LORETTA B. MEALY, Individually and as Personal Representative of the ESTATE OF TERRENCE L. MEALY, and INVESTMENT ENTERPRISES, INC., Plaintiffs and Appellants,
BRUCE PRINS and CORRINE PRINS, and PRAIRIE SKY GUEST & GAME RANCH, LLC, Defendants and Appellees.
JANUARY 8, 2019
FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT ROBERTS
COUNTY, SOUTH DAKOTA THE HONORABLE JON S. FLEMMER Judge
RASMUSSEN JULIE DVORAK of Siegel, Barnett and Schutz, LLP
Aberdeen, South Dakota Attorneys for plaintiffs and
SCHOENBECK JOSEPH ERICKSON of Schoenbeck Law, P.C. Watertown,
South Dakota, SHAWN M. NICHOLS of Cadwell, Sanford, Deibert
& Garry, LLP Sioux Falls, South Dakota Attorneys for
defendants and appellees.
Loretta and Terrence Mealy and their corporation, Investment
Enterprises, Inc., loaned Bruce and Corrine Prins nearly $1.2
million to operate Prairie Sky Guest & Game Ranch, LLC
(collectively the Prins). Fifty-five promissory notes secured
the loans. In 2015, Loretta, the Estate of Terrance Mealy,
and Investment Enterprises, Inc. (collectively the Mealys)
sued the Prins for breach of contract, unjust enrichment, and
conversion. The Prins filed a counterclaim for relief
including claims for conversion and unjust enrichment. In
August 2015, the Prins moved for partial summary judgment,
arguing that a portion of the Mealys' claims were barred
by the statute of limitations and that the mortgage was
unenforceable. The circuit court granted the Prins summary
judgment in part, dismissing forty-eight of the fifty-five
promissory notes as time-barred and concluding that the
related mortgage did not secure a valid debt and was
The case preceded to a jury trial. With respect to the seven
promissory notes not barred by the statute of limitations,
the jury returned a verdict for the Mealys on their breach of
contract claim and determined the date on which prejudgment
interest should accrue. The jury rejected the Mealys'
claim for conversion and instead awarded the Prins $135, 000
for a portion of their conversion counterclaim. With respect
to the parties competing claims for unjust enrichment, the
jury rendered an advisory verdict for the Mealys, awarding
them $135, 000. The circuit court adopted this recommendation
and entered a judgment consistent with the verdicts. The
Mealys appeal, alleging several errors for our review. The
Prins, by notice of review, challenge the advisory jury's
award to the Mealys on their unjust enrichment claim. We
affirm in part and reverse in part.
and Procedural History
In the late 1990s, the Prins presented a business plan to
Terrance Mealy, an attorney from Iowa, to open a hunting
lodge named Prairie Sky Guest and Game Ranch (Prairie Sky) on
the Mealys' property in Marshall County. Between 1999 and
2008, the Prins borrowed $1, 187, 000 from the Mealys,
evidenced by fifty-five promissory notes.
On September 21, 2000, the parties signed an open-ended
mortgage pledging the Prins's property as additional
security. The mortgage listed the Mealys' business,
Investment Enterprises, as the exclusive mortgagee and
enumerated a single debt-a promissory note for $325,
000-contained within a recital clause. The mortgage did not
list any other notes, but it did include a broad future
advances clause. The parties executed thirty of the
fifty-five notes after signing the mortgage, none of which
involved the sum of $325, 000 reflected in the mortgage's
recital clause. All six notes listing Investment Enterprises
as creditor were executed after the mortgage.
At some point in 2000 or 2001, the Mealys and the Prins began
acquiring buffalo together. Neither party completed a
detailed summary of yearly ownership percentages until after
the lawsuit was filed. However, financial documents and
correspondence between Bruce Prins and Terrance Mealy in
2004, 2007 through 2008, and 2009 indicate that during those
years, the parties believed the Mealys owned 71% to 75 % of
the herd while the Prins owned the remaining portion.
In 2008, the Mealys experienced financial difficulty and
stopped loaning money to the Prins. Accordingly, the Prins
applied for a loan from Dacotah Bank in Sisseton, South
Dakota. On September 21, 2009, Dacotah Bank, the Prins, and
the Mealys (acting on behalf of Investment Enterprises)
signed a subordination agreement that modified the lien
priorities, granting Dacotah Bank's loan superiority over
Investment Enterprise's mortgage. The agreement contained
a recital specifically listing a $325, 000 promissory note as
the debt secured by the mortgage. It did not mention any of
the fifty-five promissory notes.
The Prins failed to make any payments on the promissory
notes; however, the Mealys did not immediately attempt to
enforce the debt. In early 2011, Terrence died of cancer.
Several years later, on June 2, 2014, Bruce Prins met with
two bankers (Dan Stein and Jonathan Holthe) acting on behalf
of the Mealys to discuss the debt. Both submitted affidavits
attesting that during the meeting, Bruce admitted he owed the
Mealys money and promised to pay the debt. In February 2015,
Patrick, the Mealys' son, and Mark Motz, a Prairie Sky
hunting guide, met with Bruce. Patrick and Motz each executed
affidavits stating that Bruce orally promised to transfer his
buffalo, the personal property in the lodge, and the Prairie
Sky name and business to the Mealys as partial payment on the
debt. Patrick indicated that they valued these assets at
$130, 000. No evidence suggests this transfer occurred.
