Law Capital, Inc. v. Kettering
2013 SD 66
S.D.2013Background
- In Dec. 2005 Thomas Konrad needed a $225,000 loan; Attorney Douglas Kettering introduced lender Bob Law of Law Capital and prepared the promissory note and mortgage.
- The Konrad parents, Norman and Leola, signed documents that became collateral for Thomas’s loan; Kettering recorded the mortgage.
- Thomas made a $25,000 payment in March 2006 and then defaulted; Law later demanded payment and discovered no collection action had been taken by Kettering.
- Law sued Thomas and the Konrads; defenses and settlement resulted in Law releasing the mortgage for $220,000 and then suing Kettering’s estate for malpractice/fraud to recover unpaid interest.
- Law’s theories: (1) Kettering breached duties by not disclosing dual attorney-client/business relationships, so the note/mortgage violate public policy and are void; (2) Kettering fraudulently induced the Konrads to sign, so those instruments are void.
- The circuit court granted summary judgment for the Kettering estate; the Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Law) | Defendant's Argument (Estate) | Held |
|---|---|---|---|
| Whether the note & mortgage are void as against public policy because Kettering failed to disclose/obtain consent for his dual/ adverse attorney-client relationship | Kettering’s conflict and nondisclosure violated duties and public policy; contract should be unenforceable and Estate liable | Even if Kettering breached, voiding the contract is an extraordinary remedy; Thomas’s testimony shows he signed without reading and likely would not avoid the contract; public policy does not automatically void the instruments | Court held public policy did not require voiding the note/mortgage; summary judgment for Estate affirmed |
| Whether Kettering fraudulently induced the Konrads to sign the note & mortgage | The Konrads were frugal, didn’t recall signing, and were told documents would keep an ex-daughter-in-law from inheriting — ergo fraud/ trickery | No evidence of affirmative misrepresentation, concealment, or sleight of hand; documents were labeled and there is no proof Kettering prevented reading or intentionally deceived them | Court held fraud was speculative/no evidence of intentional deceit; summary judgment for Estate affirmed |
Key Cases Cited
- Horne v. Crozier, 565 N.W.2d 50 (S.D. 1997) (summary judgment standard)
- Niesent v. Homestake Mining Co., 505 N.W.2d 781 (S.D. 1993) (public policy sources)
- Jasper v. Smith, 540 N.W.2d 399 (S.D. 1995) (contract public policy review is legal question)
- Himrich v. Carpenter, 569 N.W.2d 568 (S.D. 1997) (elements of legal malpractice)
- Bartron v. Codington Cnty., 2 N.W.2d 337 (S.D. 1942) (caution against voiding contracts on public policy absent clear showing)
- Connelly v. Sherwood, 268 N.W.2d 140 (S.D. 1978) (party bound by own testimony; cannot adopt more favorable version of facts)