#25766-rev & rem-DG

2012 S.D. 56

                             IN THE SUPREME COURT
                                     OF THE
                            STATE OF SOUTH DAKOTA

                                   * * * *

STERN OIL COMPANY, INC.,                     Plaintiff and Appellee,

 v.

JAMES R. BROWN d/b/a EXXON
GOODE TO GO and FREEWAY MOBIL,               Defendants and Appellants.

                                   * * * *

                  APPEAL FROM THE CIRCUIT COURT OF
                     THE SECOND JUDICIAL CIRCUIT
                  MINNEHAHA COUNTY, SOUTH DAKOTA

                               * * * *
                    HONORABLE KATHLEEN CALDWELL
                                Judge

                                   * * * *
MICHAEL D. BORNITZ
WILLIAM D. SIMS of
Cutler & Donahoe, LLP
Sioux Falls, South Dakota                    Attorneys for plaintiff
                                             and appellee.
MATTHEW S. McCAULLEY
ROCHELLE R. SWEETMAN of
Murphy, Goldammer &
 Prendergast, LLP
Sioux Falls, South Dakota
 and
RONALD A. PARSONS, Jr. of
Johnson, Heidepriem & Abdallah, LLP
Sioux Falls, South Dakota                    Attorneys for defendants
                                             and appellants.

                                   * * * *
                                             ARGUED AUGUST 23, 2011
                                             REASSIGNED APRIL 24, 2012

                                             OPINION FILED 07/03/12
#25766

GILBERTSON, Chief Justice (on reassignment).

[¶1.]         Stern Oil argues that James Brown contracted to purchase a minimum

amount of fuel for his two convenience stores from Stern Oil for a ten-year period.

When Brown notified Stern Oil that he would no longer purchase its fuel, Stern Oil

initiated this breach of contract action. Brown filed a counterclaim, alleging

fraudulent inducement. The circuit court granted Stern Oil’s motion for summary

judgment on both the breach of contract claim and on Brown’s counterclaim, but the

issue of damages proceeded to trial. 1 After a court trial, the circuit court awarded

Stern Oil eight years of lost profits. We reverse the circuit court’s grant of summary

judgment.

                                       FACTS

[¶2.]         Brown farms near Gettysburg, South Dakota, and has owned interests

in several businesses. In late 2004, he acquired and redesigned two convenience

stores on opposite sides of Exit 2 on Interstate 29 in North Sioux City, South

Dakota. Stern Oil, a fuel distributor for Exxon Mobil Corporation (ExxonMobil),

contacted Brown while he was remodeling the properties. Although Brown was

negotiating with another fuel distributor, he ultimately elected to do business with

Stern Oil. One convenience store was branded Exxon Goode To Go, and the other

was branded Freeway Mobil.

[¶3.]         In October 2005, Brown and Stern Oil executed a Motor Fuel Supply

Agreement (MFSA) for each of Brown’s two convenience stores. Each MFSA listed



1.      This portion of the opinion was tried by the Honorable Bradley G. Zell.


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the maximum volume of fuel that Stern Oil was obligated to offer to sell to Brown

each year. The maximum annual volume for the first contract year at Freeway

Mobil was 1.38 million gallons of gasoline, and the maximum annual volume for the

first contract year at Exxon Goode To Go was 1.5 million gallons of gasoline and

720,000 gallons of diesel. After the first contract year, the maximum annual

volume of fuel was adjusted each year based on sales volume. 2 Brown was obligated

to purchase at least seventy-five percent of the maximum annual volume of fuel. If

Brown failed to purchase the minimum amount of fuel that the MFSAs required,

Stern Oil had the option to terminate the agreements or refuse to renew them.

[¶4.]         The MFSAs also briefly addressed the price of the fuel that Brown was

required to purchase from Stern Oil:

              Unless otherwise specified, all prices shall include applicable
              taxes, and are subject to change by [Stern Oil] at any time and
              without notice. All prices are payable in cash in U.S. dollars at
              time of delivery, or other payment terms as [Stern Oil] may
              specify, except to the extent credit is extended on such terms
              and conditions as [Stern Oil] may determine in its sole
              discretion.

Stern Oil faxed and emailed Brown a fuel price sheet each business day. The price

sheet listed the rack price of the various types of fuel that Brown could purchase;



2.      Section 4(b) of both MFSAs provides:

              For each month of the remaining contract years, the Maximum
              Monthly Volume for the current month shall be the greater of
              actual volume in the prior month or actual volume in the
              current month of the prior year purchased by [Brown] from
              [Stern Oil]. The Maximum Annual Volume for the current
              contract year will be the sum of the Maximum Monthly Volumes
              in the current contract year.


                                          -2-
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the applicable federal and state taxes and fees; and Stern Oil’s markup, delivery,

and freight charges. 3 By adding the additional fees and charges to the rack price,

the price sheet listed the total price of the various types of fuel Brown could

purchase from Stern Oil.

[¶5.]         Under a brand incentive program, Brown and Stern Oil also executed a

Repayment Agreement (BIP) for each of Brown’s two convenience stores. The BIPs

provided that Stern Oil would reimburse Brown for the costs of certain

improvements to his convenience stores. Stern Oil thus assisted Brown in

designing the layouts of his stores and equipping the stations with ExxonMobil-

approved fuel dispensers and payment systems. The BIPs gave Stern Oil the option

of reimbursement in the event of Brown’s breach or default:

              [I]n such event, at [Stern Oil’s] option, any and all Improvement
              Costs expended, reimbursed, or otherwise provided to [Brown]
              by [Stern Oil] or [ExxonMobil], either directly or indirectly, shall
              become immediately due and payable from [Brown] to [Stern
              Oil] (the “Repayment Amount”) . . . .