The Mealys filed a complaint on March 3, 2015, alleging
breach of contract and the conversion of buffalo. They also
brought an equitable claim for unjust enrichment and
requested imposition of a constructive trust, accounting, and
injunctive relief. The Mealys did not attempt to foreclose on
the mortgage. The Prins counterclaimed for conversion of
personal and business property, misappropriation of a
business opportunity, unjust enrichment, and trademark
infringement. After litigation began, Bruce Prins created a
document estimating his ownership in the buffalo herd from
2000 to 2015. As of 2014, Bruce believed he owned
approximately 64% of the herd while the Mealys owned the
In August 2015, the Prins moved for partial summary judgment,
asserting that many of the promissory notes were time-barred.
They also attacked the mortgage's validity for failing to
secure a debt because it did not list any of the promissory
notes. The circuit court granted their motion in part,
finding forty-eight of the fifty-five promissory notes
time-barred by the statute of limitations. The court also
concluded that the mortgage was void and unenforceable. It
was undisputed that the remaining seven notes, all of which
were demand notes, fell within a longer statutory period and
In preparation for trial, the Prins deposed the Mealys'
buffalo expert, Tim Fraiser, and then moved to exclude his
opinion regarding the ownership percentages of the herd for
failing to qualify as an expert on this topic. The circuit
court granted the motion, excluding Fraiser's opinion on
that subject because he lacked specialized accounting
knowledge. The Mealys did not include Fraiser on
their witness list.
A jury trial on the remaining legal and equitable claims
commenced in November 2017. Fraiser did not take the stand at
trial to discuss the ownership of the buffalo herd, and the
Mealys did not hire another forensic accountant to review the
numbers. Patrick and Loretta both responded to questions
elicited by the Prins on cross-examination regarding whether
a forensic accountant had evaluated the number of buffalo in
the herd. Loretta testified that she did not hire a forensic
accountant to assess ownership of the herd. Patrick testified
about a "bison consultant" they hired from Texas.
The Prins then requested a missing witness instruction
because they believed Patrick and Loretta each alluded to
opinions of Tim Fraiser, a witness that did not testify at
trial. Over the Mealys' objection, the circuit court gave
At the conclusion of trial, both parties requested special
verdict forms. The Prins's form required the jury to
calculate prejudgment interest on the demand notes if they
rendered a verdict for the Mealys. The Mealys' form, in
contrast, did not address prejudgment interest because they
believed the terms of the notes controlled the issue. The
circuit court gave the jury the Prins's verdict form.
The jury returned a verdict for the Mealys in the sum of
$196, 000 on their breach of contract claim for the seven
promissory notes not barred by the statute of limitations and
determined the date on which prejudgment interest should
accrue. The jury rejected the Mealys' conversion claim
regarding the buffalo and instead awarded the Prins $135, 000
for their converted business property. On the remaining
equitable issue, the jury rendered an advisory verdict. It
awarded the Mealys $135, 000 for unjust enrichment, and the
circuit court adopted the recommendation. Following the
verdict, the Prins satisfied the judgment in full by paying
the principal and interest as calculated from the dates set
by the jury on the seven enforceable promissory notes.
The Mealys appeal, raising several issues which we restate as
1. Whether the circuit court erred by granting the
Prins's motion for partial summary judgment.
2. Whether the circuit court erred by giving the jury a
missing witness instruction.
3. Whether the circuit court erred by using the Prins's
proposed special verdict form.
Prins, by notice of review, contend that the circuit court
erred by adopting the advisory jury's verdict awarding
the Mealys $135, 000 for unjust enrichment because the jury
should not have been allowed to consider the forty-eight
time-barred promissory notes when determining the Mealys'
unjust enrichment claim.
Whether the circuit court erred by granting the
Prins's motion for partial summary judgment.
The Mealys challenge the circuit court's order granting
the Prins's motion for partial summary judgment. The
court, applying South Dakota law, concluded that forty-eight
of the notes were barred by the statute of limitations and no
rule applied to extend the statutory period. It also
concluded the mortgage was unenforceable because it failed to
secure a valid debt.
When summary judgment is entered based upon the statute of
limitations, we engage in a burden-shifting analysis to
determine whether judgment as a matter of law is proper.
See Strassburg v. Citizens State Bank, 1998 S.D. 72,
¶ 5, 581 N.W.2d 510, 513. If the defendant
"presumptively establishes the defense by showing the
case was brought beyond the statutory period, the burden then
shifts to the plaintiff to establish the existence of
material facts in avoidance of the statute of
limitations[.]" Id. "Generally, a statute
of limitations question is left for the jury; however,
deciding what constitutes accrual of a cause of action is a
question of law and reviewed de novo." Rodriguez v.
Miles, 2011 S.D. 29, ¶ 7, 799 N.W.2d 722, 725.
Both parties agree that despite the choice of law provision
in the mortgage, South Dakota law applies when assessing the
enforceability of the promissory notes. Of the forty-eight
notes involved, forty-five are "time notes" and
three are "demand notes." The statute of limitations
for a time note is six years. SDCL 57A-3-118(a). Demand
notes, in contrast, fall under a ten-year statute of
limitations if no demand for payment is made or the obligor
fails to pay interest or principal for ten continuous years.
SDCL 57A-3-118(b). The statute of limitations ran on the time
notes between April 29, 2005 and December 21, 2012, and on
the demand notes between April 16, 2012 and December 30,
2014. The Mealys filed their lawsuit March 3, 2015, well
after expiration of all forty-eight notes. Once the Prins
presumptively established that the forty-eight promissory
notes were beyond the statutory period, the Mealys were
obligated to show that genuine issues of material fact
existed concerning the running of the statute of limitations.
The Mealys argue that the circuit court erred in failing to
recognize that the 2009 subordination agreement, which
references the mortgage but not the notes, revived the
statute of limitations on the promissory notes by
acknowledgement. Alternatively, the Mealys argue that the
Prins's post-default conduct created questions of fact