Center of Life Church v. Nelson

#28188, #28208-a-SLZ
2018 S.D. 42

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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CENTER OF LIFE CHURCH, Plaintiff and Appellee,

v.

ROBERT NELSON and
DEBRA NELSON, Defendants and Appellants.

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APPEAL FROM THE CIRCUIT COURT OF
THE SECOND JUDICIAL CIRCUIT
MINNEHAHA COUNTY, SOUTH DAKOTA

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THE HONORABLE MARK E. SALTER
Judge

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MITCHELL A. PETERSON of
Davenport, Evans, Hurwitz,
& Smith, LLP Attorneys for plaintiff and
Sioux Falls, South Dakota appellee.

TIMOTHY A. CLAUSEN
RYLAND DEINERT of
Klass Law Firm, LLP Attorneys for defendants and
Sioux City, Iowa appellants.

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CONSIDERED ON BRIEFS
APRIL 16, 2018
OPINION FILED 05/30/18
#28188, #28208

ZINTER, Justice

[¶1.] Shortly after purchasing a house, the buyers experienced significant

water-penetration issues. The buyers subsequently sued the sellers for violating

statutory-disclosure requirements. The jury found in favor of the buyers, and both

parties appeal. The sellers argue the circuit court erred in denying their motions

for judgment as a matter of law and for a new trial. The buyers argue the court

erred in denying their request for attorney fees. We affirm.

Facts and Procedural History

[¶2.] In 1999, Robert and Debra Nelson purchased the single-family house

that is at issue in this case. It is a large 6,100 square foot structure that sits at the

bottom of a hill. It has a swimming pool and two separate basements: one located

under the kitchen and one located under the garage. The kitchen basement was

finished and had several rooms. The garage basement was unfinished, had a crawl

space, and was primarily used for storage. Water from the home’s sump pumps,

roof gutters, and drains in the backyard patio drained into four underground pipes

that ran near the house and into the street.

[¶3.] In 2003, Nelsons began experiencing water penetration in the kitchen

basement. They had a “LaCroix” dewatering system installed. The installation

involved drilling holes in the foundation to allow the water to run into a plastic

gutter that ran inside the house to a sump pump. The system did not prevent water

penetration but instead redirected it. According to Nelsons, they did not experience

further water problems in the kitchen basement after installing the LaCroix

system.

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[¶4.] In 2008, after deciding to build a new home, Mr. Nelson noticed a

puddle of water in the garage basement. He had a “Blackburn” dewatering system

installed in the garage basement. Installation of that system involved removal of

part of the concrete floor to install tile, which collected and directed the water to a

sump pump. Mr. Nelson testified he did not go into the garage basement very often,

but he stated he did not notice any water-penetration issues in the garage basement

after installing the Blackburn system.

[¶5.] Nelsons moved out of the house in April or May 2009. Prior to putting

it on the market, they painted most of the interior walls, replaced the hardwood

floors, and installed several new appliances. In June 2009, they put the house on

the market and filled out the seller’s disclosure form required by SDCL 43-4-37 to -

44. At the urging of their real estate agent, Jay Zea, Nelsons also had

“HouseMaster” perform a home inspection and prepare a report.

[¶6.] The inspection report noted that there were water marks and stains on

the walls and floor and that one of the sump pumps was broken. It also noted that

the grade around parts of the house sloped toward the foundation. Although the

report noted the sloping landscaping, Zea wrote on the report: “Normal. No

problem.” Zea testified that he made this notation because Mr. Nelson told him it

was not a problem.

[¶7.] Section II of the disclosure form requires yes or no answers to

questions concerning structural information. The form also requires that sellers

who answer “Yes” to any of the questions are to “explain” in additional comments or

on an attached separate sheet. The first question under Section II of Nelsons’ form

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asked: “Are you aware of any water penetration problems in the walls, windows,

doors, basement, or crawl space?” Nelsons checked the box marked “Yes.” After the

question, Nelsons wrote, “Basement.” The second question asked for the date and

nature of any “water damage related repairs that were made.” Nelsons wrote:

“Basement dewatering system installed” in the “Last 5 years.” The statement did

not incorporate the home inspection report,1 and no other information concerning

water penetration issues was disclosed.

