Discover Bank v. Stanley

#24822-rev & rem-DG

2008 SD 111

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *

DISCOVER BANK, Plaintiff and Appellee,

v.

JOSEPH STANLEY, Defendant and Appellant.

* * * *

APPEAL FROM THE CIRCUIT COURT OF
THE FIFTH JUDICIAL CIRCUIT
SPINK COUNTY, SOUTH DAKOTA

* * * *

HONORABLE TONY PORTRA
Judge

* * * *

ROBERT A. MARTIN
Rapid City, South Dakota Attorney for plaintiff
and appellee.

CASEY N. BRIDGMAN of
Bridgman and Adel
Wessington Springs, South Dakota Attorneys for defendant
and appellant.

* * * *

ARGUED SEPTEMBER 30, 2008

OPINION FILED 11/12/08
#24822

GILBERTSON, Chief Justice

[¶1.] Discover filed a motion for summary judgment in a breach of contract

claim against cardholder Joseph Stanley. Discover did so without filing a statement

of undisputed material facts. The circuit court granted Discover’s motion, and

entered a judgment against Stanley. Stanley appeals. We reverse.

FACTS

[¶2.] Joseph Stanley applied for and was granted a Discover card in

March of 1996. The terms which Discover applied to issuance of the card are

not in dispute. In part the terms stated: “We must hear from you no later

than 60 days after we sent you the first bill on which the error or problem

appeared.” 1

1. The terms and conditions of the credit card account included the following:

UNAUTHORIZED USE. If a Card is lost or stolen, or if you
think that someone is using your Account or a Card without
your permission, notify us immediately. . . . You agree to assist
us in determining the facts relating to any theft or possible
unauthorized use of your Account or a Card and to comply with
such procedures as we may require in connection with our
investigation.

PROMISE TO PAY. You agree to pay us in U.S. Dollars for all
purchases, cash advances, and balance transfers including
applicable Finance Charges and other charges or fees, incurred
by you or anyone you authorize or permit to use your Account or
a Card, even if you do not notify us that others are using your
Account or a Card.
...
Your Billing Rights
KEEP THIS NOTICE FOR FUTURE USE
This notice contains important information about your rights
and our responsibilities under the Fair Credit Billing Act.

(continued . . .)
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________________________
(. . . continued)
1. Notify Us in Case of Errors or Questions About Your
Bill
If you think your bill is wrong, or if you need more information
about a transaction on your bill, write us on a separate sheet of
paper at the address listed on your bill for Notice of Billing
Errors. Write to us as soon as possible. We must hear from you
no later than 60 days after we sent you the first bill on which
the error or problem appeared. You can telephone us, but doing
so will not preserve your rights.
In your letter, give us the following information:
• your name and Account number.
• your dollar amount of the suspected error.
• describe the error and explain, if you can, why you believe
there is an error. If you need more information, describe
the item you are not sure about.
...
2. Your Rights and Our Responsibilities After We Receive
Your Written Notices
We must acknowledge your letter within 30 days, unless we
have corrected the error by then. Within 90 days, we must
either correct the error or explain why we believe the bill was
correct.
After we receive your letter, we cannot try to collect any amount
you question, or report you as delinquent. We can continue to
bill you for the amount you question, including finance charges,
and we can apply any unpaid amount against your Account
credit limit. You do not have to pay any questioned amount
while we are investigating, but you are still obligated to pay the
parts of your bill that are not in question.
If we find that we made a mistake on your bill, you will not have
to pay any finance charges, and you will have to make up any
missed payments on the questioned amount. In either case, we
will send you a statement of the amount you owe and the date
that it is due.
If you fail to pay the amount that we think you owe, we may
report you as delinquent. However, if our explanation does not
satisfy you and you write us within ten days telling us that you
still refuse to pay, we must tell anyone we report you to that you
have a question about your bill. And, we must tell you the name
of anyone we report you to. We must tell anyone we report you
to that the matter has been settled between us when it finally is.
If we don’t follow these rules, we can’t collect the first $50 of the
questioned amount, even if your bill was correct.

