Hofeldt v. Mehling, 22380.

• Decision Date: 05 March 2003
• Docket Number: No. 22380.,22380.
• Citation: 2003 SD 25,658 N.W.2d 783
• Parties: Douglas HOFELDT, Plaintiff and Appellant, v. Roy MEHLING, Defendant and Appellee.
• Court: South Dakota Supreme Court

658 N.W.2d 783

2003 SD 25

Douglas HOFELDT, Plaintiff and Appellant, v. Roy MEHLING, Defendant and Appellee.

No. 22380.

Supreme Court of South Dakota.

Considered on Briefs January 13, 2003.

Decided March 5, 2003.

Timothy R. Whalen, Lake Andes, South Dakota, Attorney for plaintiff and appellant.

Kent R. Cutler, Kimberly R. Wassink of Cutler & Donahoe, Sioux Falls, South Dakota, Attorneys for defendant and appellee.

KONENKAMP, Justice.

[¶ 1.] In a land sale, after the buyer made the required down payment, the seller failed, in violation of the contract, to deliver clear title for nearly five years. During this time, the buyer was permitted to farm the land and obtain subsidy payments for it. He paid no rent and kept all the subsidies. When the seller finally delivered clear title and the sale closed, the seller sued the buyer to obtain rent and subsidies, claiming that the buyer had been unjustly enriched. The circuit court ruled that the buyer had not been unjustly enriched because he only received what he would have been entitled to had the seller delivered title promptly in accord with the contract. Because we find no abuse of discretion, we affirm.

Background

[¶ 2.] In 1972, Roy Mehling began leasing agricultural property in Hand County from Douglas Hofeldt's aunt. Under their arrangement, Mehling retained two-thirds of the proceeds from his crops and paid the remaining one-third as rent. Each year Mehling paid the rent following the harvest. After the aunt passed away, Hofeldt inherited the property. He continued the lease arrangement. In March 1995, the parties canceled their lease and entered a contract for deed.

[¶ 3.] Under the terms of the contract, the purchase price for the land was $91,200, with $3,000 as a down payment, and the remainder was due within thirty days or upon Hofeldt's delivery of a warranty deed. In addition, the contract provided for no interest and the buyer was to have possession of the property, along with any rent, issues, and profits from the date of final payment. The seller was required to promptly cure any title defects and provide title to the property clear of all encumbrances. Mehling paid the down payment and secured financing for the remaining amount.

[¶ 4.] Shortly thereafter, the abstract revealed that title to the property was encumbered by an IRS lien. Mehling immediately notified Hofeldt of the lien and Hofeldt assured Mehling that he would promptly resolve the matter. After a month had passed, Mehling offered to modify the contract to provide for installment payments rather than a lump-sum payment. Hofeldt declined. He wanted to resolve the matter so that the sale could be closed.

[¶ 5.] Mehling soon discovered that, without title to the land, he was unable to enroll the property in federal farm programs. He sought and obtained written authorization from Hofeldt that allowed him to enroll the property in the Farm Service Agency (FSA) program. Thus, with Hofeldt's knowledge and assistance, Mehling continued to possess and farm the land and retain the profits from the property.

[¶ 6.] Over the years, from 1995 to 1999, Hofeldt and Mehling had several phone conversations in which they discussed Hofeldt's progress in clearing the title. During their discussions, both continued to express their desire to close the deal. Mehling's lender was not pleased about holding the loan open for him. Mehling claims to have lost opportunities to purchase other properties while this matter was pending. Hofeldt regularly reassured Mehling that he would promptly resolve the situation and see that the lien was removed. At no time during these discussions, however, did Hofeldt ever mention the payment of rent. Hofeldt and Mehling did discuss real estate taxes. Although the contract provided that Mehling was to pay the property taxes, Hofeldt agreed to pay them until they were able to close. Mehling later tendered reimbursement for those taxes.

[¶ 7.] Hofeldt said he had two attorneys and one accountant working on the Internal Revenue Service lien, but progress was slow.¹ Unknown to Hofeldt, the lien was removed in January 1997. Notice that the lien had been released was mailed to Hofeldt and his Nebraska attorney, however, Hofeldt had moved to another address and his legal counsel failed to advise him on this matter. Finally in October 1999, Hofeldt and his South Dakota lawyer discovered that the lien had been removed. Now that Hofeldt was able to provide Mehling with a warranty deed, they made arrangements to close on the contract for deed.

[¶ 8.] After the transaction closed, Hofeldt sued Mehling for unpaid rent and reimbursement of subsidies for the years 1995 through 1999. Mehling asserted several affirmative defenses to these claims, including waiver, estoppel, laches, and possession. The circuit court granted judgment for Mehling. Hofeldt appeals on the following issues: (1) "Whether the trial court erred in holding in favor of Mehling in light of the express terms of the contract for deed." (2) "Whether Hofeldt was entitled to recover from Mehling rents and other damages on the theory of unjust enrichment."

