Velocity Investments, LLC v. Dybvig Installations, Inc.

#26447-rev & rem-GAS
2013 S.D. 41IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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VELOCITY INVESTMENTS, LLC, Plaintiff and Appellee,
v.
DYBVIG INSTALLATIONS, INC.
and JILL R. DYBVIG and
DAVID J. DYBVIG, as
Personal Guarantors, Defendants and Appellants.
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APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
CUSTER COUNTY, SOUTH DAKOTA
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THE HONORABLE MARY THORSTENSON
Retired Circuit Court Judge
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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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