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In re Estate of Cullum

Supreme Court of South Dakota

November 4, 2015

IN THE MATTER OF THE ESTATE OF ROBERT L. CULLUM, Deceased.

CONSIDERED ON BRIEFS ON OCTOBER 5, 2015

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE ROBERT GUSINSKY JUDGE

JOHN K. NOONEY ROBERT J. GALBRAITH of Nooney & Solay, LLP Rapid City, South Dakota Attorneys for claimant and appellant Duane Pankratz.

SHANE M. PULLMAN JESS M. PEKARSKI of Costello Porter Hill Heisterkamp Bushnell & Carpenter, LLP Rapid City, South Dakota Attorneys for appellee Estate of Robert L. Cullum.

OPINION

WILBUR, JUSTICE

[¶1.] Duane Pankratz appeals the circuit court's decision granting summary judgment on his claims against Robert Cullum's estate for breach of an oral promise to transfer corporate stock and for the recovery of corporate debt Robert Cullum personally guaranteed to pay. We affirm.

Background

[¶2.] Duane Pankratz and Robert Cullum have been neighbors since the1970s. Prior to his death in 2012, Cullum owned and operated Mineral Technology Corporation (MinTec). At some point between 2000 and 2003, Cullum and his son Scott approached Pankratz for a loan because, according to Pankratz, MinTec was "facing bankruptcy." Pankratz explained that Cullum believed MinTec "was very close to coming up with some great materials to sell and they just felt they needed a little more time, relief, pressure from the bankers and other agencies that had loaned them money." Pankratz agreed to loan MinTec money, although he could not recall the exact amount of the loan. Pankratz later claimed that in exchange for the loan, Cullum personally guaranteed the debt and promised to give Pankratz the same personal guaranty Cullum had given to the bank. Pankratz also claimed that Cullum promised to give him MinTec stock equal to that held by Cullum. Neither the personal guaranty nor promise to transfer MinTec stock was reduced to writing.

[¶3.] Over the next many years, Pankratz continued to loan MinTec money. Pankratz claimed that he and MinTec executed approximately twenty promissory notes related to the loans. Pankratz later claimed that each time he and Cullum executed a note, they renegotiated the payment terms and Cullum personally guaranteed MinTec's debt. It is undisputed that in 2007, MinTec was delinquent on its debt to Pankratz. Pankratz and MinTec consolidated the previously-executed promissory notes into two promissory notes totaling $1, 557, 370.70. Cullum signed the notes in his capacity as president of MinTec. As security for the loans, Pankratz and MinTec executed an agreement whereby Pankratz took an interest in all MinTec's currently-owned and after-acquired personal property, including inventory and equipment. Pankratz also took a mortgage on certain real property owned by MinTec. Lastly, Cullum's wife, Mary Cullum, mortgaged four parcels of real property to Pankratz as additional security. The mortgage identified that the real property was leased to MinTec, and provided that "the proceeds from an [sic] foreclosure" would not be applied to the amount due on the promissory notes until after Pankratz exhausted recovery via MinTec.

[¶4.] After MinTec and Pankratz executed the consolidated promissory notes, MinTec made payments to Pankratz on the debt. By 2012, MinTec had paid Pankratz approximately $1, 500, 000. In January 2012, Cullum unexpectedly died. On February 11, 2012, The Estate of Robert L. Cullum (Estate) published a notice to creditors. Pankratz filed a statement of claim against the Estate providing:

The Claimant made substantial loans to Mineral Technology Corporation ("MinTec") pursuant to an agreement with the Decedent, nearing $2 million of which $300, 000 is still outstanding. In addition to promising to repay the rescue loan amounts, the Claimant was promised by the Decedent that the Claimant would be given an equal number of shares in MinTec as that owned by the Decedent.

The Estate disallowed the claim, and Pankratz petitioned the circuit court to allow the claim. The record reveals that Pankratz also brought a separate suit against MinTec related to debt due on the promissory notes.

[¶5.] The Estate moved for summary judgment asserting that there existed no binding personal guaranty between Cullum and Pankratz and that the statute of limitations barred Pankratz's claim for MinTec shares. In response, Pankratz asserted that a material issue of fact was in dispute, whether Cullum personally guaranteed MinTec's debt, because, according to Pankratz, he loaned money to MinTec solely on Cullum's personal assurances. Pankratz further claimed that the statute of limitations was tolled on his claim that Cullum breached their oral agreement to transfer MinTec stock. The statute of limitations was tolled, Pankratz argued, because he continued to loan MinTec money on the continued promise by Cullum to transfer stock.

[ΒΆ6.] After considering the parties' written briefs, arguments, and the record, the circuit court issued a memorandum decision. It ruled that the promissory notes, security agreement, and mortgage were "complete and unambiguous." It, therefore, refused to consider any extrinsic evidence that Cullum personally guaranteed the loans between MinTec and Pankratz. The circuit court alternatively ruled that even if it did consider Pankratz's evidence, the personal guaranty would be unenforceable because it was not in writing as required under SDCL 56-1-4 and the circumstances did not warrant application of the limited exception in SDCL 56-1-6. Lastly, the court concluded that the undisputed evidence established ...


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