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Randy Kramer, An Individual v. William F. Murphy Self

June 27, 2012

RANDY KRAMER, AN INDIVIDUAL, PLAINTIFF AND APPELLANT,
v.
WILLIAM F. MURPHY SELF- DECLARATION OF TRUST AND MIKE D. MURPHY, AN INDIVIDUAL, DEFENDANTS AND APPELLEES.



APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE PATRICIA C. RIEPEL Judge

The opinion of the court was delivered by: Severson, Justice

#26072-a-GAS

ON FEBRUARY 14, 2012

[¶1.] Randy Kramer initiated a breach of contract action against Mike D. Murphy and the William F. Murphy Self-Declaration of Trust (Trust). The circuit court dismissed the case, finding that it was precluded from hearing the case under the terms of a forum-selection clause incorporated into the parties' contract. Kramer appeals. We affirm.

BACKGROUND

[¶2.] Tri-State Ethanol, LLC owned an ethanol plant in Rosholt, South Dakota. Kramer was one of the members and managers of Tri-State Ethanol.

Kramer was also a member of White Rock Pipeline, LLC, which owned a pipeline that supplied natural gas to Tri-State Ethanol. The other individuals and entities that held membership interests in White Rock Pipeline included Murphy, Walter Woods, Tri-State Ethanol, and the Trust.

[¶3.] In order to comply with various federal regulations, Tri-State Ethanol determined it was necessary to purchase the membership interests of Kramer,

Murphy, Woods, and the Trust. To accomplish this, Tri-State Ethanol entered into a loan agreement (Loan Agreement) with Murphy and the Trust. Tri-State Ethanol's duty to repay the loan was evidenced by a $2,100,000 secured promissory note (Promissory Note) and a $380,000 secured balloon promissory note (Balloon Note).*fn1 The two notes were attached to the Loan Agreement.

[¶4.] The Loan Agreement contained a forum-selection clause, which stated, "[Tri-State Ethanol] . . . agrees that at the sole election of [Murphy and the Trust], the jurisdiction and venue for any suit hereon shall be the Fourteenth (14th) Judicial District in Rock Island County, Illinois." The Promissory Note and the Balloon Note also contained similar forum-selection clauses.

[¶5.] To compensate the members who held an interest in White Rock Pipeline, an agreement to disburse funds (Disbursement Agreement) was also executed. The parties to the Disbursement Agreement included Murphy, Woods, Kramer, and the Trust.*fn2 The Disbursement Agreement provided that 79.3% of each monthly payment Tri-State Ethanol made on the Balloon Note was to be disbursed to Murphy, Walter Woods, Kramer, and the Trust until they were each fully compensated for the value of their respective interests.

[¶6.] The Disbursement Agreement was attached to the Loan Agreement along with the Balloon Note and the Promissory Note. However, the Disbursement Agreement did not contain a forum-selection clause.

[¶7.] Tri-State Ethanol was unable to meet its financial obligations and eventually filed for Chapter 11 bankruptcy. During the course of the bankruptcy proceedings, Murphy and the Trust reached a settlement agreement regarding payment of the Loan Agreement and the Disbursement Agreement. Murphy and the Trust, through its trustee, represented to the bankruptcy court that they would use the settlement proceeds to pay Kramer the amounts owed under the Disbursement Agreement. The bankruptcy court approved the settlement agreement.

[ΒΆ8.] After the settlement proceeds from Tri-State Ethanol's bankruptcy estate were distributed, Murphy and the Trust refused to pay Kramer the full amount listed in the Disbursement Agreement. Kramer then filed a complaint against Murphy and the Trust for breach of the Disbursement ...


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