Parmely Trust v. Magness

#30135-r-SPM
2023 S.D. 49

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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THE GENEVIEVE J. PARMELY
REVOCABLE TRUST, Plaintiff and Appellee,

v.

BRAD MAGNESS, Defendant and Appellant.

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APPEAL FROM THE CIRCUIT COURT OF
THE THIRD JUDICIAL CIRCUIT
HAND COUNTY, SOUTH DAKOTA

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THE HONORABLE PATRICK T. PARDY
Judge

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JEFF BURNS of
Churchill, Manolis, Freeman,
Kludt & Burns, LLP
Huron, South Dakota Attorneys for defendant and
appellant.

JOHN K. NOONEY
ROBERT J. GALBRAITH
JARED D. NOONEY of
Nooney & Solay, LLP
Rapid City, South Dakota Attorneys for plaintiff and
appellee.

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CONSIDERED ON BRIEFS
APRIL 25, 2023
OPINION FILED 09/20/23
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MYREN, Justice

[¶1.] The Genevieve J. Parmely Revocable Trust sought a declaratory

judgment asking the court to determine that an option agreement made with Brad

Magness was invalid because of the absence of consideration. The parties filed

cross-motions for summary judgment regarding the existence of consideration. The

circuit court granted summary judgment in favor of the Trust. Magness appeals.

We reverse and remand with direction to enter summary judgment on that issue in

favor of Magness.

Factual and Procedural History

[¶2.] Genevieve and James Parmely owned land in joint tenancy. In 2000,

they sold a portion of their land to Brad Magness for $325 per acre. During the

discussions leading up to the sale, Magness agreed to that purchase price with the

understanding that he would have an option to buy the remainder of their land at a

lower per-acre price. However, the 2000 purchase agreement did not mention any

such option and contained an integration clause. 1

[¶3.] In 2002, the Parmelys and Magness memorialized their option

agreement by signing a document titled “Real Estate Option” that provided

Magness an option to buy the remainder of the Parmelys’ land for $285 per acre. In

2006, the same parties signed a second “Real Estate Option” that corrected a

1. The integration clause provided: “INTEGRATION: This writing constitutes
the entire Agreement between the parties and there are no other oral or
written agreements or understandings of any kind or character except those
contained herein. This Agreement may be changed or modified only by a
written agreement signed by the parties.”
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typographical error in the legal description of the property. Both documents were

signed before a notary by all parties.

[¶4.] James died in 2018, and, by operation of law, Genevieve became the

sole owner of the land described in the real estate option documents. In March

2019, Genevieve transferred her interest in the land to the Genevieve J. Parmely

Revocable Trust. In July 2019, the Trust sought declaratory relief, asking the

circuit court to declare that both real estate options were “not valid under South

Dakota law and that any and all rights granted by the [real estate options] are

hereby extinguished.” Magness answered and asserted that the Trust failed to

state a claim upon which relief could be granted. In April 2020, Magness advised

the Trust he was exercising his option to purchase the remaining property.

[¶5.] During his deposition, Magness testified that the $325-per-acre asking

price by the Parmelys in the 2000 purchase agreement was above the market value

of the property at the time and the Parmelys were firm on this price because it

provided them sufficient funds to purchase other property. Magness told them that

he would be willing to pay $325 per acre if they gave him an option to purchase the

rest of the land for $285 per acre, a price that Magness believed reflected the fair

market value of the property at the time. Magness testified that the Parmelys

orally agreed to give Magness an option to purchase the remaining property on

these terms. Magness’ testimony is undisputed as it is the only recollection of

events in the settled record. James passed away before litigation, and Genevieve

was not competent to testify. The Trust moved for summary judgment, arguing

that the option agreements were “void for lack of consideration.” Magness opposed

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the motion, arguing that “there is a genuine issue of material fact as Brad Magness

in his deposition testimony . . . clearly indicates he paid an increased price for the

property in the underlying Purchase Agreement on the condition that he receive an

option to purchase the remainder of Plaintiff’s real property at a lesser price.” In

November 2021, following a hearing on the summary judgment motion, the circuit

court issued a memorandum decision denying the motion because there were

disputed material facts about whether there was valid consideration for the option

agreements.

