Hanna v. Landsman

• Decision Date: 17 June 2020
• Docket Number: #28927
• Citation: 945 N.W.2d 534
• Parties: Terry HANNA and Rhonda Hanna, Plaintiffs and Appellants, v. William LANDSMAN, Defendant and Appellee.
• Court: South Dakota Supreme Court

945 N.W.2d 534

Terry HANNA and Rhonda Hanna, Plaintiffs and Appellants,

v.William LANDSMAN, Defendant and Appellee.

#28927

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS SEPTEMBER 30, 2019

OPINION FILED June 17, 2020

GARY W. SCHUMACHER, TODD D. WILKINSON of Wilkinson & Schumacher Law, Prof. LLC, De Smet, South Dakota, Attorneys for plaintiffs and appellants.

JENNIFER GOLDAMMER, DONALD McCARTY of Helsper, McCarty & Rasmussen, P.C., Brookings, South Dakota, Attorneys for defendant and appellee.

DEVANEY, Justice

[¶1.] In this breach of contract case, the circuit court granted summary judgment to the defendant, concluding that the alleged agreement relating to the transfer of real property was unenforceable because it was for an unlawful purpose, lacked consideration, and violated the statute of frauds. The plaintiff appeals, and we reverse and remand.

Factual and Procedural Background

[¶2.] Terry Hanna owned a trucking business and farmland in Deuel County. In 2000, he experienced financial difficulties and enlisted the help of Bill Landsman, a longtime acquaintance experienced in assisting individuals with debt settlement and restructuring. Landsman and Hanna dispute what transpired after Landsman began helping Hanna. However, we relate the evidence in a light most favorable to Hanna, the party against whom summary judgment was granted.

[¶3.] Landsman holds a real estate license and operates Landsman Realty. He also worked as a financial agricultural counselor for the State on a contract basis. In his role as an agricultural counselor, Landsman would assist individuals in financial distress and mediate disputes between the individuals and their lenders. Although Landsman was not hired to be Hanna's counselor in an official capacity, it is undisputed that he advised Hanna on his finances and negotiated reduced settlements for Hanna on various debt obligations. He also loaned Hanna money to assist with Hanna's financial situation. Landsman characterized his role with Hanna as "his banker, per se" and explained that he came up with a plan for Hanna to deal with his debt without going through bankruptcy.

[¶4.] This appeal concerns 240 acres (the property) in Deuel County owned by Hanna since 1985 and encumbered by a mortgage with First National Bank in Brookings for approximately $260,000. Hanna's home and shop for his trucking business are located on the property. According to Hanna, Landsman orchestrated a multi-step plan for Hanna to sell the property to Landsman so that Hanna could satisfy his mortgage, but also so that Hanna could make payments toward regaining ownership while he continued to reside on the property and operate his trucking business.

[¶5.] The record reflects that one of Hanna's debts included federal payroll taxes he failed to remit from the tax period ending June 30, 1999 to the tax period ending June 30, 2002. He testified that his now ex-wife had been his bookkeeper and that he did not learn that his taxes were unpaid until their divorce. While Landsman was assisting Hanna with his debt restructuring, Landsman learned that the IRS had told Hanna that it would be filing liens for the unpaid taxes totaling $359,593. After learning this, Landsman and Hanna executed Landsman's multi-step plan concerning the transfer of Hanna's property.

[¶6.] To execute the plan, Landsman asked Midwest R & S Corporation to purchase the property from Hanna and thereafter sell it to him (Landsman). According to Landsman, Midwest was owned by Robert Fishback who also owned First National Bank in Brookings, the bank holding the mortgage on Hanna's property. Although Landsman was not a shareholder, Landsman related that Midwest was a company in which he would invest money, and Midwest would in turn invest Landsman's money in real estate. Landsman testified that he and Fishback had frequently, and for many years, done business together. At the time Landsman arranged for Midwest to purchase Hanna's property, Landsman had an existing cash investment at Midwest, on which Midwest was paying interest to.

[¶7.] On October 7, 2000, Hanna and Midwest executed a purchase agreement for Midwest to buy the property (including the land, buildings, truck shop, fences, dugout, and six semi-trailers) for $183,000. Hanna and Fishback signed the agreement, and Landsman also signed, but as the seller's broker and agent.

[¶8.] The record also contains a "COMMENT SHEET" for "William Landsman" created by Midwest. The October 10, 2000 entry related the following:

Today Bill Landsman was in to get $500 from Midwest to purchase some farm real estate from Terry Hanna. This transaction was approved by Tom and Bob.

