Baker v. Wilburn, 16602

CourtSupreme Court of South Dakota
Citation456 N.W.2d 304
PartiesLeMoine BAKER, Plaintiff and Appellant, v. Lavern E. WILBURN and Robert M. Steele, Defendants and Appellees.
Docket NumberNo. 16602,16602
Decision Date28 June 1990

Page 304

456 N.W.2d 304
LeMoine BAKER, Plaintiff and Appellant,
Lavern E. WILBURN and Robert M. Steele, Defendants and
No. 16602.
Supreme Court of South Dakota.
Argued Nov. 27, 1989.
Decided May 16, 1990.
Rehearing Granted June 28, 1990.

Mitchell C. LaFleur of LaFleur, LaFleur & LaFleur, Rapid City, for plaintiff and appellant.

Richard E. Huffman, for defendants and appellees; John J. Delaney, Banks, Johnson, Johnson, Colbath & Huffman, Rapid City, on the brief.

SABERS, Justice.

LeMoine Baker appeals from a judgment denying his claim against Wilburn & Steele individually for payments under a business sale agreement.


In 1972, Wendell Peden sold what was then known as the Anchor Lounge to Marlow Jurisch and his wife. The sale of the business was pursuant to an agreement which required Jurisch to make regular payments to Peden. Peden eventually assigned his seller's interest in this Peden/Jurisch agreement to the Black Hills Animal Hospital, which he controlled. In

Page 305

1976, Baker purchased an undivided one-half interest in the business from Jurisch for $50,000. The Jurisch/Baker partnership was forced to move the business to a new location in early 1978 and planned to reopen the bar under the new name of Branding Iron Lounge.

The partnership encountered financial problems beginning in mid-1978, eventually causing the partners to believe the renewal of their liquor license was in jeopardy. As a result, Jurisch contacted Wilburn & Steele to see if they would be interested in investing in the Branding Iron Lounge. Wilburn & Steele attempted to purchase an interest in the business on the basis that they would have no obligation to Baker. To attempt to reach this result, Wilburn & Steele required Jurisch to obtain Baker's share of the business free and clear of any liens or encumbrances.

On November 14, 1979, Baker, Jurisch and his wife, and Wilburn & Steele entered into a series of agreements. Pursuant to these agreements, Baker transferred his interest in the business to Jurisch and his wife for $62,000, Jurisch acquired his wife's interest in the business, and Wilburn & Steele acquired fifty-one percent of the business from Jurisch for $62,000. Wilburn & Steele paid Jurisch a $25,000 down payment, $15,000 of which Jurisch paid as a down payment to Baker. At the same time, Wilburn & Steele entered into an agreement with Animal Hospital to purchase its seller's interest in the Peden/Jurisch purchase agreement. 1 Wilburn, Steele, and Jurisch then incorporated Branding Iron, Inc. with Jurisch owning forty-nine percent and Wilburn & Steele owning fifty-one percent. Jurisch was required to pledge his stock to guarantee his obligations to Wilburn & Steele, but Wilburn & Steele were not so required. As a result of these transactions, Jurisch owed Wilburn & Steele $720 a month for their purchase of the Animal Hospital's seller's interest in the business, Wilburn & Steele owed Jurisch $468.72 a month as payment towards their purchase of fifty-one percent of the business, and Jurisch owed Baker $602.92 a month as payment for Baker's interest in the business.

The Jurisch/Baker partnership dissolution agreement and contract for sale was incorporated by reference into the Jurisch/Wilburn & Steele contract. Baker was made a secondary party to this contract because he was required to waive any security interest in the business and to indemnify Wilburn & Steele from any and all claims, demands, or causes of action brought or asserted by third parties against Wilburn & Steele arising from acts or omissions of Jurisch or Baker occurring prior to the date of possession. The Jurisch/Wilburn & Steele contract provided that the parties would establish the National Bank of South Dakota as escrow agent to receive, transfer, and make application of payments regarding the agreement and those which were due under the terms and conditions of the Jurisch/Baker contract.

In order to establish the Bank as escrow agent, Jurisch and Wilburn & Steele executed a letter of transmittal which the Bank received on April 15, 1980. That document stated that all payments into the Bank escrow account were to be credited directly to an escrow account set up by Jurisch and Baker. The Jurisch/Baker escrow account provided that all proceeds in that account were to be deposited in Baker's savings account. The Jurisch/Baker escrow account was to receive monthly payments of $602.92 from Jurisch for the purchase of Baker's interest in the business. Since the payments by Wilburn & Steele to Jurisch were automatically transferred to this escrow account, Jurisch was only required to add approximately $134 on his own to complete his monthly payment to Baker.

