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Law Capital, Inc v. Kettering

Supreme Court of South Dakota

August 21, 2013

LAW CAPITAL, INC a/k/a LAW CAPITAL, Plaintiff and Appellant,
v.
DIANE KETTERING, PERSONAL REPRESENTATIVE OF THE DOUGLAS R. KETTERING ESTATE, Defendant and Appellee.

CONSIDERED ON BRIEFS ON APRIL 22, 2013

APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT HUTCHINSON COUNTY, SOUTH DAKOTA THE HONORABLE GLEN W. ENG Judge

DAVID M. HOSMER Attorney for plaintiff and appellant.

WILLIAM FULLER of Fuller & Williamson, LLP Attorneys for defendant and appellee.

OPINION

KONENKAMP, Justice

[¶1.] This is a legal malpractice case against a deceased attorney's estate. The circuit court granted summary judgment for the estate.

Background

[¶2.] In December 2005, Thomas Konrad urgently needed $225, 000. No 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. (Law). In addition to their attorney-client relationship, Law and Kettering had been partners in at least one of Law's business ventures. During Kettering's conversation with Law about a loan for Thomas, Law asked whether there would be collateral for the loan. Kettering told Law that there was a "half section of ground clear, " referring 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 their impending divorce, might gain an interest in his parents' land when they died. Thomas's parents, Norman and 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 meeting with Kettering at his office in August 2005, and signing documents they thought would protect their land from Thomas's wife.

[¶4.] On December 15, 2005, Thomas and his parents went to Kettering's office and executed the promissory note and mortgage Kettering drafted, whereby the 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 his vehicle. His parents then went inside and signed paperwork. Thomas could not verify what his parents signed, and the Konrads could not remember what they signed. But their signatures appear on the note and mortgage, and they do not dispute that the signatures are theirs. Neither the Konrads nor Thomas left Kettering's office with copies of the note or mortgage. Kettering 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 2008, Law went to the 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, Kettering passed away. Seven months later, Law retained counsel and brought suit to enforce the note and mortgage against Thomas and the Konrads. In his answer, Thomas asserted an affirmative defense: the note and mortgage were void because Kettering failed to disclose his attorney-client and business relationship with Law and failed to obtain a waiver of this conflict of interest. Law amended his complaint to add the Douglas A. Kettering Estate as a defendant. In the 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 the Konrads. In exchange for $220, 000 and an agreement to assist Law in his litigation against the Kettering Estate, Law released the mortgage on the Konrads' land. Law then sought to recover from the Estate the amounts outstanding on the note, asserting that Kettering's acts voided the note and mortgage, and, therefore, the Estate was liable to Law for the interest due on the note: $925, 456.14.

[ΒΆ8.] In moving for summary judgment, the Estate argued that Law could have legally enforced the note and mortgage regardless of Kettering's conflict of interest. The circuit court denied the motion. In its second motion for summary judgment, the Estate argued that regardless of Kettering's failure to obtain a waiver of any conflict of interest, Kettering had not fraudulently induced the Konrads into signing the note and mortgage; consequently, Law could have enforced the note and mortgage against the Konrads. The court granted summary judgment for the Estate. Law appeals asserting that the court erred as a matter of law ...


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