S.W. Croes Family Trust v. Small Business Administration

446 N.W.2d 55, 1989 S.D. LEXIS 158, 1989 WL 107775

• Court: South Dakota Supreme Court
• Decided: September 20, 1989
• Docket: 16146
• Status: Published

Opinions

MILLER, Justice

(on reassignment).

This appeal concerns procedural issues arising in an action commenced upon the default in a contract for the sale of a motel. In affirming the trial court we hold that it did not commit reversible error in (1) dismissing appellants’ cross-claim grounded in fraud and deceit, (2) denying appellants’ motion to amend their cross-claim, and (3) granting summary judgment in favor of appellees on their cross-claim.

FACTS AND PROCEDURAL HISTORY

In December 1982, S.W. Croes sold the Luxury Lodge motel in Spearfish, South Dakota, to Carl J. and Gregory C. Sheesley and Hans Pfeiffer (appellees) on a “Contract For Deed and Security Agreement.” In September 1984, before appellees completed payment under the contract, they sold the property to Roger K. and Nance Allan (appellants) under a similar contract for deed and security agreement. It was agreed between the parties that appellants would assume and pay the balance due and owing under the Croes/Sheesley/Pfeiffer contract. Croes had previously consented to the conveyance and transfer but did not release appellees from liability in the event of default by appellants.

Appellants defaulted by failing to make payments for November and December 1986. In 1987, payments were made for January, February and March but nothing was paid thereafter. As a result, Croes commenced an action against appellees, appellants, the Small Business Administration (SBA) and Norwest Bank. (SBA and Nor-west Bank were made parties to the original action primarily for the purpose of determining the priority of their security interests.) What ensued thereafter was the filing of a series of counterclaims, cross-claims and motions by all parties.¹ In addition thereto, several motions to amend pleadings were made by appellants.

In September 1987, Croes filed a motion for summary judgment against appellees and appellants. At approximately the same time, appellees filed a motion for summary judgment against appellants. On the date set for hearing (October 7, 1987) the court granted Croes’ motion for summary judgment and took appellees’ motion under advisement. At the same time, the court granted appellants’ motion for leave to amend and to conduct further discovery.

On November 2, 1987, appellants filed amended pleadings. After receiving appellants’ amended pleadings, appellees filed motions to compel appellants to set forth their claims in separate counts, for more definite statement, to compel appellants to elect remedies and four motions for summary judgment. All of these motions were granted with the exception of those for summary judgment, which were taken under advisement. Appellants were given until November 17, 1987, to respond, which date was later extended, at their request, to November 24, 1987. Appellants’ sole response to the trial court’s prior orders was a document entitled “Cross Petitioners Allans’ Answer to Defendants Sheesley and Pfeiffer Motion for Summary Judgment.” There was no specific pleading which set forth their claims in separate counts or electing remedies, nor did they file any amendments to their pleadings. On December 1, 1987, a telephonic hearing was held. Appellees moved for dismissal of appellants’ amended cross-claim (which had been improperly styled as a counterclaim) on the grounds that appellants’ pleadings failed to state a cause of action upon which relief could be granted. Although appellants had previously elected to proceed in fraud, they made no amendment of their prior pleading which was grounded in both rescission and fraud and which prayed for damages relating to rescission. Because of appellants’ prior election to proceed on a fraud claim, the trial court struck the allegations in the pleadings relevant to rescission. Thus, at that point, there were insufficient allegations on the grounds of fraud and no prayer for damages. In fact, in the colloquy between court and counsel, appellants’ counsel could not articulate with reasonable clarity what their damage claim was. The court then dismissed the pleading for the reason that no damages, a necessary element in order to sustain a cause of action in fraud, had been alleged. Appellees were also granted summary judgment on their cross-claim.²

DECISION

I

WHETHER THE TRIAL COURT COMMITTED REVERSIBLE ERROR IN DISMISSING APPELLANTS’ PLEADING FOR FRAUD AND DECEIT.

As stated earlier, appellees made a motion to dismiss the second amended “counterclaim” of appellants for the reason that it failed to state a cause of action. This motion was granted.

Pursuant to SDCL 15-6-41(b) and (c), the court has power to grant a motion to dismiss a pleading when the pleader has failed to comply with the rules of civil procedure (SDCL ch. 15-6), or failed to comply with any order of the circuit court. Under our statute, the power to dismiss is discretionary. Duncan v. Pennington County Hous. Auth., 382 N.W.2d 425 (S.D.1986). In reviewing the grant or denial of such a motion, this court’s inquiry is whether the circuit court abused its discretion. Duncan, supra. Where an abuse of discretion is not shown reversible error will not lie. See Shamburger v. Behrens, 418 N.W.2d 299 (S.D.1988).

