Ainsworth v. Erck

388 N.W.2d 886, 1986 S.D. LEXIS 272

• Court: South Dakota Supreme Court
• Decided: June 4, 1986
• Docket: No. 15065
• Status: Published

Opinions

WUEST, Justice.

This is an appeal from a decree quieting title to a lot and building in Spearfish, South Dakota. We affirm.

In 1978, appellee Lyle Ainsworth (father) sold appellee Lincoln Ainsworth (son) a lot and building in Spearfish, South Dakota, under an oral contract. No down payment was made and son was to make payments whenever he could. Father reported the sale on his 1978 income tax return at $47,-000, but continued to pay all real estate taxes, maintenance and repairs. Son took possession of the building and rented it, remitting some of the rental proceeds to his father and using the balance to live on.

Son operated a clothing store in Rapid City, South Dakota, where he met appellant Leo Erck (Erck), who successfully suggested that son obtain a real estate license through Erck’s agency, with Erck as supervising broker. As part of a deal to list the son’s business in 1979, Erck loaned him $15,000. Erck secured the note with a mortgage on the building without checking the title, either by ordering title insurance or by examining an abstract. Erck has been licensed as a real estate salesman since 1970 or 1971 in North Dakota and as a broker in South Dakota since 1975. He testified his wife probably drew the mortgage.

Although he collected the rents from the property, son only made full payments to his father for one or two years of the six years from 1978 to 1984. The rest of the time he made inadequate payments or none at all. By the time father learned of the mortgage in 1982, son had missed many payments, as he was using the rent to live on.

At trial, father testified the oral contract for deed between himself and son remained in effect from the sale in April, 1978, through 1984. He further testified that son surrendered the property to him in 1984. A quit claim deed from son to father dated November 1, 1984, was produced at trial.

The property was listed for sale by son, as owner, on September 26, 1984. After offers and counteroffers, the property was sold on November 1, 1984. Son signed the preliminary papers; however, the final contract was signed by father. Son testified that father had asked him to sell the property for father.

In October 1984, Erck was requested to release the mortgage on the premises. When he refused father commenced this quiet title proceeding against Erck, son, and their wives. Ercks answered and after a court trial a decree was entered, quieting title in father. The Ercks appealed.

Ercks’ first claim of error concerns the trial court’s Finding of Fact IV, which provides:

For tax years 1978 through 1988, plaintiff reported the oral transaction as an installment sale to Lincoln Ainsworth and reported payments of principal and interest totalling $28,711.00, which he in reality never received from defendant Lincoln Ainsworth.

They argue this finding is clearly erroneous because the evidence establishes some payments were made by son to father. This is true; however, the findings of fact later address those payments. In Finding of Fact VII, the court found that from 1978 to 1983 “with the exception of a few quarterly rent payments” son made no other payments to father. Based on these facts, the court entered a conclusion of law that son had “no estate or interest” in said real property. The court further held the mortgage, was not a valid lien against the property.

There is conflicting evidence as to the amount of money father received from son, but the trial court’s findings were within the realm of the evidence and we will not reverse unless findings are clearly erroneous. Matter of Estate of Gosmire, 331 N.W.2d 562 (S.D.1983); Mobridge Community Industries v. Toure, 273 N.W.2d 128 (S.D.1978).

In this final claim of error, Erck urges that father should be estopped from asserting Erck’s mortgage was not a valid lien upon the premises. Father testified he was unaware of the mprtgage until 1982 and the trial court agreed, holding he was unaware of the note or mortgage until several years after ⅛‡ execution. The court further found there was no evidence of fraud on the part of j father. Although Ercks claim estoppel their argument urges fraud, which must be proven by a preponderance of the evidence.; Aschoff v. Mobil Oil Corp., 261 N.W.2d 120 (S.D.1977). Since father never knew about the mortgage until 1982, he cannot be charged with fraud when he sold the building to son nor when son executed the 'mortgage in 1979. Although son may be guilty of bad faith or fraud, that cannot be imputed to father and, since the court determined son had “no estate or interest” in the property, son did not have any equity upon which the lien could attach. Both issues raised by Erck are attacks upon the court’s findings of fact which cannot be disturbed unless they are clearly erroneous. We do not find them clearly erroneous. :

The judgment is affirmed.

MORGAN and SABERS, JJ., concur. HENDERSON, J., dissents. FOSHEIM, C.J., deeming himself disqualified, did not participate.