#29395-r-SRJ

2021 S.D. 40

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

SMITH ANGUS RANCH, INC. (SAR), Plaintiff and Appellee,

v.

TRAVIS HURST, as an alleged

Director of SAR, and as

an Individual, Defendant, Third-Party

Plaintiff and Appellant,

v.

CRAIG SMITH and LANCE SMITH, Third-Party Defendants.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE FOURTH JUDICIAL CIRCUIT

HARDING COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE GORDON D. SWANSON

Retired Judge

* * * *

MICHAEL K. SABERS

TRAVIS B. JONES of

Clayborne, Loos & Sabers, LLP

Rapid City, South Dakota Attorneys for plaintiff and 

appellee.

MATTHEW E. NAASZ

DAVID LUST of

Gunderson, Palmer, Nelson

 & Ashmore, LLP

Rapid City, South Dakota Attorneys for defendant, thirdparty plaintiff and appellant.

* * * *

ARGUED

APRIL 27, 2021

OPINION FILED 07/14/21
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JENSEN, Chief Justice

[¶1.] Smith Angus Ranch Inc. (SAR), a South Dakota corporation, brought 

an action alleging Travis Hurst (Travis) wrongfully acquired SAR assets and made 

improper purchases using SAR funds while serving as a director and officer of SAR. 

The complaint alleged breach of fiduciary duty and self-dealing, among other 

claims. The court granted SAR’s motion for partial summary judgment on the 

claims for breach of fiduciary duty and self-dealing, after prohibiting Travis from 

presenting extrinsic oral evidence to show he was authorized to carry out the 

contested transactions. We granted Travis’ petition for an intermediate appeal of 

the circuit court’s ruling. We now reverse and remand.

Facts and Procedural History

[¶2.] Calvin and Dee Smith operated a family ranch in Jones County. They 

had three children: Lance, Craig, and Julie. Beginning in 1994, Julie and her 

husband Travis (the Hursts) began working with Calvin and Dee on the Jones 

County ranch. They did not receive a salary for their labor. In 2000, Calvin and 

Dee sold their Jones County ranch and bought a ranch in Harding County. The 

Hursts also relocated their family to Harding County to work on the ranch with 

Calvin and Dee. Lance and Craig had left the family ranching business prior to 

Calvin and Dee’s purchase of the Harding County ranch.

[¶3.] Calvin and Dee incorporated the Harding County ranching operation 

as SAR and were SAR’s initial shareholders, officers, and directors. Travis was 

added as a signatory on SAR’s checking account at the time of incorporation and 
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made purchases on the account over the years. When Calvin died in 2008, Dee 

became the sole shareholder, director, and officer of SAR.

[¶4.] In 2013, Dee began treatment for cancer, which reduced her time at 

the ranch. She filed an Amended Annual Report with the South Dakota Secretary 

of State adding Travis as a director and vice president of SAR. Travis testified that 

Dee made these changes so he could sell SAR cattle at local sale barns, but the 

amendment did not alter “the operation of the ranch . . . in any meaningful way.” 

Travis claimed he continued to write checks drawn on SAR’s “checking account as 

needed, and as directed by Dee, to make ranch related purchases” just as he had 

before he became a director and officer.

[¶5.] While serving as a director and officer, Travis wrote checks on SAR’s 

account to purchase a vehicle for his son, a vehicle for himself, fencing supplies for 

land he owned, and other supplies associated with raising livestock that he owned 

personally. Travis claimed that Dee orally authorized each of these transactions. 

Travis also presented the depositions of Lance and Craig, in which they admitted 

that Dee had purchased vehicles for their children.

[¶6.] In 2015, Dee began transferring both personal assets and SAR assets 

to the Hursts. She sold 6,000 acres of ranch land, which she owned individually, to 

the Hursts via a contract for deed. Dee also transferred SAR vehicles to Travis. 

After purchasing the ranch land, Travis claimed that, “under Dee’s direction,” he 

and Julie assumed ownership of half of the 2015 SAR calf crop and branded them 

with their personal brand. Travis claimed Dee had agreed to pay him and Julie the 

calves as rent for allowing SAR livestock to graze on the ranch land that Dee had 
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recently sold to them. Travis claimed that Dee also gifted them the other half of the 

2015 calf crop and instructed them to place their brand on the calves.

