Schmidt v. Wildcat Cave, Inc.

Decision Date21 December 1977
Docket NumberNo. 11714,11714
Citation261 N.W.2d 114
PartiesHarlan A. SCHMIDT and Earl J. Schmidt, Plaintiffs and Appellants, v. WILDCAT CAVE, INC., Defendant and Respondent.
CourtSouth Dakota Supreme Court

Harlan A. Schmidt pro se.

Gordon Verne Goodsell, Rapid City, for plaintiff and appellant Earl J. Schmidt.

Terrance J. Crow, Hill City, for defendant and respondent.

ZASTROW, Justice (on reassignment).

From a verdict and judgment for defendant-seller (Wildcat Cave, Inc.) denying damages in an action for deceit and from an order denying a new trial, plaintiffs-purchasers (Schmidts) appeal. We affirm.

On March 31, 1973, Wildcat Cave, Inc. contracted to sell certain real and personal property to the Schmidts. The real property consisted of an 1.65-acre lot and an 80-acre tract of land on which a tourist attraction known as Wildcat Cave was located. The owners of Wildcat Cave, Inc., Mr. and Mrs. Stanley Wallberg, lived in a mobile home on what they thought was a part of the 80-acre tract. In listing the property for sale, the seller designated the asking price for the entire 81.65 acres as $67,000, or, alternatively, $56,000, if the seller could retain the 5-acre homesite. The Schmidts desired all of the real property for proposed parking lot expansion and, after negotiations, purchased the 81.65 acres for $58,500. Thereafter, the Schmidts discovered that although they had received 81.65 acres, the mobile home site was not owned by Wildcat Cave, Inc. but was United States Forest Service land.

Other discoveries made by Schmidts were (1) that the annual number of paid admissions to the tourist attraction allegedly represented as over 10,000 was a total from 1949, but the 1971 1 total admissions were significantly lower; (2) that the number of billboards advertising the attraction was considerably less than allegedly represented; and (3) that the 1971 gross income from the attraction was $6,849.45, not the $9,000 allegedly represented to Schmidts. Because of these discoveries, Schmidts commenced an action on July 24, 1974, to recover $86,000 2 in damages from Wildcat Cave, Inc. for "false, fraudulent and deceitful representations."

From an unfavorable jury verdict, Schmidts have appealed and contend that reversible error was committed by the trial court in (1) not instructing the jury on constructive fraud, (2) incorrectly instructing the jury on the certainty of damages requirement, (3) incorrectly taxing as costs certain items, and (4) not granting a new trial.

Constructive Fraud

The Schmidts first contend that the trial court committed reversible error in failing to give a constructive fraud instruction. We must first determine whether the claimed error is reviewable. It is beyond dispute that a court must instruct the jury fully on the issues presented by the pleadings and evidence. SDCL 15-6-51(a). However, the failure of a court to correctly or fully instruct the jury is not reviewable unless an objection or exception to the instruction identifying the defect therein with sufficient particularity was taken or a written instruction correctly stating the law was requested. SDCL 15-6-51; Englebert v. Ryder, 1958, 77 S.D. 333, 91 N.W.2d 739; Lang v. Burns, 1959, 77 S.D. 626, 97 N.W.2d 863; Ross v. Foss, 1958,77 S.D. 358, 92 N.W.2d 147. However, SDCL 15-6-51 is not intended to be used as a technical excuse for overlooking the trial court's erroneous instructions. In making objections, no particular formality is required if it is clear that the trial judge was informed of the possible errors so that he may have the opportunity to correct the instructions. See 5A Moore's Federal Practice P 51.04; Wright & Miller, Federal Practice and Procedure: Civil § 2554.

The record discloses that the Schmidts did not present any written, "requested" instruction but did object and except to the exclusion of constructive fraud from Instruction No. 9. 3 The objection sufficiently identified the failure to instruct on constructive fraud as an alleged legal defect to allow this court to review the correctness of the court's instruction. The trial court, however, was correct. 4

An instruction on constructive fraud, as defined in SDCL 53-4-6, should not be given in a tort action for deceit brought under SDCL 20-10. SDCL 53-4 makes contracts obtained by duress, fraud, undue influence, or mistake voidable. SDCL 53-4-5 defines actual fraud which makes a contract voidable; SDCL 53-4-6 defines constructive fraud which makes a contract voidable. The tort action of deceit is based only upon actual fraud as defined by SDCL 20-10-2, and requires scienter or its equivalent. Constructive fraud, which requires no fraudulent intent, is not a basis for deceit under SDCL 20-10, nor under common law, 37 C.J.S. Fraud §§ 2, 4; 37 Am.Jur.2d, Fraud and Deceit, §§ 185, 188, 197, 220. Although actual fraud may be the basis of tort actions and contract actions, constructive fraud is the basis only for actions for the avoidance of contracts. 37 C.J.S. Fraud §§ 2, 4; 37 Am.Jur.2d, Fraud and Deceit, § 220, 17 C.J.S. Contracts §§ 149, 152, 154(c), 160.

