# 26523

- a - JKK
201 3 S.D. 66 IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA * * * * LAW CAPITAL, INC a/k/a LAW CAPITAL , Plaintiff and Appellant ,

v. DIANE KETTERING, PERSONAL REPRESENTATIVE OF THE DOUGLAS R. KETTERING ESTATE , Defend ant and Appellee

.
* * * * APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT HUTCHINSON COUNTY, SOUTH DAKOTA * * * * THE HONORABLE GLEN W. ENG Judge * * * * DAVID M. HOSMER Yankton , South Dakota Attorney for plaintiff and appellant

.
WILLIAM FULLER of Fuller & Williamson, LLP Sioux Falls , South Dakota Attorneys for defendant and appellee

. * * * * CONSIDERED ON BRIEFS ON APRIL 22 , 2013 OPINION FILED 

### 08 / 21 / 13# 26523

- 1

- KONENKAMP, Justice [¶ 1. ] This is a legal malpractice case against a deceased attorney ’ s estate. The circuit court granted summary judgment for the estate. B ackground [¶ 2. ] In December 2005, Thomas Konrad urgently needed $225,000

. N o bank would lend him the money. He discussed his problem with Attorney Douglas Kettering , who had performed legal services for him in the past. Kettering told Thomas that he knew a person who could lend him the money : Bob Law of Law Capital, Inc

. (La w)

. In addition to their attorney

- client relationship, Law and Kettering had been partners in at least one of Law’s business ventures. D uring Kettering’s conversation with Law about a loan for Thomas, Law asked whether there would be collateral for the l oan. Kettering told Law that there was a “half section of ground clear,” refer ring to Thomas’s parents’ land. In agreeing to the loan, Law dictated its terms : Thomas would repay $225,000 plus $20,000 in interest by January 15, 2006, and then $500 per day until Thomas paid the debt in full. [¶ 3. ] Around the same time, Thomas was having marital problems. He feared that his wife , in the ir impending divorce, might gain an interest in his parents’ land when they died

. Thomas’s parents, Norman an d Leola Konrad, were farmers who owned an unencumbered 320 acres

. Thomas shared his concern with his parents and suggested that they have Kettering draft the necessary paperwork to protect their land. The Konrads later testified that they remembered meet ing with Kettering at his office in August 2005 , and signing documents they thought would protect their land from Thomas’s wife

.# 26523

- 2

- [¶ 4. ] O n December 15, 2005, Thomas and his parents w ent to Kettering’s office and executed the promissory note and mortgage Kettering drafted , whereby
t he Konrads provided the collateral for Thomas’s $225,000 loan from Law. Thomas later claimed that he , alone, went into Kettering’s office , signed the note and mortgage, received a check for $225,000, and returned to h is vehicle. H is parents then went inside and signed paperwork. Thomas could not verify what his parents signed, and t he Konrads could not remember what they signed. But their signatures appear on the note and mortgage , and they do not dispute that the

s ignatures are theirs. Neither t he Konrads nor Thomas left Kettering’s office with copies of the note or mortgage. Ke ttering recorded the mortgage with the Hutchinson County Register of Deeds

. [¶ 5. ] On March 9, 2006, Thomas paid Law $25,000 on the note . He never made another payment. Law claimed that for several years he asked Kettering to collect the unpaid portion of the note from Thomas and that Kettering assured Law that he would. But Kettering took no action against Thomas . In late 200 8, Law
went to t he Konrads ’ home and told Norman that the note he and his wife had signed with Thomas was in default

. According to Law, Norman acted as though he knew nothing of any note or mortgage. [¶ 6. ] On April 23, 2009, at age fifty

- five , Ketterin g passed away. Seven months later, Law retained counsel and brought suit to enforce the note and mortgage against Thomas and t he Konrads . In his answer, Thomas asserted an affirmative defense : the note and mortgage were void because Kettering f ail ed to disclose his attorney

- client and business relationship with Law and failed to obtain# 26523

- 3

- a waiver of th is conflict of interest. Law amended his complaint to add the Douglas A. Kettering Estate as a defendant. In t he Konrads ’ answer to Law’s amended complaint , they asserted that Kettering fraudulently induced them into signing the note and mortgage. [¶ 7. ] Law reached a settlement with Thomas and t he Konrads

. In exchange for $220, 000 and an agreement to assist L aw in his litigation agains t the Kettering Estate, Law released the mortgage on t he Konrads ’ land. Law then s ought to

recover from the Estate the amount s outstanding on the note, asserting that Kettering’s acts voided the note and mortgage, and , therefore, the Estate wa s liable
to Law for the interest due on the note: $925,456.14. [¶ 8. ] In moving for summary judgment, the Estate argued that Law could have legally enforce d the note and mortgage regardless of Kettering ’ s conflict of interest. The circuit court denied the motion. In its second motion for summary judgment, t he Estate argued that regardless of Kettering’s failure to obtain a waiver of any conflict of interest, Kettering had not fraudulently induce d t he Konrads into signing the note and mortgage ; consequentl y , Law could have enforce d the note and mortgage against t he Konrads

