#27772-a-LSW

2016 S.D. 77

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

THOMAS KONRAD, Plaintiff and Appellee,

v.

MYRON R. STOEBNER and 

PATRICIA STOEBNER, Defendants and Appellants.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE FIRST JUDICIAL CIRCUIT

HUTCHINSON COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE PATRICK T. SMITH

Judge

* * * *

ROBERT T. KONRAD of

Olinger, Lovald, McCahren,

 Van Camp & Konrad, PC

Pierre, South Dakota Attorneys for plaintiff 

and appellee.

SCOTT R. SWIER

MICHAEL A. HENDERSON of

Swier Law Firm, Prof. LLC

Avon, South Dakota Attorneys for defendants 

and appellants.

* * * *

CONSIDERED ON BRIEFS 

ON OCTOBER 3, 2016

OPINION FILED 11/02/16
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WILBUR, Justice

[¶1.] In this appeal of the circuit court’s confirmation of an arbitration 

award, we determine whether the arbitrator exceeded his powers. We affirm. 

Background

[¶2.] Thomas Konrad and Myron and Patricia Stoebner entered into a 

contract for the sale of real property on December 30, 2002. They amended that 

agreement and executed a second contract in 2011 (Contract). Under the Contract, 

the Stoebners agreed to sell to Konrad nine parcels of real estate in Hutchinson and 

Charles Mix counties. The sales were set to occur on specific dates over the course 

of several years. The Contract set forth the purchase price for each parcel. 

[¶3.] After the Stoebners sold Konrad Parcel 8 in January 2014, but before 

the parties closed on the sale of the last parcel, Parcel 7, the Stoebners learned that 

Konrad had executed a mortgage on Parcel 8 prior to becoming the record owner of 

that parcel. In the Stoebners’ view, Konrad’s execution of a mortgage before he 

owned Parcel 8 constituted a breach of contract. The Stoebners sent Konrad a 

notice of default and refused to close on the sale of Parcel 7, which was scheduled to 

occur on January 9, 2015. In response, on January 9, 2015, Konrad sent the 

Stoebners a notice of default for the Stoebners’ failure to sell Konrad Parcel 7. 

[¶4.] The Contract contains an arbitration clause. On February 10, 2015, 

Konrad sent the Stoebners a demand for arbitration. In March 2015, after the 

Stoebners did not consent to arbitration, Konrad brought suit in circuit court for 

injunctive relief, requesting that the court enter an order compelling the Stoebners 

to sell and transfer Parcel 7 to Konrad. The Stoebners answered and requested that 
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the court compel arbitration. Konrad did not object, and the parties retained James 

McMahon to serve as the arbitrator. 

[¶5.] On May 18, 2015, the arbitrator sent the parties a letter setting forth 

the agreed-to rules to govern the arbitration. In particular, the parties agreed that 

the arbitrator was to resolve the dispute between the parties and “that the decision 

or award of the arbitrator [would] be final.” The parties further agreed that the 

arbitrator would issue a written decision. In a subsequent letter, the arbitrator 

identified the parties’ claims as follows: Konrad alleged the Stoebners breached the 

Contract when they refused to close on the sale of Parcel 7, and the Stoebners 

alleged that Konrad breached the Contract when he gave CorTrust Bank a 

mortgage on Parcel 8. In the Stoebners’ view, the mortgage constituted a “transfer” 

as defined by the Contract, which is an incurable “event of default” under the 

Contract. 

