Brown v. Powell

2002 SD 75, 648 N.W.2d 329, 2002 S.D. LEXIS 88

• Court: South Dakota Supreme Court
• Decided: June 26, 2002
• Docket: None
• Status: Published

Opinions

AMUNDSON, Justice.

[¶ 1.] Shirley Brown appeals a trial court order directing enforcement of the terms of a contract for deed between herself and the assignee of the contract, Joan Powell. We affirm.

FACTS

[¶ 2.] Brown owned some apartments in Gettysburg, South Dakota. In 1996, she sold the property to James and Benita Donovan for $30,000 on a contract for deed. The contract acknowledged a $5,000 down payment with the balance payable at the rate of $303.19 on the first day of each month and the final payment due on June 1, 2006. The contract required Donovans to pay the real estate taxes and to insure the premises and contained the following nonassignment clause:

Neither this agreement nor any interest in the above described real property shall be assigned or conveyed by [Dono-vans] without written consent of [Brown].

[¶ 3.] Donovans fully complied with the contract for deed until October 1998. By that time, James Donovan had incurred an indebtedness to attorney Joan Powell for her legal fees in another matter. Thus, on October 23, Donovan assigned his interest in the rents and profits from the Gettysburg property to Powell.

[¶ 4.] Donovans continued to make the payments under the contract for deed until February 16, 1999. On that date, James Donovan entered into a real estate purchase agreement with attorney Powell to sell his interest in the contract for deed to her. From February 17, 1999 to September 27, 1999, Powell made the payments required by the contract for deed to Brown with checks drawn on an account entitled “Joan Elayne Powell, Esq. Business Account.”

[¶ 5.] In October 1999, Brown refused Powell’s monthly payment. On November 12, she commenced a foreclosure action against Donovan alleging default on the contract for deed in the failure to insure the premises, the failure to make timely payments and the failure to pay real estate taxes. On December 9, Powell, acting as Donovan’s attorney, answered the complaint and generally denied its allegations. On December 13, Powell filed her own notice of claim of interest in the realty asserting the assignment of rents and profits, the execution of the real estate purchase agreement and her receipt of a quitclaim deed to the property from Donovan.

[¶ 6.] On March 15, 2000, Powell moved to intervene in the action against Donovan and for a dismissal of the suit. A hearing was held on March 27. During the hearing, Powell tendered the full amount owing on the contract for deed from October 1999 to the hearing date. Powell also represented that she had satisfied all other indebtedness against the property including utility bills, taxes and insurance. After the hearing, the trial court entered findings of fact, conclusions of law and an order dismissing Donovan as a party, granting Powell’s motion to intervene, and directing that she tender past due payments under the contract and that Brown accept the payments pursuant to a valid assignment of the contract.

[¶ 7.] Brown subsequently filed a series of motions including a motion to amend her complaint to include Benita Donovan and Joan Powell as defendants. In addition, Brown filed a motion for the trial court to vacate its previous findings, conclusions and order on the basis that Powell had misrepresented her payment of the real estate taxes on the property. A hearing was held on November 27 and, on December 4, the trial court entered its order granting Brown’s motions and specifically vacating its findings as to the payment of real estate taxes by Powell.

[¶ 8.] The action was brought to trial before the court on May 8, 2001. During trial, Powell explained the confusion over her payment of the real estate taxes on the property and provided evidence of her payment of all outstanding indebtedness including the taxes and insurance. After trial, the trial court entered findings of fact and conclusions of law incorporating its earlier findings and further determining that: the taxes and insurance on the property were current; the amount of the default was five times the $303 monthly payments; the default was caused by hard feelings and miscommunication; Powell made a good faith effort to keep the contract up to date and follow it; and, that it would be inequitable to forfeit the contract. Based upon its findings and conclusions, the trial court entered an order very similar to the order it had previously vacated. The court further ordered that Powell should retender the past due monthly payments to Brown pursuant to a valid assignment of the contract for deed from Donovan and that the original terms of the contract should be enforced between Brown and Powell. Brown appeals.

ISSUE

[¶ 9.] Are the trial court’s findings of fact clearly erroneous?

[¶ 10.] Brown challenges the validity of Donovan’s assignment of the contract for deed to Powell on the basis of the contract’s nonassignment clause and the lack of written consent to the assignment by Brown. Powell argues that Brown waived the nonassignment clause by accepting contract payments from her after the assignment. We agree.

