835 N.W.2d 117
S.D.2013Background
- On Jan. 27, 2000, JAS entered a purchase agreement with BBS; Bradley, Brian, and Daniel Staton signed as personal guarantors.
- The purchase included sale of ESP’s sheet metal installation business and a covenant not to compete for seven years within 100 miles of Rapid City.
- BBS/Statons later sued for breach of the agreement; JAS and Swaby counterclaimed, alleging fraud and breach of the covenants.
- A 2012 jury awarded JAS/Swaby $67,000 for breach of the purchase agreement and $100,000 to BBS/Statons for breach of the covenant not to compete.
- JAS/Swaby argued Swaby personally should be dismissed from the counterclaim due to improper service of process.
- The trial court admitted several witness testimonies and parol/evidentiary items later deemed improper; prejudgment interest and certain post-trial questions were unresolved by the jury verdicts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Service of process on Swaby personally | BBS/Statons substantially complied | Swaby not personally served; insufficient | Swaby not properly served; dismissal proper |
| Fraud/deceit claim against JAS | Fraud claim viable; triable | Fraud/ deceit rejected by jury | Res judicata prevents relitigation; no further consideration of fraud warranted |
| Admission of improper witness/testimony about contract | Testimony admissible to show intent | Testimony improper; prejudicial | Court abused discretion admitting several categories of testimony (pre-contract statements, contract interpretation, extrinsic evidence) |
| Covenant not to compete — entity liability | Swaby breached covenant personally | Swaby not party to contract; cannot be liable | Swaby improperly named personally; issue should have been decided against JAS/BBS on the record; submit to jury against JAS only |
| Prejudgment interest calculation | Interest mandated on damages | No date chosen for loss; interest improper | Remand for prejudgment interest computation due to missing loss-date specification |
Key Cases Cited
- R.B.O. v. Priests of the Sacred Heart, 2011 S.D. 86 (S.D. 2011) (proper service of process governs personal jurisdiction for third-party claims)
- Wagner v. Truesdell, 574 N.W.2d 627 (S.D. 1998) (definition of substantial compliance with service statutes)
- Spade v. Branum, 643 N.W.2d 765 (S.D. 2002) (due process requires proper notice of proceedings)
- Black Hills Jewelry Mfg. Co. v. Felco Jewel Indus., Inc., 336 N.W.2d 153 (S.D. 1983) (res judicata and party-centered privity considerations)
- Equip. Serv. Prof’ls, Inc. v. Denowh, 693 N.W.2d 54 (S.D. 2005) (separate corporate identity; veil of corporate form)