Biegler v. Kraft
| Decision Date | 17 July 2012 |
| Docket Number | CIV 11-3010-RAL |
| Parties | MARTIN A. BIEGLER CARA M, BIEGLER, and CHRISTINE K. SCHIRBER, IRA, by and through its Trustee, BankWest, Inc., Plaintiffs, v. RICHARD KRAFT and CARYN R. KRAFT, Defendants. |
| Court | U.S. District Court — District of South Dakota |
GRANTING IN PART AND
DENYING IN PART MOTION
Plaintiffs Martin A. Biegler, Cara M. Biegler, and Christine K. Schirber, IRA, by and through its Trustee, Bank West, Inc., (collectively "Bieglers") sued Defendants Richard Kraft and Caryn R. Kraft ("Krafts") seeking specific performance of what the Bieglers allege to be a contract for the purchase of 314 acres in Dewey County, South Dakota. The Bieglers started this case by filing a complaint and a lis pendens on May 26, 2011. The Krafts answered and denied that there was an enforceable contract. The Krafts also filed a counterclaim for slander of title due to the filing of the lis pendens. After discovery in this case, the Krafts filed a motion for summary judgment, which this Court grants in part and denies in part through this Opinion and Order.
There are relatively few genuine issues of material fact in this case. In ruling on the motion for summary judgment filed by the Krafts, this Court at this stage must resolve genuine disputes as to any material fact in favor of the Bieglers. See Fed. R. Civ. P. 56. Thus, the Courttakes the facts primarily from the Plaintiffs' response to Defendants' Statement of Material Facts and Plaintiffs' Statement of Additional Material Facts. Doc. 38.1
The Bieglers are South Dakota residents. The Krafts previously lived in South Dakota, but were Alaska residents at the time of the start of this lawsuit and presently. More than $75,000 is legitimately at stake, triggering diversity jurisdiction under 28 U.S.C. § 1332.
Defendant Caryn Kraft is the record owner of a 314-acre farm and ranch containing a house and other buildings located in Dewey County, South Dakota. Doc. 38 at 6-7, ¶ 1. Caryn Kraft is married to Defendant Richard Kraft. The Krafts decided that they wished to sell the 314 acres, including the house and buildings, and chose to do so through an auction process in 2011. Doc. 35 at 1; Doc. 38 at 1, ¶ 1; Doc. 38 at 7, ¶ 3. The Krafts hired attorney Steve Aberle of the Aberle & Aberle Law Office of Timber Lake, South Dakota, to handle the sale of the property. Doc. 38 at 7, ¶ 4.
The Krafts provided information about the land and auction through what the Bieglers call a "sale bill," published in newspapers, on flyers, and on a website. Doc. 38 at 7, ¶ 5; Doc. 36-3. The sale bill described a two-phase auction process. In the first phase, bidders were to submit sealed bids with "land sale" marked on the outside of the envelope to the Aberle & Aberle Law Office on or before a May 3, 2011 deadline. Doc. 36-3, The top three bidders then would be notified and allowed to participate in a second phase of bidding at the Aberle & Aberle LawOffice. The sale bill specified that the winning bidder must post a "fifteen percent non-refundable deposit of earnest money" upon acceptance of the bid. The sale bill also stated:
Seller reserves the right to reject any and all bids. Any announcements made day of auction supersede any and all previously printed material and any other oral statements made.
The sale bill identified the land as consisting of 13 5 acres used for grass and grazing, and 135 acres of tilled land.2 The sale bill described the home on the property as a 4,000 square foot, five bedroom, three-and-a-half-bath, multiple level home, surrounded by trees, and with a self-standing garage, large machinery quonset with cement floor, corrals with a barn, and two connected functioning wells, Doc. 36-3. The Krafts had not obtained an appraisal of what the value of the home was separate from the land and remaining buildings being auctioned. The bill of sale did not identify separate values assigned to any part of the land or buildings, but stated that the property "will be sold as a single unit," Doc. 36-3; Doc. 38 at 7, ¶ 7.
The Bieglers submitted a sealed bid in phase one of the auction in the amount of $397,500. Doc. 38 at 7, ¶ 8. A total of nine sealed bids were submitted for the property, and the Bieglers were the highest bidders in phase one of the auction. Doc. 38 at 8, ¶¶ 9-11.
After opening all of the sealed bids and knowing how high they were, Defendant Richard Kraft, acting on behalf of his wife, met with attorney Steve Aberle to discuss what amount of the purchase price to allocate to the value of the house. Doc. 38 at 8, ¶¶ 12-13. The amount of purchase price to be allocated to the house was important to the Krafts, because the Krafts couldavoid paying the 15 percent capital gains tax on gains from sale of the house, but owed a 15 percent capital gains tax on gains on any portion of the purchase price assigned to the land or other buildings. Based on the amount of the sealed bids, the Krafts and attorney Aberle chose to allocate $250,000 of the purchase price to the value of the residence in a draft purchase agreement. Doc. 38 at 8-9, ¶¶ 13-15.
