#26447-rev & rem-GAS

2013 S.D. 41

                             IN THE SUPREME COURT
                                     OF THE
                            STATE OF SOUTH DAKOTA

                                    ****
VELOCITY INVESTMENTS, LLC,                   Plaintiff and Appellee,

      v.

DYBVIG INSTALLATIONS, INC.
and JILL R. DYBVIG and
DAVID J. DYBVIG, as
Personal Guarantors,                         Defendants and Appellants.

                                    ****

                   APPEAL FROM THE CIRCUIT COURT OF
                     THE SEVENTH JUDICIAL CIRCUIT
                     CUSTER COUNTY, SOUTH DAKOTA

                                   ****
                  THE HONORABLE MARY THORSTENSON
                        Retired Circuit Court Judge

                                    ****


ROBERT J. BREIT
DAVID L. EDWARDS of
Breit Law Office, PC
Sioux Falls, South Dakota                    Attorneys for plaintiff
                                             and appellee.

MARK F. MARSHALL of
Bangs, McCullen, Butler,
 Foye & Simmons, LLP
Rapid City, South Dakota                     Attorneys for defendants
                                             and appellants.

                                    ****
                                             CONSIDERED ON BRIEFS
                                             ON FEBRUARY 12, 2013

                                             OPINION FILED 06/05/13
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SEVERSON, Justice

[¶1.]         Dybvig Installations entered into an agreement with Wells Fargo for a

business line of credit, which eventually went into default. Velocity Investments,

the alleged successor in interest to Wells Fargo, filed suit to collect against Dybvig

Installations and Jill R. and David J. Dybvig as personal guarantors of the debt.

Velocity eventually filed a motion for summary judgment after the Dybvigs, acting

pro se, failed to respond to Velocity’s statement of material facts and requests for

admissions. The trial court granted the motion for summary judgment. We reverse

and remand.

                                  BACKGROUND

[¶2.]         Jill and David Dybvig owned a corporation named Dybvig

Installations, Inc. In December 2006, Dybvig Installations entered into an

agreement with Wells Fargo for a line of credit for the business. The original

amount of the line of credit was $25,000. The Dybvigs signed a document titled

“Business Direct Credit Application” with the subtitle “Agreement and Personal

Guarantee.” David signed the document with his name, followed by President,

Dybvig Installations. Jill signed the document with her name, followed by

Secretary, Dybvig Installations. The Dybvigs allege that when they signed the

document a Wells Fargo representative told them that they were not personally

guaranteeing the debt because it was a business line of credit. The Wells Fargo

employee allegedly told them that because the line of credit was for their business,

the Dybvigs should sign the document as officers of the corporation.




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[¶3.]        Dybvig Installations defaulted on the line of credit. On June 21, 2011,

Velocity Investments filed suit to collect $43,657.11 on the original $25,000 line of

credit without any supporting explanation or documentation. Velocity’s suit was

filed against Dybvig Installations and Jill and David Dybvig as personal guarantors

of the debt. The Dybvigs, then acting pro se, sent a response letter to Velocity dated

July 18, 2011, stating that their corporation was bankrupt and that they were not

personal guarantors for the business line of credit. Velocity treated this letter as an

answer to their complaint.

[¶4.]        On November 3, 2011, the Dybvigs sent another letter to Velocity. In

the letter, the Dybvigs again stated that they were told by a Wells Fargo employee

that they were signing for the corporation and not personally guaranteeing the loan.

The Dybvigs also stated that they spoke with an attorney and that they believed

that Velocity violated the Fair Debt Collection Practices Act by repeatedly calling

the Dybvigs. The Dybvigs requested a legible copy of the entire loan document and

the name of the Wells Fargo employee who provided the paperwork.

[¶5.]        Velocity served the Dybvigs with requests for admissions on February

25, 2012. The Dybvigs, still acting pro se, did not respond within the 30 days

required by statute. Thus, under SDCL 15-6-36(a), the requests for admissions

were deemed admitted. On April 3, 2012, Velocity moved for summary judgment

against Dybvig Installations and the Dybvigs. Velocity also served a statement of

undisputed material facts on the Dybvigs.

