Norwest Bank Black Hills, N.a., Plaintiff and Appellant v. Rapid City Teachers Federal Credit Union (no. 4122)… (South Dakota 1988)

Summary

The court reversed because the trial court improperly converted the Credit Union's motion to dismiss into a motion for summary judgment without notifying the parties and giving them a reasonable opportunity to submit pertinent materials. The court also held that Norwest's allegations of knowing participation in a fraudulent check-kiting scheme and negligent supervision were sufficient to survive dismissal, even though the complaint did not expressly plead duty. The court left the existence and scope of any negligence duty for development of the facts. Erickson, Circuit Judge, concurring in part and dissenting in part, would have affirmed dismissal, while allowing amendment of the fraud-related allegations.

Holding

Conversion of motion to dismiss into motion for summary judgment. A trial court must notify the parties before converting a motion to dismiss into a motion for summary judgment and must give them a reasonable opportunity to present material pertinent to summary judgment. The trial court erred by failing to take those mandatory steps.

Sufficiency of Norwest's complaint. Norwest's complaint stated claims sufficient to survive a motion to dismiss. The allegations that the Credit Union knowingly participated in a check-kiting scheme and acted fraudulently and oppressively stated a potential fraud claim, and the allegations of knowing participation by the manager and negligent supervision stated a potential negligence claim. Norwest was not required to plead duty expressly where duty could be logically inferred from the claim.