#24752-rev & rem-JKK
2008 SD 68
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
JOE BERBOS, Plaintiff and Appellee,
v.
HAROLD KRAGE and GWEN
KRAGE, Defendants and Appellants.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE FIFTH JUDICIAL CIRCUIT
BROWN COUNTY, SOUTH DAKOTA
* * * *
HONORABLE JACK R. VON WALD
Judge
* * * *
KIMBERLY A. DORSETT of
Richards, Oliver & Dorsett Attorneys for plaintiff
Aberdeen, South Dakota and appellee.
RICHARD L. RUSSMAN of
Richardson, Wyly, Wise,
Sauck & Hieb, LLP Attorneys for defendants
Aberdeen, South Dakota and appellants.
* * * *
CONSIDERED ON BRIEFS
ON MAY 19, 2008
OPINION FILED 07/16/08
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KONENKAMP, Justice
[¶1.] Joseph Berbos purchased real property from Harold and Gwen Krage
on a contract for deed. When the parties disputed ownership of a building
encroaching onto land not sold in the contract, Berbos withheld his last payment
and brought suit for specific performance. After a hearing, the circuit court granted
summary judgment for Berbos, ruling that the parties intended to convey the entire
building. On appeal, we conclude that because there are genuine issues of fact on
the question of intent, the matter must be reversed and remanded for trial.
Background
[¶2.] On May 9, 2002, the Krages and Berbos entered into a contract for
deed for the sale of certain real estate owned by the Krages in Brown County, South
Dakota. The contract described the property in metes and bounds. No buildings
were mentioned. The total purchase price was $854,000, to be paid in installments,
with the final payment of $173,444.44 due on January 1, 2004.
[¶3.] Before the last installment became due, a dispute arose between the
parties on the ownership of a building located partially on the land conveyed to
Berbos in the contract (Lot 1) and partially on the Krages’ adjoining property (Lot
2). Used for hunting purposes, the building is a large steel structure with
bedrooms, a game room, bus storage, restrooms, a cleaning room, a shower, and a
kitchen. There is no common wall by which the structure can be separated at the
line of encroachment.
[¶4.] On December 24, 2003, an attorney for Berbos wrote the attorney for
the Krages acknowledging that payment of $173,444.44 would be due from Berbos
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on January 1, 2004. The letter indicated that a check to the Krages was available
for issuance when the Krages provided clear title. A photocopy of the check was
included with the letter. In another letter, dated March 22, 2004, the Krages were
again informed that Berbos was “willing to deliver” the check “as soon as clear title
and possession of the real estate is delivered.”
[¶5.] The parties could not resolve their dispute over the building, and, on
August 23, 2004, Berbos brought suit for specific performance. Berbos asked the
court to compel the Krages to deliver merchantable title, or in the alternative, to
reform the deed. Berbos sought a summary judgment. In response, the Krages
moved to amend their answer and include an omitted counterclaim for foreclosure.
After a hearing, the court granted summary judgment for Berbos. It reasoned that
because the Krages did not reserve an interest in any of the buildings located on Lot
1, the intent of the parties was that all buildings, including the encroaching
structure, would pass with the conveyance. The Krages were ordered to deliver
merchantable title, and Berbos was ordered to pay the Krages fair market value for
the portion of Lot 2 the building encroached on.
[¶6.] For their part, the Krages sought accrued interest on the last payment
Berbos withheld. Berbos responded that because he offered to make the final
payment, the accrual of interest on the obligation was tolled. See SDCL 20-5-18.
The court denied the Krages’ request for interest, concluding that Berbos’s tender of
payment was an unconditional offer. The court further denied the Krages’ motion
to amend their answer and submit their omitted counterclaim. On appeal, the
Krages assert that the court erred when it granted summary judgment for Berbos
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and abused its discretion when it denied their motion to amend their answer and
submit an omitted counterclaim.
Analysis and Decision
[¶7.] “On appeal, we will affirm summary judgment when the facts and law
are clear and no genuine issues of material fact exist.” Citibank South Dakota, N.A.
v. Schmidt, 2008 SD 1, ¶8, 744 NW2d 829, 832 (citing Bordeaux v. Shannon County
Sch., 2005 SD 117, ¶11, 707 NW2d 123, 126). “Motions to amend engage the sound
discretion of the trial court; thus decisions to grant or deny will not be disturbed
absent a clear abuse of discretion resulting in prejudice to the nonmovant.” Prairie
Lakes Health Care Sys., Inc. v. Wookey, 1998 SD 99, ¶28, 583 NW2d 405, 417
(citing Ripple v. Wold, 1996 SD 68, ¶12, 549 NW2d 673, 676 (citing Kjerstad v.
