Opinion
No. C3-97-504.
Filed August 26, 1997.
Appeal from the District Court, Rice County, File No. C0951281.
Michael T. Keogh, Christian, Spartz, Keogh Christian, (for respondents).
James R. Keating, (for appellant).
Considered and decided by Norton, Presiding Judge, Schumacher, Judge, and Willis, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Appellant Thomas Reuvers argues the district court erred in finding he breached a contract to lease farmland to respondents Wayne O'Connor and Byron O'Connor and in awarding the O'Connors damages for lost profits. We affirm the judgment, but remand on the issue of damages.
FACTS
Wayne O'Connor and Byron O'Connor operate as an informal partnership under the name O'Connor Brothers. They are engaged in farming in Rice County. In January 1995, Thomas Reuvers placed an advertisement in the Faribault Daily News offering to sell or lease approximately 400 acres of farmland. On January 20, 1995, Wayne O'Connor, responding to the advertisement, met with Reuvers and discussed leasing the land. He was accompanied by his brother, Kevin.
Reuvers agreed to lease him the land for one year at $120 per acre. Wayne O'Connor requested a written version of their agreement, and Reuvers told him he would obtain a form lease within ten days and that they could complete it together. Wayne O'Connor presented Reuvers with a check for $4,500, approximately ten percent of the total rent.
On February 5, 1995, Reuvers advised Wayne O'Connor by telephone that he had leased the land to other tenants. On February 16, 1995, Reuvers returned Wayne O'Connor's check.
In June 1995, Wayne O'Connor and his partner, Byron O'Connor, brought an action against Reuvers alleging breach of contract. The district court held Reuvers breached a valid oral contract and awarded the O'Connors damages for lost profits in the amount of $73,308. Reuvers appeals
DECISION
1. Reuvers argues the district court erred in finding he orally contracted to lease his land to the O'Connors during the January 20, 1995 meeting. He claims his discussions with Wayne O'Connor constituted mere negotiations and he intended for a contract to arise only upon the completion of a formal written agreement.
The existence of a contract is a question of fact to be determined by the factfinder. Bergstedt, Wahlberg, Berquist Assocs., Inc. v. Rothchild , 302 Minn. 476, 480, 225 N.W.2d 261, 263 (1975).
Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.
Minn.R.Civ.P. 52.01. In cases involving conflicting testimony about the existence of a contract, a reviewing court shall affirm the district court's findings. Holt v. Swenson , 252 Minn. 510-516, 90 N.W.2d 724, 729 (1958).
When the parties to an oral agreement contemplated a later formalization of the agreement, the court must consider whether the parties intended to be bound before its formal execution. Betlach III v. Wayzata Condominium , 281 N.W.2d 328, 330 (Minn. 1979). Actual mutual assent is not required. Instead, the parties' expressed mutual assent will result in the formation of a contract. Northstar Center, Inc. v. Sibley Bowl, Inc. , 295 Minn. 424, 426, 205 N.W.2d 331, 332 (1973).
The record supports the district court's finding that Reuvers contracted to lease his land to the O'Connors even though the parties never reduced the agreement to writing. Both Wayne O'Connor and his brother, Kevin O'Connor, testified that Reuvers agreed to lease his farmland to the O'Connors and that during the meeting, Wayne O'Connor and Reuvers discussed the terms of the agreement and Reuvers accepted Wayne O'Connor's check for $4,500. Wayne O'Connor called Reuvers the following week inquiring about suitable chemicals to purchase for the land, and Reuvers told him it "would be a good idea" to purchase chemicals at that time. A party may manifest acceptance of an agreement by written or spoken words, or by conduct and actions. Holt , 252 Minn. at 516, 90 N.W.2d at 728-29. Although the parties discussed formalizing the agreement, Wayne O'Connor testified this was at his suggestion and for the purpose of record keeping. The record supports the district court's finding of a contract.
2. Reuvers argues the district court erroneously concluded that the O'Connors used reasonable diligence and good faith in searching for replacement land to mitigate their damages after the breach.
