Biegler et al v. Kraft et al

Filing 53

FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION AND ORDER. Signed by U. S. District Judge Roberto A. Lange on 2/7/13. (DJP)

FTTED
FEB 0 7

2013

UNITED STATES DISTRICT COURT
DISTRTCT OF SOUTH DAKOTA
CENTRAL DIVISION
MARTIN A. BIEGLER
CARA M. BIEGLER,
ANd CHRISTINE K. SCHIRBER,IRA,
by and through its Trustee, BankWest,
Inc.,

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{<

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Plaintiffs,

CIV 1I-3010-RAL

FINDINGS OF FACT,
CONCLUSIONS OF LAW,
OPINION AND ORDER

t<

VS.

,.
:t

RICHARD KRAFT
and CARYN R. KRAFT,

tt

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Defendants.

Plaintiffs Martin A. Biegler, Cara M. Biegler, and Christine K, Schirber, LRA, by and
through its Trustee, BankWest, Inc,, (collectively "Bieglers") sued Defendants Richard Kraft and
Caryn R. Kraft ("Krafts") seeking specific performance of what the Bieglers allege to be

a

contract

for the purchase of 314 acres in Dewey County, South Dakota. The Bieglers started this case by
flrling a Complaint and

a lis pendens

on May 26,2011. The Krafts answered, raised the statute

of

frauds as a defense, and denied that there was an enforceable contract. The Krafts also filed a

counterclaim for slander of title due to the filing of the lis pendens. After discovery in this case,
the Krafts fìled a motion for summary judgment, which this Court granted in part and denied in

part. Doc. 45. This Court conducted

a court

trial of the fact issues in this case on December l0

and 11,20L2.

I.

Findings of Fact
Plaintiffs Martin and Carc Biegler are married and live in Timber Lake, South Dakota.

Christine Schirber is the mother of Cara Biegler and has a self-directed Individual Retirement
Account (IRA) through BankWest, Inc., as Trustee. Martin Biegler is a general contractor and

carpenter from Timber Lake. He also owned and operated a tent leasing business servicing the

Upper Midwest until recently when he sold that business. Martin Biegler is a capable and
sophisticated businessman who was described by witnesses from both sides of this lawsuit

as

sometimes loud, brash, and excitable. Cara Biegler has been a teacher in the Timber Lake school

district for many years. Christine Schirber is married to Walter "Bud" Schirber, and they have
retired to Lead, South Dakota. Christine Schirber had a career in banking culminating in heading
a bank in Timber Lake, where her husband Bud was the cashier and vice

president. Each of the

Plaintiffs are very intelligent and both Martin Biegler and Christine Schirber are very sophisticated
in the conduct ofbusiness.
Defendants Richard and Caryn Kraft are married and have lived together in Sitka, Alaska
since 2008. The Krafts previously lived just outside of Timber Lake, on a 314-acre farm/ranch.

Caryn Kraft was the record owner of that property. The Krafts had purchased the property,
including

a

five bedroom, three-and-a-half bath, 4,000-square-foot home on the property, in 1997

and had lived there

,

until 2008. Richard Kraft is a physician who has worked for the Bureau of

Indian Affairs Indian Health Services. The Krafts are very intelligent, and Richard Kraft is
sophisticated in business dealings.

When the Krafts originally moved to Alaska, they had intended to return to live in their
home outside of Timber

Lake. However, in 2011, the Krafts decided to make Alaska their

permanent home and to sell the 314-acre farmhanch, the home, and all improvements on the land.

Although Caryn Kraft was the sole record owner of the property, she chose to have her husband
Richard Kraft handle the sale of the property.
The Krafts hired Timber Lake attorney Steven Aberle to represent them in the sale of their
home and farmkanch. Aberle had conducted between 50 and 100 auction sales of real estate. The

Krafts and Aberle put together an announcement of the auction of the property describing the land
as a3I4-acre farm, consisting
areas of trees and a large

of 135 acres used for

grass

or grazing, 135 tilled acres for farming,

yard. Exhibit 1. The advertisement described the Kraft home

as

well

maintained and including two custom-built rock fireplaces, oak trim, sunken living room, over
4,000 square feet, five bedrooms, three and a half baths, surrounding golden maple trees, and

a

driveway with a mix of oak, plum, chokecherry, and apple trees. Exhibit 1. Other buildings on
the property included a large machinery quonset with a cement floor, self-standing garage, corrals

with a barn, and two functioning wells. Exhibit
through
201

L

a two-phase auction,

1. The property was to be sold as a single unit

with sealed bids to be submitted no later than 11:00 a.m. on May 3,

Exhibit 1, The top three bidders then would be notified and invited back to bid in person

at Aberle & Aberle Law Office on May

I0,2011. Exhibit

L

The sale announcement contained

the following language: "Seller reserves the right to reject any and all bids. Any announcements

made day

of auction

supersede any and

all previously printed material and any other

oral

statements made." Exhibit 1.
Cara Biegler noticed an advertisement of the sale of the Kraft home and land in the local

paper and informed her husband Martin Biegler. See Exhibit

visited a website for information on the sale. Exhibit

2.

I|l4.artin and Cara Biegler then

3. Cara Biegler desperately wanted to buy

the Kraft home, because the Bieglers' existing home was in a neighborhood that had changed for
the worse and a burglar had broken into the Bieglers'home leavingCara Biegler and her daughter

very unnerved. Cara Biegler saw the Kraft home location

as

being ideal-outside of Timber Lake,

paved road, large enough for hosting gatherings-and considered purchase of the Kraft home

on

a

as

presenting

a

once-in-a-lifetime opportunity. Martin Biegler, familiar with the home after having

re-roofed it for the Krafts in 2008, was more cautious about the home and saw problems with it,

including the home's construction in the early 1970s and the bathrooms and furnace being of that
vintage, some single pane windows, some hail damage of the siding, floor covering in the kitchen
and dining room that he would have wanted to replace, and two wood burning fireplaces that he

considered to be obsolete. Martin Biegler discussed with his wife nothaving enough cash on hand
to buy the home and land and not wanting to borrow money to finance the purchase. Meanwhile,

Cara Biegler's mother, Christine Schirber, had been looking to acquire farm or ranch land to

diversify her self-directed IRA and liked the prospect of acquiring the portion of the Kraft property
that would be separate from the home. Christine Schirber knew that her self-directed IRA could

not be used to buy a home for her daughter but could benefit from possible purchase of the
agricultural land apart from the home. The Bieglers were genuinely interested in acquiring the

Kraft home. In late March of 2011, the Bieglers sent a series of questions about the home to the
Krafts, Exhibit 4, to which the Krafts responded. Exhibits 5,6,7, and

8.

