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Terry Brown and Susan Brown v. James Hanson

May 18, 2011

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

The opinion of the court was delivered by: Severson, Justice.

#25700, #25701-aff in pt & rem in pt-GAS

ARGUED FEBRUARY 16, 2011

[¶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-inlaw, 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 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 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 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 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 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.

[¶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 ...


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