Analysis and Decision

[¶ 9.] A trial court's findings of fact will not be set aside unless they are clearly erroneous. SDCL 15-6-52(a). We will declare a finding of fact clearly erroneous only if we are definitely and firmly convinced that a mistake has been made. First Nat'l Bank in Brookings v. Kuechenmeister, 2002 SD 9, ¶ 12, 639 N.W.2d 184, 187 (citing Lewis v. Moorhead, 522 N.W.2d 1, 3 (S.D.1994)). We review the trial court's conclusions of law de novo. Carstensen Contracting, Inc. v. Mid-Dakota Rural Water System, Inc., 2002 SD 136, ¶ 8, 653 N.W.2d 875, 877 n. 2. Unjust enrichment is an equitable concept. Our standard of review for cases in equity is abuse of discretion. Kuechenmeister, 2002 SD 9 at ¶ 12, 639 N.W.2d at 187 (citing Mattson v. Rachetto, 1999 SD 51, ¶ 9, 591 N.W.2d 814, 817). An abuse of discretion occurs only if no judicial mind, in view of the law and the circumstances of the particular case, could reasonably have reached such a conclusion. Mattson, 1999 SD 51 at ¶ 9, 591 N.W.2d at 817 (citations omitted).

1. Parol Evidence Rule

[¶ 10.] Hofeldt contends that the trial court violated the parol evidence rule when it considered the parties' discussions and conduct following the execution of their unambiguous contract for deed. Although we agree with Hofeldt that the contract for deed is unambiguous, the parol evidence rule is inapplicable here.

[¶ 11.] The parol evidence rule bars extrinsic evidence of prior negotiations offered to contradict or supplement a written contract. E. Allan Farnsworth, Farnsworth on Contracts § 7.2, at 209-10 (2d ed 1998). It is a rule of substantive law, not of evidence. Auto-Owners Ins. Co. v. Hansen Housing, Inc., 2000 SD 13, ¶ 14, 604 N.W.2d 504, 510 (citations omitted). Codified in SDCL 53-8-5, the rule provides that "[t]he execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument." (Emphasis added.) By its express statutory language, the rule does not apply to conduct and statements taking place after a contract has been executed. Thus, evidence of negotiations occurring after a written agreement will not be excluded by the parol evidence rule. See Farnsworth, supra, § 7.3, § 7.6, at 228 (2d ed 1998). Indeed, contractual rights and remedies may be modified or waived by subsequent conduct. Moe v. John Deere Co., 516 N.W.2d 332, 335 (S.D.1994). Therefore, the trial court did not violate the parol evidence rule when it considered the events occurring after the contract for deed was executed.

[¶ 12.] The express terms of the contract for deed did not require Mehling to pay rent to Hofeldt while the sale was pending. Although Hofeldt argues that the contract term providing that "[t]he Buyer [Mehling] shall have possession of said property and the rents, issue and profits thereof from the date of the final payment on this contract," obligates Mehling for the rent until the final payment, a plain reading of the contract simply does not require Mehling to pay Hofeldt rent. In addition, Mehling received a cancellation of their 1994-1995 lease agreement before executing the contract for deed. At no time during the almost five-year pendency of the contract did Hofeldt ever demand rent from Mehling. When Mehling contacted Hofeldt in the spring of 1995 to offer to convert the contract into an installment arrangement, Hofeldt never mentioned the issue of rent. Before the execution of the contract for deed, Mehling had always paid his rent immediately following the harvest, yet Hofeldt never inquired about the rent after each year's harvest. Hofeldt knew that Mehling was occupying and farming the property.

[¶ 13.] Hofeldt seeks a portion of the subsidies Mehling received during the years before the sale closed. He assisted Mehling in getting the FSA payments by completing an authorization form allowing him to do so. Hofeldt never suggested that he should share in a portion of these payments. Nor was there any mention of sharing payments in the authorization agreement Hofeldt signed. Hofeldt never told Mehling that he expected a share of the FSA payments at any time during their several conversations over the years. Under these circumstances, an obligation to pay rent and to reimburse FSA payments cannot reasonably be implied. Thus, we see no error in the trial court's ruling that Mehling was not contractually obligated to pay rent or reimburse subsidies.

2. Unjust Enrichment

[¶ 14.] Hofeldt contends that Mehling was unjustly enriched in receiving the subsidies and in failing to pay rent. Because unjust enrichment is an equitable remedy, a court has discretion to grant or deny it. Adrian v. McKinnie, 2002 SD 10, ¶ 9, 639 N.W.2d 529, 533 (citing ...