Opinion
No. C3-95-2426.
Filed June 18, 1996.
Appeal from the District Court, Carver County, File No. C7941442.
Terry H. Rueb, Rueb Karl Law Office, (for Respondents).
Paul A. Sortland, Sortland Law Office, (for Appellants).
Considered and decided by Willis, Presiding Judge, Crippen, Judge, and Amundson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1994).
UNPUBLISHED OPINION
Bob Buck and Patrick Rath, vendees in this contract for deed action, appeal from a default judgment in favor of vendors Douglas and Nancy Schmid, arguing that: (1) the district court erred by ordering specific performance for payment of a specific amount of money; (2) vendees agreed only to entry of judgment for a specific amount and the district court, therefore, erred by including findings of fact and conclusions regarding future remedies in its written order; and (3) the district court erred by concluding that vendors had not elected their remedy. We affirm in part and reverse in part.
FACTS
Respondents Douglas and Nancy Schmid (vendors) entered into a contract for deed with appellants Bob Buck and Patrick Rath (vendees). Vendors agreed to sell and vendees agreed to buy real property located in Hennepin County. Vendees agreed to pay vendors $3,600 per month for seven years, followed by a lump sum payment. The contract required vendees to pay all real estate taxes and assessments, to insure the buildings, improvements, and fixtures on the property against loss, and to maintain liability insurance on the property.
Vendors sued vendees for specific performance on the contract for deed, seeking $100,670 for delinquent installment payments and late fees and $56,662.58 for delinquent escrow payments. In the alternative, vendors sought $157,332.58 in damages, plus interest. In addition to either specific performance or damages, vendors sought to recover costs and disbursements of the action.
At a pretrial hearing, vendees consented to entry of a default judgment for the amount demanded by vendors. Vendors recited on the record the amounts sought in the complaint and the method of calculating the amounts. Vendees stated that they did not agree with vendors' accounting of the amounts sought, but that they consented to default judgment for the total amount. Vendors then stated their position that the default judgment was not an election of remedies with regard to future breaches of the contract by vendees. Vendees did not agree and restated that they were consenting only to allowance of default judgment for the amount demanded in the complaint. The court refused to decide the issue of future elections of remedies. On the record, the court dismissed vendees' counterclaim without prejudice and ordered entry of default judgment in vendors' favor for $163,751.72.
In its written order, the district court included findings of fact that discussed the time period and items for which vendors sought relief. The court concluded that vendors were entitled to default judgment for specific performance on their complaint and ordered entry of judgment of $163,751.72 for the period and items described in the court's findings of fact. This appeal followed.
DECISION I. Specific Performance
Vendees contend that the district court erred by ordering specific performance for payment of a certain sum of money. They argue that specific performance is only appropriate when money damages will not suffice.
Generally, specific performance will not be granted when a party has an adequate remedy at law. However, under a contract to convey real property, both the vendor and vendee have a right to specific performance of the contract. Kennedy v. Hasse , 262 Minn. 155, 161, 114 N.W.2d 82, 86-87 (1962). Because a vendee may bring a suit in equity to compel execution and delivery of a deed, a vendor may also bring an equitable proceeding to enforce the vendee's obligation under the contract, even though a substantial part of the vendor's relief is the recovery of money. Abbott v. Moldestad , 74 Minn. 293, 299, 77 N.W. 227, 229 (1898) ( cited in Thompson v. Kromhout , 413 N.W.2d 884, 885 (Minn.App. 1987), review denied (Minn. Dec. 22, 1987)). Thus, the district court did not err in ordering specific performance in this case. See Thompson , 413 N.W.2d at 885 ("The trial court therefore properly concluded respondents were not confined to an action at law for damages but were entitled to the same equitable right as a vendee to compel specific performance of the contract for deed.").
II. Default Judgment
Vendees argue that the parties stipulated only to entry of judgment in the amount requested in the complaint plus interest and accumulated costs. They claim that the district court erred by including in its order factual findings and conclusions regarding future remedies.
The relief granted in a default judgment "is limited in kind and degree to that specifically demanded in the complaint." Duenow v. Lindeman , 223 Minn. 505, 512, 27 N.W.2d 421, 426 (1947). Entry of default judgment by the district court "is equivalent to an admission by the defaulting party to properly pleaded claims and allegations." State by Humphrey v. Ri-Mel, Inc. , 417 N.W.2d 102, 110 (Minn.App. 1987), review denied (Minn. Feb. 17, 1988).
On the basis of vendees' consent, the court entered judgment in favor of vendors in the amount requested in the complaint, including costs and interest. The court recited facts generally describing the dates and items pleaded in the complaint. Thus, the allegations of the complaint are deemed admitted, and vendees may not argue that the court improperly made findings consistent with those allegations. See id.
Even if we were to conclude that the district court erred by including findings of fact in its order, which we do not, the error in this case would have been harmless. The findings did not affect the amount of the judgment or the relief granted in favor of vendors. The court's findings of fact, therefore, do not "affect the substantial rights of the parties" and are not "inconsistent with substantial justice." See Minn.R.Civ.P. 61.
Vendees also argue that the district court erred by concluding [t]hat any payments, action, or judgment ordered herein shall not be construed as a waiver by the [vendors] of any rights they have to seek enforcement of the [vendees'] obligations under the parties' Contract for Deed. Nothing herein shall serve to excuse or relieve the [vendees] from their obligation to perform under the parties' Contract for Deed.
We agree with vendees that the district court should not have included this conclusion in its order for judgment. Vendors did not request in their complaint a determination of their future rights to enforce vendees' contract obligations. Consequently, the district court ordered relief that exceeds the kind and degree of relief demanded in the complaint. We reverse the district court's inclusion in its order of the above-quoted paragraph regarding vendors' future rights to enforce the contract for deed, and we strike that paragraph from the district court's order.
III. Election of Remedies
Vendees argue that because vendors sued for money damages, they have effectively elected their remedy and thus have waived their ability to have equitable performance and return of the property.
Vendees correctly note that this court has held that a contract for deed vendor may not recover the land, retain all monies paid, and collect additional installments due under the contract. See Neuman v. Demmer , 414 N.W.2d 240, 243 (Minn.App. 1987), review denied (Minn. Jan. 15, 1988). Vendees argue that this is what vendors are trying to do in this case. We disagree. For the past default, vendors have received money damages and thus may not cancel the contract on the basis of that default. If, however, there are future defaults, vendors will still have the option of electing to cancel the contract.
For a vendee, a contract for deed has advantages and disadvantages compared to a mortgage. The advantages include more flexible financing terms, a lower interest rate, avoiding closing costs imposed by institutional lenders in mortgage transactions, and the fact that buyers who would not qualify for a mortgage may qualify for a contract for deed. See James D. Olson , 1 Minnesota Residential Real Estate § 16.02, at 304 (1991). The disadvantages for a contract for deed vendee are that the contract for deed does not provide the protections that a mortgage does — the contract is subject to relatively quick cancellation by the seller in case of a default, and if there is a cancellation, the buyer forfeits his equity in the property. See id. It may seem unfair if a contract for deed vendor sues to recover past payments due but not paid and then cancels the contract upon the next default. Any unfairness, however, is due to the nature of the contract for deed itself.