author: HUSPENI, Judge.

text:
    STATE of Minnesota, Appellant, v. Stephen Matthew SCHULTZ, Respondent.
    No. A03-1240.
    Court of Appeals of Minnesota.
    March 30, 2004.

      Mike Hatch, Attorney General, St. Paul, MN; and Peter A. MacMillan, Michele R. Wallace, MacMillan & Wallace, PLLP, Minneapolis, MN, for appellant.
    Leonardo Castro, Chief 4th District Public Defender, Barbara S. Isaacman, Assistant Public Defender, Minneapolis, MN, for respondent.
    Considered and decided by TOUSSAINT, Chief Judge, HALBROOKS, Judge, and HUSPENI, Judge.
   OPINION

HUSPENI, Judge.

In challenging an order granting respondent’s petition for expungement of his felony assault conviction records, appellant argues that the district court abused its discretion in exercising its inherent authority to expunge. Alternatively, appellant argues that if any exercise of inherent authority was proper, such authority is limited to expungement of judicial records, and does not extend to records of the executive branch. Because the district court has broad discretion over all court records and agents of the court, we affirm its order to expunge all judicial records pertaining to respondent’s conviction. Because the court’s inherent authority to expunge is limited in cases not involving a petitioner’s constitutional rights, we reverse the portion of the order sealing nonjudicial records maintained by the executive branch. Since all executive agencies party to this action share identical interests, this reversal extends to both appealing and non-appealing executive agencies.

FACTS

On July 23, 1996, 18-year-old respondent Steven M. Schultz was arrested for second-degree assault, a felony under Minn.Stat. § 609.222 (1994). He pleaded guilty to that offense on March 4, 1997, after learning from counsel that his conviction could later be set aside upon good behavior pursuant to the “youthful offender” statute, codified at MinmStat. § 609.166 (1994). Unbeknownst to either Schultz or his attorney, however, the “youthful offender” statute had been repealed in the previous legislative session. 1996 Minn. Laws ch. 408, art. 9, § 10.

Schultz’s prison sentence was stayed for three years subject to several conditions, including service of jail time. During this period, he enrolled in behavioral therapy, improved his vocational skills, and volunteered in his community. He was discharged from probation on March 6, 2000, and the felony was reduced to a misdemeanor.

Schultz subsequently petitioned for ex-pungement of all data related to the offense, claiming that, though the count was ultimately reduced to a misdemeanor, any record check conducted on him would reveal that he had pleaded guilty to a felony. Thus, he asserted, he was unable to find gainful employment or adequate housing.

Both appellant City of Crystal (“the city”) and the State of Minnesota (state) objected to the expungement, arguing (1) the circumstances surrounding Shultz’s conviction do not qualify him for expungement, and (2) the court’s inherent power to expunge records does not extend to the executive branch.

The district court, in granting Schultz’s petition and ordering all public records relating to the arrest, indictment, trial, and subsequent discharge sealed, stated:

There is clear and convincing evidence that sealing the record would yield a benefit to [Shultz] commensurate with the disadvantage to the public and public safety of: (1) sealing the record; and
(2) burdening the court and public authorities to issue, enforce and monitor an Expungement Order (Minn.Stat. § 609A.03, subd. 5(2)).
The court administrator shall notify the following of this order: County Attorney, Crystal City Police Department, Hennepin County Sheriff, and the Bureau of Criminal Apprehension.

Only the city now appeals.

ISSUES

1. Did the district court, in exercising its inherent authority, abuse its discretion by expunging judicial records?

2. Did the district court err in ordering the expungement of executive records?

3. May the City of Crystal assert the rights of parties not before this court?

ANALYSIS

There are two legal bases that provide for the expungement of a petitioner’s criminal records. The first is statutory: a party may petition for expungement if the criminal proceedings were “resolved in favor of the petitioner.” State v. Ambaye, 616 N.W.2d 256, 257 (Minn.2000) (quoting Minn.Stat. § 609A.02, subd. 3). The second basis is the court’s inherent expungement power. Id. This inherent power may be exercised “where the petitioner’s constitutional rights may be seriously infringed by retention of his records,” or, where constitutional rights are not involved, when the court finds “ex-pungement will yield a benefit to the petitioner commensurate with the disadvantages to the public from the elimination of the record and the burden on the court in issuing, enforcing and monitoring an ex-pungement order.” Id. at 258.

The parties agree that Minn.Stat. § 609A.02 (2002) cannot apply to Schultz because the proceedings were not resolved in his favor. See id. at 259 (concluding that the term “in favor of’ “includes verdicts of not guilty and voluntary dismissals, and does not include resolutions where the defendant pleaded guilty”); City of St Paul v. Froysland, 310 Minn. 268, 275-76, 246 N.W.2d 435, 439 (1976) (concluding that the statute was not intended to protect those who pleaded guilty). This court therefore need only address the propriety and scope of a district court’s exercise of its inherent power to grant expungement. Further, because Schultz does not allege that his constitutional rights are involved in this matter, we limit our discussion to the inherent power of the court to grant expungement in the absence of constitutional concerns.

I.

“The exercise of a court’s inherent power to expunge is a matter of equity, and we therefore review the district court’s conclusion under an abuse of discretion standard.” Ambaye, 616 N.W.2d at 261. A district court’s findings of fact will not be set aside unless clearly erroneous. Novack v. Northwest Airlines, Inc., 525 N.W.2d 592, 597 (Minn.App.1995). Clearly erroneous means “manifestly contrary to the weight of the evidence or not supported by the evidence as a whole.” Id.

The city first claims that because Schultz “is only experiencing the fruits of his prior conduct,” the district court abused its discretion when it exercised its inherent authority in any manner or to any extent. Specifically, the city urges that there is no support for the determination of the district court that the benefit to Schultz in obtaining better employment or housing outweighed the burden to the public of eliminating the access of a prospective employer or landlord to Schultz’s criminal history. Our examination of the record, however, reveals support for the district court’s determination on this issue.

Schultz was arrested for second-degree assault shortly after his eighteenth birthday and before graduating from high school. He had had psychological difficulties before the incident, and has since controlled those difficulties through medication. Prior to his guilty plea, Schultz’s public defender mistakenly advised him that his record could be expunged after five years. He has also undergone extensive rehabilitation efforts, including volunteering in the community, treatment, and vocational training. The record reflects no criminal incidents since the 1996 arrest. Further, it is undisputed that Schultz has had difficulty overcoming his employment and housing problems.

We conclude that there is ample support in the record for granting expungement, and that the trial court did not err in concluding that the benefits to Schultz were commensurate with the disadvantages to the public and the burden on the court. As such, we shall not disturb the district court’s expungement of all judicial records relating to Schultz’s conviction. See State v. C.A., 304 N.W.2d 353, 358 (Minn.1981).

II.

The city next argues that even if the district court did not abuse its discretion in determining that expungement was proper, it lacked the authority to seal nonjudicial records possessed by the executive branch. This is the more difficult of the issues raised by the city, and existing case-law addressing the issue does not appear to be entirely consistent. A careful review of the precedent established by both this court and the Minnesota Supreme Court convinces us, however, that the city is correct in its assertions.

In C.A., the supreme court first clearly defined the authority to grant expungement when a petitioner’s constitutional rights are not involved, framing the issue as the “inherent power enabling courts to grant relief when it is necessary to the performance of their unique judicial functions.” Id. at 358. The C.A. court held that expungement may be ordered when “essential to the existence, dignity, and function of a court because it is a court.” Id. (quoting Clerk of Lyon County v. Lyon County Comm’rs, 308 Minn. 172, 176, 241 N.W.2d 781, 784 (1976)). Part of that “function,” the court held, is to control court records and agents of the court to prevent unfairness to individuals. Id.

The C.A. court also stated that, under appropriate circumstances, sheriffs and prosecutors could be considered “agents of the court” and therefore “within the reach of the court’s inherent power to control its internal processes,” id. at 360, and that, to a limited extent, named individuals in police departments could also be subject to orders not to disclose in certain situations. Id. at 361. The court cautioned, however, that because this inherent authority “extends only to its unique judicial functions,” courts must “proceed cautiously” in order to respect the authority of the executive and legislative branches of government. Id. at 358-59.

In State v. P.A.D., 436 N.W.2d 808 (Minn.App.1989), review denied (Minn. May 12, 1989), the district court had denied a petition for expungement, reasoning that because the petitioner alleged no violation of constitutional rights no relief was possible. This court commendably recognized that “although courts are empowered to order expungement, they ‘must proceed cautiously in exercising that authority in order to respect the equally unique authority of the executive and legislative branches of government.’ ” Id. at 810.

Relying upon C.A, however, the PAD. court remanded the matter to the district court, and observed that “trial courts are [not] precluded from ordering that records and materials controlled by the other two branches of government be returned or sealed, if doing so is necessary or conducive to fashioning a meaningful remedy.” Id.

