890 N.W.2d 213
N.D.2017Background
- John and Inez Beckstrand sold Benson County farmland to Justin and James Beckstrand by two contracts for deed (2001 and 2007); annual payments were due each November.
- James died in 2013; John died in 2014 leaving a will directing how unpaid contract payments should be distributed or forgiven.
- Purchasers (Justin and James/Cynthia) did not pay for 2013–2014; the estate sued to cancel the contracts by action.
- Because trial was set after planting, the district court allowed the land to be farmed in 2015 by the highest bidder, giving the purchasers first refusal; purchasers matched the high bid and deposited $164,202.40 with plaintiff’s counsel.
- After trial the court found purchasers in default but allowed limited redemption periods and entered an order (1) requiring certain payments, (2) forgiving remaining indebtedness conditionally, and (3) permitting the estate to keep the 2015 rental funds as "remedial for all parties."
- Purchasers appealed only the district court’s refusal to return the 2015 rental payment; the Supreme Court reversed and remanded because the district court’s findings did not adequately explain the basis for awarding the rents to the estate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who is entitled to the 2015 farm rental payments collected during pendency of cancellation-by-action? | Estate: in equity the court may allocate rents and profits; the award was remedial and within the court’s equitable authority. | Purchasers: as equitable owners under contracts for deed (akin to mortgagors), they were entitled to rents during redemption or while in possession; foreclosure statutes and redemption concepts support returning rents to purchasers. | Reversed and remanded — the court concluded foreclosure statutes did not apply, equitable authority exists to allocate rents, but the district court’s findings were inadequate to explain why the estate (not purchasers) received the funds; remand for explanation and further equitable adjustments. |
| Applicability of mortgage foreclosure statutes (redemption/rents) to cancellation-by-action of contracts for deed | Estate: not directly argued; relied on equity. | Purchasers: statutes governing mortgage/land-contract foreclosures (entitling debtor to rents during redemption) should apply. | Court: foreclosure statutes do not govern cancellation-by-action; those statutes apply to foreclosure/ statutory cancellation methods, not an equitable cancellation action. |
| Whether a redemption period or right to redeem required the district court to award rents to purchasers | Estate: court may refuse to provide statutory-style redemption and still equitably distribute rents. | Purchasers: if redemption applies, rents belong to purchasers for the redemption period. | Court: cancellation-by-action is equitable and court may allow or deny redemption; here court allowed redemption periods beginning at entry of judgment (after 2015 crop), so statutory redemption rents (if any) would have begun after the 2015 season. |
| Adequacy of findings supporting award of rents to the estate | Estate: terse findings sufficient because award was remedial. | Purchasers: findings must explain why rents granted to estate rather than purchasers. | Court: district court’s oral and written findings did not explain why it awarded the rents to the estate; findings are inadequate to permit appellate review — reversal and remand for explanation. |
Key Cases Cited
- Johnson v. Finkle, 837 N.W.2d 132 (N.D. 2013) (explains equitable ownership under a contract for deed)
- Kautzman v. Kautzman, 668 N.W.2d 59 (N.D. 2003) (mortgage/statutory foreclosure rules limited to foreclosure/land-contract foreclosure actions)
- Langenes v. Bullinger, 328 N.W.2d 241 (N.D. 1982) (describes three methods to cancel a contract for deed and distinguishes remedies)
- Nearing v. Coop, 70 N.W. 1044 (N.D. 1897) (early precedent holding contract-for-deed vendee in possession is entitled to rents/profits like an owner)
- Arhart v. Thompson, 31 N.W.2d 56 (N.D. 1948) (equitable power to adjust rights to rents and expenses in specific performance/contract disputes)