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BUSINESS LAW CHAPTER 9 THIRD PARTY CONTRACTS (CONTRACT LAW) CASES FOR ANALYSIS;
specific performance by virtue of the court; gratiutious

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127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
Supreme Court of South Dakota.
Dean F. RENNER and Loraine Renner, Plaintiffs
and Appellants,
v.
Delbert T. CRISMAN and Laura B. Crisman, De-
fendants and Respondents.
No. 10102-R-Rem-FJH.
April 22, 1964.
Action to compel specific performance of contract
to buy real estate. The Circuit Court of Pennington
County, Thomas Parker, J., entered judgment for
the defendants and the plaintiffs appealed. The Su-
preme Court, Homeyer, J., held that failure of pur-
chasers, who were in possession under installment
land contract which granted right of prepayment
and on which payments were current, to have legal
title did not preclude their right to specific perform-
ance of defendants' contract to buy land from them.
Judgment reversed and case remanded with direc-
tions.
West Headnotes
[1] Vendor and Purchaser 400 18(3)
400 Vendor and Purchaser
400I Requisites and Validity of Contract
400k18 Options, Preemptive Rights, and Ex-
ercise Thereof
400k18(3) k. Exercise. Most Cited Cases
Although option to purchase real estate is initially
unilateral, upon timely acceptance it becomes a mu-
tually binding contract capable of enforcement and
subject to same rules as bilateral contract.
[2] Specific Performance 358 66
358 Specific Performance
358II Contracts Enforceable
358k63 Contracts Relating to Real Property
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 1
358k66 k. Enforcement by Vendor. Most
Cited Cases
Remedy of specific performance is available to
vendor of real estate although relief actually sought
is recovery of money, the purchase price, for which
he may also have a remedy at law.
[3] Specific Performance 358 8
358 Specific Performance
358I Nature and Grounds of Remedy in General
358k8 k. Discretion of Court. Most Cited
Cases
Utilization of equitable remedy of specific perform-
ance is not an absolute right, but rests within sound
discretion of court controlled by established prin-
ciples of equity.
[4] Vendor and Purchaser 400 188
400 Vendor and Purchaser
400V Rights and Liabilities of Parties
400V(A) As to Each Other
400k188 k. Nature of the Relation. Most
Cited Cases
Vendor and Purchaser 400 191
400 Vendor and Purchaser
400V Rights and Liabilities of Parties
400V(A) As to Each Other
400k191 k. Possession or Control of Prop-
erty. Most Cited Cases
Relationship between installment vendor and his
purchaser is essentially that of secured creditor and
debtor, and purchaser for all practical purposes is
owner, generally with right of possession and use,
and vendor's sole interest is to be paid agreed con-
sideration in form and manner provided by instru-
ment used to secure payment thereof.
[5] Vendor and Purchaser 400 168
400 Vendor and Purchaser
400IV Performance of Contract
127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
400IV(D) Payment of Purchase Money
400k168 k. Obligation to Pay in General.
Most Cited Cases
While security device employed between install-
ment vendor of land and purchaser may curtail or
broaden scope of remedies available in case of de-
fault in payment, final interest of vendor is nothing
other than right to payment of whatever sums are
still owed him on sale of property.
[6] Specific Performance 358 66
358 Specific Performance
358II Contracts Enforceable
358k63 Contracts Relating to Real Property
358k66 k. Enforcement by Vendor. Most
Cited Cases
Failure of purchasers who were in possession under
installment land contract, which granted right of
prepayment and on which payments were current,
to have legal title did not preclude their right to
specific performance of defendants' contract to buy
land from them.
[7] Deeds 120 137
120 Deeds
120III Construction and Operation
120III(D) Exceptions
120k137 k. Nature and Creation of Excep-
tions. Most Cited Cases
Words “subject to” as frequently used in convey-
ances are generally considered terms of qualifica-
tion, and in their ordinary sense mean “subordinate
to”, “subservient to”, “limited by” or “charged
with”, and nothing in their use connotes reservation
or retention of property rights.