In focusing solely on CA’s caveat that inherent authority to expunge should be exercised with caution and respect for the other branches of government, PAD. appeared to grant far broader inherent powers to expunge than did C.A. Under PAD., the court’s authority to expunge suddenly appeared to extend in cases not involving constitutional rights to any individual or agency and any record provided the benefit to the petitioner was commensurate with any disadvantage to the public or burden on the court. Id. The court in PAD. failed to address what, we conclude, was a critical qualification in C.A: that a court’s authority to expunge under these circumstances “[ejxtends only to its unique judicial functions.” C.A., 304 N.W.2d at 358.

In In re Quinn, the supreme court clarified and re-emphasized the limits on the judicial authority to control other branches of government when neither statutory nor constitutional rights apply. 517 N.W.2d 895, 897-98 (Minn.1994). The petitioner in Quinn, a professional hockey player arrested after allegedly raping a woman in a hotel, attempted to seal his arrest records after the county attorney decided not to press charges. Id. at 897. Both the district court and the court of appeals, relying on C.A., found that the petitioner’s arrest record could be expunged, and his investigative file sealed. Id. Though the supreme court ultimately reversed the court of appeals’ decision because of the Minnesota Data Practices Act, it reinforced C.A’s holding that a court’s inherent authority to expunge without constitutional implications extends only to “unique judicial functions,” and determined that the arrest records at issue were not “judicial records” as required under C.A. See id. at 900.

Recently, in State v. T.M.B., this court relied on Quinn, and recognized the court’s lack of inherent authority to expunge non-judicial executive records absent evidence of an injustice resulting from an abuse of discretion in the performance of a governmental function. State v. T.M.B., 590 N.W.2d 809, 813 (Minn.App.1999), review denied (Minn. June 16, 1999). In so declaring, the T.M.B. court noted that “[t]he function of preparing and maintaining criminal records is a unique constitutional function of the executive branch.” Id. at 812. As such, a court may not intrude upon this function unless such intrusion is essential to the existence, dignity, and function of the court. Id. Expungement, the court held, becomes “essential” only when a petitioner’s constitutional rights have been violated. Id. And although we acknowledged the court’s inherent authority first recognized in C.A. to control court records and agents of the court, we noted that criminal records are not court records, and therefore fall outside the scope of the court’s authority under the separation-of-powers doctrine. Id.

Schultz argues that T.M.B. was wrongly decided, and inappropriately relied on Quinn to come to a conclusion that “flies in the face” of previous caselaw. We cannot agree. In holding that the separation-of-powers doctrine prevents expungement of records held by other branches of government absent evidence that executive agents abused them discretion in the performance of a governmental function, T.M.B. remains consistent with C.A., which limited the court’s inherent authority to “unique judicial functions,” corresponding court records, and agents of the court. C.A., 304 N.W.2d at 358. T.M.B. 's reliance on Quinn to hold that non-judicial records remain outside of the scope of the court’s inherent authority was therefore proper.

To the extent that P.A.D. appears to condone judicial intrusion, without constitutional implications, into the affairs of other branches of government, it must be read cautiously, construed narrowly, and brought within the analysis and rationale of C.A. and Quinn. As indicated earlier, the existing Minnesota caselaw has neither guided nor informed our decision here in a totally consistent manner. We conclude, however, that the important separation-of-powers issues implicated in expungement questions and the public policy concerns present in those questions compel the decision we reach.

Considering the limitations that we conclude have been placed by both the supreme court and this court on the power to order expungement of records possessed by other branches of government, the district court in this case overstepped its authority by ordering the executive branch to seal non-judicial records. As such, that portion of the district court’s order must be reversed.

III.

Because the city is the sole executive agency appealing the district court order, we must now examine whether our reversal should extend to non-appealing agencies. Schultz contends that it. should not because those parties failed to join the appeal, file separate notices of appeal, or file notice of review.

A number of Minnesota cases state the general rule that a reviewing court may not address issues not preserved for - appeal. E.g., Olson v. Lyrek, 582 N.W.2d 582, 584 n. 1 (Minn.App.1998); City of Ramsey v. Holmberg, 548 N.W.2d 302, 305 (Minn.App.1996), review denied (Minn. Aug. 6, 1996). The Minnesota Supreme Court has also recognized that, in general, an appealing party may not assign errors affecting other parties. Mocuik v. Svoboda, 253 Minn. 562, 566, 93 N.W.2d 547, 550 (1958); In re Estate of Wilson, 223 Minn. 409, 413, 27 N.W.2d 429, 431-32 (1947). The city argues, however, that these general rules have a notable exception where the non-appealing parties’ rights are intertwined with those of the appealing party, or where necessary to provide the appellant with full and effective relief.

Minnesota caselaw specifically addressing exceptions to the general non-relief rule is decidedly limited. This court has held that the exception applies only to circumstances where “the ruling on appeal would place the nonappealing parties in a position worse than before the appeal,” such as cases involving jointly liable defendants. Poured Concrete Founds., Inc. v. Andron, Inc., 507 N.W.2d 888,. 892 (Minn. App.1993), review denied (Minn. Jan. 27, 1994). We noted that non-appealing parties should “receive the benefit only if their interests are so intertwined that they are harmed by the result on appeal.” Id. at 892-93.

The city urges us to focus on the “intertwined interests” of the different executive agencies, and the overall harm that would result from allowing one agency to retain public records, while preventing another from doing so. It encourages this court to find guidance in Ex parte Elliot, 815 S.W.2d 251 (Tex.1991), a case decided by the Texas Supreme Court under similar circumstances. In Elliot, the district attorney appealed a trial court’s expungement of all petitioner’s criminal records. 815 S.W.2d at 251. The Texas Court of Appeals sustained the district attorney’s point of error, but limited its reformation of the trial court order to records maintained by him. Id. The Texas Supreme Court reversed the limited reformation, finding that the “law governing expunction of criminal records creates a unique situation in which all persons and agencies party to an expunction action share not only interwoven but identical interests.” Id. at 252. As such, the court reasoned, reversal of the entire district court order was warranted under the circumstances. Id.

Though Elliot has no precedential value in this jurisdiction, we are persuaded by its reasoning and its underlying policy arguments. Expungement by some, but not all agencies, would undermine the “common goals of uniform management of documentation and effective deterrence of recidivism.” Id. Further, a limited reversal would not provide full and effective relief for the appealing party, for it would be “unable to cross-reference its criminal records with those of other agencies.” Id.

When weighing these policy considerations along with the unwarranted judicial intrusion into executive-branch functions, reversal of the entire decision seems justified. The United States Supreme Court has recognized an appellate court’s power to reverse a judgment in toto if the contrary result would work an injustice. See Washington Gas-Light Co. v. Lansden, 172 U.S. 534, 556, 19 S.Ct. 296, 304, 43 L.Ed. 543 (1899). Here, were this court to reverse the district court’s order solely as it pertains to the city, it would “work an injustice” because it would be upholding the expungement of some non-court records held by the executive branch. T.M.B. held that this “intrusion upon the constitutional functions of the executive branch ... is impermissible under the separation of powers doctrine.” 590 N.W.2d at 812-13. As such, the district court’s order expunging all non-judicial records held by executive agencies must be reversed in its entirety.

DECISION

Because the district court has inherent authority over all court records and agents of the court, its order to expunge all court records pertaining to Schultz’s conviction will not be disturbed. But because the court’s inherent authority to order ex-pungement is limited in cases not involving a petitioner’s constitutional rights, we reverse the portion of the district court’s order instructing the sealing of non-judicial records maintained by the executive branch. This reversal extends to both appealing and non-appealing executive agencies.

Affirmed in part and reversed in part.

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

      . There is some debate as to appellant’s proper name in these proceedings. Shultz argues that appellant should be referred to as the Crystal Police Department because other city executive agencies are unaffected by the court’s order. See Minn.Stat. §§ 388.051, subd. 1(c), 487.25, subd. 10 (2002) (felonies prosecuted not by the city attorney’s office, but by the county attorney). Though true, a police department is a component of city government. State v. C.A., 304 N.W.2d 353, 361 (Minn. 1981). As such, it is entirely appropriate for this court to refer to appellant as City of Crystal.

      . We note also that the district court that granted Schultz's petition for expungement was the same court that accepted his guilty plea in 1997.

      . Schultz argues that this court should consider that Ambaye, the most recent supreme court case addressing a court’s authority to expunge, makes no reference to Quinn, and relies instead on earlier cases, such as C.A. Though true, the expungement order in dispute in Ambaye extended only to his indictment and prosecution — in other words, "court records." Ambaye, 616 N.W.2d at 257. Ambaye did not address non-judicial records possessed by another branch of government.


source: Caselaw Access Project

author: KONENKAMP, Justice.

license: Public Domain

text:
    2004 SD 23
    FENSKE MEDIA CORPORATION, Plaintiff and Appellant, v. BANTA CORPORATION, Defendant and Appellee.
    No. 22922.
    Supreme Court of South Dakota.
    Considered on Briefs Jan. 12, 2004.
    Decided Feb. 18, 2004.