[¶8.] Judy Shaw, a pastor at the Center of Life Church, expressed interest

in the house after her friend and real estate agent, Marcie Raggow, recommended

it. Shaw believed the house would be a good place to hold Church meetings and

provide lodging for missionaries who were temporarily staying in the area. In

August 2009, Shaw and members of the Church provided Nelsons with a brochure

suggesting they donate the house to the Church for tax benefits. Nelsons declined.

[¶9.] Shaw, Raggow, and other Church members walked through the house

several times between August and November 2009. Shaw and Raggow also

reviewed the disclosure form and HouseMaster report. No one noticed any signs of

water, mold, or mildew problems.

[¶10.] In November 2009, the Church made a formal offer at the full listing

price ($658,000) if Nelsons would donate half of the purchase price back to the

Church. The offer was not contingent on the Church’s own inspection. Nelsons

1. Copies of both the disclosure statement and the home inspection report were
left inside the house for people who came to look at the house.

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counteroffered for $595,000. The Church did not respond to the counteroffer and it

expired.

[¶11.] In December 2009, Shaw approached Mr. Nelson to continue

negotiations. The parties agreed on a price of $540,000 with no donation. A

purchase agreement was executed that did not contain a contingency for the

Church’s own inspection. The formal closing took place in early January 2010.

[¶12.] About one week after closing, Sioux Falls experienced a January

rainstorm, and Shaw observed a significant amount of mud and water flooding into

the garage basement and crawl space. A week later, Shaw observed more water

coming in from the walls in both basements. The Church continued to have water

problems every time it rained. They also experienced leaking from the roof and

gutters. When Mr. Nelson met with the Church at the house concerning these

problems, he suggested they needed to remove snow from the backyard patio and

the roof. The Church continued to experience significant water problems during

subsequent summers and winters.

[¶13.] In the summer of 2011, the Church hired several contractors to look at

the problem. One contractor used a “snake” camera to inspect the drain pipes that

ran under the yard and driveway. He observed that the pipes were shattered. He

believed that this was caused by inadequate sloping and ice jams that caused water

to build up and freeze in the pipes.

[¶14.] The estimates to repair the home were large; and the Church sued

Nelsons for violating the statutory disclosure requirements, fraudulent

misrepresentation, fraudulent concealment, and negligent misrepresentation. At

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trial, the Church called several witnesses, including three experts who opined that

the dewatering systems installed by Nelsons were insufficient. They also testified it

was likely that the problems experienced by the Church had been ongoing and could

not have first appeared after the Church acquired the property. At the close of the

evidence, Nelsons filed a motion for judgment as a matter of law. The circuit court

reserved ruling on the motion and submitted the case to the jury.

[¶15.] The jury found in favor of Nelsons on the Church’s claims of fraudulent

misrepresentation, fraudulent concealment, and negligent misrepresentation.

However, the jury found in favor of the Church on its statutory disclosures claim.

The jury awarded $192,047.91 of the Church’s $377,231.42 request for damages and

repairs.

[¶16.] In post-trial proceedings, the circuit court denied Nelsons’ motion for

judgment as a matter of law. Nelsons then renewed the motion, arguing there was

no evidence that they failed to truthfully complete the disclosure statement in good

faith. The court denied the motion. Nelsons also moved for a new trial based on an

objectionable statement of a Church witness, a violation of the court’s sequestration

order, and violations of an order prohibiting testimony regarding insurance. The

court also denied that motion. Finally, the court denied the Church’s motion for

attorney fees.

[¶17.] Nelsons appeal, and we restate their issues as follows:

1. Whether the circuit court erred in denying Nelsons’ renewed motion
for judgment as a matter of law.

2. Whether the circuit court abused its discretion denying Nelsons’
motion for new trial.

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The Church raises the following issue by notice of review:

3. Whether the circuit court abused its discretion in denying the
Church’s request for attorney fees.

Decision

Renewed Motion for Judgment as a Matter of Law

[¶18.] Before addressing the merits of Nelsons’ motions, we clarify our

standard of review. Nelsons cite to Harmon v. Washburn, 2008 S.D. 42, ¶ 10,

751 N.W.2d 297, 300, which used the abuse of discretion standard in reviewing a

circuit court’s rulings on motions for judgment as a matter of law and renewed

motions for judgment as a matter of law under SDCL 15-6-50(a)-(b). However, we

recently departed from that standard in favor of de novo review. Magner v.