The Bieglers and the Krafts knew each other and there were no

ill

feelings whatsoever

between them at that point. Indeed, Martin Biegler and Richard Kraft were childhood friends and
had graduated from Timber Lake High School in the same class. Richard Kraft had hired Martin

Biegler's construction company to do work on his home. Likewise, there were no hard feelings
between Aberle and the Bieglers. Aberle had hired Martin Biegler's business to do construction

work on his law office as well, and both the Krafts'son and Aberle's son had worked for Biegler
Construction without issue.

At the first phase of the auction, the Krafts received nine sealed bids. Exhibit 12. The top
three bids were from the Bieglers, Dennis Ulrich, and Roger "Chip" and Rita Long, with the

Bieglers'bid of $397,500 being the highest. Exhibits 9, 10, 11,12. Tyrone Kraft, the nephew of
the Krafts, submitted a bid which was not among the top three

bids. Exhibit

12.

Aberle notified the top three bidders and invited them back to phase two of the auction
scheduled for

May 10, 20i1, at 11:00 a.m, Dennis Ulrich, who was from Pennsylvania, told

Aberle that he was not interested in bidding above the Bieglers' bid of $397,500, but remained
interested in the property and would bid as high as $360,000,
purchased for that

if

the home and land could be

price. Ulrich declined to return to South Dakota to participate in phase two of

the auction. The Bieglers asked Aberle to move up the time of phase two of the auction to 8:00
a.m., because Martin and Cara Biegler's son was graduating from South Dakota State University

in Brookings on May 12, and they wished to drive the nearly six hours to arrive in Brookings for
dinner on May 1 1. Aberle checked with the Krafts and Chip and Rita Long who all agreed to an
8:00 a.m. start to phase two of the auction.
In the days before phase two of the auction, Aberle met with Richard Kraft to discuss terms

of a draft purchase agreement. Both Richard Kraft and Aberle were pleasantly surprised at the
amor.rnt of the top

bid. Richard Kraft and Aberle discussed

a

term of the draft purchase agreement

to allocate a value of $250,000 to the residence in order to reduce the amount of capital gains tax
the Krafts would owe. Both Aberle and Richard Kraft admitted at trial that

if

the initial bids had

been lower, the value they would have allocated to the home probably would have been lower, but

both Aberle and Richard Kraft felt comfortable assigning $250,000 as the value of the residence

in light of the top sealed bid of $397,500. Aberle prepared a draft purchase agreement leaving
blanks for the buyer's name, the amount to be paid, the amount of earnest money deposit, and the
values to be assigned to other structures on the land, such as the detached two-car garage, steel
shed with concrete floor and apron, pole calving barn, two wells and water line and land. Exhibit

L4. However,

the draft purchase agreement assigned $250,000 of the purchase price to

"residence." Exhibit 14. Neither Aberle nor the Krafts shared with the Longs or the Bieglers
before the second phase ofthe auction the intention to assign

a

value of$250,000 to the residence.

Meanwhile, the Bieglers had reached a preliminary agreement among themselves that twothirds of any purchase price would come from the self-directed IRA for land other than associated

with the residence, while the remaining one-third of the purchase price bid would come from
Martin and Cara Biegler for the purchase of the residence. Although BankWest, Inc., as trustee
for the Christine Schirber IRA had signed the sealed bid of the Bieglers, Exhibit 9, neither Aberle
nor the Krafts knew the extent of the IRA's involvement or the arrangement among the Bieglers
to divide the purchase price and property,

if they were

the prevailing bidder.

On the night before phase two of the auction, Tyrone Kraft, who at the time was engaged
to the niece of Chip and Rita Long, approached the Longs because he knew the Longs to be among

the top three bidders. Tyrone Kraft, who happened to be the Krafts' nephew, wanted to buy the

Kraft home and land, but had not finished among the top three bidders in phase one of the auction.
The Longs told Tyrone Kraft that they might back out of the second phase of the auction. Tyrone

Kraft asked the Longs to submit a bid for him instead and authorized, the Longs to bid up to
$405,000 for him. The Longs agreed to do so. The Bieglers, the Krafts and Aberle were unaware
at the time of phase two of the auction that the Longs were submitting a bid on behalf of Tyrone

Kraft.
On May I1,2011, at 8:00 a.m., at the Aberle & Aberle Law Offìce in Timber Lake, the

following people gathered for phase two of the auction: Richard Kraft, Aberle, Chip and Rita
Long, Martin and Cara Biegler, and Christine and Bud Schirber. Craig DeJager, the trust officer

with BankWest, Inc., participated in

a

portion of the discussions by telephone from his office in

Rapid City.
6

Aberle then took the individuals back to

a

room in the rear of the building, where there was

enough space for everyone to gather. Aberle provided the Longs and the Bieglers with a bid
packet containing the commiünent for title insurance and the draft purchase agreement. Aberle
then laboriously went through the commitment for title insurance, Exhibit 15, and certain other
matters concerning the sale. Aberle then went through the draft purchase agreement, Exhibit 14,
reading it line-by-line. The draft purchase agreement had not been distributed to any of the bidders

prior to this meeting on May 11,2011. After Aberle read the portion of the draft purchase
agreement that allocated $250,000 as the value of the residence, Martin Biegler said that he had
a problem

with that valuation, and Christine Schirber echoed Martin Biegler's concern.

The agreement among the Bieglers to divide the cost of acquiring the property two-thirds
to the IRA and one-third to Martin and Cara Biegler was inconsistent with a valuation of $250,000

for the home, A valuation of $250,000 nearly inverted the Bieglers' internal financial arrangement;
the Bieglers bid of $397,500 contemplated a value of the residence of $132,750 (one-third of the

total) with the remainder being the value of the land and possibly other improvements. Christine
Schirber's IRA could not be used to help purchase a home for Martin and Caru Biegler, but only
to purchase land and improvements separate from the home. The Bieglers did not explain this

dilemma or their circumstances to the Krafts or Aberle.

Not understanding the origin of the Bieglers'objection to valuing the home at $250,000,
Aberle then discussed the open blanks for valuing the detached gaÍage, steel shed, pole barn, and

wells, and pledged that the Krafts would work with any potential purchaser in fïlling in those

blanks. Aberle presumed that larger values for those improvements could be depreciated by

a

farmer to help shelter income from federal tax. Martin Biegler persisted in his concern being the
value of $250,000 assigned to the home. The parties dispute the exact words used by Aberle at

this point.

