GRANITE BUICK GMC, INC., f/k/а McKie Buick GMC, Inc., Plaintiff and Appellant, v. Adam RAY and Gateway Autoplex, LLC, Defendants and Appellees. McKie Ford Lincoln, Inc., Plaintiff and Appellant, v. Scott Hanna and Gateway Autoplex, LLC, Defendants and Appellees.
No. 26842
Supreme Court of South Dakota
Argued Oct. 6, 2014. Decided Nov. 5, 2014.
2014 S.D. 78, 855 N.W.2d 799
Rogеr A. Tellinghuisen, Michael V. Wheeler, DeMersseman, Jensen, Tellinghuisen, Stanton & Huffman, LLP, Rapid City, South Dakota, Attorneys for defendants and appellees.
[¶ 1.] Adam Ray worked for Granite Buick GMC (Granite Buick), and Scott Hanna worked for McKie Ford Lincoln (McKie Ford). Ray and Hanna signed noncompete agreements during the course of their employments. When the two started their own automobile dealership, Granite Buick and McKie Ford moved for injunctions to enforce the agreements. The cases were consolidated, and the circuit court bifurcated the proceedings. The court impaneled a jury to determine Ray‘s and Hanna‘s affirmative defenses, and it ruled that it would determine the right to injunctive relief after the jury trial. The jury found for Ray and Hanna on several of their defenses. In accordance with the jury verdict, the circuit court denied injunctive relief. Granite Buick and McKie Ford appeal. We сonclude that the circuit court erred in utilizing a binding jury to determine equitable defenses without the consent of the parties. We reverse and remand for the circuit court‘s entry of findings of fact and conclusions of law on all claims and defenses.
Facts and Procedural History
[¶ 2.] Granite Buick hired Adam Ray, and McKie Ford hired Scott Hanna аs automobile salesmen.1 Both Ray and Hanna signed materially identical noncompete agreements during the course of their employments. Ray and Hanna later terminated their respective employments to start Gateway Autoplex, a used car dealership. Ray asserted that his noncompete agreement was unenforceable because of statements Granite Buick representatives made to get him to sign the agreement.2 Ray pleaded the defenses of fraud in the inducement, equitable estoppel, promissory estoppel, and waiver. Hanna assertеd that his agreement was unenforceable because of representations the owner of McKie Ford made after Hanna informed the owner that Hanna was leaving.3 Hanna pleaded the defenses of waiver, promissory estoppel, and equitable estoppel.
[¶ 3.] Granite Buick аnd McKie Ford subsequently sued Ray, Hanna, and Gateway Autoplex, seeking preliminary and permanent injunctions. At an evidentiary hearing on the requests for preliminary injunctions, Granite Buick and McKie
[¶ 4.] The jury found in favor of Ray on the defenses of fraud in the inducement, promissory estoppel, equitable estoppel, and waiver. The jury found in favor of Hanna on the defenses of promissory estoppel and waiver. In accordance with the jury‘s findings, the court denied both Granite Buick‘s and McKie Ford‘s requests for injunctions.
[¶ 5.] McKie Ford and Granite Buick appeal. They contend that the circuit court erred in allowing a jury trial on Ray‘s and Hanna‘s affirmative defenses. They also contend that the court erred in denying Granite Buick‘s and McKie Ford‘s motions for judgment as a matter of law on Ray‘s and Hanna‘s defenses. They finally contend that the court erred in awarding Ray and Hanna disbursements.
Decision
[¶ 6.] Granite Buick and McKie Ford point out that they only sought equitable relief; i.e. to enjoin Ray and Hanna from engaging in a competing business. They also point out that Ray and Hanna only sought equitable relief; i.e. nonenforcement of the agreements. Granite Buick and McKie Ford argue that because the only relief sought was equitable, and because they did not consent to a binding jury trial, the circuit court improperly allowed a jury to determine this case by deciding equitable defenses. Ray and Hanna resрond that they had a right to a trial by jury because their defenses involved fraud. They contend that fraud implicates an action at law because fraud in contractual relations is prohibited by a statute. See
[¶ 7.] “Article VI, Section 6 of the South Dakota Constitution guarantees a right to a jury trial in all cases at law.” Mundhenke v. Holm, 2010 S.D. 67, ¶ 14, 787 N.W.2d 302, 305-06. Thus, this “right ... does not exist for all civil cases.” Id. ¶ 14, 787 N.W.2d at 306 (quoting First Nat‘l Bank of Philip v. Temple, 2002 S.D. 36, ¶ 10, 642 N.W.2d 197, 201). If the pleadings request equitable relief, “а jury trial is a matter for the trial court‘s discretion.” Id. (quoting First Nat‘l Bank of Philip, 2002 S.D. 36, ¶ 10, 642 N.W.2d at 201). But unless the parties agree to a binding jury in an equitable action, the jury verdict is advisory. “In all actions not triable of right by a jury the court upon motion or of its own initiative may try any issue with an advisory jury, or the court, with the consent of both parties, may order a trial with a jury whose verdict has the same effect as if trial by jury had been a matter of right.”
