Oxton v. Rudland

#28070, #28084-r-LSW
2017 S.D. 35

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
DWIGHT OXTON and
MARY JO OXTON, Plaintiffs and Appellants,

v.

EUGENE RUDLAND, CATHY RUDLAND, Defendants and Appellees,

and

TERRANCE J. WOJTANOWICZ, Defendant.

****
APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA

****

THE HONORABLE HEIDI LINNGREN
Judge
****

SHANE M. PULLMAN
PHILLIP R. STILES of
Costello Porter Hill Heisterkamp
Bushnell & Carpenter, LLP
Rapid City, South Dakota Attorneys for plaintiffs and
appellants.

MICHAEL C. LOOS of
Clayborne, Loos & Sabers, LLP
Rapid City, South Dakota
and
GREGORY G. STROMMEN of
Banks, Kappelman & Strommen, Prof. LLC
Rapid City, South Dakota Attorneys for defendants and
appellees.
****
CONSIDERED ON BRIEFS
MAY 30, 2017
OPINION FILED 6/14/17
#28070, #28084

WILBUR, Retired Justice

[¶1.] The purchasers of a home brought suit against the sellers for fraud and

failure to disclose defects. The circuit court dismissed the purchasers’ claims on

summary judgment. The purchasers appeal. We reverse and remand.

Background

[¶2.] In February 2013, Dwight Oxton executed a purchase agreement for a

home located at 1017 Gladys Street in Rapid City, South Dakota owned by Eugene

and Cathy Rudland. The Rudlands had purchased it for $165,000 from Todd and

Kari Wang just a couple months before—in December 2012 and listed it for sale for

$262,500. When the Rudlands listed the home for sale, they prepared a property

disclosure statement. On the disclosure statement, they indicated that they had

installed a “new sidewalk slab” and repaired “slight sheetrock cracking.” In a

handwritten statement in the section for additional comments, the Rudlands noted

that they had not lived in the home and were “selling the home as is.” The Oxtons

received the property disclosure statement and made an offer to purchase the home

for $245,000. They made their offer contingent upon the sale of their home in

Florida and set a closing for March 29, 2013. They also made their offer contingent

on obtaining a property inspection, which they obtained.

[¶3.] Real estate agent Terrance J. Wojtanowicz acted as a limited agent for

Dwight in this transaction. The Oxtons’ home in Florida did not sell by March 29,

2013, but they still wanted to purchase the home. Wojtanowicz advised the parties

to enter into a contract for deed.

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[¶4.] On April 12, 2013, Dwight Oxton and the Rudlands entered into a

contract for deed for the same property to be purchased at the same price. The

contract for deed indicated that Dwight was purchasing the home “as is” and that

the parties agreed that neither party made any representations or warranties

except those made in the contract for deed. The contract reiterated: “Buyer further

acknowledges that he has made an inspection of the property and is fully aware of

the environmental condition of the property and further confirms it [sic] is buying

the property ‘as-is’ with no representations or warranties from Sellers regarding the

environmental condition of the property.” The agreement contained an integration

clause, indicating that it constituted the entire agreement between the parties.

[¶5.] Within a year after moving into the home, the Oxtons began to notice

new cracks in the sheetrock throughout the home. The Oxtons later learned from

the Wangs that the home had been the subject of a prior lawsuit when the Wangs

owned it. The Wangs told the Oxtons that the home suffered significant damage

because of major settling and the presence of expansive soil. The Oxtons also

learned that Wojtanwicz had acted as an expert for the Wangs in that lawsuit. In

his report, Wojtanwicz opined that the home’s value if sold “as is” would be between

$150,000 and $155,000 because of the presence of expansive soil. The Wangs told

the Oxtons that they sold the home after the lawsuit settled. The Oxtons learned

that Wojtanwicz had acted as the limited agent in the sale of the home from the

Wangs to the Rudlands. The Oxtons also learned that the Rudlands had received a

property disclosure statement, which indicated that the home had “major settling,”

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that the “house sold as is,” that expansive soils existed, and that the “[h]ome was

part of a lawsuit do [sic] to settling and is being sold as is[.]”

