Follingstad v. Syverson
| Decision Date | 26 September 1924 |
| Docket Number | 24,058 |
| Citation | 200 N.W. 90,160 Minn. 307 |
| Parties | HENRY A. FOLLINGSTAD v. MARTIN O. SYVERSON AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Goodhue county to recover $10,000 for fraudulent representations. Defendants having served statutory notice of cancelation of land contract, plaintiff procured an injunction pendente lite. From the order granting the writ, Johnson, J., defendants appeal. Remanded with instructions to modify the order.
Statutory notice to cancel land contract -- equitable relief of vendee.
Where pending an action by a vendee of real estate in possession to recover damages from the vendor for alleged fraud inducing the contract and to have them applied in reduction of the unpaid portion of the purchase price, the vendor serves the statutory notice of cancelation of the contract, equity cannot vacate, pendente lite and by a temporary injunction, the service of the notice. But, temporarily and pending the action for fraud, it may enjoin the vendor from recording proof of the cancelation or taking any step to oust the vendee from possession.
Thomas Mohn, for appellants.
A. J. Rockne, for respondent.
Action for damages for alleged fraud inducing a land contract which evidenced the purchase on April 19, 1920, by plaintiff from defendants, of 50 acres of Goodhue county farm land for $23,000 ($460 per acre), of which $13,000 has been paid. The balance of $10,000 fell due in 1922 and has not been paid. Plaintiff has been in possession of the premises under the contract since it was executed, and now sues defendants for damages because of alleged fraudulent representations. He claims that he has been damaged in the sum of $10,000, which he asks to have offset against the unpaid purchase price.
After the action was started, defendants served notice of cancelation under the statute, section 8081, G.S. 1913. The default complained of was the nonpayment of the $10,000 which fell due on March 1, 1922, the payment of which, with interest during the 30 day period, would have reinstated the contract. Thereupon, plaintiff applied for and procured a temporary injunction restraining defendants "from proceeding further with the cancelation" and directing that it be "suspended" until the determination of this action on the merits. From the order granting the writ, this appeal is taken.
We have nothing to do with the alleged fraud perpetrated by the defendants upon plaintiff, except to recognize that the issue is pending and for determination. The injunction is but ancillary, and by the appeal there is presented, in substance, this one question: To what extent may equity interfere by injunction with the action and the rights of a vendor after he has served the statutory notice of cancelation upon a vendee, in possession, who claims that the balance of the purchase price is unliquidated because of undetermined damages resulting from the vendor's fraud inducing the contract, which he asks to have applied in reduction of the purchase price?
The statute is permissive and to the effect that a vendor may terminate a land contract on default of the vendee. In his notice, the vendor must specify the conditions of default which give him the right to terminate. It is questionable whether that right exists if the amount remaining due is unliquidated and there is a bona fide dispute as to its amount. Pending good faith efforts to settle that question by litigation, it ought to be the law, if it is not, that a vendor has no right arbitrarily to cancel. Particularly is that true in a case where the vendee is ready to pay the balance of the purchase price as soon as its amount is determined.
The statute now has a background of judicial application for our guidance. In a proper case, in order to prevent irreparable injury to the vendee, injunction lies to restrain the service of the statutory notice of cancelation. Freeman v. Fehr, 132 Minn. 384, 157 N.W. 587. After service of the notice a different problem is presented and in Nolan v. Greeley, 150 Minn. 441, 185 N.W. 647, it was held that, after the service of the notice, "the vendee cannot have a temporary injunction vacating the service or suspending the effect of the notice." The supporting argument was that the statute provided a strict method of foreclosing the interest of the vendee; the service of the notice was a "fact accomplished" and started the 30-day period for performance fixed by the statute; the effect of service of the notice was statutory and of legal right, and therefore not to be vacated nor its benefit taken from the vendor by judicial action. It was not held that further proceedings under the notice, such as recording proof of cancelation and proceedings to oust the vendee from his possession, cannot be enjoined pending an action, such as we have here, to ascertain whether in fact the vendor had the right to cancel -- whether there existed a default on the part of the vendee, for, if there was no default, or a default other than the one specified in the notice of cancelation, the latter was without effect.
In International R. & S. Corp. v. Vanderpoel, 127 Minn. 89, 148 N.W. 895, it was pointed out that damages for fraud inducing the purchase of real estate cannot be applied upon the price unless the vendee so elects. They cannot go in reduction of payment until that election has been made. It follows from that, and this was the point of the decision, that, where the vendor has served the notice of cancelation and the time for payment thereunder has expired, the vendee cannot reinstate the contract by electing thereafter to apply his damages in reduction of the unpaid purchase price. The plaintiff here is not affected by that rule because he made his election and commenced this action to enforce it before the notice of cancelation was served.
Another case important in this connection is Olson v. Northern Pac. Ry. Co. 126 Minn. 229, 148 N.W. 67, L.R.A. 1915F, 962, where it was held that, although a contract for the sale of land may be induced by fraud of the vendor, the vendee cannot recover damages, after a statutory cancelation, even to the extent of the purchase price actually paid. Under that rule, probably the plaintiff vendee will have no remedy left, unless cancelation can be stayed or an equivalent status in some manner procured pending the decision of his action for fraud.
Plaintiff has affirmed his contract and asks to have his damages applied on the purchase price. Must plaintiff pay $10,000 and interest to defendants as a condition precedent to his maintenance of an action to determine his claim, which he has a legal right to assert without undue hindrance or penalty, that he does not owe that much? If he has in fact been damaged, he has a legal right to the offset. But, under the rule in the Olson case, that right will have some difficulty surviving a statutory cancelation. Apparently, if it is to be protected from destruction by the arbitrary ex parte act of the vendor, the effect of the latter must be stayed pending the action to determine whether plaintiff has been damaged, and, if so, how much.
In Olson v. Northern Pac. Ry. Co. supra, it was said that plaintiff's claim depended upon the continued existence of the contract; that, the contract being cancelled, "there is no basis upon which to compute damages." If that is the law (which personally I doubt), then in this case, if, pending plaintiff's action for fraud, defendants are permitted to cancel, the former can have no damages, for there will be no basis for their computation and no contract to which they will be referable.
This differs from the Olson case in that here the vendee is in possession, has made substantial part, and appears in readiness to make complete, performance -- insisting,...
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