[8] Easements 141 14(1)
141 Easements
141I Creation, Existence, and Termination
141k14 Exception or Reservation
141k14(1) k. In General. Most Cited
Cases
Quitclaim deed of grantor's interest in mining
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Page 2
claim, reciting that it was subject to recorded agree-
ment between grantor and another which had given
grantor right to easement for cabin site, was not
construed to contain reservation of cabin site ease-
ment in favor of grantor who had parted with all
other interest in mining claims.
[9] Specific Performance 358 13
358 Specific Performance
358I Nature and Grounds of Remedy in General
358k11 Defenses or Objections to Relief
358k13 k. Performance Impossible. Most
Cited Cases
Alleged existence of cabin site easement on non-
contiguous 60-acre tract was not sufficiently mater-
ial to defeat specific performance of contract to buy
380-acre ranching unit, and if not subject to remov-
al or correction, compensation would be proper for
deficiency in performance. SDC 1960 Supp.
37.4605.
[10] Vendor and Purchaser 400 130(2)
400 Vendor and Purchaser
400IV Performance of Contract
400IV(A) Title and Estate of Vendor
400k130 Marketable Title
400k130(2) k. Requisites and Suffi-
ciency in General. Most Cited Cases
Fact that title to mining claims involved in land
which was subject of contract to buy originated
through treasurer's tax deed did not make title to
claims unmerchantable, since it would be a simple
matter to comply with statutory provisions neces-
sary to establish merchantable title. SDC 1960
Supp., 51.16B01 et seq.
[11] Specific Performance 358 106(1)
358 Specific Performance
358IV Proceedings and Relief
358k106 Parties
358k106(1) k. In General. Most Cited
Cases
Vendors in installment land contract while proper
127 N.W.2d 717 Page 3
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)

parties to action by purchasers to compel specific 30 Appeal and Error

performance of defendants' contract to buy land 30XVI Review
were neither necessary nor indispensable parties. 30XVI(J) Harmless Error
SDC 1960 Supp. 33.0409. 30XVI(J)2 Nature or Form of Remedy
30k1035 k. In General. Most Cited
[12] Parties 287 18 Cases

287 Parties Appeal and Error 30 1036(1)

287I Plaintiffs
287I(B) Joinder 30 Appeal and Error
287k17 Persons Who Must Join 30XVI Review
287k18 k. In General. Most Cited 30XVI(J) Harmless Error
Cases 30XVI(J)3 Parties
30k1036 Parties
Parties 287 29 30k1036(1) k. In General. Most
Cited Cases
287 Parties
287II Defendants Specific Performance 358 106(1)
287II(B) Joinder
287k28 Persons Who Must Be Joined 358 Specific Performance
287k29 k. In General. Most Cited 358IV Proceedings and Relief
Cases 358k106 Parties
358k106(1) k. In General. Most Cited
Parties 287 52 Cases

287 Parties Trial 388 26

287IV New Parties and Change of Parties
287k49 Bringing in New Parties
287k52 k. Time for Bringing in New
Parties and Laches. Most Cited Cases
Parties 287 53
287 Parties
287IV New Parties and Change of Parties
287k49 Bringing in New Parties
287k53 k. Application and Proceedings
Thereon. Most Cited Cases
Only when complete determination of controversy
cannot be had without presence of third party is
such party necessary or indispensable, and even
then party may be added by order of court on mo-
tion of any party or of its own initiative at any stage
of action. SDC 1960 Supp. 33.0411.
[13] Appeal and Error 30 1035
388 Trial
388III Course and Conduct of Trial in General
388k26 k. Adjournments Pending Trial. Most
Cited Cases
Failure of court to either bring vendors under in-
stallment land contract into purchasers' action to
compel specific performance of defendants' con-
tract to buy land on its own motion or to allow pur-
chasers reasonable time to obtain warranty deed
from vendors and to perform other acts contem-
plated by contract to buy was prejudicial error.
