First & First v. Chadco of Duluth

999 N.W.2d 553

FIRST & FIRST, LLC, a Minnesota limited liability company, et al., Appellants,

v.CHADCO OF DULUTH, LLC, a Minnesota limited liability company, Respondent.

A23-0598

Court of Appeals of Minnesota.

Filed December 11, 2023

Syllabus by the Court

A party seeking a temporary injunction to suspend cancellation of a purchase agreement for real property must demonstrate irreparable harm under the Dahl-berg factors.

St. Louis County District Court, File No. 69DU-CV-23-747

Ryan R. Dreyer, Eric G. Nasstrom, Morrison Sund PLLC, Minnetonka, Minnesota (for appellants)

James R. Magnuson, MJB Law Firm, PLLC, Chanhassen, Minnesota (for respondent)

Considered and decided by Johnson, Presiding Judge; Frisch, Judge; and Kirk, Judge.^*

OPINION

FRISCH, Judge

In this action for breach of contract related to a failed real estate transaction, appellants-purchasers appeal the district court’s denial of a motion seeking temporary injunctive relief to enjoin the cancellation of and to enforce the parties’ purchase agreement, arguing that the district court misapplied the law in determining that appellants-purchasers failed to establish irreparable harm. Because we see no abuse of discretion by the district court, we affirm.

FACTS

Appellant First & First, LLC contracted with respondent Chadco of Duluth, LLC to purchase real property in Duluth commonly known as the Spirit Valley Mall (the property).¹ The parties entered into a purchase and sale agreement effective August 2022. The parties amended the purchase agreement several times. The fifth amendment, dated December 22, 2022, is the subject of this appeal. In the fifth amendment, the parties set a closing date of January 30, 2023.

The parties did not close on January 30, 2023. First & First asserts on appeal that the parties did not close because Chadco failed to deliver various closing documents and that Chadco could not comply with its contractual obligations because title to the property was in doubt. Chadco asserts on appeal that First & First waived its title objection because it did not provide a written objection by the amended contingency date, as required by the purchase agreement. Chadco also asserts that the parties did not close because First & First had not secured financing.

The parties continued to communicate about the transaction after the agreed-upon closing date. But about one month after the closing date, Chadco’s broker emailed First & First relaying that "all parties to this transaction are no longer under contract, our Purchase Agreement and extensions have expired," and Chadco would "go no further." Later that day, an individual later identified as Chadco’s counsel emailed First & First’s counsel, inquiring about outstanding title-survey work and a timeline for closing. On March 9, Chadco sent First & First a notice of default, stating that First & First had defaulted by not closing on January 30. On March 23, Chadco sent First & First a notice of cancellation of purchase agreement.

On April 17, First & First filed a complaint in district court, alleging that Chadco breached the purchase agreement because Chadco failed to supply closing documents to First & First by January 30. First & First also alleged that Chadco was not entitled to initiate a statutory cancellation. First & First sought, in pertinent part, (1) a judgment for specific performance of the purchase agreement, and (2) a declaration of the parties’ rights and obligations regarding the purchase agreement and Chadco’s statutory cancellation of the purchase agreement under Minn. Stat. §§ 555.01-.16 (2022). First & First also moved for temporary injunctive relief to enjoin statutory cancellation of the purchase agreement.

The district court heard First & First’s motion for temporary injunctive relief, and counsel for both parties appeared at the hearing. The district court denied the motion, and First & First appeals.

ISSUE

Did the district court abuse its discretion by denying the motion for a temporary injunction?

ANALYSIS

First & First argues that the district court misapplied the law in denying its motion for a temporary injunction. It specifically argues that the district court was obligated under Minnesota law to presume the existence of irreparable harm because this matter involves a dispute over real property, and First & First seeks specific performance. We disagree.