[¶7.] Dee executed a will on April 3, 2015, in which she forgave all 

outstanding principal and interest payments that the Hursts owed for the ranch 

land at the time of her death. The will stated: “I am aware that my sons may not be 

happy with the provisions I have made . . . . [H]owever I ask them to honor my 

wishes . . . .” The will bequeathed her shares in SAR to Lance and Craig. In May 

2015, Dee wrote separate $100,000 checks to Lance and Craig that stated 

“inheritance” or “inheritance share” on the memo line. Dee suffered a stroke several 

months later and moved to a nursing home. She resided there for a week until she 

passed away on October 24, 2015.

[¶8.] SAR was dissolved in September 2016. On September 4, 2018, Lance 

and Craig caused SAR to file a complaint against Travis, which alleged breach of 

fiduciary duty, self-dealing, usurpation of corporate opportunity, fraud, and 

conversion. SAR’s corporate documents are not available, but the parties agreed 

that these documents did not grant Travis the explicit authority to self-deal.

[¶9.] On July 21, 2020, SAR moved for partial summary judgment on the 

counts for breach of fiduciary duty and self-dealing. SAR argued that Travis 

engaged in self-dealing by taking ownership of SAR cattle and by using SAR funds 

to purchase vehicles, fencing, and livestock supplies for himself and his family. 

SAR argued “[t]hat no written authorization existed to justify self-dealing and 

Defendant Director[ Travis’] attempt to utilize ‘oral’ authorization [from Dee] fails 

as a matter of law.” In support, SAR cited Estate of Stoebner v. Huether, in which 
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this Court applied “a bright-line rule that no oral extrinsic evidence may be 

introduced to raise a factual issue as to whether an attorney-in-fact was authorized 

to self-deal under a power of attorney.” 2019 S.D. 58, ¶ 23, 935 N.W.2d 262, 268. 

SAR argued the bright-line rule applies to all fiduciaries, including a corporate 

director or officer. As such, SAR claimed that Travis could not testify Dee 

authorized the transactions at issue.

[¶10.] Travis argued that he did not breach his fiduciary duties to SAR 

because Dee “was singularly in charge of corporate . . . decisions” and she instructed 

him to carry out each transaction. He argued that the Stoebner rule is limited to 

the fiduciary obligations of an attorney-in-fact arising from a power of attorney 

(POA). Further, he claimed that his testimony was relevant and generated a 

genuine issue of material fact concerning whether he breached his fiduciary duties 

under South Dakota’s corporate statutes.

[¶11.] The circuit court granted SAR’s motion for partial summary judgment 

on the claims for breach of fiduciary duty and self-dealing. The court recognized 

that Travis’ testimony and other evidence may support his claim that Dee 

authorized the activity at issue. However, the court extended and applied the 

bright-line rule from Stoebner to corporate directors and officers, holding Travis’ 

testimony that Dee had authorized the transactions was inadmissible. After 

excluding Travis’ testimony, the court held it was undisputed that Travis used SAR 

assets to obtain items for his personal benefit.

[¶12.] Travis petitioned for intermediate appeal, which this Court granted. 

He claims the circuit court erred by applying the rule in Stoebner to exclude 
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extrinsic oral evidence that the transactions were authorized or approved and 

thereby erred in granting SAR’s motion for partial summary judgment.

Analysis and Decision

[¶13.] “We review a circuit court’s entry of summary judgment under the de 

novo standard of review.” Stoebner, 2019 S.D. 58, ¶ 16, 935 N.W.2d at 266. Under 

de novo review, “[w]e give no deference to the circuit court’s decision[.] Our task on 

appeal is to determine only whether a genuine issue of material fact exists and 

whether the law was correctly applied.” Id. (alteration in original) (citations 

omitted).

[¶14.] “The existence and scope of a fiduciary duty are questions of law. 

Whether a breach of a fiduciary duty occurred, however, is a question of fact.” 

Chem-Age Indus., Inc. v. Glover, 2002 S.D. 122, ¶ 37, 652 N.W.2d 756, 772. “South 

Dakota law reflects the traditional view that fiduciary duties are not inherent in 

normal arm’s-length business relationships, and arise only when one undertakes to 

act primarily for another’s benefit.” Dinsmore v. Piper Jaffray, Inc., 1999 S.D. 56, ¶ 

20, 593 N.W.2d 41, 47. Corporate officers are fiduciaries. See SDCL 55-7-2(2).

