Pioneer Bank & Trust v. Reynick

#24889-a-PER CURIAM
2009 SD 3

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

* * * *

PIONEER BANK & TRUST,
SPECIAL ADMINISTRATOR OF THE
ESTATE OF ELEANOR YOUMAN SIGLOH, Plaintiff and Appellee,
v.
DAWN REYNICK a/k/a DAWN ROWE, Defendant and Appellant,
and
DORCAS CAMERON, GERALD CAMERON,
DAWN REYNICK a/k/a DAWN ROWE, TROY
CAMERON, TODD REYNICK CAMERON, Defendants.

* * * *
APPEAL FROM THE CIRCUIT COURT
OF THE SIXTH JUDICIAL CIRCUIT
JACKSON COUNTY, SOUTH DAKOTA
* * * *
HONORABLE LORI S. WILBUR
Judge
* * * *
KAREN PAIGE HUNT
THOMAS E. BRADY of
Brady Pluimer, PC Attorneys for plaintiff
Spearfish, South Dakota and appellee.

PATRICK M. GINSBACH of
Farrell, Farrell & Ginsbach, PC Attorneys for defendant
Hot Springs, South Dakota and appellant.

* * * *

CONSIDERED ON BRIEFS
ON NOVEMBER 3, 2008

OPINION FILED 1/14/09
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PER CURIAM

[¶1.] Dawn Reynick, also known as Dawn Rowe (Rowe), appeals an order

sanctioning her and her attorney, Patrick Ginsbach (Ginsbach), in the amount of

$4,920.61 payable to Pioneer Bank and Trust (Bank). We affirm.

FACTS

[¶2.] Rowe’s mother, Dorcas Cameron (Dorcas), and Dorcas’s husband,

Gerald Cameron (Gerald), who was Rowe’s stepfather, exercised a power of attorney

for a period of time on behalf of Dorcas’s aunt, Eleanor Youman Sigloh (Sigloh).

Upon Sigloh’s death, Dorcas was appointed her personal representative. While

occupying these positions of trust, Dorcas engaged in self-dealing by obtaining funds

from Sigloh and her estate in the approximate amount of $324,353.85. Some of the

funds were spent while the balance was deposited or invested in accounts held by

Dorcas, Gerald or Dorcas’s other daughter, Laurie Robertson (Laurie).

[¶3.] In late 2006, Bank, as special administrator of Sigloh’s estate,

commenced an action against Dorcas, Gerald, Laurie and two other individuals who

once exercised a power of attorney on Sigloh’s behalf. The complaint raised causes

of action for breach of fiduciary duty and fraud and sought an accounting and

damages.

[¶4.] Following Bank’s commencement of its action, discovery ensued. A

series of partial summary judgments were then entered against the various

defendants in the case. A partial summary judgment in the amount of $454,626.08

was entered against Dorcas in April 2007.

[¶5.] During the discovery process, information was discovered suggesting

that Dorcas had not only transferred funds obtained from Sigloh and her estate to
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Gerald and Laurie, but also to several of her other children, including Rowe. Thus,

in July 2007, Bank moved to amend its complaint to join Rowe and three of her

siblings as defendants in the action previously commenced against Dorcas and the

other original defendants. An order granting the motion was entered on August 16,

2007. On September 26, 2007, Rowe filed an answer in the action and a

counterclaim against Bank for barratry. Rowe alleged that Bank’s action was

frivolous, malicious and brought for an improper and unjustifiable motive.

[¶6.] On November 8, 2007, the circuit court entered a partial summary

judgment against Laurie in the amount of $23,601.28 on a theory of implied trust.

In December 2007, Bank moved for sanctions against Rowe and her attorney,

Ginsbach, alleging that Rowe’s counterclaim for barratry was unwarranted and

interposed for improper purposes. On February 13, 2008, Bank filed a motion for

summary judgment on Rowe’s counterclaim. An order granting the motion was

entered on March 26, 2008. The order also imposed sanctions on Rowe and her

attorney, Ginsbach, in the amount of $4,920.61. A judgment for the sanctions was

entered on April 9, 2008. Rowe appeals.

