Konrad v. Stoebner
2016 SD 77
S.D.2016Background
- Konrad and Myron & Patricia Stoebner entered a 2011 amended contract for sale of nine parcels; sales occurred on specified future dates.
- After Parcel 8 closed (Jan 10, 2014), CorTrust mistakenly recorded a mortgage on Parcel 8 three days earlier (Jan 7, 2014); Konrad had executed the mortgage instruments in December 2013 but did not yet own Parcel 8.
- Stoebners viewed the mortgage execution/recording as a prohibited "transfer" under Section 7.1 D and notified Konrad of default, refusing to close on Parcel 7 (scheduled Jan 9, 2015); Konrad issued a counter-notice of default.
- The parties agreed to arbitration, submitted the contract dispute (whether the mortgage was an incurable default/transfer) to arbitrator James McMahon, and agreed his decision would be final.
- The arbitrator concluded the premature recording did not constitute a transfer by Konrad under the contract, found Stoebners breached by refusing to transfer Parcel 7, awarded transfer and fees; the circuit court confirmed the award and denied vacatur.
Issues
| Issue | Plaintiff's Argument (Konrad) | Defendant's Argument (Stoebners) | Held |
|---|---|---|---|
| Whether the arbitrator exceeded his powers by ignoring the contract definition of "transfer" | The mortgage recording was a mistake by CorTrust and did not transfer Konrad's interest; arbitrator within authority to interpret contract | The contract definition of "transfer" unambiguously includes a mortgage of any interest, so arbitrator misapplied plain language and exceeded authority | Court: Arbitrator did not exceed powers; interpretation reasonably fits contract language and submission |
Key Cases Cited
- Black Hills Surgical Physicians, LLC v. Setliff, 855 N.W.2d 407 (S.D. 2014) (describing deference to arbitration and limits on vacatur)
- Spiska Eng’g, Inc. v. SPM Thermo-Shield, Inc., 730 N.W.2d 638 (S.D. 2007) (review limited to whether award conforms to submission; will not interfere absent clear contradiction)
- Azcon Constr. Co., Inc. v. Golden Hills Resort, Inc., 498 N.W.2d 630 (S.D. 1993) (standards for reviewing arbitrator authority)
- Ethyl Corp. v. United Steelworkers of Am., 768 F.2d 180 (7th Cir. 1985) (arbitral awards exceed powers only when based on principles outside the contract)