(continued . . .)
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[¶3.] Stanley received a billing statement sometime in calendar year 1997

for a charge or charges totaling $1,718.02. Stanley claimed he did not make the

charge(s), but believed he owed something on the account. Stanley did not dispute

the charge(s) within the sixty-day period as provided in the “Your Billing Rights”

section of the credit card agreement. Over the next eight years, Stanley continued

to pay on the account without making any additional charges to the account.

[¶4.] In 2004 after paying over $8,600.00 on the account, yet failing to pay

off the balance, Stanley disputed the 1997 charge(s). The record is unclear if he did

so over the telephone or in writing. During the time Stanley continued to dispute

the charge(s), Discover claimed it was unable to provide account statements prior to

June 15, 1998, as requested by Stanley. Discover claimed it had not retained

records prior to June 15, 1998, which showed the original charge(s) made sometime

in calendar year 1997.

[¶5.] In addition to not being able to provide Stanley with documentation

prior to June 15, 1998, Discover would not close Stanley’s account despite repeated

requests to do so. Stanley was told over the telephone by several Discover

employees that they were unable to close the account without a credit counselor

________________________
(. . . continued)
The language quoted from the Discover card agreement under “Your Billing
Rights” is contained verbatim in Regulation Z found at 12 CFR § 226.1 et
seq., as issued by the Board of Governors of the Federal Reserve System,
which provides the method and manner for implementation of the Truth in
Lending Act, 15 USC § 1601. The language is a mandatory disclosure
required by the Fair Credit Billing Act, 15 USC § 1666, et seq., (FCBA),
which provides dispute resolution procedures for both credit card holders and
their creditors. 15 USC § 1666-1666(j).

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being present on the telephone line. At some point, Stanley ceased paying on the

account.

[¶6.] On March 8, 2005, Discover Bank sued Stanley for the unpaid balance

on the account, which at that time totaled $6,565.41. Based on the prayer for relief,

the complaint appears to allege breach of contract. Discover’s request for relief

demanded judgment against Stanley in the sum of $6,565.41 with interest “as

authorized under said Discover Card plus costs and whatever further and

additional relief is deemed equitable by the Court.”

[¶7.] Stanley did not file an answer with the court. Instead, he wrote the

attorney representing Discover in the matter and disputed Discover’s claim that

Stanley owed $6,565.41 on the account, stating that he had not made the original

charge(s). 2 Stanley did so in writing using the method prescribed in the Complaint,

which cited to the Fair Credit Billing Act, 15 USC § 1601 et seq. Discover served

Stanley with requests for production, requests for admission, and interrogatories,

which Stanley failed to answer. Discover filed a motion for default judgment at

which time Stanley hired legal counsel.

[¶8.] On May 31, 2007, Discover moved for summary judgment. Discover

failed to file a statement of undisputed material facts with its motion and affidavit.

Stanley resisted the motion for summary judgment, and argued that Discover’s

failure to provide a statement of undisputed material facts was fatal to its motion

2. It is unclear when Stanley’s first letter to Discover was written, as it is not in
the record. However, a letter dated May 17, 2005, references the first letter
and provides substantiation that Stanley contested charges in writing at
least by that date.

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under SDCL 15-6-56. Stanley also argued that Discover’s inability to substantiate

the original charge(s) to the account upon which the balance of $6,565.41 was based

raised a genuine issue of material fact for the finder of fact as to whether Stanley

had made the original charge(s) in 1997, and whether he owed the money in

question. Finally, Stanley raised the defense of accord and satisfaction, claiming he

was told by Discover telephone agents that the balance had been satisfied. Stanley

evidenced this with a copy of a statement provided by Discover dated December 31,

2004, which showed a zero balance.

[¶9.] On January 15, 2008, a hearing was held on Discover’s motion for

summary judgment. The circuit court held that Discover’s failure to file a

statement of undisputed material facts was not fatal to its motion for summary

judgment, as the circuit court concluded there were no disputed facts in contention.