[1] We begin by describing the statutory authority related to First & First’s underlying claims. The termination of a contract for the conveyance of real estate is governed by Minn. Stat. § 559.21 (2022). See also Minn. Stat. § 559.217 (2022) (governing cancellation of residential purchase agreements). Under section 559.21, a seller of real estate may terminate a purchase agreement upon 30 days’ notice of a purchaser’s default. Minn. Stat. § 559.21, subds. 2a, 4. If the default is not cured within 30 days (or if the purchaser does not satisfy certain other statutory requirements), the purchase agreement terminates. Id, But a party facing statutory cancellation of a contract for the conveyance of real estate may bring an action in district court alleging an affirmative defense to termination and requesting an order temporarily restraining or enjoining termination of the contract subject to the requirements of Minn. R. Civ. P, 65. Minn. Stat. § 559.211, subd. 1 (2022). A district court may grant a temporary injunction if, upon review of any affidavits, deposition testimony, or oral testimony presented to the court, it determines that there are sufficient grounds to warrant such relief. Minn. R. Civ. P. 65.02(b).

[2-4] We next describe well-settled Minnesota law governing injunctive relief. The propriety of injunctive relief is a decision that "rests within the sound discretion of the [district] court, and its action will not be disturbed on appeal unless, based upon the whole record, it appears that there has been an abuse of such discretion." Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278 N.W.2d 81, 91 (Minn. 1979). A district court abuses its discretion if it bases its decision to grant injunctive relief on an erroneous interpretation of the law or if it disregards facts. DSCC v. Simon., 950 N.W.2d 280, 286 (Minn. 2020); Cramond v. Am. Fed’n of Lab. & Cong, of Indus. Orgs., 267 Minn. 229, 126 N,W.2d 252, 256-57 (1964). On appeal, the party challenging a district court’s decision on a request for injunctive relief bears the burden to show that the district court abused its discretion. See Bud Johnson Constr. Co. v. Metro. Transit Comm'n, 272 N.W.2d 31, 33 (Minn. 1978).

[5-7] Because a temporary injunction provides relief before a trial on the merits, the party seeking an injunction must show that it would be irreparably harmed before an injunction may issue. DSCC, 950 N.W.2d at 286. We "consider five factors in reviewing the district court’s irreparable harm determination." Id. The five factors, known as the Dahlberg factors, are:

(1) The nature and background of the relationship between the parties preexisting the dispute giving rise to the request for relief.

(2) The harm to be suffered by plaintiff if the temporary restraint is denied as compared to that inflicted on defendant if the injunction issues pending trial.

(3) The likelihood that one party or the other will prevail on the merits when the fact situation is viewed in light of established precedents fixing the limits of equitable relief.

(4) The aspects of the fact situation, if any, which permit or require consideration of public policy expressed in the statutes, State and Federal.

(5) The administrative burdens involved in judicial supervision and enforcement of the temporary decree.

Id. at 286-87 (quoting Dahlberg Bros., Inc. v. Ford Motor Co., 272 Minn. 264, 137 N.W.2d 314, 321-22 (1965)). In conducting our review, we view the facts in the light most favorable to the prevailing party. Bud Johnson Constr., 272 N.W.2d at 33. Against this backdrop, we now consider First & First’s challenge to the district court’s denial of temporary injunctive relief.

First & First primarily argues that, notwithstanding the five Dahlberg factors, the district court was obligated under Minnesota law to presume the existence of irreparable harm because this dispute involves the purchase of real property, and damage to a party’s lights in real property is not, by its nature, compensable by money damages. Stated differently, First & First argues that it met its burden to show irreparable harm by its very allegations, divesting the district court of its discretion to determine irreparable harm in cases involving alleged damage to rights in real property. This argument finds no support in Minnesota law.

[8,9] Our assessment of irreparable harm does not change solely because First & First has asserted damage to its right to purchase real property and seeks specific performance as a remedy. Although First & First points to Minnesota authority acknowledging that monetary damages can be an inadequate remedy in disputes regarding a contract for purchase of real property, that authority involves the availability of a specific-performance remedy and does not stand for or support the proposition that a presumption of irreparable harm exists in such disputes when one party seeks injunctive relief. Shaugh-nessy v. Eidsmo, 222 Minn. 141, 23 N.W.2d 362, 368 (1946) (reasoning that in a dispute regarding an interest in land, monetary damages are presumed to be inadequate); Schumacher v. Ihrke, 469 N.W.2d 329, 335 (Minn. App. 1991) (holding that the district court acted within its discretion in awarding specific performance even where other remedies would be adequate). First & First does not cite to any authority supporting the proposition that a district court is ever divested of its discretion in assessing irreparable harm when determining the propriety of temporary injunctive relief, and we are aware of none.² To the contrary, when considering a motion for temporary injunctive relief in...