Ravellette Publications, Inc., 517 NW2d 419, 423 (SD 1994))).
[¶8.] The Krages contend that summary judgment was improperly granted
for two reasons: (1) an equitable claim is not “suited for summary disposition,” see
Ahl v. Arnio, 388 NW2d 532, 534 (SD 1986); and (2) there are material issues of fact
in dispute over what the parties intended for the disputed building. Summary
judgment is proper “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment as
a matter of law.” SDCL 15-6-56(c). Even though this action sounds in equity, and
such cases are not often susceptible to summary judgment, if there are no material
issues of fact in dispute, summary judgment may be appropriate. Farm Credit
Services of Am. v. Dougan, 2005 SD 94, ¶7, 704 NW2d 24, 27 (“summary judgment
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is a preferred method for disposing of any legally inadequate claim”) (citing Horne
v. Crozier, 1997 SD 65, ¶5, 565 NW2d 50, 52).
[¶9.] The Krages do not dispute that the contract for deed is silent on
whether the buildings on Lot 1 were to be conveyed with the deed. They take issue,
however, with the fact that the court “did not reference specific legal authority for
the proposition that the absence of a written reservation constitutes the intent to
transfer a fixture, or portion thereof, when the fixture is located outside the bounds
of the legal description.” The Krages further contend that when a portion of a
building is not included in the legal description of the land conveyed, the intent of
the parties cannot be ascertained solely from the four corners of the contract.
Berbos, on the other hand, argues that a reading of several contracts surrounding
the parties’ agreement together with an understanding of the history of the parties’
relationship, provide ample support for a conclusion that everyone intended that all
buildings on Lot 1 be sold as part of the overall transaction, including that portion
of the structure encroaching on Lot 2.
[¶10.] In granting summary judgment, the circuit court concluded that, as a
matter of law, all the buildings located on Lot 1 were sold under the contract for
deed because the deed did not include a reservation by the Krages of an interest in
any building. The court then ruled that the Krages intended to sell the entire
disputed building, including the part encroaching on Lot 2, based on its reading of
the four corners of the parties’ contract for deed, the earnest money agreement, and
the fact that the Krages did not assert, in response to Berbos’s motion for summary
judgment, that they intended to retain a portion of the disputed building.
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[¶11.] “Generally, absent a specific reservation in a deed, buildings and other
improvements used in connection with realty in such a way as to constitute
appurtenances or fixtures pass as a matter of course by the conveyance.” N.P., Inc.
v. Turboff, 111 SW3d 40, 44 (Tex 2003); see also Sheets v. Selden et al., 69 US 177,
17 LEd 822 (1864); Milam v. Coleman, 418 SW2d 329, 331 (TexCtApp 1967);
Baldwin v. Breed, 1843 WL 411 (Conn); Van Wagner v. Van Nostrand, 1866 WL 388
(Iowa 1865); Conner v. Coffin, 1851 WL 2098 (NH). Buildings that belong to the
grantor, “being part of the land, cannot be reserved by parol when the land is
conveyed; the deed conveys them to the grantee, unless the reservation be in
writing.” Herzog v. Marx, 94 NE 1063, 1064 (NY 1911) (quoting Mott v. Palmer, 1
NY 564, 569 (1848)). Here, the contract for deed contains no reservation, and
therefore, the court did not err when it ruled that all the buildings located on Lot 1
passed with the conveyance.
[¶12.] As to the disputed building not located wholly within Lot 1, we must
determine whether the court was correct in ruling that, as a matter of law, the
parties intended the entire building to be conveyed under the contract. The court
found no issue of material fact in dispute based in part on the four corners of the
contract for deed and the earnest money agreement, and in part because “Mr.
Krage’s responding affidavit does not state that he intended to keep all or part of
the building. . . .”
