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

HENDERSON, Justice

(dissenting).

In joining the dissent of Judge Berndt, I wish to express that it was a circuit court judge’s responsibility to review the circuit court file. Peeved he might have been with out-of-state counsel, yet he owed a duty to ferret out the substantive pleading. Authorities in Judge Berndt’s dissent clearly substantiate that our decision today is wrong in that it vaults technical considerations, in the construction of pleadings, over the liberal rules of construction favored by civil code pleading.

We must, in my opinion, review pleadings so that they admit of the spirit and reason of the law. Liberal construction of pleadings tends to eradicate the evil which they are incipiently designed to remedy.

Common law pleading was a system of technical rules and principles whereby technical propriety had to be observed to produce a justiciable issue. These technical rules are obsolete under the modern Rules of Civil Procedure. “The object of pleading is not to destroy but to advance the ends of justice.” 71 C.J.S. Pleading § 1, at 18 (1951). Accord: Katin et al. v. Crispel, 22 N.J.Misc. 394, 395-397, 39 A.2d 183, 184 (N.J.Cir.1944).

Technical writs were the “open sesame” to justice under the common law. A pleader who failed to allege the facts to fit within a writ was immediately bounced out of court. This precipitated a great deal of injustice, spawning the chancery courts and ultimately a new system of pleading.

In 1966, this Court reaffirmed its historic stance on construction of pleadings in Burmeister v. Youngstrom, 81 S.D. 578, 585, 139 N.W.2d 226, 228 (1966) by expressing:

By statutory mandate, SDC 1960 Supp. 33.0915, [now, SDCL 15 — 6—8(f) ] we are required to construe a pleading liberally for the purpose of determining its effect with a view of doing substantial justice between the parties. See Baker v. Jewell, 77 S.D. 573, 96 N.W.2d 299 [1959]. Courts do not favor objection to pleadings in the manner attempted in this case and to justify the objection interposed, it must appear that the defect relied upon is such that it could not be cured by an amendment to conform to the proof. Knapp v. Brett, 54 S.D. 1, 222 N.W. 297 [1929]. (note added).

The original source of SDCL 15 — 6—8(f) in South Dakota is CCivP 1887, § 128.

Recent South Dakota authority supports the viewpoint of liberal grants by a trial court to “freely” amend. In Tesch v. Tesch, 399 N.W.2d 880, 882 (S.D.1987), this Court unanimously held:

The cases are legion. A trial court may permit the amendment of pleadings before, during, and after trial without the adverse party’s consent. Koenekamp v. Picasso, 63 S.D. 440, 443, 260 N.W. 623, 624 (1935); Murphy v. Plankinton Bank, 18 S.D. 317, 318, 100 N.W. 614, 616 (1904). See 61A Am.Jur.2d Pleading §§ 311, 315 (1981); 71 C.J.S. Pleading § 28 (1951). SDCL 15-6-15(a) states that “leave [to amend] shall be freely given when justice so requires.” The trial court’s decision will not be disturbed on appeal absent a clear abuse of discretion which results in prejudice to the non-moving party. Behringer v. Muchow, 72 S.D. 80, 83, 30 N.W.2d 5, 6 (1947). See also Edwards v. Chicago, M. & St. P. Ry. Co., 21 S.D. 504, 510, 110 N.W. 832, 834 (1907). Prejudice is often shown when a party is surprised and unprepared to meet the contents of the proposed amendment. See Edwards, 110 N.W. at 834; 61A Am.Jur.2d Pleading § 315.

There would have been no surprise here. An abuse of discretion took place.

Desiring to keep South Dakota in the main stream of construing pleadings to do substantial justice, I am compelled to dissent and accordingly join the dissent of Judge Berndt believing that it represents the general principle that pleadings must, of necessity, be construed in a light most *60favorable to the pleader and non-moving party or we shall step backward into common law, technical writ pleading. Janklow v. Keller, 90 S.D. 322, 331, 241 N.W.2d 364, 368 (1976). See, also, Wilson v. Great Northern Railway Company, 83 S.D. 207, 157 N.W.2d 19 (1968).

