Summary
The Supreme Court of South Dakota reviewed a foreclosure dispute arising from an agreement previously held to constitute an equitable mortgage. The court held that the borrowers tendered payment before foreclosure, which stopped interest from accruing, and that they were not liable for interest on property taxes paid by the lender. The court also reversed the award of attorney's fees and the foreclosure judgment, remanding for proceedings consistent with the opinion.
Topics
Practice areas
Questions Presented
- Whether the McKinnies made a sufficient tender of payment before foreclosure.
- Whether the tender was unconditional and stopped the running of interest under SDCL 20-5-18.
- Whether the trial court improperly assessed interest on property taxes paid by Adrian.
- Whether Adrian was entitled to attorney's fees for the original action and the foreclosure action.
Holdings
- The McKinnies tendered payment before foreclosure because they communicated an intent to pay the amount due, had sufficient funds available, and were prepared to close after issuance of the title policy.
- The tender was unconditional and stopped the running of interest as of May 10, 2000 under SDCL 20-5-18.
- The McKinnies could not be required to pay interest on property taxes that Adrian paid while preventing the McKinnies from paying them.
- Adrian was not entitled to recover attorney's fees incurred in the original action or in a foreclosure action made necessary by his refusal to accept the tender.
Key quotations
“Objections to tender must be made at the time of tender or they are waived.” (99)
“Adrian chose to test the validity of McKinnies' right to pay off the balance; that choice, however, did not entitle him to receive interest after he rejected their offer of payment.” (100)
Factual background
The parties' agreement, although labeled a lease and option to purchase, had previously been determined to be an equitable mortgage, with Adrian holding a security interest in the property. The McKinnies notified Adrian of their intent to pay the balance, had sufficient funds escrowed, and were prepared to close once title insurance issued on May 10, 2000. Adrian refused to accept payment because he believed the agreement was a lease and option that had terminated after default. The trial court nevertheless foreclosed the mortgage and awarded interest through judgment, interest on property taxes, and attorney's fees for both the original and foreclosure litigation.
Procedural history
In the prior appeal, the South Dakota Supreme Court held that the parties' lease and option-to-purchase agreement was an equitable mortgage and reversed and remanded. On remand, Adrian sought foreclosure; after the McKinnies' default judgment was set aside, the trial court held a court trial, found the McKinnies in default, foreclosed the mortgage, and awarded principal, interest, taxes, and attorney's fees. The McKinnies appealed the redemption amount, interest calculation, and attorney's-fee award.
Remand instructions
Remand for proceedings consistent with the opinion, including correction of the interest calculation, removal of interest on property taxes, and reconsideration of the foreclosure and attorney's-fee consequences in light of the May 10, 2000 tender.