ISSUE ONE

[¶7.] Whether the circuit court erred in failing to enter findings of
fact and conclusions of law?

[¶8.] The circuit court did not enter findings of fact and conclusions of law in

support of its order or judgment imposing sanctions. Rowe argues this requires

reversal of the award.

[¶9.] SDCL 15-6-11(c) once required a court awarding sanctions to enter

findings of fact and conclusion of law in support of the award. See SDCL 15-6-

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11(c)(2004). This express requirement was omitted when this Court amended

SDCL 15-6-11(c) by rule in 2006. See 2006 SDSessL ch 281 (Supreme Court Rule

06-07). Currently, the only explicit requirement that a rationale be set forth for an

award of sanctions appears in SDCL 15-6-11(c)(3): “Order. When imposing

sanctions, the court shall describe the conduct determined to constitute a violation

of this rule and explain the basis for the sanction imposed.” This language is

essentially analogous to Federal Rule of Civil Procedure 11(c)(6): “An order

imposing a sanction must describe the sanctioned conduct and explain the basis for

the sanction.” Rule 11(c)(6) has been analyzed as follows:

If sanctions are deemed appropriate, the 1993
amendment requires that the district court “describe the
conduct determined to constitute a violation” of Rule 11
and “explain the basis for the sanction imposed.” Thus, as
the illustrative cases cited in the note below make clear,
the district judge should indicate fairly precisely what
conduct has been found to be improper and under which
provision of law the sanctions are being awarded by the
court. In addition, and particularly when a substantial
amount of money is involved, the district judge should
state with some specificity the manner by which the
sanction has been computed. These requirements are
designed to promote the rational exercise of trial court
discretion in the utilization of Rule 11 and to facilitate
effective appellate review. Some federal courts, however,
have been less specific when the sanction has been based
on the general conduct of the litigation by the lawyer who
is being sanctioned.

5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §

1337.3 (2008)(emphasis added).

[¶10.] Here, the court’s order granting sanctions provided:

Furthermore, the Court, having determined that the
evidence and law supports the claim against Rowe, in that
evidence showed Rowe received funds unlawfully removed

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from the Estate of Eleanor Youman Sigloh by Dorcas
Cameron and Gerald Cameron, the Court granted
summary judgment against Rowe’s sibling Laurie
Robertson who had received funds unlawfully removed
from the Estate of Eleanor Youman Sigloh by Dorcas
Cameron and Gerald Cameron and the Court authorized
joining Rowe as a defendant in the action and that the
claim against Rowe was not frivolous or malicious or filed
in bad faith; and the Court, having determined that the
counterclaim of barratry was asserted without reasonable
inquiry into whether the counterclaim was warranted by
existing law, without argument for the extension,
modification or reversal [of] existing law and without
evidentiary support; and the Court having determined
that Rowe and her attorney Patrick Ginsbach should be
sanctioned for violating SDCL 15-6-11(c), it is hereby

ORDERED that the motion for Sanctions Pursuant to
SDCL 15-6-11(c) on Counterclaim of Barratry shall be and
the same is GRANTED; and it is further

ORDERED that Defendant Rowe and her attorney
Patrick Ginsbach shall pay, as sanctions, the amount of
$4,920.61, as the expenses incurred by Plaintiff in
attorney’s fees and expenses of responding to and
defending the barratry counterclaim, and Rowe and her
attorney Patrick Ginsbach shall be jointly and severally
liable for the sanctions . . ..

[¶11.] These passages from the court’s order fulfill the requirement that the

court indicate with fair precision the conduct found improper and the provisions of

law under which sanctions are being awarded. See Wright and Miller at § 1337.3.

