PLAINS COMMERCE BANK, INC. v. BECK
This text of 986 N.W.2d 519 (PLAINS COMMERCE BANK, INC. v. BECK) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
#29512, #29560-aff in pt & rev in pt-JMK & MES 2023 S.D. 8
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
PLAINS COMMERCE BANK, INC., a banking corporation, Plaintiff and Appellant,
v.
MATTHEW A. BECK, a married person; KELLEY R. BECK, a married person; MATTHEW A. BECK, Trustee of the B&B FARM TRUST, u/t/a November, 1, 1999; BROWN COUNTY, a governmental instrumentality of the State of South Dakota; MARSHALL COUNTY, a governmental instrumentality of the State of South Dakota; DEERE & COMPANY, a corporation, Defendants,
and
JAMIE MOECKLY, Intervenor and Appellee.
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA
THE HONORABLE SCOTT P. MYREN (Appeal #29512) THE HONORABLE RICHARD A. SOMMERS (Appeal #29560) Judges
ARGUED OCTOBER 6, 2021 OPINION FILED 02/15/23 ****
REED RASMUSSEN of Siegel, Barnett and Schutz, LLP Aberdeen, South Dakota
ROGER DAMGAARD JORDAN J. FEIST of Woods, Fuller, Shultz and Smith, P.C. Sioux Falls, South Dakota Attorneys for plaintiff and appellant Plains Commerce Bank.
JOSHUA G. WURGLER KENNITH L. GOSCH of Bantz, Gosch & Cremer, LLP Aberdeen, South Dakota Attorneys for intervenor and appellee Jamie Moeckly. #29512, #29560
KERN, Justice, and SALTER, Justice
[¶1.] Justice Kern delivers the majority opinion of the Court on
Issues 1 through 4. Justice Salter delivers the majority opinion of the
Court on Issue 5.
[¶2.] KERN, Justice, writing for the Court on Issues 1 through 4.
[¶3.] Gary and Betty Beck created B&B Farms Trust as an irrevocable
spendthrift trust in 1999, naming their three children as secondary beneficiaries
and themselves as primary beneficiaries. Matthew Beck, their youngest child,
served as Trustee. In 2015, Matthew took out a large personal loan with Plains
Commerce Bank and granted a mortgage to Plains Commerce on $800,000-worth of
Trust real estate as partial collateral. All beneficiaries of the Trust signed a
consent to mortgage the Trust real estate prepared by their family attorney at the
request of Plains Commerce. Matthew defaulted on the loan, and Plains Commerce
commenced a foreclosure action against Matthew in his capacity as Trustee for B&B
Farms Trust. Jamie Moeckly intervened in the action on behalf of the Trust and
the parties filed cross-motions for summary judgment on whether Plains Commerce
can foreclose on the Trust real estate. The circuit court granted Jamie’s motion for
summary judgment and denied Plains Commerce’s. The court concluded that
Matthew’s mortgage on Trust real estate was void and unenforceable. The circuit
court subsequently awarded attorney fees to Jamie Moeckly. Plains Commerce
appeals the court’s order granting Jamie summary judgment and her motion for
attorney fees. We affirm in part and reverse in part.
-1- #29512, #29560
Factual and Procedural Background
[¶4.] In 1999, Gary Beck and Betty Beck executed a Trust Agreement
creating the B&B Farms Trust. Gary and Betty were the grantors and primary
beneficiaries of the Trust. Their children, Brian Beck, Jamie Moeckly, and
Matthew Beck, were named as secondary beneficiaries. Matthew was designated as
the Trustee. The trust corpus was comprised of the real estate (farmland) owned by
Gary and Betty in Brown County, South Dakota. This real estate was the only
asset transferred to the Trust. In July 2015, the Trust property was appraised at
$3,659,000.
[¶5.] At the same time the Trust was created, Matthew purchased 560 acres
of farmland from his parents. This land was sold directly from Gary and Betty to
Matthew and never became part of the Trust. Matthew obtained personal financing
to make this purchase, and Gary and Betty put the proceeds from Matthew’s
purchase toward paying off a portion of the existing debt on their remaining real
estate that was transferred to the Trust. In her deposition, Betty described the
purpose of the Trust as a means to protect Gary and Betty’s assets and as a form of
estate planning.
[¶6.] The B&B Farms Trust is an irrevocable 1 spendthrift 2 trust. During
their lives, Gary and Betty were to receive the net income from the Trust as
1. An irrevocable trust is one which may only be terminated under certain circumstances, specifically, “by judicial action or by written agreement entered into by all beneficiaries, if continuance of the trust on its existing terms is not necessary to carry out a material purpose” or “by judicial action or by written agreement by the trustor and all beneficiaries” regardless of (continued . . .) -2- #29512, #29560
primary beneficiaries. After Gary and Betty pass away, the Trust will become
revocable only with the consent of a majority of the secondary beneficiaries:
Matthew, Brian, and Jamie. The Trust assets, namely, the Trust real estate, may
then be disbursed by being split into thirds to Matthew, Brian, and Jamie. The
Trust Agreement does not authorize the trustee to self-deal 3 or provide for a means
for beneficiaries to approve trustee self-dealing.
[¶7.] The record reflects that in 2010, Matthew, in his personal capacity and
as Trustee of B&B Farms Trust, obtained two loans from Legendary Loan Link, Inc.
He obtained a $564,000 loan on August 16, 2010, and a $1,225,000 loan on
September 16, 2010. Matthew executed mortgages on the 680 acres of property
constituting the Trust property and the 560 acres he owned personally to secure
these loans. The mortgages contain two signature lines for Matthew, one as
Trustee for the Trust and one in his personal capacity. Matthew testified in his
deposition that he used the loan funds to pay for machinery, inputs, and taxes. He
________________________ (. . . continued) “[w]hether or not continuance of the trust on its existing terms is necessary to carry out a material purpose.” SDCL 55-3-24.
2. A spendthrift trust restricts how both a creditor and a debtor/beneficiary may interact with the trust corpus. As to creditors, a spendthrift trust is one from which “no creditor may reach present or future mandatory distributions from the trust at the trust level.” SDCL 55-1-41. As to debtors, a spendthrift trust “is sufficient to restrain voluntary or involuntary alienation of a beneficial interest by a beneficiary to the maximum extent provided by law.” SDCL 55- 1-35.
3. “Self-dealing occurs when an agent [the trustee, Matthew, in this case] pits their personal interests against their obligations to the principal.” Est. of Stoebner v. Huether, 2019 S.D. 58, ¶ 19, 935 N.W.2d 262, 268 (citation omitted).
-3- #29512, #29560
acknowledged that he personally, not the Trust, owned the machinery. There is no
indication in the record that Matthew obtained the written consent of any of the
Trust beneficiaries prior to encumbering Trust property with the Legendary Loan
Link mortgages.
[¶8.] In 2015, Matthew sought financing from Plains Commerce Bank in his
individual capacity. According to Plains Commerce, Matthew needed the financing
because Legendary Loan Link had refused to provide him additional operating
funds. In reviewing Matthew’s financial information, Plains Commerce determined
Free access — add to your briefcase to read the full text and ask questions with AI
#29512, #29560-aff in pt & rev in pt-JMK & MES 2023 S.D. 8
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
PLAINS COMMERCE BANK, INC., a banking corporation, Plaintiff and Appellant,
v.
MATTHEW A. BECK, a married person; KELLEY R. BECK, a married person; MATTHEW A. BECK, Trustee of the B&B FARM TRUST, u/t/a November, 1, 1999; BROWN COUNTY, a governmental instrumentality of the State of South Dakota; MARSHALL COUNTY, a governmental instrumentality of the State of South Dakota; DEERE & COMPANY, a corporation, Defendants,
and
JAMIE MOECKLY, Intervenor and Appellee.
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA
THE HONORABLE SCOTT P. MYREN (Appeal #29512) THE HONORABLE RICHARD A. SOMMERS (Appeal #29560) Judges
ARGUED OCTOBER 6, 2021 OPINION FILED 02/15/23 ****
REED RASMUSSEN of Siegel, Barnett and Schutz, LLP Aberdeen, South Dakota
ROGER DAMGAARD JORDAN J. FEIST of Woods, Fuller, Shultz and Smith, P.C. Sioux Falls, South Dakota Attorneys for plaintiff and appellant Plains Commerce Bank.
JOSHUA G. WURGLER KENNITH L. GOSCH of Bantz, Gosch & Cremer, LLP Aberdeen, South Dakota Attorneys for intervenor and appellee Jamie Moeckly. #29512, #29560
KERN, Justice, and SALTER, Justice
[¶1.] Justice Kern delivers the majority opinion of the Court on
Issues 1 through 4. Justice Salter delivers the majority opinion of the
Court on Issue 5.
[¶2.] KERN, Justice, writing for the Court on Issues 1 through 4.