The three high bidders—the Bieglers, Roger and Rita Long, and a bidder from Pennsylvania—were notified that they were entitled to return for phase two of the auction at Aberle & Aberle Law Office on May 6, 2011. The Longs and the Bieglers were the only bidders who elected to return on May 6, 2011 for phase two of the bidding. Doc. 38 at 10, ¶¶ 21-22. Richard Kraft and attorney Aberle met with the Longs and the Bieglers in attorney Aberle's conference room, Doc. 38 at 10, ¶ 26. The Bieglers and the Longs were provided, for the first time, with the draft purchase agreement and a commitment for title. Doc. 38 at 11, ¶ 27, and 9, ¶ 19. Attorney Aberle discussed the draft purchase agreement, commitment for title insurance, and certain other disclosure forms with the Bieglers and the Longs. Doc. 38 at 11, ¶¶ 29-30. When attorney Aberle reached the section of the draft purchase agreement that set forth the proposed allocation of $250,000 as the value of the house, Plaintiff Martin Biegler stated that there was a problem with such a substantial allocation to the value of the house. Doc. 38 at 11-12, ¶¶ 31 -33. According to the Bieglers, attorney Aberle responded that the Krafts would work with the highest bidder concerning the allocation of reasonable amounts toward the house, land, and other structures, and that an allocation of value would be determined after the auction. Doc. 38 at 12, ¶¶ 34-35. The Bieglers believed that allocating $250,000 as the value of the house was excessive, could trigger scrutiny from the Internal Revenue Service, would result in an abnormally low price per acre, and could have negative tax consequences for the Bieglers. Doc.38 at 13, ¶ 38. Based on attorney Aberle's alleged statement that proper allocation of the purchase price would be discussed later, the Bieglers did not discuss further the value of the home before proceeding with phase two of the auction.
Before the bidding in phase two of the auction began, everyone understood that any increase in a bid would have to be by at least $2,500. Doc. 38 at 13, ¶ 39. Attorney Aberle, as an agent for the Krafts, acted as the auctioneer, beginning the phase two auction by stating, "we would start the bidding now for the Richard Kraft place." Doc. 38 at 13, ¶¶ 40-41. Attorney Aberle announced that the Bieglers had the high bid of $397,500 from phase one of the auction and told the Longs that they would need to increase their bid to at least $400,000. Doc. 38 at 13, ¶ 42. The Longs chose to bid $400,000. Doc. 38 at 13, ¶ 43. The Bieglers then bid $410,000. Doc. 38 at 14, ¶ 44. The Longs declined to increase their bid further, congratulated the Bieglers on winning the auction, and then left attorney Aberle's office. Doc. 38 at 14, 45, 49-50. According to the Bieglers, attorney Aberle declared the auction ended with the Bieglers being the high bidders. Doc. 38 at 14, ¶ 49.
Plaintiff Martin Biegler then calculated by hand the amount of earnest money that would need to be remitted—15 percent of $410,000 being $61,500.00. Attorney Aberle agreed with that calculation. Doc. 38 at 15, ¶ 51, The Bieglers then directed BankWest, Inc. to commence wiring a portion of the earnest money—$41,000—to Aberle & Aberle Law Office's trust account. Id.; Doc. 39-4. The Bieglers had intended to write a check for the remaining $20,500 of the earnest money. Doc. 38 at 17, ¶ 62. The parties went through the draft purchase agreement, and attorney Aberle took notes where certain provisions would be or needed to be changed. As the discussions were winding down, Defendant Richard Kraft observed that there was nothing left for him to do and he started to leave. Doc. 38 at 16, ¶ 54. At that point, Plaintiff Martin Bieglerraised the issue of the allocation of $250,000 of the purchase price to the house as the remaining issue. Doc. 38 at 16, ¶ 55.
Attorney Aberle and Richard Kraft told the Bieglers that the allocation of $250,000 of the purchase price as the value of the house was to benefit the Krafts for purposes of federal income tax and allegedly said that the allocation was non-negotiable. Doc. 38 at 16, ¶ 57. After the Bieglers suggested allocating $130,000 of the purchase price to the house, attorney Aberle and Richard Kraft separately met. Doc. 38 at 16-17, ¶ 58. Upon returning to the conference room, attorney Aberle said that the amount of the purchase price allocated to the home could be reduced to $ 130,000, if the Bieglers would pay the Krafts $ 18,000 more to cover an increase in the capital gains tax that the Krafts would then owe. Id. The Bieglers rejected this proposal. Doc. 38 at 17, ¶ 59. The Bieglers suggested that the parties could have the house appraised and use that amount, but the Krafts did not accept that proposal. Doc, 38 at 17, ¶ 60. Defendant Richard Kraft then...
To continue reading
Request your trial