[¶6.]         When Brown notified Stern Oil that he would no longer purchase its

fuel, Stern Oil initiated this breach of contract action. Brown filed a counterclaim,

alleging that Stern Oil fraudulently induced him to enter into the MFSAs and the

BIPs by verbally guaranteeing a five-cent profit on every gallon of fuel he sold.

Brown claimed that Stern Oil’s prices were so high that he was unable to make a

profit on the sale of fuel at his convenience stores. Stern Oil moved for summary

judgment on its breach of contract claim and on Brown’s fraudulent inducement



3.      The “rack price” is the price ExxonMobil charges Stern Oil for fuel at its
        terminals.

                                          -3-
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counterclaim. The circuit court granted Stern Oil’s motion for summary judgment

on both claims. It concluded that a breach of contract occurred as a matter of law

but left the issue of damages for trial. Brown then filed a motion for

reconsideration, which, following a hearing, the circuit court denied.

[¶7.]        The issue of damages proceeded to trial in October 2009 and January

2010. The circuit court awarded Stern Oil eight years of lost profits in the amount

of $925,317. A judgment in that amount plus prejudgment interest was entered

against Brown in August 2010. The circuit court later added attorneys’ fees and

taxable and non-taxable disbursements to the original judgment. Brown moved for

a new trial, but his motion was deemed waived. Brown appeals.

                                     ANALYSIS

[¶8.]        A grant of summary judgment is proper “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law.” SDCL 15-6-56(c). Thus, “[t]his

Court reviews a grant of summary judgment to determine whether the moving

party has demonstrated the absence of any genuine issue of material fact and

entitlement to judgment on the merits as a matter of law.” Tolle v. Lev, 2011 S.D.

65, ¶ 11, 804 N.W.2d 440, 444. “All reasonable inferences drawn from the facts

must be viewed in favor of the non-moving party.” Id. Yet, “the party challenging

summary judgment must substantiate his allegations with sufficient probative

evidence that would permit a finding in his favor on more than mere speculation,

conjecture, or fantasy.” Id.


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[¶9.]         “Summary judgment is not the proper method to dispose of factual

questions.” Bozied v. City of Brookings, 2001 S.D. 150, ¶ 8, 638 N.W.2d 264, 268.

“Summary judgment is an extreme remedy, [and] is not intended as a substitute for

a trial.” Discover Bank v. Stanley, 2008 S.D. 111, ¶ 19, 757 N.W.2d 756, 762.

“However, on appeal this Court will affirm the circuit court’s ruling granting a

motion for summary judgment if any basis exists to support the ruling.” Id.

                            Fraudulent Inducement Claim

[¶10.]        Because the MFSAs were primarily agreements for the sale of goods,

South Dakota’s version of the Uniform Commercial Code (UCC), which is codified in

Title 57A of the South Dakota Code, governs the dispute in this case. See SDCL

57A-2-102. 4 The parol evidence rule is set forth under SDCL 57A-2-202. At the

time of the court trial on Stern Oil’s motion for summary judgment, SDCL 57A-2-

202 provided:

              Terms with respect to which the confirmatory memoranda of the
              parties agree or which are otherwise set forth in a writing
              intended by the parties as a final expression of their agreement
              with respect to such terms as are included therein may not be
              contradicted by evidence of any prior agreement or of a
              contemporaneous oral agreement but may be explained or
              supplemented
              (a)   By course of dealing or usage of trade (§ 57A-1-205) or by
                    course of performance (§ 57A-2-208); and


4.       SDCL 57A-2-102 provides:

              Unless the context otherwise requires, this chapter applies to
              transactions in goods; they do not apply to any transaction
              which although in the form of an unconditional contract to sell
              or present sale is intended to operate only as a security
              transaction nor does this chapter impair or repeal any statute
              regulating sales to consumers, farmers or other specified classes
              of buyers.

                                         -5-
#25766

              (b)    By evidence of consistent additional terms unless the
                     court finds the writing to have been intended also as a
                     complete and exclusive statement of the terms of the
                     agreement.

SDCL 57A-2-202 (2008).

[¶11.]        We have recognized an exception to the parol evidence rule when

evidence is introduced to establish fraud as a ground for rescinding a contract. As

we explained in Sabbagh v. Professional & Business Men’s Life Insurance Co.,

              [i]t is well established that, as fraud vitiates everything which it
              touches, parol evidence is always admissible to show, for the
              purpose of invalidating a written instrument, that its execution
              was procured by fraud, or that, by reason of fraud, it does not
              express the true intentions of the parties. The rule in this
              respect is not rendered inapplicable by the fact that the writing
              contains a recital to the effect that all agreements between the
              parties are contained therein . . . .

79 S.D. 615, 629, 116 N.W.2d 513, 520 (1962) (quoting 32 C.J.S. Evidence § 979).

This “fraud exception” to the parol evidence rule applies to contracts governed by

the UCC. See 1 James J. White & Robert S. Summers, Uniform Commercial Code §

2-11 (5th ed. 2006) (recognizing an exception to the parol evidence rule when a

party seeks to rescind a contract governed by the UCC on the basis of fraud); SDCL

57A-1-103(b) (“Unless displaced by the particular provisions of this title, the

principles of law and equity, including . . . the law relative to . . . fraud[ ] [and]

misrepresentation, . . . supplement its provisions.”).