It appears that Aberle

stopped just short of pledging to negotiate the assignment of a

different value to the residence, but said enough to leave those in the room inferring that the Krafts
would negotiate not only the empty blanks but also the value assigned to the residence. Ultimately,

the issues surrounding the $250,000 valuation to the residence were finessed in the pre-bid
discussion. Aberle declared that all parties had sufficient knowledge to proceed with phase two

of the auction, and there was no further pre-bid discussion of valuation of the residence. The
parties agreed that any increase in any bid for the property would be in increments of at least
$2,500.

ln order to use a conference phone to connect trustee Craig DeJager, all individuals at the
meeting moved to the reception area at the front of Aberle & Aberle Law Office. Aberle acted

as

the auctioneer. Aberle announced that the high bid in phase one of the auction had been $397,500,

and turned to the Longs to see whether they would bid at least $400,000. Chip Long then bid
$400,000. TheBieglersbrieflymetseparatelyandreturnedwithMartinBieglerbidding$410,000.

Neither the Longs' bid nor the Bieglers' bid had an express term of a certain separate value to be
assigned to the residence. Aberle then turned to the Longs to ask whether they had another bid,

and Chip Long said that they were done. The Longs then congratulated the Bieglers and left

Aberle & Aberle Law Office. There was no actual "fall of the hammer," although some remember
Aberle saying something to the effect that the auction was done or over.

Aberle, Richard Kraft, Martin and Cara Biegler, and Christine and Bud Schirber then
returned to the back conference room to work through the draft purchase agreement. Martin
Biegler calculated the 15 percent earnest money deposit required in the draft purchase agreement
as being $61,500,

of which the Bieglers contemplated $41,000 coming from the IRA and the

remainder from Martin andCaraBiegler. Christine Schirber made arrangements to have 541,000
wire transferred from her self-directed IRA to pay roughly two-thirds of the earnest money deposit.
As the discussion neared the issue of the allocation of the value to the residence, Richard

Kraft, concerned about helping his wife prepare for the forthcoming auction of their personal
property, stood up to excuse himself and said that there appeared to be no further reason for him

to be there. At that point, Martin Biegler responded that there remained "the elephant in the
room," referring to the valuation to ascribe to the residence. Either Richard Kraft or Aberle or both

of them made it known that they were serious about the $250,000 valuation for the residence.
Martin Biegler replied that $250,000 was not

a reasonable value

for the residence and that he had

received an appraisal valuing the home at $125,000 to $130,000. Aberle asked Biegler to produce
the appraisal. Martin Biegler responded that the appraisal was not in

writing. Aberle, believing

Martin Biegler to be lying, then asked who performed the unwritten appraisal. Martin Biegler
refused to identify the individual.r Discussion became increasingly heated among Martin Biegler,

Aberle, and Richard Kraft.

Bud Schirber suggested the alternative of agreeing to hire an independent appraiser to
resolve the value of the residence. Although he did not voice agreement, those in the room
observed that Richard Kraft seemed open to that idea. Aberle then asked to speak with Richard

Kraft separately. Aberle discussed separately with Richard Kraft the tax ramifications that went
with lowering the value of the residence,

as the

Krafts faced a 15 percent capital gains tax on the

t At trial, Martin Biegler testified that appraiser Jerry Hulm somewhat informally opined to him
that the residence was worth $125,000 to $130,000, but had put nothing in writing, Mr. Hulm did
not testify attrial, and indeed no party presented evidence as to the separate value ofthe residence
and the land, other than testimony that the Court elicited through its own questioning of certain
witnesses about land values in the area and the type of land the Krafts owned.

gain on the purchase of the agricultural land. Richard Kraft and Aberle agreed on a proposal to
request that the Bieglers pay an amount approximating what the Krafts would face as an increase

in their capital gains tax responsibility, in exchange for any reduction in the value of the residence
below $250,000.
Aberle and Richard Kraft then rejoined the Bieglers. Aberle told the Bieglers that if they
wanted to have a value of $130,000 assigned to the residence, then they should pay an extra
$18,0002 to cover the capital gains tax ramifications that the Krafts would experience as a result

of such a lowering of the value of the residence. Martin Biegler did not respond favorably at all
to the proposal. Martin Biegler, who had paid capital gains tax after selling his tent rental business
and who had just had his credibility attacked over the existence of an informal appraisal, berated

Richard Kraft for trying to transfer his tax responsibility to the Bieglers and told Kraft that he had
to pay his own taxes because the Bieglers would not do so for

him. By this time, many in the room

were agitated. Christine Schirber suggested to Aberle that he provide to her by email a written
proposal for how the impasse might be broken. Aberle agreed to send such an email to Christine

Schirber. Cara Biegler then produced a checkbook to write the remainder of the earnest money
deposit to Richard

Kraft. Richard Kraft refused to accept

the check, and said that no deal was in

place. The Biegler group then left the office.

With Richard Kraft present, Aberle called the Longs to see

if their bid of $400,000

remained in place. Chip Long, who answered the phone, told Aberle and Richard Kraft that he

would check and call back. When Chip Long called back shortly afterwards, he told Aberle and
Richard Kraft for the first time that he had been bidding on behalf of Tyrone Kraft, the nephew

of

This number represents the difference between $250,000 and $130,000 times the 15 percent
capital gains tax rate.
'?

10

Richard Kraft, and that the $400,000 bid was still in place. Richard Kraft then left Aberle's offrce
to help his wife with the personal property at the home.

Meanwhile, the Bieglers were driving to Brookings on a route that took them through
Mobridge, South Dakota. The Bieglers had long used the Mobridge accounting fìrm of Cahill,
Bauer

& Associates. The Bieglers stopped atthat firm

and asked for their accountant, who was

not available. They instead met with accountant Jason Hatzenbuhler and asked Hatzenbuhler what
the IRS rules were concerning allocation of a portion of a purchase price to a home in connection

withreducingcapitalgainstaxexposure. Hatzenbuhleradvisedthat$250,000isthemaximumthat
the IRS atthat time exempted per person for a personal residence from the application of the
capital gains tax. Coincidentally, the Krafts likewise used Cahill, Bauer & Associates of Mobridge
as their accounting

ftrm. Hatzenbuhler told

Jessica

Whitlock, one of his fellow accountants at the

firm, about the Bieglers' visit. Jessica Whitlock then called her accounting client Richard Kraft.
Richard Kraft, already agitated over what had transpired at the auction, became increasingly upset
and

suspicious-mistakenly it turns su13- that Martin Biegler was inquiring into his own personal

financial information.

After the call with his accountant, Richard Kraft returned to Aberle's office. Shortly after
arriving there and early in his meeting with Aberle, Richard Kraft received a call on his cellular
phone from Martin Biegler. Martin Biegler was so loud that Richard Kraft could hold the phone
away from his ear to allow Aberle to hear what Martin Biegler was saying. Kraft told Biegler that
he was with

Aberle. Biegler responded that since Kraft was already "lawyered up," Biegler would

do the same and that the next person Kraft would hear from would be the Bieglers' attorney.