Appellants failed to specifically comply with the trial court’s order requiring them to set forth their claims in separate counts. Although they did make a more definite statement and elect a remedy, it was done via a response to appellees’ summary judgment motion, in which response, among other things, they improperly asserted damages in the amount of $348,900. Exhibit E attached to the response merely indicated possible damages of $48,900. After being informed by the trial court of this error, they still could not clearly articulate their damage claim (nor have they on appeal clarified what their alleged damages are). Appellants have suggested that their response to the summary judgment sufficed to sufficiently set forth their damage claim. However, a response to a motion for summary judgment is not a pleading. It is merely a response to a motion. Not even a motion for summary judgment is a pleading. See SDCL 15-6-7(a) and (b).

Under Holy Cross Parish v. Huether, 308 N.W.2d 575, 576 (S.D.1981), “a pleading based on fraud as a basis of recovery of damages must allege all the essential elements of actionable fraud to be sufficient.” Essential elements of actionable fraud, as set forth in Holy Cross Parish, are that a representation was made as a statement of fact, which was untrue by the party making it, or else recklessly made; that it was made with intent to deceive and for the purpose of inducing the other party to act upon it; that he did in fact rely on it and was induced thereby to act to his injury or damage. South Dakota law requires that damages be pleaded with reasonable certainty. Wang v. Bekken, 310 N.W.2d 166, 167 (S.D.1981).

The court did not abuse its discretion in dismissing appellants’ pleading. The pleading failed to state a cause of action in that it did not plead or allege damages with reasonable certainty. Further, such failure was a violation of the trial court’s specific order. Ministrelli Constr. Co. v. Monroe County Road, 153 Mich.App. 144, 395 N.W.2d 38 (1986); Banaszewski v. Colman, 131 Mich.App. 92, 345 N.W.2d 647 (1983); Holy Cross, supra.

II

WHETHER THE TRIAL COURT ABUSED ITS DISCRETION BY DENYING APPELLANTS’ MOTION TO AMEND THEIR PLEADING AGAINST APPELLEES.

The record reflects that the trial court, on several occasions throughout the course of this action, granted appellants’ motions to amend various pleadings, including their claims against appellees. During the telephonic hearing, after the trial court granted appellees’ motion to dismiss (see Issue 1), appellants orally moved the court to set aside its order and allow them to again amend their pleadings. That motion was denied.³

SDCL 15-6-15(a) states, in pertinent part: “[A] party may amend its pleadings only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” On appeal, this court will not disturb the trial court’s decision to permit or deny amendment of pleadings unless there has been a clear abuse of discretion which results in prejudice to the nonmoving party. Tesch v. Tesch, 399 N.W.2d 880 (S.D.1987); Zahrowski v. Dahl, 78 S.D. 255, 100 N.W.2d 802 (1960).

It was apparent to the trial court that appellants’ pleadings were not and may never be in compliance with South Dakota law or the court’s orders. Appellants’ pleadings and responses were simply becoming less enlightening and more confusing. The trial court was becoming understandably frustrated.

Nothing in the record indicates that appellants could clear up the confusion they created even if they were allowed to amend their pleadings one more time. There must be some reasonable finality in allowing a party to amend, to enable the court and opposing counsel to make adequate preparation for trial. We hasten to note that appellants did not desire to amend in some minor respect to conform to the proof, but, rather, sought a major amendment, which went to the heart or grounds of the litigation. There has been no showing that the trial court abused its discretion by denying appellants’ motion to amend, especially where previous motions had been granted without compliance with court orders or any improvement to the pleadings. Tesch, supra.

WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF APPEL-LEES ON THEIR CROSS-CLAIM AGAINST APPELLANTS.

Summary judgment is proper if it can be shown that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. SDCL 15 — 6—56(c); Wilson v. Great Northern Ry. Co., 83 S.D. 207, 157 N.W.2d 19 (1968).

From our review of the record, and considering the state of the pleadings, motions and responses, we are convinced that the trial court properly granted summary judgment. Aschoff v. Mobil Oil Corp., 261 N.W.2d 120 (S.D.1977).

Affirmed.

MORGAN, J., and BRADSHAW, Circuit Judge, concur. HENDERSON, J., and BERNDT, Circuit Judge, dissent. BERNDT, Circuit Judge, sitting for WUEST, C.J., disqualified. BRADSHAW, Circuit Judge, sitting for SABERS, J., disqualified.

1 . In most instances, appellants were represented before the trial court by counsel from Oklahoma.

2 . The specific judgment from which this appeal is taken states that appellants, by electing to limit their multi-faceted pleading (cross-claim improperly styled as counterclaim) to an action for fraud and deceit, consented to dismissal of the rescission action, thereby ratifying the contract. Nothing in appellants’ brief to this court directly challenges that ruling; therefore it is res judicata.

3 . It is clear after a review of the record that appellants’ out-of-state counsel either failed to understand and appreciate our rules of civil procedure or chose to ignore them. This is evidenced by, among other things, inadequate pleadings and responses to motions, failure to comply with court orders, late filings, the imposition of sanctions against him by the court, and counterclaiming when there should be a cross-claim.