Payments in accordance with the agreements and the escrow accounts were regularly made through March 1982 when Wilburn, Steele, and Jurisch cancelled their escrow account. At that time, Branding Iron, Inc. agreed to assume the obligation of Wilburn & Steele to Jurisch and continued

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to make payments to the Jurisch/Baker escrow account for several months. However, after November 1982, Branding Iron, Inc. ceased to make the payments. Baker instituted this action to enforce Wilburn & Steele's obligation to pay their obligation to Jurisch into the Bank escrow account. The trial court concluded that Baker did not possess enforceable rights regarding the payments Wilburn & Steele were to make to Jurisch. Baker appeals, claiming the court erred in concluding that Wilburn & Steele were not contractually obligated to make the payments into the escrow account. We reverse.

1. All documents executed for related purposes in the same

transaction must be construed together.

The effects and terms of a contract are questions of law to be resolved by the court. North River Ins. Co. v. Golden Rule Constr., Inc., 296 N.W.2d 910, 912 (S.D.1980); Delzer Constr. Co. v. South Dakota State Bd. of Transp., 275 N.W.2d 352, 355 (S.D.1979). On appeal, this court can read a contract itself without a presumption in favor of the trial court's determination. North River, supra, 296 N.W.2d at 912-13. The court is to enforce and give effect to the unambiguous language and terms of the contract. GMS, Inc. v. Deadwood Social Club, Inc., 333 N.W.2d 442 (S.D.1983). Whether the language of a contract is ambiguous is a question of law for the court. Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149 (S.D.1986). A contract is ambiguous when application of rules of interpretation leave a genuine uncertainty as to which of two or more meanings is correct. North River, supra, 296 N.W.2d at 913; see also Enchanted World Doll Museum, supra, 398 N.W.2d at 151.

All writings that are executed together as part of a single transaction are to be interpreted together. See Restatement (Second) Contracts Sec. 202 (1981). We have recognized this rule, noting that: "[W]hen two or more instruments are executed at the same time by the same parties, for the same purpose and as part of the same transaction, the court must consider and construe the instruments as one contract." GMS, supra, 333 N.W.2d at 444 (emphasis added). Moreover, it is not critical whether the documents were executed at exactly the same time or whether the parties to each agreement were identical. As the court in Hampton Roads Shipping Ass'n v. International Longshoremen's Ass'n, 597 F.Supp. 709 (E.D.Va.1984), remanded on other grounds, 746 F.2d 1015 (4th Cir.1984), cert. denied, 471 U.S. 1017, 105 S.Ct. 2022, 85 L.Ed.2d 304 (1985), cert. denied, 471 U.S. 1102, 105 S.Ct. 2327, 85 L.Ed.2d 845 (1985), stated:

Where several writings are connected by internal references to each other, even if they were executed on different dates and were not among all of the same parties, they will constitute a single contract as long as they involve the same subject matter and prove to be parts of an entire transaction.

Id. at 716; see also Newman-Green, Inc. v. Alfonzo-Larrain R., 612 F.Supp. 1434 (N.D.Ill.1985) (Agreements executed at the same time and in the course of the same transaction must be read and construed together, regardless whether the parties were identical).

The multiple documents executed in order to change the ownership of this business cannot be separated, but must be construed together as a single contract involving the same transaction. Several factors compel the conclusion that the writings were part of a single contract or transaction. For example, the parties required the documents to be executed together at the same time and not in isolation. Wilburn & Steele's attorney testified that his clients would not have entered into the agreement if the partnership dissolution agreement was not completed. The Jurisch/Wilburn & Steele contract refers to the Jurisch/Baker contract, and Baker is included as a secondary party. 2 Moreover, Baker

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released any security interest in the business and agreed to indemnify Wilburn & Steele against prior partnership acts as part of that agreement. The only consideration for Baker's promise is to include the other documents executed at that time within the transaction. Otherwise, Baker would receive nothing in exchange for his promise to release his security interest and the agreement would not make sense.

Wilburn & Steele argue that the following language of the Jurisch/Baker contract is determinative:

1. [Seller's] sole remedy in the event of default shall be an action for breach of contract against Marlow E. Jurisch and Seller hereby waives any right he may have to prosecute an action against Rita J. Jurisch or any assignee or transferee of this agreement or any interest herein....

2. Seller does by these [promises] waive any and all liens, encumbrances, security interest, and entitlements whatsoever with regard to the subject matter of this agreement and the resulting stock of any corporate entity to which this property may be transferred and the interest of stockholders therein.


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