#23601-a-LOVRIEN, Circuit Judge 

2006 SD 72

IN THE SUPREME COURT 

OF THE 

STATE OF SOUTH DAKOTA 

* * * * 

DAKOTA, MINNESOTA & EASTERN 

RAILROAD CORPORATION Plaintiff and Appellee, 

 v. 

ACUITY, a Mutual Insurance Co. 

f/k/a HERITAGE MUTUAL INSURANCE 

COMPANY, d/b/a HERITAGE INSURANCE, Defendant and Appellant. 

* * * * 

APPEAL FROM THE CIRCUIT COURT 

OF THE THIRD JUDICIAL CIRCUIT 

BEADLE COUNTY, SOUTH DAKOTA 

* * * * 

HONORABLE ROBERT L. TIMM 

Judge 

* * * * 

BRIAN J. DONAHOE and 

MEREDITH A. MOORE of 

Cutler & Donahoe Attorneys for plaintiff 

Sioux Falls, South Dakota and appellee. 

GARY P. THIMSEN and 

JENNIFER L. WOLLMAN of 

Woods, Fuller, Shultz & Smith Attorneys for defendant 

Sioux Falls, South Dakota and appellant. 

* * * * 

 ARGUED MARCH 21, 2006 

 OPINION FILED 8/9/06 
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LOVRIEN, Circuit Judge 

[¶1.] Dakota, Minnesota and Eastern Railroad (DM&E) sued its automobile 

insurance company, Acuity, alleging that the negligence of an unidentified and 

uninsured motorist caused an accident involving a vehicle driven by DM&E employee 

Julian Olson (Olson) and that the business automobile policy issued by Acuity to DM&E 

covered the loss. A Beadle County jury found for DM&E and the trial court entered 

judgment accordingly. We affirm. 

FACTS AND PROCEDURE 

[¶2.] On July 28, 1998, DM&E employee Olson was operating a motor vehicle 

within the scope of his employment on I-90 near Rapid City. Olson was involved in a 

serious rollover accident which rendered him a paraplegic. DM&E held a business 

automobile policy with Acuity which was in effect on the day of Olson's accident. 

[¶3.] Olson brought suit against DM&E under the Federal Employer's Liability 

Act, 45 USC § 51 et seq (FELA), for negligent maintenance of the vehicle's Hy-Rail 

System.1 DM&E tendered defense of the suit to Acuity. Acuity refused. The case went 

to trial. On the last day of trial, before the jury reached a verdict, a settlement was 

reached between Olson and DM&E. 

[¶4.] DM&E then brought a declaratory judgment action against Acuity to 

determine whether Acuity was obligated to defend and provide coverage for Olson's 

FELA action against DM&E. Acuity claimed that coverage was barred due to valid 

policy exclusions. The trial court agreed and granted summary judgment in favor of 

Acuity. It concluded that the employee indemnification and employer's liability 

 

1. The Hy-Rail System is equipment that when attached to a motor vehicle allows 

the vehicle to be driven on either railroad tracks or the public roadway. 
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exclusion in the policy barred coverage for Olson's accident. We affirmed the trial 

court's grant of summary judgment in DM&E v. Heritage Mut. Ins. Co., 2002 SD 7, 639 

NW2d 513 (DM&E I). 

[¶5.] During the pendency of DM&E I, Olson brought a products liability suit 

against the manufacturer of the Hy-Rail system. That lawsuit was settled in April 

2003. On July 26, 2001, also during the pendency of DM&E I, DM&E brought the 

present Uninsured Motorist (UM) action against Acuity. DM&E claimed the negligence 

of an unidentified and uninsured motorist was the cause of Olson's accident. 

[¶6.] On November 21, 2001, Acuity moved to dismiss the present action based 

upon res judicata and collateral estoppel. Acuity also moved for summary judgment, 

claiming it had no obligation under the policy to pay uninsured motorist benefits to 

DM&E for injuries suffered by a DM&E employee. DM&E moved to hold the case in 

abeyance until this Court decided DM&E I. On February 28, 2002, after our decision in 

DM&E I, the trial court denied Acuity's motion to dismiss. In April 2002 Acuity filed an 

application for stay and petition for discretionary appeal. Both motions were denied. 