The circuit court further found that it was not relevant to the motion for summary

judgment that Discover was unable to provide the original record of the charge(s)

from 1997.

[¶10.] Stanley presented evidence to dispute Discover’s claim that he owed on

the charge account. That evidence included an affidavit in which Stanley claimed

he paid over $8,600.00 on the account, a claim Discover never disputed.

[¶11.] The evidence also included a copy of the account statement from

December 31, 2004, in which a payment credit of $6,565.41 against a balance of the

exact amount was reflected, and an affidavit in which Stanley claimed he had been

told by Discover that he no longer owed anything on the account. A description at

the bottom of the statement indicated an internal charge off of $6,565.41 was made

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on December 31, 2004. The circuit court accepted the explanation provided by

Discover’s counsel, that the designation “internal charge off” was an accounting

method used by Discover prior to sending out an account for legal action. The

circuit court did so despite Stanley’s affidavit, which stated Stanley was told by a

Discover telephone customer service agent that Stanley no longer owed anything on

the account. The circuit court rejected Stanley’s statement based on an argument

advanced by counsel for Discover that Stanley’s self-serving statement in his

affidavit without more, such as the name of the Discover telephone customer service

agent or confirmation in writing, was insufficient to create a genuine issue of

material fact under SDCL 15-6-56.

[¶12.] The circuit court further found that the time for Stanley to contest the

1997 charge(s) had long passed. The circuit court found that Stanley’s attempts to

contest the charge(s) in 2004 and 2005 were untimely, and were subject to the

defenses of laches or waiver. Regardless of the rationale, the circuit court held that

it was an undisputed fact that Stanley owed the original charge(s) due to the

passage of time and Stanley’s failure to contest the charge(s) within sixty-days as

required by the terms and conditions of the credit card account.

[¶13.] The circuit court granted Discover’s motion for summary judgment and

entered an order of judgment against Stanley in the amount of $6,565.41 for

principal, prejudgment interest of $1,331.32, plus court costs and service fees in the

amount of $67.10, for a total judgment of $7,963.83. Stanley appeals.

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[¶14.] Stanley raises the following issues on appeal:

1. Whether a moving party in a motion for summary
judgment is required to provide a statement of undisputed
material facts.

2. Whether a genuine issue of material fact was in dispute
when Discover provided no evidence that Stanley made
the original charge(s) to the Discover credit card.

STANDARD OF REVIEW

[¶15.] Statutory interpretation is a question of law to be reviewed under the

de novo standard of review. Martinmaas v. Engelmann, 2000 SD 85, ¶49, 612

NW2d 600, 611 (citing Moss v. Guttormson, 1996 SD 76, ¶10, 551 NW2d 14, 17

(citing U.S. West Communications, Inc. v. Public Util. Comm’n, 505 NW2d 115, 122-

23 (SD1993))).

The purpose of statutory construction is to discover the true
intention of the law which is to be ascertained primarily from
the language expressed in the statute. The intent of a statute is
determined from what the legislature said, rather than what the
courts think it should have said, and the court must confine
itself to the language used. Words and phrases in a statute
must be given their plain meaning and effect. When the
language in a statute is clear, certain and unambiguous, there is
no reason for construction, and the Court’s only function is to
declare the meaning of the statute as clearly expressed.

Id. The same rule applies to construction of this Court’s rules of civil procedure. See

Maynard v. Heeren, 1997 SD 60, ¶14, 563 NW2d 830, 835 (citing Cummings v.

Mickelson, 495 NW2d 493, 500 (SD 1993)).

[¶16.] Our well-settled standard of review for a motion for summary

judgment provides:

Summary judgment is authorized “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to

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any material fact, and that the moving party is entitled to
judgment as a matter of law.” We will affirm only when there
are no genuine issues of material fact and the legal questions
have been correctly decided. All reasonable inferences drawn
from the facts must be viewed in favor of the non-moving party.
The burden is on the moving party to clearly show an absence of
any genuine issue of material fact and an entitlement to
judgment as a matter of law.