They further fulfill the requirement that the court state with specificity the manner

by which sanctions have been computed. Id. Thus, the absence of formal findings

of fact and conclusions of law on these issues does not require reversal of the

sanctions award. See Foval v. First Nat. Bank of Commerce in New Orleans, 841

F2d 126, 130 (5thCir 1988)(district court need not support its Rule 11 decision with

specific findings of fact and conclusions of law if justification underlying the decision

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is readily apparent from the record); Nat’l Bank of Arkansas in N. Little Rock v.

Parks, 970 F2d 480, 483 (8thCir 1992)(court need not make detailed factual findings

and legal conclusions in making a Rule 11 determination if its findings and

conclusions, as well as the record, are adequate to give the appellate court a clear

understanding of the grounds for the court’s decision).

ISSUE TWO

[¶12.] Whether the circuit court abused its discretion in awarding
Bank sanctions?

[¶13.] Appeals involving sanctions under Rule 11 (SDCL 15-6-11) are

reviewed under the abuse of discretion standard of review. Hahne v. Burr, 2005 SD

108, ¶ 22, 705 NW2d 867, 874. An abuse of discretion is a discretion exercised to an

end or purpose not justified by, and clearly against, reason and evidence. Id.

[¶14.] Rowe argues there was no evidence to support Bank’s claim against

her and, therefore, its cause of action was frivolous and malicious. Rowe contends

that because Bank’s action was frivolous and malicious, her counterclaim for

barratry was warranted. Accordingly, she argues that the circuit court abused its

discretion in awarding Bank sanctions for her counterclaim.

[¶15.] Barratry is defined by SDCL 20-9-6.1 which provides in pertinent part:

“Barratry is the assertion of a frivolous or malicious claim or defense or the filing of

any document with malice or in bad faith by a party in a civil action.” (Emphasis

added). Thus, “[c]ivil barratry exists when a party brings a frivolous or malicious

claim.” Citibank (S.D.), N.A. v. Hauff, 2003 SD 99, ¶ 30, 668 NW2d 528, 537.

“A frivolous action exists when ‘the proponent can present
no rational argument based on the evidence or law in
support of the claim’. . . . To fall to the level of

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frivolousness there must be such a deficiency in fact or
law that no reasonable person could expect a favorable
judicial ruling. . . . [F]rivolousness ‘connotes an improper
motive or [a] legal position so wholly without merit as to
be ridiculous.’”

A malicious action is one brought for an improper,
unjustifiable motive.

“[A]n action is malicious if it ‘is begun in
malice, and without probable cause to believe
it can succeed, and which finally ends in
failure.’” . . . Malice “exists when the
proceedings are instituted primarily for an
improper purpose.” An improper purpose
occurs in situations where:

the plaintiff in the original action was
actuated by any unjustifiable motive,
as where he did not believe his claim
would be held valid, or where his
primary motive was hostility or ill
will, or where his sole purpose was to
deprive the defendant of a beneficial
use of his property or to force a
settlement having no relation to the
merits of the claim.

Id., ¶¶ 31 – 32, 668 NW2d at 537 (citations omitted).

[¶16.] In determining whether the claim at issue in Citibank was frivolous or

malicious so as to constitute barratry, this Court concluded:

Although we hold today that [plaintiff] did not have a
legal claim against [defendant], [plaintiff’s] action was not
frivolous or malicious. [Plaintiff] raised rational
arguments based on the evidence and law in support of its
claim. The discovery and briefing also reflect that the
claim did not lack merit to the extent that no reasonable
person could expect a favorable judicial ruling or that it
was so wholly without merit as to be ridiculous. We
finally see no evidence to support the notion that
[plaintiff] had an improper motive when it commenced its
collection action against [defendant].

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Citibank, 2003 SD 99, ¶ 33, 668 NW2d at 537.

