Stoebner v. Konrad

#28201-dismiss-SRJ
2018 S.D. 47
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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MYRON and PAT STOEBNER, Plaintiffs and Appellants,
v.
THOMAS KONRAD, Defendant and Appellee.
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APPEAL FROM THE CIRCUIT COURT OF
THE FIRST JUDICIAL CIRCUIT
HUTCHINSON COUNTY, SOUTH DAKOTA
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THE HONORABLE PATRICK T. SMITH
Judge
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JOEL A. ARENDS of
Sioux Falls, South Dakota Attorney for plaintiffs and
appellants.
ROBERT THOMAS KONRAD of
Olinger, Lovald, McCahren,
Van Camp, & Konrad, P.C.
Pierre, South Dakota Attorneys for defendant and
appellant.
****
CONSIDERED ON BRIEFS
APRIL 16, 2018
OPINION FILED 06/20/18
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JENSEN, Justice
[¶1.] Myron and Pat Stoebner (the Stoebners) sued Thomas Konrad seeking
a declaratory judgment and rescission of a contract for the sale of land and an
incorporated lease. The Stoebners appeal the circuit court’s order granting
Konrad’s motion to compel arbitration, dismissing the temporary injunction, and
staying all proceedings until the parties engage in arbitration. Because no
statutory authority exists to entertain the Stoebners’ appeal as a matter of right, we
dismiss for lack of appellate jurisdiction.
Background
[¶2.] The Stoebners and Konrad executed a contract for the sale of several
parcels of real property owned by the Stoebners. 1 A lease agreement that granted
the Stoebners a lifetime interest in a certain subset of the parcels of land sold was
attached and incorporated by reference into the sales contract. On February 14,
2017, the Stoebners filed a complaint against Konrad alleging that Konrad intended
to lease 70 acres of land to a third party that would infringe on some of the property
leased to the Stoebners. The Stoebners also alleged that the lease is facially invalid
and executed under a mistake of law because agricultural land cannot be leased for
a period of time exceeding 20 years pursuant to SDCL 43-32-2. As a result, the
Stoebners claim they are entitled to rescission of both the lease and sales contract.
1. We recently upheld an order confirming an arbitration award that required
the Stoebners to transfer certain parcels of land to Konrad under the same
contract between the parties. See Konrad v. Stoebner, 2016 S.D. 77, 887
N.W.2d 327.
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[¶3.] The Stoebners also filed a motion for a temporary restraining order
and a request for an order to show cause why a preliminary injunction should not be
issued by the circuit court. On February 23, 2017, the circuit court issued the
temporary restraining order against Konrad and a show cause order setting a
hearing for preliminary injunction on February 27, 2017. On February 24, 2017,
Konrad filed a demand for arbitration, a motion to stay all proceedings pending
arbitration, and an objection to injunctive relief.
[¶4.] At the hearing, the circuit court only considered the demand for
arbitration, stating “it would seem logical, then, to take that question up first, as I
believe it would be dispositive of other questions if arbitration were, in fact, ordered
by this court.” During the hearing, the circuit court heard arguments on the
arbitration issue and determined that the Stoebners’ claims were subject to
arbitration. The request for a preliminary injunction was not argued or addressed
by the circuit court at the hearing. The court entered an order on March 2, 2017,
compelling arbitration on all the claims alleged in the Stoebners’ complaint and the
motion for injunctive relief; staying all proceedings until the parties have engaged
in arbitration; and dismissing the “temporary injunction ordered in this case.” 2
2. By statute, a temporary injunction may be either a temporary restraining
order or a preliminary injunction. SDCL 21-8-1. The circuit court never
issued a preliminary injunction or addressed the motion for preliminary
injunction. Rather, it ordered the motion for preliminary injunction to be
heard as part of the arbitration. Because the temporary restraining order
was the only temporary injunction ordered in the case, we conclude the
court’s order dismissed the temporary restraining order.
