Northwest Realty Co. v. Colling

• Decision Date: 29 December 1966
• Docket Number: No. 10296,10296
• Parties: NORTHWEST REALTY COMPANY, a Corporation, Plaintiff and Respondent, v. Edward C. COLLING, Defendant and Respondent, and Raymond Jesse, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 675

147 N.W.2d 675

82 S.D. 421

NORTHWEST REALTY COMPANY, a Corporation, Plaintiff and Respondent, v. Edward C. COLLING, Defendant and Respondent, and Raymond Jesse, Defendant and Appellant.

No. 10296.

Supreme Court of South Dakota.

Dec. 29, 1966.

Rehearing Denied March 2, 1967.

Gunderson, Farrar, Carrell & Aldrich, Rapid City, for defendant and appellant, Raymond Jesse.

Dana, Golden, Moore & Rasmussen, Sioux Falls, for plaintiff and respondent, Northwest Realty Co.

Mundt & Weisensee, Sioux Falls, for defendant and respondent, Edward C. Colling.

HOMEYER, Judge.

This is an equitable action for strict foreclosure of an executory contract for the sale of real estate and personal property which includes the Valley-Hi Country Club near Rapid City. Foreclosure was decreed and one of two named defendants appeals. Plaintiff-respondent, Northwest Realty Company, is named as vendor in such contract and at all times material herein, it was represented by Sheldon F. Reese, its president and managing officer. For brevity and simplicity we will refer to plaintiff-respondent as Reese; defendant-respondent, Edward C. Colling, the vendee named in the contract, as Colling; and the defendant-appellant, Raymond Jesse, as Jesse.

The complaint alleges the execution of the contract by Reese and Colling and a purported assignment thereof to Jesse; that Reese is ready, willing and able to perform; that default exists in the payment required to be made on January 2, 1964 and that in accord with the contract, Reese has declared the full amount due and payable; that payment has been demanded and unless made, Reese elects to cancel and terminate the contract. The prayer for relief among other things asks the court under its statutory authority to equitably adjust all rights of the parties and to determine the respective interests of Colling and Jesse, and allow them, or either of them, time to perform and absolve themselves from default.

The answer of Jesse alleges an equitable estoppel to prevent Reese from pursuing his remedy of strict foreclosure unless he pays amounts deposited in escrow by Jesse and used to improve the property. He also counterclaims against plaintiff and cross claims against Colling for damages, actual and exemplary, for fraud and deceit. ¹ The answer of Colling alleges an accord and satisfaction between Colling and Jesse and also a cross claim for damages against Jesse.

The trial court found against Jesse on the issues of estoppel and damages for fraud. It also found an accord and satisfaction between Colling and Jesse and fixed the interests of Colling and Jesse in the property to correspond with their accord and satisfaction. Time for complying with the terms of the contract was fixed for Colling first and then for Jesse if Colling failed to comply on default in payment of taxes and insurance and also in payment of principal and interest. No payments were made by either defendant and the judgment of foreclosure became final as provided by SDC 1960 Supp. 37.3101.

With some lack of clarity in the assignments of error we believe the prime question presented is whether the evidence when considered in its entirety will support the court's finding of no equitable estoppel and no fraud.

These factual determinations were required to be made by the trial court from an involved and somewhat bizzarre chain of events and circumstances which we will only summarize. Much of the evidence is documentary and undisputed. Very little conflict exists as to what transpired. The subject property consists primarily of 318 acres of real estate and a nine-hole golf course is located on an 80 acre tract thereof. of. A club house is situated thereon and the contract also covers the equipment and furnishings to operate the golf course and club house. The property originally belonged to the Jolly Acres Country Club, a private corporation, which had encountered financial difficulty in its operation.

During the summer of 1962 Reese was in the process of foreclosing liens which he held on the subject property and perfecting his title thereto when Colling who lived at Scottsbluff, Nebraska and termed his occupation as oil and promotional work, became interested in the property. Originally it appears he was promised a large commission by one Carmella Rankin, who purported to be representing some of the larger stockholders of Jolly Acres, if he was able to sell the property, and she had given him some form of document setting forth the arrangement. Colling was also engaged in selling farm and ranch buildings and had an earlier limited acquaintance with Jesse, a rancher from near Antioch, Nebraska, to whom he had attempted to sell a machine shed a few months before.