[¶ 8.] In this case, the circuit court treated the jury‘s verdict as binding. However, the parties did not agree to submit the matter to a binding jury as required by
[¶ 9.] We look “to the common law” to determine whether a claim is an action at law triable to a jury as a matter of right or whether it is an equitable action for trial to the court. Grigsby v. Larson, 24 S.D. 628, 124 N.W. 856, 858 (1910).4 The question is whether the “subject” of the action “is the type of case in which [the movant] would have been entitled to a jury trial in the common-law courts of [territorial South Dakota].” State v. One 1969 Blue Pontiac Firebird, 2007 S.D. 63, ¶ 18, 737 N.W.2d 271, 276 (quoting State v. One 1990 Honda Accord, 154 N.J. 373, 712 A.2d 1148, 1150-51 (1998)).
[¶ 10.] In this case, all claims and defenses were equitable. See Metro. Life Ins. Co. v. Jensen, 69 S.D. 225, 230, 9 N.W.2d 140, 142 (1943) (“Injunction is distinctly an equitable remedy.“); Deckert v. Independence Shares Corp., 311 U.S. 282, 289, 61 S.Ct. 229, 233, 85 L.Ed. 189 (1940) (“That a suit to rescind a contract induced by fraud ... may be maintained in equity ... is well established.“);5 Vander Heide v. Boke Ranch, Inc., 2007 S.D. 69, ¶ 27, 736 N.W.2d 824, 833 (promissory estoppel); Nist v. Nist, 2006 S.D. 67, ¶ 15, 720 N.W.2d 87, 89 (waiver); Bonde v. Boland, 2001 S.D. 98, ¶ 24, 631 N.W.2d 924, 928 (estoppel). See generally Dan B. Dobbs, Handbook on the Law of Remedies: Damages-Equity-Restitution § 2.3, 41-44, § 4.8, 293-94, § 9.5, 638 (1973) (discussing the equitable remedies of fraud in the inducement, еstoppel, and waiver). Because the parties only sought equitable claims and defenses, Ray and Hanna had no right to a binding jury trial under South Dakota
[¶ 11.] Ray and Hanna, however, argue their defenses raised “questions of fact,” and therefore, they were entitled to a jury trial as a matter of right. Ray and Hanna rely on several cases containing language stating that various equitable defenses raised “question[s] of fact for the jury.” See Poeppel v. Lester, 2013 S.D. 17, ¶ 20, 827 N.W.2d 580, 585; L.A. Tucker Truck Lines v. Balt. Am. Ins. Co. of N.Y., 97 F.2d 801, 806 (8th Cir. 1938); Schultz v. Heritage Mut. Ins. Co., 902 F.Supp. 1051, 1057 (D.S.D. 1995); Ehresmann v. Muth, 2008 S.D. 103, ¶ 20, 757 N.W.2d 402, 406; Garrett v. BankWest, Inc., 459 N.W.2d 833, 848 (S.D. 1990); Winans v. Light, 52 S.D. 359, 217 N.W. 635, 637 (1928). Although these cases contain such language, the cases involved monetary damages or legal issues requiring juries.6 Ultimately, Ray and Hanna fail to recognize that disputed questions of fact can be involved in either legal or equitable actions “depend[ing] upon the context in which they arise.” See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 516, 79 S.Ct. 948, 960, 3 L.Ed.2d 988 (1959) (Stewart, J. dissenting). Therefore, the mere existence of a dispute of fact does not dictate whether a claim is equitable or is one at law to which the right оf jury trial attaches.