[¶6.] The arbitrator held a hearing on August 4, 2015. The arbitrator 

identified the primary issue to be decided: “whether a mortgage on Parcel 8, which 

was given by Konrad to CorTrust Bank and recorded by CorTrust on January 7, 

2014 was an incurable default under the Master Contract.” The arbitrator noted 

that the evidence demonstrated that Konrad signed a promissory note, commercial 

loan and agreement, and mortgage in favor of CorTrust in December 2013. The 

mortgage listed Parcel 8 as collateral. CorTrust was not to record the mortgage 

until Konrad closed on the sale of Parcel 8. (The Stoebners did not dispute that 

CorTrust was not to record the mortgage.) CorTrust, however, mistakenly recorded 

the mortgage on January 7, 2014, three days prior to the sale of Parcel 8 to Konrad. 
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After the closing on Parcel 8, the Stoebners and Konrad learned that CorTrust 

recorded the mortgage early. Ultimately, Konrad and CorTrust executed a partial 

release of the mortgage. The Stoebners stipulated that they suffered no harm as a 

result of CorTrust recording the mortgage three days early. However, they argued 

that Konrad’s execution of a mortgage on Parcel 8 while the Stoebners still owned 

Parcel 8 constituted a “transfer” in violation of Section 7.1 D of the Contract. 

Konrad, in response, asserted that the execution of the mortgage did not constitute 

a transfer because he did not transfer or intend to transfer his interest in Parcel 8; 

CorTrust mistakenly recorded the mortgage. 

[¶7.] The arbitrator issued a written decision on August 12, 2015. The 

arbitrator identified that Article 7.3 provided that Konrad did “not have the right to 

cure any Event of Default under Sections 7.1 A, 7.1 B, or 7.1 E.” There is no section 

7.1 E in the Contract. The arbitrator concluded that Section 7.3’s reference to 

Section 7.1 E was “clearly supposed to be 7.1 D.” Section 7.1 D provided that a 

default occurs when Konrad transfers his “interest in any Parcel other than in 

accordance with the requirements of Article 8.” The arbitrator held, therefore, that 

“a transfer in violation of 7.1 D would be incurable.” A “Transfer” is defined in 

Section 8.1 as “any assignment, conveyance, transfer, lease, sublease, or mortgage 

of this Master Contract or any interest in any Parcel.” 

[¶8.] Based on his view of the evidence, the arbitrator concluded that 

Konrad’s execution of a mortgage on Parcel 8 did not constitute a transfer in 

violation of 7.1 D. “[T]here is no question a mortgage was not to be filed on Parcel 8

prior to the closing. Consequently, Konrad did not transfer or intend to transfer his 
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interest in Parcel 8 prior to the closing.” In the arbitrator’s view, what happened 

“was not an Event of Default under the Master Contract and was not a legitimate 

basis for the Stoebners to refuse to transfer Parcel 7 or to invalidate the transfer of

Parcel 8.” The arbitrator regarded it “[i]llogical to believe that the language in 

Article 7.1 D of the Master Contract was intended to preclude Konrad from 

obtaining a loan and giving a mortgage to a lender as he closed on a parcel.” 

Alternatively, the arbitrator indicated that even if the Contract could be construed 

in this manner, it would have been “unreasonable for Stoebners to refuse a request 

by Konrad to give a mortgage to a financing institution loaning Konrad money to 

purchase a parcel.” The arbitrator ruled that the Stoebners breached the Contract 

and ordered the Stoebners to transfer Parcel 7 to Konrad. The arbitrator also 

ordered that the Stoebners pay the arbitrator’s and Konrad’s fees. 

[¶9.] Konrad filed an application for judicial confirmation of the arbitration 

award in circuit court under SDCL 21-25A-23. The Stoebners moved to vacate the 

award under SDCL 21-25A-24(3), arguing that the arbitrator exceeded his powers. 

The court held a hearing on November 23, 2015, issued a memorandum decision on 

January 8, 2016, and issued findings and conclusions on January 20, 2016. The 

court denied the Stoebners’ application to vacate the award and confirmed the 

arbitration award. The Stoebners appeal, asserting that the circuit court erred 

when it refused to vacate the arbitration award. 

Analysis 

[¶10.] The Stoebners assert that the arbitrator exceeded his powers by 

disregarding the contractual definition of “transfer.” In the Stoebners’ view, had 
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the arbitrator correctly applied the unambiguous definition of “transfer,” it would 

have concluded that Konrad’s mortgage of his interest in Parcel 8 constituted a 

transfer in violation of the Contract. 