A party injured by a breach of contract is legally obligated to minimize loss caused by the breach. Wavra v. Karr , 142 Minn. 248, 251, 172 N.W. 118, 120 (1919). The party may only recover damages that could not be prevented with reasonable diligence and good faith. Id. The breaching party bears the burden of proving the injured party failed to exercise reasonable diligence and good faith to minimize damages. Lanesboro Produce and Hatchery Co. v. Forthun , 218 Minn. 377, 381, 16 N.W.2d 326, 328 (1944).
As the breaching party, Reuvers carried the burden of proving the O'Connors failed to exercise reasonable diligence and good faith in attempting to minimize their damages. Reuvers presented no evidence that the O'Connors were aware of suitable replacement land. Nor did he present evidence that comparable land was, in fact, available. Although Reuvers knew of several farms for rent, he did not disclose this information to Wayne O'Connor. Wayne O'Connor testified that he unsuccessfully searched the local newspaper for other advertised farmland and "kept his ear to the ground" for word-of-mouth leads on available land. He further testified that he did not place an advertisement in the local newspaper seeking land because his attempt to locate land in that manner the previous year was not fruitful. The record supports the district court's finding that the O'Connors used reasonable diligence and good faith in their attempt to locate alternative land to rent for the 1995 growing season.
3. Reuvers claims the district court erred in awarding the O'Connors lost profits damages because the breach occurred three months before the commencement of the growing season. Reuvers also argues the O'Connors failed to prove their alleged lost profits to a reasonable degree of certainty and the district court's award of damages was based on speculation.
In support of his assertion that lost profits were an inappropriate measure of damages, Reuvers cites Glaubitz v. Meyer , 149 Minn. 161, 182 N.W. 1002 (1921). That case involved the breach of a farm lease prior to the growing season. The supreme court held the proper measure of damages was the difference between the injured party's rent for replacement land and the rent agreed on under the contract. Id. at 163, 182 N.W. at 1003. Reuvers argues Glaubitz stands for the proposition that damages must compensate only a lessee's loss of the "benefit of the bargain" when a lessor breaches a farm lease before the growing season. However, in Glaubitz , the farmer injured by the breaching party was able to obtain replacement land. Id. at 162, 182 N.W. at 1003. By contrast, the trial court found that the O'Connors tried but were unable to find replacement land. The measure of damages articulated in Glaubitz is not applicable to this case where replacement land was not procured.
We conclude the district court properly determined lost profits were the measure of damages. This court has held that lost profits may be an appropriate measure of damages for breach of a farm lease, even when the lessor breaches the lease before the growing season. See Nelson v. Smith , 349 N.W.2d 849, 854 (Minn.App. 1984) (lost profits correctly awarded when lessor breached contract to lease farmland for three-year term at end of first growing season and prior to second growing season, and lessee was unable to obtain replacement land), review denied (Minn. July 26, 1984). Although Reuvers's breach of the lease occurred approximately three months prior to the growing season, the O'Connors were unable to find suitable replacement land. An injured party is entitled to damages that the parties reasonably could have foreseen. Poppen v. Wadleigh , 235 Minn. 400, 405, 51 N.W.2d 75, 78 (1952). As a foreseeable consequence of Reuvers's repudiation of the lease, the O'Connors did not realize profits from farming the land.
Damages for lost profits must be proven to a reasonable degree of certainty. Nelson , 349 N.W.2d at 854 (citing Poppen , 235 Minn. at 405, 51 N.W.2d at 78). The district court calculated damages by deducting the O'Connors' estimated production costs from their estimates of productivity based on the yield from other area farms they operated during 1995. This was a correct method for ascertaining lost profits. See Poppen , 235 Minn. at 405-06, 51 N.W.2d at 78 (testimony of other farmers operating nearby farms based opinions of probable net profit on knowledge of land and growing season, methods and costs of production, and market prices during season, helped prove lost profits damages to a reasonable degree of certainty).
The district court did not, however, indicate in its findings what factors it considered in determining the O'Connors' operation costs. In particular, we are unable to determine if the district court accounted for the O'Connors' labor expenses, including the value of their own time if they performed the work themselves, and the depreciation of their equipment. We, therefore, remand the issue of damages to the district court for specific findings, and if necessary, an evidentiary hearing.