Turner v. Ferrin

Rule of Law:

When real property is sold "in gross" (as a whole parcel rather than by acre), a variation in acreage is not grounds for contract rescission unless the discrepancy is material and substantial, or if the vendor cannot convey merchantable title and the buyer proves the defect as fact.

Facts:

• Steve and Debra Ferrin owned an irrigated ranch near Miles City, Montana, the precise acreage of which was later disputed (approximately 96 acres as listed in the contract, but later claimed by Turners to be as small as 90 acres).
• On September 13, 1982, David and Patricia Turner signed a buy-sell agreement, prepared by Steve Ferrin, who was also a real estate broker, to purchase the property for $230,000.
• On October 12, 1982, the Turners paid a $100,000 down payment, and all parties executed a contract for deed, which described the property as "96.73 acres, more or less."
• The Turners moved onto the property in October 1982 and subsequently spent $26,815.69 on improvements.
• The Turners timely made annual payments of $16,133.97 in 1983 and 1984, but failed to make the 1985 payment.
• On December 24, 1985, the Turners and Ferrins entered into an accommodation agreement extending the time for the 1985 payment, but the default was not cured.
• The property description in the contract for deed, and later in the warranty deed placed in escrow, included an exception for the Burlington Northern Railroad right-of-way, but the Turners alleged it actually contained a right of way for a state highway not properly excepted in the deed.
• A survey commissioned by the Turners showed the tract contained 90.73 acres, which used the U.S. Highway 10 right-of-way as a boundary instead of the railroad right-of-way, resulting in a discrepancy of approximately six acres.

Procedural Posture:

• Prior to a scheduled forfeiture date, the Turners filed an action for declaratory judgment in a state trial court (District Court of the Sixteenth Judicial District), attempting to have the contract declared a mortgage, thereby entitling them to a right of redemption and occupancy.
• The Ferrins were granted summary judgment on the declaratory judgment issue.
• The Turners then filed for Chapter 11 relief in Bankruptcy Court.
• The Turners pursued rescission of the contract in Bankruptcy Court, but the cause was remanded to the Montana State District Court due to mandatory abstention under 28 U.S.C. Section 1334(c)(2).
• An amended complaint was filed by the Turners on March 19, 1987, in the District Court, alleging for the first time an acreage shortfall and issues with the warranty deed's description and recordability.
• A bench trial was held on September 18, 1987, in the District Court of the Sixteenth Judicial District, Custer County.
• On October 21, 1987, the District Court issued a judgment disallowing rescission, finding the Turners guilty of laches, that the Ferrins had given due notice of default, and ordering the Turners to cure the default within 30 days or face contract termination and forfeiture.
• The Turners filed consolidated post-trial motions on October 30, 1987, seeking amendment of the findings of fact, conclusions of law, and judgment, or in the alternative, a new trial.
• The District Court denied these post-trial motions.
• The Turners appealed to the Montana Supreme Court from the final order denying these motions and from the judgment; the Turners are the appellants and the Ferrins are the respondents.