[¶12.]        In this case, Brown sought to rescind the MFSAs and the BIPs by

introducing evidence that Stern Oil fraudulently induced him to enter into the

agreements by verbally guaranteeing a five-cent profit on every gallon of fuel he

sold. The circuit court concluded that the parties’ negotiations and the alleged


                                            -6-
#25766

verbal guarantee were inadmissible parol evidence. Without the evidence of the

alleged verbal guarantee, the circuit court held that Brown’s fraudulent inducement

claim failed as a matter of law. However, under the fraud exception to the parol

evidence rule, this evidence is not barred and the circuit court incorrectly invoked

the parol evidence rule. We will affirm a grant of summary judgment “only if all

legal questions have been decided correctly.” Muhlbauer v. Estate of Olson, 2011

S.D. 42, ¶ 7, 801 N.W.2d 446, 448. Therefore, because the circuit court incorrectly

decided a legal question in this case—whether the parol evidence rule barred

evidence supporting Brown’s fraudulent inducement counterclaim—we cannot

affirm its grant of summary judgment.

[¶13.]        In addition, whether Stern Oil fraudulently induced Brown to enter

into the agreements involves disputed material facts. Brown claims that Stern Oil

orally guaranteed a five-cent profit on every gallon of fuel he sold. Stern Oil

contends that it did not make this guarantee. For summary judgment purposes,

“[a] disputed fact is . . . material [if] it would affect the outcome of the suit under the

governing substantive law in that a reasonable jury could return a verdict for the

nonmoving party.” Robinson v. Ewalt, 2012 S.D. 1, ¶ 10, 808 N.W.2d 123, 126.

Here, the disputed fact, whether Stern Oil did or did not make the oral guarantee,

would certainly affect the outcome of Brown’s fraudulent inducement counterclaim

and thus, it is material to the claim. The circuit court’s ruling improperly disposed

of this factual question by granting summary judgment.




                                           -7-
#25766

[¶14.]         Furthermore, Brown’s counterclaim employs actual fraud under SDCL

53-4-5. “Actual fraud is always a question of fact.” SDCL 53-4-5. 5 We have

acknowledged that “[q]uestions of fraud and deceit are generally questions of fact

and as such are to be determined by the jury.” Ehresmann v. Muth, 2008 S.D. 103,

¶ 20, 757 N.W.2d 402, 406. Regarding the reliance element of actual fraud, the fact

that Brown testified he signed the agreements in reliance upon the five-cent

guarantee provides an evidentiary basis to support his claim. This case is in large

part a question of credibility: Brown says he signed the contract in reliance upon

this representation and Stern Oil says he did not. Questions of credibility are also

questions of fact for the jury. Cont’l Grain Co. v. Heritage Bank, 1996 S.D. 61, ¶ 16,

548 N.W.2d 507, 511. The circuit court’s grant of summary judgment improperly

disposed of genuine issues of material fact.

[¶15.]         The dissent argues that Brown failed to submit evidence sufficient to

support a finding that Brown’s reliance upon Stern Oil’s alleged misrepresentation




5.       SDCL 53-4-5 defines actual fraud in relation to contracts:

               Actual fraud in relation to contracts consists of any of the
               following acts committed by a party to the contract, or with his
               connivance, with intent to deceive another party thereto or to
               induce him to enter into the contract:
               (1) The suggestion as a fact of that which is not true by one who
               does not believe it to be true;
               (2) The positive assertion, in a manner not warranted by the
               information of the person making it, of that which is not true,
               though he believe it to be true;
               (3) The suppression of that which is true by one having
               knowledge or belief of the fact;
               (4) A promise made without any intention of performing it; or
               (5) Any other act fitted to deceive.

                                           -8-
#25766

was justified. The dissent claims that even if Brown’s version of the facts are true,

Brown failed to carry this burden, thus making summary judgment appropriate.

However, the question of whether Brown’s reliance was justified is a question of fact

in this case. Brown presented evidence that the retail market in that area was

highly competitive. The evidence also demonstrated that Stern Oil set the price.

Therefore, there was a factual dispute regarding the justifiable reliance evidence

because Brown was not entirely free to choose a retail price for the fuel he sold.

[¶16.]         Furthermore, Brown was not required to prove all elements of

fraudulent inducement in order to survive summary judgment. “A motion under

SDCL 15-6-56 (Rule 56) is designed ‘to isolate and dispose of factually unsupported

claims or defenses.’” Chem-Age Indus., Inc. v. Glover, 2002 S.D. 122, ¶ 18, 652

N.W.2d 756, 765 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S. Ct.

2548, 2553, 91 L. Ed. 2d 265 (1986)). “[T]he focus in summary judgment hearings

centers on the existence of admissible and probative evidence to support the

challenged claim or defense.” Id. (citing Prudential Ins. Co. v. Hinkel, 121 F.3d 364,

366 (8th Cir. 1997)). 6 Brown’s fraudulent inducement counterclaim was not a

factually unsupported claim, especially considering that the offered evidence is not

barred by the parol evidence rule. Brown was not required to establish and prove

every element of fraudulent inducement, as the summary judgment proceeding was




6.       In Ehresmann, this Court concluded that “because the essential elements of
         the claims are adequately supported by alleged facts, albeit disputed,
         summary judgment [was] inappropriate for Ehresmann’s claims of fraud and
         deceit and negligent misrepresentation.” Ehresmann, 2008 S.D. 103, ¶ 22,
         757 N.W.2d at 406.