      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 appel-lee.
   KONENKAMP, Justice.

[¶ 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 plaintiffs allegations, taken as true, fail to state any viable legal theory to overcome the broad language of the release, we affirm.

Background

[¶ 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 Ban-ta 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:

WHEREAS, a dispute has risen between the parties arising out of the parties’ prior business dealings.
WHEREAS, Banta and Fenske desire to settle such dispute and all other issues in controversy between them relating to or arising out of the dispute and any other matters between them of any kind, upon the terms and conditions herein set forth, and deem such settlement to be in their best interests in order to avoid the expense, inconvenience, and distraction of litigation.
NOW, THEREFORE, Banta and Fenske agree as follows:
1. In consideration of the mutual understandings, covenants and agreements set forth herein, and subject to the full and complete performance thereof, Ban-ta and Fenske agree that all claims, liabilities, obligations, causes of action, and controversies arising out of the dispute and/or any other matter between them are hereby settled.
3. This instrument constitutes and contains the entire understanding and agreement between the parties concerning the subject of this release and supersedes all prior negotiations, agreements or understandings between the parties.
4. Fenske hereby releases and discharges Banta, its predecessors, successors, affiliates, and assigns ... from any and all claims, liabilities, obligations, and causes of action of any kind, whether known or unknown, which Fenske may now or hereafter possess which in any way relate to any goods or services provided by Fenske to Banta prior to the Effective Date.
* * *
6. Banta agrees to pay Fenske the sum of $25,000.
* * *

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 “[wjhether 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.”

Analysis and Decision

[¶ 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.” Schlosser v. Norwest Bank South Dakota, N.A., 506 N.W.2d 416, 418 (S.D.1993) (citation omitted). “[Pjleadings should not be dismissed merely because the court entertains doubts as to whether the pleader will prevail in the action as this is a matter of proof, not pleadings. The rules of procedure favor the resolution of cases upon the merits by trial or summary judgment rather than on failed or inartful accusations.” 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 Oumer Ins. Co. v. Enterprise Rentr-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 ivay 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 Ban-ta 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, “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.”

[¶ 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 have materially affected his settlement with the debtor.

In response, Banta argues that the language of the release that “all claims, liabilities, obligations, and causes of action of any kind, whether known or unknown” clearly bars such claims.

[¶ 14.] In Boman v. Johnson, 83 S.D. 265, 266, 158 N.W.2d 528 (1968), a plaintiff claimed to have an unknown substantial injury, and therefore, the injury was not within the contemplation of the parties when they signed the release. In construing SDC 47.0241, the predecessor of SDCL 20-7-11, the trial court reasoned that a “release would not preclude recovery for injuries not known or suspected to exist when the settlement was agreed upon.” Boman, 83 S.D. at 267, 158 N.W.2d at 530. In affirming, this Court cited with approval language in Aronovitch v. Levy, 238 Minn. 237, 56 N.W.2d 570 (1953), concluding that a release expressly covering unknown injuries does not present a bar “to an action for such unknown injuries if it can be shown that such unknown injuries were not within the contemplation of the parties when the settlement was agreed upon but that, if the parties did in fact intentionally agree upon a settlement for unknown injuries, such release will be binding.” Boman, 158 N.W.2d at 530.

[¶ 15.] Our rationale in Boman was reaffirmed in Flynn v. Lockhart, 526 N.W.2d 743 (S.D.1995). In that case, the plaintiff signed a release absolving the defendant of all claims arising from an accident. Id. at 744. In a motion for summary judgment, the defendant asserted that the release signed by the plaintiff precluded her from bringing a claim resulting from the accident. Id. While in Flynn we eventually determined that summary judgment was appropriate, we stated that “South Dakota has long adhered to the rule that a general release, under certain circumstances, may be voided on the ground of mutual mistake.” Id. at 746 (citation omitted). We further noted that even where the language of a release purports to bar “all known and unknown” claims, such language is “not [a] conclusive impediment ] to voiding a release on grounds of mutual mistake.” Id. at 746-47. Finally, in Park-hurst, we recognized that a release may be avoided where a plaintiff showed “clear and convincing proof of a substantial injury which was not discovered until after settlement.” 1996 SD 19, ¶ 19, 544 N.W.2d at 214 (citation omitted).

[¶ 16.] Nonetheless, for a claim of mutual mistake to prevail in these circumstances, it is necessary to distinguish between claims involving unknown injuries and claims involving unknown consequences of known injuries. Id. ¶ 14 (citing Petersen v. Kemper, 70 S.D. 427, 18 N.W.2d 294, 296-97 (1945)). Fenske’s current action entails the latter. Fenske’s complaint clearly establishes that its injuries were no different when it filed this action than when it earlier executed the release. Fenske’s initial action against Banta and its current action stem from the same injury, Xyan’s failure to completely satisfy the debt it owed to Fenske. While Fenske may have been unaware of all of the consequences of that injury, it was nonetheless aware of the injury.

[¶ 17.] While the burden is light to overcome motions to dismiss for failure to state a claim, plaintiffs must show entitlement to relief through some viable legal theory. Fenske has not met that burden. The language of the release covers the injury Fenske now claims it suffered. Fenske was aware of that injury before signing the release, even if it was not aware of all the consequences it might suffer as a result of that injury. Furthermore, Fenske has not specifically alleged facts to show that it was induced into signing the release by fraudulent behavior. Thus, we are satisfied that the circuit court did not err when it dismissed Fenske’s complaint for failure to state a claim.

[¶ 18.] Affirmed.

[¶ 19.] GILBERTSON, Chief Justice, and ZINTER and MEIERHENRY, Justices, and MILLER, Retired Justice, concur.

[¶ 20.] MILLER, Retired Justice, sitting for SABERS, Justice, disqualified.

       The federal courts hold likewise in interpreting Rule 12(b)(6), identical to our Rule 12(b)(5). See, e.g., Grider v. Texas Oil & Gas Corp., 868 F.2d 1147, 1148 (10thCir.), cert. denied, 493 U.S. 820, 110 S.Ct. 76, 107 L.Ed.2d 43 (1989) ("beyond doubt” that non-movant "can prove no set of facts’’).


author: MEIERHENRY, Justice.

text:
    2004 SD 26
    FIRST DAKOTA NATIONAL BANK, Plaintiff and Appellee, v. PERFORMANCE ENGINEERING AND MANUFACTURING, INC., Fred L. Thurman, Defendants, and State Steel Supply Company, Defendant and Appellant.
    No. 22888.
    Supreme Court of South Dakota.
    Argued on Jan. 14, 2004.
    Decided Feb. 25, 2004.

      Michael Henderson, Scott Perrenoud of Cadwell, Sanford, Deibert & Garry, Sioux Falls, South Dakota, Attorneys for plaintiff and appellee.
    Timothy Clausen, Barbara F. Orzechow-ski of Klass, Stoik, Mugan, Villone, Phillips, Orzechowski, Clausen & LaPierre, Sioux City, Iowa, Attorneys for defendant and appellant.
   MEIERHENRY, Justice.

[¶ 1.] First Dakota National Bank and State Steel Supply Company were secured creditors of Performance Engineering & Manufacturing, Inc. (PEM). First Dakota sought declaratory relief asking the trial court to determine the order of priority to PEM’s accounts receivables. Both First Dakota and State Steel claimed a valid first lien. Both parties filed motions for summary judgment. The trial court granted summary judgment in favor of First Dakota. State Steel appeals. We affirm.

FACTS

[¶ 2.] CorTrust Bank, First Dakota, and State Steel had perfected security interests in assets, including accounts receivables, of PEM. PEM experienced financial difficulties and was failing to meet its debt obligations. State Steel agreed to advance funds to PEM to complete work in progress. In exchange for State Steel’s infusion of funds, First Dakota agreed to subordinate its prior perfected security interest in PEM’s accounts receivables in favor of State Steel for the time period commencing on February 22, 2001 and ending on May 23, 2001 and limited to a maximum amount of $120,000. Subsequent to the subordination agreement, State Steel and two other non-party creditors filed a Chapter 11 Bankruptcy Petition forcing PEM into bankruptcy on April 3, 2001. Prior to the bankruptcy filing, State Steel had advanced PEM $42,294. Subsequent to the bankruptcy filing, PEM sought permission from the Bankruptcy Court to allow State Steel to advance additional funds to PEM. On May 3, 2001, the bankruptcy court approved the postpetition financing which included the approval of a stipulation agreement between State Steel and CorTrust Bank. The court’s approval order authorized State Steel to provide PEM with up to $64,500 in additional post-petition funds in order for PEM to fill several pending orders. The court’s order also provided that CorTrust would receive the first $5,552 of accounts receivables and that State Steel would thereafter receive the lesser of $64,500 or the amount of its post-petition advancements to PEM. Additionally, State Steel was to procure hazard insurance for PEM. Although First Dakota had notice and appeared at the bankruptcy hearing regarding the approval of the post-petition financing and stipulation, First Dakota was not a party to the stipulation agreement.