[¶6.] In July 2014, the Oxtons brought suit against the Rudlands and

Wojtanowicz. This appeal concerns only the suit against the Rudlands. The Oxtons

claimed that the Rudlands violated SDCL 43-4-38 when they negligently and

intentionally failed to disclose defects. They also asserted that the Rudlands

fraudulently misrepresented the value of the home by selling it “as is” and

fraudulently deceived Dwight by suppressing facts known to the Rudlands related

to the property. The Oxtons sought compensatory and punitive damages.

[¶7.] The Rudlands answered and asserted that any problems with the

home were caused by the Oxtons’ undertaking of significant landscaping, which

they claimed compromised the ability to keep water away from the home’s walls and

away from the soil beneath the home. The Rudlands also asserted multiple

affirmative defenses. The Rudlands counterclaimed against Dwight Oxton for

breach of contract based on the alterations he completed to the property, including

the landscaping project, and for Dwight’s failure to maintain property and liability

insurance coverage and name the Rudlands as additional insureds. They claimed

that they gave Dwight notice of his defaults under the contract and that Dwight

failed to cure the defaults. Because of Dwight’s breaches and failures to cure, the

Rudlands requested that the circuit court order the Oxtons to vacate the property

and award the Rudlands damages, costs, and attorney’s fees.

[¶8.] The Rudlands moved for partial summary judgment. They argued that

the unambiguous language of the contract for deed foreclosed the Oxtons’ claim that

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the Rudlands violated SDCL 43-4-38 and the claims that the Rudlands

misrepresented any facts or fraudulently concealed any facts. According to the

Rudlands, Dwight agreed to buy the home “as is” and agreed that the Rudlands

made no representations or warranties other than those made in the contract for

deed. In response, the Oxtons asked the circuit court to consider parol evidence.

[¶9.] After a hearing, the circuit court granted the Rudlands’ motion for

partial summary judgment. The court found the language of the contract for deed

unambiguous and refused to consider parol evidence. Specifically, the court held

that “[t]he enforceable, fully-integrated and unambiguous contract disposes of all

causes of action against the Rudlands.” In regard to the Oxtons’ claims of fraud, the

court refused to consider parol evidence because the purchase agreement and

property disclosure statement had “been expressly supplanted by the terms of the

contract for deed when Oxtons could not close on the original transaction” and

under the contract for deed, the Oxtons purchased the property “as is.” The court

further concluded that there was “no factual support for the claim that Dwight

Oxton was fraudulently induced to enter into the contract for deed.” In the court’s

view, it would be a “twist of logic” to allow the Oxtons to use the property disclosure

statement to support their fraud claim when the Oxtons agreed to buy the property

“as is.”

[¶10.] In regard to the Oxtons’ claims that the Rudlands negligently and

intentionally failed to disclose defects as required by SDCL 43-4-38, the court found

Lucero v. Van Wie, 1999 S.D. 109, 598 N.W.2d 893 controlling. In that case, this

Court held that parties can waive the requirement of SDCL 43-4-38. Relying on

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Lucero, the circuit court held that the contract for deed provided that necessary

waiver.

[¶11.] The Oxtons appeal, asserting the following issues:

1. Whether the circuit court erred when it concluded that the
parol evidence rule precluded consideration of the property
disclosure statement when the Oxtons alleged fraud.

2. Whether the circuit court erred when it concluded that the
“as is” clause barred the Oxtons’ claim that they relied on the
Rudlands’ misrepresentations.

3. Whether material issues of fact exist precluding summary
judgment on the Oxtons’ claim that the Rudlands failed to
complete the property disclosure statement in good faith as
required by SDCL 43-4-38.

By notice of review, the Rudlands claim the circuit court abused its discretion when

it refused to award them attorney’s fees.

Analysis

1. Parol Evidence and the “As Is” Clause

[¶12.] We combine the Oxtons’ first two issues because whether the court

erred when it applied the parol evidence rule is intertwined with the question

whether the court erred when it granted the Rudlands summary judgment on the

Oxtons’ claims of fraudulent misrepresentation and fraudulent concealment.

Summary judgment is appropriate “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” SDCL 15-6-56(c). We give no deference

to the circuit court’s decision to grant summary judgment—our review is de novo.

Highmark Fed. Credit Union v. Hunter, 2012 S.D. 37, ¶ 7, 814 N.W.2d 413, 415.

