Karim v. Werner, C5-81-1123.

• Citation: 333 NW 2d 877
• Decision Date: 27 May 1983
• Docket Number: No. C5-81-1123.,C5-81-1123.
• Parties: Haroon KARIM, et al., Appellants, v. Richard G. WERNER, et al., Respondents.
• Court: Minnesota Supreme Court

333 N.W.2d 877 (1983)

Haroon KARIM, et al., Appellants, v. Richard G. WERNER, et al., Respondents.

No. C5-81-1123.

Supreme Court of Minnesota.

May 27, 1983.

Thomas E. Sanner and Terence J. McCloskey, Johnson, Sands, Lizee, Fricker & McCloskey, Minneapolis, for appellants.

Jerrold M. Hartke, Hartke, Atkins & Montpettit, So. St. Paul, for respondents.

Considered and decided by the court en banc without oral argument.

PETERSON, Justice.

Haroon and Latiefa Karim (plaintiffs) appeal from an order for judgment adjudging plaintiffs in breach of a contract for deed (C/D-1) with Richard and Kathleen Werner (defendants). Plaintiffs are vendees in the contract for deed; defendants are vendors. We affirm.

In 1975, plaintiffs purchased commercial investment property (known as Newport Plaza) on a contract for deed basis from Wil-Mur Enterprises, Inc. (Wil-Mur). Wil-Mur assigned its vendor's interest to defendant. Both plaintiffs and defendants were experienced and sophisticated in real estate investment.

In April 1978, plaintiffs sold Newport Plaza to Jeffrey Dziuk by a separate contract for deed (C/D-2). Plaintiffs obtained no consent from defendants for the sale and continued payments on the original contract for deed, C/D-1. Dziuk notified defendants of the sale in July 1978, and took over the existing leases on the property. Defendants served plaintiffs with a cancellation notice on March 1, 1979, citing the breach of the "due-on-sale" clause of C/D-1 as cause for the notice. Plaintiffs responded with the present action, seeking to enjoin defendants from proceeding with cancellation. The trial court determined that the cancellation notice was effective, and that the due-on-sale clause had been breached.

Plaintiffs initially concede that the due-on-sale clause does not work an unreasonable restraint on alienation of property. This view comports with Holiday Acres No. 3 v. Midwest Federal Savings & Loan Ass'n of Minneapolis, 308 N.W.2d 471 (Minn. 1981),¹ where we held that a due-on-sale clause contained in a mortgage agreement did not constitute an unlawful restraint upon the alienation of the residential investment property at issue. Since the property at issue in the present case is commercial investment property and no inequities were proved in the bargaining process leading to the contract for deed, we have no difficulty in enforcing the due-on-sale clause, if the transaction under review falls within its ambit.

To analyze the due-on-sale clause of C/D-1, we begin with the language of the clause:

Parties of the second part plaintiffs shall not transfer, sell or assign their interest in the Contract for Deed to be executed between the parties without prior written consent of party of the first part defendants. Any transfer in violation of this provision shall be cause for immediate acceleration of the then remaining balance.

Plaintiffs essentially argue that — for the clause to be enforceable — they would have had to sell their entire interest in the contract for deed, that is, to sell the contract. Plaintiffs did not sell, assign, or transfer C/D-1 to Dziuk; rather, they entered into a new contract for deed, C/D-2, with Dziuk, a contract containing different terms and obligations than those contained in C/D-1 entered into between plaintiffs and defendants. Plaintiffs kept C/D-1, continuing payments and retaining certain obligations. They suggest the transaction does not invoke the clause.

We do not read the due-on-sale clause so strictly, recognizing that an interest in a piece of real estate is a "bundle of rights we know as property." Holiday Acres No. 3,...