L & L PARTNERSHIP a/k/a Lutz and Laidlaw Partnership a/k/a Lutz-Laidlaw Partnership, Marvin Lutz, General Partner, Plaintiffs, v. ROCK CREEK FARMS, Defendant and Appellant, and Michael Arnoldy; Ann Arnoldy, Defendants and Appellees, and David M. Finneman; Connie S. Finneman; Tom J. Wipf; Johnny Jay Wipf d/b/a Wipf Farms; Joann Wipf; Rabo Agrifinance, Inc. f/k/a AG Services of America, Inc. and Rabo Agservices, Inc.; Sheehan Mack Sales and Equipment, Inc.; Farm Capital Company, LLC., Daniel R. Mahoney; Portfolio Recovery Associates, PRA III LLC; Pfister Hybrid Corn Co.; Kaup Seed & Fertilizer, Inc.; Joyce M. Wolken; Charles W. Wolken; Stan Anderson; Dennis Anderson; Kent Kjerstad; U.S. Bancorp Equipment Finance, Inc.; Kenco Inc. d/b/a Warne Chemical & Equipment Company; Doug Kroeplin Ag Services, Inc.; Credico, Inc. d/b/a Credit Collections Bureau; Scot D. Eisenbraun; Melody Eisenbraun; Bart Cheney; Hal Oberlander; Kei Oberlander; Ray S. Olsen; Patrick X. Trask; Rose Mary Trask; Pennington County, South Dakota; Meade County, South Dakota; and The United States of America, Defendants. L & L Partnership a/k/a Lutz and Laidlaw Partnership a/k/a Lutz-Laidlaw Partnership, Marvin Lutz, General Partner, Plaintiffs, v. David M. Finneman and Connie S. Finneman, Defendants and Appellants, and Michael Arnoldy; Ann Arnoldy, Defendants and Appellees, and Rock Creek Farms, Successors in Interest to David M. Finneman and Connie S. Finneman; Tom J. Wipf; Johnny Jay Wipf d/b/a Wipf Farms; Joann Wipf; Rabo Agrifinance, Inc. f/k/a AG Services of America, Inc. and Rabo Agservices, Inc.; Sheehan Mack Sales and Equipment, Inc.; Farm Capital Company, LLC., Daniel R. Mahoney; Portfolio Recovery Associates, PRA III LLC; Pfister Hybrid Corn Co.; Kaup Seed & Fertilizer, Inc.; Joyce M. Wolken; Charles W. Wolken; Stan Anderson; Dennis Anderson; Kent Kjerstad; U.S. Bancorp Equipment Finance, Inc.; Kenco Inc. d/b/a Warne Chemical & Equipment Company; Doug Kroeplin AG Services, Inc.; Credico, Inc. d/b/a Credit Collections Bureau; Scot D. Eisenbraun; Melody Eisenbraun; Bart Cheney; Hal Oberlander; Kei Oberlander; Ray S. Olsen; Patrick X. Trask; Rose Mary Trask; Pennington County, South Dakota; Meade County, South Dakota; and The United States of America, Defendants.
Nos. 26373, 26374
Supreme Court of South Dakota
Decided Feb. 19, 2014
2014 S.D. 9
Argued Jan. 14, 2014.
Robert R. Schaub, Sundall, Schaub & Fox, PC, Chamberlain, South Dakota and Vince M. Roche, Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellees.
James P. Hurley, Bangs, McCullen, Butler, Foye & Simmons, LLP, Rapid City, South Dakota, Attorneys for defendants and appellants.
Robert R. Schaub, Sundall, Schaub & Fox, PC, Chamberlain, South Dakota and Vince M. Roche, Elizabeth S. Hertz, Davenport, Evans, Hurwitz & Smith, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellees.
SEVERSON, Justice.
