#26842-rev & rem-SLZ

2014 S.D. 78

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

GRANITE BUICK GMC, INC., 

f/k/a 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.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE SEVENTH JUDICIAL CIRCUIT

PENNINGTON COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE JANINE M. KERN

Judge

* * * *

JOHN K. NOONEY

ROBERT J. GALBRAITH of

Nooney, Solay & Van Norman, LLP

Rapid City, South Dakota Attorneys for plaintiffs 

and appellants. 

ROGER A. TELLINGHUISEN

MICHAEL V. WHEELER of

DeMersseman, Jensen, Tellinghuisen, 

 Stanton & Huffman, LLP

Rapid City, South Dakota Attorneys for defendants 

and appellees.

* * * *

ARGUED OCTOBER 6, 2014

OPINION FILED 11/05/14
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ZINTER, Justice

[¶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 conclude 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 as 

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 

 

1. Granite Buick and McKie Ford were originally part of the “McKie Automotive 

Group” and were formerly operated under different names and different 

ownership. Consequently, some of the facts referenced in this opinion 

occurred with Granite Buick’s and McKie Ford’s predecessors.
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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 asserted 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 and 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 Ford introduced evidence rebutting Ray’s and Hanna’s defenses. The circuit 

 

2. During a company sales meeting, one employee asked if the agreement would 

be used to prevent employees from moving to better positions. Troy 

Claymore, the general sales manager, was leading the discussion about the 

agreement. Ray testified: 

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, your 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.

3. During the conversation, Hanna told Mark McKie about Hanna’s plans to 

open the new business with Ray. Hanna then asked Mark McKie two 

questions about leaving. Hanna asked if Mark McKie was “gonna come after 

[Hanna] in any way whatsoever” and if “this is in no way going to affect our 

relationship or our families’ relationship[?]” Mark McKie replied, “Shit, no, 

Scotty, that will never be the case.” Hanna testified that he relied upon Mark 

McKie’s statements in leaving to start the new business.
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court granted a preliminary injunction against Hanna but denied a preliminary 

injunction against Ray. The court explained that it found Ray established a viable 

defense against Granite Buick, but McKie Ford was likely to succeed against Hanna 

on the merits. The court ruled that it would decide the requests for permanent 

injunctions after a jury determined Ray’s and Hanna’s defenses. 

[¶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 respond that they had a right to a 
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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 SDCL 53-4-5. They also contend that they had a right to a jury trial on 

their defenses because the defenses involved disputed issues of fact. The parties’

contentions require us to discuss: the right to a jury trial in actions at law and 

actions in equity; whether the claims in this case sounded in law or equity; whether 

a binding or advisory jury trial is permitted in equitable actions; the procedure for 

trial with advisory juries; and whether our scope of review on appeal from an 

advisory jury permits us to review the appellants’ challenges to the jury’s findings.

[¶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, “a 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.” SDCL 15-6-39(c) (emphasis added). See also First W. Bank, Sturgis v. 

Livestock Yards Co., 466 N.W.2d 853, 856 (S.D. 1991) (“If the relief sought is 

equitable, the decision of whether to empanel an advisory jury is wholly within the 
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trial court’s discretion.” (emphasis added) (citing Nizielski v. Tvinnereim, 453 

N.W.2d 831, 833-34 (S.D. 1990))); Nizielski, 453 N.W.2d at 834 (“[O]n equitable 

issues a jury’s verdict is advisory only[.]”). 

[¶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 SDCL 15-6-39(c). On the contrary, Granite Buick and McKie Ford 

objected to a jury trial, arguing that all issues were equitable. Therefore, we must 

determine whether the defenses were “cases at law” triable to a jury as a matter of 

“right” within the meaning of Article VI, § 6 of the South Dakota Constitution, or 

whether they were claims sounding in equity.

[¶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, 

 

4. “When analyzing the right to trial by jury, the term ‘common law’ refers to 

those principles of English law that evolved in the common-law courts such 

as the Court of the Exchequer, as opposed to those applied in the Admiralty, 

Chancery, or Ecclesiastical Courts.” 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, 712 A.2d. 1148, 1150 (N.J. 1998)). We examine the common law as it 

existed at the time South Dakota’s Constitution was adopted. SDCL 15-6-

38(a) provides that “[t]he right of trial by jury . . . shall be preserved to the 

parties inviolate.” “The effect of this provision was merely to continue 

unimpaired and inviolate the right as it existed in the territory when the 

Constitution was adopted.” In re McClellan’s Estate, 20 S.D. 498, 107 N.W. 

681, 684 (1906) modified on reh’g, 21 S.D. 209, 111 N.W. 540 (1907).
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¶ 18, 737 N.W.2d 271, 276 (quoting State v. One 1990 Honda Accord, 712 A.2d. 

1148, 1150-51 (N.J. 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, ¶ 5, 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, estoppel, 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 Constitution Article VI, § 6 and SDCL 15-6-39(c).

[¶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 

 

5. Fraud in the inducement may be legal or equitable depending on the relief 

sought. Fraud in the inducement warrants rescission, and rescission could be 

heard both at law and in equity. “In equity the suit is not on rescission, but

for rescission; it is not a suit based upon the rescission already 

accomplished . . . , but a suit to have the court decree a rescission.” Dan B. 

Dobbs, Handbook on the Law of Remedies: Damages-Equity-Restitution 294 

(1973) (footnotes omitted). Ray and Hanna did not seek a legal remedy such 

as damages on a rescission (or in this case on the nonenforcement) of the 

agreement. Their defense was equitable because they asked for rescission 

(nonenforcement) of the agreement. 
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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; 

Garret 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 

of 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 

 

6. More specifically, Rays and Hannas’ cited cases are distinguishable either 

because they involved legal causes of action (i.e. breach of contract, 

conversion, legal malpractice, or recovery of money) or because they involved 

money damages requested by way of complaint or counterclaim. Moreover,

Ray’s and Hanna’s cases did not consider the issue of whether a particular 

claim was an action at law triable to a jury as a matter of right.
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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 accounting, 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 because 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 enforcement of the agreements. Because all claims and defenses were

equitable, Ray and Hanna had no right to a binding jury trial. 
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[¶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 conclusions of law 

as it must in any other nonjury case.” Id. at 355; SDCL 15-6-52(a) (“In all actions 

tried upon the facts . . . with an advisory jury, the court shall . . . find the facts 

separately and state separately its conclusions of law[.]”). Moreover, our “[r]eview 

on appeal is of the findings of the court as if there had been no verdict from an 

advisory jury, and there can be no review of supposed errors relating to rulings 

before, and instructions to, the advisory jury.” 9 Wright & Miller, supra, § 2335, at 

358-59 (footnotes omitted). 

[¶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 there 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. 
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Similarly, until the court enters its findings and conclusions, we cannot determine 

prevailing party status 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.