[¶3.] Gary and Betty Beck created B&B Farms Trust as an irrevocable
spendthrift trust in 1999, naming their three children as secondary beneficiaries
and themselves as primary beneficiaries. Matthew Beck, their youngest child,
served as Trustee. In 2015, Matthew took out a large personal loan with Plains
Commerce Bank and granted a mortgage to Plains Commerce on $800,000-worth of
Trust real estate as partial collateral. All beneficiaries of the Trust signed a
consent to mortgage the Trust real estate prepared by their family attorney at the
request of Plains Commerce. Matthew defaulted on the loan, and Plains Commerce
commenced a foreclosure action against Matthew in his capacity as Trustee for B&B
Farms Trust. Jamie Moeckly intervened in the action on behalf of the Trust and
the parties filed cross-motions for summary judgment on whether Plains Commerce
can foreclose on the Trust real estate. The circuit court granted Jamie’s motion for
summary judgment and denied Plains Commerce’s. The court concluded that
Matthew’s mortgage on Trust real estate was void and unenforceable. The circuit
court subsequently awarded attorney fees to Jamie Moeckly. Plains Commerce
appeals the court’s order granting Jamie summary judgment and her motion for
attorney fees. We affirm in part and reverse in part.
-1- #29512, #29560
Factual and Procedural Background
[¶4.] In 1999, Gary Beck and Betty Beck executed a Trust Agreement
creating the B&B Farms Trust. Gary and Betty were the grantors and primary
beneficiaries of the Trust. Their children, Brian Beck, Jamie Moeckly, and
Matthew Beck, were named as secondary beneficiaries. Matthew was designated as
the Trustee. The trust corpus was comprised of the real estate (farmland) owned by
Gary and Betty in Brown County, South Dakota. This real estate was the only
asset transferred to the Trust. In July 2015, the Trust property was appraised at
$3,659,000.
[¶5.] At the same time the Trust was created, Matthew purchased 560 acres
of farmland from his parents. This land was sold directly from Gary and Betty to
Matthew and never became part of the Trust. Matthew obtained personal financing
to make this purchase, and Gary and Betty put the proceeds from Matthew’s
purchase toward paying off a portion of the existing debt on their remaining real
estate that was transferred to the Trust. In her deposition, Betty described the
purpose of the Trust as a means to protect Gary and Betty’s assets and as a form of
estate planning.
[¶6.] The B&B Farms Trust is an irrevocable 1 spendthrift 2 trust. During
their lives, Gary and Betty were to receive the net income from the Trust as
1. An irrevocable trust is one which may only be terminated under certain circumstances, specifically, “by judicial action or by written agreement entered into by all beneficiaries, if continuance of the trust on its existing terms is not necessary to carry out a material purpose” or “by judicial action or by written agreement by the trustor and all beneficiaries” regardless of (continued . . .) -2- #29512, #29560
primary beneficiaries. After Gary and Betty pass away, the Trust will become
revocable only with the consent of a majority of the secondary beneficiaries:
Matthew, Brian, and Jamie. The Trust assets, namely, the Trust real estate, may
then be disbursed by being split into thirds to Matthew, Brian, and Jamie. The
Trust Agreement does not authorize the trustee to self-deal 3 or provide for a means
for beneficiaries to approve trustee self-dealing.
[¶7.] The record reflects that in 2010, Matthew, in his personal capacity and
as Trustee of B&B Farms Trust, obtained two loans from Legendary Loan Link, Inc.
He obtained a $564,000 loan on August 16, 2010, and a $1,225,000 loan on
September 16, 2010. Matthew executed mortgages on the 680 acres of property
constituting the Trust property and the 560 acres he owned personally to secure
these loans. The mortgages contain two signature lines for Matthew, one as
Trustee for the Trust and one in his personal capacity. Matthew testified in his
deposition that he used the loan funds to pay for machinery, inputs, and taxes. He
________________________ (. . . continued) “[w]hether or not continuance of the trust on its existing terms is necessary to carry out a material purpose.” SDCL 55-3-24.
2. A spendthrift trust restricts how both a creditor and a debtor/beneficiary may interact with the trust corpus. As to creditors, a spendthrift trust is one from which “no creditor may reach present or future mandatory distributions from the trust at the trust level.” SDCL 55-1-41. As to debtors, a spendthrift trust “is sufficient to restrain voluntary or involuntary alienation of a beneficial interest by a beneficiary to the maximum extent provided by law.” SDCL 55- 1-35.
3. “Self-dealing occurs when an agent [the trustee, Matthew, in this case] pits their personal interests against their obligations to the principal.” Est. of Stoebner v. Huether, 2019 S.D. 58, ¶ 19, 935 N.W.2d 262, 268 (citation omitted).
-3- #29512, #29560
acknowledged that he personally, not the Trust, owned the machinery. There is no
indication in the record that Matthew obtained the written consent of any of the
Trust beneficiaries prior to encumbering Trust property with the Legendary Loan
Link mortgages.
[¶8.] In 2015, Matthew sought financing from Plains Commerce Bank in his
individual capacity. According to Plains Commerce, Matthew needed the financing
because Legendary Loan Link had refused to provide him additional operating
funds. In reviewing Matthew’s financial information, Plains Commerce determined
that his personal assets were not sufficient to collateralize the loan amount he was
requesting (about $2,000,000). Matthew then suggested using Trust land as
collateral. As Plains Commerce explained in a brief before the circuit court, it
“considered Matthew’s request and found a potential issue with using the Trust
land as collateral, discussed it with counsel, and suggested Matthew get written
consents from the other beneficiaries to obtain a mortgage.” Plains Commerce
contends that “[o]btaining the consent of the secondary beneficiaries was done out of
an abundance of caution on the part of Plains Commerce Bank.”
[¶9.] Prior to attempting to get the consents to mortgage, Matthew had
attempted to obtain written consents from the beneficiaries to sell him Trust
property, a plan that was abandoned. Ultimately, all primary and secondary
beneficiaries were presented with and signed consents to mortgage the Trust
property prior to execution of the Plains Commerce mortgage. Plains Commerce
has distanced itself from these consents, stating that it “had nothing to do with the
-4- #29512, #29560
drafting of the consent papers and was not present at the meeting when the
consents were signed. Attorney Danny Smeins drafted the consent agreements.”
[¶10.] In her deposition, Jamie testified that she did not learn of the
existence of the Trust until October 2015 when Betty attempted to get Jamie to sign
a consent for Matthew to sell Trust property. She claimed that she had attempted
to get a copy of the Trust Agreement from Smeins but was unsuccessful in obtaining
a copy prior to signing the consent to mortgage in November 2015. Jamie first saw
a copy of the Trust Agreement sometime after January 2018. Therefore, at the time
she signed the consent to mortgage, she did not know the terms of the Trust.
[¶11.] Jamie and Brian testified in their respective depositions that they
understood the $800,000 worth of Trust property used as collateral for the
November loan was intended to represent Matthew’s one-third of the Trust Estate’s
value that he would receive as a secondary beneficiary upon disbursement of the
Trust. At the time the mortgage against the Trust property was executed, Matthew
already had a personal debt of $2,100,000. Betty stated that she did not know of
Matthew’s $2,100,000 debt until the day of her deposition, but she also testified to
having memory issues and it is disputed whether she truly knew the amount of
Matthew’s debt. In regard to Jamie’s knowledge of Matthew’s debt, Jamie testified
that prior to signing the consent to mortgage, she had an office conference with
Smeins, who told her that Matthew had about $500,000 in debt and explained that
such debt was the reason he was trying to get a loan from the bank.
[¶12.] On November 25, 2015, Matthew received a $1,855,000 loan from
Plains Commerce Bank, using as collateral property he and his wife Kelley owned
-5- #29512, #29560
and $800,000 worth of Trust property. Matthew signed the mortgage in his
capacity as Trustee. However, the promissory note for this loan was signed by
Matthew and Kelley, not Matthew as Trustee. Thereafter, Matthew and Kelley
used the loan proceeds to pay off the Legendary Loan Link debts and satisfy the
existing mortgages on the Trust property and Matthew’s personal property
associated with those debts. As a consequence of Matthew and Kelley paying off the
Trust’s Legendary Loan Link debts with their personal loan from Plains Commerce,
there was no debt remaining on Trust assets and all debt had been transferred to
Matthew and Kelley personally. However, their personal loan was partially
collateralized with a mortgage on $800,000 worth of Trust property.
[¶13.] In January 2018, Matthew and Kelley defaulted on their loan
obligations and Plains Commerce commenced the foreclosure action at the center of
this case against Matthew and Kelley personally and Matthew in his capacity as
Trustee of the B&B Farms Trust. Matthew and Kelley retained counsel for the
action and filed an answer responding to the foreclosure complaint in their personal
capacities on February 27, 2018. On March 21, 2018, Matthew, in his capacity as
Trustee of the B&B Farms Trust, filed an answer to the foreclosure complaint,
denying every allegation and reserving the right to assert affirmative defenses as
the case developed.
[¶14.] Jamie, as a secondary beneficiary to the Trust, filed a motion to
intervene on behalf of B&B Farms Trust on June 1, 2018, alleging that Matthew
had an “irreconcilable conflict of interest between his individual capacity and
trusteeship, and his efforts to protect his personal interests in this case threaten
-6- #29512, #29560
damage to the trust.” Jamie further alleged that Matthew had “engaged in an
extraordinary amount of self-dealing with trust assets, particularly by encumbering
the trust’s real property.”