3 The Bieglers

in fact did not ask for any financial information concerning the Krafts.
11

Martin Biegler also told Kraft that he could make this sale last as long as he wanted to. Richard
Kraft responded by telling Biegler "to have fun."
The trust between the parties had broken down to the point where Christine Schirber
thought it best to withdraw the $41,000 of earnest money deposited from her self-directed IRA.
Christine Schirber called Craig DeJager, the trustee at BankIVest, Inc., and advised him that there
had been a major disagreement regarding the purchase of the home after the wire of the $41,000.

BankWest, Inc. reversed the wire, with a notation "returned wire funds-customer requested that
funds be returned because the purchase fett through." Exhibit 19. After that, Aberle sent an email
to Christine Schirber describing his perspective on what occurred and concluding: "At this point,

Richard and Caryn [Kraft] formally reject the bid submitted by you, Marty and Cara." Exhibit 20.
Richard Kraft then engaged Tyrone Kraft in negotiations for the sale of the property. The
negotiations culminated in the sending of a draft purchase agreement, warranty deed, and notice
of purchase agreement by Aberle to the attorney for Tyrone Kraft on May 24,2011. Close in time
to that date, Bud Schirber called Richard Kraft, apologizedfor any offense caused to the Krafts,
and offered to pay the additional

$1

8,000 to resuscitate the purchase agreement between the Krafts

and the Bieglers. Richard Kraft told Bud Schirber that he needed to think about the proposal and

would call him back. Richard Kraft called Bud Schirber back shortly afterwards and declined to
accept the additional $18,000 to consummate a purchase agreement with the Bieglers.
The Krafts then signed a purchase agreement with Tyrone Kraft setting the purchase price

at $375,000, with the value of the home being $234,000. Doc. 38 aI 19-20,nn72,74. The
reduction in the value of the home from $250,000 to $234,000 was done on close to what is

a

prorated basis. That is, when the Krafts selected $250,000 as the value of the home, the high bid
was $397,500. The purchase price of $375,000, to be paid by Tyrone Kraft, was approximately

t2

6,5 percent below that. The reduction of home value from $250,000 to $234,000 is a reduction

of approximately 6.5 percent. The purchase agreement entered into between the Krafts and their
nephew Tyrone contained the following provision:
The parties to this agreement specifically acknowledge that a threat
of litigation has been made by Martin Biegler to force [the Krafts]
to sell the above described property to Martin and Caru Biegler
and the self-directed IRA of Kristi Schirber (hereinafter referred to
as "Bieglers"). The parties to this agreement have decided to
proceed with the sale based upon the agreement of the parties that

[the Krafts] shall have the right to repurchase this property from
fTyrone Kraft] for the original purchase price in the event specific
performance is ordered by a court of competent jurisdiction or if it
appears that monetary damages may be granted to Bieglers.

Doc. 38 at 19,173.
On May 26,2011, the Bieglers filed this lawsuit and a lis pendens. Due to the filing of the

lis pendens, the sale to Tyrone Kraft has not occurred, although Tyrone Kraft has been living in
the home in question. The Krafts have lost the opportunity to protect a portion of the sale price

from being taxed as a capital gain, because they have not resided at the home now for over three
years.

II.

Conclusions of Law
This Court has diversity jurisdiction over this case under 28 U.S.C, $ 1332, because there

is complete diversity citizenship between the South Dakota Plaintiffs and the Alaska Defendants
and more than $75,000, exclusive of interest and costs, are at issue
governs this dispute over property within South Dakota.

A. South

Dakota Statute of Frauds Issue

1. SDCL

$ s3-8-2

t3

here. South Dakota law

The Krafts have raised as a defense the South Dakota statute of frauds, South Dakota
Codified Laws ("SDCL") $ 53-8-2. That statute, in relevant part, provides:
The following contracts are not enforceable by action unless the
contract or some memorandum thereof is in writing and subscribed
by the party to be charged or his agent, as authorized in writing:

(3) An agreement for sale of real estate or an interest therein . . . .
However, this does not abridge the power of any court to compel
specific performance of any agreement for sale of real estate in
case of part performance thereof . . .
.

SDCL $ 53-S-2. This Court previously has analyzed the application of that statute to this case,
well

as addressing and rejecting the

as

Bieglers'claim of "partperformance." Although itduplicates

this Court's prior Opinion and Order Granting in Part and Denying in Part Motion for Summary
Judgment, this Court

will repeat some of the analysis concerning SDCL $ 53-8-2.

The Supreme Court of South Dakota has explained what writing is necessary to satisfy this

portion of the statute of frauds. In Amdahl v. Lowe,471 N.W.2d 770 (S.D. 1991), the Supreme
Court of South Dakota stated:
The statute of frauds requires that contracts for the sale of land
must not only be in writing and signed by the party who is to be
charged, but the writing must contain all the material terms and
conditions of the oral agreement between the parties. To satisfy the
statute of frauds, a memorandum for the sale of land must describe
the land, the price, and the contracting parties; it need not detail the
form or delivery of deed, the time and place of payment, or any
other matters, The statute of frauds requires only that the writing
evidence the substance of the contract. There is no fatal ambiguity

if

the contract terms are sufficiently certain to make the acts
required of each party clearly ascertainable.

Id. at774-775 (citations omitted);
748 N.W.2d

see also LaMore Rest. Gp..

756,76r.

T4

LLC v. Akers, 2008 SD 32,

f

15,

The "purpose of the statute is to remove uncertainty by providing written evidence of an
enforceable obligation," but the statute of frauds is not to "be used to work an injustice." Jacobson
v. Gulbransen, 2001 SD 33,1126,623 N.W.2d 84,90 (citations omitted) (internal quotation marks

omitted). Accordingly, " [t]he agreement itself need not be the writing relied upon, a memorandum
evidencing the obligation is sufficient." Wigsins v. Shewmake, 374 N.W.2d I I 1, 1 14 (S.D. 1985)

(citing SDCL $ 53-8-2). That is, "any memorandum that reasonably identifies the subject matter
of the action and is signed by the party to be charged will satisfy the statute's writing requirement."

Northstream Invs.. Inc. v. 1804 Countrv Store Co.,2005 SD 61, n

n,697 N.W.2d 762,766.

However, neither the Krafts nor their attorney signed any purchase agreement with the
Bieglers. SDCL $ 53-8-2 expressly states that
enforceable

a contract

within the scope of that provision is "not

by action unless the contract or some memorandum thereof is in writing

and

subscribed by the party to be charged or his agent." The South Dakota Supreme Court has equated

the word "subscribed" with "signed." See Amdahl,47l N.W.2d at774 ("[c]ontracts for the sale

of land must. . . be in writing and signed by the party who is to be charged . . . . ");Northstream
Invs., 2005 SD 61

atl17,697 N.W.2d at766 (noting

any memorandum may satisfy the statute

of frauds if it "is signed by the party to be charged"). In today's electronic world, there may be
ways of satisfying the requirement of a contract to be "subscribed," other than by an actual physical

signature. Tolle v.

