Opinion ID: 1920501
Heading Depth: 1
Heading Rank: 1

Heading: Simpler Approach to Equitable Adjustment

Text: The difficulty and complexity of including tax calculations in the court's analysis of benefits and detriments is readily apparent. In fact, it is probably impossible to equitably adjust all the rights of the parties by focusing upon the benefits and detriments to Sellers. Therefore, this court would be better served by an approach that attempts to enforce the agreement entered into by the parties, rather than an approach that attempts to convert a contract for deed into a lease agreement. As explained in Freyfogle, Vagueness and the Rule of Law: Reconsidering Installment Land Contract Forfeitures, 1988 Duke L.J. 609 (1988): [A] vendor should have the right to obtain the benefit of her contract bargain.... Full compensation is the normal rule in contract breach settings; there is no particular reason to deviate from the rule here. In determining the amount of the vendor's recovery, courts should focus on the proper method of damage calculation. The purchaser's payments, as well as the purchaser's equity, are irrelevant. What is relevant is simply the value of the property (at the date on which the vendor recovers it) and the unpaid contract amount. Id. at 650. It cannot be said this approach is inequitable as there is nothing inequitable about giving the Sellers the benefit of their bargain. Equitable adjustment of the rights of the parties is still easily achieved under the above described approach. As explained by Professor Freyfogle: Courts can calculate the restitution amount simply: the purchaser is entitled to the excess of the property's value over the unpaid purchase price. A state, as a policy matter, might allow the vendor to retain some portion of the excess as extra compensation for her injuries. Id. To equitably adjust the rights of the parties, the court simply subtracts the payment due Sellers from the property value and Buyers are entitled to a refund of the excess. However, Sellers should be allowed to offset their foreclosure expenses against the refund so they are not penalized for enforcing the contract. Here, Sellers were entitled under the contract to a balloon payment of $123,585.44 plus interest from the due date, November 1, 1987. In lieu of such a payment, the property, with a value adjudged to be $147,356.00, will be returned to Sellers. In this situation the equitable adjustment works out as follows: property value: $147,356.00 LESS balloon payment: $123,585.44 interest at 7.5% from 11-1-87 to 10-1-89: $ 18,374.85 ___________ Refund: $ 5,395.71 LESS foreclosure expense offset: $ 21,293.21 ___________ Amount due Buyers: ($ 15,897.50) Under this approach, Sellers do not receive a windfall. Instead, they incur a loss of almost $16,000 in unrecovered foreclosure expenses. In other words, Sellers still fall short of receiving the full benefit of their bargain. At the same time, the court's interference with the contract is minimal. I have great empathy for this elderly, retired farm couple who sold their farm and moved to town in 1977 in hopes of a financially secure and peaceful retirement, but must now pay $19,878.84, plus interest, to regain possession of their farm. This area of the law, as interpreted and implemented by the majority, is a can of worms. It may well be the death of contract for deed sales of farms, homes, and businesses. For example, see the problems identified in Freyfogle, supra, and in my writing in Safari, Inc. v. Verdoorn, 446 N.W.2d 44, 47 (S.D.1989). I am authorized to state that MILLER, J., joins in this special writing.