On February 3, 2004, the trial court dismissed Acuity's motion for summary judgment. 

In April 2004 Acuity filed a second application for stay and petition for discretionary 

appeal. These motions were denied on April 5, 2004. 

[¶7.] On April 9, 2004, DM&E moved to amend its complaint to add a cause of 

action for bad faith. The motion was granted. Acuity moved to bifurcate the bad faith 

and UM claim. The motion to bifurcate was granted. After the trial court ruled on 

preliminary discovery motions in the bad faith matter, the parties agreed to suspend 

any further action on that claim until resolution of the UM claim. 
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[¶8.] The UM claim was tried on January 24-25, 2005, in Beadle County, Huron, 

South Dakota. The jury returned a verdict in favor of DM&E, finding an unidentified 

motorist negligently caused Olson's accident. An amended partial judgment was filed 

on February 15, 2005. Over Acuity's objection, DM&E sought and was granted 

prejudgment interest. Acuity moved for judgment notwithstanding the verdict and a 

new trial. Both motions were denied. Acuity filed its notice of appeal on April 6, 2005. 

While a number of issues were raised by Acuity on appeal, we conclude that only a few 

issues merit discussion. 

ANALYSIS 

ISSUE ONE 

[¶9.] Did the trial court err in failing to grant Acuity's motion to dismiss 

based upon res judicata and collateral estoppel? 

[¶10.] Acuity claims that DM&E I settled, or should have settled, all of the issues 

between the parties and that the trial court committed error when it refused to grant 

Acuity's motion to dismiss based upon the doctrines of res judicata and collateral 

estoppel. We affirm the trial court's decision to deny Acuity's motion to dismiss. 

 [¶11.] This Court's review of such motions is well settled. Our standard of review 

of a trial court's grant or denial of a motion to dismiss is the same as our review of a 

motion for summary judgment: is the pleader entitled to judgment as a matter of law. 

See Jensen Ranch, Inc. v. Marsden, 440 NW2d 762, 764 (SD 1989). 

Summary judgment is authorized "if the pleadings, 

depositions, answers to interrogatories, and admissions on 

file, together with the affidavits, if any, show that there is no 

genuine issue as to any material fact, and that the moving 

party is entitled to judgment as a matter of law." SDCL 15-6-

56(c). We will affirm only when there are no genuine issues of 

material fact and the legal questions have been correctly 
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decided. Bego v. Gordon, 407 NW2d 801, 804 (SD 1987). All 

reasonable inferences drawn from the facts must be viewed in 

favor of the non-moving party. Morgan v. Baldwin, 450 

NW2d 783, 785 (SD 1990). The burden is on the moving 

party to clearly show an absence of any genuine issue of 

material fact and an entitlement to judgment as a matter of 

law. Wilson v. Great Northern Ry. Co., 83 SD 207, 212, 157 

NW2d 19, 21 (1968). 

Holzer v. Dakota Speedway, Inc., 2000 SD 65, ¶8, 610 NW2d 787, 792 (citing Kimball 

Investment Land, Ltd. v. Chmela, 2000 SD 6, ¶7, 604 NW2d 289, 292 (citing Mattson v. 

Rachetto, 1999 SD 51, ¶8, 591 NW2d 814, 816-17 (quoting Estate of Shuck v. Perkins 

County, 1998 SD 32, ¶6, 577 NW2d 584, 586))). We make an independent review of the 

record and are not bound by the trial court's factual assessments in granting summary 

judgment. Spenner v. City of Sioux Falls, 1998 SD 56, ¶7, 580 NW2d 606, 609; 

Carpenter v. City of Belle Fourche, 2000 SD 55, ¶6, 609 NW2d 751, 756. 

[¶12.] Res judicata and collateral estoppel are two distinct doctrines. Nelson v. 

Hawkeye Ins. Co., 369 NW2d 379, 380 (SD 1985); Schell v. Walker, 305 NW2d 920, 922 

(SD 1981). While these two doctrines are very similar in nature, they produce different 

results. Schell, 305 NW2d at 922. 

