McCollam v. Cahill

#24895-a-JKM

2009 SD 34

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *

KELLY B. MCCOLLAM and
MICHELLE M. MCCOLLAM, Plaintiffs and Appellants,

v.

NEIL D. CAHILL, Defendant and Appellee.

* * * *

APPEAL FROM THE CIRCUIT COURT
OF THE FIFTH JUDICIAL CIRCUIT
WALWORTH COUNTY, SOUTH DAKOTA

* * * *

HONORABLE SCOTT P. MYREN
Judge

* * * *

JOHN W. BURKE of
Thomas, Braun, Bernard & Burke, LLP Attorneys for plaintiffs
Rapid City, South Dakota and appellants.

MELISSA E. NEVILLE
KENNITH L. GOSCH of
Bantz, Gosch & Cremer, LLC Attorneys for defendant
Aberdeen, South Dakota and appellee.

* * * *

ARGUED ON MARCH 24, 2009

OPINION FILED 05/13/09
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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

1. While Cahill addresses mistake, fraud, and failure of consideration in his
brief, McCollams do not address mistake as grounds for rescission.

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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 NW2d 600, 606-07 (quoting Parmely v. Hildebrand (Parmely I),

1999 SD 157, ¶9, 603 NW2d 713, 717 (emphasis in original)). “One obvious purpose

of the disclosure statutes is ‘to provide prospective buyers with information about

material defects known to the seller concerning the property.’” Id. ¶23 (quoting

Coughlin v. Gustafson, 772 NE2d 864, 869 (Ill 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 NW2d 509, 513 (emphasis

removed) (quoting Engelhart v. Kramer, 1997 SD 124, ¶20, 570 NW2d 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 NW2d at 607 (citing Engelhart, 1997 SD 124, ¶20, 570 NW2d 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

2. This question was revised by the legislature in 2005 to read: “Are you aware
of any other material facts or problems that have not been disclosed on this
form?” See SDCL 43-4-44.

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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 NW2d 1, 5-6

(quoting Smetana v. Smetana, 2007 SD 5, ¶7, 726 NW2d 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 NW2d 277, 284 (quoting In re Estate of Dokken, 2000 SD 9,

¶10, 604 NW2d 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 NW2d 824, 832 (quoting Ziegler Furniture and

Funeral Home, Inc. v. Cicmanec, 2006 SD 6, ¶14, 709 NW2d 350, 354).

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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 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 on the property when Cahill lived there.

[¶8.] On the other hand, Cahill presented testimony from multiple

witnesses that few, if any, snakes were seen on the property while Cahill owned it.

After receiving evidence from both parties, the court determined that during the

thirty plus years that Cahill owned the property, Cahill only discovered one snake

in the house. The court also determined that McCollams only saw two snakes in the

house and that some snakes were seen in the yard in 2006. McCollams claim that

the court’s finding that “[t]he evidence does not establish that the number of snakes

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on the Cahill property was ‘significant’ or ‘inordinate’ in relation to any other

property in the vicinity” is clearly erroneous.

[¶9.] Here, the trial court was confronted with conflicting testimony. Cahill

could only remember having one snake in his house.3 Other witnesses for Cahill

testified that they regularly entered the house and basement to retrieve files or

clean and had not seen snakes in Cahill’s house. One witness who claimed to have

seen numerous snakes in Cahill’s basement several years prior to the sale was

discredited by the court. Other witnesses testified to seeing some snakes, usually

dead, on the road next to the property. Other witnesses claimed they had never

seen a snake on Cahill’s property. Kelly McCollam admitted that he visited the

property several times prior to closing and had not seen a snake. One witness

testified that she observed that McCollams had left a patio door open through which

a snake could have entered the house. With conflicting testimony from numerous

witnesses, we defer to the trial court to weigh the evidence and judge the credibility

of the witnesses. See In re Estate of Pringle, 2008 SD 38, ¶18, 751 NW2d at 284

(quoting In re Estate of Dokken, 2000 SD 9, ¶10, 604 NW2d at 490-91). Based on all

the testimony, the trial court determined Cahill saw few snakes on the property

over the course of thirty years and only one snake inside the house. McCollams are

unable to show that the trial court’s findings are clearly erroneous.

3. McCollams claim that some of the trial court’s findings are clearly erroneous
as to whether Cahill had told two of the witnesses about finding a snake in
the house. Even if the findings were erroneous, McCollams have shown no
prejudice because the court determined based on Cahill’s own testimony that
he had found a snake in the house.