[¶13.] “Where a portion of a building has not been embraced within the
description of the land conveyed by the common owner of all the land covered by the
building, and where it does not clearly appear from the grant that the parties
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intended the entire building to pass, the cases hold generally that such grantee has
no right of ownership in, or right of possession to, the portion of the building on the
adjoining land.” Podlesny v. Baranko, 82 PaD&C 281, 284-85 (PA 1952) (emphasis
added); see also Adams v. Marshall, 52 AmRep 271 (Mass 1884); Whyte v. Builders’
League of New York, 58 NE 517, 518 (NY 1900); Griffiths v. Morrison, 12 NE 580,
581 (NY 1887); Baker v. Zingelman, 393 A2d 908, 911 (PaSuperCt 1978) (citing
Nestico v. Carnucci, 39 NorthumberlandLJ 39 (1966)). In the contract for deed
here, there is no mention of any buildings, let alone the disputed building.
Therefore, the garage-office portion situated on Lot 2 is not embraced within the
description of the land conveyed, and in accord with the general rule, Berbos has no
right to ownership of the portion of the building located on Lot 2. See Podlesny, 82
PaD&C at 284-85.
[¶14.] Despite the fact that Berbos has no right to own the portion of the
building on Lot 2, the court concluded that there is no material issue of fact in
dispute that the parties intended to pass the entire building with the conveyance.
As noted earlier, the court remarked that it was relying on the four corners of the
earnest money agreement and the contract for deed. These two documents,
however, shed no light on the parties’ intent with respect to the disputed building.
There is no mention of buildings whatsoever in the contract for deed. And, in the
earnest money agreement, while there is a phrase “including all buildings therein,”
this relates to a third party’s right to occupy the buildings on Lot 1.
[¶15.] “Summary judgment is a drastic remedy, and should not be granted
unless the moving party has established a right to a judgment with such clarity as
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to leave no room for controversy.” Richards v. Lenz, 539 NW2d 80, 83 (SD 1995)
(citing Jewson v. Mayo Clinic, 691 F2d 405 (8thCir 1982)). Berbos contends that
several documents and the history surrounding the parties’ transaction support a
conclusion that the parties intended to convey the entire building. He further
argues that the Krages failed to specifically attest in opposition to summary
judgment that they intended to retain all or any portion of the disputed building.
[¶16.] In his affidavit, Berbos declared that “[a]t no time did I enter into any
oral or written agreement with Mr. Krage that he would retain ownership of one
half of any rooms in this building. A review of the photographs sets forth that it
would be absolutely nonsense and impractical to physically divide a room in a
building where those rooms where [sic] completely dependant upon the facilities
and building located on Lot 1 for their proper use.” In a responsive affidavit, Mr.
Krage asserted that Lot 2 “was not subject to the relevant contract for deed and was
retained by Harold Krage and inhabited by” the Krages’ stepson. Mr. Krage further
attested that “prior to the execution of the contract for deed, a steel structure was
erected, partially upon the boundary of Lot 1 and Lot 2. . . . Berbos was well aware
that the steel building straddled the Lot 1/Lot 2 lines,” but “the contract for deed,
drafted by Berbos’s attorney, Robert Ronayne, made no reference to this fact and
was executed by Berbos.”
[¶17.] While the Krages’ affidavit does not contain a specific statement that
they intended to retain the building in whole or in part, the affidavit does state that
they intended to retain all of Lot 2 and that the Krages’ stepson occupied Lot 2.
These two statements support a reasonable inference, or at least a reasonable
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doubt, that the portion of the building located on Lot 2 was intended to be retained
by the Krages. See St. Paul Fire & Marine Ins. Co. v. Engelmann, 2002 SD 8, ¶15,
639 NW2d 192, 199 (“Not only must the facts not be in issue, but also there must be
no genuine issue on the inferences to be drawn from those facts.”). From our review
of the record, the intent of the parties is not clear. See Citibank South Dakota, N.A.,
2008 SD 1, ¶14, 744 NW2d at 834 (quoting S.D. Dept. of Rev. v. Thiewes, 448 NW2d
1, 2 (SD 1989) (citing Wilson v. Great Northern R.R. Co., 83 SD 207, 212, 157 NW2d
19, 21 (1968))). Moreover, when there is reasonable doubt on whether a genuine
issue of material facts exists, the doubt should be resolved against the movant.
