Kimball Investment Land, Ltd. v. Chmela, 21035.

• Citation: 2000 SD 6,604 N.W.2d 289
• Decision Date: 12 January 2000
• Docket Number: No. 21035.,21035.
• Parties: KIMBALL INVESTMENT LAND, LTD., Plaintiff and Appellee, v. Marvin CHMELA and Joann Chmela, Defendants and Appellants.
• Court: Supreme Court of South Dakota

604 N.W.2d 289

2000 SD 6

KIMBALL INVESTMENT LAND, LTD., Plaintiff and Appellee, v. Marvin CHMELA and Joann Chmela, Defendants and Appellants.

No. 21035.

Supreme Court of South Dakota.

Argued December 1, 1999.

Decided January 12, 2000.

John F. Cogley of Morgan, Theeler, Cogley & Petersen, Mitchell, South Dakota, Attorneys for plaintiff and appellee.

Wally Eklund of Johnson, Eklund, Nicholson, Peterson & Fox, Gregory, South Dakota, Attorneys for defendants and appellants.

GILBERTSON, Justice.

[¶ 1.] Defendants Marvin and Joann Chmela (Chmelas) appeal the circuit court's order granting the motion of Plaintiff Kimball Investment Land, Ltd. (Kimball) for summary judgment on Kimball's claim to foreclose two mortgages executed between the Chmelas and Kimball's predecessors. Chmelas also appeal the circuit court's award of Kimball's attorney's fees. We affirm.

FACTS AND PROCEDURE

[¶ 2.] The Chmelas reside on farmland in Brule County, South Dakota. Marvin has farmed this land for the past 35 years. In 1974, Chmelas became acquainted with a group of hunters (hunters) from Arkansas. Hunters included Johnny Prislovsky (Prislovsky) and W.C. "Dub" Grizzle (Grizzle). Prislovsky and Grizzle were at all times acting on behalf of hunters. From 1974 to 1986 hunters used Chmelas' land on a "friendship" basis, paying Chmelas no compensation for hunting the land.

[¶ 3.] After the 1986 hunt, Marvin commented to Prislovsky he probably would not see them next year because the bank was going to foreclose on his land. Subsequently, Prislovsky and Grizzle agreed to loan money to Chmelas in return for exclusive hunting rights on the land. On February 3, 1987, Chmelas executed a loan agreement in which Prislovsky and Grizzle agreed to loan Chmelas $68,400. Hunters were given exclusive hunting rights on the land until Chmelas paid the indebtedness on the note, with a provision that if Chmelas prepaid, hunters would have two years of hunting rights after prepayment. This loan was evidenced by a promissory note dated February 3, 1987, which stated Chmelas' debt was to be secured by two mortgages on various tracts of Chmelas' farmland located in Brule County.¹ The mortgages were properly recorded with the Brule County Register of Deeds. The promissory note, with a principal balance of $68,400, called for interest-only payments at five percent per annum for the first two years. Thereafter, the principal amount together with interest at ten percent per annum was to be amortized in annual payments over a period of 25 years. The note further provided each installment of the principal and interest not paid when due would bear interest at ten percent per annum.

[¶ 4.] The relationship between Chmelas and hunters continued, with hunters using the land as provided in the loan agreement. Chmelas however failed to make most of the payments required by the 1987 loan agreement. Chmelas made the five percent interest-only payments due in 1988 and 1989, and paid $4,000 of the $7,535.50 payment due February 1, 1990. They were also given a credit of $3,200 in 1991 for pasture rent and raising pheasants. However, as of February 1, 1998, $68,400 of the principal and $76,047.80 in accrued interest (for a total of $144,447.80) was due on the note. In 1993 at their annual meeting, the hunters discussed the fact Chmelas were making no payments. Hunters asked Chmelas for an option to purchase the land and three additional years of hunting rights in the event Chmelas sold the land or prepaid the total debt. Chmelas accepted this proposal. By April 29, 1994, the new loan agreement (agreement) had been drafted by Cogley and signed by Chmelas, Prislovsky and Grizzle.

[¶ 5.] Each year from 1988 through 1997, Grizzle sent Chmelas a statement reflecting the amount due on the note for that year, and Chmelas never disputed the amount shown on the statement. Chmelas acknowledged receiving at least four or five of the annual statements including one in 1996. In 1995, 1996 and 1997, Chmelas discussed with hunters the fact they did not have the money to pay the annual installment due on the loan.