Lev,20ll

SD 65, at

fl 13, 804 N.W.2d

440,444-45 (holding that

a

confirmation e-mail was a "subscribed" contract that satisfied the statute of frauds). Although
there was a written contract under negotiation that would have satisfied the statute of frauds,
neither the Krafts nor their agent signed that purchase agreement or any other such writing.
The Bieglers nevertheless have contended that the documents surrounding the two-phase

auction-the bill of sale advertising the auction, information of a similar nature on a website, and
15

ultimately the proposed and unsigned purchase agreement-satisfy the writing requirement. This
material identifies the land and contracting parties and other details. There is no dispute that the
high bid atphase two of the auction was $410,000, albeit with an issue remaining about how much
of that purchase price would be allocated to the value of the home on the property' However, the

fact that most of the terms of the proposed purchase of real estate can be pieced together from
memoranda and parol statements does not satisfy the requirement of SDCL $ 53-8-2 that there be
some

writing "subscribed by the party to be charged or his agent'"

2. Part Performance
The Bieglers have argued that SDCL $ 5 3-S-2(3) is satisfied because of "part performance"
and the operation of promissory estoppel. SDCL $ 53-8-2(3) indeed recognizes that a court may

compel specific performance of a real estate agreement rendered unenforceable under the statute

of frauds if there is "part performance thereof." The Bieglers asserted that they engaged in part
performance by having

a

portion of the earnest money wire-transferred to the Krafts' account and

negotiating for changes to the draft purchase agreement. The Bieglers also were prepared to write
a check for the remainder of the earnest money, but Richard

Kraft refused to accept such a check

due to the parties' disagreement over how much of the purchase price to allocate to the value of the
home.

The Supreme Court of South Dakota in Durkee v. Van Well , 2002 SD 150, 654 N.W.2d
807, consideredwhatconductamountedto "partperformance" under SDCL $ 53-8-2(3). Ld.,2002

SD 150 at\123-28;654 N.V/.2d at 815-16. In Durkee, the Van Wells acquired property in 1975

adjacenttopropertyownedbytheDurkees.

Id.,2002 SD 150atflfl l-2;654N.W.2dat810-11'

Through a survey completed prior to the purchase of the property, the Van Wells learned that

a

boundary fence between the two properties was located 35 feet off of the actual boundary line to

t6

the benefit of the Durkees.

Id.

The Van Wells discussed the situation with the Durkees, and the

Van Wells and Durkees reached an oral agreement.

Id. Under the oral agreement, the Durkees

would be allowed continued use of the strip of property on their side of the fence that was part of
what the Van Wells thought they were buying, the Van Wells would pay the entire property tax
for the property, and when it became necessary to replace the fence, the Van Wells would remove
the old fence and place a new fence at the actual boundary with the Van Wells and Durkees

splittingthecostofthenewfence. Id.,2002 SD 150atfl3,654 N.W.2dat811. In2000,theVan
Wells removed the original fence and began constructing a new fence on the surveyed property

line. Id., 2002 SD 150 at 11[4-5,

654 N.W.2d at 8l

1. After the new fence was almost half done,

the Durkees sued to enjoin the Van Wells from relocating the fence and asserted ownership of the

disputed 3S-foot strip of land by adverse possession.

Id. After a court trial, the court concluded

that both promissory estoppel and partial performance took the case out of the application of the
statute of frauds. Id., 2002 SD 150 at fl 6, 654 N.W.2d at 81 1-12. The Supreme Court of South

Dakota affirmed, noting that, in reliance on the agreement, the Van Wells had partially performed

by leaving the fence in its existing location, allowing the Durkees continued use of the property,
maintaining the fence through the years, paying property taxes for the disputed strip of land,
removing the old fence, and constructing almost half of

a new fence before the Durkees objected.

1d.,2002 SD 150 at\28,654 N.W.2d at 816.
By contrast with Durkee, the Bieglers'alleged partperformance consisted of

a

wire transfer

of approximately two-thirds of the earnest money deposit which Christine Schirber reversed later
that same day, attempting to pay the remainder of the earnest money deposit which Richard Kraft
refused to accept, and negotiating certain terms

of a purchase agreement without reaching an

agreement on the amount of the purchase price to assign to the house. Yet,
T7

if

an agreement for sale

andpurchase of the property existed between the Bieglers and the Krafts, the Bieglers'performance

ultimately would consist of paying the $410,000 purchase price, and the Krafts'obligation would
be to transfer the property to the Bieglers.

cancelled the wire transfer, and

if

If the Bieglers had paid the earnest money in full or not

the Krafts had retained the earnest money, this might be

a

different case. However, with the Bieglers having reclaimed all of the partial payment of earnest
money, the doctrine of part performance does not spare the Bieglers' claims from the operation

of

5DCL $ 53-8-2(3). See also Williams v. Denham, 162 N.w.2d 285, 288 (S.D. 1968) ("Even
payment of part of the purchase price is not sufficient in itself to take a case out of the operation

of the Statute of Frauds.").

3. Promissory

EstoPPel

The Bieglers also claim promissory estoppel, an issue on which this Court found there to
be a question of

fact. Promissory estoppel is a recognized exception to the operation of the statute

of frauds, because the statute of frauds is not designed to work an injustice. Durkee, 2002 SD 150

atl2I,654 N.W.2d at 814-15; Jacobson,200l SD 33 atflfl 25-27,623 N.W.2d
Estate of Gosmire, 33

I N.W.2 d 562,567 (S.D. 1933).

at 90-91; In re

Thus, "[a]n oral promise to convey real

property is enforceable by specific performance where the grantee . . . has acted in reliance upon
the promise of the grantor in such a manner that it would invoke a fraud or prejudice against the
grantee not to grant specific performance thereon." In re Estate of Gosmire, 331 N.W.2d at 567 .

