Phipps v. First Federal Sav. & Loan Ass'n of Beresford

• Decision Date: 11 October 1988
• Docket Number: No. 15958,15958
• Citation: 438 N.W.2d 814
• Court: South Dakota Supreme Court
• Parties: Nancy PHIPPS, Plaintiff and Appellant, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF BERESFORD, James F. Weber, President, Defendant and Appellee. . Considered on Briefs

Page 814

438 N.W.2d 814

Nancy PHIPPS, Plaintiff and Appellant, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF BERESFORD, James F. Weber, President, Defendant and Appellee.

No. 15958.

Supreme Court of South Dakota.

Considered on Briefs Oct. 11, 1988.

Decided April 12, 1989.

Charles F. Carbiener, Vermillion, for plaintiff and appellant.

Phillip O. Peterson of Frieberg, Peterson & Travis, Beresford, for defendant and appellee.

HENDERSON, Justice.

PROCEDURAL HISTORY/ISSUES

Plaintiff/Appellant Nancy Phipps (Phipps) initiated an action in the circuit court for Clay County against Defendant/Appellee First Federal Savings and Loan Association of Beresford (First Federal) alleging, in separate counts, "negligence by statute" and breach of contract. Phipps' claims arose from First Federal's refusal to accept her attempts to cure default on a 180-day redemption mortgage and related mortgage note on a house. This refusal, she argued, prevented her acceptance of a bona-fide offer to purchase the house. For relief, Phipps sought (1) $55,000 in compensatory damages, (2) $10,000 in exemplary damages, (3) excuse of performance on the principal and interest due, (4) complete satisfaction of the mortgage, (5) attorney fees, and (6) prejudgment interest. In turn, First Federal filed a counterclaim seeking foreclosure and a deficiency judgment, arguing that it had accelerated Phipps' loan prior to her attempts to cure her default.

The trial of this matter was to the court. At the end of the trial, First Federal, with Phipps' consent, was granted permission to submit, later, an appraisal to establish the current value of the house. The trial court, off the record shortly thereafter, indicated that judgment would be issued in Phipps' favor. First Federal did not submit its valuation evidence until after the trial court issued its memorandum opinion which, contrary to its earlier pronouncement, then favored First Federal. The trial court allowed submission of this late evidence under SDCL 15-6-60(b), South Dakota's excusable neglect statute.

Phipps has appealed, asserting that the trial court erred in six regards, and urges:

1) She had a right, under SDCL 21-47-8, ¹ to cure her current defaults at any time prior to entry of judgment;

2) First Federal waived its right to accelerate Phipps' payments;

3) Evidence was insufficient to support a finding that First Federal had given Phipps clear and unequivocal notice of its decision to accelerate her payments;

4) Evidence was insufficient to support a finding that Phipps' default was the result of her own conduct;

5) The trial court abused its discretion in reopening the case to allow First Federal to submit additional evidence; and

6) Evidence was sufficient to support an award of damages to Phipps for inequitable and unconscionable conduct by First Federal.

We affirm, treating all alleged errors seriatim.

FACTS

An appreciation of the crucial facts are vital to our consideration. On June 26, 1980, Phipps purchased a house in Vermillion, assuming an existing 180-day mortgage secured by a mortgage note. First Federal was mortgagee. Phipps was required to make a principal and interest payment on the first day of each month in the amount of $303.72. The mortgage note contained the following provision:

If any deficiency in the payment of any installment under this note is not made good prior to the due date of the next such installment, the entire principal sum and accrued interest shall at once become due and payable without notice at the option of the holder of this note. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default.

The mortgage by which the note was secured also contained an acceleration clause:

Upon a default in the payment of any indebtedness hereby secured or in the performance of any of the terms or conditions hereof the entire indebtedness hereby secured shall, at the option of the Mortgagee, immediately become due and payable, and this mortgage may be foreclosed by action, or by advertisement as provided by Statute or the Rules of Practice relating thereto, and this paragraph shall be deemed as authorizing and constituting a power of sale as mentioned in said statutes or rules, and any amendatory thereof. THE PARTIES AGREE THAT THE PROVISIONS OF THE ONE HUNDRED EIGHTY DAY REDEMPTION MORTGAGE ACT GOVERN THIS MORTGAGE

Another paragraph in the mortgage indicated that "Mortgagor waives notice of the exercise of any option granted to Mortgagee herein, or in said note, and waives and relinquishes all rights of homestead in said premises."

