Kallstrom v. Marshall Beverages, Inc., s. 15279

• Decision Date: 17 December 1986
• Docket Number: Nos. 15279,15284,s. 15279
• Citation: 397 N.W.2d 647
• Parties: Alice KALLSTROM and Ronald Kallstrom, Plaintiffs and Appellees, v. MARSHALL BEVERAGES, INC. and Robert B. Marx, Defendants and Appellants.
• Court: South Dakota Supreme Court

Page 647

397 N.W.2d 647

Alice KALLSTROM and Ronald Kallstrom, Plaintiffs and Appellees, v. MARSHALL BEVERAGES, INC. and Robert B. Marx, Defendants and Appellants.

Nos. 15279, 15284.

Supreme Court of South Dakota.

Argued Oct. 22, 1986.

Decided Dec. 17, 1986.

Karen Gangle, Sisseton, for plaintiffs and appellees.

Danny R. Smeins of A. William Spirey Law Office, Britton, for defendants and appellants.

WUEST, Chief Justice.

Appellants appeal from an amended judgment of specific performance in favor of the appellees which ordered the appellants, as buyers, to make obligated payments under a contract for the sale of real estate. Affirmed in part, reversed in part, and remanded to the trial court.

Appellees, Ronald and Alice Kallstrom (Kallstroms) were owners and operators of K & K Resort on the west side of Lake Traverse in Roberts County, South Dakota. Appellant Robert B. Marx (Marx), an officer of appellant Marshall Beverages, Inc. (Marshall Beverages), approached Kallstroms about selling their regular liquor license, Sunday liquor license, and beer license to Marshall Beverages. Marx wanted the liquor licenses for his own place of business, because under state law, the County Commissioners could only issue seven liquor licenses in Roberts county. Since seven were already issued, Marx needed to acquire an existing license and have the Commissioners approve its transfer to his business. Kallstroms would not agree to a sale of the licenses only but did indicate their willingness to sell the entire business, including liquor licenses, real estate, and certain personal property.

Prior to execution of any purchase agreement the Kallstroms showed Marx the boundaries to the resort property. They also provided Marx with a 1983 property tax receipt to help Marx in preparing a purchase agreement. Although the receipt contained a legal description of the property, it did not actually indicate the number of acres involved. The Kallstroms did not know how many acres were included in the property and so advised Marx, who indicated that he could discover that information at the courthouse. Marx prepared a purchase agreement which gave a legal description of the property and listed the parcel as 4.9 acres. Marx has never explained where he obtained the 4.9 acre figure, which later proved to be incorrect.

The purchase agreement was executed on May 24, 1984, in which Kallstroms agreed to sell and Marshall Beverages agreed to buy the property known as K & K resort, including real estate, cabins, itemized equipment, and related liquor licenses. The purchase price was $30,000, with $1,500 payable upon execution of the contract, $13,500 upon transfer approval of the liquor licenses and delivery of a warranty deed, and a promissory note for $15,000, including interest, to be paid in fifty-nine monthly installments of $250 and a final balloon payment of $5,574.95. The promissory note was secured by the personal property by separate contract. The contract further included a cancellation or windup clause which provided for the buyer's right to cancel the agreement and demand the sellers return the earnest money as adjusted by any used fair rental value of the property upon the sellers failure to provide a warranty deed, title insurance, abstracts of title, or transfer of the liquor licenses. Appellants took immediate possession of the property.

On August 14, 1984, the Roberts County Board of Commissioners (Commissioners) approved the transfer of the plaintiffs' regular liquor license to the defendants. Sometime before August 14 the appellants discovered the K & K Resort property only amounted to three acres and not the 4.9 acres provided in the contract when Kallstrom's bank furnished an abstract of the property directly to the appellants which stated the acreage to be 3 acres. Later, on August 17, rather than advise the Kallstroms of this error, or attempt to call off the agreement, the appellants pursued closing, tendered $13,500, and accepted a warranty deed from the Kallstroms with the proper legal description without any statement as to acreage. This deed and the closing papers were prepared by appellant. At the same time, they delivered their note for $15,000, secured by the personal property, for the balance of the purchase price. Subsequently, the Commissioners notified the appellants on August 28 that approval of the Sunday liquor license would require their operation evidence that 50% of gross sales were derived from the sale of food for a period of at least 90 days. Since the appellant intended to use the license at another location which had not yet begun operations, he was unable to meet those requirements.

On November 1, 1984, appellants notified Kallstroms they were cancelling the contract under the windup clause because the Kallstroms did not deliver a full 4.9 acres of real property and because transfer of the Sunday liquor license had not been accomplished. On December 18, 1984, the Kallstroms commenced an action against appellants seeking specific performance of the purchase agreement, or in the alternative money damages. The appellants counterclaimed for rescission and in the alternative, damages for breach of the purchase agreement.

Following a July 8, 1985 trial on the issue of specific performance, the trial court ruled that until appellants submitted a proper application for the Sunday liquor license to the Commissioners, the request for specific performance was not ripe for decision. Thereafter, the proper request was filed, and appellants received the Sunday license on July 23, 1985. Kallstroms renewed their request for specific performance which was granted. This appeal followed.

Kallstroms claim the appellants failed to properly perfect...