In Jacobson, the Supreme Court of South Dakota characterized the elements of promissory
estoppel as

a "promise which the promissor should reasonably expect to induce action

or

forbearance on the part of the promisee or a third person and which does induce such action or

forbearance." Jacobson, 2001 SD 33 at!l

27

,623 N.W.2d at 91 (citation omitted). Such a promise

18

becomes binding

"if injustice

can be avoided only by enforcement of the promise." Id. (citation

omitted).
The Bieglers point to Aberle's statements made just before the second phase of bidding that

led the Bieglers to believe the Krafts would negotiate with the successful bidder on a proper
allocation of the value of all structures on the property. Although Aberle appears to have stopped
short of pledging that the 5250,000 valuation for the residence was negotiable, his words implied

to the Bieglers that the K¡afts would work with the high bidder toward allocating a reasonable
amount for the value of the house, land, and other structures following the second phase of the

auction. All parties moved forward with phase two of the bidding, despite knowing that an issue
about the proper valuation of the residence remained. The Bieglers'bid of $410,000 was made in

reliance on their belief that the Krafts would agree to some reduction in the amount of the purchase

price allocated for the home. However, the Bieglers did not condition their bid on the valuation

of the home at $130,000 until the competition for the purchase of the home-Chip and Rita

Long-had left Aberle's office.
Under these circumstances, there is what this Court would consider

a

vague promise-that

the Krafts may negotiate with the successful bidder on the proper allocation of the value assigned
to the home, structures, and land. The vague promise is one that the Krafts could expect to induce

action, bids in reliance on the statement, but could not expect to induce a bidder to believe that the
bidder could unilaterally supply his own value for the residence. The vague promise did result in
a

bid of $410,000 from the Ptaintiffs. As this Court noted in denying summary judgment to the

Krafts previously, "this, however, leaves open the question whether'injustice can be avoided only
by enforcement of the promise' and a related question of whether an alleged breach of
to negotiate in good faith support specific performance, and,
L9

if

a promise

so, on what terms." Biegler v.

Kraft, CIV 1 1-301O-RAL,2OL}WL29l5515, at*1 (D.S.D. July 17, 2012) (citing Jacobson, 2001
SD 33 at127,623 N.W.2d at9I).

This Court, on summary judgment, had to view the facts in the light most favorable to the
nonmoving party, the Bieglers. However, promissory estoppel is in the nature of an affirmative
defense to the application of the statute of frauds where the Bieglers carry the burden of proof by
a

preponderance of the evidence at

trial.

See 56

A.L.R.3d 1037; 614 Am. Jur. 2d Pleading $ 303.

The Bieglers have not met their burden of proof by a preponderance of the evidence on the
elements of promissory estoppel. First, there is a problem with relying on this sort of promise.
Aberle's words left the Bieglers with the impression that the value of the home could be negotiated
after phase two of the auction, but the promise was less than direct. In submitting their bid, the
Bieglers, even knowing that the valuation of the home was very material to them, did not condition
the bid of $410,000 on a valuation of the home at $130,000 or at any other number. This Court
does not doubt that Aberle and Richard Kraft were trying to finesse the issue and to stick with a

valuation of $250,000 for the residence. However, the promise here induced an action-a bid in
reliance on

a

supposition that the value of the home was negotiable-that is not of the nature where

"injustice can be avoided only be enforcement of the promise." See Jacobson, 2001 SD 33 atl27
623 N.W.2d at

,

91. Indeed, although it was tepid negotiating, the Krafts made a proposal under

which they would accept a $130,000 valuation of the home, albeit by having the Bieglers pay to
the Krafts an extra amount approximating the adverse tax

ramifications. Although Martin Biegler

found the proposal both unacceptable and offensive, it nevertheless was a counter-proposal to the

Bieglers'desire to have the valuation of the home set at $130,000. Even when discussion became
so testy that no agreement that day was likely, Aberle on behalf of the Krafts agreed to provide

Christine Schirber with a written proposal by email. That written proposal never materialized,
20

because Richard

Kraft chose to abandon further negotiations with the Bieglers based on the

mistaken belief that Martin Biegler was prying into his finances at Krafts' accounting firm and

a

subsequent argument over the phone during which Martin Biegler seemed to threaten a lawsuit.

The Bieglers did not negotiate further that day, and only after about two weeks passed did Bud

Schirber attempt to restore the deal on his own. The doctrine of promissory estoppel does not
support enforcing a vague promise to negotiate a key term when the parties' efforts, tepid as they
were, to do so blew apart the entire transaction.

4. Auction Exception
The Bieglers maintain their alleged agreement with the Krafts to buy the land is enforceable

notwithstanding SDCL $ 53-8-2, because the sale was through an auction thereby making SDCL
$ 53-8-4 applicable. SDCL $ 53-8-4 provides:

When a sale is made by public auction of any real or personal
property, an entry by the auctioneer, or actual clerk ofthe sale, in
his sale book at the time of the sale, of the kind of property sold
and description thereof sufficient for identification, the terms of
sale, the price, and the names of the purchaser and person on
whose account the sale was made, is a sufficient memorandum to
satisfy the requirements of $ 53-8-2.

SDCL $ 53-8-4. The Krafts were attempting to sell the land in question by a two-phase public
auction with Aberle serving as the auctioneer. There was no formal sale book, but

a

draft purchase

agreement set forth most of the terms of sale, the price of $410,000 as the high bid in the second
phase apparently was recorded, and the identity of prospective purchasers was apparent. Although

this Court addressed these issues at length in the Opinion and Order Granting in Part and Denying

in Part Motion for Summary Judgment, repetition of part of the analysis here is helpful. Biegler,
2012 WL 2915515, at *8-10.

2I

There is a dearth of authority

in South Dakota on what actions during an auction are

sufficienttoremoveacasefromthestatuteof frauds. SDCL ç57A-2-32S,aprovisionof

the

Uniform Commercial Code that applies to transactions in goods and not to real estate sales, refers
to a sale by auction being complete "when the auctioneer so announces by the fall of the hammer

or in some other customary manner." Although less than completely clear at this stage what
Aberle said, his comments following receipt of the Bieglers' $410,000 bid were sufficient to cause
the unsuccessful
was no formal

bidders-the Longs-to congratulate the Bieglers and leave the building' There

"fall of the hammer," but there was communication about the Bieglers having the

high bid and the need to proceed to discuss completion of the purchase agreement.
The Bieglers previously asserted that, because the sale was by auction and they were the

high bidder, they thereby have a binding contract without any issue under the statute of frauds.
Such an argument would prevail

if

the Krafts had sold the property at an "absolute auction." An

"absolute auction" is "an auction in which the property is sold to the highest qualified bidder with

nolimitingconditionsoramount.'r S.D.Admin.R.20:69:06:01.01(2). Whenthereisan"absolute
auction," sometimes called an "auction without reserve,' the seller is making an offer to sell with

no reservation or conditions, and the bid reflects acceptance of that offer. See Washburn v.
Thomas, 37 P.3d 465,467 (Colo. App. 2001); Pvles v. Goller,674

A.2d35,40 (Md. Ct.

Spec.