Brinkman, 2016 S.D. 50 ¶¶ 11-13, 883 N.W.2d 74, 80-81. Ultimately, we apply the

same standard as the circuit court: we view the evidence in the light most favorable

to the verdict or to the nonmoving party. Id. ¶ 14, 883 N.W.2d at 81. Then,

“[w]ithout weighing the evidence, the court must . . . decide if there is evidence that

supports [the] verdict.” Id. “If sufficient evidence exists so that reasonable minds

could differ, judgment as a matter of law is not appropriate.” Id. And because our

review is de novo, we give no deference to the circuit court’s decision. Steineke v.

Delzer, 2011 S.D. 96, ¶ 7, 807 N.W.2d 629, 631.

[¶19.] The substantive law governing a seller’s property disclosure statement

is well-established. “[W]ith the adoption of South Dakota’s disclosure statutes[,] the

doctrine of caveat emptor has been abandoned in favor of full and complete

disclosure of defects of which the seller is aware.” Engelhart v. Kramer, 1997 S.D.

124, ¶ 20, 570 N.W.2d 550, 554. “The statutes require a complete and truthful

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disclosure made in good faith, not a disclosure simply sufficient to put the buyer on

notice of the defects.” Fuller v. Croston, 2006 S.D. 110, ¶ 18, 725 N.W.2d 600, 606.

A seller who intentionally or negligently fails to comply “is liable to the buyer for . . .

the actual damages and repairs suffered by the buyer as a result of the violation or

failure.” SDCL 43-4-42. However, “a seller is not liable for a defect or other

condition in the residential real property being transferred if the seller truthfully

completes the disclosure statement.” SDCL 43-4-40.

[¶20.] Nelsons argue they truthfully completed the disclosure statement and

therefore cannot be liable. They point out they disclosed that they had experienced

water penetration in the “Basement” and that they had installed a dewatering

system in the “Last 5 years.” But they do not support their “truthfully completed”

argument with an analysis of the evidence at trial. Instead, they rely heavily on

two statements made by the circuit court. Nelsons first point out that the court

stated it did not believe there was evidence suggesting they were untruthful or

acted in bad faith. Nelsons also point out that the circuit court denied the renewed

motion for judgment as a matter of law partly because it stated Nelsons did not

disclose the frequency or magnitude of the water penetration issues. Nelsons claim

this reasoning impermissibly “expanded the requirements” of the disclosure

statutes.

[¶21.] Nelsons’ reliance on the circuit court’s statements is misplaced. First,

as previously noted, because our review is de novo, we give no deference to the

circuit court analysis. Second, the circuit court was not “expanding the

requirements” of the disclosure statutes; it was merely hypothesizing how the jury

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could have reached its verdict based on the evidence. And in reviewing that matter,

the frequency and magnitude of the water problems were relevant. The question

was not simply whether Nelsons were truthful in reporting what they did disclose,

the question was also whether their disclosure was complete; i.e. a “complete and

truthful” disclosure made in good faith. See Fuller, 2006 S.D. 110, ¶ 18, 725 N.W.2d

at 606.

[¶22.] We explained the complete and truthful standard in Engelhart. We

noted that the “terms ‘truthful[]’ and ‘complete’ do not operate independently to the

exclusion of the other. A plain reading of the terms together evince[s] a more

exacting standard than truth alone.” Engelhart, 1997 S.D. 124, ¶ 11, 570 N.W.2d

at 552-53. Therefore, even if Nelsons’ disclosure statement was “truthful” in that it

disclosed a water-penetration occurrence, the jury would be warranted in finding

Nelsons liable if it also found that the statement was not “truthfully complete”

because there were also ongoing issues that were not disclosed.

[¶23.] The Church’s theory was that Nelsons violated the disclosure statutes

because they experienced ongoing water-penetration issues, they were aware of

those ongoing issues, and they failed to disclose them. Nelsons disputed these

factual claims. Mr. Nelson specifically testified that his answers on the disclosure

statement were intended to represent that the problems had been fixed. Therefore,

the dispute at trial and on appeal is a factual one. Did the Church introduce

evidence indicating Nelsons were aware of ongoing water issues that were not

disclosed? If so, the jury could have found that Nelsons’ disclosure statement only

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put the Church on notice of defects and was not a “complete and truthful” disclosure

made in good faith. See Fuller, 2006 S.D. 110, ¶ 18, 725 N.W.2d at 606.