Here, the Schmidts were not raising a defense to an action for damages for a breach of the contract, nor were they attempting to have the contract rescinded under SDCL 21-12-1, SDCL 53-11-2 (see Baker v. Jewell, 1959, 77 S.D. 573, 96 N.W.2d 299) or reformed under SDCL 21-11-1. In such contract actions, an instruction on constructive fraud would have been proper, but in a tort action, as pleaded by the plaintiffs, it is not.

Schmidts also argue that they were entitled to an instruction upon the theory of "negligent misrepresentation." However, no instructions, written or otherwise, were presented to the trial court and no objections or exceptions to the instructions for a failure to instruct on "negligent misrepresentation" were made and there was nothing in the plaintiffs' pleadings or evidence to suggest such a theory of recovery. Instead, Schmidts argue that their request for an instruction on "constructive fraud" was synonymous with a request for an instruction on "negligent misrepresentation."

Whatever similarities there may be between our statutory "constructive fraud" 5 and "negligent misrepresentation," 6 the objection by the Schmidts to Instruction No. 9 (see footnote 3) was not sufficient to preserve as error the trial court's failure to instruct on the tort of negligent misrepresentation.

Schmidts argue that the court's definition of "actionable fraud" requiring that a representation must be "known to be untrue by the party making it, or else recklessly made" was error. Again, the plaintiffs attempt to raise this issue based upon their objection to Instruction No. 9. Nothing in that objection even remotely identifies with particularity this alleged defect, and it is not reviewable on appeal.

Certainty of Damages

Instruction No. 10 is complained of as incorrectly stating the rule of damages in a deceit action. As given, the instruction was:

"You are further instructed ladies and gentlemen that a plaintiff seeking damages in law action for fraud must prove that he has suffered damages directly as a consequence of fraud and to an extent that is definite and ascertainable."

The plaintiffs on appeal argue that the amount of damages in a tort action need only be proven with "reasonable certainty." The defendant asserts that the plaintiffs did not properly preserve this objection to the instructions on these grounds. The plaintiffs' objection 7 is sufficient to raise the issue of whether the instruction correctly stated the certainty of damages requirement.

The language of Instruction No. 10 was obviously taken from dicta in Sabbagh v. Professional & Business Men's Life Insurance Company, 1962, 79 S.D. 615, 628, 116 N.W.2d 513, 520. The language of Sabbagh was an incomplete statement taken from the text of 24 Am.Jur., Fraud and Deceit, § 265:

"Hence, one seeking to recover damages for fraud in a law action must prove that he has suffered a loss directly from, and as a clear and necessary consequence of, the fraud to an extent so definite and ascertainable that an award providing for the payment to him of a sum properly compensating him for the fraud practiced upon him, or granting him adequate relief by way of recoupment, may be made." 8

See also County of Nelson v. Northcote, 6 Dak. 378, 43 N.W. 897.

Instruction No. 10 was apparently given to advise the jury that it was not to make an award for damages which were uncertain, remote, conjectural or speculative, but to give recovery for those which were proximately caused by the fraudulent representations. SDCL 21-3-1; 37 Am.Jur.2d, Fraud and Deceit, §§ 283, 343; 37 C.J.S. Fraud § 141; Prosser, Torts (4th Ed.), Chap. 18, § 110. This is in accord with this court's decision that:

"The authorities recognize a distinction between uncertainty as to the cause or fact of damages and uncertainty as to the amount. See Annotation in 78 A.L.R. 858. The rule against indefinite or uncertain damages applies only to such damages as are not the definite or certain results of the wrong. Uncertainty as to the fact is fatal to recovery, but uncertainty as to the measure or extent of the damages does not bar recovery. * * * " Kowing v. Williams, 1954, 75 S.D. 454, 459, 67 N.W.2d 780, 783.

See also 22 Am.Jur.2d, Damages, §§ 23-25; 25 C.J.S. Damages § 25, et seq. In determining the amount of recovery, there need only be "a reasonable basis for measuring the loss" and it is only necessary that the damages "can be measured with reasonable certainty." Kressly v. Theberge, 1961, 79 S.D. 386, 112 N.W.2d 232; Swenson v. Chevron Chemical Company, 1975, S.D., 234 N.W.2d 38; Fredrick v. Dreyer, 1977, S.D., 257 N.W.2d 835.

The confusion arises from the use of the word "extent" in Instruction No. 10 and in the American Jurisprudence text. "Extent" as used was intended to refer to the scope or degree of the injury, not the amount, 9 but in the context used, the word "extent"...

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    ...jury might have, and probably would have, returned a different verdict if a correct instruction had been given. Schmidt v. Wildcat Cave, Inc., 261 N.W.2d 114, 119 (S.D.1977) (citation omitted). See also Ryken v. Blumer, 307 N.W.2d 865 (S.D.1981). Mere assertions of what the jury may have co......
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