[¶6.]        The Dybvigs responded with a letter on May 9, 2012. The letter again

asserted that the Dybvigs did not personally guarantee the loan and that they had


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not received a legible copy of the “Business Direct Credit Application” document.

Further, the Dybvigs referenced the Fair Debt Collection Practices Act and

requested documentation and “validation” of the amount owed because they

disputed the amount of the loan.

[¶7.]        The trial court held a hearing on the motion for summary judgment on

May 17, 2012. The Dybvigs appeared pro se. The trial court granted Velocity’s

motion for summary judgment after finding that the Dybvigs did not raise any

dispute of material fact regarding their liability as guarantors, but a judgment was

not signed until June 28, 2012.

[¶8.]        Prior to the entry of judgment, the Dybvigs retained counsel, who

made an initial appearance on June 4, 2012. On June 4, 2012, Dybvigs moved for

relief from the judgment based on SDCL 15-6-60(b)(6), which allows relief for “[a]ny

other reason justifying relief from operation of the judgment.” Also on June 4, 2012,

the Dybvigs moved for leave to file answers to requests for admissions based on

SDCL 15-6-36(b), which authorizes the court to permit withdrawal or amendments

of admissions. The trial court heard arguments on both motions on June 28, 2012,

and found that because the Dybvigs failed to respond to the statement of

undisputed material facts, they no longer had a basis to seek relief from discovery

matters that preceded the motion for summary judgment. Further, the trial court

found that the Dybvigs did not show that exceptional circumstances existed and did

not meet their burden to show excusable neglect for relief from judgment. A

judgment was signed and filed for $43,657.11 plus $175.10 for Velocity’s costs on

June 28, 2012, nunc pro tunc to May 17, 2012.


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[¶9.]           The Dybvigs appeal. They argue that (1) the trial court abused its

discretion by denying Dybvigs’ motion for leave to answer requests for admissions,

(2) the trial court abused its discretion by denying Dybvigs’ motion for relief from

judgment, and (3) the trial court erred by granting Velocity’s motion for summary

judgment.

                               STANDARD OF REVIEW

[¶10.]          This Court views “motion[s] to permit late filing of [ ] answers to the

requests for admissions as tantamount to a motion for withdrawal or amendment of

the admissions.” Tank v. Munstedt, 504 N.W.2d 866, 868 (S.D. 1993). “A trial

court’s decision on a motion to withdraw admissions is reviewed under the abuse of

discretion standard of review.” Id. (citing American Auto. Ass’n v. AAA Legal Clinic,

930 F.2d 1117, 1119 (5th Cir. 1991) and Farr Man & Co., Inc. v. M/V ROZITA, 903

F.2d 871, 876 (1st Cir. 1990)). Our standard of review for summary judgment is

well settled:

                We must determine whether the moving party demonstrated the
                absence of any genuine issue of material fact and showed
                entitlement to judgment on the merits as a matter of law. The
                evidence must be viewed most favorably to the nonmoving party
                and reasonable doubts should be resolved against the moving
                party. The nonmoving party, however, must present specific
                facts showing that a genuine, material issue for trial exists. Our
                task on appeal is to determine only whether a genuine issue of
                material fact exists and whether the law was correctly applied.
                If there exists any basis which supports the ruling of the trial
                court, affirmance of a summary judgment is proper.

Jacobson v. Leisinger, 2008 S.D. 19, ¶ 24, 746 N.W.2d 739, 745 (quoting Cooper v.

James, 2001 S.D. 59, ¶ 6, 627 N.W.2d 784, 787).




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                                    DISCUSSION

[¶11.]       (1) Whether the trial court abused its discretion by denying the
             Dybvigs’ motion for leave to answer requests for admissions.

[¶12.]       A trial court may permit withdrawal or amendments of admissions

“when the presentation of the merits of the action will be subserved thereby and the

party who obtained the admission fails to satisfy the court that withdrawal or

amendment will prejudice that party in maintaining [the] action or defense on the

merits.” SDCL 15-6-36(b). See also AgFirst Farmers Co-op v. Diamond C Dairy,

LLC, 2013 S.D. 19, ¶¶ 24-25, 827 N.W.2d 843, 850 (requiring trial courts use the

two-part test to determine “whether to allow amendment or withdrawal of a party’s

admission”). We have previously expressed our “preference that matters be

resolved on their merits and not on technical violations of the discovery rules.”

