Dahl v. Sittner, 16018

• Decision Date: 14 September 1988
• Docket Number: No. 16018,16018
• Citation: 429 N.W.2d 458
• Parties: Dewey DAHL and Lavonne Dahl, Plaintiffs and Appellants. v. Peter SITTNER and Sittner Real Estate, Inc., Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 458

429 N.W.2d 458

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

No. 16018.

Supreme Court of South Dakota.

Argued May 25, 1988.

Decided Sept. 14, 1988.

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

Dale L. Morman of Morman, Smit, Shepard & Hughes, Sturgis, Randolph J. Seiler of Seiler & Cain, Mobridge, for defendants and appellees.

WUEST, Chief Justice.

Dewey and LaVonne Dahl (Dahls) appeal an order granting summary judgment in favor of Peter Sittner (Sittner) in an action charging Sittner with fraud and misrepresentation and breach of fiduciary duty regarding the sale of the Dahls' ranch. We reverse and remand for further proceedings.

On July 25, 1979, the Dahls and Sittner signed a listing contract to sell the Dahls' 1400 acre ranch in Ziebach County, South Dakota. The Dahls had been contemplating selling their ranch because Dewey's back problems and pending back surgery placed serious doubt on his ability to continue ranching.

Under the terms of the listing agreement, Sittner, a realtor licensed in South Dakota and North Dakota, ¹ agreed to use his best efforts to locate a buyer at the Dahls' asking price of $265 per acre. ² The terms further provided that the purchase price was to be paid entirely in cash and that Sittner would receive a 5% commission in the event a suitable buyer was found. The duration of the listing agreement was one year.

On February 20, 1980, Sittner entered a contract with Donna Klock (Klock), ³ a real estate broker from Minnesota. This contract stated that Klock could solicit buyers for the Dahl property and present them to Sittner. If Sittner then completed a sale, Klock would receive 40% of Sittner's commission. Sittner cancelled this agreement in July, 1980, but the parties renewed it on December 4, 1980.

Klock first contacted the Dahls on January 28, 1981, when she brought them a handwritten listing agreement running from that date through March 13, 1981. This listing contract was written on one of Sittner's forms and appeared to bear Sittner's signature. Sittner, however, claims that he was unaware of Klock's meeting with the Dahls and that the signature on this agreement was not his.

Klock again visited the Dahls at their ranch in the summer of 1981. This time she accompanied Sittner. Sittner formally introduced Klock to the Dahls and indicated that she would be assisting him in his efforts to sell the Dahls' ranch. Although it is not clear whether Sittner explained the extent of Klock's involvement, the Dahls contend that Sittner stated Klock would be "handling the sale of their ranch."

On October 27, 1981, Sittner brought the Dahls a third listing contract which was signed by both parties. This agreement listed the Dahls' ranch for sale at $280 per acre. In all other aspects, the agreement was identical to the first listing contract.

Prior to this meeting with the Dahls, Sittner had little, if any, contact with them. Klock, on the other hand, visited the Dahls frequently. In addition to bringing potential buyers to the Dahl property and telephoning the Dahls regarding the sale of their ranch, Klock also stopped at the ranch for personal visits.

In February, 1982, Klock telephoned the Dahls and stated that she found a buyer for their ranch. Klock then drove to the ranch to discuss the sale of the Dahls' livestock and equipment. Klock informed the Dahls that she arranged for Duane Harter (Harter), an auctioneer from Minnesota, to sell their personal property at a public auction and that Harter would be contacting them. The Dahls subsequently received a telephone call from Harter and the two parties signed an auction contract on February 21, 1982. The agreement set the auction date for March 2, 1982, and provided that Harter was to conduct the sale of not only the Dahls' livestock and equipment but also the real estate. Although a buyer for the land supposedly had been found, Klock's and Harter's plan was to "exercise" the real estate at the auction to see if someone would bid higher than the price the secured buyer had agreed to pay. This auction was cancelled when Klock informed the Dahls that the buyer subsequently revoked his offer.