[¶15.] Travis was an officer and director of SAR when he engaged in alleged 

acts of self-dealing, and Travis does not contest SAR’s claim that he was acting as a 

corporate fiduciary when he engaged in these transactions. Further, Travis worked 

with Dee on closely-held family ranches for over two decades prior to this litigation 

and regularly made purchases on SAR’s behalf since its incorporation. Travis also 

conceded that his activities on behalf of SAR increased after Calvin’s death in 2008 

and Dee’s cancer diagnosis in 2013. Therefore, for the purpose of considering the 
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summary judgment motion, we conclude that Travis was acting in a fiduciary 

capacity when the activity at issue occurred.

[¶16.] As a general rule, a fiduciary may not engage in self-dealing. See In re 

Estate of Stevenson, 2000 S.D. 24, ¶ 11, 605 N.W.2d 818, 821 (discussing trustees). 

“[F]iduciar[ies] must act with utmost good faith and avoid any act of self-dealing 

that places [their] personal interest in conflict with [their] obligations to the 

beneficiaries.” Id. ¶ 9. However, in certain cases, “our statutes set forth specific 

exceptions to this general rule.” Id. ¶ 11. See, e.g., SDCL 55-2-3 (governing 

trustees); SDCL 47-1A-861.1 (governing corporate officers).

[¶17.] We have “held that a power of attorney must be strictly construed 

. . . .” Bienash v. Moller, 2006 S.D. 78, ¶ 13, 721 N.W.2d 431, 435. Relying on the 

general prohibition against self-dealing and our rule that POAs must be strictly 

constructed, this Court has held that “if the power to self-deal is not specifically 

articulated in the power of attorney, that power does not exist.” Id. ¶ 14. “As a 

corollary to this [] rule,” in Bienash we “adopt[ed] a bright-line rule that no oral 

extrinsic evidence will be admitted to raise a factual issue” concerning a principal’s 

intent to allow self-dealing by an attorney-in-fact. Id. ¶¶ 23-24.

[¶18.] In adopting this rule, the Court considered the decisions of other states 

holding POAs must be strictly construed, and which have barred extrinsic evidence 

of a principal’s intent to allow self-dealing. Id. ¶¶ 18-23. The Court noted the policy 

rationale for excluding extrinsic evidence of a principal’s intent in attorney-in-fact 

relationships:

When one considers the manifold opportunities and temptations 

for self-dealing that are opened up for persons holding general 
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powers of attorney—of which outright transfers for less than 

value to the attorney-in-fact [himself or] herself are the most 

obvious—the justification for such a flat rule is apparent. And 

its justification is made even more apparent when one considers 

the ease with which such a rule can be accommodated by 

principals and their draftsmen.

Id. ¶ 21 (quoting Kunewa v. Joshua, 924 P.2d 559, 565 (Haw. Ct. App. 1996)

(alteration in original)). This Court applied the bright-line rule barring oral 

extrinsic evidence again in Studt v. Black Hills Fed. Credit Union, 2015 S.D. 33, ¶ 

14, 864 N.W.2d 513, 517. Most recently, we affirmed the rule in Stoebner stating, 

“[w]e have adopted a bright-line rule that no oral extrinsic evidence may be 

introduced to raise a factual issue as to whether an attorney-in-fact was authorized 

to self-deal under a power of attorney.” 2019 S.D. 58, ¶ 23, 935 N.W.2d at 268 

(emphasis added).

[¶19.] In extending this bright-line rule to corporate fiduciaries, the circuit 

court relied on language from Stoebner stating, “a written document must clearly 

articulate that the fiduciary is authorized to engage in self-dealing.” Id. Although 

Stoebner involved a POA, the circuit court read Stoebner broadly to also prohibit a 

corporate officer or director from presenting extrinsic oral evidence concerning a 

principal’s intent in the absence of writing that expressly granted the power to selfdeal.