[¶24.] Nelsons argue there was no evidence they were aware of ongoing

issues. We disagree. We acknowledge there was no direct evidence of ongoing

issues: none of the witnesses who testified observed any signs of ongoing problems

prior to the sale. However, the Church produced both expert testimony and

circumstantial evidence from which the jury could have found that Nelsons were

aware of long-standing, ongoing issues.

[¶25.] Jeremy Carlson, a landscaping contractor who assessed the house’s

landscaping and drainage, identified several pre-sale problems that were causing

water to get into the home. Those problems included deteriorated brick, an exterior

grade that sloped toward the foundation, and a drainage system that was

inadequate to handle the amount of water coming into the system. He also

indicated these problems would have originated long before the Church acquired the

house. He testified that the collapsed drainage pipes would have frozen “within the

first couple of years” and that many of the issues “started with initial construction.”

Thus, he opined that the problems would not have started like a “light switch”—the

owner of this house could not “go from one year to having nothing and then all of a

sudden one year you have really bad issues.”

[¶26.] Jason Kolb, another contractor, agreed. He testified that the drainage

system was inadequate to handle any significant amount of water. He also testified

that the water-penetration issues were due to the slope of the grade and ice jams.

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He opined that water would have continued to penetrate the house after the

dewatering systems were installed.

[¶27.] Pat McKnight, a masonry contractor, provided an additional consistent

opinion. He testified that the slope of the backyard patio caused water to pool up

and run into the house. He specifically opined that the water-penetration issues did

not start with the January 2010 storm and that water problems would have

continued after the dewatering systems were installed.

[¶28.] There was also circumstantial evidence suggesting Nelsons were aware

of ongoing water problems. First, both McKnight and Kolb observed caulking

around the foundation, which they believed was an attempt to prevent moisture

from getting inside. Second, Shaw testified that on one occasion while viewing the

house, Mr. Nelson made comments about having to remove snow from the back

yard. Third, several witnesses observed that Nelsons had left several cans of

water-, mold-, and mildew-resistant paint at the newly repainted house.

[¶29.] We finally note that there was evidence discrediting Nelsons’

credibility concerning their awareness of ongoing problems. For example, Mr.

Nelson’s claim of no backyard-water pooling was not consistent with other evidence.

The sloping patio was clearly a pre-sale condition, the jury heard testimony that the

sloping patio and inadequate drainage was causing the pooling, and the jury saw a

video of water pooling on the back patio after a rain storm. Additionally, Mr.

Nelson made a statement to Shaw impliedly acknowledging that the garage

basement floor might continue to get wet. Shaw testified that prior to purchasing

the house, she told Mr. Nelson that she wanted to carpet the garage basement, but

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Mr. Nelson suggested she should lay tile instead. Similarly, Mrs. Nelson’s basis for

knowledge of water problems was attacked. She testified that she would have

noticed water problems if they were occurring because she was frequently in the

kitchen basement doing laundry. But the Church pointed out that she failed to

mention this in her deposition and that Nelsons had newer laundry facilities at

other, more convenient places in the house.

[¶30.] Viewing the circumstantial evidence in a light most favorable to the

verdict, and leaving it to the jury to judge credibility, there was sufficient evidence

for the jury to find Nelsons were aware of ongoing water penetration issues that

were not disclosed. Accordingly, there was sufficient evidence for the jury to find

that Nelsons intentionally or negligently failed to truthfully complete the disclosure

statement.2 The circuit court did not err in denying Nelsons’ renewed motion for

judgment as a matter of law.

Motion for New Trial

[¶31.] Nelsons first argue they are entitled to a new trial because two Church

witnesses mentioned insurance in their testimony.3 Prior to trial, the court issued

an order in limine prohibiting any reference to insurance. However, Raggow’s

2. Nelsons contend that upholding the jury’s verdict would impose a strict
liability standard. See Engelhart, 1997 S.D. 124, ¶ 18, 570 N.W.2d at 554
(“We . . . hold that strict liability is not the requisite standard under South
Dakota’s disclosure statutes.”). We disagree. The jury was correctly
instructed that Nelsons could only be liable if the jury found that Nelsons
intentionally or negligently failed to complete the disclosure statement. The
evidence in the record supports such a finding.

