Fenske Media Corp. v. Banta Corp.
Decision Date | 18 February 2004 |
Docket Number | No. 22922.,22922. |
Citation | 2004 SD 23,676 N.W.2d 390 |
Court | South Dakota Supreme Court |
Parties | FENSKE MEDIA CORPORATION, Plaintiff and Appellant, v. BANTA CORPORATION, Defendant and Appellee. |
Robert Gusinsky of Lynn, Jackson, Shultz & Lebrun, Rapid City, South Dakota, Attorneys for plaintiff and appellant.
Michael P. Reynolds of Barker, Wilson, Reynolds & Burke, Rapid City, South Dakota, Attorneys for defendant and appellee.
[¶ 1.] We are confronted with the question whether the circuit court acted properly in dismissing this case under SDCL 15-6-12(b)(5) on the ground that plaintiff had signed a release in an earlier lawsuit against the same defendant, resulting in the dismissal of that lawsuit with prejudice. Because the plaintiff's allegations, taken as true, fail to state any viable legal theory to overcome the broad language of the release, we affirm.
[¶ 2.] Fenske Media Corporation and Banta Corporation contracted for Fenske to print textbooks. The total value of the contract was $102,268.32. Unknown to Fenske, Banta was acting as an agent for an undisclosed principal, Xyan.com, Inc. Upon completion of the printing order, however, Banta informed Fenske that the textbooks should be shipped to Xyan.
[¶ 3.] Between January 3 and February 20, 2001, Xyan paid Fenske $77,268.32 of the amount due, leaving $25,000 unpaid. On March 31, 2001, Xyan filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.
[¶ 4.] On May 30, 2001, Fenske sued Banta for the unpaid balance. Subsequently, on July 13, 2001, Fenske and Banta signed a Mutual Release of All Claims. Under this settlement, Banta agreed to pay Fenske the unpaid balance of $25,000. The release provided in part:
On July 26, 2001, with the release having been executed, the circuit court granted Banta's motion to dismiss with prejudice.
[¶ 5.] Several months after the release was signed, Xyan brought a complaint against Fenske in the United States Bankruptcy Court to avoid the preferential transfer of $77,268.32. Xyan had paid the sum within ninety days of its bankruptcy filing. See 11 USC 547(b)(5). In November 2002, Fenske agreed to return to Xyan $50,000 of the amount.
[¶ 6.] Now with a $50,000 shortfall, Fenske commenced this action against Banta. In its pleading, Fenske alleged that Banta, as an agent for an undisclosed principal, was liable for the shortfall. Banta moved to dismiss under SDCL 15-6-12(b)(5). The circuit court ruled that the release coupled with the earlier dismissal with prejudice precluded Fenske from maintaining this new action against Banta. Fenske appeals questioning "[w]hether the trial court should have dismissed Fenske's complaint for failure to state a claim for which relief can be granted on the basis of a release executed in another case."
[¶ 7.] We review de novo a trial court's dismissal of a claim under SDCL 15-6-12(b)(5). Osloond v. Farrier, 2003 SD 28, ¶ 4, 659 N.W.2d 20, 22 (citing City of Colton v. Schwebach, 1997 SD 4, ¶ 8, 557 N.W.2d 769, 771). In evaluating a complaint, the court must accept the material allegations as true and construe them in a light most favorable to the pleader and determine whether the allegations allow relief on "any possible theory."1Schlosser v. Norwest Bank South Dakota, N.A., 506 N.W.2d 416, 418 (S.D.1993) (citation omitted). Thompson v. Summers, 1997 SD 103, ¶ 6, 567 N.W.2d 387, 390 (quoting Janklow v. Viking Press, 378 N.W.2d 875, 877 (S.D.1985)). Motions to dismiss under Rule 12(b)(5) test only the legal sufficiency and not the facts of the pleading. Stumes v. Bloomberg, 1996 SD 93, ¶ 6, 551 N.W.2d 590, 593 (citation omitted). Such motions are viewed with disfavor and seldom prevail. Thompson, 1997 SD 103, ¶ 5,567 N.W.2d at 390.
[¶ 8.] Releases are contractual agreements. Parkhurst v. Burkel, 1996 SD 19, ¶ 12, 544 N.W.2d 210, 212. Because contract interpretation presents a question of law, our standard of review is de novo. Auto Owner Ins. Co. v. Enterprise Rent-A-Car Co.-Midwest, 2003 SD 52, ¶ 7, 663 N.W.2d 208, 209-210. It is well settled that in interpreting a contract, we rely on the language of the contract to ascertain the intent of the parties. Carstensen Contracting, Inc. v. Mid-Dakota Rural Water Sys., Inc., 2002 SD 136, ¶ 8, 653 N.W.2d 875, 877. Where possible, we must give meaning to all the provisions of a contract. Id.
[¶ 9.] Fenske asserts that the language of the release provides a legal theory on which it may proceed. Specifically, Fenske argues that the fourth provision of the release demonstrates that the parties only intended to cover "any goods or services provided by Fenske to Banta." Because the current claim involves only "goods or services provided by Fenske to Xyan," Fenske reasons that the claim is not covered by the express language of the release. We cannot support such a tenuous interpretation.
[¶ 10.] When read as a whole, the release provides but one reasonable and consistent interpretation of the parties' intentions. The first declaration in the release states, "WHEREAS, a dispute has risen between the parties arising out of the parties' prior business dealings." This language encompasses the matters the parties intended to discharge through the release. It includes "the parties' prior business dealings." This intention is manifested in the provision of the release that states "all claims liabilities, obligations, causes of action, and controversies arising out of the dispute ... are hereby settled." When this language is considered with the broad language of the fourth provision declaring that Banta be released from all claims "which in any way relate to any goods or services provided by Fenske to Banta," the only consistent and reasonable interpretation that can be drawn is that Banta and Fenske intended Banta to be released from all claims arising from their dispute. Certainly, that prior dispute involved the agreement between Fenske and Banta, when Banta acted as an agent for Xyan.
[¶ 11.] Fenske next argues that if Banta intended the release to cover "goods and services provided by Fenske to Xyan" then it should be permitted to proceed on a theory of either mutual mistake or fraud. Fenske asserts that it may establish that (1) "Banta made a mistake when it wrote [in the release] `goods and services provided by Fenske to Banta,'" or (2) "Banta misrepresented to whom the goods and services were truly destined, knowing that Xyan would file for bankruptcy protection and therefore avoid full payment." We note initially that Fenske's complaint does not allege any instances of fraud or mistake. SDCL 15-6-9(b) provides,
[¶ 12.] Furthermore, the fraud theory falls short. For a theory based upon fraud to succeed, it is not enough that one party intend to defraud another. Cleveland v. BDL Enterprises, Inc., 2003 SD 54, ¶ 26, 663 N.W.2d 212, 220. It is also necessary that the fraudulent behavior induced the other party to act to its detriment. Id. Fenske does not dispute that it was aware that Xyan, not Banta, was the principal several months before it released Banta. As such, it is plain that the previous existence of an undisclosed principal did not induce Fenske to enter into the release. Therefore, Fenske's allegation does not provide a legal theory upon which it may proceed.
[¶ 13.] Fenske also proposes that it may proceed on a theory of mutual mistake. This assertion rests on the notion that the relief Fenske seeks in the current action was at the time of the release an "unknown claim." Fenske argues that a general release does not extend to unknown claims. This theory is based on SDCL 20-7-11, which provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must...
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