text:
    2003 ND 21
    FIRST WESTERN BANK & TRUST, Plaintiff v. FIRST LUTHERAN CHURCH FOUNDATION, Salvation Army-Ward County Chapter, Trinity Hospital, Model High School Alumni Association, Kirsten Marquardt, Michelle Marquardt, Daniel Templeton, Miles Templeton, Darrel Templeton, Sonia Armour, Paul Marquardt and Rodger Marquardt, Defendants, Paul Marquardt, Defendant and Appellant, and Rodger Marquardt, Defendant and Appellee.
    No. 20020170.
    Supreme Court of North Dakota.
    Feb. 19, 2003.

      Dean A. Frantsvog, Olson Burns Lee, Minot, N.D., for defendant and appellant.
    Robert S. Rau, Bosard, McCutcheon & Rau, Ltd., Minot, N.D., for defendant and appellee.
   VANDE WALLE, Chief Justice.

[¶ 1] Paul Marquardt appealed from a judgment which ordered that the proceeds of his deceased mother’s annuity belonged solely to Rodger Marquardt and effectively denied Paul’s motion to amend a prior memorandum opinion or, in the alternative, grant a new trial. We conclude the trial court did not abuse its discretion in failing to amend or grant a new trial, and we affirm.

I

[¶ 2] In 1996, Laura 0. Marquardt purchased an annuity from New York Life Insurance Company (“New York Life”). On March 2, 1998, Laura executed a last will and testament devising her property to her two sons, Paul and Rodger, her grandchildren, and various charities and other entities. Under the terms of the will, Paul and Rodger were to receive equal shares of a percentage of the estate. On July 26, 1999, Laura executed a codicil to the will which provided:

SONS TO SHARE EQUALLY EXCEPT AS TO ANNUITY CONTRACT: I believe that the Annuity is set up so that it is payable on my death to my son RODGER MARQUARDT. In any event, I give and bequeath the said Annuity Contract with New York Life Insurance Company, which presently has a value of more than $50,000.00 to my son RODGER MARQUARDT. It is my intention that the rest of my estate is to be shared equally between my sons. In the event that at the time of my death I hold any of my assets in an account or ownership so that an asset becomes payable to either RODGER or PAUL because of a joint tenancy, right of sur-vivorship, payable on death clause or similar clause so that the asset does not come under the management of my Personal Representative, then I ask as to such property items, they be taken into account and computation be made in the distribution of my estate so that each of my sons share equally from my estate save and except that RODGER is to have the entirety of the Annuity Contract. I give this advantage to my son RODGER to balance out on account of help previously given to our son PAUL.

[¶ 3] On August 18, 1999, Laura entered into a revocable trust agreement with First Western Bank & Trust Company (“First Western”) to manage her financial affairs. At that time, Laura also executed a durable power of attorney giving First Western power and authority to act as her attorney in fact. On October 5, 1999, Laura and Paul met with the trust officer who subsequently had ownership of the annuity transferred to Laura’s trust and the beneficiary of the annuity changed.

[¶ 4] Laura died on February 7, 2001, and First Western was appointed personal representative of her estate. First Western collected the proceeds of the annuity and placed them in the trust. On October 2, 2001, First Western petitioned the court for determination of testacy, settlement and confirmation of distribution of the estate. First Western proposed distributing the $57,846.05 proceeds of the annuity according to the trust provisions.

[¶ 5] Rodger was the only interested person to file an objection to the proposed distribution. Rodger alleged the durable power of attorney did not authorize First Western to change the ownership and beneficiary of the annuity. Rodger claimed that, under the July 26, 1999 will codicil, he was entitled to the entire proceeds of the annuity. At the hearing on the objections, Paul testified on behalf of First Western. On January 31, 2002, the trial court issued a memorandum opinion ruling that the durable power of attorney did not authorize First Western to change the annuity, that the will codicil controlled the disbursement of the annuity proceeds, and that Rodger was entitled to 100 percent of the annuity proceeds.

[¶ 6] On February 27, 2002, Paul moved to amend the memorandum opinion or, in the alternative, for a new trial “to properly consider all of the evidence in this matter which was not presented at the hearing held previously.” Paul argued the annuity was a payable on death (“P.O.D.”) account under N.D.C.C. § 30.1—31— 09(2)(b), and under N.D.C.C. § 30.1-31-10(2), a right of survivorship arising from the express terms of that account may not be altered by will. In support of the motion, Paul presented a copy of an “APPLICATION FOR A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY” from New York Life dated December 26, 1996, showing Laura as the owner and Rodger and Paul as co-beneficiaries each listed as having a 50 percent interest in the proceeds, but did not provide the court with a copy of the annuity contract itself. Paul argued that he was entitled to 50 percent of the annuity proceeds.

[¶ 7] The trial court issued an order and judgment on May 23, 2002. The court did not amend the memorandum opinion or grant a new trial and ordered that Rodger was entitled to 100 percent of the annuity proceeds.

II

[¶ 8] We will treat the trial court’s entry of judgment consistent with its memorandum opinion without specifically addressing Paul’s motion to amend or to grant a new trial as a denial of the motion. See Triple Quest, Inc. v. Cleveland Gear Co., 2001 ND 101, ¶ 14, 627 N.W.2d 379. We do not reverse the denial of a motion to amend a judgment or motion for a new trial unless the trial court abused its discretion. Jarvis v. Jarvis, 1998 ND 163, ¶ 8, 584 N.W.2d 84. A trial court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law. Howes v. Kelly Services, Inc., 2002 ND 131, ¶ 13, 649 N.W.2d 218.

[¶ 9] Paul claims the trial court erred in failing to grant the motion because the post-trial evidence he offered renders the issues addressed at the hearing moot. Paul argues the annuity qualifies as a nonprobate asset because, under N.D.C.C. § 30.1-31-10(2), a right of sur-vivorship arising from the express terms of an account or a P.O.D. designation may not be altered by a will. See Estate of Peterson, 1997 N.D. 48, ¶ 11, 561 N.W.2d 618; Estate of Leier, 524 N.W.2d 106, 109-10 (N.D.1994). Although none of the parties raised this argument or presented the court with the annuity at the hearing, Paul argues the trial court was under a duty to have ordered either production of the annuity or a further evidentiary hearing so it could apply the correct law. We reject this argument for several reasons.

[¶ 10] First, the parties have the primary duty to bring to the court’s attention the proper rules of law applicable to a case. State v. Goulet, 1999 ND 80, ¶ 10, 593 N.W.2d 345. As this Court said in Burkstrand v. Rasmussen, 77 N.D. 716, 718, 45 N.W.2d 485, 487 (1950):

Counsel in a lawsuit have the advantage of being able to become fully informed on the law of the case. The trial judge does not always have the opportunity to make as thorough an investigation of the law of the case as counsel, and must necessarily depend upon counsel to call the attention of the court to the law applicable to the case ...

The trial court will not be faulted for failing to identify what Paul claims to be the dispositive issue when the parties did not bring it to the court’s attention at the hearing. See Berg v. Ullman ex rel. Ullman, 1998 ND 74, ¶ 44, 576 N.W.2d 218 (Neumann, J., dissenting).

[¶ 11] Second, we recognize some courts have held that particular annuity contracts are nonprobate transfers and do not become a part of the decedent’s estate. See Abernethy v. Abernethy, 611 So.2d 1021, 1023 (Ala.1992); Estate of Petersen, 28 Cal.App.4th 1742, 34 Cal.Rptr.2d 449, 458 (1994). Other courts, including this Court, appear to have assumed, without specifically addressing the issue, that annuities are nonprobate transfers. See Bergheger v. Boyle, 258 Ill.App.3d 413, 196 Ill.Dec. 324, 629 N.E.2d 1168, 1171 (1994) (noting annuities did not become part of decedent’s probate estate); Succession of Lee, 831 So.2d 477, 478 (La.Ct.App.2002) (noting annuity did not become part of probate estate); Estate of Brown, 1997 ND 11, ¶ 8, 559 N.W.2d 818 (referring to “non-probate annuities”). However, the courts in Abemethy and Petersen, cases in which the issue was specifically raised and decided, relied heavily on the language of the annuity contracts at issue in reaching the conclusions the respective annuities were nonprobate transfers that did not become part of the probate estate. In his post-trial motion, Paul merely presented the court with the application for the New York Life annuity rather than the annuity contract itself. Under the reasoning of Abemethy and Petersen, the trial court would not have had sufficient evidence to decide the issue.