Mueller v. Cedar Shore Resort, Inc., 2002 SD 38, ¶10, 643 NW2d 56, 62 (quoting

Hayes v. N. Hills General Hosp., 1999 SD 28, ¶12, 590 NW2d 243, 247 (quoting

SDCL 15-6-56(c))). There must be no material facts at issue, and there must “be no

genuine issue on the inferences to be drawn from those facts.” A-G-E Corp. v. State,

2006 SD 66, ¶17, 719 NW2d 780, 786 (citations omitted).

[¶17.] The construction of a written contract is a question of law. Campion v.

Parkview Apartments, 1999 SD 10, ¶25, 588 NW2d 897, 902) (citing Production

Credit Ass’n v. Wynne, 474 NW2d 735, 740 (SD 1991) (quoting Baker v. Wilburn,

456 NW2d 304, 306 (SD 1990) (citations omitted))). The effects and terms of a

contract are questions of law to be resolved by the court. Cotton v. Manning, 1999

SD 128, ¶15, 600 NW2d 585, 588 (quoting Campion, 1999 SD 10, ¶25, 588 NW2d at

902) (citations omitted). “On appeal, this [C]ourt can read a contract itself without

a presumption in favor of the trial court’s determination. The court is to enforce

and give effect to the unambiguous language and terms of the contract.” Campion,

1999 SD 10, ¶25, 588 NW2d at 902 (citing Production Credit Ass’n v. Wynne, 474

NW2d 735, 740 (SD 1991) (quoting Baker v. Wilburn, 456 NW2d 304, 306 (SD 1990)

(citations omitted))).

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ANALYSIS

[¶18.] SDCL 15-6-56 provides the procedure for when and how a motion for

summary judgment may be filed with a circuit court. SDCL 15-6-56(a)-(g). Any

party to an action to recover a “claim, counterclaim, or cross-claim or to obtain a

declaratory judgment” is permitted under the rules to file a motion for summary

judgment. SDCL 15-6-56(a)-(b). The parties may do so with or without supporting

affidavits. Id.

[¶19.] “Summary judgment is an extreme remedy, is not intended as a

substitute for a trial.” Continental Grain Co. v. Heritage Bank, 1996 SD 61, ¶17,

548 NW2d 507, 511 (quoting Piner v. Jensen, 519 NW2d 337, 339 (SD 1994)).

However, on appeal this Court will affirm the circuit court’s ruling granting a

motion for summary judgment if any basis exists to support the ruling. Westfield

Ins. Co., Inc. v. Rowe ex rel. Estate of Gallant, 2001 SD 87, ¶4, 631 NW2d 175, 176

(citing Estate of Juhnke v. Marquardt, 2001 SD 26, ¶5, 623 NW2d 731, 732).

[¶20.] 1. Whether a moving party in a motion for summary
judgment is required to provide a statement of
undisputed material facts.
[¶21.] As a rule of statutory construction, we have determined that “[w]hen

‘shall’ is the operative verb in a statute, it is given ‘obligatory or mandatory’

meaning.” In re J.H., 1999 SD 36, ¶31, 590 NW2d 473, 479 (citing In re Groseth

Int’l, Inc., 442 NW2d 229, 231-32 (SD 1989) (citing Person v. Peterson, 296 NW2d

537 (SD 1980); Tubbs v. Linn, 75 SD 566, 70 NW2d 372 (1955); 2A Sutherland Stat.

Const. § 57.03 at 643-44 (4th ed 1984); Sutton, Use of “Shall” in Statutes, 4 J.

Marshall LQ 204 (1938), reprinted in 1A Sutherland Stat. Const. 691 (4th ed 1985)).

The statutory definition of “shall” is in accord: “As used in the South Dakota
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Codified Laws to direct any action, the term, shall, manifests a mandatory directive

and does not confer any discretion in carrying out the action so directed.” SDCL 2-

14-2.1. Statutes and court rules must be construed in their entirety. Jensen v.