[¶ 3.] State Steel infused over $190,000 into the financially troubled PEM. Of the total, State Steel advanced $120,000 during the February to May timeframe, and was reimbursed that amount by First Dakota thereby satisfying their subordination agreement. In addition, State Steel advanced at least $64,500 after the bankruptcy stipulation was approved plus $5,879 for insurance. On July 5, 2001, the Bankruptcy Court entered an order abandoning various properties from the bankruptcy estate, including the accounts receivable funds. A portion of the funds in the amount of $45,640 is the subject of this dispute. Both State Steel and First Dakota claim entitlement to the funds. State Steel raises the following issue:

ISSUE
Whether First Dakota as a third party beneficiary was bound by the Stipulation Agreement between CorTrust and State Steel.

STANDARD OF REVIEW

[¶ 4.] Review of summary judgment is well-settled:

In reviewing a grant or a denial of summary judgment under SDCL 15 — 6—56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and [established] entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party [,] and reasonable doubts should be resolved against the moving party.... Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied.

Balster v. Wipf, 2003 SD 135, ¶ 8, 672 N.W.2d 475, 478 (citing Hasse v. Fraternal Order of Eagles # 2421, 2003 SD 23, ¶ 7, 658 N.W.2d 410, 412).

DECISION

[¶ 5.] State Steel claims that First Dakota should be bound by the stipulation agreement between State Steel and CorTrust as a third party beneficiary. State Steel asserts that First Dakota is an intended beneficiary citing to the definition of beneficiary found in Restatement of Law Second — Contracts § 302(1) (1981). The Restatement provision sets forth the circumstances under which one would be considered an intended beneficiary of a promise:

(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Id. State Steel claims that the requirements of the Restatement provision were met. State Steel claims that all of the parties to the Stipulation intended that the secured creditors would benefit directly by the infusion of new funds. The stipulation provided that secured creditors were to be paid “upon accounts receivable generated as a result of pending orders.” State Steel argues that since First Dakota was a “secured creditor on the Debtor’s accounts receivables,” the agreement was, in part, made for First Dakota’s benefit. Another benefit to First Dakota was being named on the hazard insurance policy State Steel purchased for PEM. Although the evidence supports State Steel’s claim that First Dakota is a beneficiary of the stipulation agreement, the real inquiry is whether the stipulation binds First Dakota to its terms.

[¶ 6.] State Steel asserts that First Dakota is bound by the terms of the agreement and should receive the benefits as well as burdens of the agreement. State Steel relies on Haakinson & Beaty Co. v. Inland Ins. Co., 216 Neb. 426, 344 N.W.2d 454, 459 (1984) for support of the proposition that a third party beneficiary to an agreement is “subject to all of its burdens.” Id. In Haakinson, the third party beneficiary contested the forum selection clause in a bond. Id. The court stated “[i]t would be a strange situation if one could sue on a contract and gain all of its benefits, and yet be permitted to ignore any of its obligations.” Id. at 459. Further, State Steel points to the Nebraska Supreme Court’s decision in Shelter Insurance Cos. v. Frohlich, 243 Neb. 111, 498 N.W.2d 74 (1993) as further support to hold third party beneficiaries subject to the obligations under contracts from which they benefit. In Shelter, the court found that a third party beneficiary of an automobile policy was bound by the policy’s subrogation clause. Id. at 78. There the court said the claimant “became a third-party beneficiary of the policy or insurance contract between [insured] and [insurer] when [insurer] paid [claimant’s] medical expenses as required by the policy which [insurer] had issued to [insured]. Therefore, [claimant], by accepting a contractual benefit, is bound by the subrogation clause contained in the insurance policy.” Id. These cases do not address the issue in the present case. The courts in Haakinson and Shelter merely ruled that as beneficiaries exerting their rights under the contracts, they were bound by the provisions under which they claimed those rights. No liabilities or risks were placed on the beneficiaries.

[¶ 7.] Distinguishable in the present case is that First Dakota is not claiming any rights under the Stipulation Agreement. In fact, the interpretation advanced by State Steel gives no new rights to First Dakota but instead subordinates its priority rights to State Steel up to the $64,500. The attempt is to impose liability on First Dakota who is not a party to the agreement.

[¶ 8.] In two cases similar to the present case, federal courts have held that a third party cannot be held liable under a contract to which it is not a party. Motorsport Engineering, Inc. v. Maserati SPA, 316 F.3d 26 (1stCir.2002); Abraham Zion Corp. v. Lebow, 761 F.2d 93 (2ndCir.1985). In Motorsport, an auto dealer brought suit against an auto distributor. Motorsport had never had a contract with the distributor named in the case. However, Motor-sport had previously had a contract with another distributor in which the named distributor was an intended beneficiary. Motorsport argued that the named distributor “was ‘in reality’ a party to the contract because it was given explicit rights under the contract.” Motorsport, 316 F.3d at 29. The Motorsport court stated:

This argument rests on a misunderstanding of contract law. A third-party beneficiary is one who is given rights under a contract to which that person is not a party. Obligations under such a contract, including any obligations to third parties, are created by agreement between the signatories ... If the signatories so intend, a third party can enforce the contract against the signatory so obligated. But the third-party beneficiary, who did not sign the contract, is not liable for either signatory’s performance and has no contractual obligations to either.

Id. (internal citations omitted). In Abraham, a clothing manufacturer sought to bar a designer from using the designer’s own name on the labels of his designs. The manufacturer based its claim on the fact that it had contracted to use the name with other member’s of the designer’s family. The designer himself was not a party to the agreement between his family and the manufacturer. The manufacturer asserted however that the designer was a third-party beneficiary to the agreement so was bound by it. The Abraham court stated:

Plaintiffs contention that [Defendant] was a third-party beneficiary of that agreement, even if correct, would not advance their cause, since the question is not [Defendant’s] right to enforce the agreement but rather the right of the plaintiffs to enforce the agreement (as they construe it) against [Defendant].

Id. at 103 (citations omitted).

[¶ 9.] In addition to the federal cases, the comment to § 9-339 of the Uniform Commercial Code supports the premise that a person whose priority rights are subordinated must be a party to the agreement. The section states, “This article does not preclude subordination by agreement by a person entitled to priority.” Id. The Comment to § 9-339 emphasizes that “[o]nly the person entitled to priority may make [a subordination] agreement: a person’s rights cannot be adversely affected by an agreement to which the person is not a party.” Id. First Dakota’s priority could not have been subordinated without it being a party to the agreement. It is undisputed that it was not a party to the stipulation agreement.

[¶ 10.] Based on the foregoing discussion, we hold that even if First Dakota was a third-party beneficiary to the Stipulation Agreement, State Steel could not subordinate First Dakota’s secured priority interest without First Dakota being a party and agreeing to the subordination.

[¶ 11.] Because of this holding we need not address the other issues raised on appeal.

[¶ 12.] Affirmed.

[¶ 13.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and ZINTER, Justices, concur.

      . Although State Steel assigned as error the trial court's conclusion that First Dakota was not a party to the stipulation, State Steel states in its Statement of Undisputed Material Facts attached to the Summary Judgment Motion that First Dakota was not a party to the stipulation. Since this fact was not disputed in the lower court, it will not be addressed on appeal. Paragraph 11 of State Steel's Statement of Undisputed Material Facts states:
      FDNB was not a party to the stipulation that served as the basis for the Bankruptcy Court's approval of the post-petition financing by State Steel. However, FDNB had notice and was represented by counsel at the hearing on PEM's Motion for Approval of Post-Petition Financing. Furthermore, FDNB filed a response to PEM’s said Motion in which it stated: “First Dakota National Bank would not resist a third party grant of post-petition credit to the debtor after entry of an order for relief, upon reasonable terms, and for purposes reasonably calculated to benefit the estate and its creditors. ..

      . We note that the parties have not alleged that the Bankruptcy Court's Order affected the priority rights of the parties. In other words, this is not an issue of a court-ordered reorganization of priorities for post-petition financing. The issue presented to this Court is the effect of a stipulation upon a third party's security interest.


author: CARTER, Justice.

text:
    Kathleen M. JACKSON, Appellee, v. Janice SCHRADER, as Executor of the Estate of Martha C. Schrader, and Janice Schrader, Individually, Appellant.
    No. 01-2056.
    Supreme Court of Iowa.
    Nov. 13, 2003.
    Rehearing Denied March 16, 2004.

      Gregory Siemann of Green, Siemann & Greteman, Carroll, for appellant.
    Russell Wunschel of Wunschel Law Firm, P.C., Carroll, for appellee.
   CARTER, Justice.

Janice Schrader, the daughter of Martha Schrader, deceased, who enjoyed a confidential relationship with her mother, appeals from a decree requiring her to reimburse Martha’s estate for sums placed in joint tenancy with Janice or gifted to Janice during the time that the confidential relationship existed. Janice’s sister, Kathleen, cross-appeals urging that a larger reimbursement of Martha’s estate should have been ordered.