[¶ 12] Finally, even if Paul had offered the annuity contract in support of his motion, it would not have constituted newly discovered evidence. Before a new trial can be granted on the ground of newly discovered evidence under' N.D.R.Civ.P. 59(b)(4), it must be shown: 1) the evidence was discovered following trial; 2) the mov-ant must have exercised due diligence in discovering the evidence; 3) the evidence must not be merely cumulative or impeaching; 4) the evidence must be material and admissible; and 5) the evidence must be such that a new trial would probably produce a different result. Johnson v. Johnson, 2001 ND 109, ¶ 6, 627 N.W.2d 779.

[¶ 13] This Court’s decision in Perry v. Reinke, 1997 ND 213, 570 N.W.2d 224, is instructive. In that case, Reinke, the personal representative of an estate, appealed from a jury verdict finding the decedent’s last will and testament invalid as the product of undue influence exerted by Reinke. Id. at ¶¶ 1, 10. During the trial, Reinke and another person were alleged to be the beneficiaries of more than $100,000 in non-probate transfers. Id. at ¶ 26. Reinke moved for a new trial based on newly discovered evidence, arguing she had forgotten during trial that she had transferred the nonprobate assets into the estate, and supported the motion with bank records proving she made the transfers into the estate account before trial. Id. In concluding the trial court did not abuse its discretion in denying Reinke’s motion, we said:

Although the money reported in the bank records was at issue during the trial, their production after trial is not newly discovered evidence when they were easily discoverable by Reinke before the trial commenced. As this Court said in Baird v. Kensal Light & Power Co., 63 N.D. 88, 246 N.W. 279, 283 (1932), “[i]t is not enough to present a showing [ ] he did not know, ... the materiality of the evidence. It is the evidence itself, and not merely its materiality which must appear to have been newly discovered.” Id. (Citation and quotation omitted). See also 66 C.J.S. New Trial § 101 (1950) (stating “[i]n order to warrant a new trial it must appear [ ] [the] evidence is in fact newly discovered, and not merely the importance of it ....”). Moreover, the bank records, while possibly material, are not strong enough evidence to produce a different result in a new trial....
In preparing for trial, a party must marshal all of the available evidence through discovery proceedings. Failure to do so will not be forgiven in a motion for new trial.

Id. at ¶¶ 28, 29.

[¶ 14] In this case, Paul offered no explanation why the annuity contract was not and could not have been produced at the hearing. Paul’s discovery of the importance of the evidence after the hearing is insufficient to warrant a new trial.

[¶ 15] We conclude the trial court did not abuse its discretion in failing to amend the judgment or grant a new trial.

Ill

[¶ 16] The judgment is affirmed.

[¶ 17] CAROL RONNING KAPSNER, MARY MUEHLEN MARING, WILLIAM A. NEUMANN, and DALE V. SANDSTROM, JJ., concur.

      . Neither party has raised this issue on appeal. We do not consider issues that have not been raised and argued by the parties. See Roise v. Kurtz, 1998 ND 228, ¶ 11, 587 N.W.2d 573.


source: Caselaw Access Project

author: SANDSTROM, Justice.

license: Public Domain

text:
    2003 ND 26
    CONTINENTAL RESOURCES, INC., Petitioner, v. The Honorable Allan SCHMALENBERGER, Judge of the Bowman County District Court, Southwest Judicial District; McKennett Stenehjem Reierson Forsberg Hermanson, P.C.; Kent Reierson, Individually; James H. Bragg; J. Michael Gleason, d/b/a Gleason Land Co.; and Julie K. McKinley a/k/a/ Julie K. King, Respondents.
    No. 20020179.
    Supreme Court of North Dakota.
    Feb. 21, 2003.

      Lawrence Bender, Pearce & Durick, Bismarck, N.D., for petitioner.
    Kent A. Reierson, McKennett Ste-nehjem Reierson Forsberg & Hermanson, P.C., Williston, N.D., for respondents.
   SANDSTROM, Justice.

[¶ 1] Continental Resources, Inc. (“Continental”), has petitioned for a writ of mandamus or a supervisory writ directing the district court to vacate its order of May 29, 2002, and directing the district court to disqualify Kent Reierson and the law firm of McKennett Stenehjem Reierson Forsberg & Hermanson, P.C. (collectively referred to as “Reierson”), from further representing James H. Bragg, J. Michael Gleason, doing business as Gleason Land Co., and Julie K. McKinley also known as Julie K. King, or providing successor counsel with any information or documents supplied to or utilized by Rei-erson’s firm in previously representing Continental. We grant the petition.

I

[¶ 2] In 1999, Gleason, Patricia Ann Dragos, Valery John Kloeckner, and M.A. Kloeckner, individually and as trustee for Louise Ann Baker, sued Continental, alleging they owned minerals or held oil and gas leases in the Southwest of Section 17, Township 131 North, Range 106 West, in Bowman County; all of Section 17 was established as the Rosella No. 1-17 spacing unit; Continental completed a producing oil and gas well in the spacing unit; and Continental had failed and refused to pay them sums due by virtue of their mineral interests and leases. Continental answered and counterclaimed, alleging, among other things, it has a superior lease, it is entitled to a decree of quiet title, and Gleason breached a fiduciary duty to Continental “when he used information gained while acting as Continental’s agent to secure the Kloeckner Leases to the detriment of Continental.”

[¶ 3] In 1999, Bragg and Gleason sued Continental, alleging that, through oil and gas leases from Larry E. White and Kathryn E. White, they owned working interests in two oil and gas wells operated by Continental in Bowman County- — -the “Bernadette # 1-24 located in Section 24-131-105” and the “Captain # 1-23 located in Section 23-131-105” — and that Continental has refused to pay them revenue attributable to their working interests. Continental answered, denying Bragg and Gleason own working interests in the wells. Continental counterclaimed, alleging it has a leasehold interest in the minerals in the subject lands; Bragg and Gleason were employed as independent contractors by Diamond Resources, Inc. (“Diamond”), to acquire oil and gas leases for Continental in Bowman County and through that employment learned of a title dispute between Larry and Kathryn White and Robert and Joan Thom to the subject lands; and “Bragg and Gleason willfully, wrongfully and maliciously utilized information they acquired while employed by Diamond to secure oil and gas leases for themselves on the Subject Lands.”

[¶ 4] The cases were consolidated on January 12, 2001. On May 17, 2001, the trial court granted Continental’s motion to amend its answer and counterclaim. Continental served an amended answer and counterclaim additionally asserting, among other things, allegations of a trade secret violation, negligent interference with prospective business advantage, breach of employee duty of loyalty, and civil conspiracy. Continental filed a third-party complaint dated August 3, 2001, against McKinley, asserting McKinley, Gleason, and Bragg used confidential information to acquire leases and mineral interests for themselves to the detriment of Continental, and asserting claims for trade secret violation, negligent interference with prospective business advantage, civil conspiracy, indemnity, and contribution.

[¶ 5] After identifying a number of tracts for which Continental had engaged Reierson to prepare title opinions and in which Bragg, Gleason, and McKinley claim to have interests, Continental demanded that Reierson withdraw from further representing Bragg, Gleason, and McKinley and forward all files related to work Reier-son performed for Continental. In response, Reierson asserted he did not believe there was a conflict of interest and stated he would retain the files pending resolution of the issue by the trial court. In his response, Reierson said:

[O]n October 11, 1995, we opened file 22710, under which we began working on a drilling title opinion for a Wallman # 1-32 on Section 32-130-104, Bowman County, North Dakota. That drilling title opinion was never completed. We had completed a draft with some net revenue interests calculated....
It was not until we had received a list of wells earlier this year that I realized that Bragg and Gleason had an interest in the Wallman well. As you know, that interest was obtained long after our representation of Continental was completed and before we ever began representation of Bragg and Gleason. As you are aware, there is no apparent title dispute on the Wallman interest. Rather, the dispute centers on whether or not Bragg, Gleason and McKinley utilized confidential information or breached a fiduciary obligation in obtaining interests in the Bowman County area. Hence, the title work that we did for Continental is not substantially related to the issue presently before the court.

[¶ 6] On May 29, 2002, the trial court denied Continental’s motion to disqualify Reierson from further representing Bragg, Gleason, and McKinley, explaining:

Continental’s claims against Bragg, Gleason and McKinley concern whether they breached their agency, violated trade secrets, interfered with prospective advantages involving an employee’s duty of loyalty and allegations of civil conspiracy. I do not find that the title work completed by Reierson was the same matter or substantially related to the issues before the Court in this litigation.

