Heinzman v. Howard

• Decision Date: 18 June 1984
• Docket Number: No. 14225,14225
• Citation: 348 N.W.2d 147
• Parties: Robert E. HEINZMAN, Plaintiff and Appellant, v. John Freeman HOWARD and Mary Jean Howard, husband and wife, and the State Bank of Alcester, a corporation, Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 147

348 N.W.2d 147

Robert E. HEINZMAN, Plaintiff and Appellant, v. John Freeman HOWARD and Mary Jean Howard, husband and wife and the State Bank of Alcester, a corporation Defendants and Appellees.

No. 14225.

Supreme Court of South Dakota.

Argued March 21, 1984.

Decided May 9, 1984.

Rehearing Denied June 18, 1984.

Michael J. McGill, Beresford, for plaintiff and appellant.

Charles B. Haugland of Beck, Gubbrud & Haugland, Alcester, for defendants and appellees.

FOSHEIM, Chief Justice.

This is an action by Robert E. Heinzman (vendor) to foreclose a contract for deed against John Freeman Howard and Mary Jean Howard (vendees) and to set aside as fraudulent their quitclaim conveyance to the State Bank of Alcester (bank). The trial court ruled that it was immaterial whether the conveyance was fraudulent because the transfer did not obstruct any rights of the vendor under the contract for deed. The court further concluded the vendor could not rescind the contract because he failed to act promptly to enforce his contractual rights. We affirm the circuit court on all issues, modifying, however, its distribution of insurance proceeds from a fire on the property.

The contract for deed was entered on May 16, 1978, for the sale of 13 acres of Union County land. It required the vendees to pay the real estate taxes beginning June 1, 1978, and to insure the buildings for a sum equal to, or greater than, the unpaid balance. It allowed a fifteen day grace period for delinquent monthly payments. A default clause gave the vendor power to cancel the contract upon thirty days notice in case the vendees failed to make any payments or perform any of the covenants.

During the life of the contract, several payments were late. As of July 21, 1981, the vendees failed to make four payments. They did not pay the 1979 real estate taxes. In August 1981 the vendor received and deposited three checks representing late payments for June, July and August 1981. In September 1981 the vendees vacated the premises without notice to the vendor. ¹ The vendor's uncle, Fred Heinzman, who lived nearby, concluded in early October that the premises had been abandoned and so informed the vendor; about a month later, the vendor returned from Texas. He padlocked the gate, locked the house, and procured a restraining order to prevent entry by the vendees.

On November 5, 1981, the vendees quitclaimed all their interest in the real estate to the bank. On November 17, 1981 the vendor mailed to the vendees a notice of default on the contract for deed stating his intention to terminate the contract. The vendor did not then know of the quitclaim deed which was filed on December 1, 1981.

On December 31, 1981, the vendor commenced a foreclosure action against the vendees and the bank. He later amended the complaint to add a cause of action to set aside the conveyance for fraud. The vendor claimed the conveyance was fraudulent because it attempted to hinder him from reclaiming the property. The trial court held that the assignment to the bank should not be set aside as a fraudulent conveyance since the bank took the assignment subject to the terms and conditions of the contract.

SDCL 54-8-3 provides: "A creditor can avoid the act or obligation of his debtor for fraud, only where the fraud obstructs the enforcement, by legal process, of his right to take the property affected by the transfer or obligation." Regardless of the motive behind the deed it could not affect the right of the vendor to foreclose the contract with the original vendees or their assigns. In Orr v. Allen, 73 S.D. 547, 552, 45 N.W.2d 737, 739 (1951), we said: "it is well settled that the assignee of a land contract takes it subject to all equities and defenses existing while it is in the hands of the assignor." This is consistent with authorities generally:

Under the general rule that an assignee of a nonnegotiable chose in action ordinarily acquires no greater right than was possessed by his assignor, and takes subject to all equities and defenses which could have been set up against the chose in action in the hands of the assignor at the time of the assignment, it is held that an assignee of a purchaser of real estate takes subject to all the rights of the vendor under the original contract of sale, including all defenses thereto available to the vendor.

77 Am.Jur.2d Vendor and Purchaser Sec. 389 (1975). The trial court correctly concluded that the allegations of fraud were therefore irrelevant and that a valid, assigned contract for deed existed.

Vendor's second claimed error concerns the trial court's determination that when the vendor accepted late payments without objection he waived the contract clause which provided "time of payment and performance shall be an essential part of this contract." It is settled law that estoppel may apply where late payments are accepted more than once without objection. 77 Am.Jur.2d Vendor and Purchaser Secs. 586, 589 (1975); see Pier v. Lee, 14 S.D. 600, 86 N.W. 642 (1901). In the early South Dakota case of Keator v. Ferguson, 20 S.D. 473, 477, 107 N.W. 678, 679 (1906), the vendor of real property similarly permitted late payments without objection. We concluded:

It seems eminently just and equitable that a party who has neglected to enforce the provisions of his contract providing that time shall be of the essence of the contract at the time the default is made, and accepts performance of the terms thereafter should not be allowed upon a subsequent default to enforce the provision...