Brown v. Hanson , 2011 S.D. LEXIS 50 ( 2011 )

#25700, #25701-aff in pt & rem in pt-GAS
2011 S.D. 21IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
TERRY BROWN and SUSAN BROWN, Plaintiffs and Appellees,
v.
JAMES HANSON, Defendant and Appellant.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
MEADE COUNTY, SOUTH DAKOTA
* * * *
HONORABLE JEROME A. ECKRICH, III
Judge
* * * *
DYLAN A. WILDE
THOMAS E. BRADY of
Brady & Pluimer, P.C.
Spearfish, South Dakota Attorneys for plaintiffs
and appellees.
BRAD P. GORDON
ROGER A. TELLINGHUISEN of
Tellinghuisen & Gordon, P.C.
Spearfish, South Dakota Attorneys for defendant
and appellant.
* * * *
ARGUED FEBRUARY 16, 2011
OPINION FILED 05/18/11
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SEVERSON, Justice.
[¶1.] Terry and Susan Brown purchased land adjacent to James Hanson.
The neighbors signed a Common Well and Road Easement Agreement. The
document was filed in the office of the Meade County Register of Deeds. Believing
the Browns had breached the terms of the agreement, Hanson filed a letter
“rescinding” the agreement with the register of deeds. The Browns filed a lawsuit.
The trial court granted the Browns’ motion for partial summary judgment
requesting declaratory judgment. On appeal, this Court affirmed the trial court’s
ruling that rescission was not the appropriate remedy for breach of the easement.
On remand, a court trial was held on the remaining issues. Hanson now appeals
judgment in favor of the Browns on claims of slander of title and tortious
interference with a business contract. Hanson also appeals the award of attorneys’
fees and other damages. We affirm in part and remand in part.
FACTS
[¶2.] Additional facts of this case are set forth in Brown v. Hanson (Brown
I), 2007 S.D. 134, ¶¶ 1-4, 743 N.W.2d 677, 678-79. In 1995, James Hanson and his
wife purchased property in Sturgis, South Dakota. Hanson’s sister and brother-in-
law, Debbie and Virgil Schulz, purchased the adjacent property around the same
time. Hanson constructed a well on his property that supplied water to his land as
well as the Schulzes’ land. A road on Schulzes’ land provided access to Hanson’s
land. The Schulzes allowed a small group of out-of-state family and friends to camp
on their land each year during the Sturgis Motorcycle Rally. Virgil built a shower
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house for the campers in 1999. The campers were charged $8 per day to camp. The
Hansons were aware of the arrangement.
[¶3.] The Browns purchased the Schulzes’ property in June 2000. The
Browns and Hansons entered into a Common Well and Road Easement Agreement
(Agreement), which provided in part:
That this Agreement shall be binding upon Brown, Hanson and
their respective heirs, successors, and assigns, and shall be
considered to be a covenant running with the land. . . . The
parties agree that the well located upon the Hanson [p]roperty
shall be utilized to provide water service to both the Hanson
[p]roperty and the Brown [p]roperty. The parties each agree to
use the water from the well for domestic purposes only and
neither party shall sell any water from the well, without written
consent of the other party.
The Agreement further provided that the Browns and Hansons would each be
responsible for one-half of the cost for electricity to the well, maintenance to the
well, and the maintenance of the water main. Each party agreed to use the water
for “domestic purposes only.” The Agreement also granted Hansons an easement
over the Browns’ property, and split the cost of maintenance for the access road.
[¶4.] The Browns continued to host the campers each year for a small fee.
Throughout the five years the Browns lived there, Hanson was aware of the
campers and their use of the shower house. At no time did Hanson complain or
object to the Browns’ use of the shower house.
[¶5.] In 2005, Hanson’s business partner, Andra Olson, asked the Browns if
they would be interested in selling. The Browns explained that they were not
interested at that time. About one year later, the Browns wanted to move and
called Andra to see if she still wanted to purchase their land. Andra requested
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more time to consider it but never responded. Hanson told his daughter that the
Browns’ property was for sale, and she offered to purchase the property for
$210,000. Because the offer was $78,000 below their asking price, the Browns
rejected the offer. After the rejection, the daughter called the Browns and told Ms.
Brown, “You know, that agreement is between you and my dad only.”