Continental petitioned for “an order, in the form of a writ of mandamus or a supervisory order directing the Respondent, district court judge,” to vacate its order of May 29, 2002, and further directing the district court to disqualify Reierson from further representing Bragg, Gleason, and McKinley.

II

[¶ 7] This Court’s authority to issue a supervisory writ is derived from the North Dakota Constitution, Article VI, Section 2. Heringer v. Haskell, 536 N.W.2d 362, 364 (N.D.1995). The power to issue a supervisory' writ in the exercise of this Court’s superintending control over inferi- or courts is discretionary and is used only to rectify errors and prevent injustice in extraordinary cases for which there is no adequate alternative remedy. Id. We have recognized “an order denying a motion to disqualify counsel is not immediately ap-pealable.” Id. If the case proceeds to judgment before presentation of the issue, any disclosure or further disclosures of confidential client information and theories will have occurred, and it will be impossible to return the parties to the status quo. Id. at 365. We believe this is an appropriate case in which to exercise our supervisory jurisdiction.

III

[¶ 8] Continental contends Reierson is disqualified under N.D.R. Prof. Conduct 1.9 because Reierson’s continued representation of Bragg, Gleason, and McKinley in this litigation creates an appearance of impropriety.

[¶ 9] Continental has asserted, among other things: (1) In 1995 it engaged Reier-son, through Diamond, to assist Continental “in the acquisition of oil and gas exploration rights by performing title work for Continental on certain properties in Bowman County;” (2) Diamond requested Rei-erson “to prepare a drilling title opinion for one of the Baloco Properties and lands within the same section on which the Wall-man # 1-32 well was located;” (3) “Once again, Diamond provided Reierson’s Firm with documents and other confidential information necessary to assist in preparing the drilling title opinion for the Wallman Property;” (4) While conducting the title work for Continental, Reierson had contacts with Gleason and Bragg, who were contract landmen working for Diamond and Continental on the same tracts of land on which Reierson was doing title work; (5) Continental “has identified multiple tracts in which Reierson’s Firm was engaged to prepare title opinions for Continental and in which Bragg, Gleason and McKinley now have acquired or claim to own interests;” and (6) “Subsequent thereto, Reierson’s Firm took on the representation of Bragg, Gleason and McKinley in the suit which is currently pending before the district court. Now, Reierson’s firm is assisting admitted competitors of Continental to acquire these same oil and gas exploration rights in Bowman and Slope Counties.”

[¶ 10] Reierson contends his title work for Continental and the present litigation were not the same matter or substantially related and his title work for Continental was not materially adverse to Continental’s interests in this litigation:

After reviewing the matter, it was determined by the law firm that having done title work in 1995 concerning the Wallman # 1-32 was not the “same matter” nor “substantially related matter” to the allegations of a breach of a fiduciary obligation by Bragg, Gleason and McKinley as being alleged by Continental Resources. Furthermore, it was determined that the interest in which Reierson did the title work was not materially adverse to the defense of Continental’s counterclaim against Bragg and Gleason. In addition, it was not material, as the Wallman # 1-32 interest owned by Bragg, McKinley and Gleason was a very small, almost insignificant, interest compared to the claims being made in this litigation.

IV

[¶ 11] This case involves the “delicate and sometimes difficult task of balancing competing interests: the individual right to be represented by counsel of one’s choice, each party’s right to be free from the risk of even inadvertent disclosure of confidential information, and the public’s interest in the scrupulous administration of justice.” Brown v. Eighth Judicial Dist. Court, 116 Nev. 1200, 14 P.3d 1266, 1269-70 (2000).

[¶ 12] “Loyalty is an essential element in the lawyer’s relationship to a client.” Comment, N.D.R. Prof. Conduct 1.7. “The duty of confidentiality continues after the client-lawyer relationship has terminated.” Comment, N.D.R. Prof. Conduct 1.6. “An integral purpose of the rule of confidentiality is to encourage clients to fully and freely disclose to their attorneys all facts pertinent to their cause with absolute assurance that such information will not be used to their disadvantage.” Damron v. Herzog, 67 F.3d 211, 215 (9th Cir.1995). “ ‘Clients must feel free to share confidences with their lawyers. This will not occur if we permit lawyers to be today’s confidants and tomorrow’s adversaries.’ ” Clinard v. Blackwood, 46 S.W.3d 177, 188 (Tenn.2001) (quoting Penn Mut. Life Ins. Co. v. Cleveland Mall Assocs., 841 F.Supp. 815, 818 (E.D.Tenn.1993)). As the court said in Analytical Inc. v. NPD Research, Inc., 708 F.2d 1263, 1266-67 (7th Cir.1983) (citations omitted):

For rather obvious reasons a lawyer is prohibited from using confidential information that he has obtained from a client against that client on behalf of another one. But this prohibition has not seemed enough by itself to make clients feel secure about reposing confidences in lawyers, so a further prohibition has evolved: a lawyer may not represent an adversary of his former client if the subject matter of the two representations is “substantially related,” which means: if the lawyer could have obtained confidential information in the first representation that would have been relevant in the second. It is irrelevant whether he actually obtained such information and used it against his former client, or whether—if the lawyer is a firm rather than an individual practitioner—different people in the firm handled the two matters and scrupulously avoided discussing them.

[¶ 13] Confidentiality is promoted through N.D.R. Prof. Conduct 1.9, which provides:

A lawyer who has formerly represented a client in a matter shall not thereafter:
(a) Represent another person in the same matter in which that person’s interests are materially adverse to the interests of the former client; or
(b) Represent another person in a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation; or
(c) Use information relating to the representation to the disadvantage of the former client in the same or a substantially related matter except as Rule 1.6 would require or permit with respect to a client.

Thus, a lawyer may not represent another client in the same matter in which that client’s interests are materially adverse to the interest of the former client, or, without a former client’s consent, represent another client in a substantially related matter in which that client’s interests are materially adverse to the interests of the former client.

[¶ 14] In Heringer v. Haskell, 536 N.W.2d 362, 365 (N.D.1995), we said that in determining whether a law firm is disqualified under N.D.R. Prof. Conduct 1.10(c), “the firm whose disqualification is sought bears the burden of proof.” We also said “[a]ny doubt must be resolved in favor of disqualification.” Heringer, at 365. Those principles are appropriate as well in considering disqualification under Rule 1.9. See Annotated Model Rules of Prof. Conduct Rule 1.9, p. 153 (3d ed. 1996) (“Close questions are generally resolved against permitting the subsequent representation.”).

[¶ 15] The substantial relationship test presumes a lawyer acquired confidential information from a former client if the current representation of a client whose interests are adverse to those of the former client is the same as or substantially related to the former representation. ABA/BNA, Lawyers’ Manual on Professional Conduct 51:201 (2002). “The test does not require a detailing of the confidences allegedly transmitted, nor must confidences actually have passed between the former client and the lawyer.” Annotated Model Rules of Prof. Conduct Rule 1.9, p. 153 (3d ed.1996).

[¶ 16] Without asserting he received no confidential information in his earlier representation of Continental, Reierson asserts he “did not disclose any information to the Plaintiffs.” However, as the court said in Damron v. Herzog, 67 F.3d 211, 215 (9th Cir.1995), “when an attorney engages in a conflict of interest on the same matter, he or she is in a position to act on the confidential information learned from the relationship with the first client, whether or not that information is actually disclosed or acted upon in advising the new client.”

[¶ 17] The trial court tersely explained its denial of Continental’s motion to disqualify Reierson: “I do not find that the title work completed by Reierson was the same matter or substantially related to the issues before the Court in this litigation.”

[¶ 18] Bragg and Gleason acquired an interest in the Wallman well after Reierson “began working on a drilling title opinion for a Wallman # 1-32” and “had completed a draft with some net revenue interests calculated.” In our view, Reier-son’s title work for Continental on the Wallman property and the claims involving the Wallman property in the instant litigation both involve the right to proceeds from production.

