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Poeppel v. Lester - 2013 S.D. 17, 827 N.W.2d 580


Great latitude has been allowed in the admission of parol evidence to prevent fraud or injustice. No matter how clear and unambiguous a contract might be, parol evidence may be offered to show that the contract is invalid because of fraud in its inducement. Were it not so, contracting parties could insulate themselves from their own fraud. A substantial majority of jurisdictions follow the traditional, majority view that the parol evidence rule is inapplicable in cases of fraudulent inducement. A party to a contract who has been guilty of fraud in its inducement cannot absolve himself from the effects of his fraud by any stipulation in the contract, either that no representations have been made, or that any right which might be grounded upon them is waived. Parties to contracts, whether experienced in business or not, should deal with each other honestly, and a party should not be permitted to engage in fraud to induce the contract. A term unreasonably exempting a party from the legal consequences of a misrepresentation is unenforceable on grounds of public policy. South Dakota cases fall squarely within the traditional, majority rule.


In 2008, Plaintiff Rob Poeppel brought suit against Defendant Luke Lester for breach of contract for Lester's failure to purchase Poeppel's voting interest in Coldwell Banker Lewis-Kirkeby-Hall Real Estate, Inc. (CBLKH). The contract stated that Poeppel had provided all requested financial information and that Lester’s decision to purchase the shares was not based upon Poeppel’s representations or inducements. Lester failed to attend the closing and did not pay for the shares. When Poeppel brought suit, Lester raised the defense of fraudulent inducement in his answer. He alleged that Poeppel had failed to provide information and had made false claims. The trial court found the contract to be unambiguous and excluded parol evidence. The court awarded damages to Poeppel in the amount of $250,000 plus prejudgment interest and costs.


Was the parol evidence rule in S.D. Codified Laws § 53-8-5 applicable to Lester’s defense of fraudulent inducement under S.D. Codified Laws § 53-4-5?




The court found the trial court's memorandum of decision adequate under S.D. Codified Laws § 15-6-52(a) without enumerated findings of fact and conclusions of law. The court held that the parol evidence rule in S.D. Codified Laws § 53-8-5 was inapplicable to Lester’s defense of fraudulent inducement under S.D. Codified Laws § 53-4-5. The court noted that the rule announced in Schwaiger v. Mitchell Radiology Assoc., P.C., that a claim of fraud in the inducement could be dismissed as a matter of law where a written contract disclaimer was in direct contradiction to the alleged oral misrepresentation, could be relegated to advisory status as dicta.

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