App. 1996); Pirchfork Ranch co. v. Bar TL,615 P.2d 541, 548-49 (Wyo. 1980); 7 Am. lut.2d
Auction and Auctioneers $ 17.
The Krafts, however, were not selling their property at an absolute auction. Rather, the bid
sheet advertising the auction specifically stated:

Sellers reserve the right to reject any and att bids' Any
announcements made day of auction supersede any and all
previously printed material and any other oral statements made.
22

Exhibit 1. The Krafts thereby were offering the property through some form of an "auction with
reserve," which is "an auction in which the seller or seller's representative retains the right to
establish

a

minimum price, to accept or decline any and all bids or to withdraw the property at any

time prior to the announcement of the completion of the sale by the auctioneer." SD Admin. R.
20:69:06:01.01(3). Thus, the Krafts retained the right to choose not to sell the property at least up
to the time of the completion of the sale by the auctioneer. See Pvles, 109 Md. App. at 8l-82;7

Am. Jur. 2d Auctions and Auctioneers $ 17. Although the Uniform Commercial Code does not
apply to a sale of real estate, SDCL ç 57A-2-328(3) codifies prevailing law in stating that an
auction sale "is with reserve unless the goods are in explicit terms put up without reserve. [n an

auction with reserve the auctioneer may withdraw the goods at any time until he announces
completion of the sale." See also Youns v. Hefton,l73P.3d6''11,675 (Kan.2007) (noting that
the U.C.C. provision in real estate sale issue is "instructive although not technically applicable");

Pvles, 109 Md. App. at 81 ("The presumption in contract law is that auctions are held 'with reserve'
unless otherwise specified.");

7

Am. Jur. 2d Auction and Auctioneers $

17. An auction with

reserve is an invitation for bids, with each bid constituting an offer that may be accepted by the

seller.

See

Young, 173 P.3d at676. Typically in an auction with reserve, the contract forms when

the auctioneer closes the bidding, customarily by a fall of the hammer or some other recordation
and notification of the high bidder of the acceptance of the

bid. Id,

Some authority recognizes another type of auction, a "conditional" auction, although such
an auction seems to be a type of an auction
$ 28

with reserve. See Restatement (Second) of Contracts

andcmt. b. andd. (1981 & Supp, April 2012)(recognizing "auctionwithoutreserve" and

"auction with reserve"). In such a "conditional auction," a seller reserves the right to accept or
reject bids even after the close of bidding, Young, 173 P.3d at
23

67

6-77; Washburn, 37 P.3d, at 467

(holding that sellers could reject a final bid after the auction was closed on a real estate auction
because the auction was conditional). For an auction to be conditional, "the conditions must be

effectively communicated to prospective bidders." Yg4g, I73 P.3d at 6'77; see also Cuba v.
Hudson & Marshall. Inc. , 445 S.E.zd 386, 387-88 (Ga. Ct. App. 1994); East v. Brown,986 P.2d

523,525(Okla.Civ.App. 1999);Colemanv.Duncan,540S.W.2d935,937 (Mo.Ct. App'1976).
Here, just before the second phase of the auction commenced, Aberle, acting as an agent of the

Krafts, made a statement to the effect that, after the bidding, there would be more negotiation of
assignment of purchase price to aspects of the property. The

bill of sale had disclosed that "any

announcements made day of the auction supersede any and all previously printed material and any

otheroralstatementmade."

Exhibitl. Thebiltofsalealsostated: "Sellersreservetherightto

reject any and all bids." Exhibit

1.

The Bieglers now acknowledge that the Kraft land auction was with reserve, but argue that

the hammer of auctioneer Aberle effectively fell rendering the Bieglers the winning bidders and
that SDCL $ 53-8-4 and the law regarding auctions with reserve results in an enforceable contract.

In an auction with reserve, "the point at which the seller legally'accepts' the potential purchaser's
bid (thus entering into a contract of sale with the bidder) is less clear." Cuba v. Resolution Trust
Corp., 849 F. Supp. 793, 796 (N.D. Ga.1994). This Court thus found there to be

a

question of fact

both over whether the auction was a conditional auction where the Krafts reserved the right to
reject bids after the auction and whether,

if not

such a conditional auction, there was enough

written or done such that SDCL $ 53-8-4 renders any agreement enforceable under the statute of
frauds.

Ideally, the bill of sale for such aland auction as this that is with reserve and conditional
should have stated something to the effect that "sellers reserve the right to reject any and all bids
24

until the purchase agreement for the property is signed following the second phase of bidding."
The

bill of

sale here did disclose that announcements the day of auction "supersede any and all

previously printed material and any other statement made." Exhibit 1. In this case, there was an
announcement, or perhaps more accurately an implication, that following the second phase

of

bidding there would be negotiation over values to be assigned to the home, structures, and land.
The Bieglers knew that the Krafts'position in the negotiation over the value of the home began at

$250,000. The Bieglers entered

a bid

conditional on not only that negotiation occurring, but also

on the value to be assigned to the home of at or near $130,000.
The fact that the Bieglers'bid was conditional on a value of the home acceptable to them
is evident by the factthatthe Bieglers walked away without an agreement and withdrew the partial

payment of the earnest money deposit. Granted, the negotiation by the Krafts was tepid, but the
negotiations in which Martin Biegler engaged were not significantly better. While Bud Schirber
proposed a rational alternative of an independent appraiser and Christine Schirber remained open

to receiving an email with some alternative proposal, there is little doubt that the Bieglers' bid
remained conditional on a valuation for the home for less than $250,000.

All parties understood

before phase two of the auction that they would need to work through a purchase agreement to
arcive at a signed document. While the

bill of sale could have been more direct in disclosing that,

the statements by Aberle before the second phase of the auction conveyed that there would have
to be discussion and agreement on matters in the purchase agreement. Under the circumstances,

this Court cannot conclude that there was either a literal or proverbial "fall of the hammer," by
which the Bieglers were assured of the purchase of the property absent resolution of terms in the
purchase agreement. The Bieglers' own bid was conditional on an acceptable valuation of the
home, and the auction was an auction with reserve and conditional in nature.
25

B. Meeting of the Minds
The Krafts also argue that there was no meeting of the minds on all essential terms as

a

matter of law. In particular, the Krafts point to what they characterize as the "price" term, which
the Krafts argue to include how much of the $410,000 purchase price to allocate to the value

of

the home. This Court addressed this argument previously and found there to be a question of fact

but

will

*10-11.
repeat in part its analysis. Biesler, 2012WL2915515, at
Under South Dakota law for a contract to exist, "there must be a meeting of the minds or

mutual assent on all essential terms." Jacobson, 2001 SD 33 at u 22,623 N.W.2d at 90; Read v'
McKennan Hosp. ,2000 SD 66 atfi23,610 N.W.2d 782,786. That is, if the parties leave open
essential terms to negotiate in the future, then a contract is not established. Weitzel

v'

Sioux

VallevHeartPartners,2006 SD45 atl23,?14N.W.2d884,892;Wernerv'NorwestBankSD,

N.4., 499 N.W.2d 138,I42 (S.D. 1993). Put in other words, if the parties

have just an agreement

to agree, contemplating negotiation in the future on an essential term, there is no enforceable
contract.

W,2006

SD 45 atfl 23,'714 N.W.2d at892.