[¶11.] “Those who voluntarily make arbitration agreements assuredly 

bargain for these advantages, and a deferential standard of review protects such 

contractual arrangements.” Black Hills Surgical Physicians, LLC v. Setliff, 2014 

S.D. 68, ¶ 14, 855 N.W.2d 407, 411. The Legislature has enacted such protections, 

strictly limiting when a court may vacate an arbitration award. Id. “But on the 

question whether arbitrators exceeded their powers, we have long held a less 

deferential standard of review.” Id. ¶ 16. We examine de novo whether an 

arbitrator exceeded his powers as defined by the arbitration agreement or 

submission. Id.; Azcon Constr. Co., Inc. v. Golden Hills Resort, Inc., 498 N.W.2d 

630, 635 (S.D. 1993). 

[¶12.] In our review, we “need only examine the submission and the award to 

determine whether the award conforms to the submission.” Spiska Eng’g, Inc. v. 

SPM Thermo-Shield, Inc., 2007 S.D. 31, ¶ 12, 730 N.W.2d 638, 643 (quoting Double 

Diamond Constr. v. Farmers Coop Elev. Ass’n of Beresford, 2004 S.D. 65, ¶ 10, 680 

N.W.2d 658, 660-61). Here, the parties retained the arbitrator and submitted to the 

arbitrator the power to interpret the parties’ contract, including the meaning of the 

term “transfer.” When a party asserts that the arbitrator exceeded his authority by 

failing to apply the plain meaning or terms of a contract, we will not “interfere with 

the arbitrator’s award unless it can be said with positive assurances that the 

contract is not susceptible to the arbitrator’s interpretation.” Id. ¶ 17 (quoting 
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United Food & Commercial Workers, AFL-CIO, CLC, Local No. 88 v. Shop ‘N Save 

Warehouse Foods, Inc., 113 F.3d 893, 895 (8th Cir. 1997)). Nor will we vacate an 

award unless the arbitrator’s interpretation of the contract “so directly contradicts 

the plain meaning of the parties’ agreement that it effectively rewrites it.” Id. ¶ 17

(quoting Boise Cascade Corp. v. Paper Allied-Indus., Chem. & Energy Workers 

(PACE), Local 7-0159, 309 F.3d 1075, 1081 (8th Cir. 2002)). “Only when arbitrators 

‘must have based’ their awards ‘on some body of thought, or feeling, or policy, or law 

that is outside the contract’ are such awards deemed in excess of the arbitral powers 

delegated in the parties’ agreement.” Setliff, 2014 S.D. 68, ¶ 17, 855 N.W.2d at 412

(quoting Ethyl Corp. v. United Steelworkers of Am., 768 F.2d 180, 184-85 (7th Cir. 

1985)). 

[¶13.] From our review, the arbitrator did not base his decision “on some 

body of thought, or feeling, or policy, or law outside the contract[.]” See id. A 

“transfer” includes “any assignment, conveyance, transfer, lease, sublease, or 

mortgage of this Master Contract or any interest in any parcel.” And, under Section 

7.1 D, Konrad may not “Transfer” his “interest in any Parcel other than in 

accordance with the requirements of Article 8.” The arbitrator concluded Konrad

did not “transfer” his interest in Parcel 8 because CorTrust mistakenly recorded the 

mortgage three days before the parties closed on the sale of Parcel 8. Reading 

Section 7.1 D in context with the definition of “transfer,” we cannot say that the 

arbitrator’s interpretation ignores the plain language of the contract or “directly 

contradicts the plain meaning of the parties’ agreement” such that the arbitrator 

effectively rewrote the contract. See Spiska Eng’g, Inc., 2007 S.D. 31, ¶ 17, 730 
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N.W.2d at 644. Because the arbitrator did not exceed his powers when he decided 

the issue submitted, the circuit court did not err when it confirmed the arbitration 

award in favor of Konrad. 

[¶14.] Affirmed.

[¶15.] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and KERN, 

Justices, concur.