[¶15.] On June 4, 2018, the circuit court scheduled a hearing for August 10,
2018, on Jamie’s motion to intervene. Prior to this hearing, on July 18, 2018, Plains
Commerce moved for summary judgment on its foreclosure action against all
defendants. Additionally, Plains Commerce filed an objection to Jamie’s motion to
intervene on August 2, 2018. On August 8, 2018, Matthew responded to Jamie’s
motion to intervene, stating that he did not object to Jamie’s request to intervene in
the case to protect her interest as a beneficiary of the B&B Farms Trust, but he did
object to Jamie intervening on behalf of the Trust in place of Matthew as Trustee.
[¶16.] On August 10, 2018, the circuit court held a hearing on both Jamie’s
motion to intervene and Plains Commerce’s motion for summary judgment. Plains
Commerce withdrew its objection to Jamie’s intervention motion and its motion for
summary judgment relating to the foreclosure on the Trust real estate. Matthew
was called to testify during the hearing regarding Jamie’s motion to intervene.
Matthew testified that, as Trustee, his duties were to follow the wishes of his
parents (Gary and Betty). Matthew testified that if the wishes of his parents were
different from the obligations of the Trust Agreement, he would follow his parents’
wishes. Matthew also admitted to commingling Trust assets with his personal
-7- #29512, #29560
assets. 4
[¶17.] Through examination by counsel, Matthew introduced an exhibit
purporting to be an agreement dated January 29, 2018, signed by Matthew, Betty
in her personal capacity, and Betty on behalf of Gary under power of attorney.
When questioned by the circuit court as to the purpose for offering this exhibit,
counsel advised that this agreement was offered in response to Jamie’s motion to
intervene on behalf of the Trust and defend against the foreclosure action in place of
Matthew to show that his actions have been consistent with his parents’ wishes.
Aside from a confirmation of their earlier consent to the Plains Commerce
mortgage, the agreement contains recitals by Gary and Betty stating that they did
not realize that the Trust was irrevocable or that the Trust did not expressly grant
the Trustee the authority to self-deal; nor did they realize the ramifications of the
Trust document. They further expressed that they “would prefer to revoke or
modify the B&B Farms Trust and to turn all of the Trust property over to Matthew
Beck, if possible” and noted that “they will consider legal options to accomplish the
same.”
[¶18.] Jamie’s motion to intervene was granted by the court on September 4,
2018, substituting Jamie for Matthew as Trustee “in this action[,]” and the circuit
court allowed her to file an amended answer on behalf of the Trust, which she did
4. The following exchange regarding commingling of assets took place during Matthew’s testimony: A: [. . .] the trust and my personal stuff are all operated as one unit with my parents’ permission. Q: So you were commingling trust assets with your personal assets? A: Yes.
-8- #29512, #29560
on September 6, 2018. By this appointment, Jamie was directed to defend the best
interests of the Trust and the beneficiaries. Dacotah Bank was named Successor
Trustee in November 2018, but Jamie remains a party by intervention for purposes
of this case. The circuit court also granted partial summary judgment to Plains
Commerce, awarding it a judgment against Matthew and Kelley in their personal
capacities. To satisfy the judgment, Plains Commerce foreclosed on all of Matthew
and Kelley’s real estate used to collateralize the Plains Commerce loan. Matthew
and Kelley’s real estate holdings in both Brown and Marshall Counties were sold for
a total aggregate price of $916,120, leaving a substantial amount of the debt
outstanding. Gary Beck died in September 2019.
[¶19.] On July 9, 2020, Plains Commerce moved for summary judgment in its
favor on all remaining claims in its foreclosure action. Jamie moved for summary
judgment on July 10, 2020, asking the circuit court to void the mortgage as
unenforceable against the B&B Farms Trust or, in the alternative, to hold the
mortgage enforceable only up to an aggregate amount of $800,000 in principal plus
interest. Jamie included as an exhibit in support of her motion excerpts from the
deposition of the Plains Commerce employee, Lance Vilhauer, who processed
Matthew and Kelley’s loan and the mortgage on the Trust property. In relevant
part, Lance testified:
Q: [. . .] Did you ever talk to any of the other beneficiaries, for instance Gary and Betty, relating to Matt seeking a $2 million ag loan from Plains Commerce?
A: No, I did not.
Q: Did Matt tell you who the beneficiaries were?
-9- #29512, #29560
A: I don’t recall if he told me who they were.
Q: Do you recall reviewing the trust agreement in this situation?
A: I recall reviewing it. I recall reviewing it.
Q: Okay. Did you notice any red flags with the trust agreement that would have impacted your decision to lend money using the trust land as collateral?
A: You mentioned red flags?
Q: Yeah.
A: The red flags were - - the potential red flags were brought to my attention from our counsel.
Q: Okay. What was your understanding of what the red flags are with relationship to this trust agreement?
A: It dealt with Matt as the trustee—it dealt with Matt as the trustee to make sure he was not self-dealing.
Q: So your understanding was Matt could not self-deal under the trust agreement?
A: Correct.
Q: Okay. And again, your understanding of self-dealing is that a trustee has to take - - before a trustee can benefit personally from the trust, he has to take certain steps to make that acceptable, is that your understanding then?
A: To notify all beneficiaries, correct.
Q: Oh, he just has to give notice?
A: I would say notice and approval.
Q: Okay.
A: From the beneficiaries.
Q: You mentioned that Matt could not self-deal was one of the flags as you understood it. Were there any others?
-10- #29512, #29560
A: No, not that I can recall.
Q: Okay. Do you know whether it was an irrevocable trust or a revocable trust?
A: I believe it was noted that this is an irrevocable trust. I would have to double-check, but I think that’s what it is.
Q: Okay. Did you have any awareness of a spendthrift clause in this trust?
A: I don’t know what that is.
[¶20.] On December 22, 2020, the circuit court granted Jamie’s motion for
summary judgment on behalf of the Trust, denied Plains Commerce’s motion for
summary judgment, and dismissed Plains Commerce’s claims against the Trust
with prejudice. The circuit court held that:
[T]he mortgage and guaranty entered into by Matthew Beck as trustee of the Trust were void and unenforceable from the moment they were signed, and that any right, claim, or interest claimed by Plaintiff in the Trust’s property arising out of the mortgage and guaranty signed by Trustee Mat[t]hew Beck are likewise void and unenforceable from the moment they were signed[.]
The circuit court additionally ordered that Plains Commerce pay Jamie’s statutory
court costs in the amount of $2,620.65.
[¶21.] On December 30, 2020, Jamie moved the court for attorney fees in the
amount of $33,744.53. On December 31, 2020, the court entered an order
reassigning the case to another circuit judge. 5 Plains Commerce filed its notice of
5. The Honorable Scott P. Myren was appointed to the South Dakota Supreme Court on October 28, 2020, and assumed office on January 5, 2021. Prior to his change in judicial duties, he exercised his authority as presiding judge for the Fifth Judicial Circuit to appoint the Honorable Richard Sommers to serve as the judge for the case.
-11- #29512, #29560
appeal on January 12, 2021, from the order granting summary judgment. Plains
Commerce filed its brief in opposition to Jamie’s motion for attorney fees on
January 25, 2021. The circuit court held a hearing on the matter of attorney fees on
February 4, 2021. On February 17, 2021, the circuit court entered its findings of
fact and conclusions of law granting Jamie’s revised request for attorney fees in the
amount of $33,364.85. Because Plains Commerce had already filed its notice of
appeal, the attorney fees order was stayed by court order pending resolution of the
summary judgment appeal. Plains Commerce subsequently filed a notice of appeal
on the matter of attorney fees on February 25, 2021. We consolidate both appeals.
[¶22.] Plains Commerce raises multiple issues which we restate as follows:
1. Whether Matthew had authority under the Trust Agreement or from the consents signed by the beneficiaries to mortgage Trust property to obtain a personal loan.
2. Whether the signed consents altered the Trust Agreement.
3. Whether Plains Commerce could rely on the Certificate of Trust as authority for Matthew to mortgage Trust property to obtain a personal loan.
4. Whether § 4.1 of the Trust Agreement authorized Matthew, in his capacity as Trustee, to mortgage Trust property if the loan proceeds were partially used to satisfy Trust debt.
5. Whether the circuit court erred in awarding attorney fees to Jamie as Intervenor for the trust.
Standard of Review
[¶23.] “We review an order granting summary judgment de novo and
determine ‘whether there were any genuine issues of material fact and whether the
-12- #29512, #29560
moving party was entitled to judgment as a matter of law.’” In re Matheny Fam.