[¶17.] Applying a similar analysis here, even if Bank did not have a legal

claim against Rowe, Bank’s action was not frivolous or malicious. Bank first

introduced its claim against Rowe in a motion to amend its complaint and join

parties in July 2007. In its amended complaint, Bank alleged that funds wrongfully

received by Dorcas were distributed to Rowe and some of her siblings and that

Sigloh’s estate was entitled to recover them. Dorcas, who had already been held

liable for her actions, resisted the amendment of the complaint and joinder of Rowe

and her siblings as parties, but admitted giving Rowe some money. The court

subsequently granted the amendment of the complaint and joinder of Rowe and her

siblings in an order entered in August 2007. The court thereby determined that

Rowe was a necessary party to the action. See SDCL 15-6-19(a)(persons who must

be joined as parties in an action).

[¶18.] After Rowe filed her answer and counterclaim for barratry, Bank

exchanged a series of letters with Rowe’s counsel setting forth the legal and

evidentiary basis for its claim against Rowe and advising that it would seek

sanctions for Rowe’s counterclaim if it was not withdrawn. Bank further explained

the basis for its claim in answers to interrogatories from Rowe and in its response to

Rowe’s request for the production of documents. Specifically, Bank referenced

statements Dorcas and her husband provided under oath in depositions and

answers to interrogatories indicating that they had given significant amounts of

cash to their children, including Rowe, from funds obtained from Sigloh and her

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estate. Bank also referred to Dorcas’s bank records showing checks written to

Rowe and large withdrawals of cash during the relevant time period.

[¶19.] Whether Bank could ultimately prevail on its claim against Rowe

should not have been a consideration for Rowe or her counsel in assessing whether

the claim was barratrous. See Ridley v. Lawrence County Comm’n, 2000 SD 143, ¶

14, 619 NW2d 254, 259 (“[s]imply because a claim or defense is adjudged to be

without merit does not mean that it is frivolous.”). Rather, the existence of Bank’s

“rational arguments based on the evidence and law in support of its claim” should

have informed Rowe and her counsel that the claim was not frivolous or malicious

within the meaning of barratry. See Citibank, 2003 SD 99, ¶ 33, 668 NW2d at 537.

Moreover, Bank actually succeeded on similar arguments in obtaining its summary

judgment against Rowe’s sister, Laurie. Thus, it should have been apparent to

Rowe and her counsel that Bank’s claim was neither so lacking in merit “that no

reasonable person could expect a favorable judicial ruling” nor “so wholly without

merit as to be ridiculous.” Id. Nothing should have made this more apparent than

the circuit court’s granting of Bank’s motion to join Rowe as a defendant in the

action. It would have been incongruous for the court to order on the one hand that

Rowe should be joined as a necessary party defendant to Bank’s action while

holding on the other hand that Bank’s claim against Rowe was so wholly without

merit as to be ridiculous.

[¶20.] Finally, in addition to the foregoing, it should be noted that, as in

Citibank, there is no evidence in the record of this case to support the notion that

Bank had an improper motive in commencing its action against Rowe and, therefore

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acted with malice. Thus, there was simply no basis for Rowe to mount a claim of

barratry against Bank and the circuit court did not abuse its discretion in

sanctioning Rowe for raising it.

APPELLATE ATTORNEY’S FEES

[¶21.] Bank moves for an award of its appellate attorney’s fees. The motion is

accompanied by a “verified, itemized statement of legal services rendered” as

required by SDCL 15-26A-87.3.

[¶22.] Attorney’s fees are allowed when statutory authority authorizes the

award. In re Conservatorship of Irwin, 2007 SD 41, ¶ 25, 732 NW2d 411, 417.

SDCL 15-6-11(e) authorizes the award here:

The Supreme Court shall consider all appeals pursuant to
§§ 15-6-11(a) through 15-6-11(d) without any presumption
of the correctness of the trial court’s findings of fact and
conclusions of law. Reasonable attorneys’ fees and costs
shall be awarded to the successful party on appeal.

Accordingly, Bank is granted its appellate attorney’s fees in the amount of

$3,770.44.

[¶23.] Affirmed.

[¶24.] GILBERTSON, Chief Justice, KONENKAMP, ZINTER and

MEIERHENRY, Justices, and SABERS, Retired Justice, participating.

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