After reviewing the record and considering the arguments presented, we conclude that the standard for rebutting a presumption of undue influence that was stated in In re Estate of Todd, 585 N.W.2d 273, 275 (Iowa 1998), is unreasonably demanding and, if followed, may cause the invalidation of bona fide transfers to a dominant party in a confidential relationship. In applying a more appropriate standard, which focuses on whether the end result was the product of undue influence, we conclude on our de novo review that the evidence fails to show that many of the challenged transactions were the product of undue influence. The district court’s decree requiring reimbursement of Martha’s estate is reversed in part and affirmed in part. With respect to the additional transactions of which Kathleen complains on her cross-appeal, we affirm the judgment of the district court.

Kathleen and Janice are the children of Elmer and Martha Schrader who were married for more than fifty years. At least as early as 1973, substantial animosity developed between Kathleen and the other family members. Kathleen on two occasions sued Elmer and Martha for monies owed on a note and for conversion of personal property. When Elmer and Martha entered Kathleen’s home during her absence, she caused them to be arrested. Following her father’s death, Kathleen brought an action asserting a claim to certain real and personal property. Martha later sued Kathleen for forcible entry and detention of real property.

Elmer and Martha executed wills on April 19, 1974. The will of each gifted $1 each to Janice and Kathleen and designated the surviving spouse as the residual beneficiary. Each will provided that, if Elmer and Martha died in a common disaster, all property bequeathed and devised to a surviving spouse should go to Janice. In 1982 Elmer and Martha made Janice the contingent beneficiary on a life insurance policy. After Elmer’s death, this was changed so as to make Janice the sole beneficiary. Elmer died in August 1992. At this time, he and Martha held nearly all of their property in joint tenancy. Ten certificates of deposit totaling $189,235 were held in joint tenancy. These certificates were designated as payable to Janice on the death of the surviving joint tenant. Prior to his death, Elmer had made gifts totaling $28,000 to Janice and none to Kathleen.

Shortly following Elmer’s death, an attorney advised Martha that, if she disclaimed certain property, she could effect a substantial tax savings in the next generation. She learned that this would result in half of her property passing to Kathleen. She rejected the idea for that reason. The attorney also advised Martha at this time that, except for the limited situation involving simultaneous death, her will did not provide for a gift over in the event her spouse did not survive her. He advised her that the consequence of this omission would be that her property would pass equally to Janice and Kathleen on her death. Finally, in that meeting, the attorney counseled Martha with respect to the tax benefits of annual gifting of $10,000 to her children. The attorney testified at trial that Martha was receptive to this idea with respect to Janice but not as to Kathleen.

Sometime thereafter, Martha, together with Elmer’s brother, Ray, went to a different attorney for purposes of making a new will. She advised that attorney that she was inclined to give Kathleen only $1.00, but that in order to avoid litigation she would bequeath to her the sum of $100,000. Martha indicated that the balance of her property was to go to Janice. On September 29, 1992, a newly drafted will reflecting those terms was executed by Martha. The attorney drafting the will testified that she appeared to be fully competent and understood the terms of the will as he went over each of the paragraphs with her. They were alone at the time of this discussion. At this same meeting, the attorney prepared a power of attorney authorizing Janice to act as attorney in fact for Martha in the carrying out of her affairs.

Martha made eight annual gifts of $10,000 to Janice between December 10, 1992, and January 4, 1999. The first two checks were signed by Martha, and the last six checks were signed “Martha Schrader by Janice M. Schrader POA.” Prior to Martha’s death, the certificates of deposit that had been jointly owned with Elmer and were payable on death to Janice matured. Subsequently, new certificates of deposit totaling approximately $399,000 were purchased by Martha and placed in joint tenancy with Janice. Martha died on July 17,1999.

In 1986 Martha had been diagnosed with a brain tumor. The area of the brain affected involved speech, memory, and comprehension of oral and written communication. In 1990 radioactive seeds were implanted in the tumor, but her problems continued, and in addition, she developed a seizure disorder. Martha had a second surgery to implant radioactive seeds in April of 1994.

On April 7, 1992, Martha was tested by a clinical psychologist. She scored in the impaired range across the board on all tests, and her full scale IQ was 64, in the mild mental retardation range. The clinical psychologist testified at trial that Martha had a significant global impairment and would require assistance in supervision on a daily basis for her own safety. Other doctors testified that Martha suffered from dementia. Although one doctor testified that she had the mental capacity to conduct her ordinary financial affairs, other doctors testified that she lacked such capacity.

Kathleen contested Martha’s will of September 1992. The jury found that Martha was not competent to execute a will at that time. The jury also found that the will was the product of undue influence. A motion for judgment notwithstanding the verdict was granted with regard to the undue-influence finding but denied with respect to the finding of lack of competency. The court of appeals affirmed the district court on the issue of Martha’s competency to execute a will and did not reach the issue involving undue influence.

In addition to contesting Martha’s will, Kathleen also challenged several inter vi-vos transactions between Martha and Janice in this equitable proceeding. After hearing evidence, the district court expressed the view that Martha was not shown to have been incompetent to execute the challenged transactions until sometime near the end of 1996. The court observed in this regard:

Martha was not an average late Twentieth Century American woman. She apparently functioned quite well in her own role, but she had little desire or need to expand beyond that role. There was probably no time in her life when she would have performed well in fifteen-minute interviews with a psychiatrist or in the type of testing which was conducted during her illness. To a substantial extent she was tested with respect to matters which were irrelevant to her life. The court therefore gives the doctors’ opinions less weight than they would have in most cases.
There are undoubtedly many kinds of financial transactions which Martha would have found it difficult to understand. The transactions at issue in this case, however, were not novel or complicated. They involved matters which were part of Martha’s life and which were important to her. She was able to understand them and to decide what she wanted to do with respect to them.
Martha’s illness caused some variation in her mental functioning. The jury found that she lacked testamentary capacity at the time when she executed her will. Her mental functioning was impaired for a short time before her last surgery. She had the mental capacity to engage in ordinary and familiar financial transactions, however, during most of the time from her husband’s death until the end of 1996. The plaintiff has not shown that she lacked such mental capacity at any specific time during that period.

On the matter of the alleged undue influence, the court concluded that a confidential relationship did exist between Martha and Janice, which rendered Martha dependent on Janice’s judgment. In so concluding, the court stated:

The defendant is the daughter who stayed at home, worked for her parents from an early age and served her parents throughout the rest of their lives. As a-result, her relationship with her parents was very close. After Elmer Schrader died, Martha relied on the defendant for assistance in every aspect of her life. The defendant did not seek to dominate Martha, but she became the dominant person in the relationship because Martha needed her and trusted her.

Although the court intimated that the evidence showed a lack of a disposition by Janice to unduly influence Martha and a result unaffected by undue influence, it concluded that the standard for rebutting the presumption of undue influence that arises from a confidential relationship, as set forth in Todd, 585 N.W.2d at 275, also required a showing that the dependent person in the relationship was not susceptible to undue influence and that the dominant person in the relationship lacked opportunity to influence the transaction. Because the existence of a confidential relationship presupposes the presence of those two conditions, the district court concluded that under the Todd criteria the presumption of undue influence was not rebutted.

As a result of its determination on undue influence, the court concluded that the value of the joint-tenancy-property interests created during the confidential relationship must be returned to the estate by Janice together with interest. Janice was also required to reimburse the estate for the value of eight annual $10,000 cash gifts to her, gifts of jewelry and a cameo, and gifts made to Tom and Terry Dohse in the sum of $5500 from Martha’s funds. All of the latter transactions occurred during the confidential relationship.

Certain deductions from the amounts to be reimbursed were allowed by the court. The value of the certificates of deposit owned jointly by Elmer and Martha and made payable to Janice on death of the surviving joint tenant was subtracted from the joint-tenancy property for which reimbursement was required. It was the court’s theory that those certificates were simply rolled over into new certificates of title owned jointly by Martha and Janice.

The court also concluded that Janice was entitled to retain the proceeds of a life insurance policy of which she had been made beneficiary by Martha because this was a continuation of the beneficiary status that Janice had enjoyed prior to the existence of the confidential relationship. Also, because Janice had invested $3000 of her own funds in a jointly owned automobile, the court reduced the amount of reimbursement for the car’s value by that amount. Under the district court’s decree, Janice was required to reimburse Martha’s estate nearly $550,000. An existing loan to the estate from Janice in the sum of $355,345.28 was set off against that sum.

I. Burden of Proof.

Because the case was tried by equitable proceedings in the district court, our review of the facts on appeal is de novo. Iowa R.App. P. 6.4; see In re Receivership of Mt. Pleasant Bank & Trust Co., 526 N.W.2d 549, 553 (Iowa 1995). We give weight to the district court’s factual findings; however, we are not bound by them. Mt. Pleasant Bank, 526 N.W.2d at 553.