About June 21, 1962, Colling saw Jesse and told him for an advance of $40,000 he would erect the building valued at $33,000 on his ranch and repay the $40,000 within one year. Jesse was shown pictures of the property and the document Mrs. Rankin had given him. The matter was discussed with Jesse's banker and the bank made a loan of $40,000 to Jesse who turned the money over to Colling. In return, Colling gave Jesse a paid-up contract for the machine shed to be erected on Jesse's ranch by June 21, 1963 and a letter ² above his notarized signature describing the transaction.

Subsequently Jesse showed these documents to his then lawyer, Stubbs, who was dubious of their value and he recommended a trip to Rapid City to investigate. On July 13, 1962, Jesse looked at the property, checked the courthouse records thereon, and ascertained that Reese had considerable money invested therein and that such property was in the process of foreclosure. He contacted Reese and showed him the documents he had obtained from Colling and permitted Reese to make copies. Reese warned Jesse against dealing with Mrs. Rankin and Colling and asked him if he wanted help in getting his money back. Reese also attempted to telephone Jesse's attorney at Alliance, Nebraska, but could not reach him. Before parting Reese advised Jesse not to discuss the matter with anyone except his attorney. The following day Jesse contacted Colling and told him of his meeting and conversation with Reese and Colling recommended that he staty away from Reese because if Reese thought Jesse was pressuring Colling he might raise the price on the property. The record reflects no further contacts between Reese and Jesse until either the latter part of March or the early part of April 1963. Colling and Jesse had infrequent telephone conversations during the summer of 1962 as to his progress on the sale or refinancing of Jolly Acres in which Colling indicated that he felt he could deal with Reese if he was unsuccessful in dealing with the stockholders of Jolly Acres. ³

In early September 1962 Colling contacted Reese for an option on the property and on September 5, 1962, Reese wrote a letter which states that his attorney has been instructed to prepare an option. ⁴ The written option was executed on September 14, 1962 and incorporated substantially the terms specified in the letter. In late September Colling approached Jesse for the $25,000 payment required by the option. ⁵ On October 30, 1962, Colling obtained another option ⁶ from Reese which was in much greater detail and recited that it amended and superseded the option of September 14th. On December 6, 1962, Colling entered into a Lease Agreement with the Burgess & Bielski Investment Co. Inc., for a period of five years beginning April 18 1963 with an option to renew for an additional ten-year period. The lease covered the 80 acres on which the golf course was located together with equipment and the lessor before the beginning of the lease period agreed to remodel and refurnish the club house and to construct an enclosed heated swimming pool at a cost of not to exceed $75,000. ⁷ Shortly after the date of such lease Colling again contacted Jesse and showed him the October 30th option and the December 6th lease. He also told him that he had paid the sum of $39,050.00 required by the option and expressed satisfaction in securing Burgess as the lessee of the golf course property. Jesse was given copies of the agreements and he took them to his lawyer, Mr. Harris, ⁸ and they all subsequently met with Jesse's banker ⁹ who made some telephone calls to Rapid City and Pierre concerning Burgess. Jesse also made a trip to Rapid City where he met Mr. and Mrs. Burgess and inspected their operations at Pactola Lodge. On December 19, 1962, Jesse and Colling entered an agreement prepared by Harris reciting the initial advance of $40,000 and an additional escrow advance of $50,000 and Jesse took an assignment of the rentals under the lease. ¹⁰

On January 2, 1963 Reese and Colling entered into a contract for deed which complies substantially with the provisions of the October 30th option. ¹¹ On December 27, 1962, Colling and Burgess had entered into an Escrow Agreement involving monies to be used in refurnishing and improving the golf course and club house as required by the lease. Reese approved the Escrow Agreement. ¹²

On January 18, 1963 Reese approved the lease of the premises to the Burgess and Bielski Investment Co. Inc., although he testified that he did not consider it a good lease particularly because it provided no minimum rent and no time limit on when the memberships were to be sold. ¹³ By an Agreement dated January 19, 1963, he required Burgess and Bielski as individuals to acknowledge that their lease would be void if Colling or his assigns failed to make the payments in the contract for deed. The same instrument provided that if such default occurred they would purchase the property for the amount which remained unpaid on the contract plus costs of foreclosure. Reese said he told Colling of this agreement shortly after it was executed, but Colling disclaimed knowledge thereof until about August 1964. Jesse was informed of this Agreement before April 10, 1963....