Instead of Bill purchasing the property himself, Midwest is going to purchase it for now. It will be in turn purchased by Bill. Tom has required a 25% down payment and the rate will be 9.5%.

Midwest will have title to the property for now but a purchase agreement should be prepared between Midwest and Bill to protect both parties. A loan was prepared for now between Midwest and Bill.

The final closing is expected to happen on the 20th. Advanced $182,933.14 24th.

The closing occurred on October 23, 2000, when Hanna executed a warranty deed conveying the land to Midwest. Landsman notarized the deed. The closing statement provides that the selling price was $183,000, that Hanna paid off his existing note on the property for $146,023.43, and that $30,889.66 was due to the seller at closing.¹ Hanna signed the closing statement, and Landsman signed as Hanna's broker. The purchase agreement and warranty deed were filed on October 24, 2000.

[¶9.] Also on October 24, 2000, Midwest and Landsman executed a purchase agreement whereby Midwest agreed to sell Landsman the same 240 acres (including the land, buildings, truck shop, fences, dugout, and six semi-trailers) for $183,000. The agreement required Landsman to pay Midwest $46,183.15 on October 27, 2000 and the balance by January 2, 2003. The agreement further indicated that "any payment made to Midwest would be subtracted from the balance of the principal."

[¶10.] Two other documents were executed on October 24, 2000—a lease agreement and an option agreement. They purport to be agreements between Hanna and Midwest; however, it appears from the record that they were drafted by Landsman. The lease agreement listed Hanna as the tenant and Midwest as the landlord and indicated that the property to be leased included the building site, truck garage, and 15 of the 240 acres Hanna had just sold. The lease term was two years, and Hanna was to pay $550 per month in rent starting in November 2000. Hanna signed the agreement, and Landsman signed as follows: "Midwest R & S Corporation by W.M. Landsman."²

[¶11.] The option agreement is entitled as an agreement between "Terry L. Hanna and Midwest R & S Corporation by W.M. Landsman. " (Emphasis added.) The option agreement provided a property description and the following options and terms:

I, Terry Hanna may buy all the land buildings back before December 31, 2001 for the purchase price, expenses and 5% of the purchase price of $183,000.00

or

Terry Hanna may buy all the land and buildings back before December 31, 2002 for the purchase price, expenses, and 10% of the purchase price of $183,000.00

also

Teery [sic] Hanna must pay monthly payments of 550.00. Payments are due to Midwest R & S, %[sic]First National Bank, Brooking, SD on the first of each month. Payments will be determined by what the taxes are. $1000 per year for up-keep on the property, insurance on the buildings, interest and principal on the land of $183,000 plus 9.5% interest and 30 year amortization.

or

Terry Hanna may purchase the house acreage for $65,000 plus expenses any time up to December 31, 2002.

or

The truck acreage for $20,000 plus expenses up to December 31, 2000.

The acreage and truck acreage may be purchased separately. The 6 trailers and the semi tractor that are on the purchase agreement revert to Terry Hanna at closing of property on October 24, 2000.

Note: Terry Hanna knows he may loose [sic] all of the land and buildings, if the payments are not made on time.

Terry Hanna also knows W.M. Landsman is going through Midwest R & S Corporation as the lender and W.M. Landsman is a Licensed Real Estate Agent.

Hanna signed this document, but it does not contain a signature of either Landsman or Fishback.

[¶12.] In November 2000, after these transactions, the IRS filed multiple tax liens which generally attached to "all property and rights to property belonging to" Hanna. The liens identify the last date each lien could be refiled, which varied between November 2009 and October 2012. It is not clear what amount, if any, Hanna paid toward these liens. He testified that he did make some payments on the tax debt, but he also testified that he did not pay off the liens and that they were ultimately released because of the passage of time. Hanna asserted that the tax debt was "settled," pointing to the IRS release forms containing language stating that the taxes have been satisfied. Both Landsman and Hanna testified that an IRS representative indicated that the IRS would not attempt to enforce the liens and would allow Hanna to continue in his trucking business so long as Hanna remained current on his taxes.

[¶13.] After Hanna, Midwest, and Landsman executed their respective agreements related to the property, Landsman and Hanna separately issued payments to Midwest, though the reason for these payments is not apparent from the transaction documents. Midwest's Comment Sheet reflects that Midwest applied these payments to Landsman's note: "Today $46,183.15 was posted as a principal reduction on MW#62457. WM Landsman #18639 for $15,750.00 & Terry Hanna #5028 for $30,433.15." However, there is no record of a new mortgage being placed on the property securing Landsman's note. Nevertheless, the purchase agreement between Landsman and Midwest sets forth a $183,000 purchase price, with $46,183.15 to be paid on October...