The existence of a valid contract is a question of law to be determined by the court.
Weirzel,2006 SD 45 atl22,714 N.W.2d

at892;@,499

N.W.2d

atl4l.

Consentto contract

likewiseisaquestionoflawinSouthDakotaforthecourt. LaMoreRest.,2008SD32atfl15,
748 N.W.2d at'761. However, under South Dakota law, "whether the parties had such a meeting

oftheminds[toformacontract]isaquestionoffact."

Jacobson,200lSD33atlf 22,623N.W.2d

at90;seealsoBehrensv.Wedmore,2005 SD79 at12I,698N.W.2d555,566(notingthat
whether the parties' intent and conduct established a binding agreement generally is a fact
question). Whether

a term of an alleged contract is essential to the parties can be a

26

mixed question

of law and fact.

See LaMore Rest.,2008 SD 32,

n17,748 N.V/.2d at762 (discussing what

constitutes a "material term" of a contract).
Here, the "price" term, in the sense of the overall price for the property, was established

through the bid process as 5410,000. However, the parties dispute whether a related term-the
amount of the purchase price to be allocated to the home-was an essential term on which the
parties failed to agree. The conduct of the parties demonstrates the importance of the term, in that
the Krafts wanted the Plaintiffs to pay $18,000 over the purchase price in order to accommodate
the Bieglers'request for valuing the home at $130,000, and the Bieglers at the time of the second
phase

of the auction would not carry through with the purchase of the property at the price of

$410,000 if the amount allocated to the residence was $250,000.4 Indeed, to preserve their internal
agreement to allocate the $410,00 cost of the property two-thirds to the

IRA and one-third

Martin and Cara Biegler, the Bieglers could not have the value of the residence exceed

$

to

139,000.

Discussion over the appropriate value to allocate to the home quickly led to a tense and agitated
discussion from Martin Biegler on the one hand and Richard Kraft and Aberle on the other. There

was no prior animosity whatsoever among Martin Biegler, Richard Kraft, and Aberle, yet
discussion of the appropriate price to assign to the home quickly led to hard feelings that persisted
and were evident during the court

trial. Following that discussion, Richard Kraft refused to accept

a check for the remaining earnest money deposit and Richard Kraft and Aberle declined to
negotiate further, shortly thereafter the IRA withdrew the wire transfer of roughly two-thirds

of

the earnest money understanding that the negotiation had failed to produce an agreement, and

o

Bud Schirber later called Richard Kraft to offer to pay the additional $ 18,000, but by that
time Aberle had sent an email rejecting the bid and the Krafts had progressed toward selling the
home to their nephew on different terms.
27

before the day was out Martin Biegler communicated to Richard Kraft that he was planning to
"lawyer up"

as

Kraft had done and to sue. The circumstances of this case plainly demonstrate that

the allocation of the value to the home was an essential term on which there was no meeting of the

minds.
The Bieglers' Complaint sought specific performance, which is the remedy under South

Dakota law to enforce an alleged agreement for the purchase of real property. Amdahl,47 I

N.W.2d at773; SDCL $ 21-9-9. Specific performance is an equitable remedy. McCollam v.
Cahill,2009 SD 34,n15,766 N.W.2d 171,176. Among the problems with requiring specific
performance under the circumstances of this case is that this Court would have to arrive at the
appropriate valuation of the home, thereby supplying an essential term on which the parties could

not agree. Neither party presented any written appraisal of the home or testimony from any
appraiser. To arrive at a proper valuation of this home, this Court would have to engage in
speculation regarding just what land or out-buildings Martin and Cara Biegler would have received

relative to the IRA and what value the land, home, and other buildings separately had. Specific
performance is not appropriate under the circumstances of this case.

C. Slander of Title Counterclaim
The Krafts filed a counterclaim for slander

oftitle

based on the Bieglers

filing

a

lis pendens

in connection with this lawsuit. SDCL $ 43-30-9 allows a slander of title claim and states:
No person shall use the privilege of filing notices hereunder for the
purpose of slandering the title to land and in any action brought for
the purpose of quieting title to land, if the court shall find that any
person has filed a claim for the purpose only ofslandering title to

such land, he shall award the plaintiff all of the costs of such
action, including attorney fees to be fixed and allowed to the
plaintiff by the court, and all damages that plaintiff may have
sustained as the result of such notice of claim having been filed for
record.
28

SDCL $ 43-30-9. The Supreme Court of South Dakota has recognized that this statute "does not
indicate a legislative intent to allow a court to award attorney's fees in a slander of title action when
the slander does not result in a quiet title action under SDCL

ch.2l-41." Brown v. Hanson,

201 I

sD 2l ,n34,798 N.W.2d 422,43r.
The first nineteen words of SDCL $ 43-30-9 and case law in South Dakotarccognize

a

slander of title claim apart from a quiet title action. The elements of such a claim in South Dakota
are that the party claiming slander of title must show that:

[T]he publication was false and that the publication

"(l)

was

derogatory to the title to [the] property, its quality, or fthe property
owner's] business in general, calculated to prevent others from
dealing with fthe property owner] or to interfere with [the property
owner's] relations with others to [the property owner's]
disadvantage (often stated as malice); (2) was communicated to a
third party; (3) materially or substantially induced others not to
deal with [the property owner]; (4) resulted in special damage."

Brown,211 SD 21,n19,798 N.V/.2d at428 (quoting Gresory's.Inc. v. Haan,1996 SD
545 N.W.2d

35,'11 12,

488,493). The threshold question, therefore, is whether the lis pendens contained

false statements. [d.
The lis pendens filed in this case described the property, gave notice of this pending lawsuit
and stated that "the object of the pending action is, inter alia, to obtain specific performance of the
sale of the real property" to the Bieglers. Doc.
as required

3. The lis pendens was brief and in no way "false"

for a slander of title claim in South Dakota law. See Brown, 2011 SD

2l,n 19,798

N.V/.2d at 428; Gresory's. Inc. , 1996 SD 35, n 12, 545 N.W.2d 488, 493. The Bieglers are not
entitled to specific performance as sought in their Complaint, but there was a fact issue in this case
that prevented this Court from granting summary judgment or judgment as a matter of

law.

See

Bieqler, 2012WL2915515, at *10-1. Under the circumstances, the Krafts have notmet their

29

burden of proof to establish that the necessary elements of a slander of title

claim. Brown,

20

11

SD 21, n20,798 N.W.2d at428.

III. Conclusion and Order
For the reasons explained, it is hereby
ORDERED that Judgment for the Defendants enter on Plaintiffs' Complaint. It is further
ORDERED that Judgment for the Plaintiffs enter on Defendants'Counterclaim.
Dated February

1!

zots.
BY THE COURT:

ROBERTO A. LANG
UNITED STATES DISTRICT ruDGE

30