Rоbert LEONARD, Plaintiff and Appellee, v. STATE of South Dakota, ex rel. South Dakota REAL ESTATE COMMISSION, Defendant and Appellant.
No. 25619.
Supreme Court of South Dakota.
Decided Dec. 15, 2010.
2010 S.D. 97
Argued Nov. 16, 2010.
Lindsеy Riter-Rapp Robert C. Riter, Jr. of Riter, Rogers, Wattier & Northrup, LLP, Pierre, South Dakota, Attorneys for defendant and appellant.
[¶ 1.] Does the assignment of a real estate purchase agreement to a new buyer require the broker to obtain a new аgency agreement along with its required disclosures under
Background
[¶ 2.] In June 2004, Walter D. Miller hired Garry Neiderworder of Rapid Realty to represent him in the sale of ranch land in Meade County, South Dakota. Neiderworder became both the listing agent and broker. Russell Engesser wanted to purchase Miller’s land and entered into an agency agreement with Robert Leonard, also of Rapid Realty. Because Leonard and Neiderworder were both affiliated with Rapid Realty and represented the seller (Miller) and the buyer (Engesser), Engesser and Leonard signed an addendum to the agency agreement, creating a limited agency relationship. On that same day, Engesser offered to purchase Miller’s land for $900,000, contingent on the sale of Engesser’s land. Miller countered with a request for $930,000, but accepted Engesser’s contingenсy. Engesser accepted Miller’s counteroffer, and they signed a purchase agreement, reflecting a sale price of $930,000. The agreement also noted a backup purchase offer from Bill Gikling for $933,750.
[¶ 3.] Ultimately, Engesser was unable to sell his land. On lеarning this, Leonard mentioned the land transaction to Daniel Wolken, who expressed an interest. Leonard gave Wolken a map of the property. Wolken and his partners, Scott Grimsrud and Norman Rieger (both now deceased), considered purсhasing the land through their company, Western Dakota Land, LLC. Leonard arranged a meeting with Engesser, Wolken, and Grimsrud to discuss Western Dakota’s options in light of
I, Russell H. Engesser, the undersigned, for one dollar and other good and valuable consideration, assign all of my interest in and to two certain Purchase Agreements dated June 17th, 2004 between Miller, Seller/Engesser, Buyer, and dated September 10th, 2004 between Hackens, Seller/Engesser, Buyer. Along with all of the rights, privileges, and obligations set forth therein to.
The exeсuted assignment names Scott A. Grimsrud, Daniel L. Wolken, and Norman L. Rieger as assignees.
[¶ 4.] Following the assignment, Leonard gave Wolken copies of certain restrictive covenants on the property. Wolken questioned Leonard and Neiderworder on thе legal ramifications of the covenants. According to Wolken, Leonard and Neiderworder represented that the covenants would not restrict Western Dakota’s ultimate purchase of the property or hamper them from using and develоping the property after the purchase. The parties closed on the sale in October 2004. Some time later, Western Dakota decided to sell the property by auction. But it came to light that the map Leonard gave Wolken was incоrrect in several respects, and the covenants were more restrictive than Leonard and Neiderworder previously represented. To remove these difficulties, the restricted two hundred and forty acres were withdrawn, and the remaining acres were sold.
[¶ 5.] Western Dakota, Wolken, and Grimsrud filed a complaint with the South Dakota Real Estate Commission against Leonard and Neiderworder for their representations on the sale of the land, in particular the covenants on the two hundred and forty acres. In addition to the issues raised by Wolken and Grimsrud, the Commission charged that Leonard had violated certain statutory obligations when he failed to execute a new agency agreement with Wolken after Engesser assigned his right to purchase the property to Wolken.
[¶ 6.] Both Wolken and Leonard appeared at the administrative hearing. Although he considered Leonard his agent, Wolken testified that Leonard never explained the nature of their relationship or discussed any potential conflicts, considering that Neiderworder represented the seller. Leonard testified that he became Wolken’s agent when Engesser assigned the purchase agreement to Wolken. Leonard asserted that the assignment of the purchase аgreement transferred to Wolken Leonard’s agreement with Engesser, and therefore, satisfied the requirement to execute a written agency agreement under
[¶ 7.] The hearing examiner issued a proposed decision, which the Commission adopted, finding by clear and convincing evidence that Leonard committed unprofessional conduct under
[¶ 8.] In Leonard’s appеal, the circuit court concluded that the Commission erred as a matter of law when it held that Leonard was required to execute a
Analysis and Decision
[¶ 9.] The purchase agreеment assignment provided that Engesser “assign[ed] all of [his] interest in and to” his purchase agreement and “all of the rights, privileges, and obligations set forth therein to.” The purchase agreement refers to the agency agreement. Aside from disputing whether this doсument accomplished an assignment of the agency agreement, the Commission further claims that because
[¶ 10.] Leonard responds that the language of the assignment between Engesser and Wolken clearly and unambiguously assigned the agency agreement between Engesser and Leonard: the рurchase agreement referred to the agency agreement, and the assignment transferred all the “rights, privileges, or obligations” of the purchase agreement. Leonard also relies on Wolken’s past experience in buying property аnd asserts that Wolken understood the nature of his agency relationship with Leonard.
[¶ 11.]
[¶ 12.] The mandates of
[¶ 13.] We next examine the costs assessed and penalty imposed against Leonard.
| 2/11/09 | 6/19/09 | 8/17/09 | 8/21/09 | |||
| Jim Robbennolt— Riter Law Firm | Riter Law Firm | 855.00 | 2058.50 | 2,162.00 | 5,075.50 | |
| Jim Robbennolt | Service of complaint & notice of hearing | |||||
| Capital Reporting Services | Court Reporting services | 476.00 | 476.00 | |||
| Jim Robbennolt | Witness fees and mileage | |||||
| 5,551.50 |
The Commission, in its brief to this Court, asserts that the witnеss fees and mileage should have included a cost of $625.49, which would bring the total to $6,176.99.
[¶ 14.] Leonard challenges the Commission’s assessment because the Commission failed to itemize what actual expenses relate to the case against him alone. Because the administrative action before the Commission was against both Leonard and Neiderworder, Leonard claims that the assessment should be remanded to the Commission with directions to apportion the expenses and eliminate those attributable to Neiderworder.
[¶ 15.] While we think that straight apportionment may not be the proper method for assessing costs, the assessment must reflect the Commission’s “actual expenses for the proceeding against the licensee[.]” Id. Based on the itemization provided by the Commission, and the fact that the matter included proceedings against Neiderworder, the record is insufficient to determine if Leonard was assessed the Commission’s actual expenses related to him. We remand to the Commission to ascertain the actual expenses related to the proceeding against Leonard.
[¶ 16.] Leonard lastly argues that the $1,000 fine is unreasonable because (1) Wolken’s complaint to the Commission did not assert that Leonard failed to execute a written agency agreement (the Commission was the first to bring up that issue in its formal complaint), and (2) no harm resulted to Wolken as a result of his failure to execute a written agency agreement.
[¶ 17.] That the Commission was the first to assert the issue of Leonard’s failure to execute a written agency agreement is of no consequence. If the Commission believes that “a licensee ... has engaged or is engaging in conduct constituting
[¶ 18.] Reversed and remanded.
[¶ 19.] GILBERTSON, Chief Justice, and ZINTER, MEIERHENRY and SEVERSON, Justices, concur.