[¶13.] Collateral estoppel prevents relitigation of issues that were actually 

litigated in a prior proceeding. Id. It also precludes a party which 

successfully maintains a certain position in a legal proceeding 

. . . from later assuming a contrary position simply because 

that party's interests have changed, especially if the change 

works to the prejudice of one who acquiesced in the position 

formerly taken by that party. 

Watertown Concrete Products, Inc. v. Foster, 2001 SD 79, ¶10, 630 NW2d 108, 112 

(citing New Hampshire v. Maine, 532 US 742, 749, 121 SCt 1808, 149 LEd2d 968 

(2001)). The purpose of collateral estoppel is to "protect the integrity of the judicial 
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process by prohibiting parties from deliberately changing positions according to the 

exigencies of the moment." New Hampshire, 532 US at 749-50. This Court has held 

that three elements must be satisfied in order to apply collateral estoppel: (1) the later 

position must be clearly inconsistent with the earlier one; (2) the earlier position was 

judicially accepted, creating the risk of inconsistent legal determinations; and (3) the 

party taking the inconsistent position would derive an unfair advantage or impose an 

unfair detriment to the opponent if not estopped. Watertown Concrete Products, 2001 

SD 79, ¶12, 630 NW2d at 112. 

[¶14.] We conclude that the doctrine of collateral estoppel is inapplicable here. 

The uninsured motorist issue was not "actually litigated" in the prior proceeding, 

DM&E I. In addition, DM&E took no position in DM&E I that is clearly inconsistent 

with its position in this case. In both cases it maintained that Olson's accident was 

caused by something other than a malfunction of the Hy-Rail System equipment. The 

trial court did not err by refusing to grant Acuity's motion to dismiss based on the 

doctrine of collateral estoppel.2 

[¶15.] Res judicata prevents the relitigation of a claim or issue that was "actually 

litigated or which could have been properly raised." Nelson, 369 NW2d at 381; see also 

Keith v. Willers Truck Serv. Inc., 64 SD 274, 266 NW 256 (1936). Res judicata is 

founded upon two premises: "A person should not be twice vexed for the same cause 

and public policy is best served when litigation has a repose." Black Hills Mfg. Inc. v. 

Felco Jewel Ind., Inc., 336 NW2d 153, 157 (SD 1983). In Commissioner of Internal 

 

2. Since the first element of collateral estoppel has not been satisfied, there is no 

need to consider the remaining two elements. 
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Revenue v. Sunnen, 333 US 591, 597, 68 SCt 715, 719, 92 LEd 898 (1948), the United 

States Supreme Court noted that: 

The general rule of res judicata applies to repetitious suits 

involving the same cause of action. It rests upon 

considerations of economy of judicial time and public policy 

favoring the establishment of certainty in legal relations. The 

rule provides that when a court of competent jurisdiction has 

entered a final judgment on the merits of a cause of action, 

the parties to the suit and their privies are thereafter bound 

'not only as to every matter which was offered and received to 

sustain or defeat the claim or demand, but as to any other 

admissible matter which might have been offered for that 

purpose.' Cromwell v. County of Sac, 94 US 351, 352 (1876). 

The judgment puts an end to the cause of action, which 

cannot again be brought into litigation between the parties 

upon any ground whatever, absent fraud or some other factor 

invalidating the judgment. See von Moschzisker, 'Res 

Judicata,' 38 Yale LJ 299; Restatement of the Law of 

Judgments, §§ 47, 48. 

Id. 

[¶16.] This Court has previously held that a final judgment on the merits is a bar 

to any future action between the same parties or their privies upon the same cause of 

action settling not only every issue actually presented to sustain or defeat the right 

asserted, but every issue that might have been raised in the first action. Adam v. 

Adam, 254 NW2d 123, 130 (SD 1977)(citing Chicago & N.W. Ry. Co. v. Gillis, 80 SD 

617, 622, 129 NW2d 532, 534 (1964)). A judgment which bars a second action upon the 

same claim extends not only to every matter offered and received to sustain or defeat 

the claim or demand but also to all other admissible matters which might have been 

offered to the same purpose. Id. at 130-31. 