[14] Specific Performance 358 14
358 Specific Performance
358I Nature and Grounds of Remedy in General
358k11 Defenses or Objections to Relief
358k14 k. Performance Involving Act or
Assent of Person Not Party to Contract. Most Cited
Cases

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
Enforcement of contract will not be denied because
consent of a third person is necessary to perform-
ance, where it reasonably appears that such third
person does or will consent.
[15] Specific Performance 358 131
358 Specific Performance
358IV Proceedings and Relief
358k131 k. Judgment or Decree. Most Cited
Cases
Interlocutory decrees are recognized in and adapt-
able to specific performance actions to permit
parties to effectuate contract which they have made.
**718 *535 Whiting, Lynn, Freiberg & Shultz,
Rapid City, for plaintiffs and appellants.
Gunderson, Farrar, Carrell & Aldrich, Rapid City,
for defendants and respondents.
HOMEYER, Judge.
Specific performance of a real estate contract was
denied plaintiffs and they appeal.
The subject property is a ranching unit of about 380
acres in Pennington County known as the Medicine
Mountain ranch. On February 2, 1957, it was sold
by L. M. Test and Lois L. Test to plaintiffs under
contract for deed for $35,000. A down payment of
$1,000 was made with the execution of the con-
tract, $2,000 was paid March 15, 1957 and the bal-
ance was payable in annual installments of $1,100.
One of plaintiffs testified payments were current at
the time of trial which would mean that $25,400 re-
mained unpaid on the contract. Plaintiffs had the
privilege of prepaying all or any part of the unpaid
purchase price with accrued interest to date of pay-
ment at any time. The contract for deed is not a part
of the record except as portions are shown in one of
the abstracts of title. On February 28, 1962,
plaintiffs granted defendants a written two-month's
option to purchase the ranch for $40,000. In the op-
tion plaintiffs covenanted that they were the owners
of the property; that the title was to be conveyed
free and clear of all **719 encumbrances; that it
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 4
was given to enable defendants to obtain a govern-
ment insured FHA loan; that seller was to pay all
expenses of title clearing, if required, abstracts,
etc., and that all taxes, liens, encumbrances, or oth-
er interests of third persons were to be satisfied,
discharged, or paid by plaintiffs; title evidence was
to be obtained from persons and be in such form as
the government shall approve; that conveyance was
to be by general warranty deed in the form, manner
and at the time required by the government and
buyers were to receive a valid, unencumbered, in-
defeasible fee simple title meeting all government
requirements; that the purchase price was to be paid
at the time of recording such deed. On April 27,
1962, defendants accepted the option and shortly
afterwards plaintiffs delivered abstracts of title to
the loaning agency. On May 22, 1962, defendants
through their counsel served notice of rescission
upon plaintiffs claiming misrepresentation.*536
This action was commenced on September 14,
1962. In their complaint plaintiffs allege ownership
of the ranch on date of option, execution and ac-
ceptance of option, delivery of abstracts, service of
notice of rescission, refusal to perform by defend-
ants, and that plaintiffs are ready, willing and able
to perform and offer to perform. By answer de-
fendants admitted granting of the option to them
and written acceptance thereof, but otherwise
denied the allegations of the complaint. They af-
firmatively alleged misrepresentation of the ranch
boundaries by plaintiffs' agent and asked for can-
cellation of the contract.
The trial court found that plaintiffs were not the
owners of the fee title to the subject property and
were unable to deliver title in accordance with the
terms of the option agreement. Also, that plaintiffs
did not have good and merchantable title and could
not give defendants a title free from reasonable
doubt. These findings are challenged by proper as-
signments of error.
[1] Although an option to purchase real estate is
initially unilateral in its nature, upon timely accept-
ance it becomes a mutually binding contract cap-
127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
able of enforcement and subject to the same rules as
a bilateral contract. Tennant v. Rafferty, 44 S.D.