                                         -9-
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not a substitute for trial. Brown offered specific and probative admissible evidence

and demonstrated that there is a genuine issue for trial regarding the fraudulent

inducement counterclaim. This was sufficient to preclude summary judgment. For

all of these reasons, the circuit court erred in granting summary judgment to Stern

Oil on Brown’s fraudulent inducement counterclaim.

                              Breach of Contract Claim

[¶17.]       Brown argues that the circuit court erred by granting Stern Oil

summary judgment on its breach of contract claim because the MFSAs were not

enforceable contracts. In support of his argument, Brown cites LaMore Restaurant

Group, LLC v. Akers, in which we stated, “[i]f an agreement leaves open essential

terms and calls for the parties to agree to agree and negotiate in the future on

essential terms, then a contract is not established.” 2008 S.D. 32, ¶ 16, 748 N.W.2d

756, 761 (quoting Weitzel v. Sioux Valley Heart Partners, 2006 S.D. 45, ¶ 23, 714

N.W.2d 884, 892). In LaMore, we recognized that price is ordinarily an essential

term of an agreement that must be “fixed and determinable or reasonably certain.”

See id. ¶ 18 (citations omitted). Here, the MFSAs did not define the price of the fuel

Brown was required to purchase from Stern Oil. Brown thus argues that the

MFSAs were not enforceable contracts. In LaMore, however, the contract at issue

was for the sale of real estate, so South Dakota’s version of the UCC did not apply.

See id. ¶ 2. Here, the MFSAs were primarily agreements for the sale of goods and

we must therefore apply the provisions of Title 57A, South Dakota’s version of the

UCC, to decide this case. SDCL 57A-2-102.




                                        - 10 -
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[¶18.]         SDCL 57A-2-305(1) addresses the enforceability of an agreement that

leaves the price term open. The statute provides:

               (1) The parties if they so intend can conclude a contract for sale
               even though the price is not settled. In such a case the price is a
               reasonable price at the time for delivery if:
                   (a) Nothing is said as to price; or
                   (b) The price is left to be agreed by the parties and they fail
                   to agree; or
                   (c) The price is to be fixed in terms of some agreed market or
                   other standard as set or recorded by a third person or agency
                   and it is not so set or recorded.
               (2) A price to be fixed by the seller or by the buyer means a price
               for him to fix in good faith.
               (3) When a price left to be fixed otherwise than by agreement of
               the parties fails to be fixed through fault of one party the other
               may at his option treat the contract as canceled or himself fix a
               reasonable price.
               (4) Where, however, the parties intend not to be bound unless
               the price be fixed or agreed and it is not fixed or agreed there is
               no contract. In such a case the buyer must return any goods
               already received or if unable so to do must pay their reasonable
               value at the time of delivery and the seller must return any
               portion of the price paid on account.

SDCL 57A-2-305 (emphasis added). Thus, open price term contracts are

permissible under SDCL 57A-2-305(1), but only if the parties intended to enter into

an open price term contract. Comment 2 to UCC § 2-305, which is almost identical

to SDCL 57A-2-305, explains that whether the parties intended to enter into a

contract containing an open price term “is, in most cases, a question to be

determined by the trier of fact.” 7 Furthermore, we have acknowledged that

“[a]ctions involving state of mind, which include cases involving intent, are not



7.       Although the comments to the Uniform Commercial Code were not adopted
         by the South Dakota Legislature, this Court has found them to be a helpful
         guide to interpreting the text of the Code. Estate of Klauzer, 2000 S.D. 7, ¶
         33 n.5, 604 N.W.2d 474, 481 n.5.

                                          - 11 -
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usually suited for summary disposition.” Ahl v. Arnio, 388 N.W.2d 532, 534 (S.D.

1986) (citing 73 Am. Jur. 2d Summary Judgment § 4 (1974)).

[¶19.]         Here, whether the agreements in this case are open price term

contracts under SDCL 57A-2-305 is material to Stern Oil’s breach of contract claim

because it resolves whether the agreements are enforceable in the first instance.

Whether the agreements are open price term contracts involves disputed material

facts. 8 Brown argues that the contracts did not contain an open price term or a

fixed price term, and the contracts are therefore unenforceable. 9 Stern Oil, on the

other hand, argues that the contracts contain open price terms, making the

agreements enforceable contracts. 10 The circuit court disposed of the liability

portion of Stern Oil’s breach of contract claim without allowing the introduction of

evidence on the issue of intent. As discussed above, the circuit court erroneously

invoked the parol evidence rule, excluding Brown’s offered evidence regarding the

alleged five-cent profit guarantee. This evidence was relevant to whether the




8.       See, e.g., Upsher-Smith Labs., Inc. v. Mylan Labs., Inc., 944 F. Supp. 1411,
         1432 (D. Minn. 1996) (recommending denial of summary judgment because
         the issue of whether the alleged contract includes an open price term involves
         disputed, material questions of fact).

9.       Brown does not argue that the MFSAs are not contracts. Rather, Brown
         contends that the MFSAs are unenforceable contracts due to their lack of a
         sufficiently definite price term.

10.      As Brown notes, in granting Stern Oil partial summary judgment on liability,
         the court did not expressly conclude that the contracts contain open price
         terms under SDCL 57A-2-305. In fact, the court did not cite SDCL 57A-2-305
         in its memorandum decision. It was not until after the trial on damages that
         the court expressly held that the contracts contained open price terms.