[¶ 12.] Similarly, Ray‘s invocation of fraud does not determine whether the claim is an action at law or one in equity. Although fraud often gives rise to actions at law, the factual dispute concerning fraud does not, by itself, make the claim an action at law. In Grigsby, 124 N.W. at 858-59, we concluded that an action to determine adverse claims to real estate was on the equity rather than law side of the court even though the conveyance of land at issue was made for the purpose of defrauding creditors.
[¶ 13.] Ray and Hanna also argue that Mundhenke, 2010 S.D. 67, 787 N.W.2d 302, supports the right to a jury trial on equitable defenses. In that case, Mundhenke sought “an аccounting, dissociation, and dissolution of a business he claimed was operated as a partnership with ... Holm.” Id. ¶ 1, 787 N.W.2d at 303. Holm responded that the partnership did not exist and a resolution of that issue involved a request for legal relief to which the right to a jury trial existed. Id. This Court did state that there was a right to jury trial beсause Holm‘s request was for a determination of legal rights under statute, which implicated an action at law. Id. ¶ 18, 787 N.W.2d at 307. But we did not hold that the analysis is simply dependent on the existence of a statute (or a dispute of fact). The parties in Mundhenke essentially agreed that the determination of the existence of a valid partnership “implicated an action at law,” and therefore, we did not decide the issue. Id. We specifically noted: “Neither party argues otherwise in this appeal. Therefore, we apply the law argued by the parties and express no opinion on the merits of this issue.” Id. ¶ 18 n.*, 787 N.W.2d at 307 n.*. Mundhenke is not controlling.
[¶ 14.] In this case, all parties sought equitable relief. Granite Buick and McKie Ford requested an injunction to enjoin its former employees from starting a competing business. Ray‘s and Hanna‘s defenses only raised an equitable request to prevent
[¶ 15.] Nevertheless, “[a] circuit court has broad discretion in an equitable action to determine whether to grant or deny a jury trial.” Id. ¶ 11, 787 N.W.2d at 305 (citing Fox v. Burden, 1999 S.D. 154, ¶ 32, 603 N.W.2d 916, 924). But, as previously noted, the jury is advisory. See supra ¶ 7. It is “merely advisory to the court, and may be either adopted, or set aside, and other findings made by the court in opposition thereto.” F. Meyer Boot & Shoe Co. v. C. Shenkberg Co., 11 S.D. 620, 80 N.W. 126, 129 (1899). Because jury findings on equitable defenses are advisory, “responsibility for the decision-rendering process remains with the trial judge....” See 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2335, 354-55 (3d ed.2008) (analyzing the analogous Federal Rule of Civil Procedure 39(c)). And “[t]he court must prepare the findings of fact and the conсlusions of law as it must in any other nonjury case.” Id. at 355;
[¶ 16.] The circuit court treated the jury verdict as binding. The court did not enter findings of fact and conclusions of law adopting, setting aside, or rendering its own decision on the verdict. Because therе are no findings of fact and conclusions of law by the circuit court to review in this appeal, we are unable to review the court‘s denial of Granite Buick‘s and McKie Ford‘s motions for judgment as a matter of law. Similarly, until the court enters its findings and conclusions, we cannot determine prevailing party stаtus and the right to the taxation of disbursements. When a case is “[im]properly submitted to a jury for a binding verdict,” the verdict must be considered advisory and the “case should be remanded to the [circuit] court for findings of fact and conclusions of law.” Black v. Gardner, 320 N.W.2d 153, 156 (S.D. 1982). We reverse and remand for the entry of findings of fact and conclusions of law on the equitable claims and defenses relating to the request for injunctive relief.
[¶ 17.] GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON, and WILBUR, Justices, concur.
Notes
Troy Claymore said, if you make a lateral move, I‘m going to enforce [the agreement]. I want to stop it. If you make a lateral move from here to say Chevy. But if you ever get the chance to better yourself, yоur family, and I wouldn‘t hold you to it is what he said.
Ray also talked with others, including his supervisor, Darin Rittenour, about the agreement. Rittenour told Ray, “You don‘t have to worry about Troy [Claymore], he is a man of his word.” Ray testified he relied “a hundred percent” on what Claymore had told him at the meeting and what Rittenour told him about Claymore. Ray eventually signed the agreement.