Oakes Farming Ass'n v. Martinson Bros., 10039

• Decision Date: 21 April 1982
• Docket Number: No. 10039,10039
• Citation: 318 N.W.2d 897
• Parties: OAKES FARMING ASSOCIATION, a cooperative, Plaintiff, Appellee and Cross- Appellant, v. MARTINSON BROTHERS, a partnership, and John Martinson, Linda L. Martinson, Oscar Martinson and Susan M. Libecki, jointly and severally as individuals, Defendants, Appellants and Cross-Appellees. Civ.
• Court: North Dakota Supreme Court

Page 897

318 N.W.2d 897

OAKES FARMING ASSOCIATION, a cooperative, Plaintiff, Appellee and Cross- Appellant, v. MARTINSON BROTHERS, a partnership, and John Martinson, Linda

L. Martinson, Oscar Martinson and Susan M.

Libecki, jointly and severally as

individuals, Defendants,

Appellants and

Cross-Appellees.

Civ. No. 10039.

Supreme Court of North Dakota.

April 21, 1982.

Pearson & Christensen, Grand Forks, for plaintiff, appellee and cross-appellant; argued by Douglas Christensen, Grand Forks.

Fintan L. Dooley, Bismarck, for defendants, appellants and cross-appellees.

SAND, Justice.

This is an appeal by the defendants, Martinson Brothers, a partnership, and John Martinson, Linda L. Martinson, Oscar Martinson, and Susan M. Libecki, jointly and severally as individuals [hereinafter referred to as Martinson] from a deficiency judgment in the amount of $260,017.45 and a cross-appeal by the plaintiff, Oakes Farming Association, a North Dakota cooperative [hereinafter referred to as Oakes], from that part of the judgment allowing Martinson a setoff in the amount of $79,655.00.

On 9 July 1975 Orrin and Naomi Streich [Streichs] sold certain farmland and equipment to Oakes by contract for deed ¹ and by an equipment installment sales agreement. ² A security agreement was also executed giving the Streichs a security interest in the equipment sold to Oakes "together with all repairs, improvements, accessions thereof and substitutions and replacements therefor."

On 31 December 1977 Martinson and Oakes mutually agreed that Oakes would sell and Martinson would buy "all of Oakes' tangible real and personal property, except that personal property described and set forth in Exhibit A" ³ for the total price of Martinson took possession of the farm on 1 January 1978 and used the equipment and farmed the land during 1978. Martinson failed to make payments to Oakes in 1978 pursuant to the terms of the 31 December 1977 agreement, and, as a result, Oakes was not able to pay Streich. Streich then initiated separate actions to foreclose the contract for deed (civil 9264) ⁵ and to cancel the equipment installment sales contract (civil 9264-B a.k.a. 9265). ⁶

$2,702,000.00. The contract did not allocate the total sales price into separate prices for the real and personal property. Most of the property sold by Oakes to Martinson had been purchased by them from the Streichs under the contract for deed and the installment sales agreement. The payment schedule set up between Martinson and Oakes provided that Martinson would make a down payment of $5,000.00 contemporaneously with the 31 December 1977 agreement, $420,000.00 within a year, and Martinson would assume Oakes' obligation under the 9 July 1975 contract for deed with Streichs ⁴ and the 9 July 1975 equipment installment sales contract.

Oakes brought a crossclaim in civil 9264 against Martinson Brothers and John Martinson, Linda L. Martinson, Oscar Martinson and Susan M. Libecki jointly and severally. Count I of Oakes' complaint sought judgment in the sum of $633,879.63 against Martinson for their failure to make payments pursuant to the 31 December 1977 Martinson answered Oakes' crossclaim and asserted various claims against Oakes which alleged in substance that Oakes had removed certain personal property from the premises which was included in the 31 December 1977 agreement. ⁷ However, no defense was raised by Martinson as to the nonseverability of the real and personal property in the 31 December 1977 agreement.

agreement. Count II of Oakes' complaint alleged in substance that Martinson failed to make installment payments due under the Streich-Oakes equipment contract and as a result Martinson owed Oakes the sum of $434,642.00. Count III sought to foreclose and cancel any interest of Martinson in the real property involved. Count III also provided that by virtue of Martinson's default Oakes retained the right in a separate action to request a deficiency judgment against Martinson for the costs of the action and for all amounts due under the agreement which exceeded the fair value of the subject property.