[¶6.] In March 2022, the Trust filed a motion requesting the circuit court to

clarify and reconsider its summary judgment order. Magness filed a cross-motion

for summary judgment in which he asked the circuit court to enter a judgment in

his favor, determining the option agreements were supported by valid

consideration. Magness argued that he was entitled to judgment as a matter of law

because “SDCL 53-6-3 states a written instrument is presumptive evidence of a

consideration” and his undisputed testimony established that he agreed to pay the

higher price for the initial parcel in return for an option to purchase the remaining

land.

[¶7.] On the morning of May 26, 2022, the circuit court entered an order

approving a stipulation between the parties authorizing Magness to file an

amended answer that asserted a statute of limitations defense and a counterclaim

for enforcement of the option agreement. That afternoon, the parties appeared

before the circuit court to argue their motions. The parties did not mention the

amended answer or discuss Magness’ claim of a statute of limitations defense. At

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the end of the hearing, the circuit court requested post-hearing briefs on the cross-

motions for summary judgment. Following the hearing, the clerk of courts filed the

amended answer and the order approving the stipulation.

[¶8.] In June 2022—before the circuit court decided the pending motions—

the Trust moved for summary judgment a second time. It also filed a post-hearing

brief and a brief supporting its second motion for summary judgment. In these

briefs, the Trust argued that the integration clause in the 2000 purchase agreement

made the Parmelys’ prior oral promise for an option ineffectual.

[¶9.] On July 19, 2022, the circuit court issued a letter decision that said the

Trust’s motion for reconsideration was denied, Magness’ motion for summary

judgment was denied, and the Trust’s second motion for summary judgment was

granted. It determined that the written option agreements were not supported by

independent consideration and were null and void because the “performance of a

pre-existing duty cannot form the basis for valid consideration for a contract.”

[¶10.] Magness filed a “motion for reconsideration and/or to rescind court’s

July 19, 2022 opinion granting summary judgment in favor of Plaintiff.” Magness

argued that the circuit court improperly granted the Trust’s second summary

judgment motion before he could submit his opposition. On the same day, in light of

his amended answer, Magness moved to dismiss the Trust’s declaratory judgment

action, arguing that it was barred by the doctrine of laches and the statute of

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limitations in SDCL 15-2-13. 2

[¶11.] At a later hearing on these motions, the circuit court clarified its prior

ruling: “I have never looked at the second motion for summary judgment; and it in

no way was a part of my analysis.” The circuit court further explained: “I do not

know why that is in there. . . . The ‘conclusion’ paragraph [of the letter decision]

should say, ‘Accordingly, for the reasons set forth above, Plaintiff’s motion for

clarification and reconsideration is granted. Defendant’s motion for summary

judgment is denied.’” The circuit court treated the Trust’s second motion for

summary judgment as if it had not been ruled upon. The circuit court also

addressed Magness’ arguments supporting his motion to dismiss:

As for the defenses of laches and statute of limitations, I do not
believe those were ever before me or presented as a defense for
the summary judgments; and therefore I don’t believe they
provide a defense for the summary judgment motion. In
addition, just so the record is clear, though, I do find the
[Trust’s] argument on the statute of limitations as briefed, in
their brief, convincing; and I do believe that the statute of
limitations hasn’t run. However, that said, I also don’t believe
they were ever presented to this Court as a defense as it relates
to the motion for summary judgment.

2. SDCL 15-2-13 provides in part:

Except where, in special cases, a different limitation is
prescribed by statute, the following civil actions other than for
the recovery of real property can be commenced only within six
years after the cause of action shall have accrued:

(1) An action upon a contract, obligation, or liability,
express or implied, excepting those mentioned in §§ 15-2-6
to 15-2-8, inclusive, and subdivisions 15-2-15(3) and (4)
....
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The circuit court concluded, “with the edits that I have just announced in my

‘conclusion’ paragraph, the ruling will stand.” The circuit court issued an order to

that effect and a judgment declaring that the 2002 and 2006 options were “not

supported by valid consideration and any and all rights under [these options] are

hereby extinguished.” Magness appeals.

