-06-04(3), N.D.C.C., provides that an agreement for the sale
of real property, “if made by an agent of the party sought to be charged, is
invalid unless the authority of the agent is in writing subscribed by the party
sought to be charged.” See also Tostenson v. Ihland, 147 N.W.2d 104, 111 (N.D.
1966) (applying to an attorney-agent). Thus, under subsection 3, Swanson and
Open Road needed to sign a writing granting authority to Stefanson to execute
the agreement on their behalf. Assuming that a signature block on an email
could in some circumstances constitute a signature on an attached document
9
rather than only a signature on the body of the email, and Lund has cited no
authority for that proposition, Lund has failed to identify any evidence in the
record of a signed writing authorizing Stefanson to execute the agreement.
Because the statute of frauds was not satisfied by a signed writing, the alleged
settlement agreement is invalid.
C
[¶21] Lund contends the parties’ partial performance of the settlement
removed the agreement from the statute of frauds. Lund claims the parties
partially performed upon their agreement to dismiss the pending lawsuits
between them when Foss emailed the district court to inform it the parties had
resolved the matter, to ask it to take the trial scheduled for the next day off the
calendar, and to request fourteen days to submit closing documents.
[¶22] In the absence of a written agreement, a court may “compel the specific
performance of any agreement for the sale of real property in case of part
performance thereof.” N.D.C.C. § 47-10-01. “To take a contract out of the
statute of frauds, the party seeking to enforce the oral contract must establish
part performance that is not only consistent with, but that is consistent only
with, the existence of the alleged oral contract.” Kohanowski v. Burkhardt,
2012 ND 199, ¶ 16, 821 N.W.2d 740. “Cases accepting the doctrine of part
performance have recognized three major categories of acts by the purchaser
that may make an oral contract enforceable: paying the contract price, taking
possession of the property, and making improvements.” Johnson Farms v.
McEnroe, 1997 ND 179, ¶ 18, 568 N.W.2d 920.
[¶23] Lund does not argue that he performed any of the actions that we have
recognized as part performance of an oral contract for the sale of real property,
such as paying the contract price, taking possession of the property, or making
improvements. Instead, he argues he partially performed upon the agreement
to dismiss the pending lawsuits by emailing the district court to request the
pending trial be removed from the court’s calendar. Lund does not cite any
authority that has applied the part performance of an oral sale of real property
to any actions outside of the three major categories, or provide any reason to
10
expand the doctrine. Further, Lund has not demonstrated that the act of
emailing the court to request the pending trial be removed from the calendar
is consistent only with the existence of the alleged oral contract. Such an act is
consistent with both having an agreement in place and an agreement to agree,
without all of the essential terms agreed upon. See Tarver v. Tarver, 2019 ND
189, ¶ 9, 931 N.W.2d 187 (agreement to agree with uncertain terms is
unenforceable). Accordingly, we conclude the part performance exception to the
statute of frauds does not apply.
D
[¶24] Lund argues that allowing Swanson and Open Road to rely on the
statute of frauds as a defense would promote an injustice. He contends that
after the parties had an agreement in place, Swanson and Open Road lost
interest in settling once this Court ruled in their favor in Open Road Trucking,
2019 ND 295.
[¶25] “The purpose and intent of the statute of frauds is to prevent fraud and
perjury, and the statute should not be used as a defense where the effect would
be to accomplish a fraud or to enable a party to enrich himself unjustly at the
expense of another.” Wilhelm v. Berger, 297 N.W.2d 776, 779 (N.D. 1980). In
Nelson v. TMH, Inc., the plaintiff sued a corporation and an incorporator of the
corporation for the unpaid balance of a loan made by the plaintiff to the
corporation. 292 N.W.2d 580, 581. The incorporator induced the plaintiff, with
whom he was in a position of trust, to make the loan to the corporation under
the false pretense that he was financially unable to do so himself. Id. at 585.
The incorporator assured the plaintiff that she would be fully compensated on
the loan and that he would see to it that she was repaid. Id. The corporation
and the incorporator repeatedly refused to comply with the plaintiff’s requests
that papers be drawn up containing the terms of the loan. Id. The incorporator
raised the statute of frauds as a defense to avoid repayment of the loan. Id. at
583. The Court concluded that the incorporator could not invoke the
protections of the statute of frauds under such circumstances. Id. at 585.
11
[¶26] Lund does not argue that he detrimentally relied on the alleged
settlement agreement, or that Swanson or Open Road were unjustly enriched
as a result of the non-performance of the alleged agreement. He claims that he
missed out on the benefit of the bargain. Such an argument, if accepted, would
render the statute of frauds meaningless. This case is unlike Nelson, where
fraud and injustice were apparent from the circumstances. Because a statute
of frauds defense under these circumstances does not promote an injustice or
perpetrate a fraud, we decline to remove this case from the statute of frauds.
IV
[¶27] We find the remaining issues and arguments raised by the parties
unnecessary to our decision.
[¶28] Because the alleged settlement agreement is invalid under the statute of
frauds, we affirm the judgment.
[¶29] Jon J. Jensen, C.J.
Gerald W. VandeWalle
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
12