[¶17.] This Court has held that four elements must be satisfied in order to apply 

res judicata: (1) the issue in the prior adjudication must be identical to the present 
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issue, (2) there must have been a final judgment on the merits in the previous case, (3) 

the parties in the two actions must be the same or in privity, and (4) there must have 

been a full and fair opportunity to litigate the issues in the prior adjudication. Matter 

of Guardianship of Janke, 500 NW2d 207, 209 (SD 1993)(citing Raschke v. DeGraff, 81 

SD 291, 295, 134 NW2d 294, 296 (1965)). 

[¶18.] As to the first element, whether the issue in DM&E I is identical to the 

present issue, the Eighth Circuit Court of Appeals in Hanson v. Hunt Oil Co., 505 F2d 

1237, 1240 (8th Cir 1974), established the test which this Court has repeatedly applied: 

"whether the wrong for which redress is sought is the same in both actions." Woodbury 

v. Porter, 158 F2d 194, 195 (8th Cir 1946); Barnes v. Matzner, 2003 SD 42, ¶16, 661 

NW2d 372, 377. In DM&E I, DM&E sought defense and indemnification from Acuity in 

its suit with Olson. DM&E based its claim on the terms of its business automobile 

insurance contract with Acuity. In this case, DM&E seeks recovery under the 

uninsured motorist provisions of the same insurance contract. Acuity correctly asserts 

that in both DM&E I, and the present case, the wrong for which redress is sought by 

DM&E is Acuity's alleged breach of the same insurance contract. See Great West Cas. 

Co. v. Hovaldt, 1999 SD 150, ¶8, 603 NW2d 198, 201 (recognizing an action on the 

policy is contractual). Therefore, Acuity argues that DM&E should have brought all of 

the claims it had against Acuity under the provisions of the insurance contract, 

including the claim of unidentified motorist coverage, in DM&E I. Acuity argues that 

since it did not, DM&E is now precluded by the doctrine of res judicata from raising the 

issue of unidentified motorist coverage in a second lawsuit. 
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[¶19.] In support of its argument, Acuity relies on this Court's decision in Nelson, 

369 NW2d at 379. There, in the initial case between the parties (Nelson I), Nelson 

instituted a declaratory judgment action against Hawkeye. Id. at 380. This Court held 

that, pursuant to the provisions and exceptions of its policy, Hawkeye had no duty to 

defend. Id. In the second action (Nelson II), Nelson brought an action against the 

insurer seeking reimbursement of counsel fees and judgment for death loss of his pigs 

caused by the insured's negligence. Id. Summary judgment was entered in favor of 

Hawkeye. Id. Based upon pre-trial investigation by both parties, this Court 

determined that the death loss of pigs suffered by the original plaintiff Schultz was 

either known or should have been known in the first declaratory judgment action. Id. 

at 381. As a result, the judgment in Nelson I was held to be res judicata. Id. 

[¶20.] The issue in DM&E I was whether, under the terms of the insurance 

policy, Acuity had a duty to defend and indemnify DM&E in the suit brought by Olson. 

The issue in the present case is whether, under the terms of the same insurance policy, 

DM&E is entitled to UM benefits due to the negligence of an unidentified driver. While 

the specific issue in DM&E I is not identical to the specific issue in this case, both 

issues relate to the same accident, the same set of facts, the same insurance contract 

and can only be resolved by making a determination of DM&E's rights under that 

contract. In addition, DM&E knew or should have known of the existence of an 

unidentified slow moving vehicle when DM&E I was tried. In fact, DM&E used 

evidence of an unidentified slow moving vehicle to bolster its claims in DM&E I that the 

accident was caused by something other than the Hy-Rail equipment. We conclude that 

all claims DM&E had against Acuity under the provisions of the insurance contract 
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could have been brought in DM&E I. Acuity has demonstrated a technical basis to 

conclude the first element has been satisfied. 

[¶21.] Concerning the second and third elements, it is undisputed that there has 

been a final judgment on the merits in DM&E I, and the parties in the two actions are 

the same. Therefore, we turn to the fourth element, was there or would there have been 

a full and fair opportunity to litigate all of the contract issues in DM&E I? We hold that 

the fourth element has not been established. 