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parties intended to enter into a contract with an open price term and ultimately, the

enforceability of the contracts.

[¶20.]         Furthermore, whether Stern Oil set the prices in good faith is a

question of fact. Under SDCL 57A-2-305(2), “[a] price to be fixed by the seller or by

the buyer means a price for him to fix in good faith.” The contracts in this case

state that “all prices shall include applicable taxes, and are subject to change by

[Stern Oil] at any time and without notice.” The agreements between Stern Oil and

Brown placed absolutely no boundaries on Stern Oil’s power to fix the fuel prices.

The agreements allowed Stern Oil to raise prices on an arbitrary basis for any

reason or no reason at all. Therefore, even if a fact finder had determined that

SDCL 57A-2-305 applies, a fact finder must then determine whether Stern Oil

actually set the prices in good faith by examining the factual evidence presented by

the parties. 11

[¶21.]         The dissent argues that the plain language of SDCL 57A-2-305(2) does

not require an express contract provision obligating the seller to fix the price term

in good faith in order to qualify as an open price term contract. We agree. Contrary

to the dissent’s claim otherwise, we do not conclude in this case that SDCL 57A-2-

305(2) may not apply to the agreements between Brown and Stern Oil merely

because the agreements do not expressly provide that “Stern Oil will fix the prices



11.      The dissent argues that Brown did not argue on appeal that there are
         disputed questions of fact regarding whether Stern Oil set the price of its fuel
         in good faith and as a result, the issue is not before this Court. However, we
         do not decide the issue of whether Stern Oil set the prices in good faith on the
         merits, but merely note that this issue involves additional questions of fact
         precluding summary judgment disposition in this case.

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in good faith.” Instead, we conclude that whether the parties intended to enter into

open price term contracts and whether Stern Oil fixed fuel prices in good faith were

disputed questions of fact because of the alleged profit guarantee in a competitive

retail market and Brown’s argument that there was no “ascertainable market

standard” by which to determine a reasonable fuel price. For all of these reasons,

the circuit court erred in granting partial summary judgment on the liability

portion of Stern Oil’s breach of contract claim.

[¶22.]         We also cannot overlook the procedural connection between Stern Oil’s

breach of contract claim and Brown’s fraudulent inducement counterclaim. While

they are indeed two separate claims, a finding in Brown’s favor on the fraudulent

inducement claim may affect the outcome of Stern Oil’s breach of contract claim,

considering that one remedy for fraudulent inducement is contract rescission.

SDCL 57A-2-721; 48 Am. Jur. Proof of Facts 3d 329, Proof of Fraudulent

Inducement of a Contract and Entitlement to Remedies § 17 (2011). Therefore, we

reverse and remand both claims for a new trial.

                                   CONCLUSION

[¶23.]         Both Brown’s fraudulent inducement counterclaim and Stern Oil’s

breach of contract claim involve disputed material facts. The circuit court erred in

granting Stern Oil summary judgment. Therefore, we reverse and remand for

further proceedings. 12

[¶24.]         ZINTER and WILBUR, Justices, concur.



12.      Because we reverse the grant of summary judgment, we decline to address
         the remaining issues raised on appeal.

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[¶25.]       KONENKAMP and SEVERSON, Justices, dissent.



SEVERSON, Justice (dissenting).

[¶26.]       I respectfully dissent. Brown alleges that Stern Oil fraudulently

induced him to enter into the MFSAs and the BIPs by verbally guaranteeing a five-

cent profit on every gallon of fuel he sold. In addressing this issue, the circuit court

concluded that the parties’ negotiations regarding the MFSAs and the BIPs,

including the alleged verbal guarantee of a five-cent per gallon profit, was

inadmissible parol evidence. Without the evidence of the alleged verbal guarantee,

the circuit court held that Brown’s fraudulent inducement claim failed as a matter

of law.

[¶27.]       The parol evidence rule, codified at SDCL 57A-2-202, governs disputes

involving agreements for the sale of goods. At the time of the hearing on Stern Oil’s

motion for summary judgment, the statute provided as follows:

             Terms with respect to which the confirmatory memoranda of the
             parties agree or which are otherwise set forth in a writing
             intended by the parties as a final expression of their agreement
             with respect to such terms as are included therein may not be
             contradicted by evidence of any prior agreement or of a
             contemporaneous oral agreement but may be explained or
             supplemented
             (a)   By course of dealing or usage of trade (§ 57A-1-303) or by
                   course of performance (§ 57A-2-208); and
             (b)   By evidence of consistent additional terms unless the
                   court finds the writing to have been intended also as a
                   complete and exclusive statement of the terms of the
                   agreement.

SDCL 57A-2-202 (2008).




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[¶28.]       It is well settled that, when evidence is introduced to establish fraud as

a ground for rescinding a contract, the parol evidence rule does not apply. Sabbagh

v. Prof’l & Bus. Men’s Life Ins., Co., 79 S.D. 615, 116 N.W.2d 513, 520 (1962)

(quoting 32 C.J.S. Evidence § 979); see Majority Opinion ¶ 11. Here, Brown sought

to introduce evidence that Stern Oil fraudulently induced him to enter into the

contracts by guaranteeing a five-cent profit on every gallon of fuel he sold. Such

evidence is not barred by the parol evidence rule. Accordingly, I agree with the

majority that the circuit court erroneously applied the parol evidence rule. But I do

not believe our analysis ends with that determination.

