Schleuter Co., Inc. v. Sevigny

Citation1997 SD 68,564 N.W.2d 309
Decision Date11 June 1997
Docket NumberNos. 19820,19842,s. 19820
PartiesThe SCHLEUTER COMPANY, INC., Babson Credit Plan, Inc., and Babson Brothers, Inc., Plaintiffs and Appellants, v. Donald J. SEVIGNY, Diane Sevigny, Bank of Hoven, a Corporation, Clarence J. Frost, Anna Marie Frost, Inman-McDowell, Inc., Defendants, v. HOVEN INDUSTRIES, INC., and John F. Cedarberg, III, Defendants and Appellees. John F. CEDARBERG, III, Cross-Plaintiff and Appellee, v. Donald J. SEVIGNY and Diane Sevigny, Cross-Defendants.
CourtSupreme Court of South Dakota

Page 309

564 N.W.2d 309
1997 SD 68
The SCHLEUTER COMPANY, INC., Babson Credit Plan, Inc., and
Babson Brothers, Inc., Plaintiffs and Appellants,
v.
Donald J. SEVIGNY, Diane Sevigny, Bank of Hoven, a
Corporation, Clarence J. Frost, Anna Marie Frost,
Inman-McDowell, Inc., Defendants,
v.
HOVEN INDUSTRIES, INC., and John F. Cedarberg, III,
Defendants and Appellees.
John F. CEDARBERG, III, Cross-Plaintiff and Appellee,
v.
Donald J. SEVIGNY and Diane Sevigny, Cross-Defendants.
Nos. 19820, 19842.
Supreme Court of South Dakota.
Argued April 30, 1997.
Decided June 11, 1997.

Jay R. Gellhaus & Lonald L. Gellhaus of Williams, Gellhaus & Gerdes, Aberdeen, for appellants.

Craig E. Smith of Neumayr and Smith, Gettysburg, for appellees.

SABERS, Justice.

¶1 This dispute concerns priority in real property between creditors' judgment liens and buyer's unrecorded contract for deed. The trial court held that buyer had a superior interest in the property by virtue of mortgagee's assignment of mortgage. We reverse.

FACTS

¶2 In 1978, Donald Sevigny d/b/a Sevigny Farm Service (Sevigny) erected a building on a small parcel of land in Hoven, South Dakota, from which he operated his business. The Bank of Hoven (Bank) held a first mortgage on this property, which was recorded May 14, 1979 with the Potter County Register of Deeds. Sevigny's financial problems led him to enter into an agreement to sell the property. On May 15, 1985, Sevigny, Bank, and John Cedarberg (Cedarberg) entered into a contract for deed according to which Cedarberg would purchase Sevigny's property for $69,000.00. Neither the contract for deed nor a memorandum thereof were recorded with the Register of Deeds. Cedarberg paid $1,000.00 downpayment and agreed to make 95 monthly payments of $1,003.39. 1 The parties agreed further:

That contemporaneously with this Agreement, the Buyer and the Bank of Hoven intend to enter into an Escrow Agreement whereby the sums due and payable under this Agreement are to be paid in escrow to the Bank of Hoven, and the Bank of Hoven is to apply said sums to the indebtedness of the Sellers, and that when final payment under this Contract is made in full, the Bank of Hoven shall satisfy said mortgage, thereby releasing the above described real estate from any lien under said mortgage and that said Escrow Agreement is a condition precedent to this Contract for Deed.

The escrow agreement was executed at the same time as the contract for deed, and provided that

when payments are made in full under [the contract for deed] ... the Bank agrees to release and satisfy the above described

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real estate mortgage and to furnish Purchaser with the Warranty Deed which the Bank of Hoven shall be holding in escrow until final payment is made.

Neither Sevigny nor Cedarberg retained legal counsel in this transaction. David Von Wald, Bank's attorney, handled the matter. The contract for deed was not recorded with the Register of Deeds until March 16, 1993, nearly 12 years after it was executed.

¶3 Sevigny testified on cross-examination that he also made payments to the escrow account:

A: I was making payments to this escrow account also because I had a part of that debt which was equipment and other items.

....

Q: And then am I correct, though, that the bank was willing to accept less than full payment for releasing their mortgage from you?

A: To be truthful, this I do not remember. I had no knowledge of it at the time. The only thing he had stated to me, there would be a balance left over at the time Mr. Cedarberg would be done paying his portion which was my obligation.

¶4 Plaintiffs took default judgments against Sevigny for debts accrued in his business. Schleuter Co., Inc.'s judgment for $542.86 was docketed with the Potter County Clerk of Courts January 6, 1987. 2 Babson Credit Plan, Inc. and Babson Brothers, Inc. each took separate judgments, $3,725.76 and $9,955.45, respectively; both were docketed with the Clerk of Courts November 22, 1988. 3

¶5 A notation on the 1985 Potter County tax notice for the property states:

4-23-86

Dear Mr. Cedarberg,

I am bringing it to your attention that in checking with the Register of Deeds we find there is no deed filed in your name for this description.