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Similarly, we review de novo the circuit court’s decision to exclude parol evidence.

Poeppel v. Lester, 2013 S.D. 17, ¶ 19, 827 N.W.2d 580, 584.

[¶13.] The Oxtons do not dispute that the contract for deed is unambiguous

and fully integrated. They claim, however, that the parol evidence rule has

absolutely no application when a party alleges fraud. They further assert that the

“as is” clause and disclaimer of representations or warranties in the contract for

deed cannot shield the Rudlands from liability for fraud.

[¶14.] Ordinarily, the parol evidence rule bars the admission of parol or

extrinsic evidence to vary the terms of a written contract. SDCL 53-8-5; Auto-

Owners Ins. Co. v. Hansen Hous., Inc., 2000 S.D. 13, ¶ 13, 604 N.W.2d 504, 510.

But “[i]t must be understood that the parol evidence rule ‘is in no sense a rule of

evidence[.]’” Auot-Owners, 2000 S.D. 13, ¶ 14, 604 N.W.2d at 510 (quoting 9 J.

Wigmore, Evidence § 2400, at 4 (Chadbourn rev ed 1981)). It is “a rule of

substantive law.” Id. This Court has consistently held that “the parol evidence rule

does not apply in cases of fraud in the inducement” despite that the contract is

clear, unambiguous, and fully integrated. Poeppel, 2013 S.D. 17, ¶¶ 19, 21, 827

N.W.2d at 584-85; Engels v. Ranger Bar, Inc., 2000 S.D. 1, ¶ 15, 604 N.W.2d 241,

245; Holmes v. Couturier, 452 N.W.2d 135, 137 (S.D. 1990); Sabbagh v. Prof’l & Bus.

Men’s Life Ins. Co., 79 S.D. 615, 629, 116 N.W.2d 513, 520 (1962). Nor can parties

shield themselves from liability for fraud by using a disclaimer, a stipulation, or a

statement that no representations have been made in the contract. Poeppel, 2013

S.D. 17, ¶¶ 22-23, 827 N.W.2d at 585-86. To conclude otherwise would mean

“contracting parties could insulate themselves from their own fraud.” Id. ¶ 21.

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[¶15.] Here, the Oxtons seek to use parol evidence to prove fraudulent

concealment and fraudulent misrepresentation. These causes of action are

governed by SDCL 20-10-2. To prove fraudulent concealment, the Oxtons must

show, among other things: “(1) the suppression of a fact by one who is bound to

disclose it, or (2) the suppression of a fact by one who gives information of other

facts which are likely to mislead for want of communication of that fact.” See

Milligan v. Waldo, 2001 S.D. 2, ¶ 10, 620 N.W.2d 377, 380. On their claim of

fraudulent misrepresentation, the Oxtons must show, in part, that (1) the Rudlands

made a representation of fact that was untrue, (2) that they knew it was untrue or

made the representation recklessly, and (3) that they made the representation with

the intent to deceive Dwight or with the purpose of inducing him to act upon it. See

id.

[¶16.] In support of these claims, the Oxtons presented evidence that the

Rudlands purchased the home for $165,000 just months before selling it for

$245,000. When the Rudlands purchased the home, they were informed via the

Wangs’ property disclosure statement that the home was the subject of a lawsuit,

that it had experienced “major settling,” and that expansive soils existed. Despite

this information, the Rudlands completed a property disclosure statement that did

not inform Dwight of the same material facts. In fact, although the Wangs checked

the box “yes” in answer to the question on the presence of expansive soils, the

Rudlands checked the box “no” for the same question.

[¶17.] The Rudlands, however, respond that the disclosure statement is

irrelevant because Dwight received it in the transaction governed by the purchase

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agreement, which transaction terminated when the Oxtons did not sell their home

in Florida. They also claim that the Oxtons “greatly exaggerate” their claims of

being defrauded. They point to Dwight’s deposition testimony where he testified

that he was aware he was purchasing the home “as is,” that he knew the contract

for deed said that the Rudlands were making no representations or warranties, and

that he admitted they had an opportunity to and did obtain a home inspection.

[¶18.] “A provision in a contract that the buyer takes the property ‘as is’ does

not confer upon the seller a general immunity from liability for fraud.” Holmes, 452

N.W.2d at 137; accord Engles, 2000 S.D. 1, ¶ 15, 604 N.W.2d at 245. More

importantly, “reliance in a fraudulent inducement case is a question of fact.”