Tr., 2015 S.D. 5, ¶ 7, 859 N.W.2d 609, 611 (citation omitted). On review, “[t]he
evidence must be viewed most favorably to the nonmoving party and reasonable
doubts should be resolved against the moving party. . . . If there exists any basis
which supports the ruling of the trial court, affirmance of a summary judgment is
proper.” Kirlin v. Halverson, 2008 S.D. 107, ¶ 10, 758 N.W.2d 436, 443 (citation
omitted). In a foreclosure action, the circuit court’s award of attorney fees is
“reviewed for abuse of discretion.” Adrian v. McKinnie, 2004 S.D. 84, ¶ 6, 684
N.W.2d 91, 94. An abuse of discretion occurs when there is “a fundamental error of
judgment, a choice outside the range of permissible choices, a decision, which, on
full consideration, is arbitrary or unreasonable.” Arneson v. Arneson, 2003 S.D. 125,
¶ 14, 670 N.W.2d 904, 910.
Analysis and Decision
1. Whether Matthew had authority under the Trust Agreement or from the consents signed by the beneficiaries to mortgage Trust property to obtain a personal loan.
[¶24.] Plains Commerce asserts that the circuit court erred in concluding that
Matthew could not, under the Trust Agreement, mortgage Trust property to obtain
a personal loan when, as here, he obtained written consent from the primary
beneficiaries, Gary and Betty, to mortgage his one-third future interest in the trust
assets. Plains Commerce recognizes that the Trust Agreement contains a
spendthrift provision prohibiting a beneficiary from encumbering trust assets.
However, Plains Commerce claims that, despite this provision, § 6.2 of the Trust
Agreement authorized Gary and Betty to expand Matthew’s existing power under
-13- #29512, #29560
§ 4.1 “to secure debts of the Trust or debt secured by real estate at the time of the
creation of the Trust” to include the power to mortgage Trust property to obtain a
personal loan, so long as Gary and Betty provide unanimous written consent.
[¶25.] In response, Jamie asserts that the spendthrift provision “broadly and
unequivocally forbids making the Trust Estate liable” for a beneficiary’s personal
debts and “prohibits a beneficiary from, generally, encumbering or disposing of his
interest prior to its distribution.” Jamie further asserts that although there is an
exception in the spendthrift provision allowing the beneficiary to encumber an
interest in the Trust Estate “by power of appointment or withdrawal expressly
granted hereunder[,]” the exception does not apply here because nothing in the
Trust Agreement itself grants such power of appointment or withdrawal to
Matthew. Finally, Jamie claims that when § 6.2, which enabled Gary and Betty to
authorize the Trustee to sell, option, or dispose of interests in the real estate, is read
in harmony with the spendthrift provision, Matthew was not authorized to
mortgage Trust property for a personal loan.
[¶26.] The interpretation of a trust instrument “is a question of law reviewed
de novo.” In re Est. of Long, 2014 S.D. 26, ¶ 31, 846 N.W.2d 782, 788 (citation
omitted). “When interpreting a trust instrument, we must ‘ensure that the
intentions and wishes of the [settlor] are honored.’” Id. (alteration in original)
(quoting In re Sunray Holdings Tr., 2013 S.D. 89, ¶ 14, 841 N.W.2d 271, 274). To do
so, we first “look to the language of the trust instrument[,]” and “[i]f the language of
the trust instrument makes the intention of the [settlor] clear, it is our duty to
-14- #29512, #29560
declare and enforce it.” Id. (alteration in original) (quoting Sunray Holdings, 2013
S.D. 89, ¶ 14, 841 N.W.2d at 274).
[¶27.] Here, a review of the language of the Trust Agreement does not
support Plains Commerce’s contention that Matthew had authority to mortgage
Trust property for a personal loan. It is undisputed from the evidence in the record
that Matthew’s use of $800,000 in Trust property as collateral for the November
loan represented the predicted one-third share he would inherit as a beneficiary
upon disbursement. 6 Yet, the spendthrift provision unambiguously bars
beneficiaries from encumbering Trust property for personal debt. That provision
states under Article VIII:
PROTECTION OF TRUST FUND[:] No title in or to any Trust fund created under this Agreement shall vest in any beneficiary, and neither the principal nor the income of the Trust Estate shall be liable for the debts of any beneficiary, and no beneficiary shall have any power to transfer, encumber or in any manner, other than by power of appointment or withdrawal expressly granted hereunder, to anticipate or dispose of his or her interest in any Trust Estate hereunder, or the income produced thereby, prior to the actual distribution thereof by the Trustee to such beneficiary.
(Emphasis added.)
[¶28.] Moreover, contrary to Plains Commerce’s view, § 6.2 does not invoke
the exception to the spendthrift provision allowing a beneficiary to encumber his or
her interest in a trust “by power of appointment or withdrawal expressly granted
hereunder.” (Emphasis added.) Article VI is titled, “Trustee’s powers as to sale of
6. Attorney Smeins came up with the $800,000 amount by estimating that the Trust assets were worth $2,400,000 and roughly dividing that amount into thirds.
-15- #29512, #29560
real estate[,]” and § 6.2 provides that “[t]he Trustee is not authorized to sell, option
or dispose of any interest in the real estate during the lifetime of GARY J. BECK
except upon the unanimous written consent of both the primary beneficiaries.”
Notably, Matthew did not sell Trust property—he mortgaged it. And, more
significantly, even if the word “dispose,” when read in isolation, includes
mortgaging property, when the term is viewed in light of the Trust Agreement as a
whole, there is a more specific provision placing limits on the Trustee’s power to
mortgage Trust property in § 4.1. As the circuit court noted, “[t]he specific provision
limiting the Trustee’s ability to mortgage trust property cannot be made
meaningless by a less specific provision that by its terms relates to the sale of trust
property.”
[¶29.] Even if § 6.2 was intended to authorize the Trustee to mortgage Trust
real estate upon the written consent of Gary and Betty, nothing in § 6.2 evinces an
express grant of power to a beneficiary to encumber or otherwise dispose of an
interest in the Trust real estate to secure a personal loan. By its plain terms, § 6.2
authorizes Matthew, as the Trustee, to sell, option, or dispose of an interest in real
estate during Gary’s lifetime upon Gary and Betty’s written consent. Thus, this
provision only authorizes Matthew, as the Trustee, to exercise his fiduciary duties
with respect to Trust property and does not provide Matthew authority to mortgage
his beneficial one-third future interest in the Trust to secure a personal loan.
[¶30.] Plains Commerce nevertheless contends that because all the primary
and secondary beneficiaries signed the consents to mortgage, Matthew, as Trustee,
was authorized to self-deal by mortgaging his future interest in Trust property to
-16- #29512, #29560
secure a personal loan, notwithstanding the spendthrift provision. Plains
Commerce recognizes that a trustee generally does not have authority to self-deal
unless the trust contains “clear and unmistakable language” authorizing such self-
dealing. See In re Est. of Stevenson, 2000 S.D. 24, ¶ 15, 605 N.W.2d 818, 822.
However, Plains Commerce relies on the exception to this rule in SDCL 55-2-3(1)
that allows a trustee to self-deal “[w]hen the beneficiary does have the capacity to
contract and, with a full knowledge of the motives of the trustee and of all other
facts concerning the transaction which might affect his own decision and without
the use of any influence on the part of the trustee, permits the trustee to do so[.]”
[¶31.] The problem with Plains Commerce’s argument is that Matthew is also
a beneficiary and the spendthrift provision specifically requires that a beneficiary’s
power to encumber the Trust property be expressly granted in the Trust Agreement.
Thus, while it is true that SDCL 55-2-3(1) provides an avenue for a trustee to
engage in self-dealing when such is not clearly and unmistakably authorized by the
trust document, the statute does not authorize a beneficiary to encumber an
anticipated interest in a spendthrift trust. Self-dealing by a trustee and a
beneficiary encumbering an anticipated future interest in a trust are not
synonymous actions, and spendthrift provisions, like the one here, limit the type of
self-dealing transactions by a trustee who is also a beneficiary that might otherwise
be authorized under the statute.
[¶32.] Importantly, to allow, as Plains Commerce suggests, written
permission in a document outside the Trust Agreement to override the spendthrift
provision would eviscerate the “formidable barriers” the Legislature has placed
-17- #29512, #29560
“between creditor claims and trust funds protected by a spendthrift provision.” See
In re Cleopatra Cameron Gift Tr., 2019 S.D. 35, ¶ 26, 931 N.W.2d 244, 251. Those
barriers are codified in SDCL chapter 55-1. For example, when a “trust contains a
spendthrift provision, no creditor may reach present or future mandatory
distributions from the trust at the trust level.” SDCL 55-1-41. Further, spendthrift
provisions are “sufficient to restrain voluntary or involuntary alienation of a
beneficial interest by a beneficiary to the maximum extent provided by law.” SDCL
55-1-35. They apply “to both distribution interests and remainder interests” and
constitute “a material provision of a trust.” SDCL 55-1-37.
