Beals v. Autotrac, Inc.
2017 SD 80
| S.D. | 2017Background
- AutoTrac, an S corp in Fairfax, SD, planned a $500,000 expansion and offered 200 Class A shares at $2,500/share; board resolutions conditioned issuance on fulfillment of a "Working Agreement."
- Varner Beals, an 83-year-old with diagnosed dementia who managed his affairs and operated a bee business, paid $200,000 toward a promised $500,000 investment and signed a written agreement to buy 200 Class A shares.
- The agreement restricted use of Beals’s funds to expansion and equipment, prohibited using them to pay existing debts, and contemplated issuance of lesser-class stock until payments were complete.
- After Beals failed to complete payments, AutoTrac scaled back expansion plans; Beals’s son (as POA) sued alleging deceit, fraud, and undue influence.
- The circuit court granted summary judgment for AutoTrac on all claims; on appeal the South Dakota Supreme Court affirmed as to deceit and fraud but reversed and remanded as to undue influence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Deceit (SDCL ch. 20-10) | Parsons exaggerated AutoTrac's financial prospects to induce investment. | No specific false factual suggestion; Beals testified Parsons was sincere and merely optimistic. | Affirmed — summary judgment proper; plaintiff’s evidence speculative and his deposition undercuts intent element. |
| Fraud (actual fraud under SDCL ch. 53-4) | AutoTrac suppressed existence of a $100,000 debt and thus deceived Beals. | No duty to disclose in arm’s-length business transactions; no evidence of active concealment or inquiry by Beals. | Affirmed — no genuine issue that AutoTrac suppressed facts; mere nondisclosure insufficient. |
| Undue influence (SDCL 53-4-7(2)) | Parsons exploited Beals’s dementia/weakness of mind to obtain investment. | Parsons and Howard claim they were unaware of Beals’s health issues. | Reversed — genuine dispute of material fact exists about Beals’s mental weakness and whether it was exploited; remanded. |
| Summary judgment standard | N/A — procedural point | N/A — procedural point | Applied: review favoring nonmoving party; if any basis supports trial court ruling, affirmance proper. |
Key Cases Cited
- Gades v. Meyer Modernizing Co., 865 N.W.2d 155 (S.D. 2015) (summary judgment standard; view evidence favorably to nonmoving party)
- Peters v. Great W. Bank, Inc., 859 N.W.2d 618 (S.D. 2015) (nonmoving party must substantiate allegations with probative evidence)
- Guilford v. Nw. Pub. Serv., 581 N.W.2d 178 (S.D. 1998) (party cannot rely on a better version of facts than given in deposition)
- Estate of Elliott ex rel. Elliott v. A & B Welding Supply Co., 594 N.W.2d 707 (S.D. 1999) (standard that mere speculation cannot defeat summary judgment)
- Schwartz v. Morgan, 776 N.W.2d 827 (S.D. 2009) (no duty to disclose in arm’s-length business transactions absent fiduciary/employment relationship)
- Taggart v. Ford Motor Credit Co., 462 N.W.2d 493 (S.D. 1990) (same principle regarding nondisclosure in arm’s-length dealings)