Case Name: HALVORSON et ux., Appellants v. BIRKLAND, Respondent
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1969-10-08
Citations: 84 S.D. 328
Docket Number: File No. 10590
Parties: HALVORSON et ux., Appellants v. BIRKLAND, Respondent
Judges: BIEGELMEIER, P. J., and ROBERTS, J., concur.
Reporter: South Dakota Reports
Volume: 84
Pages: 328–336

Head Matter:
HALVORSON et ux., Appellants v. BIRKLAND, Respondent
(171 N.W.2d 77)
(File No. 10590.
Opinion filed October 8, 1969)
Rehearing denied November 12, 1969
Morris Myers, Aberdeen, for plaintiffs and appellants.
George J Rice, Aberdeen, for defendant and respondent.

Opinion:
HANSON, Judge.
This litigation stems from the sale of the "Lone Pine Trailer Court" in Aberdeen on July 22, 1964 to plaintiffs, Elvin and Beverly Halvorson, by the defendant, Joseph O. Birkland. One June 12, 1967 plaintiffs commenced an action, designated as Civ. 67-176, seeking a declaration of rights under the contract for sale; a judgment for payments made under the contract in the amount of $12,300; and for $5,440 damages for alleged breach of the contract. On June 26, 1967 plaintiffs commenced a second action designated as Civ. 67-215, in which they seek a rescission of the contract. Defendant answered both actions with a general denial, a plea of waiver and estoppel, and a counterclaim asking for a strict foreclosure of the contract for sale. Upon stipulation of counsel the two actions were consolidated for trial. The issue of damages was submitted to a jury which returned a verdict of $1.00 in favor of plaintiffs. The court then entered findings of fact and conclusions of law denying plaintiffs' right to rescind because of estoppel and granting defendant's prayer for strict foreclosure of the contract for deed. A single judgment was entered. Plaintiffs appeal from the judgment. A further appeal from the order denying motion for a new trial was unnecessary. State Highway Commission v. Madsen, 80 S.D. 120, 119 N.W.2d 924, as such order is reviewable on appeal from the judgment.
Plaintiffs sought rescission and recovery of payments made under the contract of sale on alternate grounds, viz.: (1) Mistake induced by misrepresentations made by defendant and (2) failure of consideration resulting from defendant's failure or refusal to tender an abstract showing merchantable title according to the contract.
In summary, it appears the defendant Birkland operated the "Lone Pine Trailer Court" on Lots 4 to 17 in Block 41 of Roche's East Side Addition to the City of Aberdeen, South Dakota. Block 41 is bounded on the east by Greenwood Street (otherwise referred to as Greenway Street) and on the south by Fifth Avenue Southwest. Both streets are sixty-six feet wide. The northern tier of lots in Block 56 adjoining Block 41 on the south was owned by defendant's wife and the area platted as Fifth Avenue Southeast between Block 41 and Block 56 was used by defendant in the operation of his trailer court. Also the west half of Greenwood Street was used and a large cement block incinerator utilized by the tenants of the trailer court was situated thereon.
In July 1964 defendant decided to sell the trailer court and listed it for sale with C. A. Draeger, a realtor in Aberdeen. Through a mutual acquaintance plaintiffs learned the property was on the market and contacted defendant. They met on two occasions prior to July 22, 1964 and in the course of negotiations an inspection was made of the boundaries and court facilities. There is a dispute as to the representations made by defendant during negotiations as to ownership of the west half of Greenwood Street and Fifth Avenue Southeast. According to plaintiff Halvorson, defendant informed him both streets had been vacated and were owned by him. Plaintiff further testified he contemplated an expansion of the trailer court making more use of the street areas and he would not have purchased the trailer court except for the representation of ownership by defendant. Defendant, on the other hand, testified he told Halvorson the streets would have to be vacated but that wasn't much of a problem.
The parties agreed on the terms of sale which were incorporated in an Earnest Money Contract of Sale prepared by Mr. Draeger which was executed on July 22, 1964. Defendant furnished the realtor with a description of the property to be inserted in the contract as follows: "The Lone Pine Court, located on and all of Block 41 Roaches Addition to Aberdeen, South Dakota less Lots 1-2-3-18-19 & 20 Plus that portion of 5th avenue running on the south side of said Block 41 which has been vacated and plus that portion of Greenway Street running on the east side of Block 41 which has been vacated, the west half of said street vacated is to be conveyed with this property." The contract further provided (1) the sale price of $36,000 was to be paid as follows: $1,000 down, $5,000 as soon as sellers furnished a contract of deed and the balance of $30,000 to be paid at the rate of $225 per month commencing September 1, 1964, and (2) the transaction was to be completed by August 1, 1964 when possession of the property would be given to the purchasers. Mr. Draeger testified that when the Earnest Money Contract was executed in his office on July 22, 1964 the defendant told him, in the presence of plaintiff Halvorson, that Greenwood Street had been vacated.