Tank, 504 N.W.2d at 868. “‘Provision is made for withdrawal or amendment of an

admission. This provision emphasizes the importance of having the action resolved

on the merits, while at the same time assuring each party that justified reliance on

an admission in preparation for trial will not operate to his prejudice.’” Id. at 869

(quoting Farr Man & Co., Inc., 903 F.2d at 876).

[¶13.]       Just as in Tank, allowing the Dybvigs to answer the requests for

admissions would serve the presentation of the merits of this case because the

merits were not reached. See id. at 868. Because allowing the Dybvigs to answer

would serve the presentation of the merits of the case, Velocity needed to

demonstrate to the trial court that it would be prejudiced if the Dybvigs were

allowed to answer. In this case,



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             [t]he prejudice contemplated by the Rule is not simply that the
             party who initially obtained the admission will now have to
             convince the fact finder of its truth. Rather, it relates to the
             difficulty a party may face in proving its case, e.g., caused by the
             unavailability of key witnesses, because of the sudden need to
             obtain evidence with respect to the questions previously
             answered by the admissions.

Id. at 869 (quoting Farr Man & Co., Inc., 903 F.2d at 876). Velocity does not argue

that it would have difficulty proving its case caused by the withdrawal of

admissions or that the answer to requests for admissions would come too near a

trial date. Thus, Velocity fails to demonstrate the prejudice required by the statute.

Because the trial court did not reach the merits of the case and there was no

demonstration of prejudice as required by SDCL 15-6-36(b), the trial court abused

its discretion in denying the Dybvigs’ motion to answer the requests for admissions.

[¶14.]       (2) Whether the trial court erred in granting Velocity’s motion
             for summary judgment.

[¶15.]        The record reveals that there are a number of factual questions and

unresolved legal issues related to the key document in this litigation. The Dybvigs

signed the “Business Direct Credit Application,” and included after their signatures

designations as officers of Dybvig Installations. Outside of the signatures of the

Dybvigs, the title of the document, and the notation that $25,000 of credit was

requested, the body of the “Business Direct Credit Application” copy presented by

Velocity is totally illegible and incomprehensible. Velocity seeks a judgment of

$43,657.11 with no original document, no explanation as to the calculation of the

money due, no documentation of the discrepancy between the original line of credit

and the judgment, no assignment from the original party, Wells Fargo, and no

showing as to why Velocity is a proper party to this suit. It is impossible to read the

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copy of the document upon which this litigation is based. Because we cannot read

the document, we cannot determine from the language what the Dybvigs allegedly

guaranteed. The document also contains a blacked out square next to the Dybvigs

names in the heading, and we cannot decipher what the square blacks out. The

document may as well be written in hieroglyphics. Ultimately, we are unable to

read the key document in this litigation. The record substantiates that the Dybvigs

repeatedly requested a legible copy of the document—none was produced and none

was before the trial court. Further, there are genuine issues of material fact and

law regarding the amount of debt and what the Dybvigs agreed to in signing the

“Business Direct Credit Application.” There is also an issue of law and fact

regarding whether the Dybvigs’ signatures were as corporate officers, rather than

personal guarantors.

[¶16.]       From our review of the record, it is clear that the trial court granted

summary judgment solely based upon the Dybvigs’ failure to respond to the request

for admissions supporting a statement of undisputed facts. Since we determined

that the trial court erred in denying the Dybvigs’ motion to answer the request for

admissions, genuine issues of material fact still exist. Because Velocity did not

prove entitlement to judgment as a matter of law, the motion for summary

judgment should have been denied. Based on our reversal of the summary

judgment, we need not address the motion for relief under SDCL 15-6-60(b)(6).

                                  CONCLUSION

[¶17.]       The trial court abused its discretion by denying the Dybvigs’ motion for

leave to answer requests for admissions and erred in granting Velocity’s motion for


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summary judgment. Based on this disposition, we need not address the Dybvigs’

request for relief under SDCL 15-6-60(b)(6). We reverse and remand.

[¶18.]      GILBERTSON, Chief Justice, and KONENKAMP, ZINTER and

WILBUR, Justices, concur.




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