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Knigge v. B & L Food Stores, Inc.

Supreme Court of South Dakota

February 1, 2017

DAVID KNIGGE, Plaintiff and Appellant,
v.
B & L FOOD STORES, INC. and ESTATE OF ROBERT ALLEN KNIGGE, Defendants and Appellees.

          ARGUED ON JANUARY 10, 2017

         APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT SPINK COUNTY, SOUTH DAKOTA THE HONORABLE TONY L. PORTRA Judge

          STEPHANIE E. POCHOP of Johnson Pochop & Bartling Gregory, South Dakota Attorneys for plaintiff and appellant.

          KRISTEN M. KOCHEKIAN of Gillette Law Office, PC Redfield, South Dakota Attorneys for defendants and appellees.

          ZINTER, Justice

         [¶1.] David Knigge entered into an oral employment contract with his brother, Robert Knigge, to manage a grocery store that was owned by Robert and his wife Lynette. David entered into the contract in part because Robert had cancer and a limited time to live. The contract allegedly included a severance payment to David if Lynette desired to end David's employment after Robert's death. Robert died five months after the contract was negotiated, and Lynette terminated David's employment two months later. When Lynette refused to pay the severance, David sued to enforce the agreement. The circuit court granted summary judgment dismissing the suit. The court ruled that the oral contract was unenforceable under the statute of frauds. Because this contract was not governed by the statute of frauds, we reverse and remand.

         Facts and Procedural History

         [¶2.] Robert was a shareholder in corporations that operated grocery stores in Redfield, South Dakota (B & L Food Stores, Inc.), Linton, North Dakota (K & B Foods, Inc.), and Oakes, North Dakota (K & J Foods, Inc.). The B & L stock was owned by Robert and Lynette. Robert actively managed all three stores. Lynette did not participate in management of the Redfield store before Robert's death.

         [¶3.] In October 2011, Robert was diagnosed with stage 4 glioblastoma, a form of brain cancer. He was given approximately eighteen months to live. In November 2012, Robert asked his brother David if he would be interested in managing the Oakes store-which was then being managed by Kalie, Lynette's daughter from a prior marriage. At that time, David had worked for the State as a certified public accountant in Pierre for thirty years. Robert and David orally agreed that David would manage the Oakes store without a salary and would have the option to purchase the store for $200, 000. When Kalie left the Oakes store prematurely, David resigned from his accounting position and used accrued vacation leave to maintain a steady income while he transitioned to his new position. He put his home up for sale and commuted to Oakes to manage the store on weekends.

         [¶4.] Robert's condition deteriorated, and in January 2013, he was informed that further treatment was unavailable. According to David, Robert wished to maintain the Redfield store as a legacy for his children[1] but felt that his son Jason was not ready to manage it. Because Robert had limited time to live and could not manage the store himself, he asked David to close the Oakes store, move to Redfield, and manage the Redfield store. David accepted the oral employment offer, abandoned his plans to manage and purchase the Oakes store, [2] moved in with Robert and Lynette until he could find a suitable home, and began managing the Redfield store in March 2013. According to David, the contract terms included a $70, 200 salary, a bonus based on the store's performance, reimbursement for half of David's health insurance costs, [3] the opportunity to invest in future stores, and a $100, 000 severance payment if David was terminated for any reason. The terms of the contract were never reduced to writing.

         [¶5.] Lynette did not participate in Robert's negotiations with David, but she overheard Robert discussing contract terms on the phone with David, including David's salary and the possibility of a bonus. She contended that she never heard Robert mention a severance package or that David would receive health insurance benefits. She did, however, acknowledge the possibility that Robert had other negotiations regarding David's employment.

         [¶6.] Robert died in June 2013. David continued managing the Redfield store until Lynette terminated his employment in August 2013, approximately five months after David's employment began and seven months after the contract was formed. Although Lynette learned of the existence of the severance agreement from two associates approximately a week before she terminated David, she refused to pay David the severance. David subsequently sued B & L and Robert's estate (Defendants) for breach of contract.

         [¶7.] Defendants did not dispute the existence of the employment contract. They did, however, dispute the existence of terms providing for both health insurance and the severance payment. They moved for summary judgment, arguing that the oral employment contract was unenforceable under the one-year provision of the statute of frauds. See SDCL 53-8-2(1). They contended that the contract could not be performed within one year because it was tied to longer term contingencies: either David's retirement in ten to fifteen years, or one of Robert and Lynette's children reaching the age of majority and taking over the business. They also contended that promissory estoppel did not remove the contract from the statute. David responded that the contract did not fall within the statute because it could have been performed within one year. David pointed out that Robert was dying, he and Lynette had a strained relationship, and he agreed to the severance payment because he did not want to force Lynette to continue employing him after Robert's death. He also contended that promissory estoppel removed the agreement from the statute.

         [¶8.] The circuit court agreed with Defendants and granted their motion for summary judgment. It ruled that the oral contract was unenforceable under the statute of frauds because it could not be performed within one year. The court found that the contract was for an unspecified term of years and tied to contingencies that could not occur in one year: David's retirement in ten to fifteen years or Robert's children reaching adulthood and taking over management of the store. The court also ruled that promissory estoppel did not apply because "[t]he loss of the opportunity to buy the Oakes ...


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