II. Respective Burdens of Proof in Actions to Avoid Inter Vivos Transfers as a Result of Alleged Undue Inñuence.

The respective burdens of proof placed on the parties in actions to avoid inter vivos transfers as a result of alleged undue influence were thoroughly reviewed in Todd, 585 N.W.2d 273 (Iowa 1998). That case involved a challenge to both a will and a series of inter vivos transfers as the result of alleged undue influence. The jury’s verdict was for the contestants as to both the will and the inter vivos transfers.

The appellant challenged the district court’s instructions to the jury on the burden of proof for avoiding an inter vivos transfer. We held that, although the burden of proof in assailing the will was by a preponderance of the evidence, the burden of proof in assailing the inter vivos transfers was by clear, convincing, and satisfactory evidence. Todd, 585 N.W.2d at 276. Based on that conclusion, we affirmed that portion of the judgment setting aside the will but granted a new trial on the challenge to the inter vivos transfers.

In discussing the respective burdens of proof, we stated in Todd:

To summarize, contestants seeking to set aside a will based on undue influence carry the burden of proving the essential elements of the action by a preponderance of the evidence. Persons seeking to set aside inter vivos transfers carry a higher burden of proving their cause of action by clear, satisfactory and convincing evidence.

Id. at 277 (footnote omitted). We further stated:

Where a confidential relationship is found to exist, and inter vivos conveyances are challenged, the burden of proof shifts to the benefited parties to prove — by clear, satisfactory, and convincing evidence — their freedom from undue influence.

Id. (footnote omitted). Following this reference to confidential relationships, we added a footnote in Todd, which declared:

Four elements must be proven to rebut a presumption of undue influence being exerted by a person in a confidential relationship with the grantor.... [T]he grantee must prove (1) the grantor’s lack of susceptibility to undue influence; (2) the want of opportunity to exercise such influence and effect the wrongful purpose; (3) the lack of a disposition to influence unduly for the purpose of procuring [an] improper favor; and (4) a result clearly unaffected by undue influence.

Todd, 585 N.W.2d at 273 n. 5. As authority for this proposition, we relied on the court of appeals decision in In re Estate of Baessler, 561 N.W.2d 88, 92 (Iowa Ct.App.1997).

It appears without dispute in the present case that a confidential relationship existed between Martha and Janice at the time of the inter vivos transactions that were voided by the district court. Although the district court intimated that Janice was not disposed to influence Martha unduly and that the result did not appear to be the product of undue influence, it believed that the first two conditions of the four-pronged test in Todd, i.e., lack of susceptibility and want of opportunity, had not been rebutted. The district court commented, and we agree, that because those two conditions form the basis for a confidential relationship the effect of requiring all four of the stated propositions to be rebutted is to render the presumption conclusive.

Our acceptance of the court of appeals’ criteria in Baessler was not necessary to the decision in Todd. Upon further reflection, we are convinced that the Baessler criteria provide an unrealistic standard for rebutting the presumption of undue influence that arises from a confidential relationship. We are satisfied that, notwithstanding the susceptibility of a grantor to undue influence and the opportunity of a grantee to exercise such influence, it is possible to have an inter vivos transfer between such parties that is not the product of undue influence.

In reaching this result, we draw in part on our legislature’s directives with regard to the public-policy implications of fiduciary self-dealing in its enactment of the Probate Code. Iowa Code section 633.155 recognizes that self-dealing by a fiduciary in a probate setting may occur if approved by court order. See In re Guardianship of Jordan, 616 N.W.2d 553, 558 (Iowa 2000) (recognizing self-dealing by fiduciaries is permissible if approved by court on finding of an adequate reason for the transaction). We are similarly satisfied that all transactions between persons in a confidential relationship should not be prohibited in an inter vivos setting. That appears to have been the rule under our holdings prior to Todd.

In First National Bank v. Curran, 206 N.W.2d 317 (Iowa 1973), we stated the rule for rebutting the presumption of undue influence arising from a confidential relationship as follows:

When a confidential relationship is shown, the person in whom the trust is reposed is not merely required to go forward with the evidence; he has the burden of persuasion to uphold the transfers. His burden is heavy. He must produce “clear, satisfactory and convincing evidence.” He is required to prove “entire good faith on his part and free, voluntary, and intelligent action on the part of the grantor.”

Curran, 206 N.W.2d at 322 (emphasis added) (citations omitted). Similarly, in Merritt v. Easterly, 226 Iowa 514, 284 N.W. 397 (1939), we stated the rule as follows:

Since that [confidential] relationship existed between the deceased and the appellant, the burden was upon the appellant to rebut the presumption of overreaching on his part, and to affirmatively establish that in his acquisition of property, in the transaction in controversy, he took no advantage of the deceased by reason of their relationship, but that she acted voluntarily with freedom, intelligence and a full knoioledge of all of the facts.

Merritt, 226 Iowa at 530, 284 N.W. at 405 (emphasis added).

We believe that the statements which we have italicized from the Curran and Merritt cases more accurately reflect the correct standard for rebutting the presumption of undue influence that flows from a confidential relationship than our dictum in Todd. Consequently, we hold that the rule for rebutting the presumption of undue influence arising from a confidential relationship only requires the grantee of a transaction to prove by clear, satisfactory, and convincing evidence that the grantee acted in good faith throughout the transaction and the grantor acted freely, intelligently, and voluntarily. That is the standard which we apply in considering the transactions that have been challenged in the present case.

There are three categories of transactions that are affected. The first category includes the transactions in which Martha demonstrated a clear propensity outside of the confidential relationship to reward Janice on her death vis-a-vis that type of transaction. It has been shown by clear, satisfactory, and convincing evidence that those transactions were not the product of undue influence by Janice and fairly reflected Martha’s free-will determination. These transactions include all of the joint-tenancy property, including bank accounts, investment accounts, and certificates of deposit. They also include the life insurance and annuities. They do not include the gifts to Tom and Terry Dohse, the gifts to Janice of jewelry and a curio cabinet, or the profit on the sale of a tractor. As to the latter transactions, there is no specific proof of Martha’s wishes existing outside of the confidential relationship, and the presumption of undue influence has not been rebutted.

The third category of property includes the annual gifting of $10,000 to Janice. As to those transactions, we believe it has been established by clear, convincing, and satisfactory evidence that they were made pursuant to a course of estate planning initiated of Martha’s own volition and carried out with Janice’s assistance consistent with Martha’s wishes. These gifts have not been shown to have been the product of undue influence by Janice.

III. The Mental Competency Issue.

Because the district court decided the case primarily in Kathleen’s favor, based on the claims of undue influence, it did not discuss in detail the claim that Martha lacked the necessary mental competency to carry out the challenged inter vivos transactions. Dispositive of this issue, however, is the finding of the district court, previously discussed, that from the time of her husband’s death Martha had the mental capacity to engage in ordinary and familiar financial transactions such as those that are being contested by Kathleen. Based on that premise, the district court properly disposed of the competency issue on the ground that Kathleen had failed to show that Martha lacked mental capacity at any specific time during that period. We are in agreement with those findings and reject the arguments based on alleged lack of mental competency.

Kathleen urges that our conclusion must be otherwise because, at all times material to the challenged transactions, Janice was acting under a power of attorney executed by Martha on the same day that the jury in the will-contest case found her to be lacking in the mental competency required to make a valid will. Because the level of competency required for inter vivos transactions is even higher than that required for testamentary dispositions, see In re Estate of Faris, 159 N.W.2d 417, 420 (Iowa 1968), Kathleen urges that the power of attorney must be found to be invalid under principles of issue preclusion. Assuming that the power of attorney is found to be invalid on that theory, that would not ipso facto invalidate the challenged inter vivos transactions. The absence of an express agency relationship does not preclude the creation of an implied agency relationship. We have recognized that

“[t]he relation of agency does not depend upon an express appointment and acceptance thereof, but it may be, and frequently is, implied from the words and conduct of the parties and the circumstances of the particular case.”

Greenlease-Lied Motors v. Sadler, 216 Iowa 302, 307, 249 N.W. 383, 386 (1933)(quoting 2 C.J. 435 § 32). To establish an implied agency

“[djirect evidence is not indispensable,- — indeed, frequently is not available,- — but instead, circumstances may be relied on, such as the relation of the parties to each other and their conduct with reference to the subject-matter of the contract.”

State v. Reynolds, 209 Iowa 543, 546, 228 N.W. 283, 285 (1929)(quoting 21 Ruling Case Law 820). We find that all of the transactions challenged in this case were carried out under circumstances that support a finding that an implied agency relationship existed under which Janice was acting as Martha’s agent with her approval and consent.

IY. The Issues on Cross-Appeal.

Kathleen’s cross-appeal involves the certificates of deposit, which the district court concluded were the result of rolling over previously existing certificates of deposit payable to Janice on death. Kathleen urges that it is impossible to trace the funds so as to sustain the conclusion of the district court. We need not answer this question because, like the other joint-tenancy property, we conclude that these certificates of deposit were placed in joint tenancy as a result of Martha’s exercise of her free will and the transactions were not influenced by Janice.

