Rudnitski v. Seely

• Decision Date: 16 March 1990
• Docket Number: No. C0-89-43,C0-89-43
• Parties: Richard RUDNITSKI, et al., Devisees of Alice Rudnitski, Respondents, v. Elizabeth SEELY, Petitioner, Appellant.
• Court: Minnesota Supreme Court

Page 664

452 N.W.2d 664

Richard RUDNITSKI, et al., Devisees of Alice Rudnitski, Respondents, v. Elizabeth SEELY, Petitioner, Appellant.

No. C0-89-43.

Supreme Court of Minnesota.

March 16, 1990.

Syllabus by the Court

1. Contract for deed vendors, who, upon default by the contract vendee cancel the contract by following the statutory cancellation procedures (Minn.Stat. § 559.21 (1988)), are barred from later maintaining an action against the contract vendees for waste by the doctrine of election of remedies.

2. The doctrine of election of remedies does not bar a contract vendor from suing a vendee for conversion of personal property, the value of which was part of the consideration for the vendor's promise to sell, notwithstanding the vendor had previously cancelled the contract for deed pursuant to Minn.Stat. § 559.21 (1988).

Patrick W. Stewart, Stevens, Egan, Stewart & Lauer, Burnsville, for appellant.

Jerry O. Relph, Hughes, Thoreen & Sullivan, St. Cloud, for respondents.

Heard, considered and decided by the court en banc.

KELLEY, Justice.

This case presents us with two issues: (1) whether an action alleging that a contract for deed vendee had committed waste survives the vendor's cancellation of the contract, and, (2) whether a contract for deed vendor can maintain an action after its cancellation for conversion of personal property which was not described in the contract for deed. In granting the contract vendees summary judgment, the trial court ruled that the election of remedies doctrine prevented the maintenance of actions on both claims. In reversing, the court of appeals panel held that the action for waste survived the cancellation, and that the vendor's conversion claim was not precluded by the election of remedies doctrine. Rudnitski v. Seely, 441 N.W.2d 827, 830-31 (Minn.App.1989). Because we conclude that in this case the action for waste did not survive the cancellation, we reverse the court of appeals on the waste issue, but affirm the court of appeals and remand the conversion claim to the trial court for trial.

By contract for deed dated August 20, 1980, appellant Elizabeth Seely contracted to purchase from Alice Rudnitski farmland and buildings in Benton County, Minnesota. ¹

The contract for deed itself recited a purchase price of $176,000, no part of which was identified as representing the value of certain personal property, consisting of several pieces of farm machinery, and was payable $30,000 down and by semi-annual $1,500 installments of principal plus interest. One clause in the contract authorized the vendor, upon cancellation, to retain all payments and improvements made by the vendee as liquidated damages for breach of contract. ² The contract likewise prohibited removal of buildings and improvements from the land, but otherwise was devoid of other provisions concerning waste or conversion.

Because Seely failed to pay the installment payment due August 5, 1986, failed to maintain insurance on the property, and failed to timely pay real estate taxes, respondents commenced proceedings to cancel the contract pursuant to Minn.Stat. § 559.21 (1988). The cancellation was completed on April 23, 1987. As permitted by the liquidated damage clause, respondents retained the down payment and all payments which had been made on the contract. ³

After repossessing the property, the respondents claim to have discovered damage in the nature of waste to the real estate and conversion of certain personal property. This action was commenced by a verified complaint which alleged that Seely had seriously damaged, in excess of normal wear and tear, the house, barn, milkhouse, and other property, and, as well, that she had converted several pieces of farm equipment sold with the farm by selling them at an auction before relinquishing possession.

Following the trial court entry of summary judgment, respondents moved for reconsideration. Before that motion could be heard and determined, respondents appealed from the judgment. ⁴

Among the options available to a contract for deed vendor upon default of a vendee is cancellation of the contract pursuant to Minn.Stat. § 559.21 (1988). Ordinarily when that option is exercised, the vendor will be held to have elected a remedy and will thereafter be prevented from receiving double recovery by seeking damages for breach of contract. Wayzata Enters. v. Herman, 268 Minn. 117, 119, 128 N.W.2d 156, 158 (1964). The election of remedies doctrine applies when an action was pursued to a determinative conclusion, the vendor procured advantage from his or her actions, or if the vendee was subjected to injury. First Nat'l Bank v. Flynn, 190 Minn. 102, 106-07, 250 N.W. 806, 808 (1933); Kosbau v. Dress, 400 N.W.2d 106, 110 (Minn.App.1987); Covington v. Pritchett, 428 N.W.2d 121, 124 (Minn.App.1988). In short, one cannot ordinarily cancel a contract by the statutory procedure and then recover benefits due under it.

I. Waste.

Appellant Seely argues that when respondents cancelled the contract for deed and retained the contract payments which had been made by her, as permitted by the liquidated damage clause, they elected a remedy and are now barred from seeking recovery of additional damages for alleged waste. We agree.

Waste is conduct by a person in possession of land which is actionable by another with an interest in that same land to protect the reasonable expectations of the nonpossessing party. 5 R. Powell, Powell on Real Property, p 636 (1989) [hereinafter Powell]. Waste involves more than just ordinary depreciation, it involves negligence or intentional conduct which results in material damage to the property. Moore v. Phillips, 6 Kan.App.2d 94, 627 P.2d 831, 834 (1981).

Inclusion in a contract for deed of an express prohibition against waste or a liquidated damage clause mentioning waste would bar a vendor's recovery after cancellation. In such case, waste constitutes a breach of the contract and cancellation would terminate any existing right to recover for the breach. See Powell, p 638. However, this case presents a more difficult problem. Here there is no contract-imposed duty to prevent waste, and, therefore, if the vendee, in fact, committed waste, such commission is not a breach of any express or specific term of the contract. Thus, if the vendor's claim for waste is to be barred by the doctrine of election of remedies, we cannot limit our inquiry to only the specific contract terms, but must additionally examine the relationship between the legal claim for waste and a breach of the contract, taking into consideration the fairness of allowing a vendor who has benefited from statutory cancellation to sue for waste.

Although both contract and property law have contributed to the shaping of the action for waste, its origin clearly lies in the tort law. Powell, p 636. Appellant argues that there is no inconsistency in allowing a vendor to sue for waste after the contract for deed has been cancelled because waste is a tort action whereas the statutory cancellation is bottomed in contract law. We note, however, that the election of remedies doctrine, insofar as it relates to contract for deed remedies, rests not so much on consistency as upon concepts of fairness, such as that a vendor should not have a double remedy for a vendee's default. To allow a vendor to recover for waste in addition to retaining all contract payments by forfeiture would permit such a double recovery. The approach urged upon us by the respondents, it seems to us, completely overlooks the whole contractual...