Garrett v. Stock
3:22-cv-03003
D.S.D.Apr 14, 2025Background
- Plaintiffs (the Garretts) sold farmland to Defendants (the Stocks) and leased back the land with an option to repurchase, contingent on timely rent payments.
- Plaintiffs failed to pay rent in 2021 and 2022; Defendants gave notice of default and ultimately evicted plaintiffs after prevailing in state court via jury verdict.
- Plaintiffs sued in federal court, alleging breach of contract, improper notice, and fraudulent inducement, and filed lis pendens notices clouding the title to the property.
- Defendants counterclaimed for unpaid rent and moved for summary judgment, arguing preclusion by the earlier state court verdict.
- The South Dakota Supreme Court affirmed the state court judgment for the Stocks, and the federal court was asked to expunge the lis pendens and grant summary judgment for the defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Material breach of agreements | Stocks breached first (settling fence dispute, improper notice) excused Garretts' nonpayment | Garretts breached first by not paying rent, excusing any subsequent Stocks conduct | For Stocks—state verdict precludes relitigation, Garretts breached first |
| Validity of notice of default | Notice was defective—did not come from escrow agent, didn't allow full cure period | Notice was adequate, plus breach occurred regardless of notice form | For Stocks—notice found adequate by state jury, preclusion applies |
| Fraudulent inducement claim | Contracts were induced by false statements (re promise not to interfere) | No actionable fraud; contract valid and affirmed by state court | For Stocks—state court deemed contracts valid, claim precluded |
| Expungement of lis pendens | Notice should remain pending ongoing litigation | No good faith basis after final judgment; clouds title | For Stocks—lis pendens expunged, no longer proper/pursued in good faith |
Key Cases Cited
- Taylor v. Sturgell, 553 U.S. 880 (2008) (articulates claim and issue preclusion doctrine)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (defines issue preclusion standards)
- Montana v. United States, 440 U.S. 147 (1979) (preclusion principles of judicial efficiency and fairness)
- Miera v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75 (1984) (federal courts must give same preclusive effect as state courts)
- Hicks v. O'Meara, 31 F.3d 744 (8th Cir. 1994) (tests for res judicata—"same nucleus of operative fact")
- Bank of Hoven v. Rausch, 449 N.W.2d 263 (S.D. 1989) (South Dakota res judicata framework)
- Nature's 10 Jewelers v. Gunderson, 648 N.W.2d 804 (S.D. 2002) (fraudulent inducement renders contract voidable, not void)