L&L P'ship v. Rock Creek Farms, Finnemans
2014 SD 9
S.D.2014Background
- Finnemans owned ~16,700 acres: ~7,500 acres in fee simple and ~9,200 acres by two contracts for deed with L&L Partnership. They mortgaged ~16,500 acres to Rabo Agrifinance (Rabo).
- Rabo foreclosed on its mortgage; Michael and Ann Arnoldy redeemed portions and, after post-foreclosure proceedings and appeals, Ann Arnoldy was granted the owner’s right of redemption and received a sheriff’s deed to the mortgaged property (including most contract-for-deed land).
- Separate foreclosure by L&L on the contracts for deed led to litigation over who has the statutory right to cure (comply with) contract-for-deed defaults under SDCL 21-50-3.
- RCF (Rock Creek Farms, successor/assignee of Finnemans’ interests) and the Finnemans contended only the original contract vendee or voluntary assignee could cure the contract default; Arnoldy asserted equitable ownership and the cure right after the Rabo foreclosure and her redemption.
- The circuit court concluded Arnoldy held equitable title to the contract-for-deed land and the right to cure defaults under SDCL 21-50-3, denied Appellants’ motion to vacate the sheriff’s deed, and substituted Arnoldy for RCF; the Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Arnoldy obtained equitable ownership of the contract-for-deed land and the SDCL 21-50-3 right to cure defaults after redeeming at Rabo foreclosure | Appellants (RCF/Finneman): only the original vendee or a voluntary transferee may exercise cure rights; cure right cannot be involuntarily transferred by mortgage foreclosure | Arnoldy: equitable title (and associated cure rights) passed to her by operation of law after Rabo’s foreclosure, redemption, and sheriff’s deed | Court: Affirmed — equitable title (and cure rights under SDCL 21-50-3) transferred to Arnoldy by operation of law following foreclosure and issuance of sheriff’s deed; cure right can pass with equitable title |
| Whether the sheriff’s deed to Arnoldy should be vacated for lack of due process | Appellants: the sheriff’s deed was a “secret deed” issued without notice or hearing, violating due process | Arnoldy: the sheriff’s deed was a ministerial act effectuating the May 26, 2011 order that granted redemption; notice was provided earlier in proceedings | Court: Affirmed denial to vacate — any due-process question tied to the May 26, 2011 order (not the ministerial sheriff’s deed); Appellants had notice and opportunity to be heard |
| Whether the court erred by substituting Arnoldy for Rock Creek Farms | Appellants: substitution was procedurally improper and altered their substantive rights without hearing | Arnoldy: substitution under Rule 25(c) is appropriate where interest transferred; substitution is procedural and does not change substantive rights | Court: Affirmed substitution — substitution was a permissible procedural device; substantive rights were already extinguished by the transfer of title, so substitution was harmless |
Key Cases Cited
- Anderson v. Aesoph, 697 N.W.2d 25 (S.D. 2005) (equitable title under a contract for deed is transferable and carries contract rights)
- Rist v. Andersen, 19 N.W.2d 833 (S.D. 1945) (redemption by mortgagor extinguishes the foreclosing mortgage but leaves property subject to junior liens)
- Kruse v. State, 38 N.W.2d 925 (S.D. 1949) (sheriff’s deed following foreclosure conveys title free of junior liens)
- Luxliner P.L. Exp. Co. v. RDI/Luxliner, Inc., 13 F.3d 69 (3d Cir. 1993) (Rule 25(c) substitution is procedural and does not usually alter substantive rights)