[¶ 6.] In early 1998, Prislovsky and Grizzle executed a written instrument transferring their interest in the promissory note, mortgages and the agreement to Kimball. Kimball commenced an action in Brule County Circuit Court, seeking to foreclose on the two mortgages securing the promissory note. Chmelas filed an answer and counterclaim, seeking declaratory relief under the agreement. Both parties filed motions for summary judgment. The circuit court granted Kimball's motion for summary judgment. As part of the judgment, the circuit court also awarded $6,093.12 in attorney's fees to Kimball. Chmelas appeal, raising the following issues for our consideration:

1. Did the circuit court err when it granted Kimball summary judgment on the promissory note and mortgages.

2. Did the circuit court err when it awarded Kimball its attorney's fees.

STANDARD OF REVIEW

[¶ 7.] Our standard of review for a circuit court's grant of a motion for summary judgment is well settled. As we recently stated in Mattson v. Rachetto:

Summary judgment is authorized "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law." SDCL 15-6-56(c). We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. Bego v. Gordon, 407 N.W.2d 801, 804 (S.D.1987). All reasonable inferences drawn from the facts must be viewed in favor of the non-moving party. Morgan v. Baldwin, 450 N.W.2d 783, 785 (S.D.1990). The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law. Wilson v. Great N. Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968).

1999 SD 51, ¶ 8, 591 N.W.2d 814, 816-17

(quoting Shuck v. Perkins County, 1998 SD 32, ¶ 6, 577 N.W.2d 584, 586). Cases involving the interpretation of written documents are particularly appropriate for disposition by summary judgment, such interpretation being a legal issue rather than a factual one. Dale v. Pelton, 365 N.W.2d 1, 3 (S.D.1985); Wilson, 157 N.W.2d at 21.

ANALYSIS AND DECISION

[¶ 8.] 1. Did the circuit court err when it granted Kimball summary judgment on the promissory note and mortgages.

[¶ 9.] Chmelas claim the 1994 agreement extinguished the debt owed to Kimball and satisfied the previous note and mortgages in return for giving hunters three additional years of hunting rights, an option to purchase and right of first refusal to sale of the land. In response, Kimball argues the clear language of the agreement reflects the sole intent of the parties was to amend the 1987 loan agreement to extend the hunting rights of hunters, give them an option to purchase and right of first refusal. Kimball claims the agreement had no effect upon the outstanding indebtedness due by Chmelas or on the mortgages serving as security for the debt. We agree with Kimball.

[¶ 10.] The construction of a written contract is a question of law. Cotton v. Manning, 1999 SD 128, ¶ 15, 600 N.W.2d 585, 588 (citing Campion v. Parkview Apartments, 1999 SD 10, ¶ 25, 588 N.W.2d 897, 902) (quoting Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871, 873 (S.D. 1995)).

The effects and terms of a contract are questions of law to be resolved by the court.... On appeal, this court can read a contract itself without a presumption in favor of the trial court's determination.... The court is to enforce and give effect to the unambiguous language and terms of the contract....

Campion, 1999 SD 10, ¶ 25, 588 N.W.2d at 902 (citing Production Credit Ass'n v. Wynne, 474 N.W.2d 735, 740 (S.D.1991) (quoting Baker v. Wilburn, 456 N.W.2d 304, 306 (S.D.1990) (citations omitted))).

[¶ 11.] The agreement acknowledges the prior documents between these parties consisted of a promissory note, two mortgages and loan agreement. In the next provision the agreement sets forth its purpose to "amend the said Loan Agreement in its entirety ..." No mention is made of any amendments to the existing note or mortgages.

[¶ 12.] Chmelas base their argument that the agreement cancelled the previous debt on the following provision 7. The parties agree that this Agreement constitutes the sole and only agreement between them respecting the subject matter hereof, that it contains all of the terms and conditions agreed upon by them and supersedes all previous written or oral agreements between them and that it correctly sets forth their obligations to each other as of its date. It is further agreed that any modification of the Agreement shall be ineffective unless the same shall be in writing and signed by the parties hereto.

Kimball counters that this provision limits itself to the "subject matter hereof" which under the terms of the document is limited to the "Loan Agreement" and thus excludes the note and mortgages. Support for Kimball's argument is found from the balance of the text of the agreement.

[¶ 13.] Paragraph three of the agreement states:

Chmelas give and grant to Grizzle and Prislovsky and their successors and assigns, not to exceed twenty (20) individuals, the sole hunting rights on the real property herein described and on any other property which is farmed by the Chmelas until the indebtedness referred to herein is paid in full; provided, however, that if Chmelas prepay the said indebtedness, the sole and exclusive hunting rights herein granted shall continue for a period of five (5) years after such payment. (emphasis added).

If the parties had intended the debt due under the promissory note was to be deemed forgiven, paragraph three of the agreement would not have referred to hunting rights continuing until the debt was paid in full or for five years from the date...