[¶22.] First, while all issues could have been brought in DM&E I, we conclude 

that the fact that they were not did not violate the policy considerations underlying the 

doctrine of res judicata. Given the particular facts of this case, even if DM&E's claims 

against Acuity for defense and indemnification and unidentified motorist coverage were 

all brought in DM&E I, it would be reasonable to expect that the trial court would have 

bifurcated these issues and tried each separately. A resolution of the various issues 

would almost certainly have followed the same course as has been followed here, 

whether these issues had been raised in a single lawsuit or in separate lawsuits. Acuity 

would have had to defend the two causes of action. The only question is whether Acuity 

would do this at separate trials in a bifurcated lawsuit or at separate trials in separate 

lawsuits. Since two trials were inevitable, the policy behind the doctrine of res judicata 

would not have been served by application of the doctrine. Acuity would have still been 

twice vexed for DM&E's claims under the insurance contract, this litigation would not 

have found repose until both issues were resolved and the use of judicial resources 

would not have been conserved in any significant way. 
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[¶23.] Second, while both actions are based on the terms and provisions of the 

same insurance contract, each cause of action is different. Because each cause of action 

is different, the doctrine of res judicata is applied much more narrowly. 

[But] where the second action between the same parties is 

upon a different cause or demand, the principle of res judicata 

is applied much more narrowly. In this situation, the 

judgment in the prior action operates as an estoppel, not as to 

matters which might have been litigated and determined, but 

'only as to those matters in issue or points controverted, upon 

the determination of which the finding or verdict was 

rendered.' Cromwell, 94 US at 353. See also Russell v. Place, 

94 US 606, 24 LEd 214 (1876); Southern Pacific R. Co. v. 

United States, 168 US 1, 48, 18 SCt 18, 27, 42 LEd 255 

(1897); Mercoid Corp. v. Mid-Continent Inv. Co., 320 US 661, 

671, 64 SCt 268, 273, 88 LEd 376 (1944). Since the cause of 

action involved in the second proceeding is not swallowed by 

the judgment in the prior suit, the parties are free to litigate 

points which were not at issue in the first proceeding, even 

though such points might have been tendered and decided at 

that time. But matters which were actually litigated and 

determined in the first proceeding cannot later be relitigated. 

Once a party has fought out a matter in litigation with the 

other party, he cannot later renew that duel. 

Sunnen, 333 US at 597-98. 

[¶24.] Here the unidentified motorist claim was not "swallowed" by the judgment 

in DM&E I, even though all issues could have been tendered in that cause of action. 

Accordingly, we conclude the parties were free to litigate the unidentified motorist 

claim, which was not at issue in the first proceeding, even though it might have been 

brought and decided at that time. The trial court did not err by refusing to grant 

Acuity's motion to dismiss based on the doctrine of res judicata. 

ISSUE TWO 

[¶25.] Was DM&E entitled to recover prejudgment interest on the jury's 

verdict? 

 
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[¶26.] Acuity argues that the prejudgment interest determination is controlled by 

the insurance policy. As such, DM&E would not be entitled to prejudgment interest 

until there was a determination that DM&E was legally entitled to recover under the 

terms of that policy. This would be the date of the jury verdict: January 25, 2005. 

DM&E contends that South Dakota law is clear on this issue and that prejudgment 

interest is required from the date a demand is made for the policy benefits: July 23, 

2001. See Isaac v. State Farm Mut. Auto. Ins. Co., 522 NW2d 752, 764 (SD 1994). 

Prejudgment calculations are done as a matter of law. As such, the standard of review 

is de novo. City of Sioux Falls v. Johnson, 2001 SD 108, ¶8, 632 NW2d 849, 852; City of 

Colton v. Schwebach, 1997 SD 4, ¶8, 557 NW2d 769, 771. 

[¶27.] We find DM&E's argument persuasive and a correct statement of the law. 

Any person who is entitled to recover damages . . . is entitled 

to recover interest thereon from the day that the loss or 

damage occurred[.] . . . Prejudgment interest on damages 

arising from a contract shall be at the contract rate, if so 

provided in the contract; otherwise, if prejudgment interest is 

awarded, it shall be at the category B rate of interest specified 

in § 54-3-16. 

 SDCL 21-1-13.1. The trial court determined that the date of DM&E's demand was July 

23, 2001, the date this action was commenced. Acuity relies on case precedent from 

other jurisdictions in support of its argument that the date of the jury verdict controls. 