Poeppel, 2013 S.D. 17, ¶ 28, 827 N.W.2d at 587. Questions of fact on material issues

such as fraud are not appropriate for summary judgment. Indeed, “[t]hough the

purpose of [summary judgment] is to secure a just, speedy and inexpensive

determination of the action, it was never intended to be used as a substitute for a

court trial or for a trial by jury where any genuine issue of material fact exists.”

Bourk v. Iseman Mobile Homes, 316 N.W.2d 343, 343-44 (S.D. 1982). On summary

judgment, “[t]he evidence must be viewed most favorably to the nonmoving party

and reasonable doubts should be resolved against the moving party.” Campion v.

Parkview Apartments, 1999 S.D. 10, ¶ 22, 588 N.W.2d 897, 902 (quoting Wildeboer

v. S.D. Junior Chamber of Comm., 1997 S.D. 33, ¶ 9, 561 N.W.2d 666, 668).

[¶19.] From our review of the record, the circuit court erroneously concluded

that there was “no factual support for the claim that Dwight Oxton was

fraudulently induced to enter into the contract for deed.” Rather, the Oxtons

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presented specific facts to support their claims that the Rudlands fraudulently

concealed and misrepresented facts to induce Dwight to purchase the home and that

he relied on the Rudlands’ representations when he agreed to purchase the home

under the contract for deed. Therefore, the court erred when it applied the parol

evidence rule to exclude the Oxtons’ extrinsic evidence. The court also erred when

it granted the Rudlands summary judgment on the Oxtons’ fraud claims.

2. Disclosure Statement as Required by SDCL 43-4-38

[¶20.] The Oxtons next claim that the circuit court erred when it granted

summary judgment on their claim that the Rudlands violated SDCL 43-4-38. They

assert that they did not waive their rights under SDCL 43-4-38 by entering into the

contract for deed to purchase the home “as is.” They also claim that the

circumstances are distinguishable from Lucero, 1999 S.D. 109, 598 N.W.2d 893

because, unlike in Lucero, the Rudlands gave the Oxtons a disclosure statement.

1999 S.D. 109, 598 N.W.2d 893.

[¶21.] Although Lucero involved a contract for deed and the sale of a home

“as is,” we did not declare that the use of “as is” language or general disclaimers

against warranties or representations constitutes waiver of the disclosure

requirements under SDCL 43-4-38 as a matter of law. Id. ¶ 13. We interpreted

SDCL chapter 43-4 to allow for waiver and then held that waiver occurred in Lucero

on “the facts” of the case. Id. ¶ 17.

[¶22.] Here, however, the facts do not support that the parties waived the

disclosure requirements. Dwight agreed to purchase the home “as is” on a contract

for deed, but neither the circumstances nor the contract language support that the

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intent was to waive disclosure requirements. In fact, the Rudlands completed and

delivered a property disclosure statement to Dwight. “To support the defense of

waiver, there must be a showing of a clear, unequivocal and decisive act or acts

showing an intention to relinquish the existing right.” Norwest Bank South Dakota,

N.A. v. Venners, 440 N.W.2d 774, 775 (S.D. 1989) (quoting Subsurfco, Inc. v. B-Y

Water Dist., 337 N.W.2d 448, 456 (S.D. 1983)); accord Wehrkamp v. Wehrkamp,

2009 S.D. 84, ¶ 9, 773 N.W.2d 212, 215. Because no clear, unequivocal, or decisive

act or acts exist on this record, we reverse the circuit court’s summary disposition of

the Oxtons’ claim that the Rudlands violated SDCL 43-4-38.

3. Notice of Review—Attorney’s Fees

[¶23.] The Rudlands assert that the circuit court abused its discretion when

it denied their motion for an award of attorney’s fees under SDCL 43-4-42. That

statute allows for an award of attorney’s fees “to the prevailing party” in a suit

under this section. Id. Because we reverse the circuit court’s decision summarily

disposing of the Oxtons’ claim under SDCL chapter 43-4, we need not address this

issue.

[¶24.] Reversed and remanded.

[¶25.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and KERN,

Justices, concur.

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