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[¶10.] The court concluded that “the presence of one bull snake in one’s house

on a single occasion over [thirty] years of occupancy is not the type of disclosure

required by the disclosure statutes or otherwise.” Reviewing the trial court’s

findings, the court did not err in drawing this conclusion. McCollams had to prove

that a snake problem existed prior to the sale and if so, that Cahill was aware of it

and failed to disclose it. Their evidence did not persuade the trial court. Under our

standard of review, we must be firmly convinced that a mistake has been made. We

are not so persuaded.

[¶11.] McCollams claim that the trial court erred in granting specific

performance and denying rescission of the contract for deed. Both of these claims

are based on Cahill’s failure to disclose the snake problem. According to SDCL 53-

11-2, a contract may be rescinded only under certain circumstances:

(1) If consent of the party rescinding or of any party jointly
contracting with him was given by mistake or obtained through
duress, fraud, or undue influence exercised by or with the
connivance of the party as to whom he rescinds, or of any other
party to the contract jointly interested with such party;
(2) If through fault of the party as to whom he rescinds, the
consideration for his obligation fails in whole or in part;

SDCL 53-11-2 (emphasis added); see also SDCL 21-12-1.

[¶12.] Since the court found that the “snake problem” was not a defect

requiring disclosure, it likewise does not constitute fraud or lack of consideration.

Consequently, McCollams’ request for rescission based on fraud or lack of

consideration also fails. Cahill delivered the property to the McCollams as

contracted. Therefore, the trial court did not err in refusing to grant rescission of

the contract for deed. The contract for deed is enforceable.

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[¶13.] Alternatively, McCollams argue that specific performance is not an

appropriate remedy for breach of the contract and that the circuit court abused its

discretion when it granted specific performance. Relying on SDCL 21-9-3,

McCollams claim that specific performance is not appropriate because Cahill did not

provide “adequate consideration” and/or because Cahill obtained McCollams’ assent

“by misrepresentation, concealment, circumvention, or unfair practice.” Id. The

statute provides that specific performance is not appropriate in the following

situations:

(1) If he has not received an adequate consideration for the
contract;
(2) If it is not, as to him, just and reasonable;
(3) If his assent was obtained by misrepresentation, concealment,
circumvention, or unfair practice of any party, to whom
performance would become due under the contract, or by any
promise of such party which has not been substantially fulfilled;
(4) If his assent was given under the influence of mistake,
misapprehension, or surprise, except that where the contract
provides for compensation in case of mistake, a mistake within
the scope of such provision may be compensated for, and the
contract specifically enforced in other respects, if proper to be so
enforced.

SDCL 21-9-3 (emphasis added). McCollams also assert that the equitable remedy of

specific performance is not appropriate because Cahill did not come with “clean

hands.” See Talley v. Talley, 1997 SD 88, ¶29, 566 NW2d 846, 852 (citing Shedd v.

Lamb, 1996 SD 117, ¶26, 553 NW2d 241, 245 ) (“A party seeking equity in the court

must do equity, including entering the court with clean hands.”). “‘A [person] who

does not come into equity with clean hands is not entitled to any relief herein, but

should be left in the position in which the court finds him.’” Id. (quoting Kane v.

Schnitzler, 376 NW2d 337, 341 (SD 1985)).

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[¶14.] As with McCollams’ claim for rescission, their claim against specific

performance relies on their allegation of a snake problem that Cahill had a duty to

disclose. The trial court’s ruling that the situation did not require Cahill to disclose

a snake problem allowed the court to consider specific performance as a remedy. It

also obviated McCollams’ claim that Cahill had “unclean hands.”

[¶15.] Specific performance is an equitable remedy, and “[a]n essential

element to equitable relief is the lack of an adequate remedy at law.” Rindal v.

Sohler, 2003 SD 24, ¶12, 658 NW2d 769, 772 (citations omitted). “The presumed

remedy for the breach of an agreement to transfer real property is specific

performance.” Wiggins v. Shewmake, 374 NW2d 111, 115 (SD 1985) (citing SDCL

21-9-9). The trial court granted specific performance partially because of the

evidence of damage and deterioration to the property while in McCollams’

possession. The court also found that McCollams had created a perception in the

community that the property had a “snake problem.” The court determined that

this irrevocable perception substantially affected the marketability of the house.

Because the court was not able to quantify damages, Cahill lacked an adequate

remedy at law. The trial court did not abuse its discretion in awarding Cahill

specific performance.

[¶16.] We affirm.

[¶17.] GILBERTSON, Chief Justice, and KONENKAMP and ZINTER,

Justices, and SABERS, Retired Justice, concur.

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