[¶6.] The Browns received a letter dated May 19, 2006, from Hanson. In it,
he stated, “You have breached both paragraphs 2 and 4 [of the Agreement] . . . by
not using the well for domestic purposes and by failing to pay half of the cost of
the electricity for the well.” In addition, Hanson wrote that it was a further breach
of the Agreement that the Browns were “advertising your property for sale and
improperly using the camp ground income as buyer inducement to purchase the
property” because “you are attempting to sell a commercial use of the water that
you simply do not have.” Because of these breaches, Hanson stated that, “effective
upon receipt of this letter I have terminated [Agreement] dated June 14, 2000.”
Hanson concluded by informing the Browns that, “If you desire to have me further
supply your residence with water under a new agreement for only domestic
purposes then you will need to contact me.”
[¶7.] After receiving the May 19, 2006 letter from Hanson, the Browns met
with an attorney, who told them that Hanson could not legally rescind the
Agreement. After the meeting, the Browns showed their property to Joe and Paula
Ford. During the viewing, Mr. Brown informed the Fords of the issues Hanson
raised regarding the Agreement and that he was claiming it was rescinded. The
Fords received a copy of the Agreement and took it to their own attorney. After
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discussing the issues raised by Hanson, the attorney told the Fords he believed the
Agreement was still in effect and would run with the property. The Fords and
Browns met again and entered a Purchase Agreement dated June 11, 2006. The
Fords were to purchase the Browns’ property for $280,000 on July 11, 2006.
[¶8.] After entering the Purchase Agreement, the Browns directed their
attorney to respond to Hanson’s letter. The attorney told Hanson in a letter dated
June 16, 2006, that he was not allowed to rescind the Agreement and that the
Browns would pay their share of the electricity costs for the well if he would provide
copies of the bills, subtracting what they had already paid to the electric company.
Despite the attorney’s letter, Hanson filed his May 19, 2006 letter with the Meade
County Register of Deeds on July 5, 2006. The next day, Hanson sent the attorney
a letter. Hanson clarified, “Let there be no mistake about my thoughts, I am not
looking for money owed for water illegally taken. Rather, I am repudiating the well
agreement due to your clients’ material breaches of it.” Hanson further stated, “I
repeat again that there is no longer a well agreement. Any past agreement no
longer exists!!!” The letter also indicated that the Browns were to contact his
attorney if they wanted a new well agreement and that Hanson would turn off the
water to the Browns in 90 days.
[¶9.] The Browns and the Fords went to the Meade Title Company on July
11, 2006, to close on the property. There they learned that Hanson filed his May 19,
2006 letter with the register of deeds. The ability to close on the sale and purchase
was prohibited because the filed letter caused an exception to be placed on the title
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policy. Mrs. Ford contacted their mortgage company and was informed that they
would not receive financing with the exception on the title policy.
[¶10.] Mrs. Ford then contacted Hanson. She offered to enter a well
agreement with him so they could close on the property sale with the Browns. Mrs.
Ford testified that Hanson was angry and he told her the Fords did not have a right
to the Browns’ property because “[his daughter] had put an offer in, it was a good
offer, [and the] Browns should have taken it.” After Hanson’s refusal to work
anything out with the Fords, the Fords went to the Browns and entered a
Residential Lease Agreement. Despite repeated attempts by the Browns’ attorney,
Hanson was unwilling to rescind his filing. Furthermore, although Hanson claimed
he would enter a new agreement, he insisted upon several conditions including: (1)
the Browns’ acknowledgement that the Agreement was terminated; (2) the Browns’
agreement to “indemnify Mr. Hanson in any form or fashion relating to any future
legal actions or lawsuits occurring between the Browns and their buyers of the
property”; and (3) the Browns’ reimbursement of attorneys’ fees to Hanson.
[¶11.] The parties were unable to reach a new agreement. The Browns filed a
complaint requesting a declaratory judgment that Hanson was not entitled to
rescind the Agreement. They further alleged that Hanson had breached their
Agreement by claiming to rescind it, that Hanson had slandered their title by filing
his letter with the register of deeds, and that Hanson committed tortious
interference with their contract to sell the property to the Fords. The Browns
requested compensatory and punitive damages with interest and attorneys’ fees.