[¶33.] The spendthrift provision in the Trust Agreement embodies these
principles, and Plains Commerce has not directed this Court to any authority
supporting its claim that the self-dealing exception for trustees in SDCL 55-2-3(1)
can override the spendthrift provision in this Trust Agreement or the formidable
barriers in SDCL chapter 55-1. 7 Therefore, the circuit court did not err when it
concluded as a matter of law that Matthew did not have authority, under the Trust
Agreement or from the consents to mortgage, to mortgage Trust property to obtain a
7. The dissent recognizes the formidable barrier a spendthrift provision creates. However, in the dissent’s view, all interested parties could, under SDCL 55-1- 53, vary “the spendthrift provision as it related solely to Plains Commerce” by executing the consents to mortgage. Infra ¶ 79. That statute provides: “[t]he terms of a governing instrument may expand, restrict, eliminate, or otherwise vary any provisions of general application to trusts and trust administration.” SDCL 55-1-53 (emphasis added). Even if we set aside the fact that no language in the consents to mortgage at issue here seeks to modify the spendthrift provision, it is apparent that SDCL 55-1-53 is not implicated in this case. This statute authorizes the trust instrument to vary the general provisions that would otherwise apply to all trusts and trust administration. It does not provide an avenue for beneficiaries to vary provisions in a trust agreement by written consent.
-18- #29512, #29560
personal loan. Because of our resolution of this issue, we need not decide whether
the consents satisfied the requirements of SDCL 55-2-3(1).
[¶34.] Alternatively, Plains Commerce asserts that the consents signed by
the beneficiaries altered the Trust Agreement, including the spendthrift provision,
such that Matthew could “secure his debts with an $800,000 mortgage on Trust
property.” Plains Commerce directs this Court to the language in Article III of the
Trust Agreement providing that the Trust may be “altered or amended by Grantors”
during Gary’s lifetime with “unanimous consent of the primary and secondary
beneficiaries[.]” In its view, because the language of Article III allows the Trust to
be altered upon unanimous consent, the grantors and beneficiaries could, via the
consents, change the Trust to allow Matthew to “secure his debts with an $800,000
mortgage on Trust property[.]”
[¶35.] A review of the consents to mortgage does not support that the primary
and secondary beneficiaries consented to altering the Trust Agreement. 8 The
consents at issue state:
I, the undersigned, a secondary beneficiary of the B&B Farms Trust u/t/a dated November 1, 1999, hereby consent to the Trustee mortgaging or encumbering the following real estate to Plains Commerce Bank, Aberdeen, South Dakota:
8. The dissent suggests that whether the consents to mortgage altered the provisions of the Trust is a question of fact. On the contrary, the validity of an effort to change a trust instrument does not turn on the subjective intent of those who signed the consent documents, but rather on the legal sufficiency of the consent documents themselves. Our interpretation of the consents, therefore, is a legal question as it generally would be for matters involving the interpretation of text.
-19- #29512, #29560
[legal description of real estate] I am aware and understand that the Trustee has authority or discretion to mortgage or encumber the trust property, however the proposed mortgage to Plains Commerce Bank benefits the Trustee and not all trust beneficiaries. This document confirms my consent to the mortgage of the real estate by Trustee and secondary beneficiary, Matthew Beck. This consent is limited to the current proposed mortgage and any future mortgages not to exceed $800,000.00. This is not a consent to additional or new loans and encumbrances, except as stated herein and except for extensions of the note and mortgages up to the limits set forth herein.
[¶36.] By its express terms, the consents applied only to a single
transaction—not to the Trust Agreement itself. Indeed, noticeably absent is any
language indicating that the Grantors intended to alter the Trust Agreement or
more specifically that the Grantors intended to alter the spendthrift provision.
While all the beneficiaries signed the consents to mortgage, it cannot be said that
they unanimously consented to an alteration of the Trust Agreement. Rather, it is
apparent from the language of the consents to mortgage that the beneficiaries
consented to a specific transaction between Matthew and Plains Commerce
involving a mortgage not to exceed $800,000 on real estate owned by the Trust. 9
Because there is no language in the written consents to support Plains Commerce’s
claim that the grantors and beneficiaries altered the Trust Agreement, the circuit
9. Notably, the agreement signed in the course of the litigation by Gary through Betty as his POA, Betty, and Matthew in January 2018 and offered to the circuit court as an exhibit, seems to acknowledge that the existing consents did not operate to modify the Trust Agreement. The agreement specifically refers to the “ramifications of the Trust document” and that Gary and Betty “would prefer” to modify the Trust and would “consider legal options to accomplish the same.”
-20- #29512, #29560
court properly concluded that the consents to mortgage did not authorize Matthew
to mortgage Trust property for his personal loan.
3. Whether Plains Commerce could rely on the Certificate of Trust as authority for Matthew to mortgage Trust property.
[¶37.] Plains Commerce notes that it was provided a Certificate of Trust
prepared by Attorney Smeins that identified Matthew as the Trustee and provided
that the Trustee “possesses the entirety of the powers granted by [statute] which
indicates as to real estate the power to lease, mortgage, enter contracts, etc.” In
Plains Commerce’s view, although it had a copy of the actual Trust Agreement, it
could rely on the Certificate of Trust to enforce the transaction because it acted in
good faith in entering into the transaction with Matthew. See SDCL 55-4-54
(providing that “[a]ny person who in good faith enters into a transaction in reliance
on a certificate of trust may enforce the transaction against the trust property as if
the representations contained in the certification were correct”).
[¶38.] Under SDCL 55-4-51, a trustee may, instead of furnishing the trust
instrument or a copy thereof to a person who is not a beneficiary of the trust,
furnish a “certificate of trust” containing, among other required information, the
applicable powers of the trustee set forth in the instrument, “including those powers
authorizing the trustee to sell, convey, pledge, mortgage, lease, or transfer title to
any interest in property held in the trust[.]” “[A] certificate of trust is conclusive
proof as to the matters contained in it and any party may rely upon the certificate,
except a party who has actual knowledge of the facts to the contrary.” SDCL 55-4-
51.1 (emphasis added). Although, as Plains Commerce notes, “[k]nowledge of the
-21- #29512, #29560
terms of the trust may not be inferred solely from the fact that a copy of all or part
of the trust instrument is held by the person relying on the certification,” see SDCL
55-4-53, here, the undisputed evidence in the record shows that Plains Commerce
had actual knowledge that the Trust Agreement did not allow Matthew, as the
Trustee, to mortgage Trust property to secure his personal debt. Plains Commerce
acknowledges that it reviewed the Trust Agreement and had its legal counsel
review the Trust Agreement prior to entering into the transaction with Matthew.
And as the circuit court noted, Plains Commerce’s knowledge that the Trust
Agreement did not authorize the transaction at issue was apparent given its “efforts
to create such authority through the execution of the purported consents.” In light
of this undisputed evidence, the circuit court properly determined that Plains
Commerce could not, under SDCL 55-4-54, seek to enforce Matthew’s personal
mortgage “against the trust property as if the representations contained in the
certification were correct.” 10
10. The dissent offers a policy argument for why the nature of transactions between commercial lenders and family-farm trusts warrants a different result in this case. Respectfully, however, our decision is and must be based on the controlling provisions of the Trust Agreement and applicable trust laws. Moreover, this Court’s ruling does not mean, as the dissent suggests, that “no matter what reasonable legal efforts” commercial lenders undertake to extend a line of credit, “its efforts will be highly suspect.” Infra ¶ 82. On the contrary, governing trust instruments can allow for alterations. In fact, here, Article III of the Trust Agreement did allow for alterations to be made with the consent of all the beneficiaries. But for the reasons explained in this opinion, the language of the consents at issue did not alter the provisions of the Trust Agreement.
-22- #29512, #29560
4. Whether § 4.1 of the Trust Agreement authorized Matthew, in his capacity as Trustee, to mortgage Trust property if the loan proceeds were partially used to satisfy Trust debt.
[¶39.] Plains Commerce further argues that § 4.1 of the Trust Agreement
authorized Matthew to mortgage the Trust property under the circumstances here.
This provision provides:
Grantors acknowledge that the real estate assets to be made part of the Trust may be mortgaged to secure debts of the Trust or debt secured by real estate at the time of creation of the Trust. It is understood by the Grantors that the Trustee shall apply as much of the income of the Trust Estate to the retirement of this debt as he deems prudent, and the retirement of the debt is to be given priority over income distributions to the beneficiaries of the Trust.
[¶40.] During the summary judgment hearing, the circuit court asked counsel
for Plains Commerce whether “there is a factual dispute over whether the money
Matthew was securing by the mortgage was debt of the estate.” Counsel did not
identify evidence in the record supporting that the mortgage at issue secured a debt
of the Trust. Rather, counsel replied, “I don’t think there is a material factual
dispute that should preclude summary judgment.” Ultimately, the circuit court
determined that “[t]here is no legitimate factual dispute that the loan secured by
Matthew was not a debt that fell within either of those two [italicized] categories.”
[¶41.] On appeal, Plains Commerce appears to acknowledge that Matthew
and Kelley’s promissory note, secured in part by the $800,000 mortgage on Trust
property, cannot be characterized as a debt of the Trust. However, in Plains
Commerce’s view, § 4.1 authorized the mortgage here because at the time the Trust
-23- #29512, #29560
was created, “there was still farm debt” and the loan to Matthew and Kelley “was
used, in part, to satisfy debt which existed when the Trust was created.” In
particular, Plains Commerce directs this Court to deposition testimony by Betty,
Matthew, and Brian wherein they each claimed that debt existed at the time the
Trust was created, and to Lance Vilhauer’s testimony that when Matthew
requested the loan from Plains Commerce, Matthew told him that a large portion of
the existing debt related to his parents’ debt.