[¶ 11.] As authority for her argument, Powell relies upon this Court’s holding in Smith v. Hegg, 88 S.D. 29, 214 N.W.2d 789 (1974) that a nonassignment provision in a lease was waived by the lessor’s actual knowledge of the assignment and acceptance of monthly lease payments from the assignee for approximately five years. See also Wandler v. Lewis, 1997 SD 98, 567 N.W.2d 377 (vendor’s acquiescence in previous nbnconsensual assignments of property and acceptance of payments made pursuant to contract after prior assignments waived nonassignment clause of contract). Other jurisdictions have also held that a nonassignment provision in a land sale contract is waived where the vendor learns of the assignment and accepts payments on the contract from the assignee while abandoning any efforts to revoke the contract. See Distasio v. Gervazio, 234 Mich. 482, 208 N.W. 440, 442 (1926)(nonassignment requirement of contract waived by vendor’s receipt from as-signee and retention of payments required by contract); Ross v. Page, 11 N.D. 458, 92 N.W. 822, 825 (N.D.1902)(deviations from provisions of land sale contract waived where vendor accepted and retained money payments knowing that contract had been assigned and that assignee made the payments in reliance on the assignment); Nielsen v. Baldridge, 173 Or. 555, 146 P.2d 754, 758 (1944)(vendor waived provision against nonassignment in land contract where vendor permitted escrow to accept payments from assignees after learning of the assignment); Parker v. Camp, 656 N.E.2d 882, 884 n. 2 (Ind.Ct.App.l995)(vendor waived any right to assert nonassignment clause in land contract where vendor accepted several payments from assignee of contract and correspondence between vendor’s agent and assignee demonstrated vendor treated contract as being with assignee):

[¶ 12.] Here, the trial court found as a fact that there was “strong evidence that [Brown] was aware of Mr. Donovan’s assignment of the Contract for Deed while accepting payment thereunder from Joan Powell.” Brown argues that this finding is clearly erroneous and that there is no evidence to support it. We disagree.

This Court reviews a trial court’s findings of fact under the “clearly erroneous” standard.... In applying the clearly erroneous standard, our function is not to decide factual issues de novo. The question is not whether this Court would have made the same finding that the trial court did, but whether on the entire evidence we are left with a definite and firm conviction that a mistake has been committed. We will not overturn the trial court’s decision unless, after reviewing all the evidence, we are left with a definite and firm conviction that a mistake has been made. Due regard shall be given to the opportunity the trial court had to judge the credibility of witnesses.

Zarecky v. Thompson, 2001 SD 121, ¶ 8, 634 N.W.2d 311, 314 (citations omitted).

[¶ 13.] Contrary to Brown’s assertions, we find sufficient evidence to support the finding that she was aware of the assignment of the contract. Brown’s son, who has long held a power of attorney to manage her affairs, admitted at trial that he knew his mother was accepting contract payments from Powell. Although he also testified that he knew that Powell was Donovan’s attorney and that he thought Powell was acting on Donovan’s behalf in making the payments, there is no logic in this assertion. Powell represented Donovan in a criminal matter unrelated to any real estate transaction. Neither Brown nor her son provided any explanation whatsoever as to why Powell’s representation of Donovan in a separate criminal proceeding should have led them to believe that Powell was acting on Donovan’s behalf in making payments on the contract for deed. Thus, we find no clear error in the trial court’s rejection of this explanation.

[¶ 14.] Certainly Powell’s payments were sufficient to suggest to a prudent mind that “further inquiry should be made” concerning the nature of Powell’s interest in the realty. See Smith, 88 S.D. at 34, 214 N.W.2d at 792 (finding that purchaser knew of leasehold interest in realty held by original lessee’s assignee upheld where purchaser possessed information sufficient to suggest to a “prudent mind that further inquiry should be made”). The seven checks Powell issued to Brown from February 1999 through September 1999 were all written on aii account plainly captioned:

JOAN ELAYNE POWELL, ESQ.

Business Account

Powell further testified that:

The fact of the matter is that I wrote on the checks what they were for. They knew by living in this small community that Donovan didn’t have anything to do with the apartments anymore, had open and notorious possession of the apartments.

The checks admitted as evidence support this testimony. The check written in February 1999 to cover contract payments for January and February contained the notation, “Donovan contract.” The second check written in March 1999 contained the notation, “March Donovan Apts.” The third check written in May 1999 to cover payments for April and May contained the notation, “Apr/May.” The fourth check written in June of 1999 contained the notation “June 99.” The sixth check written in August of 1999 contained the notation, “Aug 99.” None of the checks gave any indication in any fashion that the payments on the contract were being issued by Powell on Donovan’s behalf rather than in her own right. Thus, they provided Brown with no reasonable basis to form such a belief.

[¶ 15.] If the checks alone were insufficient to make Browns aware of the assignment of the contract for deed and Powell’s assumption of some sort of interest in the realty, Powell also showed that she had an exchange with Brown’s counsel in June 1999 about insurance coverage on the property. In response to counsel’s inquiry, Powell provided him with copies of insurance policy declaration pages showing the property was insured. Some of the declaration pages named both Powell and Donovan as insureds. Powell also indicated in her testimony that she orally informed counsel at that time that she had the property.