We find this authority unpersuasive. A determination of prejudgment interest is 

mandated by statute. South Dakota law is clear as to the date and rate from which 

prejudgment interest shall run. Therefore, the trial court correctly determined the 

proper date from which prejudgment interest should run is from the commencement of 

this action: July 23, 2001. 
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ISSUE THREE 

[¶28.] Did the trial court abuse its discretion in granting DM&E's motion 

to compel discovery and denying Acuity's motion to quash? 

[¶29.] As noted earlier, the trial court allowed DM&E to amend its complaint to 

add a cause of action for bad faith and also granted Acuity's motion to bifurcate the UM 

and bad faith causes of action. DM&E began discovery on the bad faith claim, issuing 

subpoenas to Acuity's attorney Gary Thimsen and his partner James Moore. Acuity did 

not respond to discovery. DM&E then moved to compel discovery. Acuity moved to 

quash the subpoenas. DM&E's motion to compel was granted and Acuity's motion to 

quash was denied. Acuity has appealed these rulings. 

[¶30.] We note the request to bifurcate the trial of the UM claim and the bad 

faith claim was made by Acuity. It sought two trials. An appeal of the UM matter is 

properly before us because the trial court has entered a final judgment as to the UM 

matter. However, an appeal of the trial court's rulings related to the bad faith cause of 

action is not properly before us because that action is still pending. The trial court has 

entered no final judgment concerning the bad faith cause of action. No appeal from a 

final judgment concerning the bad faith claim has been filed with this Court. Therefore, 

the issues surrounding the bad faith claim are not properly before us on appeal.3 In 

reality, Acuity is seeking a discretionary appeal of the trial court's discovery orders 

entered in the bad faith action. Acuity has not followed the statutory requirements for 

a discretionary appeal found at SDCL 15-26A-13.4 Acuity cannot put these issues 

 

3. See SDCL 15-26A-3. 

4. SDCL 15-26A-13 provides: 
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before us by simply including them in its appeal of the UM action. Accordingly, we 

conclude we lack jurisdiction to review the decisions of the trial court on the bad faith 

claim. 

[¶31.] Acuity has also raised a number of other issues on appeal.5 We have 

 

An appeal from an intermediate order made before trial as 

prescribed by subdivision 15-26A-3(6) may be sought by filing 

a petition for permission to appeal, together with proof of 

service thereof upon all other parties to the action in circuit 

court, with the clerk of the Supreme Court within ten days 

after notice of entry of such order. 

5. In addition to the issues discussed herein, Acuity claims on appeal: 

1. That the uninsured motorist endorsement in the 

automobile liability policy between Acuity and DM&E 

did not provide coverage for DM&E in the event one of 

its employees sustained injury as the result of the 

negligence of a third party. 

2. That the trial court should have granted Acuity's 

motions for directed verdict or in the alternative, its 

motions for judgment notwithstanding the verdict and 

new trial because the trial court: 

a. Allowed witness Barbara Radlinger's recorded 

recollection to be received in evidence under 

SDCL 29-26-9; 

b. Allowed expert witness Michael Selves to give 

his opinion; 

c. Allowed the jury to view a video tape showing 

the operation of Hy-Rail equipment; 

d. Found that sufficient evidence was presented at 

trial for the jury to find negligence on the part of 

the unidentified driver, and; 

e. Instructed the jury on proximate cause rather 

than the specific language of the insurance policy 
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carefully considered these issues and find them to be without merit. The decisions and 

rulings of the trial court were within the trial court's sound discretion and were clearly 

supported by the law and the facts. Accordingly, as to the trial court's rulings on the 

bad faith claim we conclude we have no jurisdiction. On all other issues, we affirm. 

[¶32.] GILBERTSON, Chief Justice, and MEIERHENRY, Justice, and GORS, 

Circuit Judge, and ENG, Circuit Judge, concur. 

[¶33.] LOVRIEN, Circuit Judge, for SABERS, Justice, disqualified. 

[¶34.] GORS, Circuit Judge for KONENKAMP, Justice, disqualified. 

[¶35.] ENG, Circuit Judge for ZINTER, Justice, disqualified. 

 

and did not use a form of verdict requested by 

Acuity.