235, 184 N.W. 195; Alfson v. Anderson, N.D., 78
N.W.2d 693; 81 C.J.S. Specific Performance § 47.
[2][3] The remedy of specific performance is avail-
able to the vendor of real estate although the relief
actually sought is the recovery of money, the pur-
chase price, for which he may also have a remedy
at law. 49 Am.Jur., Specific Performance, § 94;
Marso v. Heck, 50 S.D. 332, 210 N.W. 153.
Utilization of this equitable remedy is not an abso-
lute right, but rests within the sound discretion of
the court. Watters v. Ryan, 31 S.D. 536, 141 N.W.
359. However, this discretion is a judicial discre-
tion and controlled by established principles of
equity J. I. Case Threshing Mach. Co. v. Farns-
worth, 28 S.D. 432, 134 N.W. 819. Denial of spe-
cific performance in the instant case does not ap-
pear to have been predicated on equitable prin-
ciples.
[4][5] It is obvious the trial court took the position
that since the Tests had not conveyed the legal title
to plaintiffs, they were not entitled to specific per-
formance and this was a condition *537 precedent
to their right to ask for specific performance. The
relationship between an installment vendor and his
vendee is essentially that of secured creditor and
debtor. The vendee for all practical purposes is the
owner of the property, generally with the right of
possession and use, and the vendor's sole remaining
interest is to be paid the agreed consideration in the
form and manner provided by the instrument used
to secure payment thereof. The security device em-
ployed may curtail or broaden the scope of remed-
ies available in case of default of payment, but the
final interest of the seller is nothing other than the
right to payment of whatever sums are still owed
him on the sale of the property. The vendee's in-
terest has been termed an equitable interest, Phillis
v. Gross, 32 S.D. 438, 143 N.W. 373; **72039 S.D.
434, 164 N.W. 971, or an equitable title. Paynes-
ville Land Co. v. Grabow, 160 Minn. 414, 200
N.W. 481; Miller v. Dyer, 20 Cal.2d 526, 127 P.2d
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 5
901, 141 A.L.R. 1428. Courts have not hesitated in
granting the vendee specific performance in cases
where the vendor holds an executory contract from
a third person either by proceeding against the im-
mediate vendor alone with proper compensation for
the deficiency in performance, if any, or by joining
the holder of the legal title in the action. Vaughn
v. Rosencrance, 73 S.D. 36, 38 N.W.2d 822. Cutler
v. Lovinger, 212 Mich. 272, 180 N.W. 462. See
also annotation 141 A.L.R. 1432.
In the Paynesville Land Co. case, supra, the court,
in disposing of the same contention urged by de-
fendants herein, said: ‘But when the vendor has a
valid subsisting enforceable contract, with a third
person who holds title and who stands ready to per-
form, it is sufficient. Such does not prevent the
vendee from getting all that he is entitled to under
his contract. An incumbrance or other defect re-
movable at the time of the completion of the pur-
chase is not a ground for rescission. Duluth Loan
& Land Co. v. Klovdahl, 55 Minn. 341, 56 N.W.
1119. Where existing liens can be discharged out
of the purchase price to the paid at delivery of the
deed, the vendor is not required to discharge such
liens out of his own funds prior to the time fixed for
such delivery, but may cause them to be paid out of
the purchase price at that time. Johnson v. Herbst,
140 Minn. 147, 167 N.W. 356; Lynch v. Higgins,
154 Minn. 151, 191 N.W. 422. The same principle
should also reach and include the amount *538 due
to former owners who have sold under contract.
The vendee does not suffer, and there is nothing un-
reasonable in such course of business. We are of
the opinion that plaintiffs under the facts in this
case were, at the time for performance, in a position
to carry out the contract with appellant, and the
character of their title was such as to fulfill all legal
requirements.’