After proper motions, the trial court granted summary judgment in favor of the
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Browns on the declaratory judgment action, finding that Hanson could not legally
rescind the Agreement. This Court unanimously affirmed the circuit court. Brown
I, 2007 S.D. 134, 743 N.W.2d 677.
[¶12.] Meanwhile, Hanson and the Fords entered a new Common Well
Agreement on June 25, 2007. With the new agreement in place, the Fords’
mortgage company agreed to provide the financing necessary to close on the
property. The closing between the Browns and the Fords occurred on June 29,
2007.
[¶13.] A trial to the court was held July 16 and 17, 2008. The trial court’s
findings of fact and conclusions of law were not filed until June 8, 2010. On June
19, 2010, the trial court granted judgment in favor of the Browns on slander of title
and tortious interference with a business contract. It also granted punitive
damages and attorneys’ fees. Total damages were awarded as follows:
Pecuniary damages: $3,965 plus prejudgment interest at 10%
Attorneys’ fees: $21,618.70 plus post-judgment interest
at 10%
Punitive damages: $14,000 plus post-judgment interest
at 10%
[¶14.] On appeal, Hanson raises the following issues:
1. Whether the trial court erred in finding Hanson liable for
slander of title.
2. Whether the trial court erred in finding Hanson liable for
tortious interference with a business contract.
3. Whether the trial court erred in awarding the Browns’ attorneys
fees for Hanson’s slander of title.
4. Whether the Browns are entitled to claim as compensatory
damages the $6,300 credit they gave to the Fords.
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[¶15.] On appeal, the Browns raise the following issue:
5. Whether the trial court erred in the amount awarded for
pecuniary damages.
STANDARD OF REVIEW
[¶16.] The trial court’s findings of fact are reviewed under the clearly
erroneous standard of review. McGregor v. Crumley, 2009 S.D. 95, ¶ 15, 775
N.W.2d 91, 95. The trial court’s conclusions of law are reviewed de novo. Id.ANALYSIS
[¶17.] 1. Whether the trial court erred in finding Hanson liable for
slander of title.
[¶18.] The trial court found that Hanson slandered the Browns’ title by filing
the May 19, 2006 letter containing false statements with the county register of
deeds. This Court has previously recognized a slander of title cause of action for
filing a false mechanic’s lien. Gregory’s, Inc. v. Haan, 1996 S.D. 35, ¶ 12, 545
N.W.2d 488, 492. In Gregory’s, this Court cited to the Restatement (Second) of
Torts §§ 623A and 624 (1977), while discussing disparagement of property or
slander of title. Id. at 493. The Restatement provides:
§ 623A. Liability for Publication of Injurious Falsehood-General
Principle.
One who publishes a false statement harmful to the interests of
another is subject to liability for pecuniary loss resulting to the
other if
(a) he intends for publication of the statement to result in
harm to interests of the other having a pecuniary value, or
either recognizes or should recognize that it is likely to do so,
and
(b) he knows that the statement is false or acts in reckless
disregard of its truth or falsity.
§ 624. Disparagement of Property-Slander of Title.
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The rules on liability for the publication of an injurious
falsehood stated in § 623A apply to the publication of a false
statement disparaging another’s property rights in land,
chattels or intangible things, that the publisher should recognize
as likely to result in pecuniary harm to the other through the
conduct of third persons in respect to the other’s interests in the
property.
§ 629. Disparagement Defined
A statement is disparaging if it is understood to cast doubt upon
the quality of another’s land, chattels or intangible things, or
upon the existence or extent of his property in them, and
(a) the publisher intends the statement to cast the doubt,
or
(b) the recipient’s understanding of it as casting the
doubt was reasonable.
There is no reason why this action should not apply to the letter Hanson filed with
the register of deeds in this case.
[¶19.] In order to prove slander of title, the plaintiffs must show that the
publication was false and that the publication:
(1) was derogatory to the title to plaintiff’s property, its quality,
or plaintiff’s business in general, calculated to prevent others
from dealing with plaintiff or to interfere with plaintiff’s
relations with others to plaintiff’s disadvantage (often stated as
malice); (2) was communicated to a third party; (3) materially or
substantially induced others not to deal with plaintiff; and (4)
resulted in special damage.