Phipps' payment history was erratic. She developed a pattern of missing one month's payment, then paying two or more installments together during the following month. For example, on October 21, 1982, she paid her installments due in September, October, and November of that year. She testified that she was too busy to pay her bills on time. Phipps was a medical doctor. We note, in the record that, no less than ten times, she was delinquent in her payment over a period of three years. First Federal sent written notices of her delinquencies, with no effect. On August 4, 1983, First Federal received a check of $1,167, for Phipps' installments due in August, September, and parts of July and October of 1983. This check was returned to First Federal on August 22, 1983, for insufficient funds. This return was apparently caused by an earlier error by Phipps' Texas bank.

First Federal mailed a letter to Phipps, dated August 22, 1983, requesting that she send a certified check or money order for $1,172 ($1,167 plus a $5 service fee), same to pay for her insufficient funds check, which was to be received at First Federal no later than September 30, 1983. Because of Phipps' dishonored check, which represented all or part of four monthly installments, her erratic payment record, and distant address, First Federal attempted to contact her by telephone, but was informed that her line was disconnected. Also, in late August, a default notice, dated August 25, 1983, mailed to Phipps' Texas address, was returned to First Federal with notation that no such person lived there. James Weber, a vice-president of First Federal, telephoned Phipps' realtor, Sue French of French Realty, in Vermillion. No new address for Phipps was provided to Weber, as her new Rapid City address had not been put in French Realty's files.

On August 24, 1983, French called Weber to inform him that a potential buyer was, as French phrased it at trial, "very interested in assuming the loan or possibly going on a contract for deed." Weber responded that the loan could not be assumed because Phipps had defaulted and her loan had been accelerated. Although the potential buyer had given French a $1,000 check as "earnest money," an "Offer and Agreement to Purchase," quoting a purchase price of $45,000 prepared by French, was never signed by the buyer. The buyer rented Phipps' house for a period, and eventually left the Vermillion area.

Two days after Weber informed French that Phipps' loan was not assumable, Phipps visited French's office. Phipps immediately called Weber, who told her that her loan was accelerated, but that a new loan might be arranged. Phipps offered to cure the default with funds from a Rapid City bank, but First Federal refused her overtures, which, she claimed, prevented her acceptance of the buyer's bona fide offer to purchase.

Phipps' arguments that she had a right, under SDCL 21-47-8, to cure her default, that First Federal had waived its right to accelerate the loan by tolerating previous late payments, and that First Federal had not given Phipps notice of its intent to accelerate, were rejected by the trial court. This appeal followed.

DECISION

I. UNDER SDCL 21-47-8, DID PHIPPS HAVE A RIGHT TO CURE HER DEFAULTS AT ANY TIME PRIOR TO ENTRY OF JUDGMENT?

Phipps first argues that SDCL 21-47-8, applies to foreclosures of short-term redemption mortgages. This statute directs dismissal of mortgage foreclosure actions if the defendant, prior to entry of judgment, brings into court the principal and interest due plus costs and disbursements. We disagree.

SDCL 21-49-11 provides:

Any mortgage made pursuant to this chapter on real property of an area of not more than forty acres containing therein a power of sale, upon default being made in the conditions of the mortgage, may be foreclosed as provided in chapter 21-47 or 21-48 or as provided in this chapter. Any mortgage made pursuant to Secs. 21-49-1 to 21-49-10 prior to July 1, 1977 may be foreclosed as provided therein or as provided in this section. (Emphasis added.)

According to the above statute, the procedures set out in SDCL chs. 21-47, 21-48, and 21-49 are alternatives. The provisions of SDCL ch. 21-47, including SDCL 21-47-8, do not apply here, as foreclosure was sought under SDCL ch. 21-49. This result is warranted by the degree of redundancy between these chapters, as exemplified by SDCL Secs. 21-47-3 and 21-49-17, which both authorize the foreclosing court to enter judgment against any person other than the mortgagor who is obliged under the mortgage debt. Such redundancy is inexplicable if, as Phipps argues, the provisions of SDCL ch. 21-47 were intended to apply to foreclosure under SDCL ch. 21-49.

The mortgage in question provided, at paragraph 9, that "THE PARTIES AGREE THAT THE PROVISIONS OF THE ONE HUNDRED EIGHTY DAY REDEMPTION MORTGAGE ACT GOVERN THIS MORTGAGE." "The terms which were agreed upon by both parties should be complied with and enforced unless they conflict with the applicable law." First Fed. Sav. & Loan Ass'n of Sioux Falls v. Dardanella Financial Corp., 351 N.W.2d 460, 462 (S.D.1984). SDCL ch. 21-49 is the applicable law. These chapters, SDCL 21-47, 21-48, and 21-49, are independent and complete in themselves. See, e.g., Lien v. Rowe, 77 S.D. 422, 427, 92 N.W.2d 922, 925 (1958) ...