3. We review the denial of a new trial under the abuse of discretion standard of
review. Casper Lodging, LLC v. Akers, 2015 S.D. 80, ¶ 45, 871 N.W.2d 477,
492 (abrogated on other grounds by Magner, 2016 S.D. 50, 883 N.W.2d 74).

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testimony included a statement suggesting that HouseMaster had errors and

omissions insurance for its inspection report. Additionally, Raggow and Shaw

testified that Mr. Nelson had told Shaw to file a claim with the Church’s insurance

company. After the final mention of insurance, the court instructed the jury to

disregard any reference to insurance.

[¶32.] Although Nelsons contend the references to insurance violated the

court’s order, they fail to demonstrate prejudice. The circuit court indicated that

the purpose of its order “was to effectuate the purposes of Rule 411, which prohibits

evidence of liability insurance for the purpose of establishing negligence or

wrongdoing.” See SDCL 19-19-411 (“Evidence that a person was or was not insured

against liability is not admissible to prove whether the person acted negligently or

otherwise wrongfully.”). But here, the witnesses did not testify that Nelsons—the

alleged wrongdoers—had insurance. The witnesses only referenced the Church’s

and HouseMaster’s insurance. Nelsons have not demonstrated how those brief

references to other parties’ insurance suggested Nelsons acted negligently or

wrongfully. They have also not demonstrated how the references to others

insurance indicated that Nelsons had insurance to pay any damages awarded.

Moreover, the circuit court gave a curative instruction. Generally, “if a court

excludes improperly admitted evidence and directs the jury to disregard it, the error

is cured.” Young v. Oury, 2013 S.D. 7, ¶ 18, 827 N.W.2d 561, 567.

[¶33.] Nelsons next argue they were entitled to a new trial because a church

witness both violated the court’s sequestration order and also provided objectionable

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testimony.4 The record reflects that Mark Brooks, a member of the Church, entered

the courtroom during Shaw’s testimony in violation of the court’s sequestration

order. Nelsons also point out that Brooks made an objectionable statement that he

believed a water-sealing primer known as “Kilz” was used by Nelsons in the

basement. However, Nelsons have not shown that they were prejudiced by either

occurrence. Brooks was in the courtroom for only approximately five minutes before

being asked to leave, and he did not recall the subject of Shaw’s testimony. This

record does not suggest that Brooks’s brief time in the courtroom gave him access to

testimony that could have affected his subsequent testimony. Furthermore, the

court sustained Nelsons’ objection to Brooks’s reference to Kilz and instructed the

jury to disregard it. As previously noted, we presume the jury follows such

instructions to disregard excluded evidence. See id.

Attorney Fees

[¶34.] The Church argues the circuit court erred in denying its request for

attorney fees. “South Dakota utilizes the American rule that each party bears the

burden of the party’s own attorney fees.” In re S.D. Microsoft Antitrust Litig.,

2005 S.D. 113, ¶ 29, 707 N.W.2d 85, 98. “Attorney fees may only be awarded by

contract or when specifically authorized by statute.” W. Nat’l Mut. Ins. Co. v. TSP,

Inc., 2017 S.D. 72, ¶ 21, 904 N.W.2d 52, 60. SDCL 43-4-42 authorizes fees in this

type of case. It provides that “the court may award costs and attorney fees to the

prevailing party.” SDCL 43-4-42 (emphasis added). The Legislature’s use of the

4. “Whether a [new trial] should be granted where the court’s sequestration
order is violated is within the discretion of the trial court.” State v. Dixon,
419 N.W.2d 699, 701 (S.D. 1988).

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word “may” makes fee awards discretionary under this statute.5 See In re Groseth

Int’l, Inc., 442 N.W.2d 229, 231 (S.D. 1989) (“Ordinarily, the word ‘may’ in a statute

is given permissive or discretionary meaning. It is not obligatory or mandatory as

is the word ‘shall.’”); Keller v. Keller, 2003 S.D. 36, ¶ 18, 660 N.W.2d 619, 624

(concluding that the decision to award attorney fees under an analogous statute “is

left to the sound discretion of the court”); Berggren v. Schonebaum, 2017 S.D. 89,

¶ 10, 905 N.W.2d 563, 565 (“Normally, an award of attorney fees is reviewed for an

abuse of discretion.”).