[¶ 1.] David and Connie Finneman (Finnemans) (Appeal No. 26374) and Rock Creek Farms Partnership (RCF) (Appeal No. 26373), collectively referred to as Appellants, appeal the circuit court‘s decision granting Ann Arnoldy (Arnoldy) equitable ownership of the real estate outlined in two contracts for deed. We affirm.1
[¶ 2.] This appeal is part of a continuing dispute between Appellants and Arnoldy concerning the ownership of 16,700 acres of farmland in Pennington and Meade Counties.2 The Finnemans owned 16,700 acres of land. Of those acres, 7,500 were owned in fee simple and 9,200 were purchased via contract for deed from L & L Partnership (L & L). The first contract for deed, dated April 29, 1996, was for 6,950 acres; the second, dated October 13, 1999, was for 2,250 acres. Finnemans encumbered their interest in all the land except 200 acres of the contracts for deed property with two mortgages, one to Rabo Agrifinance, Inc. (Rabo), and an inferior mortgage to FarmPro Services, Inc. (FarmPro). In May 2007, Finnemans used a quit claim deed to transfer their interests in all the property to RCF, which included Finnemans and other outside investors as partners.3 While L & L‘s foreclosure on the contracts for deed is the subject of this appeal, the two mortgages of Rabo and FarmPro have been the subject of four previous appeals to this Court.4
[¶ 3.] FarmPro foreclosed on its mortgage in 2000 and received a final judgment in 2003.5 A sheriff‘s sale was held in 2006. In 2007, Michael Arnoldy and Ann Arnoldy, brother and sister, purchased a number of judgments and redeemed the land as creditors. A Finneman associate, Daniel Mahoney, redeemed the land from Michael Arnoldy under two judgments the Arnoldys believed were fraudulent. Ann Arnoldy then redeemed from Mahoney. RCF and Finnemans then purported to exercise the owner‘s right of redemption. In October 2008, Arnoldys filed a declaratory judgment action based on the alleged fraud surrounding the Mahoney redemption. The circuit court granted summary judgment in favor of Arnoldys in January 2010. RCF and Finnemans appealed to this Court in Arnoldy I, 2010 S.D. 89, 791 N.W.2d 645.
[¶ 4.] While Arnoldy I was pending in circuit court, Rabo foreclosed on its mortgage in July 2009. In its pleadings, Rabo asserted that Finnemans had waived the owner‘s right of redemption in a previous modification to the loan. Rabo moved for judgment on the pleadings, which Judge Delaney granted. While Judge Delaney‘s January 15, 2010 order stated that Rabo‘s motion for judgment on the pleadings would be granted in all respects, the corresponding judgment added a clause not alleged in the pleadings stating that RCF had the owner‘s right of redemption.
[¶ 5.] On December 1, 2010, in Arnoldy I, we reversed the circuit court‘s grant of summary judgment because the circuit court erred in handling the in camera review of Defendant‘s client files and genuine issues of material fact precluded summary judgment on Arnoldy‘s claims of delay, fraud, deceit, and wheth-
[¶ 6.] At approximately the same time that Arnoldy filed her appeal in Arnoldy II, she also moved the Rabo foreclosure court, pursuant to
[¶ 7.] In March 2010, while the appeal of Arnoldy I was pending and prior to Arnoldy‘s Rule 60(b) motion in the Rabo foreclosure to set aside the January 15, 2010 order, L & L commenced its foreclosure proceedings on the contracts for deed. The case went to trial in July 2011, after Arnoldy I had been decided and while the appeal of Rabo I was pending. At the conclusion of the trial, the circuit court made findings on the amount L & L was owed under the contracts for deed and delayed the ruling on who had the right to cure the contracts for deed default until after Rabo I was decided. In Rabo I, we dismissed the appeal for failure to serve notice of appeal on the United States as a party defendant. Rabo I, 2012 S.D. 20, ¶¶ 6-20, 813 N.W.2d at 125-30.
[¶ 8.] In response to our dismissal of the claims in Rabo I, RCF and Finnemans filed Rule 60(b) motions in attempt to again address the issues originally raised in Rabo I. The motions were denied and RCF and Finnemans appealed. Our decision in Rabo II affirmed the circuit court‘s denial of the Rule 60(b) motions. Rabo II, 2013 S.D. 64, ¶ 29, 836 N.W.2d 631, 641. As a result of our decision in Rabo II, Judge Delaney‘s May 26, 2011 order granting Arnoldy the right of redemption to the mortgaged property remained in effect, and Arnoldy II was dismissed. Id. at 641, n. 8.
[¶ 9.] Shortly after Rabo I was decided, the circuit court ruled on the L & L foreclosure granting Arnoldy equitable ownership of the real estate described in the contracts for deed and the right to cure the contracts for deed default under
- Whether the circuit court erred in granting Arnoldy equitable ownership of the real estate in the contracts for deed and the right to cure the contracts for deed default under
SDCL 21-50-3 . - Whether the circuit court erred in denying Appellants’ motion to vacate the sheriff‘s deed.
- Whether the circuit court erred in substituting Arnoldy for Rock Creek Farms.
[¶ 10.] We review conclusions of law de novo. Eagle Ridge Estates Homeowners Ass‘n, Inc. v. Anderson, 2013 S.D. 21, ¶ 13, 827 N.W.2d 859, 864. A circuit court‘s decision to substitute parties is reviewed for abuse of discretion.