PLEADING IN THOSE DAYS OF YORE

De quarantina habenda. At common law, a writ which a widow entitled to quarantine might sue out in case the heir or other persons ejected her. It seems to have been a summary process, and required the sheriff, if no just cause were shown against it, speedily to put her into possession. Black’s Law Dictionary 398 (5th ed.1979).
De rationabili parte bonorum. A writ which lay for the widow (and children) of a deceased person against his executors, to recover a third part of the deceased’s personalty, after payment of his debts, or to recover their reasonable part or share of his goods. 2 Bl.Comm. 492. Black’s, at 398.
De rescussu. Writ of rescue or rescous. A writ which lay where cattle distrained, or persons arrested, were rescued from those taking them. Black’s, at 399.
De uxore rapta et abducta. Old English writ which lay where a man’s wife had been ravished and carried away. A species of writ of trespass. 3 Bl.Comm. 139. Black’s, at 406.

Reflection on these old English writs, á few examples above, dictates a conclusion that they were onerous, rigid, and quite often subverted, rather than served, justice. Time begot their demise.

The Federal Rules of Civil Procedures were enacted in 1938. Beginning in 1939, the South Dakota Rules of Civil Procedure tracked these Federal Rules. Read, Some Reflections On The Golden Anniversary of The Federal Rules of Civil Procedure, 33 S.D.L.Rev. 195 (1988) by Professor David S. Day. Onward, pleading soldiers ....

BERNDT, Circuit Judge

(dissenting).

I respectfully dissent regarding the majority’s disposition of Issue I. The trial court’s dismissal of Allans’ cross-claim for failure to state a claim upon which relief could be granted was based on too restrictive a view of Allans’ pleadings.

SDCL 15-6-8(f) provides: “All pleadings shall be so construed as to do substantial justice.” In interpreting Federal Rule of Civil Procedure 8(f), which is phrased identically, the United States Supreme Court observed that “[t]he Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits.” Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 103, 2 L.Ed.2d 80, 86 (1957). This Court adopted the Conley position, verbatim, in Miller v. Scholten, 273 N.W.2d 757, 760 (S.D.1979). “The rules of procedure favor resolution of cases upon the merits by trial or summary judgment rather than on failed or inartful accusations.” Johnson v. Kreiser’s, Inc., 433 N.W.2d 225, 226 (S.D. 1988). Under these authorities, the trial court clearly abused its discretion.

Although the majority concedes that Al-lans “did make a more definite statement and elect a remedy”, it errs in deeming the document containing them to be a “response to a motion for summary judgment.” (Conference op. at p. 4). This document was prepared in response to the trial court’s orders dated November 17, 1987, directing Allans, among other things, to make an election between an action for deceit or rescission, and set forth their claims in separate counts. These are matters better considered as amendments to Allans’ pleadings, rather than mere response to a motion for summary judgment. In Friedenthal, Kane and Miller, Civil Procedure, § 512, at p. 267 (1985), it is noted that the modern trend in pleading is not to require a party to make a binding election of remedies in his initial pleading. Instead, such party may amend his complaint unless and until some real prejudice is shown. *61Friedenthal, at 267. This is exactly what Allans were doing in this case.

