Peterson v. Issenhuth
2014 SD 1
| S.D. | 2014Background
- Dennis and Debra Peterson sold two lots to H&S Builders under a purchase agreement (Aug. 2006) that required water, sewer, and road improvements by June 1, 2007, and contained a mandatory arbitration clause.
- After disputes, Petersons refunded two $25,000 payments to H&S (Apr and June 2008) without consulting counsel; H&S later sued for breach (Nov. 2009).
- Petersons retained attorney Thomas Issenhuth to defend; he drafted pleadings but failed to respond to H&S’s requests for admission and did not invoke the contract’s arbitration clause.
- Because Issenhuth did not respond, requests were deemed admitted; he also did not oppose H&S’s summary judgment motion and failed to notify clients of developments or settlement offers; court granted summary judgment to H&S (Sept. 2010) for about $104,628.82.
- Petersons later replaced Issenhuth, settled with H&S (late Aug. 2011) conceding lots and paying $1,000, and then sued Issenhuth for legal malpractice; court entered default judgment on liability against Issenhuth and tried proximate cause and damages at bench trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the “case within a case” standard is required to prove proximate cause in malpractice when the underlying claim is breach of contract | Petersons: Not always; plaintiffs need not always show they would have prevailed at trial/arbitration | Issenhuth: (implicit) plaintiff must show what result would have occurred absent attorney error | Court: Strict “case within a case” misapplied here; Staab/Weiss approach (ask whether attorney conduct proximately caused actual loss) governs |
| Whether Issenhuth’s breaches proximately caused recoverable damages | Petersons: Issenhuth’s failures (no arbitration, no responses, no settlement communication) caused the judgment and economic loss (sale of business at reduced value, inability to borrow) | Issenhuth: Damages not proven to be proximately caused by his conduct; many losses preceded his involvement or are speculative | Held: Petersons failed to prove damages were proximately caused by Issenhuth; damages too speculative and largely result of prior breach or market conditions |
| Whether testimony and evidence established actual dollar damages from malpractice | Petersons: Realtor and negotiator testimony established lower sale price and worse settlement because of judgment | Issenhuth: Testimony was speculative, lacking comparables and causal link | Held: Court found appraisal and negotiation testimony unreliable; no admissible proof of loss amount |
| Whether default on liability required award of damages | Petersons: Default on liability entitles them to damages proved at trial | Issenhuth: Liability default does not relieve plaintiff of proving proximate cause and damages | Held: Default established duty and breach, but plaintiffs still must prove proximate cause and damages; they failed to do so |
Key Cases Cited
- Staab v. Cameron, 351 N.W.2d 463 (S.D. 1984) (attorney not liable for contract losses that predate attorney’s involvement)
- Weiss v. Van Norman, 562 N.W.2d 113 (S.D. 1997) (attorney malpractice damages limited to losses proximately caused by attorney conduct)
- Chem-Age Indus., Inc. v. Glover, 652 N.W.2d 756 (S.D. 2002) (elements of legal malpractice claim)
- Haberer v. Rice, 511 N.W.2d 279 (S.D. 1994) (discussing the “case within a case” standard in malpractice claims)
- Bailey v. Duling, 827 N.W.2d 351 (S.D. 2013) (damages are speculative when the fact of damages is uncertain)