## Facts

- Rob Poeppel owned 100 no-par voting shares, representing a 25% voting interest, in Coldwell Banker Lewis–Kirkeby–Hall Real Estate, Inc. (CBLKH), a real-estate brokerage.
- Lucas (Luke) Lester worked with CBLKH as a broker associate/independent contractor and sought to purchase Poeppel’s ownership interest.
- On March 28, 2008, Poeppel and Lester executed a written agreement for Poeppel to sell Lester the 100 shares for $500,000, with a closing date of May 15, 2008.
- The contract included an “Access to Information” provision stating that the seller had provided the buyer certain financial information about the shares and company and that the buyer formed his own opinion as to value.
- The same provision also stated that, before closing, the seller (or company) would provide the buyer full access to properties, books, contracts, commitments, and records and would furnish information the buyer reasonably requested.
- The agreement contained disclaimers stating the seller made no warranty about the income-producing ability of the shares or company profitability and that share value depended in part on the buyer’s skill and ability.
- The contract also included integration/reliance language indicating the buyer had access to documents and was relying on his own investigation rather than representations or inducements by the seller or the seller’s agents.
- Lester did not attend the scheduled closing and did not pay the purchase price; shortly after, he communicated that he was unable to obtain financing structured as needed.
- Poeppel sued Lester for breach of contract.
- Lester raised fraud in the inducement, asserting Poeppel had not actually provided the financial information recited in the contract and had made misrepresentations or omissions about the company (including statements related to the company’s financial condition and related matters).
- Lester sought to introduce evidence that Poeppel told him the financial information could not be disclosed until after the contract was executed, contradicting the contract’s recital that the information had already been provided.
- On the eve of trial, the circuit court ruled the contract was unambiguous on the disclosure/acknowledgment language and excluded Lester’s proffered evidence about the alleged lack of disclosure, treating it as barred by the parol evidence rule.
- After the evidentiary ruling, Lester stipulated to breach, and the case proceeded to a bench trial on damages only; the court awarded Poeppel $250,000 plus prejudgment interest and costs.
- Lester appealed, challenging the unambiguous-reading ruling, the exclusion of his fraud-inducement evidence, the refusal to allow amendment of pleadings relating to fraud, and the resulting judgment.

## Issues

1. Whether the stock-purchase agreement was ambiguous regarding the parties’ acknowledgment that financial information had been provided.
2. Whether the parol evidence rule bars evidence offered to prove fraudulent inducement when the written agreement is unambiguous and includes integration and reliance-disclaimer language.
3. Whether excluding Lester’s fraud-inducement evidence required reversal of the judgment entered after his stipulation to breach and the damages trial.

## Decision

- The Supreme Court of South Dakota affirmed the circuit court’s determination that the written contract was unambiguous on its face regarding the financial-information acknowledgment and access language.
- The court held the circuit court erred by excluding Lester’s proffered evidence of fraudulent inducement on parol-evidence grounds.
- The court reversed the judgment and remanded for further proceedings so the fact-finder could consider Lester’s fraudulent-inducement defense and related evidence.
- Because the damages judgment followed a stipulation made after the exclusion of fraud evidence, the award could not stand and was subject to reconsideration on remand.

## Legal Principles

- Contract interpretation begins with the writing as a whole; when language is clear, courts apply its plain meaning.
- The parol evidence rule generally prevents using prior or contemporaneous extrinsic evidence to vary the terms of an integrated written contract.
- The parol evidence rule does not bar extrinsic evidence offered to show fraud in the inducement, because such evidence challenges whether the contract is validly formed rather than what its terms mean.
- Reliance disclaimers, integration clauses, and warranty disclaimers do not automatically defeat a claim or defense alleging that a party was induced to sign by fraud.
- Fraudulent inducement typically presents fact questions that should be decided by the fact-finder when supported by admissible evidence.

## Conclusion

Poeppel v. Lester holds that although a stock-purchase agreement may be unambiguous as written, a court may not use the parol evidence rule to exclude evidence offered to prove fraudulent inducement; the South Dakota Supreme Court therefore reversed the judgment entered after the trial court’s exclusion ruling and remanded for proceedings in which Lester could present his fraud-inducement evidence.


Poeppel v. Lester, 827 N.W.2d 580 (2013)