[¶35.] The Church, however, contends that the circuit court’s discretion under

SDCL 43-4-42 extends only to the amount of fees that may be awarded rather than

the decision to award them. Relying on several federal cases interpreting an

attorney-fee provision in a civil rights statute (42 U.S.C. § 1988), the Church

contends that “[a]bsent special circumstances, a prevailing party should be awarded

. . . fees as a matter of course.” See Hatfield v. Hayes, 877 F.2d 717, 719 (8th Cir.

1989) (interpreting 42 U.S.C. § 1988 (1989)).

[¶36.] The Church’s reliance on attorney fee awards in federal civil rights

cases is misplaced. The United States Supreme Court limited the discretion of

federal district courts to deny plaintiffs’ attorney fees under the civil rights statute

for one significant reason. The Court did so because it was “necessary to carry out

5. Compare SDCL 21-35-23 (requiring that attorney fees “shall” be allowed in
certain condemnation proceedings); SDCL 15-17-51 (providing that
reasonable attorney fees “shall” be awarded against a party filing certain
frivolous or malicious claims); SDCL 15-6-37 (providing that the court “shall”
award attorney fees in certain discovery matters unless specified conditions
are found); SDCL 34-23A-22 (providing that the court “shall” render
judgment for attorney fees in certain actions relating to abortion).

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Congress’ intention that individuals injured by racial discrimination act as ‘“private

attorneys general,” vindicating a policy that Congress considered of the highest

priority.’” Indep. Fed’n of Flight Attendants v. Zipes, 491 U.S. 754, 759, 109 S. Ct.

2732, 2735, 105 L. Ed. 2d 639 (1989) (quoting Newman v. Piggie Park Enter., Inc.,

390 U.S. 400, 402, 88 S. Ct. 964, 966, 19 L. Ed. 2d 1263 (1968)). But when that

congressional purpose is not present, the Supreme Court recognized that the

presumption of awarding fees as a matter of course does not apply. Christiansburg

Garment Co. v. E.E.O.C., 434 U.S. 412, 418-19, 98 S. Ct. 694, 699, 54 L. Ed. 2d 648

(1978) (imposing more restrictive requirements on those who prevail in the defense

of civil rights claims). Because there is no indication the Legislature intended

South Dakota’s disclosure statutes to incentivize “private attorney general” actions

to vindicate inaccurate home disclosures, we decline to apply the federal civil-rights

presumption here. Such a presumption would also be inappropriate because a 2009

amendment makes clear that even though the Legislature intended to encourage

the disclosure of housing defects, it also intended attorney fees to be awarded to

sellers who prevail in the defense of such claims. See 2009 S.D. Sess. Laws ch. 200,

§ 1 (“An act to allow sellers to receive attorney fees in actions involving the

disclosure statement required for certain real estate transfers.”).

[¶37.] A better analogy can be drawn from the Supreme Court’s analysis of

attorney fee awards under a more similar statutory scheme. See generally Fogarty

v. Fantasy, Inc., 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994). In that

case, the fee dispute involved § 505 of the Copyright Act, which provides that a

court “may . . . award a reasonable attorney’s fee to the prevailing party” in cases

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involving the improper use of another’s copyright. 17 U.S.C. § 505. The Supreme

Court noted that the statute’s use of the word “may” granted discretion and that the

“automatic awarding of attorney’s fees to the prevailing party would pretermit that

discretion.” Fogerty, 510 U.S. at 533, 114 S. Ct. at 1033. The Court concluded that

nothing in the text or purpose of the statute suggested that Congress intended

“[s]uch a bold departure from traditional practice.” Id. at 534.

[¶38.] The same is true with respect to SDCL 43-4-42. The Legislature’s use

of the word “may” clearly requires the use of discretion in awarding fees. However,

the Church’s request for a presumptive award of attorney fees is essentially an

argument that SDCL 43-4-42 requires application of the “British rule,” which

awards attorney fees to the prevailing party as a matter of course. See Fogerty,

510 U.S. at 533, 114 S. Ct. at 1033. The Supreme Court rejected that argument in

Fogerty, and we must reject it here. Requiring courts to award fees to the

prevailing party as a matter of course in home-disclosure cases would nullify the

Legislature’s express grant of discretion.