[¶42.] Even accepting this conclusory testimony that debt existed on Trust
assets at the time the Trust was created in 1999, the parties do not dispute that the
debt secured by Plains Commerce’s mortgage was not a debt of the Trust or a debt
that was secured by Trust property at the time of the creation of the Trust. By its
own terms, Plains Commerce’s 2015 mortgage only secured Matthew and Kelley’s
personal debts. The Plains Commerce mortgage specifically defines the “Secured
Debts” as the $1,855,000 promissory note signed by Matthew and Kelley and “[a]ll
present and future debts” from Matthew and Kelley to Plains Commerce.
Regardless of whether Matthew commingled his personal assets and debts with
those of the Trust and used some of the proceeds of his personal loan to pay off debts
of the Trust, it is undisputed by virtue of the plain language of the mortgage at
issue that it did not secure debts of the Trust. Therefore, the circuit court properly
concluded that § 4.1 does not apply to Matthew’s actions.
[¶43.] In conclusion, Plains Commerce Bank offered Matthew Beck a
personal loan using as partial collateral a mortgage on $800,000 worth of land
belonging to an irrevocable spendthrift trust of which Matthew was both the trustee
-24- #29512, #29560
and a secondary beneficiary. Although Plains Commerce required Matthew to
secure written consents to the mortgage from all primary and secondary trust
beneficiaries in an attempt to avoid the inherent self-dealing conflict that arises
when a trustee mortgages trust land for personal benefit, the consents did not
override the formidable spendthrift provision in this Trust and did not alter the
Trust Agreement. Also, because Plains Commerce had actual knowledge that
Matthew did not have authority under the Trust Agreement to mortgage Trust
property to obtain a personal loan, it could not rely on the Certificate of Trust as
authority for Matthew to do so. Finally, § 4.1 of the Trust does not apply under the
circumstances here because the mortgage at issue did not secure debts of the Trust.
We, therefore, conclude that the circuit court properly granted Jamie’s motion for
summary judgment and dismissed Plains Commerce’s claims against the Trust.
For these reasons, we affirm.
[¶44.] JENSEN, Chief Justice, and SALTER and DEVANEY, Justices, concur
on Issues 1 through 4.
[¶45.] ZELL, Retired Circuit Court Judge, dissents on Issues 1 through 4.
[¶46.] SALTER, Justice, writing for the Court on Issue 5.
5. Whether the circuit court erred in awarding attorney fees to Jamie as Intervenor for the trust.
[¶47.] A court must have specific authority to depart from what is commonly
known as the “American Rule” under which the parties pay their own attorney fees.
Rupert v. City of Rapid City, 2013 S.D. 13, ¶ 32, 827 N.W.2d 55, 67. This authority
could come from a contractual right or attorney fees could be specifically authorized
by statute. Id.
-25- #29512, #29560
[¶48.] Here, the latter type is implicated as Plains Commerce challenges the
circuit court’s decision to grant Jamie’s request for attorney fees pursuant to SDCL
15-17-38. The relevant text of the statute provides:
[A]ttorneys’ fees may be taxed as disbursements if allowed by specific statute. The court, if appropriate, in the interests of justice, may award payment of attorneys’ fees in all cases of divorce, annulment of marriage, determination of paternity, custody, visitation, separate maintenance, support, or alimony. The court may award attorneys’ fees from trusts administered through the court as well as in probate and guardianship proceedings. Attorneys’ fees may be taxed as disbursements on mortgage foreclosures either by action or by advertisement.
[¶49.] Plains Commerce argues that because the case effectively lost its
identity as a mortgage foreclosure action, the provisions of SDCL 15-17-38 do not
permit an award of attorney fees. Jamie contends that the action remains a
foreclosure action. Citing our decision in Kimball Inv. Land, Ltd. v. Chmela, 2000
S.D. 6, 604 N.W.2d 289, Jamie argues that SDCL 15-17-38 “clearly grants power to
authorize attorney’s fees in mortgage foreclosure actions[.]”
[¶50.] But we did not go so far in Kimball Inv. Land. Instead, we stated only
that “[SDCL 15-17-38] is specific statutory authorization for an award of attorneys'
fees in mortgage foreclosures and provides the authorization for the circuit court's
award of attorney's fees[.]” 2000 S.D. 6, ¶ 24, 604 N.W.2d 289, 296 (emphasis
added). Then, using an uncomplicated reading of SDCL 15-17-38, we determined
that a non-regulated creditor which had obtained summary judgment in its action
to foreclose on the debtor’s property was eligible for an award of attorney fees.
-26- #29512, #29560
[¶51.] However, Jamie is not the party seeking foreclosure, and she did not,
of course, obtain foreclosure relief. So, to determine whether SDCL 15-17-38
authorized an award of attorney fees here requires a closer reading of the statute,
which ultimately leads us to accept Plains Commerce’s view, though for different
reasons.
[¶52.] Leaving aside the last sentence of SDCL 15-17-38 concerning mortgage
foreclosures, other provisions within the statute authorize attorney fees in three
different types of civil actions. In each instance, the Legislature took care to
expressly denominate the class of cases for which a court could award attorney fees.
For instance, SDCL 15-17-38 allows a court to award attorney fees in certain kinds
of family law “cases.” Also, in certain types of trust cases, judges may allow
attorney fees “from trusts administered through the court.” Id. (emphasis added).
And finally, a court may grant attorney fees in “probate and guardianship
proceedings.” Id. (emphasis added).
[¶53.] But the clause relating to mortgage foreclosures is much different
because SDCL 15-17-38 does not authorize attorney fees in foreclosure actions; it
authorizes them on mortgage foreclosures by action or by advertisement. (Emphasis
added.) In other words, attorney fees are permitted when there is a foreclosure—
not simply when there is a foreclosure action, as suggested by Jamie. The idea that
the Legislature did not allow for attorney fees within the broader class of
foreclosure cases—just the foreclosure relief itself—highlights a distinction
illustrated elsewhere in our Code.
-27- #29512, #29560
[¶54.] Indeed, several sections of the general foreclosure remedy provided in
SDCL chapter 21-47 distinguish between the foreclosure action and the foreclosure
remedy by referring to an action, or actions, for foreclosure. See, e.g., SDCL 21-47-1
(describing venue in “[a]ctions for the foreclosure or satisfaction of mortgages”);
SDCL 21-47-4 (requiring the complaint “[i]n an action for the foreclosure or
satisfaction of a mortgage” disclose prior collection efforts). The term “foreclosure”
is used in other chapter 21-47 statutes to describe the result of the action or the
relief obtained by the action. See, e.g., SDCL 21-47-17 (“. . . a foreclosure by action
of a mortgage upon real estate operates as a complete extinguishment, satisfaction
and payment of the debt secured by the mortgage. . . .”); SDCL 21-47-13 (“Whenever
an action shall be brought for the foreclosure or satisfaction of a mortgage, the court
shall have power to render a judgment against the mortgagor for the amount of the
mortgage debt due at the time of the rendition of such judgment, and the costs of
the action, and to order and decree a sale of the mortgaged premises . . .”).
[¶55.] Perhaps even more compelling is the fact that the foreclosure relief
referenced in SDCL 15-17-38 need not be part of a mortgage foreclosure action at
all. The foreclosure could, as the statute’s text states, be obtained “by
advertisement.” See SDCL ch. 21-48 (“Foreclosure of Real Property Mortgage by
Advertisement”). In fact, SDCL 21-48-4 expressly conditions relief upon there being
no action:
To entitle any party to foreclose by advertisement, it shall be necessary that no action or proceeding shall have been instituted at law to recover the debt then remaining secured by such mortgage, or any part thereof; or, if any action or proceeding has been instituted, that the same has been discontinued, or that an
-28- #29512, #29560
execution upon the judgment rendered therein has been returned unsatisfied, in whole or in part.
(Emphasis added); see also SDCL 21-48-9 (authorizing a mortgagor subject to
foreclosure by advertisement to seek foreclosure by action).
[¶56.] Further, SDCL 21-48-15 makes clear that “the party foreclosing a
mortgage by advertisement shall be entitled to his costs and disbursements,
including any attorney fees allowed by law, out of the proceeds of the sale.”
(Emphasis added.) There is no authority within chapter 21-48 that contemplates
taxing attorney fees as a disbursement for any party other than a mortgagee.
[¶57.] Consequently, the fact that this case traces its origin to a foreclosure
action has no impact upon the application of SDCL 15-17-38 here. Because there
was no mortgage foreclosure, the statutory provision authorizing attorney fees “on
foreclosure” does not apply. We, therefore, reverse the circuit court’s fee award.
[¶58.] JENSEN, Chief Justice, and DEVANEY, Justice, and ZELL, Retired
Circuit Court Judge, concur on Issue 5.