Standard of Review

[¶12.] A motion for summary judgment will be granted if two conditions are

met: (1) “there is no genuine issue as to any material fact”; and (2) “the moving

party is entitled to a judgment as a matter of law.” SDCL 15-6-56(c). A grant or

denial of a motion for summary judgment is reviewed de novo. N. Star Mut. Ins. v.

Korzan, 2015 S.D. 97, ¶ 12, 873 N.W.2d 57, 61 (citing Titus v. Chapman, 2004 S.D.

106, ¶ 13, 687 N.W.2d 918, 923).

Decision

Whether the Trust rebutted the presumption of consideration for the
option agreement
[¶13.] In granting summary judgment, the circuit court determined there was

no independent consideration for the written option agreements. The circuit court

concluded that “all oral negotiations and stipulations between the parties preceding

or accompanying the execution of the 2000 Purchase Agreement, including those

allegedly regarding a potential option contract, are superseded by the written

Purchase Agreement.” The circuit court relied on the integration clause and SDCL

53-8-5, which states that a written contract “supersedes all the oral negotiations or

stipulations . . . .”

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[¶14.] Magness was the only participant in the negotiations capable of

testifying about the purchase and option agreements. As a result, the Trust could

not present any contradictory evidence that would raise any question of fact

regarding how those negotiations transpired. Consequently, both parties agreed

there were no material facts in dispute. Magness’ undisputed testimony established

that he and the Parmelys negotiated an agreement to purchase a portion of their

property at an elevated per-acre price. They also agreed that in return for the

elevated per-acre price, Magness would have the option to purchase the remaining

property at a lower per-acre price. The consideration for the option agreement was

the elevated per-acre price for the first parcel. After the purchase of the initial

parcel had been completed, the parties memorialized this option agreement in

writing on two separate occasions. The subsequent memorializations place the

written option agreements outside the operation of the purchase agreement’s

integration clause. The Trust does not dispute the existence of the written option

agreements. Instead, the Trust argues that because the consideration identified in

the 2000 purchase agreement was fully allocated between the land and the

improvement identified as the property purchased in that agreement, there was no

consideration to support the option agreements. The Trust also argues Magness’

testimony may not be considered because of the integration clause and the parol

evidence rule.

[¶15.] “[T]he execution of a contract in writing . . . supersedes all the oral

negotiations or stipulations concerning its matter which preceded or accompanied

the execution of the instrument.” Hofeldt v. Mehling, 2003 S.D. 25, ¶ 11, 658 N.W.2d

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783, 787 (emphasis added) (quoting SDCL 53-8-5). “The parol evidence rule bars

extrinsic evidence of prior negotiations offered to contradict or supplement a written

contract.” Id. However, we have recognized that the parol evidence rule does not

prohibit a party from using oral extrinsic evidence to prove a collateral oral

agreement. See Tolle v. Lev, 2011 S.D. 65, ¶ 17, 804 N.W.2d 440, 446 (“Tolle is not

seeking to use Lev’s oral statements to vary any term of the written agreement . . . .

She is seeking to use the statements to prove a collateral oral agreement . . . .”).

This is particularly true where the parties subsequently entered into a written

agreement memorializing the oral agreement. The purchase agreement and the

option agreements are separate written contracts related to different parcels of real

property. As such, Magness’ testimony that he paid a higher price per acre in the

2000 purchase agreement as consideration for the separate option agreement is not

subject to exclusion under the parol evidence rule.

