Dahl v. Sittner

• Citation: 474 N.W.2d 897
• Decision Date: 28 August 1991
• Docket Number: No. 17004,17004
• Parties: Dewey DAHL and Lavonne Dahl, Plaintiffs and Appellants, v. Peter SITTNER and Sittner Real Estate, Inc., Defendants and Appellees.
• Court: Supreme Court of South Dakota

Page 897

474 N.W.2d 897

Dewey DAHL and Lavonne Dahl, Plaintiffs and Appellants, v. Peter SITTNER and Sittner Real Estate, Inc., Defendants and Appellees.

No. 17004.

Supreme Court of South Dakota.

Argued Oct. 22, 1990.

Decided Aug. 28, 1991.

Patrick M. Ginsbach, Farrell, Farrell & Ginsbach, Hot Springs, Rodney C. Lefholz, Rapid City, for plaintiffs and appellants.

Dale Morman, Morman, Smit, Shepard and Hughes, Sturgis, Jack Von Wald, Selby, for defendants and appellees.

HENDERSON, Justice (on reassignment).

PROCEDURAL HISTORY/ISSUES

Dewey Dahl (Dewey) and Lavonne Dahl (collectively referred to as Dahls) appeal from a pretrial order striking from their complaint a claim for punitive damages against Peter Sittner and Sittner Real Estate, Inc., (collectively referred to as Sittner). In October 1985, Dahls brought an action for consequential and punitive damages against Sittner alleging, in one count, fraud and misrepresentation in connection with a real estate listing for the sale of Dahls' ranch. We fully detailed the facts giving rise to this action in Dahl v. Sittner, 429 N.W.2d 458 (S.D.1988) (Dahl I ) wherein we reversed the trial court's order granting summary judgment to Sittner. This appeal only involves Dahls' claim for punitive damages. The Dahls raise three issues on appeal:

1. Is SDCL 21-1-4.1 applicable to claims for punitive damages based on fraud and deceit? We hold that it is.

2. Is SDCL 21-1-4.1 applicable to claims for punitive damages brought prior to July 1, 1986? We hold that it is.

3. Did the trial court err in ruling that SDCL 21-1-4.1 precludes Dahls from seeking punitive damages against Sittner and Sittner Real Estate? We hold that it did.

Affirmed in part, reversed in part and remanded.

FACTS

The facts pertinent to this claim concern the legal relationship between Sittner and Donna Klock (Klock), a real estate broker licensed in Minnesota but not South Dakota. On February 20, 1980, Sittner entered into a written agreement with Donna Klock. Under this agreement, Klock was to solicit prospective purchasers from Minnesota, present them to Sittner, and Sittner would then show the properties to the potential buyers. If a buyer produced by Klock purchased property listed with Sittner, Klock would receive forty percent of the sale commission. On July 7, 1980, Sittner canceled the agreement, but Klock persuaded Sittner to renew the agreement on December 4, 1980.

Sittner introduced Klock to the Dahls during the period covered by the first agreement. Subsequent to the commencement of the second agreement, Klock contacted Dahls directly and attempted to arrange a sale of their property. In addition to bringing prospective purchasers to Dahls' property, Klock also forged Sittner's signature on a listing agreement, and prepared an offer to purchase Dahls' land on Sittner Real Estate letterhead. In early March 1982, Klock assured Dahls that she would have their property sold by March 15, and persuaded them to contract with Duane Harter (Harter) to auction off both their real and personal property on that date. Three or four days before the sale date, Sittner learned of the auction when he saw a published auction sale bill. Sittner was not aware of Klock's involvement in the sale, or that Klock had allegedly secured a purchaser. Sittner did not contact anyone regarding the auction because the exclusive listing agreement guaranteed his commission on the sale of the ranch regardless of how it was sold, and because he had no involvement in the personal property sale.

On March 15, 1982, immediately prior to the auction sale, Klock assured Dahls that the land had been sold, a contract had been signed, and that $10,000 cash in earnest money had been placed in escrow in a local bank. Relying on Klock's representation that the real property had been sold, Dahls allowed the auction to proceed, first by selling off all their equipment and livestock. After all the personal property was sold, the land was offered for sale. However, the ranch was not sold at auction. Despite Dahls' insistence, Klock did not show them the written offer to purchase until a few days after the auction. It was at this time that Dahls discovered that a promissory note, not money, had been placed in escrow. In addition, Dahls found the terms of this offer unacceptable. Dahls were left in a tenuous position: They still had their ranch but no machinery or livestock to make use of the land.

In October 1985, Dahls commenced this action against Sittner and Sittner Real Estate. ¹ The trial court granted summary judgment to Sittner and we reversed. Dahl I, 429 N.W.2d 458. On remand, the trial court conducted a pretrial hearing on Dahls' punitive damages claim pursuant to SDCL 21-1-4.1. The court determined that Sittner and Sittner Real Estate were not liable for punitive damages and entered an order striking the punitive damages claim from Dahls' complaint. We granted Dahls' petition for an intermediate appeal.