V. Conclusion.

That portion of the district court’s decree requiring Janice to reimburse the estate for gifts to Tom and Terry Dohse, gifts to Janice of jewelry and a curio cabinet, and the profit from the sale of a tractor is affirmed. The district court’s decree is reversed with respect to any other sums for which reimbursement of the estate was required. The portion of the district court’s decree requiring that Martha’s estate be made the beneficiary of the annuities is also reversed.

The amount of reimbursement by Janice shall be as follows (the figures include interest as computed by the district court):

Gifts to Tom and Terry Dohse $5971.36 Gifts of jewelry to Janice $4039.15 Gift of a curio to Janice $1083.63 Profit realized on sale of tractor $2593.70

These items totaling $13,687.84 shall be reconciled with amounts to be recouped by Janice from the estate for her satisfaction of the district court’s original degree pen-dente lite. See Schwennen v. Abell, 471 N.W.2d 880, 883-85 (Iowa 1991). Costs of appeal are assessed twenty percent to appellant and eighty percent to appellee.

AFFIRMED IN PART AND REVERSED IN PART ON APPEAL; AFFIRMED ON CROSS-APPEAL.

All justices concur except WIGGINS, J., who takes no part.


author: WIGGINS, Justice.

text:
    In the Matter of the PROPERTY SEIZED FOR FORFEITURE FROM Lula M. WILLIAMS, Lula M. WILLIAMS, Appellant.
    No. 02-1937.
    Supreme Court of Iowa.
    Jan. 22, 2004.
    Rehearing Denied March 19, 2004.

      Robert A. Wright, Jr., Wright and Wright, Des Moines, for appellant.
    Thomas J. Miller, Attorney General, Kevin Cmelik, Assistant Attorney General, Patrick C. Jackson, County Attorney, and Amy K. Snook-Beavers, Assistant County Attorney, for appellee State of Iowa.
   WIGGINS, Justice.

The district court ordered $7,559.39 in United States currency forfeited to the State of Iowa from Lula M. Williams and overruled her motion for sanctions. Williams claims (1) the district court should have dismissed the forfeiture action, because the State did not file a timely notice of pending forfeiture pursuant to Iowa Code section 809A.8(l)(a)(l) (2001); (2) the Iowa Court of Appeals’ dismissal of a prior action brought by the State to forfeit the same currency precluded the bringing of the second forfeiture action under the principles of res judicata; and (3) she is entitled to sanctions under Iowa Rule of Civil Procedure 1.413(1), because the State’s commencement of the second forfeiture action was not well grounded in fact or law. We conclude the notice of pending forfeiture was untimely and the forfeiture action should be dismissed. We agree with the district court’s decision overruling Williams’ motion for sanctions. Thus we affirm in part, reverse in part, and remand with directions.

I. Background Facts and Proceedings.

On May 1, 1998, officers from the Burlington Police Department searched Williams’ home pursuant to a search warrant. The authorities seized various items of personal property, including $7,559.39 in United States currency. The State charged Williams with two counts of possession of a controlled substance in violation of Iowa Code section 124.401(5). The State eventually dismissed the criminal charges.

On May 4, 1998, Williams filed a claim for the return of the seized property. She refiled her claim on June 8, 1998, and January 4, 1999. On January 19, 1999, the State prepared and filed a notice of pending forfeiture under Iowa Code section 809A.8(2)(&). The notice alleged the State seized the property for evidentiary purposes on May 1, 1998, and for forfeiture purposes on the date of the notice, January 19, 1999. On January 29 Williams filed a resistance to the State’s notice of pending forfeiture. On March 5 the State filed an in rem judicial forfeiture complaint under Iowa Code section 809A.13. The State sought to forfeit the currency, one fax machine, three pagers, one large water bong, and all the drugs seized. Williams filed an answer requesting that the State return the currency, fax machine, and pagers.

The district court held the forfeiture hearing on December 28, 1999. Williams made an oral motion to dismiss the proceedings, because the court held the hearing on the in rem forfeiture complaint more than sixty days after service of the complaint. On January 3, 2000, the district court issued two orders. The first order overruled the motion to dismiss. In the second order the court determined the fax machine and pagers were not subject to in rem forfeiture under Iowa Code section 809A.4(2)(6) and ordered the State to return the fax machine and pagers to Williams. The court determined the currency was subject to in rem forfeiture and forfeited the currency to the State.

Williams appealed the decision forfeiting the currency. This court referred the appeal to the court of appeals. On May 15, 2002, the court of appeals concluded the State failed to show good cause as to why the district court did not hold the hearing on the forfeiture within sixty days after service of the complaint and dismissed the forfeiture action. In re Property Seized from Williams, 646 N.W.2d 861, 867 (Iowa Ct.App.2002). Procedendo issued on June 17, 2002. The district court took no action in response to the procedendo.

On July 30, 2002, the State prepared a second notice of pending forfeiture under section 809A.8(2)(6). This notice started a second in rem forfeiture against the same currency. The second notice of pending-forfeiture alleged the State seized the currency for evidentiary purposes on May 1, 1998, and for forfeiture purposes on the date of the notice, July 30, 2002. The State served Williams with this notice on August 5, 2002. The State filed this notice on September 12, 2002.

In response to the notice of forfeiture, Williams appeared at the Des Moines County clerk’s office on September 3, 2002, with a document entitled “response to notice of pending forfeiture.” Williams signed the response on September 3. The notary form on the response was not completed. The response bears two time stamps, September 3, 2002, which someone crossed out, and September 12, 2002. A motion for sanctions signed by Williams’ attorney was intermixed with the pages of the response to notice of pending forfeiture. The clerk docketed the response on September 12. The response requested the forfeiture proceedings be dismissed and the currency returned to Williams because (1) after Williams requested the return of her property, the State failed to file its notice of pending forfeiture within ninety days after seizure as required by Iowa Code section 809A.8(l)(a)(l); and (2) the State was precluded from bringing any forfeiture claims against the currency due to the prior adjudication of the matter by the court of appeals.

On September 12, 2002, the State filed its application for forfeiture order. The application alleged Williams failed to file a proper claim under Iowa Code sections 809A.8(1)(6)(1) and 809A.11; therefore, the State is entitled to forfeit the property under Iowa Code section 809A.16(3). The State attached to its application Williams’ response to notice of pending forfeiture and her motion for sanctions.

On September 12 the district court issued an order giving Williams ten days to respond to the State’s claim thát her response to notice of pending forfeiture did not constitute a proper and timely claim.

On September 18 the State filed its response to Williams’ motion for sanctions.

On October 3 the State filed a response to the court’s order of September 12 informing the court that Williams did not file a response to the court’s order of September 12. On October 4 the district court entered an order setting the hearing on the State’s application for forfeiture order and Williams’ motion for sanctions for October 14. On October 4 Williams filed a motion for extension of time. In the motion she alleged she went to the clerk’s office on September 3 with the response to notice of pending forfeiture and the motion for sanctions. The deputy clerk informed Williams that she needed to resign the response to notice of pending forfeiture in front of the clerk but it did not have to be notarized. Williams also stated the clerk filed the response to notice of pending forfeiture and the motion for sanctions. Williams further stated that on September 3 she hand delivered a copy of the response to notice of pending forfeiture and the motion for sanctions to the Assistant Des Moines County Attorney at her office.

On October 7 the State responded to the motion for extension of time. An affidavit signed by the county attorney was attached to the response. The affidavit acknowledged Williams filed the notice of pending forfeiture on September 3. The affidavit denied the county attorney received the response to notice of pending forfeiture on September 3. The affidavit further stated Williams approached the county attorney on September 17 and handed her the response to notice of pending forfeiture. Lastly, the affidavit stated two unidentified females served the motion for sanctions on the county attorney on September 18. On October 14 the court granted Williams an extension of time giving her until October 21 to respond to the court’s order of September 12.

On October 21 at 10:25 a.m., the clerk docketed a motion for extension of time filed by Williams. Williams asked for more time to obtain an affidavit from the clerk of court and to have the seizing agency served. Williams attached her affidavit to this motion. The affidavit restated the allegations contained in her October 4 motion for extension of time.

The clerk affixed a note to the filed-stamped motion for extension of time. The note indicated that when the clerk’s office received the motion for extension of time, it informed the judge of its filing and asked the judge for directions. The judge responded by telling the clerk to file and docket the motion for extension of time.

On October 21 at 10:37 a.m., the court entered its order forfeiting the currency. The district court concluded the State order gave Williams proper notice before forfeiting the currency. The district court also concluded the response to notice of pending forfeiture submitted by Williams did not constitute a proper and timely claim as required by sections 809A.8(l)(ib)(l) and 809A.11. The district court denied Williams’ motion for sanctions. Williams appeals.

II. Issues.

Williams raises several issues on appeal. They are (1) whether the district court had authority to enter an order of forfeiture after the ninety-day time period of section 809A.8(l)(a)(l) had run; (2) whether the second forfeiture action was precluded by the court of appeals’ dismissal of the first forfeiture action; (3) whether Williams’ response to the State’s second notice of pending forfeiture was timely and in a proper form; (4) whether the district court abused its discretion denying Williams’ request for time to file an affidavit and have the seizing agency served; and (5) whether the district court abused its discretion when it denied Williams’ motion for sanctions.

