969 N.W.2d 150
N.D.2022Background
- July–Dec 2018: Plaintiffs Jeanne and Nevin Tergesen contracted with Nelson Homes to buy a new manufactured home for $149,750 (deposit $13,500); written agreement provided for delivery and set up.
- Home delivered November 9, 2018; plaintiffs occupied it by December 25, 2018 and reported multiple defects (trim, sheetrock, flooring, nails, shingles).
- Nelson Homes and the manufacturer repaired many reported defects; by July 2019 most work was allegedly complete except trim and minor cosmetic items.
- Communication broke down July 24, 2019; plaintiffs declined to pay the unpaid balance ($124,250) and refused further work or to accept a contractor on the property.
- October 2019: plaintiffs sued seeking rescission, refund, costs, and removal of the home; Nelson Homes counterclaimed for breach (failure to pay balance).
- Trial court found plaintiffs breached by refusing to pay after July 24, 2019, dismissed plaintiffs’ claims, and awarded Nelson Homes the unpaid purchase price plus prejudgment interest from December 14, 2018; on appeal the Supreme Court affirmed most rulings but remanded to change the start date for prejudgment interest to July 24, 2019.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs breached by failing to pay the purchase price | Payment was not required until set up was completed; setup remained incomplete so they were excused from paying | Contract required payment before delivery and setup; plaintiffs unreasonably refused to pay after July 24, 2019 | Court: plaintiffs breached by refusing to pay on and after July 24, 2019 (court corrected that payment-before-delivery language was misread but breach finding stands) |
| Whether Nelson Homes breached by failing to set up the home in a workmanlike/timely manner or breached implied habitability warranty | Numerous defects remained uncorrected making the home unfit; breach excused plaintiffs’ payment obligation | Nelson Homes and manufacturer addressed most complaints; only minor trim/cosmetic items remained and work was in progress until plaintiffs barred the contractor | Court: no clear error in finding no material, value- impairing defect as of July 24, 2019; Nelson Homes did not breach |
| Whether plaintiffs are entitled to rescission of the contract | Failure to deliver a defect-free, fully set up home and mutual consent justify rescission (equitable rescission under N.D.C.C. §32-04-21) | Consideration (sale, delivery, set up) was substantially performed; plaintiffs did not offer restoration; rescission not justified | Court: denial of rescission affirmed—plaintiffs failed to establish statutory grounds or to offer restoration; district court did not abuse discretion |
| Proper start date for prejudgment interest on the unpaid balance | Interest should not run from Dec 14, 2018 because Nelson Homes had unfinished obligations then | Interest should run from the date the balance became due or the contract was repudiated | Court: prejudgment interest allowed but should run from July 24, 2019 (date of breach/refusal), not Dec 14, 2018; remanded to correct interest calculation |
Key Cases Cited
- Command Ctr., Inc. v. Renewable Res., LLC, 956 N.W.2d 755 (N.D. 2021) (bench-trial standard of review for findings and conclusions)
- Brash v. Gulleson, 835 N.W.2d 798 (N.D. 2013) (bench-trial credibility and factual findings review)
- Big Pines, LLC v. Baker, 940 N.W.2d 616 (N.D. 2020) (contract interpretation when language is clear is a question of law)
- Gadeco, LLC v. Industrial Commission, 830 N.W.2d 535 (N.D. 2013) (ordinary meaning of "and" as conjunctive)
- Red River Wings, Inc. v. Hoot, Inc., 751 N.W.2d 206 (N.D. 2008) (prejudgment interest runs from date right to recover became vested)
- Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494 (N.D. 1974) (date to start interest when contract repudiated)
- American Bank Center v. Wiest, 793 N.W.2d 172 (N.D. 2010) (rescission is equitable, discretionary, and not lightly granted)
- Golden Eye Resources, LLC v. Ganske, 853 N.W.2d 544 (N.D. 2014) (procedures for rescission at law vs. in equity)