Holiday Acres No. 3 v. MIDWEST FEDERAL S. & L.
| Decision Date | 27 November 1978 |
| Docket Number | No. 48200.,48200. |
| Citation | 271 NW 2d 445 |
| Parties | HOLIDAY ACRES NO. 3, Appellant, v. MIDWEST FEDERAL SAVINGS AND LOAN ASSOCIATION OF MINNEAPOLIS, Respondent. |
| Court | Minnesota Supreme Court |
Holmes, Kircher & Graven, Minneapolis, for appellant.
Hessian, McKasy & Soderberg and Thomas E. Harms and John A. Knapp, Minneapolis, for respondent.
Heard before YETKA, SCOTT and WAHL, JJ., and considered and decided by the court en banc.
Plaintiff partnership, Holiday Acres No. 3 ("Holiday Acres") appeals from the order and judgment of Dakota County District Court dismissing its declaratory judgment action for lack of an "actual justifiable controversy." We reverse, finding the important issue presented by the Holiday Acres' complaint to be capable of resolution on the existing facts. Accordingly, the case is remanded for thorough consideration of the issue raised by the complaint.
Holiday Acres and the defendant Midwest Federal Savings and Loan Association of Minneapolis ("Midwest Federal") are parties to a 1969 mortgage agreement on an apartment complex. The mortgage deed contains a standard acceleration clause, commonly referred to as a "due-on-sale" clause:
"In the event that the mortgagors convey the title, (legal, equitable or both) to all or any portion of said premises or in the event that such title becomes vested in a person other than the mortgagors in any manner whatsoever except under the power of eminent domain, then in any such case the entire unpaid principal of the note secured hereby with all accrued interest thereon shall, at the option of the mortgagee at any time thereafter, become immediately due and payable without notice."
On January 26, 1976, the Holiday Acres entered into an earnest money contract to sell the property to a third-party purchaser. The contract provided that either party could terminate if Midwest Federal did not provide an acceptable consent to the sale. Midwest Federal was advised of the terms of the prospective purchase and, in turn, notified Holiday Acres that it would require the purchaser to refinance, at a higher interest rate, callable after 10 years. This was unacceptable to the purchaser, who terminated the purchase agreement on April 15, 1976.
On September 1, 1976, Holiday Acres sued Midwest Federal, requesting declaratory judgment invalidating the due-on-sale clause as "an unlawful restraint on the alienation of property." Holiday Acres moved for summary judgment on June 8, 1977, upon which motion the district court ordered the action dismissed for want of a justiciable controversy.
The single and important issue for our determination is whether the facts alleged in the complaint in this case present a justiciable controversy under the Uniform Declaratory Judgment Act, Minn.St. 555.01, et seq.
Since the issue presented is one of justiciability, we need not reach the merits of the underlying controversy at this time.1 Holiday Acres contends that a declaratory determination is appropriate in that the issue is narrow, the parties adverse and fully represented. The Uniform Declaratory Judgment Act, Minn.St. 555.01, et seq., is designed to settle uncertainties prior to full-blown development. To require an actual consummated or conditional sale is unnecessary, they urge, as well as being unfair to plaintiffs and unrealistic in today's real estate market.
Midwest Federal counters that not only is the controversy contingent on actual sale and acceleration, but judicial analysis of the reasonableness or conscionability of the exercise of the clause, the lender's claim of an impairment of security, and the effect on real estate sales will all depend upon the existence and characteristics of a purchaser and a transaction. The interests of purchasers, real or prospective, are nowhere represented in this litigation. Finally, they argue, this case represents an unwarranted extension of declaratory judgment actions to hypothetical facts, would not finally settle the controversy (if a rule or reasonableness, etc. were adopted), and is unnecessary in view of alternative actions available.
The concept of justiciability comprehends the fundamental requirements for judicial action. As we stated in Seiz v. Citizens Pure Ice Co., 207 Minn. 277, 281, 290 N.W. 802, 804 (1940):
"* * * The controversy must be justiciable in the sense that it involves definite and concrete assertions of right and the contest thereof touching the legal relations of parties having adverse interests in the matter with respect to which the declaration is sought, and must admit of specific relief by a decree or judgment of a specific character as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. * * *"
There is, however, a notable tension between the "present controversy" required for justiciability and the latitude permitted under our declaratory judgment provisions, Minn.St. 555.01, et seq.2
Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826, 828-29 (1941).
The required immediacy or imminence is not subject to any mechanical test. In Harrington v. Fairchild, 235 Minn. 437, 51 N.W.2d 71 (1952), seller/creditor had sued for a declaration of the validity of a contract for the sale of a business and his rights thereunder. Although the defendant had not yet defaulted on the monthly payments, his words and actions left little doubt that a repudiation had occurred. Accordingly, we affirmed the order of the trial court, overruling defendant's demurrer on the ground that the complaint stated a proper case for declaratory relief. Similarly, in Minneapolis Fed. of Men Teachers v. Bd. of Education, 238 Minn. 154, 56 N.W.2d 203 (1952), we recognized that, in a proper case, the "ripening seeds of an actual controversy" would support declaratory resolutions of an impending contract dispute despite the unavailability of legal relief.3
The issue in the instant case is significant and well-defined by the parties. One attempted conveyance has already been frustrated by the dispute over the due-on-sale clause. To require a second transaction, frozen in factual context for full judicial determination, would be unwarranted and unrealistic in today's real estate market. As Holiday Acres pointed out, prospective purchasers wish to buy real estate, not lawsuits. Even pronouncement of a rule of reasonableness, for example, upholding acceleration clauses where reasonably related to continued security, would provide the parties with a commercial and legal framework for subsequent decisions.
Other jurisdictions have consistently found that challenges to...
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