[¶59.] KERN, Justice, dissents on Issue 5.
[¶60.] KERN, Justice (dissenting on Issue 5).
[¶61.] The majority asserts a position, albeit not one raised or briefed by the
parties, that the text of SDCL 15-17-38 authorizes an award of attorney fees only to
a mortgagee who has successfully prosecuted a mortgage foreclosure action. The
majority’s position, however, relies on an unnecessarily complicated reading of
SDCL 15-17-38. Supra ¶ 48. Therefore, I respectfully, dissent.
-29- #29512, #29560
[¶62.] Succinctly stated, the question becomes: how should foreclosure be
properly defined? Does it refer to a foreclosed mortgage or the proceeding initiated
to foreclose a mortgage? The majority reasons that SDCL 15-17-38 does not
authorize fees in foreclosure actions but rather “on mortgage foreclosures by action
or by advertisement,” concluding that this language permits fees only when the
movant has successfully prosecuted a foreclosure action. Supra ¶ 53. Unlike the
laws of other jurisdictions, South Dakota’s law does not take care to define the
precise meaning of foreclosure. See, e.g., 735 Ill. Comp. Stat. Ann. 5/15-1203 (2022)
(defining “foreclosure” as the proceedings and not the resolution and “to foreclose”
as “to terminate legal and equitable interests in real estate pursuant to a
foreclosure”). As one court aptly explained, “[t]he term ‘foreclosure’ commonly
means different things depending on the context in which it appears. Sometimes
people use the word ‘foreclosure’ to mean the foreclosure sale itself, which is the
event that terminates or ‘forecloses’ someone’s rights to property. The word can
also reasonably mean the process leading up to that sale.” Hiscox Dedicated Corp.
Member v. Taylor, 53 F.4th 437, 440 (8th Cir. 2022); Provident Bank v. Tenn.
Farmers Mut. Ins. Co., 234 Fed. Appx 393, 396–97 (6th Cir. 2007) (unpublished).
Another court looked to Black’s Law Dictionary to define “foreclosure” as “[a] legal
proceeding.” Waste Mgmt. of Nev. v. West Taylor St., LLC, 443 P.3d 1115, 1117
(Nev. 2019).
[¶63.] In addition to “foreclosure” having no clear meaning, SDCL 15-17-38’s
remaining language does not clearly indicate the Legislature’s intent to limit an
award of attorney fees to a mortgagee who has foreclosed on a mortgage. As this
-30- #29512, #29560
Court has said, “[a] statute or portion thereof is ‘ambiguous’ when it is capable of
being understood by reasonably well-informed persons in either of two or more
senses.” Wheeler v. Cinna Bakers LLC, 2015 S.D. 25, ¶ 6, 864 N.W.2d 17, 20
(citation omitted), superseded by statute on other grounds, SDCL 62-1-23.
[¶64.] This ambiguity must be resolved through statutory interpretation. “In
construing a statute, our purpose is to discover the true intention of the law and
that intention must be ascertained primarily from the language expressed in the
statute.” State v. Ventling, 452 N.W.2d 123, 125 (S.D. 1990) (citation omitted).
“The intent of the law must be derived from the statute as a whole and by giving the
statutory language its plain, ordinary and popular meaning.” Id. (citation omitted).
We may use the statute’s surrounding text and “dictionary definitions to determine
the plain and ordinary meaning of undefined words.” Jackson v. Canyon Place
Homeowner’s Ass’n, 2007 S.D. 37, ¶ 11, 731 N.W.2d 210, 213 (citing Halls v. White,
2006 S.D. 47, ¶ 8, 715 N.W.2d 577, 581); see Divich v. Divich, 2002 S.D. 24, ¶ 12,
640 N.W.2d 758, 762.
[¶65.] Here, SDCL 15-17-38’s text refers to actions, cases, and proceedings—
not final results. In its first sentence, SDCL 15-17-38 allows for the recovery of
attorney fees, when it is agreed upon by the parties, in all “actions and special
proceedings[,]” irrespective of result. (Emphasis added.) Likewise, the third
sentence permits recovery “in all cases of divorce, annulment of marriage,
determination of paternity, custody, visitation, separate maintenance, support, or
alimony[,]” again, irrespective of result. (Emphasis added.) And the fourth
sentence allows recovery in all “probate and guardianship proceedings.” (Emphasis
-31- #29512, #29560
added.) It is within this framework that the final sentence providing that
“[a]ttorneys’ fees may be taxed as disbursements on mortgage foreclosures either by
action or by advertisement” must be viewed—with a focus on the proceeding, not
the result.
[¶66.] By reading SDCL 15-17-38’s last sentence to require a recovering party
to have successfully foreclosed on a mortgage, the majority introduces a condition
that does not exist in the statute’s text—an interpretation this Court is not free to
make. “A court is not at liberty to read into the statute provisions which the
[L]egislature did not incorporate[.]” City of Deadwood v. M.R. Gustafson Fam. Tr.,
2010 S.D. 5, ¶ 9, 777 N.W.2d 628, 632 (alteration in original) (holding that a court
may not “add an additional requirement that is not found in the statute”). Had the
Legislature wanted to condition attorney fees on the plaintiff obtaining a favorable
result, it could have done so with language similar to what it used in SDCL 15-17-
8, 11 now repealed, providing in pertinent part that “[i]n all actions commenced and
prosecuted to judgment in the circuit court for the foreclosure of any chattel or real
11. In its entirety, SDCL 15-17-8 provided:
In all actions commenced and prosecuted to judgment in the circuit court for the foreclosure of any chattel or real estate mortgage the plaintiff in such action shall be allowed an attorney fee as follows: on the first one hundred dollars or under of such judgment, ten dollars, and three per cent on each dollar of judgment in excess of one hundred dollars and not exceeding five hundred dollars. Such attorney fee in no case shall exceed the sum of twenty-five dollars unless the court shall by order allow an additional sum when issue has been joined in such action. If the plaintiff shall fail to recover in such action, the defendant in such action shall be allowed an attorney fee not exceeding twenty-five dollars.
-32- #29512, #29560
estate mortgage the plaintiff in such action shall be allowed an attorney fee. . . .”
(Emphasis added.) See First Federal Sav. And Loan Ass’n of Rapid City v. Clark
Inv. Co., 322 N.W.2d 258, 261 n.7 (S.D. 1982) (citing SDCL 15-17-8, repealed by
1992 S.D. Sess. Laws ch. 148, § 26). 12 Likewise, SDCL 15-17-8’s limit on the
amount of attorney fees a court may award illustrates the Legislature’s ability to
circumscribe an award of attorney fees on foreclosure actions if that was its
intention. In addition, the statute’s final line, which provides, “[i]f the plaintiff
shall fail to recover in such action, the defendant in such action shall be allowed an
attorney fee not exceeding twenty-five dollars,” exemplifies how the Legislature has
historically allowed an award of attorney fees on foreclosure actions to successful
mortgagors. See SDCL 15-17-8, repealed by 1992 S.D. Sess. Laws ch. 148, § 26.
[¶67.] By repealing SDCL 15-17-8 and enacting SDCL 15-17-38 in its stead,
the Legislature did not limit SDCL 15-17-38’s award of attorney fees to mortgagees
only. Had the Legislature intended to restrict the scope of attorney fees awardable
on foreclosure actions, SDCL 15-17-8 demonstrates that the Legislature knew
exactly how to do so. See Wheeler v. Farmers Mut’l Ins. Co., 2012 S.D. 83, ¶ 24, 824
N.W.2d 102, 109 (noting that the Legislature’s exclusion of certain language with
knowledge of such language warrants not reading the language into the statute).
As this Court has said, we “must assume that the Legislature meant what the
statute says.” Beers v. Pennington Cnty., 2000 S.D. 107, ¶ 10, 616 N.W.2d 79, 82.
12. As noted by the majority, supra ¶ 56, the Legislature took the trouble to provide such specificity in SDCL 21-48-15, where it limited attorneys’ fees in foreclosures by advertisements to “the party foreclosing a mortgage by advertisement[.]” Yet the Legislature wrote no such limitation into SDCL chapter 21-47, the statutory chapter directly regulating foreclosure actions.
-33- #29512, #29560
And here, SDCL 15-17-38 provides more discretion in awarding attorney fees than
its predecessor—not less.
[¶68.] Accordingly, the language in SDCL 15-17-38 allowing for the recovery
of attorney fees on mortgage foreclosures is more appropriately read in uniformity
with the sentences that proceed it—without a focus on the result. This construction
is also consistent with the legal definition of foreclosure, which refers to “[a] legal
proceeding to terminate a mortgagor’s interest in property, instituted by the
[mortgagee] either to gain title or to force a sale[.]” Foreclosure, Black’s Law
Dictionary (11th ed. 2019) (emphasis added). 13
[¶69.] Nevertheless, in the majority’s view, “mortgage foreclosures” is
referring to the relief obtained by successfully prosecuting a foreclosure action. 14
On the contrary, through the process of mortgage foreclosures, the Legislature has
provided each party with a neutral process to resolve their disputes. Although a
mortgagee will be the initiator of the mortgage foreclosure, the proceeding is
governed by multiple rules, including statutory requirements to protect a
mortgagor’s interests. See, e.g., SDCL 21-48-9 (allowing a mortgagor to require a
13. The majority relies on SDCL chapter 21-47’s use of “foreclosure action” as a reference to the process of foreclosing through judicial proceedings rather than “foreclosure” to support their position that “foreclosures” in SDCL 15-17- 38 refers to a result. However, the use of “foreclosure” and “action” in chapter 21-47 will naturally differ from its use in SDCL 15-17-38 because chapter 21-47 deals exclusively with foreclosure actions versus foreclosure by advertisement, so action must be included to provide a meaningful distinction and avoid confusion as to chapter 21-47’s scope.