Sincerely [Potter County Treasurer]

The testimony shows that John Van Horne (then president of Bank) was contacted by Cedarberg's employee, who was told by Van Horne "that he would take care of it." All future tax notices included Cedarberg and Sevigny's names; however, the contract for deed remained unrecorded.

¶6 In 1993, Cedarberg was arranging equipment financing with Cargill, Inc., which conducted a title search on the Hoven property. Cargill discovered the title was clouded by plaintiffs' liens, as well as other judgment liens, 4 and informed Cedarberg. Cargill also gave him a copy of the lien and title search, which was dated March 4, 1993. Cedarberg recorded the contract for deed March 16, 1993 with the Register of Deeds.

¶7 In a summons and complaint dated September 22, 1994, the judgment creditors brought an action to foreclose the liens. Bank assigned the note and the mortgage to Cedarberg on October 26, 1994 and it was recorded with the Register of Deeds November 10, 1994. Bank purportedly reserved, or excluded from the assignment, $13,528.92 plus interest still owed by Sevigny. Cedarberg counterclaimed to quiet the title to the property and cross-claimed against Sevigny for the amount of the judgment liens if they were found superior to Cedarberg's interest. 5 The trial court ruled

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for Cedarberg and the judgment creditors appeal.

¶8. WHETHER UNDER THESE CIRCUMSTANCES, CEDARBERG TAKES FREE OF JUDGMENT LIENS FILED AGAINST THE PROPERTY OF HIS CONTRACT FOR DEED SELLER.

¶9 The proper resolution of this case centers upon the judgment lien statute and the recording statutes. "The construction of a statute is a question of law." First Dakota Title v. Codington County, 1996 SD 125, p 4, 554 N.W.2d 666, 667 (citations omitted). Conclusions of law are reviewed de novo. Id.

¶10 The plaintiffs in this case (hereinafter Schleuter) became judgment lien creditors by virtue of SDCL 15-16-7, which provides:

When a judgment has been docketed with a clerk of the circuit court, it shall be a lien on all the real property, except the homestead, in the county where the same is so docketed, of every person against whom any such judgment shall be rendered, and which he may have at the time of the docketing thereof in the county in which such real property is situated, or which he shall acquire at any time thereafter, for ten years from the time of docketing the same in the county where it was rendered, and no judgment shall become a lien on real property as herein provided unless it be docketed in the county where the land is situated.

When these judgments were docketed, they became valid against Sevigny's property, subject only to Bank's first mortgage, which was recorded first. SDCL 44-2-1 ("Other things being equal, different liens upon the same property have priority according to the time of their creation.").

¶11 While the unrecorded contract for deed was binding on the parties, i.e., Cedarberg, Bank, and Sevigny, it had no effect on the judgment lien creditors because it was not recorded. See SDCL 43-28-17:

Every conveyance of real property other than a lease for a term not exceeding one year...

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9 cases
  • Canal Ins. Co. v. Abraham, 20746
    • United States
    • Supreme Court of South Dakota
    • April 27, 1999
    ...127. ¶10 In addition, interpretation of contracts is a matter of law, and thus we also review them de novo. Schleuter Co., Inc. v. Sevigny, 1997 SD 68, p 15, 564 N.W.2d 309, 313; Olson v. U.S. Fidelity and Guar. Co., 1996 SD 66, p 6, 549 N.W.2d 199, 200; Estate of Thomas v. Sheffield, 511 N......
  • Canal Ins. Co. v. Abraham, 20746.
    • United States
    • Supreme Court of South Dakota
    • July 21, 1999
    ...[¶ 10.] In addition, interpretation of contracts is a matter of law, and thus we also review them de novo. Schleuter Co., Inc. v. Sevigny, 1997 SD 68, ¶ 15, 564 N.W.2d 309, 313; Olson v. U.S. Fidelity and Guar. Co., 1996 SD 66, ¶ 6, 549 N.W.2d 199, 200; Estate of Thomas v. Sheffield, 511 N.......
  • In re Claussen, Bankruptcy No. 05-41815.
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of South Dakota
    • March 23, 2007
    ...while binding on the parties, has no effect on a subsequent, good faith encumbrancer of record. The Schleuter Company, Inc., v. Sevigny, 564 N.W.2d 309, 312 (S.D. The purpose and object of our system of laws for the recording of written instruments affecting the title to real estate cannot ......
  • In re Claussen, Bankr. No. 05-41815 (Bankr.S.D. 3/23/2007), Bankr. No. 05-41815.
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of South Dakota
    • March 23, 2007
    ...while binding on the parties, has no effect on a subsequent, good faith encumbrancer of record. The Schleuter Company, Inc., v. Sevigny, 564 N.W.2d 309, 312 (S.D. The purpose and object of our system of laws for the recording of written instruments affecting the title to real estate cannot ......
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