III. Scope of Review.

Our review of forfeiture proceedings is for correction of errors at law. In re Property Seized from DeCamp, 511 N.W.2d 616, 619 (Iowa 1994). A review of an order denying sanctions is for abuse of discretion. Schettler v. Iowa Dist. Court, 509 N.W.2d 459, 464 (Iowa 1993).

IV. Preservation of Error.

The State contends Williams failed to preserve error by failing to file a claim or a petition for recognition of an exemption. Although Williams did not file a claim or a petition for exemption, she did file a response to notice of pending forfeiture raising the issue of timely notice before the court forfeited the property. Williams preserved this issue for appeal.

V. Analysis.

The Forfeiture Action. Forfeitures are not favored under the law and this court strictly construes statutes allowing forfeitures. State v. Kaufman, 201 N.W.2d 722, 723 (Iowa 1972). We have previously held the notice provisions and the time for notice provisions are mandatory. Failure to comply with the notice provisions deprives the court of the power to forfeit property seized pursuant to a search warrant. In re Forfeiture of One Hundred Twenty-Six Dollars, 251 N.W.2d 216, 217 (Iowa 1977).

The district court could not forfeit Williams’ property without first finding the State gave her proper notice of the pending forfeiture. Iowa Code § 809A.16(3). According to section 809A.8(l)(<x)(l), proper notice includes the requirement that the State files its notice of pending forfeiture within ninety days after the property is seized for forfeiture if a request by the owner to return the property has been made. The State acknowledges Williams made numerous requests for the return of her property.

To determine whether the State’s pending notice of forfeiture was timely, we must decide when the State seized the currency for forfeiture. “Seized for forfeiture” requires the seizure of the property by a law-enforcement officer “accompanied by an assertion by the seizing agency or by a prosecuting attorney that the property is seized for forfeiture, in accordance with section 809A.6.” Iowa Code § 809A.1(9). In the second notice of pending forfeiture served on Williams, the State claimed the date of seizure for forfeiture was the date of the notice, July 30, 2002. If the date of seizure for forfeiture was July 30, 2002, the filing of the notice of pending forfeiture complied with the ninety-day period of section 809A.8(l)(a)(l). The record, however, does not support the State’s claim it seized the property for forfeiture on July 30, 2002.

The Burlington Police Department physically seized the currency on May 1, 1998. When the State filed its notice of pending-forfeiture in the first forfeiture action, it listed the date it seized the currency for forfeiture purposes as January 19, 1999. The State’s actual seizure of the currency accompanied with its assertion it had seized the currency for forfeiture purposes on January 19, 1999, fixed the date of seizure for forfeiture on January 19, 1999. Iowa Code § 809A.1(9). The ninety-day limitation period of section 809A.8(l)(a)(l) began to run on this date. The State did not serve the second notice of pending forfeiture on Williams until August 5, 2002. The State did not file the second notice of pending forfeiture until September 12, 2002. It did not comply with the ninety-day limitation period of section 809A.8(l)(a)(l).

The State urges its failure to comply with the ninety-day limitation period should not defeat its second forfeiture action. It argues the five-year statute of limitation contained in Iowa Code section 809A.20 is controlling. The State contends as long as it brought the second forfeiture action within the five-year limitation period, the action is not barred by section 809A.8(l)(a)(l)’s ninety-day statute of limitation. The State’s reliance on the five-year statute of limitation is misplaced.

The State’s argument fails to distinguish a special statutory limitation from a general statute of limitation. A general statute of limitation determines a specific period of time a person has to make a claim before it is not enforceable in a judicial proceeding. Secrest v. Galloway Co., 239 Iowa 168, 174, 30 N.W.2d 793, 796 (1948). A general statute of limitation only affects the remedy not the right. Id. In contrast, a special statutory limitation qualifies the right; it makes timely compliance with the statutory limitation an element of the right created. Arnold v. Lang, 259 N.W.2d 749, 751-52 (Iowa 1977). A lapse of the statutory period extinguishes the right to proceed. Id. at 752. This deprives the court of authority to hear a particular case. See In re Estate of Falck, 672 N.W.2d 785, 789-90 (Iowa 2003).

Section 809A.8(l)(a)(l)’s requirement that notice of pending forfeiture be filed within ninety days is a special statutory limitation. It creates the State’s right to forfeit the property in rem if an owner has requested the release of the property. In order to exercise its right of forfeiture under these circumstances, the State must comply with the time limits contained in the statute creating the right to forfeit the property. Section 809A.20’s five-year limitation is a general statute of limitation. It sets an outer limit for commencing the civil forfeiture action to enforce the State’s right of forfeiture. Here, although the forfeiture action was filed within five years, the State had lost its right of forfeiture because the second notice of pending forfeiture did not comply with the ninety-day limitation contained in section 809A.8(l)(a)(l). Therefore, the district court did not have authority to hear the second forfeiture action.

Because we find this issue dispositive, we will not address Williams’ other claims concerning the forfeiture.

Motion for Sanctions. The district court refused to grant sanctions against the State, because the State was successful in its forfeiture action. We reversed the district court on the forfeiture issue. Nevertheless, on appeal we may affirm the district court’s ruling on the motion for sanctions on grounds urged in the district court but not included in the district court’s ruling. DeVoss v. State, 648 N.W.2d 56, 61-62 (Iowa 2002). The State’s response to the motion for sanctions asserted (1) Iowa Code section 809A.12(7) precludes the award of sanctions under Iowa Rule of Civil Procedure 1.413(1); (2) the State had a right to rely on the five-year statute of limitation contained in section 809A.20; and (3) the doctrine of res judicata did not apply to the court of appeals’ decision.

The State argues on appeal, because section 809A.12(7) provides “[t]he agency or political subdivision bringing the forfeiture action shall pay the reasonable attorney fees and costs ... incurred by a claimant who prevails on a claim for exemption in a proceeding under this chapter, rule 1.413(l)’s sanctions cannot be used in a forfeiture proceeding brought under chapter 809A. This may be true if Williams claimed an exemption under section 809A.11. Williams, however, did not base her arguments for dismissal of the forfeiture action on section 809A.11. The sanetion provisions of section 809A.12(7) are not applicable to this proceeding.

Iowa Code section 809A.12(16) applies the Iowa Rules of Civil Procedure to all proceedings under chapter 809A, unless otherwise provided by chapter 809A. Chapter 809A does not make any provision for sanctions when the court dismisses a forfeiture action on the grounds urged by Williams. Therefore, rule 1.413(l)’s sanctions are applicable to this case.

Rule 1.413(1) requires the person whose signature appears on the document to certify “(1) the signer has read the petition, (2) the signer has concluded after reasonable inquiry into the facts and law that there is adequate support for the filing, and (3) the signer is acting without any improper motive.” Schettler, 509 N.W.2d at 465. We view the reasonableness of the attorney’s inquiry into the facts and law at the time of the filing of the document. Weigel v. Weigel, 467 N.W.2d 277, 280-81 (Iowa 1991). The signer’s conduct is measured by an objective standard. Id. at 281.

Williams asserts the State’s commencement of the second forfeiture action was not well grounded in fact or law. In Mathias v. Glandon, 448 N.W.2d 443, 446-47 (Iowa 1989), we enumerated the circumstances we will consider to determine whether an attorney made a reasonable inquiry into the facts and law. The circumstances relevant to the State’s conduct in filing the second forfeiture action are the complexity of the factual and legal issues in question, the clarity or ambiguity of existing law, and the plausibility of the legal position asserted. Id. at 446.

When the State filed its second action for forfeiture,' the State had possession of the currency, because Williams made no effort to have the currency returned to her after the district court received the proce-dendo. Further, there was no Iowa law discussing the interplay between the five-year statute of limitation of section 809A.20 and the ninety-day statute of limitation of section 809A.8(l)(a)(l). We, therefore, determine the record provides ample evidence to conclude counsel for the State exercised reasonable inquiry into the facts and law to support the filing. Williams is not entitled to sanctions under rule 1.413(1).

VI. Disposition.

We reverse the district court’s order forfeiting the currency. We remand this case to the district court to enter an order dismissing the application for forfeiture order and ordering the return of $7,559.39 in United States currency to Williams as provided by Iowa Code section 809A.8(l)(a). We affirm the district court’s refusal to award sanctions to Williams under rule 1.413(1).

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH DIRECTIONS.

      . Iowa Code section 809A.13(7) provides in relevant part:
      The forfeiture hearing shall be held without a jury and within sixty days after service of the complaint unless continued for good cause.

      . We are not ruling on the merits of the res judicata argument made by the State. We are only holding the State’s inquiry into the facts and law is sufficient to satisfy the requirements of Iowa Rule of Civil Procedure 1.413(1).