[¶ 19] Continental has alleged “Gleason was employed ... by Diamond to acquire or assist in acquiring oil and gas leases for the benefit of Continental in the Bowman County area” and “used the secret and confidential information he had accumulated while working for the benefit of Continental in the Bowman County area to acquire oil and gas leases from the Kloeckners for the lands at issue in the Kloeckner Action.” Continental has alleged “Bragg and Gleason became aware of the title dispute between the Whites and the Thoms over the lands at issue [sections 23 and 24 in Township 131 North, Range 105 West, where the Captain # 1-32 and the Bernadette # 1-24 wells are located] in the Bragg action by virtue of being employed by Diamond to acquire or assist in acquiring leases for Continental in the Bowman County area,” and “Bragg, based upon the information he and/or Gleason gained while employed by Diamond, secured two oil and gas leases from the Whites dated July 24, 1996 in Bragg’s favor covering the lands at issue in the Bragg Action.” A Continental officer said in an affidavit:

5. Continental provided Mr. Kent Rei[e]rson with confidential purchaser’s ownership reports for the purpose of assisting Mr. Rei[e]rson in preparing title opinions for Continental. Copies of the confidential reports given to Mr. Rei[e]rson were later discovered in Mr. Mike Gleason’s files relative to lands where Mr. Gleason acquired mineral interests.
6. Continental did not provide the aforementioned confidential purchaser’s ownership reports to Mr. Gleason or any of the other parties involved in this lawsuit other than Mr. Rei[e]rson.

In its third-party complaint against McKinley, Continental alleged, among other things, that “based upon the secret and confidential information acquired while employed with Diamond for the benefit of Continental, McKinley, Gleason and Bragg conspired to take and did take oil and gas leases and mineral interests in Bowman and Slope Counties which were located in Continental’s intended buy area,” including “interests that were intended to be acquired by Diamond for the benefit of Continental ... in their own names for the benefit of themselves and to the detriment of Continental.”

[¶ 20] To the extent that Reier-son acquired confidential information in the course of doing title work for Continental that may have then been useful to Bragg, Gleason, or McKinley in their property acquisitions to the detriment of Continental, and may be useful in advocating their claims in opposition to those of Continental, the matters involved are substantially related. Bragg, Gleason, and McKinley, on the one hand, and Continental, on the other, are on opposite sides in this litigation. The interests of Bragg, Gleason, and McKinley, who are now represented by Reierson, are, therefore, materially adverse to the interests of Continental.

[¶ 21] We conclude Reierson’s title work for Continental on the Wallman property involved the same or a substantially related matter as claims involving the Wallman property in the instant litigation, his title work on other property for Continental was substantially related to the claims in the instant litigation, and the interests of Bragg, Gleason, and McKinley, who are now represented by Reierson, are materially adverse to the interests of Continental. Under N.D.R. Prof. Conduct 1.9, therefore, Reierson may not represent Bragg, Gleason, and McKinley in this matter without Continental’s consent.

[¶ 22] Although the North Dakota Rules of Professional Conduct “do not use the language, the ‘appearance of impropriety’ standard has not been wholly abandoned in spirit.” Heringer, 536 N.W.2d at 366. Concern “about the public’s perception of the legal profession, particularly as it relates to confidentiality of client information,” is a relevant consideration “when we examine and interpret the Rules.” Id.

[¶23] We view a possible appearance of impropriety from the perspective of a layperson: “[B]ecause judges have a privileged understanding of the legal system, they may fail to find an appearance of impropriety where one would be found by a layperson. The existence of an appearance of impropriety should therefore be determined from the perspective of a reasonable layperson.” Clinard v. Blackwood, 46 S.W.3d 177, 187 (Tenn.2001) (citing Heringer, 536 N.W.2d at 367).

[¶ 24] We believe a layperson “would view a law firm ‘switching sides’ in the middle of a dispute to be highly objectionable.” Heringer, 536 N.W.2d at 367. The court in Cardona v. General Motors Corp., 942 F.Supp. 968, 975 (D.N.J.1996), explained the basis for the appearance of impropriety doctrine in such cases:

At the heart of every “side-switching attorney” case is the suspicion that by changing sides, the attorney has breached a duty of fidelity and loyalty to a former client, a client who had freely shared with the attorney secrets and confidences with the expectation that they would be disclosed to no one else. It is for this reason that the “appearance of impropriety doctrine” was adopted to protect the public, our profession, and those it serves. In short, this much maligned doctrine exists to engender, protect and preserve the trust and confidence of clients.

In fact, “[t]he idea of a lawyer changing sides is at the heart of the prohibition” in Rule 1.9. Annotated Model Rules of Prof. Conduct Rule 1.9, p. 151 (3d ed.1996). Thus, to “preserve public confidence in the legal profession, and to insure the confidentiality and integrity of client information,” lawyers and law firms “must not be allowed to ‘switch sides’ ” when they have had access to the former client’s file. Her-inger, at 367. In our view, Reierson’s conduct in assisting Continental to acquire oil and gas exploration rights and then representing Bragg, Gleason, and McKinley in presenting competing claims adverse to Continental’s interests would reasonably be viewed by Continental, or any layperson, as switching sides.

V

[¶ 25] Exercising our supervisory authority, we direct the district court to disqualify Reierson and the law firm of McKennett Stenehjem Reierson Forsberg & Hermanson, P.C., from further representing Bragg, Gleason, and McKinley in this litigation and to take such further steps as are necessary to assure that confidential information is not relayed to subsequent counsel for Bragg, Gleason, and McKinley.

[¶ 26] GERALD W. VANDE WALLE, C.J, BRUCE B. HASKELL, D.J., WILLIAM A. NEUMANN, and CAROL RONNING KAPSNER, JJ., concur.

[¶ 27] The Honorable BRUCE B. HASKELL, D.J., sitting in place of MARING, J., disqualified.


author: TIMM, Circuit Judge.

text:
    2003 SD 7
    Robert E. NELSON, Plaintiff and Appellant, v. Donald A. SCHELLPFEFFER, Defendant and Appellee.
    No. 22117.
    Supreme Court of South Dakota.
    Considered on Briefs April 23, 2002.
    Decided Jan. 15, 2003.

      Kent R. Cutler and Michael D. Bornitz of Cutler, Donahoe & Mickelson, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.
    William G. Taylor and Daniel J. Harmel-ink of Woods, Fuller, Shultz & Smith, Sioux Falls, South Dakota, Attorneys for defendant and appellee.
   TIMM, Circuit Judge.

[¶ 1.] This is an appeal from a judgment crediting a payment received by Robert E. Nelson (Nelson) from Sunshine Partners Limited Partnership (Sunshine) against an obligation Donald A. Sehellpfef-fer (Schellpfeffer) owed Nelson under a separate agreement (Agreement). We affirm.

[¶ 2.] Schellpfeffer is one of two general partners and a limited partner in Sunshine. Sunshine was organized for the purpose of acquiring and eventually selling a certain parcel of commercial real estate in Tucson, Arizona.

[¶ 3.] In late 1989 Schellpfeffer approached Nelson, soliciting investment in Sunshine. Nelson was reluctant. Schellp-feffer offered to eliminate Nelson’s risk by promising to repay him the amount of his Sunshine investment together with twelve percent interest per annum on demand. Nelson accepted. The Agreement was reduced to writing and signed by the parties. It reads:

AGREEMENT

This Agreement is made and entered into this 30th day of January, 1990, by and between Robert E. Nelson, M.D., a resident of Minnehaha County, South Dakota, his heirs, successors, and assigns (Nelson) and Donald A. Schellpfef-fer, a resident of Minnehaha County, South Dakota, his heirs, successors, and assigns (Schellpfeffer).

RECITALS

The parties agree to the following facts:

A. Schellpfeffer is a general partner in Sunshine Partners Limited Partnership, a South Dakota limited partnership (the Partnership).
B. Nelson has been furnished with a copy of the Private Offering Memorandum dated July 17, 1989, in connection with the Partnership (the Offering Memorandum).
C. Schellpfeffer has solicited Nelson to become a limited partner in the Partnership.
D. Certain representations and warranties were made by Schellpfeffer to Nelson in order to persuade Nelson to purchase limited partnership interests in the Partnership other than were contained in the Offering Memorandum.
E. On the 11th day of November, 1989, Nelson subscribed for the purchase of four units in the Partnership and paid $62,562.40 as required for the initial subscription payment. There are additional capital contributions and potential capital calls as detailed in the Offering Memorandum that may be due and owing by Nelson to the Partnership arising from the purchase of four units in the Partnership.
F. Schellpfeffer has agreed to indemnify Nelson in regard to his investment in the Partnership on certain terms and conditions as hereinafter are described.
G. Schellpfeffer and Nelson agree that Nelson would not have invested in the Partnership without Schellp-feffer’s guarantee of payment as provided in this agreement.

