IVEY AND KORNMANN, a South Dakota Partnership, Plaintiff and Appellee,
WILLIAM G. WELK, Defendant and Appellant.
CONSIDERED ON BRIEFS ON APRIL 24, 2017
FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN
COUNTY, SOUTH DAKOTA THE HONORABLE RODNEY J. STEELE Retired
MARSHALL C. LOVRIEN of Bantz, Gosch & Cremer, LLC
Aberdeen, South Dakota Attorneys for plaintiff and appellee.
R. SMEINS Britton, South Dakota and BRAD A. SINCLAIR of Kaler
Doeling, PLLP Fargo, North Dakota Attorneys for defendant and
William Welk executed a promissory note in favor of Ivey and
Kornmann, a partnership (Partnership). The Partnership
subsequently brought this action to collect the debt. Welk
raised several affirmative defenses, asserting that the note
was satisfied by a subsequent agreement or substitute
performance. Welk also counterclaimed for breach of contract,
fraud, deceit, misrepresentation, negligent
misrepresentation, and unjust enrichment. The circuit court
granted summary judgment in favor of the Partnership on all
of Welk's defenses and counterclaims. Welk appeals. We
reverse and remand.
and Procedural History
The Partnership owned undeveloped real property in Aberdeen.
Charles Kornmann, who was both a partner in the Partnership
and a trustee of the Kornmann Revocable Trust (Trust),
decided to construct a twin home on the property. He
discussed the project with Welk, a family friend, and Welk
agreed to help construct the twin home. Welk subsequently
provided labor and services between April 2009 and January
2010. There is no writing evidencing the agreement or the
consideration Welk was to receive.
In May 2009, after Welk had started on the project, the
Partnership conveyed the property to Kornmann and his wife as
trustees of the Trust. The record suggests that Welk was not
aware of the transfer. The twin home was completed in
mid-2010, and on August 25, 2010, the City issued a final
certificate of occupancy.
On September 29, 2010, the Partnership loaned Welk $31, 000.
Although the record does not reflect the purpose of the loan,
the record reflects that the money came from Kornmann's
personal bank account. The record also reflects that on
October 1, 2010, Welk executed a promissory note, payable to
the Partnership on demand, for the $31, 000 plus interest.
Three years later, an unrelated dispute arose between
Kornmann and Welk regarding their interests in a condominium
in Mexico. On December 24, 2013, Kornmann sent Welk a letter
about the dispute. In the letter, Kornmann reminded Welk that
the Partnership held the promissory note and that payment
could be demanded at any time. Welk replied to the letter but
made no reference to the note.
On November 5, 2014, the Partnership demanded payment of the
note. Welk did not respond to the written demand, and the
Partnership commenced this action on the note. Welk raised
numerous affirmative defenses, including accord and
satisfaction, novation, and substitution. Welk also filed
counterclaims against the Partnership for breach of contract,
fraud, deceit, misrepresentation, negligent
misrepresentation, and unjust enrichment. The counterclaims
were based on Welk's allegation that he had entered into
an agreement with the Partnership to assist with construction
of the twin home. He alleged that he was to be compensated
for his contributions either by obtaining an interest in the
property or monetary compensation. Welk, however, alleged
that he and Kornmann had agreed that Welk would give up his
right to compensation in return for satisfaction of the note.
Therefore, Welk claimed that if he was found liable to the
Partnership on the note, the Partnership was liable to him
for breach of the agreement regarding construction of the
twin home. He also claimed that if he was found liable on the
note, the Partnership was liable for fraud, deceit,
misrepresentation, and unjust enrichment in its dealings with
The circuit court granted summary judgment in favor of the
Partnership on the note, Welk's affirmative defenses, and
Welk's counterclaims. With respect to the note, there was
no dispute that it was a valid note that Welk had not repaid.
The court rejected Welk's affirmative defenses alleging
discharge (accord and satisfaction, novation, and
substitution) because the partnership agreement required
unanimous consent of the partners to discharge a debt, and
Welk failed to identify any evidence suggesting all partners
agreed to discharge the Partnership's note. Under these
circumstances, the court reasoned that even if Kornmann and
Welk had agreed to discharge the note, the discharge was not
enforceable because Kornmann had no authority to unilaterally
discharge Partnership debts. With respect to the
counterclaims against the Partnership, the court ruled that
breach of contract, fraud, deceit, misrepresentation,
negligent misrepresentation, and unjust enrichment could only
be asserted against ...