Turner County Bd. of Adjustment, 2007 SD 28, ¶12, 730 NW2d 411, 415 (citing

Peterson, ex rel. Peterson v. Burns, 2001 SD 126, ¶32, 635 NW2d 556, 568 (quoting

Maynard, 1997 SD 60, ¶14, 563 NW2d 830, 835)). The effect of the word “shall”

may be determined by the balance of the text of the statute or rule. Application of

Megan, 69 SD 1, 9, 5 NW2d 729, 733 (1942) (quoting 59 CJ § 631, p 1074) (citation

omitted).

[¶22.] The prior version of SDCL 15-6-56(c) provided as follows:

The motion shall be served at least ten days before the time
fixed for the hearing. Any briefing must comply with § 15-6-
6(d). The adverse party prior to the day of hearing may serve
opposing affidavits. The judgment sought shall be rendered
forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law. A summary judgment,
interlocutory in character, may be rendered on the issue of
liability alone although there is a genuine issue as to the
amount of damages.

SDCL 15-6-56(c), SL 2006, ch 329 (Supreme Court Rule 06-55) (current version

enacted September 4, 2007). The prior versions of SDCL 15-6-56(c), including the

version enacted under Session Law 2006, chapter 329, did not require the moving

party to file a statement of undisputed material facts.

[¶23.] However, SDCL 15-6-56(c) was amended once again on October 18,

2006. SDCL 15-6-56(c), SL 2007, ch 302 (Supreme Court Rule (06-70) (current

version enacted September 4, 2007). The October 18, 2006, amendment, which

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became effective on January 1, 2007, introduced for the first time a requirement

that a statement of undisputed material facts be filed with a motion for summary

judgment:

(1) A party moving for summary judgment shall attach to the
motion a separate, short, and concise statement of the
material facts as to which the moving party contends there is
no genuine issue to be tried. Each material fact in this
required statement must be presented in a separate
numbered statement and with appropriate citation to the
record in the case.

(2) A party opposing a motion for summary judgment shall
include a separate, short, and concise statement of the
material facts as to which the opposing party contends a
genuine issue exists to be tried. The opposing party must
respond to each numbered paragraph in the moving party’s
statement with a separately numbered response and
appropriate citations to the record.

(3) All material facts set forth in the statement that the moving
party is required to serve shall be admitted unless
controverted by the statement required to be served by the
opposing party.

SDCL 15-6-56(c) (effective January 1, 2007) (emphasis added). That requirement

remains in effect under the current version of SDCL 15-6-56(c). If the moving party

claims there are no material facts for a trier of fact to decide, it is fair and not

unduly burdensome that he or she so specifically advises the circuit court and

opposing counsel in the form of such a statement.

[¶24.] The requirement that a statement of undisputed material facts be

attached to the motion by the party moving for summary judgment is phrased in the

mandatory term shall. In the context of this rule, this Court cannot ascertain any

other meaning given to the word “shall” that permits a party to fail to comply with a

mandatory requirement in a statute. The fact that affidavits were submitted, while

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appropriate, cannot negate the need for the statement of undisputed material facts

as required by SDCL 15-6-56(c)(1) and (2).

[¶25.] Discover’s failure to file a statement of undisputed material facts with

its May 31, 2007, motion for summary judgment prevented Stanley from knowing

exactly what facts Discover planned on using to support its motion until the day of

the hearing. The party opposing a motion for summary judgment should not have

to guess at what its opponent plans to present in court. The plain meaning of SDCL

15-6-56(c) leaves no doubt that the moving party must file a statement of

undisputed material facts with a motion for summary judgment filed on or after

January 1, 2007.

[¶26.] The circuit court erred when it did not require Discover to submit a

statement of undisputed materials facts as required by SDCL 15-6-56(c). The lack

of such a statement denied Stanley the opportunity to submit his mandatory

statement controverting those undisputed facts offered by Discover.

[¶27.] 2. Whether a genuine issue of material fact was in
dispute when Discover provided no evidence that
Stanley made the original charges to the Discover
credit card.

