15 N.W.3d 433
S.D.2024Background
- CAL SD, LLC entered a purchase agreement with Interwest Leasing, LLC to buy commercial real estate, making a $30,000 earnest money deposit.
- The agreement was contingent on CAL SD obtaining financing; before closing, Chris Welsh (CAL SD’s principal) died, and CAL SD ultimately refused to close.
- Interwest found another buyer for the same price, sold the property, but did not return the earnest money deposit to CAL SD.
- CAL SD filed a declaratory judgment action, seeking return of the deposit, claiming failure to obtain financing voided the contract per its terms.
- The circuit court classified the case as a breach of contract action at law, not equity, and submitted it to a jury, which found for CAL SD; Interwest appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Equitable vs. Legal Nature of Claim | Case is legal: breach of contract and right to return of deposit under contract terms | Case is equitable: seeking contract rescission and return of deposit | Action is legal, jury trial was proper |
| Right to Jury Trial | Entitled to jury trial for legal breach of contract issues | No right to jury trial on equitable rescission | Jury trial right applies |
| Effect of Financing Contingency | Failure to obtain financing means contract void, deposit must be returned | Contract not voided; earnest money should be forfeited | Contract void per terms, deposit returned |
| Jury Instructions | Correct to instruct jury on breach | Instructions should have addressed equitable defenses, higher standard | Instructions were proper |
Key Cases Cited
- First Nat’l Bank of Philip v. Temple, 642 N.W.2d 197 (S.D. 2002) (distinguishing legal and equitable actions for declaratory relief)
- Granite Buick GMC, Inc. v. Ray, 856 N.W.2d 799 (S.D. 2014) (analysis of legal vs. equitable nature of claims and when jury trials apply)
- Knudsen v. Jensen, 521 N.W.2d 415 (S.D. 1994) (difference between legal and equitable rescission of contracts)
- Skoglund v. Staab, 312 N.W.2d 29 (S.D. 1981) (legal vs. equitable rescission distinguished by relief sought)