Analysis
[¶ 11.] 1. Whether the circuit court erred in granting Arnoldy equitable ownership of the real estate in the contracts for deed and the right to cure the contracts for deed default under
[¶ 12.] As a result of Judge Delaney‘s May 26, 2011 order and our decisions in Rabo I and Rabo II, Arnoldy was granted the owner‘s right of redemption to all the property subject to the Rabo mortgage, which included the contracts for deed land. Prior to this appeal, Arnoldy redeemed all the mortgaged property and received the sheriff‘s deed to the same. Appellants concede that Arnoldy is the owner of the 7,500 acres not covered by the contracts for deed, but argue that only Finnemans, as original vendee to the contracts for deed, and their assignee RCF, have the right to cure the default and comply with the terms of the contracts for deed.6 We disagree.
[¶ 13.] “In a contract for deed, the installment vendor maintains ‘legal title to the property while the vendee holds equitable title and has the right to use and possession of the property.‘” Anderson v. Aesoph, 2005 S.D. 56, ¶ 21, 697 N.W.2d 25, 31 (quoting First Fed. Sav. & Loan Ass‘n of Storm Lake v. Lovett, 318 N.W.2d 133, 135 (S.D. 1982)). The equitable title held by the contract vendee is transferrable by operation of law or by an instrument in writing. Id.;
[¶ 14.] Appellants agree equitable title can be mortgaged, but argue that the right to cure a contract for deed default held under equitable title cannot be mortgaged nor involuntary transferred. Appellants cite to
[¶ 15.] We are not persuaded that the cure rights afforded by
[¶ 16.] In the instant case, Appellants had an equitable interest in 9,200 acres of land under the 1996 and 1999 contracts for deed and a legal interest in the other 7,500 acres of land. Appellants mortgaged their interest in 16,500 of the 16,700 acres to Rabo. Rabo subsequently foreclosed on all 16,500 acres under
[¶ 17.] If we adopted Appellants’ interpretation of
[¶ 18.] 2. Whether the circuit court erred in denying Appellants’ motion to vacate the sheriff‘s deed.
[¶ 19.] Appellants argue that the June 2, 2011 sheriff‘s deed issued to Arnoldy as a result of her redemption in the Rabo foreclosure “violated the basic requirements of due process” because it was a “secret deed ... prepared, signed, and filed without any prior notice and opportunity to be heard.” We disagree. Appellants’ argument incorrectly aligns the deprivation of property with the issuance of the sheriff‘s deed rather than the May 26, 2011 order that granted Arnoldy the owner‘s right of redemption. The issuance of a sheriff‘s deed is a ministerial act required to complete a transfer of title.
[¶ 20.] 3. Whether the circuit court erred in substituting Arnoldy for Rock Creek Farms.
[¶ 21.] The circuit court concluded that “Ann Arnoldy is substituted for the defendants, Rock Creek Farms Partnership, whose interest in the land has been extinguished by virtue of the issuance of the sheriff‘s deed and the decision of [Rabo I].”7 Procedural error only necessitates reversal when it has an effect on the final result and adversely affects the rights of the party assigning the error. Tri-State Co. of Minn. v. Bollinger, 476 N.W.2d 697, 700 (S.D. 1991); K & E Land & Cattle,
[¶ 22.] Appellants first argue
[¶ 23.] Under Rule 25(c), a transferee may be substituted for the original party, or “the case may be continued against the original defendant and the judgment will be binding” on the transferee even if the transferee is not named in the lawsuit. Luxliner P.L. Export, Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 71 (3rd Cir. 1993) (citation omitted);
[¶ 24.] Here, the circuit court‘s substitution of Arnoldy for RCF did not alter RCF‘s substantive rights in the litigation. Rather, the substantive rights were altered as a result of the circuit court‘s ruling that Arnoldy has equitable ownership of the real estate in the contracts for deed. Aside from its right to appeal the circuit court‘s decision, RCF no longer has any substantive rights in future litigation because it no longer holds any property interest. In its discretion, the circuit court used substitution as a procedural device for the purpose of facilitating the litigation. Our affirmance of the circuit court‘s legal conclusions regarding who possesses equitable title of the real estate in the contracts for deed forecloses any substantive rights RCF has in future litigation and therefore, any procedural error RCF advances is harmless. If the circuit court declined to substitute Arnoldy for RCF, the outcome of this case remains the same: RCF appeals, we affirm the circuit court‘s ruling, RCF is stripped of its future litigation rights concerning their ownership interest of the real estate in the contracts for deed, and our decision is binding on Arnoldy as transferee of RCF‘s contract vendee rights. Therefore, the circuit court did not err in substituting Arnoldy for RCF.
[¶ 25.] Affirmed.
[¶ 26.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER and WILBUR, Justices, concur.
SEVERSON
JUSTICE