Gregory’s, 1996 S.D. 35, ¶ 12, 545 N.W.2d at 493. The threshold question is
whether Hanson’s letter contained false statements. In Brown I, this Court stated:
The parties agree that they had an express easement. An
easement is “‘an interest in the land in the possession of another
which entitles the owner of such interest to a limited use or
enjoyment of the land in which the interest exists.’” Knight v.
Madison, 2001 S.D. 120, ¶4, 634 N.W.2d 540, 541 (citing Gilbert
v. KTI, Inc., 765 S.W.2d 289, 293 (Mo. Ct. App. 1988) (citations
omitted)). South Dakota law recognizes a “right of taking water”
as an easement “that may be attached to other land as incidents
or appurtenances.” SDCL 43-13-2. Additionally, “[t]he extent of
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a servitude is determined by the terms of the grant, or the
nature of the enjoyment by which it was acquired.” SDCL 43-
13-5.
2007 S.D. 134, ¶ 6, 743 N.W.2d at 679.
[¶20.] By its terms the easement is a covenant running with the land and
nothing in the easement granted Hanson the authority to unilaterally rescind the
easement. The trial court found that the issues Hanson pointed to in his letter as
grounds for “rescinding” the Agreement were “illusory, false, and pre-textual.”
Evidence in the record supports this finding. Based on the express language of the
Agreement and Hanson’s claimed justifications for “rescinding” it, we conclude that
his statements purporting to do so in the letter filed with the Meade County
Register of Deeds disparaged Browns’ property interest. See Brown I, 2007 S.D.
134, 743 N.W.2d 677. Hanson does not argue that other elements of the slander of
title claim were not proven. Thus, we do not analyze the remaining elements of a
slander of title claim.
Conditional Privilege
[¶21.] Hanson argues he has the defense of conditional privilege to the
Browns’ slander of title claim. Citing Restatement (Second) of Torts § 647, Hanson
explains this privilege as the ability “to disparage another’s property in land . . . by
an assertion of an inconsistent legally protected interest in himself.”
[¶22.] This Court has previously discussed a conditional privilege to file good
faith claims in public records. Gregory’s, 1996 S.D. 35, ¶ 14, 545 N.W.2d at 494.
The privilege is subsumed in the requirement that the person
suing for disparagement of title must show malice or that the
lien filer had an illegitimate purpose. Under this privilege, even
if a lien filing was erroneous, it will not support a
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disparagement of title action if the person who filed acted in the
reasonable belief that the filing was valid.
Id. (citing Hicks v. Earley, 357 S.W.2d 647 (Ark. 1962); Sullivan v. Thomas Org.,
276 N.W.2d 522 (Mich. 1979)). Furthermore, “knowledge or reckless disregard of
falsity is required.” Id. (citing Restatement (Second) of Torts § 593 cmt.c, §§ 594
and 646A).
[¶23.] In this case, the trial court found that “Hanson’s filing was malicious.
He knew the Browns had rejected his daughter’s offer on the property. He knew the
electric bill issue and camping issue were illusory, false, and pre-textual. . . .
Hanson intended not to enforce any legal rights he had, or in good faith thought he
had, under the Agreement, but rather to prevent a sale of the Browns’ property.”
The trial court found that Hanson (1) maliciously filed the letter and (2) knew or
should have known that the statements in the letter were false. Hanson has not
demonstrated that these findings are clearly erroneous and therefore the
conditional privilege defense is not available to him.
[¶24.] 2. Whether the trial court erred in finding Hanson liable for
tortious interference with a business contract.
[¶25.] The trial court found that Hanson tortiously interfered with the
Browns’ business contract with the Fords, i.e., the contract to sell the Fords the
property. Hanson argues that he had a genuine and legitimate economic interest to
protect when he recorded the May 19, 2006 letter. He claims that because of this
interest he had an absolute privilege to place the public on notice by recording the
letter.
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[¶26.] To establish a claim for tortious interference with a business
relationship, a plaintiff must prove:
(1) the existence of a valid business relationship or expectancy;
(2) knowledge by the interferer of the relationship or expectancy;
(3) an intentional and unjustified act of interference on the part
of the interferer; (4) proof that the interference caused the harm
sustained; and, (5) damages to the party whose relationship or
expectancy was disrupted.