The Dahls entered another auction contract with Harter and Irvin Salzer (Salzer), an auctioneer from Timber Lake, South Dakota, after Klock apparently informed them that she had received another offer to purchase the ranch. This auction was set for March 15, 1982. Klock and Harter again wanted to "exercise" the real estate to see if the auction would produce a higher price. Because the Dahls were not confident that Harter should be trusted to handle the transaction alone, they instructed Salzer to direct the auction.

A few days before the auction, the Dahls telephoned Sittner and requested that Harter be given the abstracts of title to their ranch. Sittner had not communicated with the Dahls since the previous October and just recently had learned through a published sale bill that the real estate was being auctioned along with the livestock and equipment. He was aware of neither Harter's involvement nor the alleged buyer Klock had located. Although Sittner did not understand why the Dahls were auctioning their real property and apparently breaching the agreement giving him the exclusive right to sell, Sittner failed to ask the Dahls about the transpiration of these recent events. The Dahls similarly failed to inquire of Sittner whether he had authorized the auction sale, whether he would receive a commission if the land sold by auction, whether Klock was still "working for" him, or even whether he or Klock had received a firm offer to purchase the land. Nonetheless, Sittner delivered the abstracts of title to Harter on March 12, 1982. At that time, however, Sittner expressed to Harter his intention to get his commission on the sale of the land even though Harter and Salzer would receive a 10% commission if the real estate sold at the auction.

The auction was conducted on March 15, 1982. Several bids were received on the real estate, but none of them were accepted. Prior to the start of the auction, the Dahls asked Klock if she had a suitable buyer for their ranch. Klock assured them that an offer to purchase had been signed and that $10,000 had been deposited in an escrow account in Mobridge, South Dakota. She further stated that another potential buyer was going to be present at the auction. Klock, however, did not show the Dahls the purchase offer until after the auction.

The Dahls found the terms of this offer to purchase unacceptable. Although the stated price was $295 per acre, the purchase price was to be paid not in cash, but by assuming the existing FmHA mortgage. The difference between the purchase price and the mortgage was to be paid to the Dahls over a period of twenty-five years. Interest on the unpaid balance would accrue annually at a rate of 9%. If the purchase price was paid in full within eighteen months after the contract for deed was signed, the buyer was entitled to a 17.5% discount. Finally, the $10,000 represented by Klock to be on deposit in an escrow account was instead stated as a promissory note.

The offer to purchase was signed on March 6, 1982, on behalf of Robert Briggs (Briggs), a real estate investor from Minnesota. It is not clear whether Klock, Harter or both participated in preparing the offer. The offer was written on one of Sittner's forms, but he denies having any knowledge about the offer, including the use of his form.

No sale of the Dahls' real estate occurred and the Dahls subsequently filed suit against Sittner alleging fraud on behalf of Sittner's agent, Klock. The Dahls claimed that Briggs' offer to purchase was a "sham" and that they sold their personal property after relying on Klock's representations that she had a buyer and a valid offer to purchase their ranch. The Dahls further contended that they were effectively displaced from their ranching business by the auction sale of their personal property as a result of their reliance on Klock and that they were damaged because their real property had not been sold.

Sittner asserted that he was completely unaware of Klock's activities and that Klock was acting on her own and outside the scope of their agreement. He further claimed that at no time did he make any representations to the Dahls that Klock was handling the sale of their ranch or that she had any authority from him whatsoever.

On August 28, 1987, Sittner brought a motion for summary judgment pursuant to SDCL 15-6-56(b), contending that the Dahls had demonstrated no genuine issue of material fact. The trial court granted Sittner's motion, essentially noting that (1) nothing in the record established a relationship among Klock, Harter and Sittner that would create a duty for Sittner toward the Dahls; (2) if the Dahl's land sold at auction, the auctioneers would receive a 10% commission and Sittner would receive nothing; (3) the Dahls were negligent in breaching their agreement with Sittner and, therefore, were precluded from seeking recovery from him on the theory of apparent authority; and (4) since Briggs' purchase offer was legitimate, no fraud was committed by Klock and the damages claimed by the Dahls, if any, resulted from their refusal to accept his offer.

The only question presented to us by this appeal is whether the trial court erred in granting summary judgment. We believe that it did. The aforementioned matters present genuine issues of material fact upon which reasonable minds...