. The court granted summary judgment for the E state . Law appeals asserting that the court erred as a matter of law when it failed to void the note and mortgage on the “substantial and ma terial evidence of Kettering’s conflict of interest and his fraudulent inducement [.] ” A nalysis and Decision [¶ 9. ] Law contends that had Thomas and the Konrads defended the suit, they would have been able to void the note and mortgage, which woul d have# 26523

- 4

- extinguished their le gal obligations to Law. Now standing in the ir shoes , Law maintains that Kettering committed legal malpractice when he failed to disclose to Thomas his conflicting attorney

- client relationship , thus violating the public policy

o f this S tate and consequently voiding the note and mortgage. Law further contends that Kettering fraudulently induced t he Konrads into signing the se documents , also making them void

. With the note and mortgage void, Law argues the Estate is liable to him for the interest he would have recovered had Kettering not acted negligently or fraudulently. [¶ 10. ] As in all summary judgment appeals, we review de novo whether there

were any genuine issue s of material fact and whether the moving party was entitled to judgment as a matter of law. SDCL 15

- 6

- 56(c); Horne v. Crozier, 1997 S.D. 65, ¶ 5, 565 N.W.2d 50, 52. A contract is unlawful if it violates “ an express provision of law or

. . . the policy of express law[.] ” See SDCL 53

- 9

- 1. “Public policy is found in the letter or purpose of a constitutional or statutory provision or scheme , or in a judicial decision.” Niesent v. Homestake Mining Co. , 505 N.W.2d 781, 783 (S.D. 1993) (citations omitted). Whether a contract violates public policy is a quest ion of law , reviewable de novo. Jasper v. Smith, 540 N.W.2d 399, 403 (S.D. 1995). [¶ 11. ] Law argues that the public policy of this State forbids the enforcement of a contract created by an attorney who committed legal malpractice by being in a d ual and adverse relationship with two clients , without the ir consent

. As this Court wrote more than seventy years ago, “ [ T ] hat which tends to debase the learned professions is at war with the public interest and is therefore contrary to public policy.” S ee Bart r on v. Codington Cnty

. , 68 S.D. 309, 32 7 , 2 N.W.2d 337, 345 (1942)

.# 26523

- 5

- A claim for legal malpractice is established when a party proves: ( 1) an attorney

client relationship giving rise to a duty; (2) the attorney, either by an act or failure to act, v iolated or breached that duty; (3) the attorney’ s breach proximately caused injury to the client; and (4) actual injury, loss , or damage. Himrich v. Carpenter , 1997 S.D. 116, ¶ 11 , 569 N.W.2d 568, 571 ( citation omitted)

. [¶ 12. ] No one disputes that Kettering had a n attorney

- client relationship with both Thomas and Law. Kettering’s dual relationship c onflicted, at the very least, because both clients would have presumably wanted the most advantageous lending agreement

. This conflict, then, imp osed a duty on Kettering to inform Thomas that he had an attorney

- client relationship with Law , that it might conflict with h is attorney

- client relationship with Thomas, and that he needed to obtain Thomas ’ s informed, written consent

. See SDCL ch. 16

- 18, a pp . Rule 1.7 (a), (b) ( South Dakota Rules of Professional Conduct )

. A ccepting Thomas’s assertion that Kettering never told him of Kettering’s relationship with Law, Kettering breached his duty to Thomas. [¶ 13. ] Yet, as this Court has cautione d ever since t erritorial days, “ ‘ The power of courts to declare a contract void for being in contravention of sound public policy, is a very delicate and undefined power ; and , like the power to declare a statute unconstitutional, should be exercised only i n cases free from doubt. ’ ” Sch

. Dist

. No. 61 v. Collins , 6 Dakota 145, 41 N.W. 466, 468 (1889) (citation omitted); Anderson v. Craven , 57 S.D. 168, 231 N.W. 538, 539 (S.D. 1930). Would Thomas have not used Kettering’s services or declined to execute the note and mortgage had he known of Kettering’s relationship with Law ? On this question, t here is# 26523

- 6

- considerable doubt. Thomas testified that due to the urgency of the situation, the specific reason for the urgency he could not recall, h e did n ot read the no te or mortgage . He said , “ I was not aware of the terms of the promissory note and I

wasn ’ t aware of anything

— I just signed the papers and picked up the check. ” In his deposition, h e could not “ say positively ” whether he would have signed the note had h e actually known its terms. And h e could not recall whether, at the time, he understood when it was to be repaid

. Needing the money and saying that he trusted Kettering that the loan was okay, Thomas had simply signed the documents. South Dakota adheres to the rule “ that a party to a lawsuit cannot claim the benefit of a version of relevant facts more favorable to his own contentions than he has given in his own testimony.” Connelly v. Sherwood, 268 N.W.2d 140, 141 (S.D. 1978) (citation omitted) . Stand ing in Thomas ’ s shoes, Law is bound by Thomas ’ s testimony. [¶ 14. ] Acknowledging Kettering’ s conflict of interest, the taking of a $225,000 loan while heedless of its terms invokes no manifest public policy to justify invalidating the loan on the ground one ’ s lawyer had a conflict of interest