IT IS MUTUALLY AGREED AS FOLLOWS:

1. At any time on or after January 1, 1993, if Nelson makes a written demand upon Schellpfeffer pursuant to this agreement, Schellpfeffer agrees to pay to Nelson all of Nelson’s Cash Capital Contributions (as that term is defined in the Partnership Agreement in the Offering Memorandum) that Nelson has paid to the Partnership from the 11th of November, 1989, to the date of the demand. Schellpfeffer agrees to pay such sum with interest at the rate of 12% per annum from the date of payment by Nelson of such Cash Capital Contributions to the date of payment by Schellpfeffer. Schellpfeffer agrees to pay the sums due and owing as provided in this agreement within 30 days after receipt of such demand.
2. Notwithstanding the demand that may be made by Nelson upon Schellpfeffer as provided in paragraph 1, Nelson shall be entitled to retain all distributions, profits, and losses that he has received from the time that he became a limited partner until the payment made by Schellpfeffer as provided in paragraph 1.
3. In the event that Schellpfeffer is required to pay the monies due and owing under this Agreement, Nelson agrees to transfer all of his interest in his limited partnership units to Schellpfeffer with all benefits, terms, conditions, and liabilities arising therefrom after the date of payment by Schellpfeffer. In addition, Schellpfeffer agrees to bear all expenses involved in the transfer of the interests of Nelson to Schellp-feffer as substituted limited partner.
4. Nelson agrees to execute any and all documents to effect the transfer of the limited partnership units to Schellpfeffer from Nelson as provided in this agreement upon the receipt of the payment required by this agreement.
5. This agreement shall be controlled by the law of the State of South Dakota. Any dispute arising from this agreement shall be venued in Minnehaha County, South Dakota.

[¶ 4.] Over the course of several years Nelson’s capital cash contributions to Sunshine grew to $197,000. Although Nelson was aware of the pending sale of a substantial portion of the Sunshine property in Tucson, on June 28, 1999 he made written demand of Schellpfeffer pursuant to paragraph one of the Agreement. Thirty days passed without payment. Nelson then sued Schellpfeffer.

[¶ 5.] In answer to Nelson’s complaint, Schellpfeffer raised, as an affirmative defense, that substantial sums were being held in escrow by Sunshine which, when released, would reduce the amount he owed Nelson. In December 1999, Sunshine issued a check to Nelson in the amount of $110,057.96, his share of the proceeds from the sale of Tucson property.

[¶ 6.] This case was tried piecemeal to the court in February, April, and July 2001. The only issue was whether Schellp-feffer’s obligation to Nelson under the Agreement should be reduced by the payment Nelson received from Sunshine. The trial court found in Schellpfeffer’s favor, concluding that to allow Nelson to collect his capital cash contributions in full from Schellpfeffer and to keep the $110,057.96 return of capital from Sunshine would be “unfair ... unreasonable ... and unconscionable,” and contrary to the intent of the parties.

[¶ 7.] The issue Nelson brings before this Court on appeal is whether the trial court erred in its interpretation of the Agreement. Contract interpretation is a question of law and the matter is reviewed here anew. AFSCME v. Sioux Falls School Dist., 2000 SD 20, 605 N.W.2d 811; Hayes v. Northern Hills General Hosp., 1999 SD 28, 590 N.W.2d 243.

[¶ 8.] The goal of contract interpretation is to see to it that the mutual intent of the parties is carried into effect. Singpiel v. Morris, 1998 SD 86, 582 N.W.2d 715. The contract is to be read as a whole, making every effort to give effect to all provisions. Crowley v. Texaco, Inc., 306 N.W.2d 871 (S.D.1981). When the words of a contract are clear and explicit and lead to no absurd consequences, the search for the parties’ common intent is at an end. Frost v. Williams, 2 S.D. 457, 50 N.W. 964 (1892); Giddings v. Nefsy, 51 S.D. 73, 212 N.W. 507 (1927).

[¶ 9.] Reading the Agreement as a whole it is clear the parties intended that:

1. Schellpfeffer would indemnify Nelson against loss, guaranteeing the return of his Sunshine investment with interest;
2. When Nelson’s investment became liquid at the end of three years, Schellpfeffer was obligated, on demand, to pay Nelson the amount he had invested in Sunshine plus 12 percent interest; and
3. Upon Schellpfeffer’s cashing Nelson out of Sunshine, Schellpfeffer would acquire Nelson’s partnership interest.

[¶ 10.] Nelson focuses our attention on paragraph two of the Agreement. He points out that he has a right to retain “all distributions, profits, and losses that he has received from the Partnership” until payment from Schellpfeffer is made under paragraph one. The term “distributions,” Nelson contends, includes return of capital from Sunshine. Because Sunshine returned $110,057.96 of Nelson’s investment to him before Schellpfeffer paid Nelson under paragraph one, Nelson reasons that the Agreement gives him the right to retain the Sunshine payment and have the entire amount invested in Sunshine ($197,-000) plus 12 percent interest paid to him by Schellpfeffer.

[¶ 11.] The American Heritage Dictionary, 4th ed (2000) defines “distribution” as “something distributed; an allotment.” The payment from Sunshine to Nelson clearly falls within the literal definition of distribution.

[¶ 12.] However, this Court is constrained from interpreting a contract literally if doing so would produce an absurd result. Frost (“an absurdity”), 2 S.D. at 460, 50 N.W. at 965. An absurd result is one that is “ridiculously incongruous or unreasonable;” a result that the parties, presumed to be rational persons pursuing rational ends, are very unlikely to have agreed upon. The American Heritage Dictionary, 4th ed (2000); Beanstalk Group, Inc. v. AM General Corp., 283 F.3d 856 (7th Cir.2002).

[¶ 13.] In this case, if we adopt the literal meaning of “distributions” we must conclude that the parties intended that Schellpfeffer would pay Nelson $197,000 plus 12 percent interest even if Sunshine returned his investment in whole or in part. Concomitantly we would have to conclude that the parties intended that Schellpfeffer, under these circumstances, would acquire Nelson’s virtually worthless partnership interest. The Agreement is transformed into a mere demand note, callable at the whim of Nelson. This interpretation of the contract is not reasonable: it is absurd.

[¶ 14.] An interpretation which gives a reasonable and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable or of no effect. Restatement 2d Contracts, § 208(a). Here, a reasonable interpretation, consistent with the stated purpose of the contract, is that the term “distributions” is not inclusive of capital returned from the partnership to Nelson. The parties sought to take the risk out of the investment for Nelson, not to have any partnership capital returns doubled by Schellpfeffer. Schellpfeffer pays Nelson $197,000 plus 12 percent interest, with credit for the $110,057.96 paid Nelson by Sunshine. Nelson suffers no loss. This makes sense.

[¶ 15.] Even if we were to find that the term “distributions” is reasonably capable of being understood as both excluding and including return of capital from the partnership, thereby demonstrating ambiguity, the evidence in the record solidly supports the conclusion that the trial court’s decision was not clearly erroneous.

[¶ 16.] The judgment is affirmed.

[¶ 17.] GILBERTSON, Chief Justice, and ZINTER, Justice, and AMUNDSON, Retired Justice, and VON WALD, Circuit Judge, concur.

[¶ 18.] TIMM, Circuit Judge, for SABERS, Justice, disqualified.

[¶ 19.] VON WALD, Circuit Judge, for KONENKAMP, Justice, disqualified.

[¶ 20.] MEIERHENRY, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.


author: PER CURIAM.

text:
    2003 SD 9
    DOUBLE DIAMOND CONSTRUCTION, Plaintiff and Appellant, v. FARMERS COOPERATIVE ELEVATOR ASSOCIATION OF BERESFORD, South Dakota, a cooperative corporation, Defendant and Appellee. and MOLLER CONSTRUCTION, INC., Defendant.
    No. 22620.
    Supreme Court of South Dakota.
    Considered on Briefs Dec. 13, 2002.
    Decided Jan. 22, 2003.

      Chad Swenson of Swenson Law Firm, Sioux Falls, for plaintiff and appellant.
    Roger Damgaard of Woods, Fuller, Shultz and Smith, Sioux Falls, for defendant and appellee.
   PER CURIAM.

[¶ 1.] Double Diamond Construction (Double Diamond) attempts to appeal from an order of the circuit court vacating an arbitration award and ordering the arbitration proceeding to be reopened for the purpose of considering Farmers Elevator’s damage claim against Double Diamond. For the reasons recited below, we dismiss Double Diamond’s appeal for lack of appellate jurisdiction.