On 26 March 1979, the day set for trial of civil No. 9264, the parties entered a stipulation in open court to the entry of judgment. Pursuant to the oral stipulation the district court, the Honorable Larry M. Hatch, entered findings of fact, conclusions of law, and order for judgment dated 26 March 1979. A judgment dated the same day was also entered which, in substance, canceled the contract for deed between Streich and Oakes, subject to Oakes' right to cure the default on or before 1 December 1979. The judgment also provided that the 31 December 1977 contract between Oakes and Martinson, insofar as it affected the conveyance of real estate, was terminated and canceled subject to Martinson's right to cure the default on or before 1 April 1979; that Martinson Brothers were indebted to Oakes in the amount of $434,642.00 which represented the agreed purchase price of the personal property described in the 31 December 1977 contract; ⁸ that Martinson was to deliver the personal property, including any replacement units, to Oakes on or before 15 April 1979; that Oakes had the continuing right to pursue by appropriate procedures a deficiency judgment against Martinson either or both arising out of the purchase price plus interest of the real property or arising out of the agreed purchase price plus interest of the personal property described in the 31 December 1977 contract; that Martinson's affirmative defenses against Oakes were dismissed; ⁹ that if Oakes received a deficiency judgment against Martinson, Martinson would receive a $90,000.00 credit for statutory exemptions on the judgment; that should Streich conduct a sheriff's sale pursuant to their security agreement with Oakes, the net proceeds derived from the sheriff's sale credited toward Streichs' judgment against Oakes would be credited toward Oakes' judgment against Martinson, and that if there was no Martinson delivered the personal property to Oakes as required by the judgment in civil 9264, and on 6 August 1979 Streich held a sheriff's sale and sold the various items of farm machinery and warehouse equipment. ¹⁰ As a result of the sheriff's sale, personal property and equipment owned by Oakes were sold for the net sum of $87,502.59. A partial satisfaction of Streichs' judgment against Oakes was entered in civil 9264 in the amount of $87,502.59, and a corresponding credit was given to Martinson in Oakes' judgment against Martinson.

sheriff's sale, then there would be credited toward Oakes' judgment against Martinson the amount of credit given Oakes by Streich for the value of the personal property and equipment.

After the sheriff's sale, Oakes brought two actions for deficiency judgments against Martinson. These actions were civil 9395 concerning the real property ¹¹ and civil 9396 concerning the personal property. Oakes' complaint in civil No. 9396 alleged in substance that a judgment in the amount of $434,642.00 representing the value of the personal property was entered against Martinson on 26 March 1979; that a sheriff's sale of certain personal property in conjunction with a levy on the execution issued on the judgment was held on 6 August 1979, and as a result of that sale approximately $88,000.00 was obtained; that pursuant to the judgment entered in civil 9264 the net proceeds of the sheriff's sale and the sum of $90,000.00 ¹² were to be credited against the sum of $482,866.40 ¹³ plus the interest at the legal rate from 26 March 1979, leaving a balance due and owing to Oakes of approximately $316,938.05.

Martinson's answer in civil action 9396 (personal property) asserted that they were entitled to credit on the judgment for certain personal property because it was neither delivered to them nor sold at the sheriff's execution sale. Martinson also alleged as an affirmative defense that the personal property and real property in the 31 December 1977 agreement were sold for a total consideration of $2,702,000.00 and the amount was not severable into specific amounts for the personal property and real property.

A bench trial was held in civil 9396. The district court issued findings of fact, conclusions of law, and order for judgment which held that Oakes was entitled to a deficiency judgment of $339,672.45, less an additional (setoff) credit of $79,655.00, for a total deficiency judgment of $260,017.45, with interest at the legal rate from 18 December 1980. Judgment was entered on 24 March 1980 and thereafter Martinson appealed and Oakes cross-appealed.

The first issue we will consider concerns the severability of the total purchase price of the 31 December 1977 agreement between Oakes and Martinson, and the 26 March 1979 stipulation and subsequent judgment which allocated $434,642.00 of that price for personal property, and $2,267,358.00 for real property. Interrelated with this issue are the doctrines of collateral attack and res judicata.

The original contract between Oakes and Martinson did not allocate values for the real and personal property; however, the findings of fact in civil 9264 provide, in part, as follows * * *

"VIII.

"... By agreement of the parties the real estate described in said contract was being sold for the total principal price of $2,267,358.00. The personal property as therein described was by agreement being sold for the total purchase price of $434,642.00."

* * *

"XIII.

"That the entire unpaid balance of the principal purchase price in regard to the real estate described in said contract in the sum of $2,262,358.00 (being the agreed purchase price for said real estate less the $5,000.00 paid at the time of the execution of the contract) plus interest on said sum to March 26, 1979 is unpaid."

"XIV.

"The entire sum of $434,642.00, representing the agreed purchase price of the personal property described in said contract of December 31, 1977, plus interest on said...