[¶29.]       In Muhlbauer v. Estate of Olson, we stated, “In considering a [circuit]

court’s grant or denial of summary judgment, this Court will affirm only if all legal

questions have been decided correctly.” 2011 S.D. 42, ¶ 7, 801 N.W.2d 446, 448

(quoting Bertelsen v. Allstate Ins. Co., 2011 S.D. 13, ¶ 15, 796 N.W.2d 685, 692-93).

The majority cites Muhlbauer in support of its conclusion that the circuit court’s

erroneous application of the parol evidence rule, by itself, is grounds for reversing

the circuit court’s grant of summary judgment. Majority Opinion ¶ 12. I disagree.

“It is a matter of settled law that this [C]ourt may affirm even where the circuit

court reaches the correct result for the wrong reason.” Oldham-Ramona Sch. Dist.

No. 39-5 v. Jensen, 503 N.W.2d 260, 264 (S.D. 1993) (citing Anderson v. Somers, 455

N.W.2d 219 (S.D. 1990)); see Schmiedt v. Loewen, 2010 S.D. 76, ¶ 20 n.3, 789

N.W.2d 312, 318 n.3 (“[A] trial court may still be upheld if it reached the right

result for the wrong reason.” (quotation omitted)). “In fact, affirmance is suitable if

any legal basis exists to support the court’s decision.” Horne v. Crozier, 1997 S.D.


                                         - 16 -
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65, ¶ 5, 565 N.W.2d 50, 52 (citing St. Paul Fire & Marine Ins. v. Schilling, 520

N.W.2d 884, 886 (S.D. 1994); Waddell v. Dewey Cnty. Bank, 471 N.W.2d 591, 593

(S.D. 1991)). In this case, I believe a legal basis exists to affirm the circuit court’s

decision.

[¶30.]        This Court has held that “entry of summary judgment is mandated

against a party who fails to make a showing sufficient to establish the existence of

an element essential to that party’s case, and on which that party will bear the

burden of proof at trial.” Danielson v. Hess, 2011 S.D. 82, ¶ 8, 807 N.W.2d 113, 115

(quoting Dakota Indus., Inc. v. Cabela’s.com, Inc., 2009 S.D. 39, ¶ 11, 766 N.W.2d

510, 513). “Sufficient evidence requires establishment of a prima facie case.” Fin-

Ag, Inc. v. Pipestone Livestock Auction Mkt., Inc., 2008 S.D. 48, ¶ 33, 754 N.W.2d 29,

43 (citing Mushitz v. First Bank of S.D., N.A., 457 N.W.2d 849, 859 (S.D. 1990)). “A

prima facie case has been established when there are facts in evidence which if

unanswered would justify persons of ordinary reason and fairness in affirming the

question which the plaintiff is bound to maintain.” Id. (quoting Sandner v.

Minnehaha Cnty., 2002 S.D. 123, ¶ 13, 652 N.W.2d 778, 783). The majority notes

that, under SDCL 53-4-5, “[a]ctual fraud is always a question of fact.” See

Ehresmann v. Muth, 2008 S.D. 103, ¶ 20, 757 N.W.2d 402, 406 (noting that

“[q]uestions of fraud and deceit are generally questions of fact and as such are to be

determined by the jury”). But this statutory provision does not relieve plaintiffs of

their duty to “show that they will be able to place sufficient evidence in the record at

trial to support findings on all the elements on which they have the burden of

proof.” Clark Cnty. v. Sioux Equip. Corp., 2008 S.D. 60, ¶ 8, 753 N.W.2d 406, 409


                                          - 17 -
#25766

(quoting Bordeaux v. Shannon Cnty. Sch., 2005 S.D. 117, ¶ 14, 707 N.W.2d 123,

127).

[¶31.]         In order for Brown’s claim of fraudulent inducement to survive

summary judgment, Brown must have submitted evidence sufficient to support a

finding that his reliance upon Stern Oil’s alleged misrepresentation was justified. 13

See Martschinske v. Olympic Styles, Inc., 628 F. Supp. 231, 239 (D.S.D. 1984), aff’d

sub nom. Martschinske v. Olympic Styles, 774 F.2d 1172 (8th Cir. 1985) (recognizing

justifiable reliance as a necessary element of a claim for fraudulent inducement

under SDCL 53-4-5). Even accepting Brown’s version of the facts as true, I believe

Brown has failed to submit evidence to support such a finding.

[¶32.]         It is undisputed that Stern Oil did not set the fuel prices at the gas

stations Brown owned. The profit margin Brown realized on the sale of fuel was

ultimately dependant upon the price Brown chose to charge his customers. Since


13.      SDCL 53-4-5 defines actual fraud in relation to contracts. The statute
         provides:

               Actual fraud in relation to contracts consists of any of the
               following acts committed by a party to the contract, or with his
               connivance, with intent to deceive another party thereto or to
               induce him to enter into the contract:
               (1) The suggestion as a fact of that which is not true by one who
               does not believe it to be true;
               (2) The positive assertion, in a manner not warranted by the
               information of the person making it, of that which is not true,
               though he believe it to be true;
               (3) The suppression of that which is true by one having
               knowledge or belief of the fact;
               (4) A promise made without any intention of performing it; or
               (5) Any other act fitted to deceive.

         SDCL 53-4-5.


                                          - 18 -
#25766

Stern Oil could not control the price of the fuel Brown sold, Brown could not have

justifiably relied upon Stern Oil’s alleged verbal guarantee of a five-cent per gallon

profit.

