Court Opinion

ID: 9733837
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:18:30.470405+00
Date Added: 2024-06-11T15:28:35.518997
License: Public Domain

HENDERSON, Justice
(dissenting).
I respectfully dissent as the equities do not justify enforcement of a forfeiture provision. An old maxim of equity proclaims “Equity abhors a forfeiture.” I dare say this case, precedentially, so far as contracts for deed and agriculture are concerned, is one of the most important cases in this Court’s history.
In addition to the $319,345.47 buyers paid sellers, buyers improved the ranch property by at least $80,000 consisting of improving cropland, improving the timber stand, constructing four new wells, improving outbuildings and corrals, and furnishing the included item of extensive labor. These improvements are not essentially in dispute. Therefore, in five years the buyers poured and contributed approximately $400,000 into this ranch. Buyers tendered delayed installment, including principal and interest in full, just 11 days late! Under the decision of the trial court, now affirmed by this Court, the buyers lose everything, the sellers keep the $400,000, and sellers are reinvested with the entire ranch — much improved. This is too hardball for me to swallow in an equitable action. It is an unconscionable foreclosure. It goes against the spirit and grain of Prentice v. Classen, cited in the majority, and SDCL 21-50-2 and 21-50-3. Under SDCL 21-50-2, a statute under Foreclosure of Real Estate Contracts, “[t]he court in such actions shall have the power to equitably adjust the rights of all the parties thereto ....” The time contemplated by SDCL 21-50-3 is to enable a defendant to comply with the contract. Scott v. Hetland, 51 S.D. 303, 213 N.W. 732 (1927). In Walsh v. Bellamy, 68 S.D. 291, 295, 2 N.W.2d 102, 104 (1942), we held: “A vendee under the terms of the statute is allowed a reasonable opportunity to comply with the terms of the contract, and a failure to tender performance before suit would not affect the merits. It would only involve a question of costs.” Buyers in this action were laboring under an immediate demand to forthwith pay almost one-half million dollars. Then, as litigation and time wore on, buyers who therebefore were in a never-never land concerning their rights (litigation outcome unknown, offsetting claim of buyers up in the air as sellers, although admitting they were obligated to pay buyers for physical damages to property, would not assist in helping buyers recover from the major develop*221er) * were granted by decision of the trial court a 90-day redemption period within which to pay almost one-half million dollars. This was not remedial justice for it was not a realistic time payment schedule. Everyone in America knows that the ranching and farming industries are deeply in trouble. In South Dakota, bankruptcies in agriculture have dramatically increased. In 1982,129 agricultural bankruptcies were filed in South Dakota. In 1983, this number increased to 189 and in 1984, it rose to 245. In 1985, as of October 31, agricultural bankruptcy filings in this state were at 279. This is a 116% increase in less than four full years. I take judicial notice of the official records of the United States Bankruptcy Court, District of South Dakota. I fully appreciate that what is reasonable to one’s viewpoint — is unreasonable to another. One of the first things we learn in law school is that reasonable men differ. To me, it is unreasonable to refuse a full payment when it is 11 days late and to then sue for and demand forthwith one-half million dollars; then, if the half million dollars is not paid, to cause the offering party to lose a $400,000 equity. .1 support this common sense approach by 2 Pomeroy, A Treatise on Equity Jurisprudence, § 433, at 206-07 (5th ed. 1941), wherein it is expressed:
The test which determines whether equity will or will not interfere in such cases is the fact whether compensation can or cannot be adequately made for a breach of the obligation which is thus secured. If the penalty is to secure the mere payment of money, compensation can always be made, and a court of equity will relieve the debtor party upon his paying the principal and interest_
[The granting of relief in such circumstances is based on the ground that it is wholly against conscience to say that because a man has stipulated for a penalty in case of his omission to do a particular act — the real object of the parties being the performance of the act — if he omits to do the act, he shall suffer a loss which is wholly disproportionate to the injury sustained by the other party.] (Emphasis supplied mine; brackets in original.)
Very recently, in Booth v. Chamales, 366 N.W.2d 843 (S.D.1985), we affirmed a circuit court’s denial of a real estate foreclosure. For seven years, the buyers in Booth were habitually late with their payments. Yet, sellers accepted these payments. Buyers took sellers to the courtroom door on a foreclosure action, and on the day before trial, buyers owed four years of delinquent taxes. Sellers in Booth accepted a tardy payment on the contract after strict foreclosure documents were served. Here, Heikkilas (sellers) refused a yearly payment from Carvers (buyers) before the action was instituted but the full payment was tendered just 11 days late. On the day of trial in the Booth case, all payments and taxes were current. In discussing the foreclosure action in Booth, the trial court relied on our recent decision in Heinzman v. Howard, 348 N.W.2d 147 (S.D.1984). We upheld the trial court’s action observing that the trial court has the power to equitably adjust