[¶39.] Because the decision to award fees is discretionary, we must decide

whether the circuit court abused its discretion in denying them to the Church, the

prevailing party. The court acknowledged that Nelsons’ disclosure was incomplete,

that the Church would be required to make substantial repairs, and that the

Church was the prevailing party. However, the court also balanced a number of

competing factors in concluding “that the remedial purposes of SDCL § 43-4-42

would not be well-served by an award of attorneys’ fees” in this case. The court did

not believe that Nelsons necessarily acted intentionally—in fact, after listening to

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the evidence, it believed that their position at trial was “fairly debatable.” The

Court also observed there was little evidence of reliance on the disclosure statement

by the Church. Relatedly, the court observed that the Church did not request its

own inspection even though both Raggow and Shaw were real estate agents and

Raggow knew that homes in the area were susceptible to water penetration.

Finally, the court believed that under the facts of this case, an award of fees would

not serve a deterrent purpose. The court believed that Nelsons may not have

understood this Court’s technical, legal distinction between truthful and complete

disclosures. The court ultimately observed that Nelsons’ conduct “was not such a

serious deviation from the statutory disclosure requirements to justify an award of

attorneys’ fees.”

[¶40.] Other than arguing that it is entitled to fees simply because it

prevailed, the Church does not dispute any of these equitable factors the circuit

court considered in denying fees. Instead, it argues the court erred in failing to

apply the factors for determining reasonable attorney fees identified in Eagle Ridge

Homeowners Ass’n v. Anderson, 2013 S.D. 21, ¶ 28, 827 N.W.2d 859, 867. But the

Eagle Ridge factors are inapplicable here. Those factors are useful in determining

the reasonableness of the fee request (the amount)6 rather than the appropriateness

6. The Eagle Ridge factors originate from Rule 1.5 of the South Dakota Rules of
Professional Conduct. Rule 1.5 expressly provides that the factors are “to be
considered in determining the reasonableness of the fee.” SDCL ch. 16-18
app. Rule 1.5 (emphasis added). Those factors are:
(1) the time and labor required, the novelty and difficulty of the
questions involved, and the skill requisite to perform the
legal service properly;
(continued . . .)
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of making an award of any amount; and here, the dispute was not over the

reasonableness of the amount the Church requested.

[¶41.] In applying the abuse of discretion standard, we “do not determine

whether we would have made the same decision as the circuit court.” Gartner v.

Temple, 2014 S.D. 74, ¶ 7, 855 N.W.2d 846, 850. Instead, our function in reviewing

matters that rest in the discretion of the circuit court “is to protect litigants from

conclusions [that] exceed the bounds of reason.” Id. Here, in concluding that fees

were not appropriate, the court not only considered the verdict obtained by the

prevailing party, it carefully considered the purposes of the disclosure statutes

together with Nelsons’ culpability and the Church’s diligence. Although we do not

formally adopt these considerations, they are relevant factors in guiding a court’s

discretion. We conclude that the circuit court’s decision based on such factors was

not a “fundamental error of judgment, a choice outside the range of permissible

________________________
(. . . continued)
(2) the likelihood, if apparent to the client, that the acceptance of
the particular employment will preclude other employment
by the lawyer;
(3) the fee customarily charged in the locality for similar legal
services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional relationship with
the client;
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Eagle Ridge, 2013 S.D. 21, ¶ 28, 827 N.W.2d 859, 867.

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#28188, #28208

choices, [or] a decision, which, on full consideration, [was] arbitrary or

unreasonable.” Gartner, 2014 S.D. 74, ¶ 7, 855 N.W.2d at 850.

Conclusion

[¶42.] The circuit court did not err in denying Nelsons’ renewed motion for

judgment as a matter of law. Further, the court did not abuse its discretion in

denying the motion for new trial and declining to award attorney fees. Affirmed.

[¶43.] GILBERTSON, Chief Justice, and SEVERSON, KERN, and JENSEN,

Justices, concur.

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