[¶16.] More important, in the context of this case, is the presumption of

consideration that existed after the option agreement was reduced to writing. “A

written instrument is presumptive evidence of a consideration” and “[t]he burden of

showing a want of consideration sufficient to support an instrument lies with the

party seeking to invalidate or avoid it.” SDCL 53-6-3 and -4. “[A] presumption

imposes on the party against whom it is directed the burden of going forward with

evidence to rebut or meet the presumption.” SDCL 19-19-301. Because the option

agreements were in writing, the Trust bears the burden to rebut the presumption of

consideration. SDCL 53-6-4. “The effect of a presumption of law is ‘to invoke a rule

of law compelling the [factfinder] to reach the conclusion in the absence of evidence

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to the contrary from the opponent.’” In re Est. of Fox, 2019 S.D. 16, ¶ 19, 925

N.W.2d 467, 473 (alteration in original) (quoting In re Est. of Gustafson, 2007 S.D.

46, ¶ 11, 731 N.W.2d 922, 926). The Trust did not offer any evidence to rebut the

presumption that Magness gave consideration for the written option agreements

with the Parmelys.

[¶17.] Faced with Magness’ testimony that the consideration for the option

agreements was the elevated per-acre price for the first parcel, the Trust was

entitled to present contrary evidence disputing Magness’ claim but failed to do so.

“The rule that absence or failure of consideration for a written contract may be

shown by parol is so elementary as to require no citation of authorities.” Indep.

Harvester Co., Ltd. v. Anderson, 45 S.D. 60, 186 N.W. 112, 114 (1921).

Agreements and negotiations prior to or contemporaneous with
the adoption of a writing are admissible in evidence to establish

(a) that the writing is or is not an integrated agreement;
(b) that the integrated agreement, if any, is completely or
partially integrated;
(c) the meaning of the writing, whether or not integrated;
(d) illegality, fraud, duress, mistake, lack of consideration, or
other invalidating cause;
(e) ground for granting or denying rescission, reformation,
specific performance, or other remedy.

Restatement (Second) of Contracts § 214 (1981); see also Poeppel v. Lester, 2013 S.D.

17, ¶ 20, 827 N.W.2d 580, 585 (quoting Restatement (Second) of Contracts § 214(d)

(1981)) (adopting § 214(d)’s approach to approve the use of extrinsic evidence in a

case involving allegations of fraud and misrepresentation).

[¶18.] The Trust also argues that the performance of a pre-existing duty

cannot form the basis for valid consideration for a contract. While the legal

principle is valid, it has no application to these factual circumstances. These
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parties simultaneously negotiated the purchase agreement and an option

agreement. During that negotiation, Magness had no pre-existing duty to pay an

elevated per-acre price. He agreed to pay the elevated per-acre price in return for

the option to purchase the remainder of the property at a lower per-acre price. The

fact that the parties memorialized that option agreement in writing later does not

alter that reality. See Ponderosa–Nevada, Inc. v. Venners, 90 S.D. 579, 584–85, 243

N.W.2d 801, 804 (1976) (construing a contract for deed and an option agreement as

two separate contracts because each related to a different parcel of real property,

provided for separate consideration, and required performance on different dates).

Consequently, the Trust failed to rebut the presumption of consideration

established by SDCL 53-6-3. The circuit court erred in granting summary judgment

for the Trust and denying summary judgment to Magness.

[¶19.] We reverse the circuit court’s entry of summary judgment that

concluded that the option agreements were not supported by valid consideration,

and we direct the entry of summary judgment on that issue consistent with this

opinion. 3 We remand for further proceedings consistent with this opinion to resolve

3. Magness asserted that the circuit court erred in denying his motion to
dismiss the Trust’s declaratory judgment action based on the statute of
limitations. As noted previously, the circuit court denied the motion as
presented because it was not a procedurally viable claim at the time the
cross-motions for summary judgment were submitted for consideration.
Having reversed the entry of summary judgment in favor of the Trust and
directed entry of summary judgment as to the existence of valid consideration
in favor of Magness, it is not necessary that we resolve Magness’ assertion
that the circuit court erred in denying his motion to dismiss the Trust’s
declaratory judgment action.
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any remaining issues regarding Magness’ counterclaim for enforcement of the

options.

[¶20.] JENSEN, Chief Justice, and KERN, SALTER, and DEVANEY,

Justices, concur.

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