FACTS AND PROCEDURE

[¶ 2.] Double Diamond filed a notice of appeal and docketing statement seeking to appeal an order of the circuit court vacating an arbitration award. The circuit court ordered that:

1) The application to vacate the arbitration award is granted for the reasons stated by the court at the hearing held before the court on July 29, 2002;
2) The arbitration award dated February 4, 2002, and the arbitrator’s memorandum decision dated February 4, 2002, are vacated to the extent they fail to address on the merits the damage claim of Farmers Elevator against Double Diamond, which claim Farmers Elevator took by assignment from Jerke Construction, Inc.;
3) The arbitration proceeding be reopened before Arbitrator E.W. Hertz for the limited purpose of considering the merits of Farmers Elevator’s damage claim against Double Diamond.

[¶ 3.] Double Diamond’s docketing statement indicates that the order entered is appealable because:

The trial court’s order is either a judgment, or an order that affects a substantial right, and the order in effect determines the action and prevents a judgment from which an appeal might be taken. SDCL 15-26A-3(1) and (2).

ISSUE

[¶ 4.] Whether the order vacating the arbitration award and remanding for hearing is appealable.

[¶ 5.] SDCL ch. 21-25A (Uniform Arbitration Act) governs the enforceability of arbitration agreements and arbitration awards. Following an arbitration award, the parties may apply to the circuit court to have the award confirmed, vacated, modified or corrected. SDCL 21-25A-23. Additionally, SDCL 21-25A-35 provides:

Appeals from orders, judgments and decrees. An appeal may be taken from:
1. An order denying an application to compel arbitration made under § 21-25A-5;
2. An order granting an application to stay arbitration made under § 21-25A-8;
3. An order confirming or denying confirmation of an award; An order modifying or correcting an award;
4. An order vacating an award without directing a rehearing; or
5. A judgment or decree entered pursuant to the provisions of this chapter.
The appeal shall be taken in the manner and to the same extent as from orders or judgments in a civil action.

SDCL 21-25A-35 (emphasis added). This Court has not previously addressed the appellate jurisdictional requirements contained in this statute.

[¶ 6.] “We are required to take notice of jurisdictional questions, whether presented by the parties or not. The appellate jurisdiction of this Court will not be presumed but must affirmatively appear from the record.” State v. Hare, 260 N.W.2d 224, 226 (S.D.1977). The question of jurisdiction to hear an appeal may be raised sua sponte. Id.

[¶ 7.] It is settled law that appellate jurisdiction can depend on compliance with conditions precedent set by the legislature. Schreifels v. Kottke Trucking, 2001 SD 90, ¶ 9, 631 N.W.2d 186, 188. The Supreme Court has only such appellate jurisdiction as may be provided by the legislature and the SDConst. art. V, § 5. State v. Hoxeng, 315 N.W.2d 308 (SD 1982). To determine whether the statutory grant of appellate jurisdiction has been met, the rules of statutory interpretation apply. “Ultimately, the purpose of statutory interpretation is to fulfill the legislative dictate. Intent is ordinarily ascertained by examining the express language of the statute.” Faircloth v. Raven Industries, 2000 SD 158, ¶ 6, 620 N.W.2d 198, 200. In addition, we assume no part of the statutory scheme was intended to be “mere surplusage.” Id.

[¶ 8.] In the order that Double Diamond now seeks to appeal, the circuit court has both vacated the arbitration award and directed a rehearing to consider the merits of a damage claim asserted against Double Diamond. SDCL 21-25A-35 clearly specifies that an appeal may only be taken from an order “vacating an award without directing a rehearing.” From this language, the legislative intent is clear; when a rehearing is ordered the decision to vacate is not appealable. Other courts addressing this issue and interpreting nearly identical statutory language have also recognized such an attempted appeal must be dismissed for lack of jurisdiction. See Nebraska Department of Health and Human Services v. Struss, 261 Neb. 435, 623 N.W.2d 308 (2001); Stolhandske v. Stern, 14 S.W.3d 810 (Tex.App.2000); Kowler Associates v. Ross, 544 N.W.2d 800 (Minn.App.1996); Maine Dep’t of Transp. v. Maine State Employees Ass’n, 581 A.2d 813 (Maine 1990).

[¶ 9.] The Nebraska Supreme Court recently determined that “an order vacating an award without directing a rehearing” permits an appeal because the arbitration process has been completed. Nebraska Dep’t of Health and Human Services, 623 N.W.2d at 315 (quoting Nebraska Statute § 25 2620). In so holding, the court recognized:

The language “without directing a rehearing” in [the Nebraska statute] which qualifies an order which vacates an award is meaningful and not superfluous. Clearly, an order which vacates an award “without directing a rehearing” concludes the matter and is therefore, appealable, whereas an order which vacates an award and directs a rehearing requires that further arbitration proceedings be conducted to finally determine the rights of the parties and is not final or appealable.

Id. at 314. See also Kowler Associates, 544 N.W.2d at 802 (stating that “when a rehearing is directed, appellate review is premature because the arbitration process has not been completed.”); Stolhandske, 14 S.W.3d at 814 (recognizing that “had the legislature intended to make all orders vacating arbitration awards immediately appealable, it could have easily done so. In fact, the Federal Arbitration Act so provides.”).

[¶ 10.] This dismissal is in accord with the legislative dictate and the fact that “this Court has consistently favored the resolution of disputes by arbitration.” Thunderstik Lodge, Inc. v. Reuer, 1998 SD 110, ¶ 14, 585 N.W.2d 819, 822. The Supreme Court of Maine aptly stated that this is consistent “with the sound policy, present throughout our system of jurisprudence as well as in the arbitration statute, of preserving judicial resources and limiting appeals prior to judgment to those instances where the element of finality is present.” Maine Dep’t of Transp., 581 A.2d at 814. This is because if the action is allowed to proceed no appeal may be necessary. Id. at 815. “Judicial economy demands that courts not provide time-consuming and perhaps unnecessary interlocutory appeals which delay the favored dispute-resolution process of arbitration.” Id.

[¶ 11.] In this case, SDCL 21-25A-35 does not allow an appeal from the circuit court’s order vacating the award of an arbitrator and directing a rehearing. Accordingly, we dismiss this appeal for lack of jurisdiction.

[¶ 12.] Appeal dismissed.

[¶ 13.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER and MEIERHENRY, Justices, participating.

[¶ 14.] SABERS, Justice, disqualified.


author: GILBERTSON, Chief Justice.

text:
    2003 SD 10
    TRIP-TENN, INC., a South Dakota Corporation, Plaintiff and Appellee, v. Russell S. SCHULTZ and Sandra S. Schultz, Defendants and Appellants.
    No. 22205.
    Supreme Court of South Dakota.
    Considered on Briefs Aug. 26, 2002.
    Decided Jan. 22, 2003.

      Frank A. Bettmann of Finch Bettmann Maks, P.C., Rapid City, for plaintiff and appellee.
    Robert M. Nash of Wilson, Olson, Nash' & Becker, Rapid City, for defendants and appellants.
   GILBERTSON, Chief Justice.

[¶ 1.] Trip-Tenn, Inc. sued Russell and Sandra Schultz (collectively Schultz) for reformation of a contract for deed to collect unpaid principal and interest. The parties entered into the contract in 1977. A discrepancy in the amortization schedule was discovered in 1992. Trip-Tenn, however, did not commence suit until 1999, two years after Schultz claims the final payment on the contract was made. The trial court reformed the contract and awarded Trip-Tenn, Inc., a judgment of $30,955.73. We affirm, concluding the appropriate statute of limitation is the ten-year period found in SDCL 15-2-8(4).

FACTS AND PROCEDURE

[¶ 2.] On May 20, 1977, the parties entered into a contract for the sale of the “Chief Café” in Custer, South Dakota. The majority of negotiations were done through realtors in Denver, Colorado. Eventually, the parties agreed on a sale price of $300,000 with $50,000 in down payment. Three additional payments of $12,000 each were made on July 1, August 1, and September 1 of that year. The remainder was to be paid in installments of $11,217.88, twice a year, over the twenty-year life of the contract. The final payment was made August 1, 1997.

[¶ 3.] Schultz’s payments were made on July 1 and August 1 of each year. The amount of the installments was based on an amortization schedule with a declining balance, at 8.5 percent interest per year. It was discovered, however, that Schultz’s installments were calculated using July 1, 1977, as the beginning date for interest accrual. Trip-Tenn’s president wrote to Schultz explaining the error and demanding an additional payment for the 8.5 percent interest on the unpaid principal, which had accrued from May 20 to July 1. Schultz promptly tendered a check in the amount of $1,999.42, believing the problem to have been solved.