[¶20.] Initially, Travis argues that the court erred by applying the bright-line 

rule from Bienash and Stoebner when SAR’s corporate documents are unavailable, 

claiming that the rule is inapplicable because there are no written documents that 

set out his fiduciary duties. Travis also argues the bright-line rule is limited to 

agents acting under a written POA. Thus, he claims the circuit court erred by 
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“anticipat[ing] this Court would, for the first time, extend the bright-line rule 

applying to agents acting pursuant to powers of attorney to other fiduciaries.” In 

support, Travis cites Hein v. Zoss, in which this Court held the circuit court abused 

its discretion by barring the admission of extrinsic evidence relevant to whether an 

attorney-in-fact “acted with utmost good faith and for the benefit of [the principal]” 

before a POA was executed. 2016 S.D. 73, ¶ 13, 887 N.W.2d 62, 67. Finally, Travis 

claims that, unlike the common law fiduciary duties of an attorney-in-fact, the 

South Dakota Business Corporation Act codified the duties owed by a corporate 

fiduciary. See SDCL 47-1A-830 to -831 (providing duties owed by directors); SDCL 

47-1A-840 to -842.2 (providing duties owed by officers).

[¶21.] SAR disputes Travis’ claim that South Dakota’s corporate statutes 

have any impact on the application of the bright-line rule to corporate fiduciaries.

SAR argues that the circuit court properly applied the rule from Bienash and 

Stoebner to prohibit Travis’ testimony concerning Dee’s alleged oral authorization. 

Further, SAR argues that if the bright-line rule is not extended to other fiduciary 

relationships, it “would open a pandora’s box of excuses in self-dealing and/or 

conversion cases that could never be closed.” Alternatively, SAR claims that “the 

record as it was presented to the [c]ircuit [c]ourt,” including “[Travis’] own selfserving unsupported [testimony,]” was insufficient to generate a genuine issue of 

material fact.∗

 

∗ The circuit court excluded Travis’ testimony concerning Dee’s oral 

authorization based on Bienash and Stoebner. We decline to consider SAR’s 

argument that Travis’ testimony is inadmissible hearsay, as this objection 

was not raised before, or considered by, the circuit court.
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[¶22.] Our cases, including our most recent decision in Stoebner, have only 

applied the rule from Bienash to acts of self-dealing by an attorney-in-fact acting 

under a written POA. We have not extended this rule to other fiduciaries, and SAR 

does not present authority from any jurisdiction that has extended the rule to other 

fiduciary relationships. Limiting the rule to acts of self-dealing by POAs is 

consistent with the recognition of this Court, and other courts, that the rule arises 

from the acute vulnerability of POAs to self-dealing. See Bienash, 2006 S.D. 78, ¶ 

21, 721 N.W.2d at 436. See also Estate of Casey v. Comm’r of Internal Revenue, 948 

F.2d 895, 898 (4th Cir. 1991) (stating the bright-line rule concerning POAs had been 

adopted “in order to avoid fraud and abuse”).

[¶23.] Further, the Legislature has codified the duties and liabilities of 

corporate officers and directors through the South Dakota Business Corporation Act 

in SDCL chapter 47-1A. The Legislature does not require that a corporate fiduciary 

obtain written authorization to avoid liability for self-dealing. Thus, our decision to 

decline extending the bright-line rule from Bienash and Stoebner to corporate 

fiduciaries is consistent with South Dakota’s statutory framework.

[¶24.] Having determined that the circuit court erred by excluding extrinsic 

oral evidence in this case, we conclude that questions of fact exist precluding

summary judgment. “Summary judgment may be granted only where there is no 

genuine issue of material fact.” Erickson v. Lavielle, 368 N.W.2d 624, 626 (S.D. 

1985). “The moving party has the burden of clearly demonstrating an absence of 

any genuine issue of material fact and an entitlement to judgment as a matter of 

law.” Johnson v. Matthew J. Batchelder Co., 2010 S.D. 23, ¶ 8, 779 N.W.2d 690, 
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693. “We view all evidence and favorable inferences from that evidence in a light

most favorable to the nonmoving party.” Id.

[¶25.] Travis presented testimony that Dee authorized each one of the 

transactions at issue. Further, as the circuit court correctly observed, “there may be 

evidence,” apart from Travis’ testimony, “tending to support Travis’[] contention 

that Dee not only approved of, but directed Travis to convert assets of SAR to his 

personal use.” Travis was never paid a salary for his work for SAR, but Dee 

transferred ownership of SAR vehicles to Travis, transferred ownership of ranch 

land to the Hursts, and then forgave the Hursts’ debt on the ranch land in her will. 

In her will, Dee also acknowledged that her favorable testamentary intent toward 

the Hursts may upset her sons.

[¶26.] The existence of disputed facts in the record requires that we reverse 

the circuit court’s decision granting partial summary judgment and remand for 

further proceedings.

[¶27.] KERN, SALTER, DEVANEY, and MYREN, Justices, concur.