Holverson v. Lundberg, 2016 ND 103

Background

In 1978 Holverson purchased a 40.4-acre tract from the Gabriel J. Brown Trust by contract for deed requiring down payment and annual payments; time was made "of the essence."
In 1980 the Trust released 5.09 acres to Holverson and took a mortgage on that parcel, subordinated to a bank mortgage.
Holverson made sporadic payments for years; in 1997 parties amended the contract and mortgage (subordinating the Trust to a $40,000 Capital Credit Union loan) and set a new payment schedule through 2008.
The Trust alleges Holverson executed and later satisfied multiple other mortgages on the land and that he misrepresented facts to induce the 1997 amendment; the Trust began cancellation proceedings in December 2012 and demanded payment in 2013.
Holverson tendered a certified check for the balance in June 2013; the Trust refused and Holverson sued to quiet title and compel conveyance. The Trust counterclaimed for fraud (rescission) and for breach (damages).
The district court granted summary judgment for Holverson, ordered conveyance, dismissed the Trust’s counterclaims, and (after appeal and amendment) the Supreme Court affirmed.

Issues

Issue	Holverson's Argument	Lundberg/Trust's Argument	Held
Whether triable issues exist on Trust’s fraud-based rescission claim	Holverson denied fraud; argued statute bars late claims and that acceptance of payments waived time-of-payment clause	Trust argued Holverson made promises he never intended to keep and fraudulently induced the 1997 amendment; alleged trustee discovered fraud only in 2013	Court assumed facts favoring Trust but held fraud/rescission claims are time-barred by limitations (discovery/constructive notice in Nov. 1997)
When fraud claim accrued under statute of limitations	Holverson: accrual occurred when Trust had constructive notice of recorded instruments in 1997	Trust: subjective discovery was in 2013, so claim is timely	Court applied discovery rule objectively: trustee was charged with constructive notice of recorder’s office in Nov. 1997, so claim accrued then and is barred by 2013 filing
Whether acceptance of sporadic late payments waived "time is of the essence" clause	Holverson: long acceptance of late/reduced payments waived the clause and barred damages remedy; he cured default under statutory cure period	Trust: waiver argument premised on fraud or was otherwise disputed	Court held as a matter of law the Trust waived the time-of-payment provision by accepting payments for 30+ years; thus Holverson entitled to conveyance
Whether triable issue exists on damages for breach of contract (alternative claim)	Holverson: remedies for breach are barred by waiver and statute; tender cured default	Trust: alternatively seeks damages if rescission denied; disputes exist about measurement and facts	Court dismissed damages claim as barred by limitations (to extent premised on fraud) and, separate from fraud, waiver precluded contractual damages arising from time-of-payment breaches

Key Cases Cited

Tibert v. Nodak Mut. Ins. Co., 816 N.W.2d 31 (N.D. 2012) (summary judgment standards)
Podrygula v. Bray, 856 N.W.2d 791 (N.D. 2014) (discovery rule and constructive notice principles)
Jones v. Barnett, 619 N.W.2d 490 (N.D. 2000) (discovery rule: notice of facts puts a party on inquiry)
Wells v. First Am. Bank West, 598 N.W.2d 834 (N.D. 1999) (objective discovery rule analysis)
Erickson v. Brown, 747 N.W.2d 34 (N.D. 2008) (fraud versus deceit; fraudulent inducement requires factual inquiry)
Vanderhoof v. Gravel Prods., Inc., 404 N.W.2d 485 (N.D. 1987) (constructive notice of recorded instruments affecting title)
First Nat. Bank v. Big Bend Land Co., 164 N.W. 322 (N.D. 1917) (senior encumbrancer and constructive notice discussion)
Langenes v. Bullinger, 328 N.W.2d 241 (N.D. 1982) (limits on remedies for contract-for-deed vendors)