[¶ 4.] In 1992, however, Trip-Tenn’s accountant noted another discrepancy or error in the amount due on the contract, as his calculated amortization schedule did not match the payments being made by Schultz. Trip-Tenn claimed the schedule in use did not account for the proper interest commencement date, the dates and amounts of the payments made in the first year, or the unusual payment schedule of only paying in July and August each year. The accountant contacted Schultz in writing, expressing his concerns. Schultz, however, disagreed with the accountant’s assessment and returned an amortization schedule prepared by a bank. While it, too, turned out to be incorrect, the new schedule also indicated a higher payment was required. Trip-Tenn, however, did not file its claim for reformation until December 8, 1999, twenty-two years after the contract was drafted, seven years after the relevant mistake was discovered and two years after the final payment was made.

[¶ 5.] Trip-Tenn sought a declaration from the circuit court that a principal balance, together with the accruing interest, was still owed on the contract. Further, Trip-Tenn sought reformation of the contract “to comply with the intent expressed between the parties in their document.” The court concluded that while the contract was not ambiguous, it did not “truly express the intent of the parties in that the actual amount of payments made [did] not satisfy the principal and interest due over the term of years agreed to between the parties.” Schultz asserted defenses of es-toppel, laches, accord and satisfaction, and statute of limitations. The court held, however, that the insufficient payments were “clearly a mutual mistake of expression” and applied SDCL 21-11-1 to reform the contract. Likewise, the trial court found that the statute of limitations was not a valid defense to Trip-Tenn’s cause of action and therefore, rejected Schultz’s assertion that the claim was time-barred.

[¶ 6.] Schultz raises the following issues for appeal:

1. Whether Trip-Tenris cause of action is time-barred.
2. Whether the trial court properly reformed the contract.

STANDARD OF REVIEW

[¶ 7.] A claim that a cause of action is time-barred is an affirmative defense. Wolff v. S.D. Game, Fish and Parks Dept., 1996 SD 23, ¶ 14, 544 N.W.2d 531, 533-34 (holding filing outside the statutory period must be “established as a matter of uncontroverted fact.”). Therefore, the burden is on Schultz to show that Trip-Tenris cause of action accrued more than six years (if applying SDCL 15-2-13) or twenty years (if applying SDCL 15-2-6), or ten years (if applying SDCL 15-2-8(4)) before the December 8, 1999 filing date. Wolff, 1996 SD 23, ¶ 14, 544 N.W.2d at 533-34. As in this case there is no question of material fact, the issue of which statute of limitations applies is one of statutory interpretation, which is reviewed de novo. Faircloth v. Raven Industries, Inc., 2000 SD 158, ¶ 4, 620 N.W.2d 198, 200 (citations omitted).

[¶ 8.] “We review a trial court’s grant or denial of reformation under an abuse of discretion standard.” LPN Trust v. Farrar Outdoor Advertising, 1996 SD 97, ¶ 13, 552 N.W.2d 796, 799 (citing Knudsen v. Jensen, 521 N.W.2d 415, 420 (S.D.1994)). “In granting the reformation, the court merely revises the writing to express their prior agreement.” Id. (citing Burke v. Bubbers, 342 N.W.2d 18, 20 (S.D.1984)) (additional citations omitted).

ANALYSIS AND DECISION

[¶ 9.] 1. Whether Trip-Tenn’s cause of action is time-barred.

[¶ 10.] The trial court correctly concluded that Burke, 342 N.W.2d at 20, requires application of the ten-year statute of limitations to this action to reform a contract. In Burke, this Court held that the ten-year statute (SDCL 15-2-8(4)) for “action[s] for relief not otherwise provided for” applied to an action to reform a deed. Burke, 342 N.W.2d at 20. This Court arrived at that conclusion because: (1) equitable actions for reformation are not considered actions upon the underlying deed, rather they are actions for reformation of the instrument; and, (2) South Dakota has no specific statute of limitations for reformation actions. Therefore, in the absence of a statute for equitable reformation, this Court applied the ten-year limitation for causes of action “not otherwise provided for.” Id. That same conclusion is applicable here because this is not an action for relief upon the contract. Rather, this is an action for reformation of that instrument.

[¶ 11.] Burke is analogous because, for statute of limitation purposes, there is no legal distinction between an action to reform a contract and an action to reform a deed arising from a contract. In both cases the proceeding is not an action at law brought upon the contract or the deed for its enforcement. Rather, both actions seek the equitable remedy of reformation of the contract or deed. Langer v. Stegerwald Lumber Co., 262 Wis. 383, 55 N.W.2d 389, 393 (1953).

[¶ 12.] Therefore, because Burke applied the ten-year statute to actions for the reformation of deeds, the same statute should apply to actions for reformation of a contract for a deed. The Wisconsin Supreme Court applied this exact analogy. That court held that Wisconsin’s general statute of limitations for equitable actions applied to an action for reformation of a contract to purchase real estate, rather than a statute of limitations for actions upon a contract. The Wisconsin Supreme Court ruled: “by analogy, if the [general equitable] statute applies to the reformation of a deed, it ought to also apply to the reformation of a contract for sale of land.” Langer, 262 Wis. 383, 55 N.W.2d 389, 393.

[¶ 13.] That analysis is applicable here. By analogy, if the Burke ten-year statute of limitations in SDCL 15-2-8(4) applies to reformations of deeds, it also applies to the reformation of the contract for the sale of Trip-Tenn’s property. Under that ten-year statute, Trip-Tenn’s 1999 action for reformation was timely, whether it accrued upon the first discovery of the mistake in 1992, or upon Schultz’s assertion of his adverse claim in 1998.

[¶ 14.] 2. Whether the trial court properly reformed the contract.

[¶ 15.] Having determined that Trip-Tenn’s cause of action is not time-barred, we now turn to the issue of whether the trial court abused its discretion when it reformed the contract under SDCL 21-11-1. This statute provides:

When through fraud or mutual mistake of the parties, or a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.

[¶ 16.] Schultz argues that there is no showing of mutual mistake and therefore, reformation of the contract was not appropriate. Additionally, Schultz contends that reformation was not proper because Trip-Tenn did not bring this cause of action until after all payments were accepted.

[¶ 17.] We find Garber v. Haskins to be controlling to the instant case. 84 S.D. 459, 172 N.W.2d 721 (1969). In Garber, this Court allowed reformation of a contract based on erroneous amortization calculations. 84 S.D. at 464, 172 N.W.2d at 723. After a review of the record, we find that there was ample evidence at trial to support the trial court’s decision to reform the contract. Both Schultz and Trip-Tenn were well aware that there were mistaken figures in the amortization table essentially from the beginning of the contract. Therefore, the contract did not “truly express the intentions of the parties.” As we stated in Garber, “The determination of these amounts was only a matter or arithmetic computation from the essential terms of the bargain on which they agreed.” Id. That same conclusion applies here. We, therefore, affirm.

[¶ 18.] SABERS, KONENKAMP, and ZINTER, Justices, and AMUNDSON, Retired Justice, concur.

[¶ 19.] MEIERHENRY, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.

      . While the problem with the interest commencement date had supposedly been solved by Schultz’s additional interest payment, that payment was calculated on $214,000 in principal, not $250,000, which Trip-Tenn now claims was the proper amount.

      . Over the course of the contract, six different amortization schedules were purportedly used to calculate Schultz’s payments. Only the last one, entered into evidence by Trip-Tenn and not seen by Schultz prior to completion of the contract, used $250,000 as the initial interest-bearing principal. The other five all treated the first three $12,000 payments as additional installments on the down payment, thus calculating interest on $214,000.

      . Burke also declined to apply the "fraud or mistake" statute of limitations sometimes used in other jurisdictions for reformation actions. Burke concluded that South Dako-la’s version of that statute is inapplicable because it (SDCL 15-2-13(6)) does not contemplate actions which are only based on mistake. Id.


author: NEUMAN, Justice.

text:
    Ron VIRDEN, Appellant, v. BETTS AND BEER CONSTRUCTION CO., INC. and Stroh Corporation, Appellees.
    No. 01-0596.
    Supreme Court of Iowa.
    Jan. 23, 2003.