14. It would be more accurate to define the foreclosure judgment/decree or the sale of the mortgaged property as the mortgagee’s relief. See SDCL 21-48-6, - 6.1; SDCL 21-47-23.
-34- #29512, #29560
mortgagee to initiate a foreclosure action rather than pursue a foreclosure by
advertisement). More importantly, the relief provided through mortgage
foreclosures is the settlement of property disputes between mortgagees and
mortgagors. And as shown by this case, the mortgage foreclosure does not always
end in favor of the mortgagee.
[¶70.] Under a proper construction of SDCL 15-17-38, the Trust would be
eligible to recover attorney fees in this mortgage foreclosure action. The circuit
court’s decision to award the Trust attorney fees in the amount of $33,364.85 was
not an abuse of discretion and should be affirmed.
[¶71.] ZELL, Retired Circuit Court Judge (dissenting on Issues 1 through 4).
[¶72.] I have reviewed the majority opinion on issues one through four and I
respectfully dissent on those issues for multiple reasons.
[¶73.] This writer’s first point of dissent regards the standard of review.
Even though the majority correctly sets forth the standard of review in a case
where summary judgment has been granted, In re Matheny Fam. Tr., 2015 S.D. 5,
¶ 7, 859 N.W.2d 609, 611; Kirlin v. Halverson, 2008 S.D. 107, ¶ 10, 758 N.W.2d
436, 443 (citation omitted), it is clear from the facts set forth in its opinion as well
as any inferences drawn therefrom, that the facts have been viewed by the
majority in a light most favorable to the moving party (Jamie), rather than to the
non-moving party, Plains Commerce Bank. This is especially true when reviewing
the circumstances surrounding the written “consent” document signed by all
interested parties and the application of the same to the waiver of self-dealing by
Matthew and the consent’s impact upon varying the spendthrift provision.
-35- #29512, #29560
[¶74.] The interpretation of a trust instrument is a question of law reviewed
de novo, but the interpretation of an instrument altering or varying the application
of its provisions would be a question of fact.
[¶75.] The disposition of cases by summary judgment where the application
and interpretation of the law can be impacted by said facts, does not lend to a wise
resolution. A full trial upon all the facts by a trier of fact who can settle the facts
based upon the determination of the credibility of witnesses, subject to cross
examination, lends to better review and application of the law. Trial by affidavit
and deposition does not sufficiently provide a complete record to resolve the many
complicated factual and legal issues in this matter and leads to bad precedence.
SDCL 55-1-41 provides:
If the trust contains a spendthrift provision, no creditor may reach present or future mandatory distributions from the trust at the trust level. Moreover, no court may order a trustee to distribute past due mandatory distributions directly to a creditor.
Yet, SDCL 55-1-53 provides:
The terms of a governing instrument may expand, restrict, eliminate, or otherwise vary any provisions of general application to trusts and trust administration. . . .
[¶76.] Although, as set forth by the majority citing In re Cleopatra Cameron
Gift Tr., 2019 S.D. 35, ¶ 26, 931 N.W.2d 251, supra ¶ 32, the Legislature has placed
“formidable barriers between creditor claims and trust funds protected by a
spendthrift provision[,]” the Legislature also allowed all interested parties to
“expand, restrict, eliminate, or otherwise vary any provisions of general application
-36- #29512, #29560
to trusts . . . .” SDCL 55-1-53. Here, all interested parties signed a written consent
to do just that, waive the self-dealing provision as well as vary the spendthrift
provision only as it related to a transaction involving Plains Commerce Bank. The
written consent did not otherwise alter or vary these or other trust provisions. A
genuine and material question of fact remains as to whether this written consent
“instrument” varied the provisions as claimed by Plains Commerce Bank but
disputed by Jamie. A trier of fact should resolve those questions.
[¶77.] This writer’s second point of dissent regards the authority cited by the
majority in supporting the positions it takes as a matter of law. When reviewing
this authority, it is quite clear the facts upon which this authority was based is not
on all fours to the facts herein.
[¶78.] In In re Stevenson, 2000 S.D. 24, ¶ 15, 605 N.W.2d 818, 822, the
settlor had died before the Trustee sought to engage in self-dealing. The Court
found no authority outside the provisions of the trust existed to ratify such action.
Here, all interested parties were alive and signed the written consent agreement
authorizing the transaction with Plains Commerce Bank.
[¶79.] The majority also cites Est. of Long, 2014 S.D. 26, ¶ 31, 846 N.W.2d
782, 789 (quoting In re Sunray Holdings Tr., 2013 S.D. 89, ¶ 14, 841 N.W.2d 271,
274; In re Florence Y. Wallbaum Revocable Living Tr., 2012 S.D. 18, ¶ 20, 813
N.W.2d 111, 117; In re Schwan 1996 Great, Great Grandchildren’s Tr., 2006 S.D. 9,
¶ 12, 709 N.W.2d 849, 852), for the proposition “we first ‘look to the language of the
trust instrument[,]’” and “[i]f the language of the trust instrument makes the
intention of the [settlor] clear, it is our duty to declare and enforce it.” The settlors
-37- #29512, #29560
in the instant case as well as all of the beneficiaries were alive and signed the
instrument (written consent) varying the trust provisions which allowed for limited
self-dealing and the varying of the spendthrift provision as it related solely to
Plains Commerce Bank. Yet, the majority does not follow its own precedent and
follow its “duty to declare and enforce it.” [the “instrument” authorized by SDCL
55-1-53]. The authority cited does not support the majority’s opinion as it relates
to the facts of this case and should not be given precedential value.
[¶80.] The majority has not cited any authority, statutory or case law,
prohibiting the conduct which took place here and its impact upon the self-dealing
and spendthrift provisions. The majority recognizes the trust provisions which
allow for an exception for self-dealing and the statutory support therefore but holds
that it does not apply to the spendthrift provision. The majority does not cite any
authority for said position. SDCL 55-1-53 allows for such varying, especially
where, as here, all interested parties including the settlors have authorized the
same. See Restatement (Second) of Trusts Section 338(1) cmts d, h. (Am. Law
Inst. 1959) as cited in Brock v. Premier Tr., Inc., 2016 WL 927382 (Nev. 2016); “A
trust may be modified, without regard to its original purpose, if the settlor and all
beneficiaries consent.” See also In re Green Valley Fin. Holdings, 32 P.3d 643, 646
(Colo. App. 2001); Hein v. Hein, 543 N.W.2d 19, 20 (Mich. Ct. App. 1995). “A
spendthrift clause, in and of itself, does not prevent modification.” Hein, 543
N.W.2d at 20.
[¶81.] This writer’s final reason for dissenting is a concern the majority’s
opinion will cause in this state regarding an unintended policy involving the
-38- #29512, #29560
extension of credit between commercial lenders and family-farm trusts. It is clear
by the facts of this case the Beck family was engaged in a farming operation. The
Becks placed the farm real estate into the Trust but apparently left out the other
farm assets (livestock, equipment, grain, etc.).
[¶82.] From the 1990s through the 2000s, numerous farm and ranch families
in South Dakota placed their farm and ranch property in “trusts” for numerous
reasons. Often these trusts were “canned” trusts and not necessarily drafted for
each specific farm/ranch operation. As appears to be the case herein, not all farm
assets were transferred into these trusts. When these family farm trusts needed to
enter into credit relationships, like here, the parties sought ways, legally, to
accomplish the credit relationship that is so crucial to operating the family farm.
Now, based upon the majority’s opinion, it will be apparent to commercial lenders
in the state that no matter what reasonable legal efforts they attempt to
accomplish extending a line of credit secured by the assets of the family farm trust,
or its menagerie, its efforts will be highly suspect and not worth the risk of
extending credit to such an operation due to the courts not upholding the parties’
agreement. I do not believe this is what the majority intended, but it has
accomplished the same by its decision.
[¶83.] For all of the above reasons, I respectfully dissent. This matter
should be reversed and remanded for a trial on these issues.
[¶84.] Lastly, regarding Issue 5, I concur that said fees are not authorized in
this action for the reasons the majority writing sets forth.
-39-
Related
Cite This Page — Counsel Stack
986 N.W.2d 519, 2023 S.D. 8, Counsel Stack Legal Research, https://law.counselstack.com/opinion/plains-commerce-bank-inc-v-beck-sd-2023.