Hofeldt v. Mehling

Supreme Court of South Dakota · 2003 · Contracts

ContractsParol Evidence RuleUnjust EnrichmentContract for Deedcontract for deedpost-execution conductparol evidencewaiver

Facts

The parties canceled an agricultural lease and entered a contract for deed in 1995 for the sale of farmland. The buyer made the down payment and secured financing, but the seller could not deliver clear title because of an IRS lien, despite the contract requiring the seller to promptly cure title defects and provide clear title. During the nearly five-year delay, the buyer continued to possess and farm the land and, with the seller's written authorization, enrolled the property in a federal farm program and kept the subsidies, while the seller never demanded rent or a share of the subsidies. After the lien issue was resolved and the sale closed in 1999, the seller sued seeking rent and subsidy reimbursement.

Issue

Whether the trial court erred by considering the parties' post-contract conduct under the parol evidence rule and by concluding that the buyer was neither contractually obligated to pay rent or share subsidies nor liable in unjust enrichment for retaining those benefits during the delay in closing.

Rule

The parol evidence rule bars extrinsic evidence of negotiations or stipulations that preceded or accompanied execution of a written contract, but it does not apply to conduct or statements occurring after execution. Contractual rights and remedies may be modified or waived by subsequent conduct. To recover for unjust enrichment, a claimant must show that the defendant received a benefit, knew of the benefit, and that it would be inequitable to allow the defendant to retain it without payment.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Wichita, Kansas, Lena Ortiz agreed in writing to sell 200 acres to Caleb Morrow. The contract required Lena to clear a recorded judgment lien before closing, but she did not do so for three years; during that time, Lena repeatedly told Caleb after signing that he could keep using the fields without paying anything until title was fixed.

If Lena later sues Caleb for three years of rent and argues that the court cannot consider her later statements because the written contract is unambiguous, how should the court rule?

Explanation. The majority rule is that the parol evidence rule bars only oral negotiations or stipulations that preceded or accompanied execution of the written agreement. It does not apply to conduct or statements occurring after execution, and contractual rights may be modified or waived by subsequent conduct. Therefore the court may consider Lena's later assurances in deciding whether rent is owed. (Derived from Hofeldt v. Mehling (n.d.).)