Selle v. Tozser, 2010 S.D. 64, ¶ 15, 786 N.W.2d 748, 753 (citing Dykstra v. Page
Holding Co., 2009 S.D. 38, ¶ 39, 766 N.W.2d 491, 499); St. Onge Livestock Co., Ltd.
v. Curtis, 2002 S.D. 102, ¶ 12, 650 N.W.2d 537, 541.
[¶27.] Hanson does not argue that the elements of tortious interference have
not been proven in this case; thus, we do not address them. Instead, Hanson argues
that he had an interest to protect, which goes to whether filing the letter was an
“unjustified act of interference.” Specifically, the interest Hanson claims is placing
the public on notice that camping was not allowed on the property.
[¶28.] We do not find this “interest” persuasive. First, the Agreement was
not so broad as to prohibit camping on the Browns’ property; rather, the Agreement
prohibited use of the water for non-domestic purposes. Additionally, we have
previously stated that “self interest is not a defense where a party’s conduct is
improper.” Table Steaks v. First Premier Bank, N.A., 2002 S.D. 105, ¶ 27, 650
N.W.2d 829, 837 (credit card company unsuccessfully argued it was protecting its
own interest when it terminated credit card processing agreement without notice,
which the jury found to be an intentional and unjustified act of interference). The
trial court did not err in finding Hanson committed tortious interference with a
business contract.
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[¶29.] 3. Whether the trial court erred in awarding the Browns
attorneys’ fees for Hanson’s slander of title.
[¶30.] In their pleadings, the Browns requested relief “for all damages
incurred by [them] arising out of [Hanson] slandering [Browns’] title on their
property.” The trial court awarded the Browns $21,618.70* in attorneys’ fees under
SDCL 43-30-9. The court also concluded an award of attorneys’ fees was
appropriate as special damages in a slander of title action, incurred to remove the
cloud on the Browns’ title. Both avenues of awarding attorneys’ fees are issues of
first impression in South Dakota. We address each approach in turn.
[¶31.] An award of attorneys’ fees is normally reviewed under the abuse of
discretion standard. Credit Collection Servs., Inc. v. Pesicka, 2006 S.D. 81, ¶ 5, 721
N.W.2d 474, 476. Because there is no contract providing for attorneys’ fees in this
case, we must determine whether SDCL 43-30-9 authorizes an award of attorneys’
fees. This is a statutory construction question, which is reviewed de novo. Id.Statute
[¶32.] SDCL 43-30-9 provides:
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
* In its discussion regarding award of attorneys’ fees, the trial court notes that
the itemization of expenses submitted by the Browns begins July 11, 2006
and end February 17, 2008. Essentially, the expenses cover the action
through the first appeal. The two-day court trial did not occur until July
2008. However, in discussing whether the amount of attorneys’ fees was
appropriate, the trial court noted the trial and extensive preparations and
work by the attorneys after the trial was over. In determining whether the
amount of attorneys’ fees requested was appropriate and sought to remove
the cloud of title, it is not clear that the trial court only considered the
attorneys’ work up until the first appeal was completed.
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of slandering title to such land, he shall award the plaintiff all
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.
[¶33.] Actions to quiet title are very specific. Quiet title actions in South
Dakota are conducted under SDCL ch. 21-41. Black’s Law Dictionary defines
“action to quiet title” as “a proceeding to establish a plaintiff’s title to land by
compelling the adverse claimant to establish a claim or be forever estopped from
asserting it.” 32 (8th ed. 2004). The Browns did not bring a claim under SDCL ch.
21-41, but rather a declaratory judgment action, common-law slander of title claim,
and a claim for tortious interference of a business contract.
[¶34.] This Court has repeatedly stated that “words and phrases in a statute
must be given their plain meaning and effect.” W. Consol. Coop. v. Pew, 2011 S.D.
9, ¶ 34, 795 N.W.2d 390, 399 (citing Discover Bank v. Stanley, 2008 S.D. 111, ¶ 15,
757 N.W.2d 756, 761). When the words and phrases of SDCL 43-30-9 are given
their plain meaning and effect, the statute does not indicate a legislative intent to
allow a court to award attorneys’ fees in a slander of title action when the slander
does not result in a quiet title action under SDCL ch. 21-41. The trial court erred in
awarding attorneys’ fees under SDCL 43-30-9.
