Dail v. South Dakota Real Estate Commission

• Decision Date: 16 September 1977
• Docket Number: No. 12047,12047
• Parties: B. H. DAIL, d/b/a Dail Realty, Appellant, v. SOUTH DAKOTA REAL ESTATE COMMISSION, Respondent.
• Court: South Dakota Supreme Court

Page 709

257 N.W.2d 709

B. H. DAIL, d/b/a Dail Realty, Appellant, v. SOUTH DAKOTA REAL ESTATE COMMISSION, Respondent.

No. 12047.

Supreme Court of South Dakota.

Argued June 6, 1977.

Decided Sept. 16, 1977.

Ramon A. Roubideaux, Rapid City, for appellant.

William J. Srstka, Jr. of Duncan, Olinger & Srstka, Pierre, for respondent.

CHRISTENSEN, Circuit Judge.

This is an appeal from a judgment of the Circuit Court of the Seventh Judicial Circuit affirming the decision of the South Dakota Real Estate Commission (Commission) which suspended the license of the appellant for one year. The appellant claims that the trial court erred in its judgment that (1) the findings of fact of the Commission were supported by substantial evidence; (2) the constitutional rights of the appellant were violated in the proceedings and hearing before the Commission; and (3) the trial court erred in granting costs against the appellant.

In April 1972, Jasper and Ada Rioux, husband and wife, and their son-in-law David Gilmore (hereinafter collectively referred to as Riouxs), purchased under a contract for deed the Cedar Court Motel from Oscar and Melda (Grace) Staton. That contract provided that the Riouxs "may not assign this agreement or resell the * * * property without first obtaining the Sellers' prior written consent thereto; provided, however, that the Sellers shall not unreasonably withhold the same." On the first annual installment in September 1973, the Riouxs made only a partial payment of the principal and interest due, and in March 1974, listed the motel with B. H. Dail, doing business as Dail Realty. Although the property was shown to several parties, none was interested. In July 1974, the Riouxs asked Dail if he would buy it. On August 4, 1974, Dail entered into an agreement to purchase the Riouxs' equity in the property for $3,000 subject to the approval of the Statons. Only the sum of $50 earnest money was paid. Later, in August, Dail and the Riouxs entered into an agreement entitled "Transfer of Interest in Real and Personal Property" drafted by Dail's attorney. That agreement specified that Dail was to take possession immediately, begin operating the motel, collect the revenues therefrom, and assigned the prepaid insurance on the premises to Dail. There is no mention in this contract of its being subject to the vendor's approval, but the contract does recite that the Riouxs have received notice of default under their contract for deed and that Dail is to attempt to renegotiate the contract with the Statons to obtain better terms. It further specifies that Dail did not assume any of the obligations of the Riouxs under the contract for deed.

Dail did contact the Statons and made them an offer which was not acceptable.

It was alleged that during the period that Dail was in possession of the motel, he operated his real estate office out of the motel in violation of SDCL 36-21-31 and 36-21-32. The evidence before the Commission was the testimony of David Sieler, Staton's attorney, that he saw a sign, "Dail's Real Estate," at the motel. Sieler further testified that Dail had left the motel telephone number for him to call. There was evidence before the Commission of Dail Realty's newspaper advertisement which lists the telephone numbers of both Dail Real Estate office, as listed with the Commission, and the motel. This advertisement sought to rent units in the motel. This evidence is disputed by Dail.

On September 16, 1974, the Statons commenced a strict foreclosure action against the Riouxs and joined Dail as a defendant because he was in possession of the property. On September 27, 1974, all the parties, being represented by attorneys, entered into a stipulation releasing the other from all claims. Dail vacated the motel premises and the Statons reentered after judgment was entered.

Mrs. Staton filed a complaint with the South Dakota Real Estate Commission on January 1, 1975, alleging professional misconduct of the appellant in making harassing telephone calls concerning her consent to an assignment of the Riouxs' contract for deed, operating his real estate office at the motel, obtaining an illegal assignment of the Riouxs' contract; and upon Dail leaving the premises, the Statons found the property to be severely damaged or missing.

On January 16, 1975, Dail filed an answer to the complaint as directed by the Commission's secretary, Jack Burchill. A formal Commission complaint, as required by ARSD 20:56:06:04 then in effect, was filed on February 7, 1975, by Burchill, which set forth Mrs. Staton's complaint in full. No answer was filed to the formal complaint because the regulations, ARSD 20:56:06:08, did not require it. Formal notice of hearing in accordance with ARSD 20:56:06:06 was sent as required by ARSD 20:56:06:07. At the hearing, the Commission's attorney called as witnesses Mr. Sieler, the complainant's attorney, and Mr. Burchill. Dail, not represented by an attorney at the hearing, cross-examined the witnesses and took the stand himself. Dail called two witnesses as a part of his defense. Neither Mrs. Staton, the complainant, nor the Riouxs were called as witnesses by either party. On April 16 1975, the Commission issued its findings of fact, conclusions of law and its decision suspending Dail's license for one year.

The standard for review of an administrative decision is established by SDCL 1-26-36, which states that the court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact; Valley State Bank v. Farmers State Bank, 1973, 87 S.D. 614, 213 N.W.2d 459; Kierstead v. City of Rapid City, 1976, S.D., 248 N.W.2d 363; provided, however, that the court may reverse or modify the agency's decision if it, inter alia, is affected by error of law, or is unsupported by substantial evidence on the whole record.

It appears that the appellant Dail takes issue with the findings of fact IV and VIII relating to whether the transaction between Riouxs, Gilmore and himself was in violation of the contract for deed; with finding of fact V relating to moving his real estate office to the motel premises and advertising his business from that location; and with finding of fact X relating to his failure to advise the Riouxs of the legal implications of the transfer of interest to himself and his son. This leaves the question of whether the findings of fact are supported by substantial evidence and whether the findings of fact are affected by errors of law.

SDCL 1-26-1(8) states that, " 'Substantial evidence' means such relevant and competent evidence as a reasonable mind might accept as being sufficiently adequate to support a conclusion." According to McCormick on Evidence, § 352 (E. Cleary Ed., 2d Ed. 1972), substantial evidence in an administrative hearing is evidence which would justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury. Such a standard measures both the quantity and quality of the evidence.

Substantial evidence must, of necessity, refer to evidence properly admitted. Appellant argues strenuously that much of the evidence on which the Commission's decision was based is hearsay. According to SDCL 1-26-19, irrelevant, incompetent, and immaterial evidence shall be excluded and the rules of evidence for trial of civil cases shall be followed. Hearsay evidence is inadmissible unless it is within an exception. SDCL 1-26-19 provides an exception, however, in certain situations. To come within the exception, hearsay must meet a two-pronged test: It must be probative of a fact not reasonably susceptible of proof under normal rules, and it must be of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs.

Finding of fact V states that Dail moved onto the motel premises and advertised his real estate office from the motel premises. Mr. Sieler testified that he had seen a sign which read "Dail Real Estate" in the window of the motel. Commission's Exhibit Number 4 was a newspaper advertisement for renting units of the motel which read "Dail Realty" and listed the motel number as well as Dail's registered office telephone number. Finally, there is Mr. Burchill's...