McCollam v. Cahill, No. 24895.

• Court: Supreme Court of South Dakota
• Writing for the Court: Meierhenry
• Citation: 766 N.W.2d 171,2009 SD 34
• Docket Number: No. 24895.
• Decision Date: 13 May 2009
• Parties: Kelly B. McCOLLAM and Michelle M. McCollam, Plaintiffs and Appellants, v. Neil D. CAHILL, Defendant and Appellee.

766 N.W.2d 171 2009 SD 34 Kelly B. McCOLLAM and Michelle M. McCollam, Plaintiffs and Appellants,
v.
Neil D. CAHILL, Defendant and Appellee. No. 24895. Supreme Court of South Dakota. Argued March 24, 2009. Decided May 13, 2009.

[766 N.W.2d 173]

John W. Burke of Thomas, Braun, Bernard & Burke, LLP, Rapid City, for plaintiffs and appellants.

Melissa E. Neville, Kennith L. Gosch of Bantz, Gosch & Cremer, LLC, Aberdeen, for defendant and appellee.

MEIERHENRY, Justice.

[¶ 1.] Kelly and Michelle McCollam entered into a contract for deed with Neil Cahill to purchase Cahill's property on the outskirts of Mobridge, South Dakota. McCollams sued Cahill for equitable rescission based on Cahill's failure to disclose the presence of snakes in and around the house. Cahill counter-sued for specific performance of the contract for deed. The trial court granted Cahill's request for specific performance. McCollams appeal.

[¶ 2.] McCollams contend that rescission should have been granted based on fraud or failure of consideration.¹ McCollams claim that Cahill had a duty to disclose a "snake problem" on the property condition disclosure statement required by SDCL 43-4-44. They claimed that had they known of the "snake problem," they would not have purchased the property.

[¶ 3.] SDCL 43-4-38 requires a seller of residential real property to disclose certain property conditions prior to sale. The disclosure form is set forth by statute and contains over 90 questions concerning the lot or title, structural information, system/utilities information, hazardous conditions, and miscellaneous information. SDCL 43-4-44. At the time of the sale, the disclosure form included the following question under the miscellaneous information section of the form: "Are there any other problems that have not been disclosed above?"² Id. The seller is required to "make each disclosure in good faith." SDCL 43-4-41.

[¶ 4.] In applying the statutes, we have previously said, "`[t]he statutes require a complete and truthful disclosure made in good faith, not a disclosure simply sufficient to put the buyer on notice of the defects.'" Fuller v. Croston, 2006 SD 110, ¶ 18, 725 N.W.2d 600, 606-07 (quoting Parmely v. Hildebrand (Parmely I), 1999 SD 157, ¶ 9, 603 N.W.2d 713, 717 (emphasis in original)). "One obvious purpose of the disclosure statutes is `to provide prospective buyers with information about

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material defects known to the seller concerning the property.'" Id. ¶ 23 (quoting Coughlin v. Gustafson, 332 Ill.App.3d 406, 265 Ill.Dec. 493, 772 N.E.2d 864, 869 (2002)). Proper disclosure requires the "`full and complete disclosure of defects of which the seller is aware.'" Parmely v. Hildebrand (Parmely II), 2001 SD 83, ¶ 9, 630 N.W.2d 509, 513 (emphasis removed) (quoting Engelhart v. Kramer, 1997 SD 124, ¶ 20, 570 N.W.2d 550, 554). The seller's good faith in truthful and complete disclosure is judged using the reasonable person standard. See SDCL 43-4-41; SDCL 43-4-44; Fuller, 2006 SD 110, ¶ 18, 725 N.W.2d at 607 (citing Engelhart, 1997 SD 124, ¶ 20, 570 N.W.2d at 555).

[¶ 5.] McCollams contend that Cahill was required to disclose that there had been snakes in the house and around the property. Consequently, McCollams had the burden of proving that a material problem with snakes existed on the property prior to sale, that Cahill was aware of the problem, and that he had failed to disclose it. The trial court concluded that McCollams had failed to prove that there was a "snake problem." The court denied McCollams' request for rescission and granted Cahill's request for specific performance. McCollams raise two issues on appeal.

ISSUES

1. Whether the trial court erred by denying rescission of the contract for deed.

2. Whether the trial court erred by granting specific performance of the contract for deed.

STANDARD OF REVIEW

[¶ 6.] We review the circuit court's findings of fact under the clearly erroneous standard. In re Estate of Smid, 2008 SD 82, ¶ 11, 756 N.W.2d 1, 5-6 (quoting Smetana v. Smetana, 2007 SD 5, ¶ 7, 726 N.W.2d 887, 891). The findings of fact will not be reversed absent "a firm conviction that a mistake has been made." Id. We review conclusions of law de novo. Id. "`The credibility of the witnesses, the weight to be accorded their testimony, and the weight of the evidence must be determined by the [circuit] court and we give due regard to the [circuit] court's opportunity to observe the witnesses and the evidence.'" In re Estate of Pringle, 2008 SD 38, ¶ 18, 751 N.W.2d 277, 284 (quoting In re Estate of Dokken, 2000 SD 9, ¶ 10, 604 N.W.2d 487, 490-91). "`We review a circuit court's decision regarding an equitable remedy under the abuse of discretion standard.'" Vander Heide v. Boke Ranch, Inc., 2007 SD 69, ¶ 17, 736 N.W.2d 824, 832 (quoting Ziegler Furniture and Funeral Home, Inc. v. Cicmanec, 2006 SD 6, ¶ 14, 709 N.W.2d 350, 354).

ANALYSIS

[¶ 7.] Whether the appropriate remedy is rescission or specific performance in this case depends on the trial court's rulings as to the underlying facts. Here, the trial court determined that no "snake problem" existed on the property. Unless the court's determination is clearly erroneous, Cahill had no duty under the statute to disclose, and McCollams' claims of fraud and lack of consideration fail. At trial, both parties presented numerous witnesses who testified to the presence or absence of snakes on the Cahill property. McCollams testified that they found two bull snakes in the house within the first weeks after moving into the house. They also testified to several other bull snakes found in the garage and around the house during the following months. They testified that encountering the numerous snakes in and around the house frightened their children and eventually caused them

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to purchase and move into another house. To prove that there was a snake problem known to Cahill, they presented several witnesses who testified to seeing snakes...