[6] In Riley v. Wheat, 45 S.D. 320, 187 N.W. 425,
vendor sought specific performance where time was
of the essence and an $8,000 mortgage was unsatis-
fied at time of performance. The court summarily
dismissed the vendee's contention that failure to
127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
pay such encumbrance excused his compliance with
the contract by stating ‘Where the incumbrance can
be removed merely by the application of the pur-
chase money, and the court can provide for a con-
veyance of a clear title to the vendee, the mere fact
that an incumbrance exists which the plaintiff has
not removed, or even is unable to remove without
the application of the purchase money, will not pre-
vent a decree for specific performance. * * *’ The
use of installment land contracts on sales of real es-
tate and the rights and remedies of parties thereto is
the subject of articles appearing in Vols. 6 and 7 of
the 1961 and 1962 South Dakota Law Review.
Their popularity and frequent usage in South
Dakota and other midwestern states as a credit in-
strument on sale of real estate is common know-
ledge. We see no compelling reason to distinguish
between unpaid mortgages and unpaid vendor's bal-
ances in contracts for deed in applying relevant
rules in specific performance actions.
Included in the subject ranch was an irregular tract
of about 60 acres noncontiguous to the main unit
and consisting of three patented mining claims
which was acquired by W. W. Towne and C. T.
Strauss as tenants in common by Treasurer's Tax
Deed in 1937. In 1947 these parties executed an
agreement which recognized each party's ownership
of a one-half interest in the property, including
minerals and timber, and further recognized
Towne's absolute right to a suitable area for a sum-
mer cabin and Strauss' exclusive grazing rights. In
1949 Towne quitclaimed his interest in the mining
claims to Myrtle Wilmarth and the deed recited that
it was subject to the recorded agreement between
Strauss and Towne. It is argued that this agreement
constituted *539 an easement by which Towne still
retained **721 rights in the mining claims and an
encumbrance upon the property justifying the court
in denying specific performance. The Tests sub-
sequently acquired all interests of Strauss and
Myrtle Wilmarth in such mining claims. It is con-
tended that when Towne conveyed his interest in
the property to Myrtle Wilmarth and used the
clause ‘subject to’ the recorded agreement between
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 6
himself and Strauss, he thereby retained a cabin site
easement in the mining claims.
[7][8][9] The words ‘subject to’ are frequently used
in conveyances and are generally considered terms
of qualification. Cox v. Butts, 48 Okl. 147, 149 P.
1090; Consolidated Coal Co. v. Peers, 166 Ill. 361,
49 N.E. 1105, 38 L.R.A. 624. In their ordinary
sense, they mean ‘subordinate to’, ‘subservient to’,
‘limited by,’ or ‘charged with’. There is nothing in
their use which connotes a reservation or retention
of property rights. Englestein v. Mintz, 345 Ill.
48, 177 N.E. 746; Shell Oil Co. v. Manley Oil
Corp., 7 Cir., 124 F.2d 714. The grantor Towne in
his conveyance to Myrtle Wilmarth parted with his
entire interest in the mining claims, subject
however to such additional rights as may have been
created and recognized in his 1947 agreement with
Strauss. This would mean that his grantee Wilmarth
acquired the right to a cabin site, but in turn was
burdened with allowing Strauss absolute grazing
rights. We are of the opinion that it would be un-
reasonable to construe the quitclaim deed as con-
taining a reservation by Towne of an easement for a
cabin site when he parted with all other interest in
the mining claims. This construction is manifested
by subsequent entries in the abstract which show
that Myrtle Wilmarth brought a partition action
against the Tests and Renners and this action ap-
pears to have been settled by her accepting absolute
title to the fourth mining claim described in the
Treasurer's Tax Deed and Agreement and convey-
ing to the Tests absolute title to the three mining
claims which are included in the subject matter of
the present action. Even assuming an easement ex-
isted which did not merge with the title of the
Tests, we are of the opinion that under the circum-
stances of this transaction it would not have been
sufficiently material to defeat specific performance
and, if not subject to removal or correction, com-
pensation would be proper for a deficiency in per-
formance. SDC 1960 Supp. 37.4605; *540Riley v.