We recently held that an order denying or dismissing a preliminary
injunction is appealable, as a matter of right, under SDCL 15-26A-3(5). See
Hedlund v. River Bluff Estates, LLC, 2018 S.D. 20, ¶ 13, 908 N.W.2d 766,
(continued . . .)
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[¶5.] The Stoebners appeal the circuit court’s order raising several issues for
our review. Because all the issues raised are predicated on the circuit court’s order
compelling arbitration, we need only address whether that order is appealable as a
matter of right under our statutes. 3
Analysis
[¶6.] Whether presented by the parties or not, we are required to take notice
of jurisdictional questions. Dale v. City of Sioux Falls, 2003 S.D. 124, ¶ 6,
670 N.W.2d 892, 894. “This Court has only ‘such appellate jurisdiction as may be
provided by the Legislature.’” State v. Stenstrom, 2017 S.D. 61, ¶ 15, 902 N.W.2d
787, 791 (quoting S.D. Const. art. 5, § 5). “The right to appeal is statutory and
therefore does not exist in the absence of a statute permitting it.” State v.
Schwaller, 2006 S.D. 30, ¶ 5, 712 N.W.2d 869, 871 (quoting Dale, 2003 S.D. 124, ¶ 6,
670 N.W.2d at 894). “To determine whether the statutory grant of appellate
jurisdiction has been met, the rules of statutory interpretation apply.” Cable v.
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(. . . continued)
771. However, an order dismissing a temporary restraining order is not an
appealable order. See Beers v. City of Watertown, 42 S.D. 441, 447, 176 N.W.
149, 150 (1920) (declaring that a temporary restraining order “is merely to
preserve the status quo until there can be a hearing upon the question of
whether or not to grant an injunction—such order does not rise to the dignity
of an injunction”). SDCL 15-6-65(b) also provides that “[t]emporary
restraining orders by their very nature may not be appealed.”
3. The Stoebners’ brief asserts that this appeal is appropriately considered as
an intermediate appeal under SDCL 15-26A-3(6), but the Stoebners failed to
timely file a petition for intermediate appeal as required by SDCL 15-26A-13.
As such, the Stoebners are limited in this instance to arguing that they have
an appeal as a matter of right.
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Union Cty. Bd. of Cty. Commn’rs, 2009 S.D. 59, ¶ 19, 769 N.W.2d 817, 825 (quoting
Johnson v. Lebert Const., Inc., 2007 S.D. 74, ¶ 4, 736 N.W.2d 878, 879).
[¶7.] The Stoebners initially argue that SDCL 15-26A-3(2) provides a right
of appeal from the order compelling arbitration. SDCL 15-26A-3(2) provides that
appeals may be taken from “[a]n order affecting a substantial right, made in any
action, when such order in effect determines the action and prevents a judgment
from which an appeal might be taken.” While the Stoebners summarily claim that
the order compelling arbitration affects a substantial right, they fail to address the
remainder of the statute’s text: “when such order in effect determines the action and
prevents a judgment from which an appeal might be taken.” SDCL 15-26A-3(2).
The circuit court’s order does not determine or resolve the merits of the Stoebners’
claims regarding the sales contract or the lease agreement. We have stated that
“[t]o be final, a judgment must ‘finally and completely adjudicate all of the issues of
fact and law involved in the case.’” Midcom, Inc. v. Oehlerking, 2006 S.D. 87, ¶ 11,
722 N.W.2d 722, 725 (quoting Griffin v. Dwyer, 88 S.D. 357, 358, 220 N.W.2d 1, 2
(1974)). Moreover, SDCL 21-25A-35 affords a right of appeal from an order or
judgment entered by the circuit court following the completion of the arbitration
proceedings.
[¶8.] Under the Federal Arbitration Act (FAA), the United States Supreme
Court has similarly defined a final decision as one that “ends the litigation on the
merits and leaves nothing more for the court to do but execute the judgment.”
Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 86, 121 S. Ct. 513, 519,
148 L. Ed. 2d 373 (2000) (quoting Digital Equip. Corp. v. Desktop Direct, Inc.,
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511 U.S. 863, 867, 114 S. Ct. 1992, 1995, 128 L. Ed. 2d 842 (1994)). The Court in
Green Tree held that an order compelling arbitration and dismissing all claims is
considered final and appealable. Id. at 89, 121 S. Ct. at 521. Here, because the
circuit court’s order compelling arbitration did not address the merits of the claims
and lacks finality, the Stoebners do not have an appeal as a matter of right from the
order compelling arbitration under SDCL 15-26A-3(2).
[¶9.] South Dakota’s version of the Uniform Arbitration Act, found in SDCL
chapter 21-25A, also fails to provide a right of appeal from the circuit court’s order
compelling arbitration. SDCL 21-25A-35 delineates when an appeal may be taken
from court orders involving issues of arbitration:
(1) An order denying an application to compel arbitration made
under § 21-25A-5;
(2) An order granting an application to stay arbitration made
under § 21-25A-8;
(3) An order confirming or denying confirmation of an award;
(4) An order modifying or correcting an award;
(5) An order vacating an award without directing a rehearing; or
(6) A judgment or decree entered pursuant to the provision of
this chapter.
Notably absent from the above list is the right to appeal from an order granting an
application to compel arbitration.
[¶10.] The plain language of SDCL 21-25A-35, being clear, certain and
unambiguous, does not provide for a right of appeal from an order compelling
arbitration. As such, “there is no reason for construction, and the Court’s only
function is to declare the meaning of the statute as clearly expressed.” Larson v.
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Krebs, 2017 S.D. 39, ¶ 18, 898 N.W.2d 10, 17 (quoting Rowley v. S.D. Bd. of Pardons
& Paroles, 2013 S.D. 6, ¶ 7, 826 N.W.2d 360, 363-64). 4
[¶11.] The Stoebners also cite Nature’s 10 Jewelers v. Gunderson, 2002 S.D.
80, 648 N.W.2d 804, in support of their claim that they have an appeal of right from
an order compelling arbitration. Nature’s 10 reversed a circuit court’s order
compelling arbitration determining that the franchise agreement, which included
an arbitration clause, perpetrated a crime and was void under South Dakota law.
2002 S.D. 80, ¶¶ 12-13, 648 N.W.2d at 807. The Stoebners argue that like the
situation in Nature’s 10, the Court should consider their appeal because the
arbitration clauses are contained in the sales contract and lease, which they allege
are void. The Stoebners do not cite the companion case to Nature’s 10: Rossi Fine
Jewelers, Inc. v. Gunderson, 2002 S.D. 82, ¶ 4, 648 N.W.2d 812, 813, which was
decided on the same day. In Rossi, this Court also affirmed an order compelling
arbitration. 2002 S.D. 82, ¶ 13, 648 N.W.2d at 816-17. We note that Nature’s 10
and Rossi were both considered under the Federal Arbitration Act (FAA) found at
9 U.S.C. §§ 1-16 (2012). More importantly, the question of whether the Court had
jurisdiction to consider an appeal as a matter of right from the order compelling
arbitration was not raised or considered in either case.
4. Other courts which have addressed the right of appeal from an order
compelling arbitration under the Uniform Arbitration Act are divided. See
Annotation, Appealability of State Court’s Order or Decree Compelling or
Refusing to Compel Arbitration, 6 A.L.R. 4th 652 (Originally published in
1981). These differing resolutions rest on the exclusivity of the state
statutory language at issue or the finality of the order.