Keystone Plaza Condominiums Ass’n v. Eastep, 2004 SD 28, ¶15, 676 NW2d 842,
847 (citations omitted). Because the matter of intent in this case can only be
resolved in a trial, we reverse the grant of summary judgment. See id.
[¶18.] On their next point, the Krages assert that the court abused its
discretion when it denied their motion to file an amended answer with their omitted
counterclaim. Their proposed amendment asserted counterclaims for interest and
foreclosure on the contract for deed. Because we reverse the grant of summary
judgment, the Krages’ motion to amend should be permitted.
[¶19.] With respect to the Krages’ request for prejudgment interest, the
circuit court found that Berbos made an unconditional offer of payment, tolling the
accrual of interest. See SDCL 20-5-18. “In the context of a contract for deed,
interest on the debt will stop running when the buyer tenders an unconditional offer
of payment.” Anderson v. Aesoph, 2005 SD 56, ¶27, 697 NW2d 25, 33 (citing Adrian
v. McKinnie, 2004 SD 84, ¶14, 684 NW2d 91, 98 (citing Schmidt v. Iowa Beef
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Processors, Inc., 347 NW2d 897, 898 (SD 1984))). Nonetheless, “[o]nly an
unconditional tender of payment sufficient to discharge the liability will toll interest
under SDCL 20-5-18.” Id. ¶28 (citing Adrian, 2004 SD 84, ¶15, 684 NW2d at 98
(citing Dougherty v. Beckman, 347 NW2d 587, 591 (SD 1984))).
[¶20.] On December 24, 2003, Berbos, through his attorney, acknowledged
that payment of $173,444.44 was due on January 1, 2004. His attorney wrote,
I am enclosing with this letter copies of the following:
1. check made payable to Mr. and Mrs. Krage in the amount of
$161,444.44; and
2. check made payable to my trust account in the amount of
$12,000.
...
We intend to withhold $12,000 from the final payment under the
contract in view of your client’s consistent inability or reluctance
to sign the documents necessary to provide title to the trailer.
At such time, however, as merchantable title is provided to the
real estate described in the contract for deed, I am authorized to
release the check in the amount of $161,444.44.
In another letter, dated March 22, 2004, counsel reiterated that the final payment
was available to the Krages: “You will note my correspondence to you of December
24, 2003, [in] which I included a copy of the check that we are willing to deliver. I
remain empowered to deliver that check as soon as clear title and possession of the
real estate is delivered.”
[¶21.] With these two letters, Berbos maintains that he tendered an
unconditional offer of payment, despite the fact that payment was conditioned on
the Krages providing clear title and possession of the real estate. According to
Berbos, requiring the Krages to provide clear title in return for payment is not a
condition sufficient to make the offer conditional. Indeed, we have said, “An offer is
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unconditional when the amount offered is sufficient to discharge the liability and
the payment does not demand something in addition to, or outside of, the original
agreement.” Anderson, 2005 SD 56, ¶28, 697 NW2d at 28 (citing Adrian, 2004 SD
84, ¶14, 684 NW2d at 98 (citing Schmidt, 347 NW2d at 898)); see also Estate of
Fisher v. Fisher, 2002 SD 62, ¶28, 645 NW2d 841, 849.
[¶22.] We conclude that the letter with the photocopied check was insufficient
under SDCL 20-5-18 because it proposed to pay the Krages $12,000 less than the
total obligation. The check was for $161,444.44, and Berbos’s total obligation was
$173,444.44. See Dougherty, 347 NW2d at 591 (tender was not for full obligation, so
insufficient). “‘[T]ender’ is generally defined as an unconditional offer of payment
consisting in the actual production of a sum not less than the amount due on a
specific debt or obligation.” Adrian, 2004 SD 84, ¶10, 684 NW2d at 96 (citation
omitted). Because this offer fails to satisfy SDCL 20-5-18, the court erred when it
concluded that the accrual of interest was tolled.
[¶23.] Reversed and remanded.
[¶24.] GILBERTSON, Chief Justice and SABERS, ZINTER, and
MEIERHENRY, Justices, concur.
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Berbos v. Krage
Court: South Dakota Supreme Court
Date filed: 2008-07-16
Citations: 2008 SD 68, 754 N.W.2d 432
Copy CitationsCombined Opinion