[¶33.]       Moreover, Stern Oil’s alleged verbal guarantee of a five-cent per gallon

profit constitutes a promise as to future events. The failure to perform a promise

does not, standing alone, amount to fraud. Under SDCL 53-4-5(4), the promise

must have been made “without any intention of performing it.” The record in this

case is devoid of evidence that Stern Oil did not intend to perform its promise at the

time it allegedly guaranteed Brown would realize a five-cent profit on every gallon

of fuel he sold. See Weitzel v. Sioux Valley Heart Partners, 2006 S.D. 45, 714

N.W.2d 884 (affirming the circuit court’s dismissal of an employee’s claim of fraud

against his employer because the employee failed to allege facts to show that the

employer made a promise of employment without an intention of performing).

[¶34.]       In opposing a motion for summary judgment, the nonmoving party

“must present specific facts showing that a genuine, material issue for trial exists.”

Robinson v. Ewalt, 2012 S.D. 1, ¶ 7, 808 N.W.2d 123, 125 (quoting Murray v.

Mansheim, 2010 S.D. 18, ¶ 4, 779 N.W.2d 379, 381-82). “Disputes of fact are not

material unless they change the outcome of a case under the law.” Hall v. State ex

rel. S.D. Dep’t of Transp., 2011 S.D. 70, ¶ 9 n.3, 806 N.W.2d 217, 221 n.3 (citing

Jerauld Cnty. v. Huron Reg’l Med. Ctr., Inc., 2004 S.D. 89, ¶ 41 n.4, 685 N.W.2d

140, 149 n.4). Here, even if we accept as true Brown’s allegation that Stern Oil

verbally guaranteed him a five-cent per gallon profit, this evidence does not change

the outcome of the case. See Kjerstad Realty, Inc. v. Bootjack Ranch, Inc., 2009 S.D.


                                         - 19 -
#25766

93, ¶ 15, 774 N.W.2d 797, 802 (“In reviewing a grant of summary judgment, we

must accept the non-moving party’s version of the facts as true.”). Brown has failed

to submit evidence sufficient to support a reasonable trier of fact’s finding that the

elements of fraudulent inducement were present. Accordingly, I would hold that

the circuit court did not err by granting Stern Oil summary judgment on Brown’s

fraudulent inducement claim.

Breach of Contract Claim

[¶35.]       Brown argues that the circuit court erred by granting Stern Oil

summary judgment on its breach of contract claim. He argues that the MFSAs

were not enforceable contracts because they lacked a price term. SDCL 57A-2-305

addresses the enforceability of an agreement that leaves the price term open. The

statute provides:

             (1) The parties if they so intend can conclude a contract for sale
             even though the price is not settled. In such a case the price is a
             reasonable price at the time for delivery if:
                 (a) Nothing is said as to price; or
                 (b) The price is left to be agreed by the parties and they fail
                 to agree; or
                 (c) The price is to be fixed in terms of some agreed market or
                 other standard as set or recorded by a third person or agency
                 and it is not so set or recorded.
             (2) A price to be fixed by the seller or by the buyer means a price
             for him to fix in good faith.
             (3) When a price left to be fixed otherwise than by agreement of
             the parties fails to be fixed through fault of one party the other
             may at his option treat the contract as canceled or himself fix a
             reasonable price.
             (4) Where, however, the parties intend not to be bound unless
             the price be fixed or agreed and it is not fixed or agreed there is
             no contract. In such a case the buyer must return any goods
             already received or if unable so to do must pay their reasonable
             value at the time of delivery and the seller must return any
             portion of the price paid on account.


                                         - 20 -
#25766

SDCL 57A-2-305.

[¶36.]         The open price fuel terms of the MFSAs allowed the seller, Stern Oil,

to change the price term “at any time and without notice.” This effectively granted

Stern Oil the right to fix the price term. Under SDCL 57A-2-305(2), parties to a

contract may agree that price will be fixed by the seller in good faith. The majority

takes issue with the fact that the MFSAs did not expressly require Stern Oil to fix

the price term in good faith. But the plain language of SDCL 57A-2-305(2) does not

require an open price term contract to include a contractual provision obligating the

seller to fix the price in good faith. The statute merely imposes an obligation on the

seller to exercise good faith in fixing the price term. See SDCL 57A-2-305(2) cmt. 3

(explaining that SDCL 57A-2-305(2) “rejects the uncommercial idea that an

agreement that the seller may fix the price means that he may fix any price he may

wish by the express qualification that the price so fixed must be fixed in good faith. .

. .”). The majority concludes that there are disputed questions of fact regarding

whether Stern Oil set the price of its fuel in good faith. Yet Brown did not assert

lack of good faith as a defense to Stern Oil’s breach of contract claim in the circuit

court, and he has not raised this issue on appeal. Indeed, Brown did not argue

below, and has not now asserted, that there are disputed questions of fact regarding

whether Stern Oil set the price of its fuel in good faith. This issue is simply not

before this Court. Therefore, it does not constitute a proper ground for reversal. 14



14.      The issue of whether an agreement is an enforceable open price term contract
         must be distinguished from the issue of whether the seller set the price in
         good faith. While these issues are related, they are separate and distinct. A
         court or trier of fact must determine whether an agreement is an open price
                                                                    (continued . . .)
                                           - 21 -
#25766

[¶37.]       Brown also argues that the parties’ course of dealing, including Stern

Oil’s alleged verbal guarantee of a five-cent per gallon profit, is evidence that the

parties did not intend to create open price term contracts. Brown raises this

argument for the first time on appeal. In responding to Stern Oil’s motion for

summary judgment, Brown argued that Stern Oil fraudulently induced him to enter

into the MFSAs and the BIPs by verbally guaranteeing he would earn a five-cent

profit on every gallon of fuel he sold. But Brown did not argue that Stern Oil’s

alleged verbal guarantee of a five-cent per gallon profit was evidence that the

parties did not intend to create open price term contracts. At the hearing on

Brown’s motion for reconsideration, Brown argued that the MFSAs were not valid

and enforceable open price term contracts because there was no “ascertainable

market standard” by which to determine a reasonable fuel price. But again, Brown

did not seek to introduce extrinsic evidence regarding the parties’ intent to contract.