[¶28.] Discover argued before the circuit court that Stanley was bound by the

terms and conditions of the credit card agreement. In this case, the terms and

conditions of the credit card agreement entered into by the parties states that

Stanley was required to pay:

[I]n U.S. Dollars for all purchases, cash advances, and balance
transfers including applicable Finance Charges and other
charges or fees, incurred by you or anyone you authorize or
permit to use your Account or a Card, even if you do not notify us
that others are using your Account or a Card.

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Thus, by the terms of its own contract, Discover is limited to pursuing Stanley for

those charges he personally incurred on the Discover card, or charges incurred by

someone Stanley authorized to use the account.

[¶29.] Discover was unable to show in its affidavit and supporting exhibits

what the 1997 charge(s) was for, when the charge(s) was made, where it was made,

who made the charge(s), and whether it was “authorized” within the meaning of the

contract. 3 Discover’s claim that Stanley owed the money was just that, a mere

claim.

[¶30.] Stanley resisted Discover’s motion for summary judgment by affidavit,

stating under oath that he did not make the 1997 charge(s), nor did he authorize

another person to make the charge(s). Thus, Stanley generated a genuine issue of

material fact as to whether he owed the 1997 charge(s) and the outstanding

balance. Stanley as the nonmoving party, not Discover, was entitled to all

reasonable inferences.

[¶31.] Discover offered nothing further to show the nonexistence of a genuine

issue of material fact other than its original claim that the balance on the June 15,

1998, billing statement, the earliest statement Discover was able to produce, was

owed by Stanley. Without some type of substantiation that the original 1997

charge(s) was “incurred by [Stanley] or anyone [Stanley] authorize[d] or permit[ted]

3. At oral argument, counsel for Stanley stated that the charge might have been
made by Stanley’s mother, but did not state whether she was an authorized
user of the card. It is undisputed in the record that neither party knew who
made the charge, what it was for, or when it was made.

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to use [the] Account or [ ] Card[,]” Discover could not prevail on its motion for

summary judgment.

[¶32.] Discover’s failure to file a statement of undisputed material facts also

impacts the issue of accord and satisfaction. An accord and satisfaction is

authorized by statute. SDCL 20-7-4. “The ‘burden of proof to establish such

defense is on the party who seeks to rely on it.’” Hubbard Milling Co. v. Frame, 310

NW2d 155, 157 (SD 1981) (citing Lang v. Burns, 77 SD 626, 97 NW2d 863 (1959)).

Nevertheless, there exists a material question of fact on the December 2004 billing

statement. Discover’s claim that the zero balance on this billing statement was an

accounting write-off cannot be ascertained as a matter of undisputed fact from the

face of that document. Moreover, Stanley testified by affidavit that he was told over

the phone by Discover that the account was satisfied. Thus, Discover has failed to

establish that no questions of fact exist as to an accord and satisfaction or lack

thereof.

[¶33.] Discover also argued that laches and waiver applied. Equitable

doctrines such as laches and waiver are generally inappropriate for a summary

judgment proceeding. Ahl v. Arnio, 388 NW2d 532, 533 (SD 1986) (citing Wilson v.

Great Northern Ry. Co., 83 SD 207, 157 NW2d 19 (1968)). The circuit court’s

reliance on the doctrine of laches and waiver in its grant of summary judgment, and

Discover’s argument on appeal that Stanley could not satisfy the elements of accord

and satisfaction, are issues of fact that must be determined below.

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[¶34.] We reverse and remand the matter to the circuit court for further

proceedings consistent with this opinion. 4

[¶35.] SABERS, KONENKAMP, ZINTER, and MEIERHENRY, Justices,

concur.

4. At oral argument discussion was had by counsel about the affect of the Truth
in Lending Act, 15 USC § 1601 and the Fair Credit Bill Act 15 USC § 1666
upon this case. (See generally supra n2). As we decide this case on state law
and procedural grounds, we express no opinion on any issues that pertain to
these federal acts.

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