Court Opinion

ID: 9858090
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:14:23.817803+00
Date Added: 2024-06-11T10:02:25.470876
License: Public Domain

HENDERSON, Justice
(specially concurring).
Attorney George Rice’s questionable representation of client Merle Haberer is well-documented by the majority opinion. However, this is not enough for Haberer to succeed on appeal. He must also prove that he would have been successful in the original litigation had Rice provided competent counsel. Taylor Oil Co. v. Weisensee, 334 N.W.2d 27 (S.D.1983).
When, on May 9, 1983, Haberer, Ed Van Meter (friend of Haberer and investor), and Rice met with First Bank officer Robert Gruman, they were led to believe that First Bank was committed to loaning Haberer $150,000. An oral agreement is not enough, however. Werner v. Norwest Bank, 499 N.W.2d 138 (S.D.1993). Thereafter, Peter Mehlhaff of First Bank, acting on behalf of Haberer Dairy & Farm Equipment, Inc., immediately applied for an SBA loan: $150,000 at 13.25% per annum interest for ten years. SBA’s Sioux Falls office received the application on May 16, 1983. Meanwhile, Rice sent *289a letter to Van Meter concerning Van Meter’s assistance in obtaining the loan.
Unbeknownst to Haberer, who had previously been rejected by the SBA for a $250,-000 loan, his new loan needed SBA approval. In fact, Mehlhaff did not even bother to have Haberer review or sign the forms. Using the previously rejected loan application, Mehlhaff simply attached the forms, including the old form with Haberer’s signature, to the new application.
In the meantime, Haberer started up his business, incurring expenses and building up debts. When he did not receive his loan after the first week, he made inquiries to the Bank and to Rice. Both put him off stating that these things take time, yet they never discouraged him from building his business. Such exchanges repeatedly continued until, after nearly three months, the loan was rejected. First Bank, ever so helpful, offered to ease the financial burden by granting Ha-berer a $125,000 loan payable in 111 days at 14.5% annual interest. Due to the huge start-up expenses incurred, Haberer had little choice but to accept the strict loan conditions. Thus, in less than four months, Ha-berer needed to recoup $125,000. Had he received the $150,000 loan, the $2,262 monthly payments would have only amounted to $9,048 over the same period. Simple math proves the dream would not have collapsed had the Bank done its job and had Rice been diligent in his duties to protect his client’s interest.
If the Bank and Rice had acted properly, either the Haberer investment would have received its loan or the investors would have been informed of the rejection at a much earlier date, avoiding unnecessary expenses. By their actions, the Bank and Rice encouraged Haberer to go further in debt. The pitfall is once Haberer was in no position to refuse, the Bank had the audacity to “assist” Haberer by charging him with higher interest and a ridiculously short term. There was no way he could make it.
Based on the stranglehold by the Bank, Haberer certainly has a meritorious defense to the foreclosure. It is also apparent that even in a light most favorable to Rice and the Bank, a shadow befalls the handling of the events surrounding the loan application. Lytle v. Morgan, 270 N.W.2d 359 (S.D.1978). A jury will determine if the remaining silhouette is a breach of contract.
I am authorized to state that Chief Justice MILLER joins this special writing.