Special Damages
[¶35.] Our analysis of the attorneys’ fees issue does not end with SDCL 43-
30-9. The Restatement (Second) of Torts § 633(1)(b) (1977) provides: “The pecuniary
loss for which a publisher of injurious falsehood is subject to liability is restricted to
. . . the expense of measures reasonably necessary to counteract the publication,
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including litigation to remove the doubt cast upon vendibility or value by
disparagement.” The majority of states that have addressed this issue have
followed the Restatement approach and determined that attorneys’ fees which flow
directly from the disparagement of title are recoverable as damages in a slander of
title action. See Fountain v. Mojo, 687 P.2d 496, 501 (Colo. App. 1984); Gambino v.
Boulevard Mortg. Corp., 922 N.E.2d 380, 423 (Ill. App. 1 Dist. 2009); Wilcox Lumber
Co., Inc. v. The Andersons, Inc., 848 N.E.2d 1169, 1171 n.1 (Ind. Ct. App. 2006);
Sullivan v. The Thomas Org., 276 N.W.2d 522, 526 (Mich. Ct. App. 1979)
(“reasonable expenses incurred by the plaintiff in removing the cloud from his title
were recoverable as damages in a disparagement of title action”); Paidar v. Huges,
615 N.W.2d 276, 280-81 (Minn. 2000) (holding that attorneys’ fees are allowed in
slander of title actions because “one party’s tortious conduct necessitated litigation
by the other party”); Ellison v. Meek, 820 So.2d 730, 738 (Miss. Ct. App. 2002); Lau
v. Pugh, 299 S.W.3d 740, 749-50 (Mo. App. S. Dist. 2009); Den-Gar Enters. v.
Romero, 611 P.2d 1119, 1124 (N.M. Ct. App. 1980) (“in a slander of title action, the
amount of attorneys’ fees incurred to quiet title is not allowed merely as an extra
expense of the suit, but is a measure of damages itself.”); Brooks v. Lambert, 15
S.W.3d 482, 485 (Tenn. Ct. App. 1999); Gillmor v. Cummings, 904 P.2d 703, 708
(Utah Ct. App. 1995) (“while special damages are ordinarily proved in a slander of
title action by evidence of a lost sale or the loss of some other pecuniary advantage,
attorney fees may be recoverable as special damages if incurred to clear title or to
undo any harm created by whatever slander of title occurred”); Rorvig v. Douglas,
873 P.2d 492, 497 (Wash. 1994).
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[¶36.] Allowing recovery of attorneys’ fees to restore a slandered title would
not be without some analogous precedent in South Dakota. Colton v. Decker, 540
N.W.2d 172 (S.D. 1995). In Colton, the plaintiff bought a truck from the defendant.
Id. at 174. While driving in Wyoming, the authorities discovered that the truck did
not have matching VIN numbers. Id. at 174-75. The plaintiff went through
significant legal hurdles to recover the truck in Wyoming. Id. at 175. Once he
returned to South Dakota, the plaintiff sued the defendant under various theories,
including breach of contract and breach of warranty of title. Id. The plaintiff
recovered attorneys’ fees, but only for what it cost to get the truck out of impound in
Wyoming. Id. at 178. The plaintiff unsuccessfully argued for attorneys’ fees for the
suit against the defendant. Id.
[¶37.] This Court has also authorized attorneys’ fees in a case where the
plaintiff incurred attorneys’ fees to recover converted money. Jacobson v. Leisinger,
2008 S.D. 19, ¶ 13, 746 N.W.2d 739, 743. The fees were separate from the
conversion action, and therefore “separable and recoverable.” Id. We noted that
“the damages must be bifurcated between ‘attorney fees incurred as a result of the
conversion litigation as compared to attorney fees incurred in recovering possession
of the property. The former are not compensable, the latter are.’” Id. ¶ 14 (citing
Motors Ins. Corp. v. Singleton, 677 S.W.2d 309, 315 (Ky. Ct. App. 1984)). Further,
this Court recognized that “attorney fees are not generally recoverable in actions
sounding in tort ‘except those fees incurred in other litigation which is necessitated
by the act of the party sought to be charged.’” Id. ¶ 15 (citing Grand State Prop. Inc.
v. Woods, Fuller, Shultz & Smith, P.C., 1996 S.D. 139, ¶ 19, 556 N.W.2d 84, 88;
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Isaac v. State Farm Mut. Auto. Ins. Co., 522 N.W.2d 752, 763 (S.D. 1994)). This
Court analogized the case to Foster v. Dischner, 51 S.D. 102, 212 N.W. 506 (1927).