      Channing L. Dutton of Lawyer, Lawyer, Dutton & Drake, L.L.P., West Des Moines, for appellant.
    Gregory A. Witke and Matthew J. Haindfield of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appel-lee Betts and Beer Construction Co., Inc.
    Richard K. Updegraff and Brian P. Ric-kert of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellee Stroh Corporation.
   NEUMAN, Justice.

Plaintiff, Ron Virden, worked in the maintenance department of Indianola High School. On the first day of school in 1997, Virden’s supervisor asked him to reinstall an angle iron that had fallen from the ceiling of the school’s new wrestling room. As Virden was bolting the angle iron into place, he fell from the top of the ten-foot ladder on which he was standing. He sustained severe injuries to his left leg, requiring several surgeries.

Virden sued the contractors, defendants Betts & Beer Construction and Stroh Corporation, who earlier in the year had installed the wrestling room ceiling. Over Virden’s objection, the district court granted these defendants summary judgment. It held their negligence, if any, was not the proximate cause of Virden’s injuries. Vir-den appealed and the court of appeals reversed. We granted further review and, now, vacate the court of appeals decision and affirm the judgment of the district court.

I. Scope of Review/Issue on Appeal.

Because this case reaches us on appeal from a summary judgment ruling, our task is to determine whether the record made before the district court demonstrates “no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Iowa R. Civ. P. 1.981. We are obliged to “view the evidence in the light most favorable to the plaintiff, giving him the benefit of every legitimate inference the evidence will bear.” Walls v. Jacob North Printing Co., 618 N.W.2d 282, 284 (Iowa 2000).

While negligence cases do not ordinarily lend themselves to summary adjudication, see id., summary judgment may be rendered when the material facts fail to show a causal link between the negligence and the injury. See Ruden v. Jenk, 543 N.W.2d 605, 612 (Iowa 1996). Issues of proximate cause, like negligence, are generally for the jury to resolve. Iowa R.App. P. 6.14(6)(j); Hollingsworth v. Schminkey, 553 N.W.2d 591, 597 (Iowa 1996). They may, however, be decided as a matter of law in an exceptional case. Iowa R.App. P. 6.14(6)(j); Hollingsworth, 553 N.W.2d at 597. We have observed that an exceptional case

is one in which after construing the evidence in its most favorable light and resolving all doubts in favor of the party seeking to establish proximate cause, the relationship between cause and effect nonetheless is so apparent and so unrelated to defendant’s conduct that no reasonable jury could conclude defendant’s fault was a proximate cause of plaintiffs injuries.

Johnson v. Junkmann, 395 N.W.2d 862, 865-66 (Iowa 1986). The question is whether this is such an exceptional case. For the reasons that follow, we think that it is.

II. Analysis.

To sustain his tort claim against these defendants, Virden would have to prove that the defendants owed him a duty of care, they breached that duty, their breach was the actual and proximate cause of Virden’s injuries, and he suffered damages. Walls, 618 N.W.2d at 285. Virden’s petition claimed that defendants’ failure to “properly assemble, install and/or inspect the roof system” required Virden to “put himself at risk to re-install the angle iron,” leading to his fall from the ladder.

The summary judgment record makes plain that neither Virden nor his employer contacted the defendants about the fallen angle iron before attempting to effect repairs. Virden also concedes that he sought no help in positioning or securing the ladder, even though several pieces of weight-lifting equipment hampered clear access to the repair site. With this record in mind, we turn to the disputed elements of Virden’s claim: duty and causation.

A Duty. Although the defendants argue as a general proposition that they owed no duty of care to Virden, they are unable to defend the district court’s ruling on that ground. It is generally held that

a building or construction contractor is liable - for injuries to, or the death of, third persons occurring after the completion of his work and its acceptance by the contractee, where the work is reasonably certain to endanger third persons if negligently prepared or constructed.

Thompson v. Burke Eng’g Sales Co., 252 Iowa 146, 155, 106 N.W.2d 351, 356 (1960). This rule rests on fundamental principles:

[T]he law imposes upon every person who undertakes the performance of an act which, it is apparent, if not done carefully will be dangerous to other persons or the property of other persons the duty to exercise his senses and intelligence to avoid injury, and any such person may be held accountable at law for an injury to person or to property which is directly attributable to a breach of such duty.

57A Am.Jur.2d Negligence § 96, at 150 (1989).

The angle iron that fell from the ceiling of the -wrestling room was six feet in length and weighed roughly ten pounds. It can hardly be disputed that lack of due care in welding the angle iron in place would put the foreseeable occupants of the room at considerable risk of injury. In other words, the defendants had a duty to Virden, and others using the room, to construct a ceiling that did not fall apart and injure someone. See Thompson, 252 Iowa at 149, 106 N.W.2d at 353 (common experience teaches that ceilings do not fall in the absence of negligence).

Virden did not suffer, however, from being hit by the angle iron or tripping over it once it fell from the ceiling. In his words, he was injured when the ladder he stood on to replace the fallen hardware “suddenly kicked out from under [him] and [he] fell.” That brings us to the crux of the case.

B. Causation. Defendants’ breach of their duty of care only constitutes actionable negligence if it is “also the proximate cause of the injury.” City of Cedar Falls v. Cedar Falls Cmty. Sch. Dist., 617 N.W.2d 11, 17 (Iowa 2000). There are two components to the proximate-cause inquiry: “(1) the defendant’s conduct must have in fact caused the damages; and (2) the policy of the law must require the defendant to be legally responsible for them.” Id.; see also Gerst v. Marshall, 549 N.W.2d 810, 815 (Iowa 1996).

With respect to the first component, a plaintiff must at a minimum prove that the damages would not have occurred but for the defendant’s negligence. City of Cedar Falls, 617 N.W.2d at 17; Gerst, 549 N.W.2d at 817. Here, viewing the facts in the light most favorable to Virden, we assume that but for the faulty weld in the angle iron he would not have been perched precariously upon a ladder attempting to fix it. So, minimally, the but-for test of causation would survive defendants’ motion for summary judgment.

The but-for test is not the end of the inquiry, however. Virden must also tender proof that defendants’ negligent welding of the angle iron was a substantial factor in bringing about his injury. City of Cedar Falls, 617 N.W.2d at 17; Scoggins v. Wal-Mart Stores, Inc., 560 N.W.2d 564, 567 (Iowa 1997). See generally Restatement (Second) of Torts § 431 cmt. a (1965) (distinguishing between “substantial cause” and cause “in the so-called philosophic sense, which includes every one of the great number of events without which any happening would not have occurred.”) This aspect of the proximate-cause inquiry focuses on the “proximity and forseeablility of the harm flowing from the actor’s conduct.” City of Cedar Falls, 617 N.W.2d at 17.

We have observed that the line between “what is sufficiently proximate and what is too remote is often a thin one.” Hollingsworth, 553 N.W.2d at 597. We recently drew the line this way:

An injury that is the natural and probable consequence of an act of negligence is actionable, and such an act is the proximate cause of the injury. But an injury which could not have been foreseen or reasonably anticipated as the probable result of an act of negligence is not actionable and such an act is either the remote cause, or no cause whatever, of the injury.

Scoggins, 560 N.W.2d at 568-69 (quoting Fly v. Cannon, 836 S.W.2d 570, 574 (Tenn.Ct.App.1992) (emphasis added)).

Here, the district court assessed defendants’ role in Virden’s mishap as remote rather than foreseeable. Its conclusion stemmed from the undisputed fact that the instrumentality causing Virden’s injury was a tipping or collapsing ladder, not a defective angle iron. We agree. The Restatement describes this distinction as the difference between the “negligence problem” and the “cause problem”:

[W]here the negligence of the act consists in its recognizable tendency to subject another to a particular hazard, the actor cannot be subject to liability for any harm occurring otherwise than by the other’s exposure to that hazard.

Restatement (Second) of Torts § 430 cmt. a (1965) (citing Restatement (Second) of Torts § 281 cmt, e). Applying this concept to the case before us, we observe that the duty to construct a solid ceiling is not to protect repairmen from perching on tall ladders but to prevent collapsing parts of the ceiling from falling on persons below.

To summarize, the unfortunate outcome of Virden’s self-help remedy cannot be said to fall naturally within the scope of the probable risk created by the defendants’ failure to properly install the ceiling. Because Virden’s fall was not a reasonably foreseeable or probable consequence of defendants’ negligence, the district court correctly granted judgment in their favor. We therefore vacate the court of appeals’ contrary decision and affirm the judgment of the district court.

COURT OF APPEALS DECISION VACATED; DISTRICT COURT JUDGMENT AFFIRMED.