Opinion ID: 2001288
Heading Depth: 1
Heading Rank: 8

Heading: were christensens entitled to reimbursement or offset for real estate taxes paid and installment payments made under a void lease agreement?

Text: Mistakenly believing the lease and option in the Addendum were valid, Christensens paid real estate taxes on the land and made installment payments to the estate of Carrie Martin from 1990 through 1993. The trial court ruled Christensens were entitled to reimbursement for these payments to the extent they exceeded the fair market rental value of the property. The trial court entered a judgment against Bank, as administrator of Martin's estate, for these sums. By notice of review, Bank contends Christensens are not entitled to restitution of money paid under a void lease and option agreement. As Bank suggests, [c]ourts generally do not grant restitution under agreements that are unenforceable on grounds of public policy. Farnsworth, supra, § 5.9 at 386. However, many courts recognize an exception to this general rule when a party would suffer a forfeiture that is disproportionate to the contravention of public policy involved. Id. See also Restatement (Second) of Contracts § 197 cmt. b (1981). The exception is often used in favor of a party who is excusably ignorant of technical rules or regulations, where strict application of these rules or regulations would result in forfeiture if restitution were not allowed. Id. We have previously recognized this exception: If a contract is deemed void for noncompliance with a statute, it is a nullity conferring no right and creating no obligation as between the parties. A party thereto must then recover, if at all, upon an implied agreement on the part of the party receiving benefits to pay what the same were reasonably worth. Thurston v. Cedric Sanders Co., 80 S.D. 426, 429, 125 N.W.2d 496, 498 (S.D.1963). Contracts implied in law rest on the equitable principle that courts will not allow a person to unjustly enrich himself at the expense of another. Id. Enrichment can be unjust if it is a result of money paid by mistake. A.G. Edwards & Sons Inc. v. Northwest Realty Co., 340 N.W.2d 187, 189 (S.D.1983) (citing 66 Am.Jur.2d Restitution and Implied Contracts §§ 3, 8, 118 (1973)). Here, when Christensens executed the Addendum agreement, they were excusably ignorant of the technical requirement that agricultural land leases not exceed twenty years. They later paid the taxes and installment amounts under the mistaken belief that the lease and option contained in the Addendum would be upheld in court. It would be inequitable to allow the estate of Martin to profit from Christensens' erroneous belief in the legality of the contract. The trial court properly allowed restitution for taxes and installment payments.