Standard of Review

The issues raised by this appeal involve the interpretation of SDCL 21-1-4.1. The proper construction to be given a statute is a question of law which is fully reviewable. Reid v. Huron Bd. of Educ., 449 N.W.2d 240, 242 (S.D.1989); Border States Paving v. Department of Revenue, 437 N.W.2d 872, 874 (S.D.1989). Accordingly, the questions presented are reviewed de novo. Reid, supra; Border States Paving, supra.

DECISION

I. SDCL 21-1-4.1 is applicable to claims for punitive damages based upon fraud and deceit.

Dahls contend that SDCL 21-1-4.1 does not apply to punitive damage claims based on oppression, fraud, or intentional conduct, as opposed to the "willful, wanton or malicious conduct" specifically referred to in the statute. Claims for punitive damages are prohibited in this state unless expressly authorized by statute. SDCL 21-1-4. Dahls' claim against Sittner for punitive damages is authorized by SDCL 21-3-2 which provides, in pertinent part:

In any action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, actual or presumed, ... the jury, in addition to the actual damage, may give damages for the sake of example, and by way of punishing the defendant.

This statute limits punitive damages to cases in which oppression, fraud, or malice is claimed. Groseth Intern. v. Tenneco, Inc., 440 N.W.2d 276, 279 (S.D.1989); Mathews v. Twin City Const. Co., 357 N.W.2d 500 (S.D.1984). See Till v. Bennett, 281 N.W.2d 276, 279 (S.D.1979) (dicta); Stugelmayer v. Ulmer, 260 N.W.2d 236, 240 (S.D.1977) (dicta). See also Hannahs v. Noah, 83 S.D. 296, 303, 158 N.W.2d 678, 682 (1968); Driscoll, Statutory Restrictions on the Discovery and Trial of Punitive and Exemplary Damage Claims in South Dakota, 33 S.D.L.Rev. 247 (1988). Malice is an essential element of a claim for punitive damages, however, malice sufficient to support exemplary damages may be either actual, malice in fact, or presumed, legal malice. Actual malice is a positive state of mind, evidenced by the positive desire and intention to injure another, actuated by hatred or ill-will towards that person. Malice is so defined in Gamble v. Keyes, 43 S.D. 245, 178 N.W. 870, 872 (1920). Presumed, legal malice, on the other hand, is malice which the law infers from or imputes to certain acts. Hannahs, 83 S.D. at 303, 158 N.W.2d at 682; 52 Am.Jur.2d Sec. 2, P 163. Thus, while the person may not act out of hatred or ill-will, malice may nevertheless be imputed if the person acts willfully or wantonly to the injury of the other. Id. In this context, however, we have said:

Malice as used in reference to exemplary damages is not simply the doing of an unlawful or injurious act, it implies that the act complained of was conceived in the spirit of mischief or of criminal indifference to civil obligations.

Id. 83 S.D. at 303, 158 N.W.2d at 682.

In construing SDCL 21-1-4.1 and 21-3-2 together, we equate the "willful, wanton" language of the former with the presumed, legal malice of the latter and the "malicious" language of the former with the actual malice of the latter.

Dahls next contend that the statute's requirement of a preliminary showing of "willful, wanton or malicious conduct" imposes a greater burden on plaintiffs claiming punitive damages based on fraud than would otherwise exist absent this statute. Dahls' argument is premised on the mistaken assumption that a punitive damages claim based on fraud does not require as one of its elements a showing that the conduct was willful, wanton, or malicious. As noted above, all punitive damages claims require a showing of either actual or presumed malice. Further, as stated in Northwest Realty Co. v. Colling, 82 S.D. 421, 433, 147 N.W.2d 675, 683 (1967), the essential elements of fraud are:

[T]hat a representation was made as a statement of fact, which was untrue and known to be untrue by the party making it, or else recklessly made; that it was made with intent to deceive and for the purpose of inducing the other party to act upon it; and that he [or she] did in fact rely on it and was induced thereby to act to his [or her] injury or damage.

(Citations omitted; emphasis added). By definition, then, fraud involves "intentional" or "reckless" conduct. The term "intentional" is synonymous with "willful." Hunter v. State, 57 Ala.App. 50, 325 So.2d 917, 921 (1975); Jackson v. Edwards, 144 Fla. 187, 197 So. 833 (1940); Black's Law Dictionary 948 (4th ed.1968). Likewise, "reckless" is synonymous with "wanton." Lipscomb v. News Star World Pub. Corp., 5 So.2d 41, 45 (La.App.1941); Commonwealth v. Welansky, 316 Mass. 383, 55 N.E.2d 902, 910 (1944); Black's Law Dictionary 1435 (4th ed.1968). Thus, SDCL 21-1-4.1 does not impose an additional burden by requiring that a party claiming punitive damages first demonstrate a "reasonable basis to believe that there has been willful, wanton or malicious conduct on the part of the party claimed against."

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