807 N.W.2d 629
S.D.2011Background
- Ross and Barbara Delzer owned a ranch in Butte County, SD; they hired Bob Gerkin (Tri-State Realty) to list the ranch and provided information about its water system.
- Ronald and Sheryl Steineke showed interest; their agents Donahue and Hughes viewed the property with Gerkin and were told the well would meet their water needs.
- The sale closed in April 2005; the Steinekes later sued for negligent misrepresentation regarding the well and its capacity.
- Delzers and Gerkin asserted that damages should be governed by Restatement (Second) of Torts § 552B, excluding the cost of a new well as recoverable pecuniary loss.
- Circuit court granted motion to exclude evidence of the well’s cost and limited damages to out-of-pocket losses plus the difference in value; judgment entered against Steinekes; on appeal Steinekes challenge the damages ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Restatement (Second) of Torts § 552B the proper damages measure for negligent misrepresentation in SD? | Steinekes argue SDCL 21-3-1 governs damages; §552B conflicts with this rule. | Delzers contend §552B provides the applicable damages measure for negligent misrepresentation. | Yes; §552B governs; damages include reliance losses and the difference in value, not expectation. |
| May Steinekes recover the cost of drilling a new well as damages? | Cost of a new well reflects pecuniary loss from reliance on misrepresentation. | Cost is not a recoverable pecuniary loss under §552B. | No; recovery is limited to reliance damages and value difference; expert costs for a new well are not recoverable. |
| Was the land-valuation testimony properly excluded as attempts to prove expectation damages? | Valuing land by deducting well cost reflects actual loss. | Valuation method impermissibly seeks expectation damages under §552B. | Affirmed; land valuation as proposed was not admissible under §552B. |
Key Cases Cited
- Bayer v. PAL Newcomb Partners, 2002 SD 40 (SD) (clear application of negligent misrepresentation damages)
- Fisher v. Kahler, 2002 SD 30 (SD) (adopts Restatement §552B approach)
- Meyer v. Santema, 1997 SD 21 (SD) (early adoption of §552 approach)
- Pickering v. Pickering, 434 N.W.2d 758 (SD) (negligent misrepresentation damages guidance)
- Voeltz v. John Morrell & Co., 1997 SD 69 (SD) (legal standard review and damages considerations)
- Wilcox v. Vermeulen, 2010 SD 29 (SD) (evidentiary rulings reviewed for abuse of discretion)