This Court has “consistently held that [it] may not review theories argued for the

first time on appeal.” Alvine Fam. Ltd. P’ship v. Hagemann, 2010 S.D. 28, ¶ 21, 780


________________________
(. . . continued)
         term contract before it considers whether the seller set the price of the
         contracted goods in good faith. If the seller failed to set the price in good
         faith, South Dakota law affords the buyer various potential remedies,
         including cancellation of the contract. SDCL 57A-2-305(3). But a seller’s
         breach of the good faith requirement of SDCL 57A-2-305(2) has no bearing on
         the initial determination of whether the parties’ agreement constituted an
         open price term contract. In this case, Brown has not argued that there are
         disputed questions of fact regarding whether Stern Oil set the price of its fuel
         in good faith. Therefore, contrary to the majority’s insinuation otherwise, it
         is improper for this Court to reverse the circuit court’s grant of summary
         judgment on this basis, even if this Court “do[es] not decide the issue of
         whether Stern Oil set the prices in good faith on the merits.” Majority
         Opinion ¶ 20 n.10.

                                          - 22 -
#25766

N.W.2d 507, 514 (citing Boever v. Bd. of Accountancy, 526 N.W.2d 747, 750 (S.D.

1995)). Because Brown did not argue to the circuit court that the parties’ course of

dealing, including Stern Oil’s alleged verbal guarantee of a five-cent per gallon

profit, was evidence that the parties did not intend to create open price term

contracts, I would decline to address this argument on appeal. 15

[¶38.]         Brown next argues that under the terms of the MFSAs, Stern Oil was

required to “offer to sell” a specified amount of fuel to Brown at prices that were to

be determined by Stern Oil, but Brown was not required to purchase any amount of

fuel from Stern Oil. Accordingly, Brown contends that the MFSAs were nothing

more than unenforceable “agreements to agree.”

[¶39.]         After reviewing the terms of the MFSAs, I find Brown’s argument to be

without merit. The MFSAs set forth a maximum volume of fuel that Stern Oil was

obligated to “offer to sell” Brown. However, in both MFSAs, Paragraph 4(c)

explicitly stated that “[i]n each contract year, [Brown] must purchase from [Stern



15.      As the majority notes, Comment 2 to UCC § 2-305 states that whether the
         parties intended to enter into a contract containing an open price term “is, in
         most cases, a question to be determined by the trier of fact.” But in this case,
         Brown did not argue to the circuit court that the parties did not intend to
         form an open price term contract. He argued only that the MFSAs were not
         valid and enforceable open price term contracts because there was no
         “ascertainable market standard” by which to determine a reasonable fuel
         price. In the alternative, Brown argued that he was fraudulently induced to
         sign the MFSAs. The circuit court found Brown’s arguments to be without
         merit and granted summary judgment in favor of Stern Oil. Brown now
         seeks to present evidence of the parties’ intent for the first time on appeal.
         Because Brown failed to raise the issue of intent before the circuit court, the
         circuit court did not have the opportunity to address the issue. As such, I
         would not address the issue of the parties’ intent to contract for the first time
         on appeal.


                                           - 23 -
#25766

Oil] a minimum of seventy-five percent (75%) of the Maximum Annual Volume for

Exxon-branded gasoline.” (Emphasis added.) The MFSAs provided that the

maximum annual volume for the first contract year at Freeway Mobil was 1.38

million gallons of gasoline, and the maximum annual volume for the first contract

year at Exxon Goode To Go was 1.5 million gallons of gasoline and 720,000 gallons

of diesel. After the first contract year, the maximum annual volume of fuel was

adjusted each year based on sales volume. The MFSAs clearly required Brown to

purchase at least 75% of the maximum annual volume of fuel. Brown’s argument

that he was not required to purchase any amount of fuel from Stern Oil is contrary

to the express terms of the MFSAs.

[¶40.]       The MFSAs contained an open price fuel term which provided that fuel

prices were “subject to change by [Stern Oil] at any time and without notice.”

Under SDCL 57A-2-305(2), parties to a contract may agree that price will be fixed

by the seller in good faith. The record shows that Stern Oil consistently set the

price of the fuel it sold to Brown and other customers at 1.5 cents above the rack

price, plus tax and freight charges. Brown has not argued that Stern Oil failed to

set the price of its fuel in good faith. I would therefore hold that the MFSAs are

valid open price term contracts under SDCL 57A-2-305(2). By refusing to purchase

fuel from Stern Oil, Brown breached the terms of the MFSAs. The circuit court did

not err in granting Stern Oil’s motion for summary judgment.

[¶41.]       For these reasons, I respectfully dissent.

[¶42.]       KONENKAMP, Justice, joins this dissent.




                                        - 24 -