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[¶12.] We only have “such appellate jurisdiction as may be provided by the
Legislature[,]” S.D. Const. art. 5, § 5, and without such authority provided by
statute to review an order compelling arbitration, we conclude that an interlocutory
order as the one at hand is not appealable as a matter of right. 5 See Dennis v. Jack
Dennis Sports, Inc., 253 P.3d 495, 496 (Wyo. 2011) (interpreting language identical
to SDCL 21-25A-35 and citing cases that support the court’s conclusion that an
order compelling arbitration is not appealable as a matter of right); but see, e.g.,
Kremer v. Rural Cmty. Ins. Co., 788 N.W.2d 538, 549 (Neb. 2010) (holding under a
statute differing from our own, that an order compelling arbitration is appealable as
5. The Stoebners’ challenge does not go to the validity of the arbitration clause
itself, which would have required the circuit court to summarily determine
the issue under SDCL 21-25A-5. Because such a determination was not
made in this case, it is unnecessary to consider whether a right of appeal
exists under SDCL 15-26A-3(2) from such a summary determination.
Severing the question of the validity of an arbitration clause under SDCL 21-
25A-5 from other questions challenging the validity of a contract is consistent
with SDCL 53-5-4, which provides for the severability of contracts. “A court
may divide a contract into ‘corresponding pairs of part performances,’ and
then enforce only those parts which do not ‘materially advance the improper
purpose’ of the agreement.” Thunderstik Lodge, Inc. v. Reuer, 2000 S.D. 84,
¶ 7, 613 N.W.2d 44, 46 (quoting E. Allan Farnsworth, Contracts § 5.8, at
381-82 (2d ed. 1990)).
This approach under South Dakota’s version of the Uniform Arbitration Act
is consistent with the United States Supreme Court’s reading of the FAA in
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S. Ct. 1204, 163
L. Ed. 2d 1038 (2006). Buckeye held that “[f]irst, as a matter of substantive
federal arbitration law, an arbitration provision is severable from the
remainder of the contract. Second, unless the challenge is to the arbitration
clause itself, the issue of the contract’s validity is considered by the arbitrator
in the first instance.” 546 U.S. at 445-46, 126 S. Ct. at 1209, 163 L. Ed. 2d
1038. This rule permits “a court to enforce an arbitration agreement in a
contract that the arbitrator later finds to be void.” Id. at 448, 126 S. Ct. at
1210 (emphasis added).
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a final order under the Nebraska statute that defines a “final order” to include any
“order affecting a substantial right made in a special proceeding”).
[¶13.] Our decision dismissing this appeal is in harmony with the plain
reading of the applicable appeal statutes and our case law favoring resolution of
disputes by arbitration:
This dismissal is in accord with the legislative dictate and the
fact that “this Court has consistently favored the resolution of
disputes by arbitration.” . . . [T]his is consistent “with the sound
policy, present throughout our system of jurisprudence as well
as in the arbitration statute, of preserving judicial resources and
limiting appeals prior to judgment to those instances where the
element of finality is present.” This is because if the action is
allowed to proceed no appeal may be necessary. “Judicial
economy demands that courts not provide time-consuming and
perhaps unnecessary interlocutory appeals which delay the
favored dispute-resolution process of arbitration.”
Double Diamond Constr. v. Farmers Coop. Elevator Ass’n of Beresford, 2003 S.D. 9,
¶ 10, 656 N.W.2d 744, 747 (per curiam) (citations omitted).
[¶14.] Based on the foregoing, the circuit court’s order compelling the
Stoebners and Konrad to engage in arbitration is not an order appealable as a
matter of right under either SDCL 15-26A-3(2) or SDCL 21-25A-35. Therefore, we
dismiss the Stoebners’ appeal. 6
[¶15.] GILBERTSON, Chief Justice, and ZINTER and KERN, Justices, and
SEVERSON, Retired Justice, concur.
6. Konrad filed a motion to recover appellate attorney fees as the prevailing
party under the terms of the contract. Because the claims have not been
determined on the merits, any request for attorney’s fees is premature.
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