Yankton Ethanol, Inc. v. Vironment, Inc., 20558

• Court: Supreme Court of South Dakota
• Citation: 592 N.W.2d 596,1999 SD 42
• Docket Number: No. 20558,20558
• Parties: YANKTON ETHANOL INC., Plaintiff and Appellee, v. VIRONMENT, INC., A South Dakota Corporation, Eugene Noonan, Jerry Noonan, Individually, and as Officers, Directors, and Stockholders of Vironment, Inc., Defendants and Appellants, and Paul Middaugh, Individually, and as Officer, Director, and Stockholder of Vironment, Inc., Defendant. . Considered on Briefs on
• Decision Date: 14 January 1999

Page 596

592 N.W.2d 596 1999 SD 42 YANKTON ETHANOL INC., Plaintiff and Appellee,
v.
VIRONMENT, INC., A South Dakota Corporation, Eugene Noonan,
Jerry Noonan, Individually, and as Officers,
Directors, and Stockholders of
Vironment, Inc., Defendants
and Appellants,
and
Paul Middaugh, Individually, and as Officer, Director, and
Stockholder of Vironment, Inc., Defendant. No. 20558. Supreme Court of South Dakota. Considered on Briefs on Jan. 14, 1999.
April 7, 1999.

Timothy L. James of James & Associates, Yankton, South Dakota, for plaintiff and appellee.

Dennis C. McFarland, Sioux Falls, South Dakota, for defendants and appellants.

AMUNDSON, Justice.

¶1 Vironment, Inc. (Vironment) appeals the circuit court's order granting Yankton Ethanol, Inc.'s (Yankton Ethanol) motion to dismiss Vironment's counterclaim. We reverse and remand.

FACTS

¶2 On September 25, 1989, Vironment contracted with Yankton Ethanol to purchase the Yankton Ethanol Plant. The contract document was prepared by attorney Charles E. Light (Light), who is also the sole shareholder, officer, and director of Yankton Ethanol.

¶3 On July 21, 1994, Vironment filed a petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code and obtained an automatic stay of any proceedings against debtor.

¶4 Yankton Ethanol obtained relief from the stay and on November 14, 1996, commenced an action against Vironment alleging breach of sales agreement, fraud with regard to Vironment's declaration of bankruptcy, and misappropriation of corporate assets. Vironment answered and filed a counterclaim, alleging fraud in the inducement to contract, an action for rescission, an action for anticipatory breach of contract, and an action to have the contract declared void. Vironment's claim rests on the allegation that Light intentionally misrepresented that the plant had produced significant quantities of fuel grade alcohol and that the plant had the capability to produce significant quantities of fuel grade alcohol for the purpose of inducing the sale of the Yankton Ethanol facility.

¶5 The trial court granted Yankton Ethanol's motion to dismiss under SDCL 15-6-12(b) on the grounds the action was barred by the statute of limitations set forth in 11 USCS 546(a)(1)(A) of the bankruptcy code and by SDCL 15-2-13. Vironment appeals, raising the following issues:

1. Whether the circuit court erred in dismissing defendant's counterclaim as barred by the period of limitation set forth in 11 USCS 546(a)(1)(A).

2. Whether the circuit court erred in dismissing defendant's counterclaim as barred by the period of limitation set forth in SDCL 15-2-13.

3. Whether the circuit court erred in granting the motion to dismiss based upon SDCL 47-7-50.

STANDARD OF REVIEW

¶6 Our standard of review for a motion to dismiss is as follows:

A motion to dismiss under SDCL 15-6-12(b) tests the legal sufficiency of the pleading, not the facts which support it. Estate of Billings v. Deadwood Congregation, 506 N.W.2d 138, 140 (S.D.1993) (citing Hunt v. Hunt, 309 N.W.2d 818, 820 (S.D.1981)). For purposes of the pleading, the court must treat as true all facts properly pled in the complaint and resolve all doubts in favor of the pleader. Johnson v. Kreiser's, Inc., 433 N.W.2d 225, 226 (S.D.1988)

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; Janklow v. Viking Press, 378 N.W.2d 875, 877 (S.D.1985). "Our standard of review of a trial court's grant or denial of a motion to dismiss is the same as our review of a motion for summary judgment--is the pleader entitled to judgment as a matter of law?" Billings 506 N.W.2d at 140 (citing Jensen Ranch, Inc. v. Marsden, 440 N.W.2d 762, 764 (S.D.1989)).

Steiner v. County of Marshall, 1997 SD 109, p 16, 568 N.W.2d 627, 631 (citing Stumes v. Bloomberg, 1996 SD 93, p 6, 551 N.W.2d 590, 592). As this presents a question of law, we review the trial court's decision de novo, with no deference given to the trial court's legal conclusions. Thompson v. Summers, 1997 SD 103, p 5, 567 N.W.2d 387, 390 (citing City of Colton v. Schwebach, 1997 SD 4, p 8, 557 N.W.2d 769, 771).

DECISION

¶7 1. Whether 11 USCS 546(a)(1)(A) of the Bankruptcy Code is applicable.

¶8 Yankton Ethanol received relief from the automatic stay imposed by the filing of bankruptcy petition in order to initiate its claims against Vironment. ¹ Vironment counterclaimed, alleging fraud in the inducement of the contract. ² The trial court dismissed Vironment's cause of action pursuant to statute of limitations found in 11 USCS 546(a)(1)(A).

¶9 Section 546 of the bankruptcy code limits the...