the rights of all parties and to fix the time within which the party or parties in default must comply with the terms of such contract. As in Booth, the buyers here were late on several payments and payments were accepted nonetheless. Although paragraph XVIII of the Contract for Deed stated that time was of the essence, a party who neglects to enforce such a provision at default and later accepts performance, shall not be allowed upon subsequent default to enforce such a provision without notifying the other party of his intent to enforce it. Keator v. Ferguson, 20 S.D. 473, 477, 107 N.W. *222678, 679 (1906). See also, Heinzman, 348 N.W.2d 147; Motet v. Hershey, 48 S.D. 493, 205 N.W. 239 (1925); Speer v. Phillips, 24 S.D. 257, 123 N.W. 722 (1909); Spolek v. Hatch, 21 S.D. 386, 113 N.W. 75 (1907); Pier v. Lee, 14 S.D. 600, 86 N.W. 642 (1901); and 77 Am.Jur.2d Vendor and Purchaser §§ 586, 589 (1975). If the parties do not treat timely payment as being of the essence, the courts should not treat it as of the essence. We do now approve of this hardball approach taken by the sellers in this case and, without question, the buyers in this case paid far more money and were in less serious default than the buyers in Booth. There are different colors and hues in flowers; there are different degrees of sin; there are different degrees of breach of contract. Some breaches of contract are indeed most serious and substantial and some are not. There are often subtle gradations. However, the 11-day full, but late, tender is not such a serious and substantia] breach that it deserves a total elimination of all equity in this ranch of the buyers. I perceive this forfeiture as being unconscionable. If the same penalty applies to all breaches, that is, total forfeiture, it is inversely proportional to the degree of breach. For, in some cases the facts demonstrate on contracts for deeds, that there has been a rather long and faithful performance. It is our duty on the highest Court of this state to equate and evaluate various decisions in the trial courts of this state. The judiciary, although indeed it must protect the buyers, must likewise protect the sellers from unfair consequences. Predictability must flow with equity begotten. It strikes me that an inconsistency in the fair administration of justice doth here lie.
The facts here do not militate all for the sellers and against the buyers. As an example, the contract in question specifically sets out the damage for late payments — a change in the interest rate from llh% to 11%. Interest is normally considered to be the damage for late or nonpayment of money. Utley v. Dunning, 38 S.D. 447, 161 N.W. 813 (1917). Finding of Fact 15, which pertains to the parties’ efforts to estimate damages, does not appear to have support in the record. Rather, it is my belief that the parties’ testimony, supported by their counsel, reflects that no efforts were specifically given to this subject. It further appears to me that boilerplate language was placed in the contract and was certainly not the words of the parties. In fact, it is undisputed that the parties themselves never discussed damages, arising from either a minor or major breach. Counsel who drew the contract testified that he had used prior contracts in inserting the forfeiture clause and specifically disclaimed any recollections of discussions as to why the clause was inserted as written. This attorney testified that he drew the contract to comport with statutory language of the South Dakota Code. Both attorneys, involved in preparing this contract, denied any discussions concerning damages which the sellers would sustain by virtue of a breach. Therefore, the three-fold test articulated in Prentice and Anderson v. Cactus Heights Country Club, 80 S.D. 417, 125 N.W.2d 491 (1963), has not been met. True, the trial court’s Findings of Fact 14, 15, and 16 purport to address these items.
He who seeks equity must do equity, we are taught as fledgling law students. Sellers seek the entire equitable interests of buyers, yet they do no equity; in late 1983, while admitting damages caused to the ranch, sellers refused an oral demand to arbitrate or pay damages. This was as late as December 1983. On January 3, 1984, buyers did not make the yearly payment; by January 18, 1984, sellers had served a notice of default. Not once did the sellers respond to the arbitration demand; buyers withheld the yearly payment. When buyers did tender the full amount of principal and interest to the escrow bank, said bank returned the installment payment per instructions from the sellers. Sellers were going for the jugular vein.
As I truly believe this trial court entered findings of fact which were clearly erroneous and has abused its broad discretionary power granted unto it by the state statutes *223on strict foreclosures of real estate contracts, I would reverse and remand. This would encompass instructions to reinstate the contract upon payment of all past-due installments, interest, and any attendant expense incurred by the 11-day tardy payment, duly tendered but refused.

 Mineral developers greatly increased natural gas drilling on this ranch; the water supply deteriorated in quantity and quality; one stock pond was ruined by dumping contaminated drilling mud into it; natural gas began to appear in the well water; some of the water contained enough gas to burn; buyers felt harassed and delayed payment pending a response to a formal demand for damages submitted to sellers; sellers did not respond to an arbitration demand and saw fit to serve a foreclosure action on March 23, 1984. Must justice be administered in halves?