Wheat, 45 S.D. 320, 187 N.W. 425; Weitzel v. Ley-
son, 23 S.D. 367, 121 N.W. 868.
127 N.W.2d 717
80 S.D. 532, 127 N.W.2d 717
(Cite as: 80 S.D. 532, 127 N.W.2d 717)
[10] We consider the contention of defendants that
the title to the mining claims is unmerchantable be-
cause it originated through a Treasurer's Tax Deed
as untenable. The tax deed was recorded on July 19,
1937. It would be a simple matter to comply with
the provisions of Chapter 51.16B, SDC 1960 Supp.
to establish marketable title.
[11][12][13][14] We come now to a more serious
question. Legal title was in the Tests, plaintiffs'
vendors, and since they were not parties to the ac-
tion, should relief be denied? This requires us to
consider the status of the Tests so far as they action
is concerned. There was no controversy between
the Tests and plaintiffs. Likewise, there was no
controversy between the Tests and defend-
ants. Parties are generally classified as formal or
proper, necessary, and indispensable. Weitzel v.
Felker, 76 S.D. 216, 76 N.W.2d 225; Keeley Lum-
ber & Coal Co. v. Dunker, 76 S.D. 281, 77 N.W.2d
689; Rogers v. Penobscot Mining Co., 8 Cir., 154
F. 606. The Tests were proper parties and could
have been joined either as plaintiffs or defendants,
SDC 1960 Supp. 33.0409, but we do not believe
they were either necessary or indispensable parties.
It is only when a complete determination of the
controversy cannot be had without the presence of a
third party that such party is necessary or indispens-
able. Keeley Lumber & Coal Co. v. Dunker, supra;
Cottrell v. Prier, 187 Or. 454, 212 P.2d 87. Even
then such party may be added by order of the court
on motion of any party or of its own initiative at
any stage of the action. **722 SDC 1960 Supp.
33.0411. Time was not of the essence. The contract
recognizes delays incidental to final performance.
The Tests were required to accept at any time the
balance remaining unpaid on their contract and is-
sue a warranty deed to plaintiffs. L. M. Test was a
witness for plaintiffs. He acted as plaintiffs' agent
in showing the ranch to defendants and pointed out
its boundaries. This was the controversy between
the parties as revealed by the notice of rescission,
pleadings, and transcript of the evidence. For this
reason defendants requested affirmative relief and
asked for a cancellation of the contract. This de-
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 7
fense was not established and such relief was *541
denied. We believe the facts and circumstances
were such that the court prejudicially erred in fail-
ing to exercise its statutory and equitable powers by
either bringing the Tests into the action on its own
motion, or allowing the plaintiffs a reasonable time
to obtain and produce in court a warranty deed from
the Tests to plaintiffs and to perform other acts con-
templated by the contract. It is generally recog-
nized that enforcement of a contract will not be
denied because the consent of a third person is ne-
cessary to performance, where it reasonably ap-
pears that such third person does or will consent.
Rice v. Theimer, 45 Okl. 618, 146 P. 702;
Goldsworthy v. Dobbins, 110 Cal.App.2d 802, 243
P.2d 883.
[15] Interlocutory decrees are recognized in and
adaptable to specific performance actions. Marso
v. Heck, 50 S.D. 332, 210 N.W. 153; Goldsworthy
v. Dobbins, supra; Moser v. Pearce, 124 Cal.App.
478, 12 P.2d 977; McKevitt v. City of Sacramento,
55 Cal.App. 117, 203 P. 132. Justice here requires
such a decree to permit the parties to effectuate the
contract which they made. We reverse the judgment
and remand the case to the trial court with direc-
tions to proceed in conformity with the views
herein expressed.
All the Judges concur.
S.D. 1964
Renner v. Crisman
80 S.D. 532, 127 N.W.2d 717
END OF DOCUMENT