[¶ 16.] In addition to the checks and the insurance policies, Powell also presented extensive evidence and testimony concerning her payment of various debts against the property including utilities, taxes and insurance. Powell testified that her payment of these debts and her possession of the property and other efforts to improve it and clean it up were open and notorious in the small community.

[¶ 17.] In conjunction with the foregoing evidence, this Court must also remain mindful that foreclosure is an equitable remedy and, therefore, various equitable principles are important to our review in this matter. See Alma Group, L.L.C. v. Weiss, 2000 SD 108, ¶ 12, 616 N.W.2d 96, 99 (foreclosure of a mortgage is an equitable action). In that regard, “[t]his Court has emphasized on numerous occasions that the law ‘abhors a forfeiture.’ ‘Forfeitures are considered odious in the law and are not favored by the courts.’ ” Bozied v. City of Brookings, 2001 SD 150, ¶ 24, 638 N.W.2d 264, 273 (citations omitted). Because forfeitures of land sale contracts are highly disfavored by the law, courts are generally quick to find a waiver of conditions alleged as a basis for a claim of breach. Cochran v. Grebe, 578 S.W.2d 351, 354 (Mo.Ct.App.1979)(forfeitures are highly disfavored by the law and the courts are therefore quick to find a waiver or estoppel in a case of this sort). In this particular instance, the condition is a covenant against assignment of the contract. Such conditions are also looked upon with disfavor. See Smith, 88 S.D. at 32-33, 214 N.W.2d at 791 (though this Court will at times enforce covenants in leases against assignment, such restraints against alienation are looked upon with disfavor and are strictly construed against the lessor).

[¶ 18.] Equity also favors those with a substantial investment in a land sale contract. See Miller v. Radtke, 230 Neb. 561, 432 N.W.2d 542, 547 (1988)(ejectment of vendee may be granted as remedy for violating terms of a land contract only where the equities justify such disposition, where property is of less value than the contract price and where such procedure does not offend against justice and equity). Accord Poommipanit v. Sloan, 1 Neb.App. 1132, 510 N.W.2d 542 (1993). As held by the Nebraska Supreme Court as a corollary to these principles, “[s]trict foreclosure will be decreed only under peculiar and special circumstances where the purchaser does not have a substantial equity in the property.” Riffey v. Schulke, 193 Neb. 317, 227 N.W.2d 4, 6 (1975).

[¶ 19.] Here, the trial court specifically-found that it would be inequitable to require Powell to forfeit the contract and this finding finds ample support in the testimony and evidence submitted by Powell concerning the extent of her investment in the property. As Powell herself summarized that evidence:

To date there’s been $22,585 just on the contract. It’s a $30,000 contract. Of course, that includes interest. The payoff on this thing is around 12,000 at this point but the fact of the matter is they’ve taken $22,585 in monthly payments. And I paid myself $8,489.32, if we count the check, you know, that I wrote back in November for $1,200 plus I’ve paid — and they’ve stipulated to this — I’ve paid one, two, $3,000 in taxes back and current. My client informed me when I took this thing over that the back taxes were paid.

I’ve bettered the Plaintiffs’ position in this case. I took a Contract for Deed that was in serious default that they hadn’t done one thing on. They’ve accepted late payments, they let taxes go by. I don’t know what their situation was with prior insurance because I think it was insured through Browns but there were numerous defaults in that contract when I took it over and I’ve gone in and I’ve cured all the defaults.

* * *

In addition to the thousands of dollars in taxes and thousands of dollars of payments that I’ve tendered to Browns, I’ve also paid thousands of dollars in back utility bills, water bills, garbage bills, things that were sitting on the books when I took this over.

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The Plaintiff has not been damaged. In fact, if I wouldn’t have come into this thing they would have gotten stuck with two years of back taxes.

Against these facts, Browns could only argue that they did not want to do business with Powell. As found by the trial court, the equities clearly favor Powell’s position in this matter.

[¶ 20.] Based upon the foregoing evidence and principles of equity, we hold that the trial court was not clearly erroneous in finding that Browns were aware of the assignment of the contract for deed to Powell. Nor was it clearly erroneous in finding that Browns accepted payments on the contract from Powell with knowledge of the assignment and that they thereby waived enforcement of the contract’s non-assignability clause.

[¶ 21.] Affirmed.

[¶ 22.] SABERS and KONENKAMP, Justices, concur. [¶ 23.] GILBERTSON, Chief Justice, and GORS, Acting Justice, dissent.