In that case, the plaintiff was awarded attorney fees incurred in releasing an
unlawful levy of his property. Both Jacobson and Foster illustrate previous
situations where this Court has found it appropriate to award attorneys’ fees, which
were necessitated by a party’s actions, outside of a contract or specific legislative
grant.
[¶38.] As in Jacobson, this “lawsuit is more complicated than the typical
[slander of title] pleadings.” Jacobson, 2008 S.D. 19, ¶ 17, 746 N.W.2d at 743.
Here, Hanson filed his letter with the Meade County Register of Deeds, causing an
exception to be placed on the Browns’ title policy and interfering with the sale of the
property to the Fords. Due to Hanson’s failure to cooperate, the Browns were left
with little choice but litigation. The Browns sued to determine if Hanson was
entitled to rescind the Agreement, as purported in the filed letter. The expense that
the Browns incurred in order to have the exception cleared from their title policy is
a pecuniary loss directly caused by Hanson’s conduct. See id. ¶ 14.
[¶39.] In this case, attorneys’ fees were properly pleaded as special damages,
incurred by the Browns to remove the disparagement on their title caused by
Hanson’s filed letter. The Browns’ request for attorneys’ fees appropriately includes
amounts spent in bringing the declaratory judgment action through appeal on
Brown I. Because Hanson was the cause of the litigation, as supported by the trial
court’s findings, attorneys’ fees are recoverable in this action as special damages.
The trial court is affirmed on the award of attorneys’ fees as special damages.
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[¶40.] 4. Whether the Browns are entitled to claim as
compensatory damages the $6,300 credit they gave to the
Fords.
[¶41.] The Browns and the Fords agreed that the Fords would be entitled to a
credit in the amount of $6,300 on the purchase price as compensation for the
Browns’ delay in closing on the sale of the property. In consideration, the Fords
released all the claims they “might” have against the Browns for the delay. The
trial court awarded this amount to the Browns as compensatory damages,
determining that “the $6,300 credit fairly and reasonably compensated the Browns
for the release paid to Fords.”
[¶42.] The trial court noted that “assuming the Fords had some type of claim
against the Browns, the Court cannot determine with absolute precision how much
the Fords’ undenominated claims are worth.” The trial court, however, went on to
note that the Browns “had to close the deal with the Fords. . . . More protracted
litigation over this property and the uncertainty of closing, especially based on past
experience, made the $6,300 seem a small price to pay. The $6,300 credit fairly and
reasonably compensates the Browns for the release paid to Fords. This item and
measure of damage is legally attributable to Hanson’s sabotage.”
[¶43.] There is a rational relationship between the trial court’s grant of
$6,300 compensatory damages and the method it used. It is the exact amount of the
credit that the Browns gave the Fords to gain a release from the claims they may
have had against them for the delay in closing. Although there is no way to know
exactly how much the Fords’ claims would have been worth, $6,300 is reasonable
under the circumstances of this case. Awarding the Browns $6,300 will make them
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whole because that is the credit they gave the Fords, which they would otherwise
have received. The award is affirmed.
[¶44.] 5. The Browns claim the trial court erred in the amount
awarded for pecuniary damages.
[¶45.] The trial court awarded the Browns $3,965 in pecuniary damages on
their slander of title and tortious interference with contract claims. First, the
Browns argue that they are entitled to interest on the amount of money they would
have “netted” at closing with the Fords, $187,804.00, had closing occurred as
scheduled on July 11, 2006, because they were deprived of the use of that money for
353 days. Using the statutory rate of 10% as set by SDCL 21-1-13.1 governing
prejudgment interest, the Browns request $18,214.48 in damages. Additionally, the
Browns argue that they are entitled to prejudgment interest on $18,214.48 from the
date the closing occurred until the date judgment was entered, which totals
$5,429.42. Second, the Browns argue that they should have received prejudgment
interest on the $6,300 awarded as compensatory damages, the $2,848 awarded for
property taxes, and $4,871 awarded for interest payments the Browns made on
their first mortgage. After the $10,481 in rent paid by the Fords is subtracted, the
Browns argue that they are entitled to $32,193.00 in pecuniary damages exclusive
of attorneys’ fees and punitive damages. Because prejudgment calculations are
done as a matter of law, the standard of review is de novo. Dakota, Minn. & E. R.R.