After signing the Earnest Money Contract plaintiffs retained Elmer Thurow, an attorney at law in Aberdeen, to examine the abstract and prepare a Contract For Deed. In testifying for defendant, over plaintiffs' objection that it violated the attorney-client privilege and the parol evidence rule, Mr. Thurow stated he examined the abstract and advised the parties orally in his office that title to the property was defective as it was based, in part, upon tax deeds and title would have to be quieted by defendant. He was apparently then retained by defendant for this purpose. Mr. Thurow also testified the matter of the streets not being vacated was discussed, but he was informed this matter would be taken care of by someone else. The Contract For Deed prepared by Mr. Thurow was signed by the parties on August 1, 1964. It contained substantially the same provisions as the Earnest Money Contract. It described the property sold as "Lots four to seventeen (4 to 17) inclusive, in Block Forty-one (41), of Roaches East side Addition to Aberdeen, in Brown County, South Dakota, and that portion of vacated 5th Avenue adjoining Block 41 on the South, and that portion of the West half of vacated Greenway Street adjoining said Block 41 on the East". The contract also obligated defendant seller to convey the property by Warranty Deed and to furnish an Abstract of Title showing merchantable title to said property and if title was not now merchantable, the seller had six months to perfect title.
Plaintiffs made the payments required of them and went into possession of the trailer court on August 1, 1964. They learned the streets had not been vacated in April 1965. They immediately contacted defendant who informed them that Mr. Ivan Hunt-singer, another attorney in Aberdeen, would get the streets vacated. On June 1, 1965 the City Commissioners of Aberdeen passed a Resolution vacating Fifth Avenue Southeast, but refused to vacate Greenwood Street.
In February 1967 plaintiffs retained their present counsel and on his advice refused to make further payments under the contract. On April 25, 1967 they notified defendant in writing he had ten days to perfect title and to furnish an abstract showing merchantable title or appropriate legal proceedings would be commenced. These actions were then started in June and were tried in December 1967.
It further appears that the City Commissioners of Aberdeen passed a Resolution vacating Greenwood Street on July 31, 1967. An abstract of title was tendered by defendant during the progress of the trial. Such abstract was certified to on the 15th day of December 1967. This was four days after the trial commenced.
Apart from and without considering the merits of plaintiffs' claimed right to rescind for mistake induced by alleged misrepresentations of defendant it would appear that plaintiffs were entitled to a decree of rescission upon their alternate ground. The Contract For Deed unequivocally required defendant to furnish an abstract showing merchantable title to all the property sold to plaintiffs on August 1, 1964 or within six months thereafter. He either failed, refused, neglected, or was unable to comply. His right to payments under the contract was dependent upon his compliance. It was a material and essential provision of the agreement. As stated in Vol. 2, Black on Rescission and Cancellation, § 427, p. 1103 "When a vendor of land, who has bound himself to convey at a given time or on performance of stipulated conditions, is unable to give a good title to the property when called upon to do so, either because he never held the title or because he has failed to acquire a title which he expected to acquire or because he has been unable to clear the title from clouds or hostile claims, the purchaser will be entitled to abandon the contract and refuse to make payment of the price, or, if he has made a partial payment, he will be entitled to rescind the contract and recover back what he has given." See also SDCL 53-11-2 subsections (2) and (4).
Furthermore, there was an obvious partial failure of consideration in that defendant agreed to sell and put plaintiffs in possession of 5th Avenue Southwest and the West Half of Greenwood Street on August 1, 1964. This was beyond his authority. He had no conveyable property or possessory rights, except as an abutting owner, in Greenwood Street or 5th Avenue. Until those streets were actually vacated by the City of Aberdeen plaintiffs acquired nothing of value from defendant so far as their use was concerned.
The rescission in this case was complete when plaintiffs gave notice of their rescission, refused to make further payments, and offered to tender back everything of value received under the contract.
As a condition to rescission "the party rescinding a contract must restore to the other party everything of value which he has received from him under the contract". SDCL 53-11-5. Therefore, the decree of rescission in this case should require plaintiffs to account and pay for the reasonable value of their use, occupation and possession of the trailer court since August 1, 1964 as an offset against their right to recover payments made under the contract. In this respect see Larson v. Thomas, 51 S.D. 564, 215 N.W. 927, 57 A.L.R. 1246. Damages for the alleged breach of contract is not an issue and in the accounting on rescission plaintiffs cannot claim such damages as an offset.
Reversed.
BIEGELMEIER, P. J., and ROBERTS, J., concur.
RENTTO, J., dissents.
HOMEYER, J., concurs in dissent.