It has long been settled law in this state that the title of a pleading and its technical form may not be elevated over the substance of a pleading. Van Brunt and Davis Co. v. Harrigan, 8 S.D. 96, 65 N.W. 421 (1895); Green v. Hughitt School Tp., 5 S.D. 452, 59 N.W. 224 (1894). Both the trial court and the majority fail to integrate Allans’ first amended pleading with the subsequent, court-ordered amendment and attachments thereto. The trial court stated “Well, I look at your Amended Counterclaim, which is actually a cross-claim, as being your pleading, period, within that document.” Allans’ attorney pointed out that the damages were specifically set out in his selection of remedies. The trial court replied “Well, I am not going to rifle through the file to try to find documents setting forth and try to piece together the claim for damages.... ” Allans’ attorney attempted to point out to the trial court precisely where the damages were set out: “Well, it sets forth an amount. But in my election deal, Your Honor, I set up the amounts of damages that we would be seeking as a consequential damage as a result of the fraud committed and those documents were provided a month ago....” “Pleadings must be reasonably interpreted; they must be read as a whole and each part must be given the meaning that it derives from the context wherein it appears.” Fundin v. Chicago Pneumatic Tool Co., 199 Cal.Rptr. 789, 152 Cal.App.3d 951 (1984).

In granting motions for dismissal for failure to state a claim upon which relief can be granted, SDCL 15-6-12(b)(5), “a court must view the pleadings and evidence in the light most favorable to the nonmov-ing party.” Janklow v. Keller, 90 S.D. 322, 331, 241 N.W.2d 364, 368 (1976). Such was not done here.

The essential elements of actionable fraud are set forth in Northwest Realty Company v. Colling, 82 S.D. 421, 433, 147 N.W.2d 675, 683 (1966) and Holy Cross Parish v. Huether, 308 N.W.2d 575, 576 (S.D.1981):

[T]hat a representation was made as a statement of fact, which was untrue and known to be 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; and that he did in fact rely on it and was induced thereby to act to his injury or damage.

The election of remedies pleads on action in fraud. The election indicates that Shees-ley and Pfeiffer, by and through their agents, led Allans to believe that the motel was a member in good standing of the Best Western franchise system.* This representation was made while it was known to be untrue. The pleading indicates that the representation was made with the intent to induce Allans to purchase the motel. Finally, the pleading indicates that in reliance upon that representation, Allans purchased the motel and were damaged to the extent of $348,900, consisting of $48,900 in repairs needed to bring the motel up to Best Western standards, and $300,000 of lost revenue due to loss of Best Western business. The Allans adequately pleaded a cause of action in fraud against Sheesley and Pfeiffer. Therefore, it was reversible error for the trial court to dismiss for failure to state a claim upon which relief could be granted.

Sheesley and Pfeiffer argue that Allans’ motion could have properly been dismissed for failure to comply with an order of the court pursuant to SDCL 15-6-41(b). That order directed Allans to elect a remedy, set forth their claims in separate counts and clarify whether they were seeking relief in rescission or deceit. Allans’ final pleading complies with the court order. In the first paragraph of that pleading, Allans, pursuant to SDCL 15-6-10(c), incorporated all their prior pleadings. In the second paragraph, Allans elect “fraudulent deceit” as their remedy and drop the rescission action. The pleading seeks only one claim against Sheesley and Pfeiffer and does so with sufficient particularity, so there was no need for separate counts. Read as a *62whole, in the context of this case, Fundin, supra, Allans’ pleading complied with the trial court’s orders.

Allans’ cross-claim, if not dismissed, obviously presented genuine questions of fact. Any summary judgment regarding their cross-claim was, on this record, erroneous. See, French v. Dell Rapids Community Hosp., 432 N.W.2d 285, 288 (S.D.1988).

In summary, no adequate grounds for dismissal of Allans’ cross-claim existed. As the trial court should be reversed on that basis, analysis of Allans’ remaining arguments is unnecessary. The purpose behind the substitution of modern pleading for the old “bushwhack” type of law pleading was to facilitate decision of cases on their substantive merits, rather than have cases turn on lawyers’ tactical and technical skill. Friedenthal, supra, § 5.1, p. 237-8; 1 Bancroft’s Code Pleading, § 6, p. 17-18 (1926). The majority opinion defeats that purpose, exalting form over substance.

I am authorized to state that Justice HENDERSON joins in this dissent.

Best Western extends franchises only to motels which meet high standards.