Corp. v. Acuity, 2006 S.D. 72, ¶ 26, 720 N.W.2d 655, 663.
[¶46.] We begin with the Browns’ assertion that they are entitled to interest
on the amount of net proceeds they would have received had the sale with the Fords
occurred as planned. The trial court rejected the Browns’ calculation of damages.
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Specifically, the trial court found that the Browns failed to offer evidence of a
market based measure of damages on their inability to access the sale proceeds.
Furthermore, the trial court explained that “the 10% rate does not necessarily
precisely measure a proven market rate of return the Browns could have received
on $187,804 for 353 days in between the aborted July 2006 closing [and] June 29,
2007.” Additionally, the trial court noted that the Browns still owned the real
property with a net worth of $187,804, and they received rent from June 2006 to
June 2007. Because the trial court did not err in finding that the Browns did not
provide adequate proof of loss due to their inability to access the net proceeds, this
issue is affirmed.
[¶47.] We now address the Browns’ argument regarding prejudgment interest
on the damages they were awarded, exclusive of punitive damages and attorneys’
fees. SDCL 21-1-13.1 provides that “[a]ny person who is entitled to recover
damages . . . is entitled to recover interest thereon.” The trial court awarded
interest on the pecuniary damages beginning June 29, 2007, which is the date the
trial court determined the damage occurred. As explained earlier, the trial court
reached the pecuniary damage amount by adding the payments made on the first
and second mortgages, the property taxes and the $6,300 compensatory credit, and
then subtracting the amount of rent the Browns received from the Fords.
Prejudgment interest was awarded on the final figure, $3,965. If we were to order
prejudgment interest on the mortgage payments, property taxes, and compensatory
credit, the Browns would receive “double” recovery. Accordingly, the trial court did
not err in its calculations of prejudgment interest.
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[¶48.] The trial court appears to have made an inadvertent error while
calculating damages. Although it repeatedly stated it was awarding $6,300 as a
compensatory credit, in its calculations it used $6,500. This means that the total
damages should be $15,015. Additionally, the trial court subtracted the amount of
rent the Fords paid to the Browns in reaching the pecuniary damage figure. The
exhibit indicating the actual amount of rent paid was not admitted into evidence,
although the Browns’ counsel uses the figure $10,481. The trial court used $11,250
after indicating the Browns had received rent for 11.5 months. However, $900 rent
per month for 11.5 months is actually $10,350. If the Fords had paid rent for 12.5
months the total rent paid would be $11,250. Therefore, the calculation should be
redone to reflect a pecuniary loss of $6,300 and a determination of the actual
amount of rent the Fords paid the Browns. The proper rent amount should be
subtracted from $15,015 for the net pecuniary loss. Additionally, the trial court
indicated that it calculated punitive damages by multiplying the net pecuniary loss
by 3.5. Because the net pecuniary loss has changed, the trial court should re-
examine the punitive damages accordingly.
[¶49.] In conclusion, after analyzing this issue, the trial court found that
$3,965 would reasonably and fairly compensate the Browns for the pecuniary harm
they suffered by Hanson’s conduct. Prejudgment interest at 10% was awarded on
the pecuniary damages from June 29, 2007. The trial court was correct in theory.
We affirm the grant of damages for net pecuniary loss, but remand for a correction
of the figures used to calculate the pecuniary damages.
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CONCLUSION
[¶50.] The trial court did not err in finding Hanson committed slander of title
and tortious interference with a business contract. The trial court erred in
awarding attorneys’ fees under SDCL 43-30-9, but not in awarding them as special
damages in the slander of title cause of action. The remaining damages and
prejudgment interest awards are correct in theory, but remanded for a correction on
the figures used, as explained above. The Browns also request appellate attorneys’
fees in the amount of $1,160.70 under SDCL 15-26A-87.3 because Hanson has
argued that the trial court was incorrect in finding he slandered the Browns’ title.
We grant the Browns’ request.
[¶51.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and
MEIERHENRY, Justices, concur.
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