. Moreover, o ur courts look askance at those sign ing a contract without reading it and knowing its conditions and then us ing such ignorance as a basis to evade the
contract ’ s obligations. LPN Trust v. Farrar Outdoor Adver

. , Inc ., 1996 S

. D

. 97, ¶ 13, 552 N.W.2d 796, 799 (citation omitted)

. This is essentially Thomas ’ s claim: his attorney told him the note and mortgage were okay; therefore, he neither read the documents nor understood how he was to repay the lo an . Contractual obligations should not dissolve on such flimsy substance. Indeed, Law points us to no authority# 26523

- 7

- that, on these facts, compels voiding the note and mortgage. “Until firmly and solemnly convinced that an existent public policy is clearly r evealed,” t his Court’s duty is ‘‘ to maintain and enforce contract s [rather] than to enable parties thereto to escape from their obligation on the pretext of public policy[.]” Bart r on , 68 S.D. at
323 , 2 N.W.2d at 344 (quoting Baltimore & Ohio S w . Ry. Co. v . Voigt , 176 U.S. 498, 505, 20 S. Ct. 385, 387, 44 L. Ed. 560 (1900))

. Contrary to Law’s insistence, therefore, the contract between Law and Thomas d id not contravene public policy solely because it was drafted by an attorney who failed to disclose a conf licting attorney

- client relationship. Thus, w e see no error in granting summary judgment against Law on his claim that Thomas would have been able to void the note and mortgage on public policy grounds

. [¶ 15. ] We next address Law’s claim that K ettering fraudulently induced t he Konrads into signing the note and mortgage. Fraudulent inducement entails willfully deceiv ing persons to act to their disadvantage

. Johnson v. Miller , 2012 S.D. 6 1, ¶ 13, 818 N.W.2d 804, 808. Deceit is defined in SDCL 2 0

- 10

- 2 as: (1) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true; (3) The suppressio n of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or (4) A promise made without any intention of performing. Although questions of fraud and deceit are normally questions of fact for a jury, such claims “may never be presumed and left to mere speculation or conjecture.” Estate of Elliot v. A & B Welding Supply Co., Inc. , 1999 S.D. 57, ¶ 19 , 594 N.W.2d# 26523

- 8

- 707, 710 (citation omitted)

. “ [ W ] hen there is n o evidence to support the submission of a question to the jury, it is improper to do so.” Rist v. Karlen , 90 S.D. 426, 431, 241 N.W.2d 717, 720 (S.D. 1976) (citation omitted). [¶ 16. ] Norman and Leola Konrad testified in their depositions and b y affidavit that they “were told the documents [they signed] would, in fact, keep [their] ex

- daughter

- in

- law [ ] from inheriting [their] property.” The y insisted they would have never signed the note and mortgage had the y known their land was collateral f or Thomas’s $225,000 loan. They did not recall signing the note and mortgage on December 15, 2005, in Kettering’s office, and therefore attested that they “were the victims of fraud or trickery[.]” Norman and Leola rely on their history of never borrowin g money from others and only lend ing “very small amounts to [their] s ons for very short periods of time.” [¶ 17. ] Still, the theory that Kettering fraudulently induced the Konrads into signing the note and mortgage rests on mere speculation. Th e Konrads do not remember signing the note and mortgage and do not remember being in Kettering’ s office on December 15

. This is not a case like Hauck v. Crawford , where a landowner was tricked by sleight of hand into signing a mineral deed, because here
t here is no evidence that Kettering prevented the Konrads from reading the documents or manipulated the m to prevent the Konrads from realizing what they signified

. See 75 S.D. 202, 204

- 05, 62 N.W.2d 92, 93 ( 1953). Undeniably , the note
t he Konrads signed w as entitled “Promissory Note , ” in bold print, and wa s only two pages long. The mortgage they signed was entitled “Collateral Real Estate Mortgage , ” also in bold print , and listed Law as the “ Lender

. ”# 26523

- 9

- [¶ 18. ] In the end, Law’s claim hinges on th e supposition that the Konrads ’ frugal lifestyle

— neither lending much money to their children n or borrowing
money themselves

— means that Kettering must have defrauded them

. W e n ever
presume f raud or lightly infer it

. See Commercial Credit Equip

. Corp. v. Johnson , 87 S.D. 411, 416, 209 N.W.2d 548, 551 (1973) , disavowed for other reasons by Aschoff v. Mobil Oil Corp. , 261 N.W.2d 120, 125 (S.D. 1977)

. The circuit court did
not err in granting summary judgment against Law on the claim of fraudulent induce ment

. [¶ 19. ] Affirm ed. [¶ 20. ] GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and WILBUR, Justices, concur.