City of Rapid City, Corp. v. Big Sky, LLC

2018 S.D. 45

CITY OF RAPID CITY, a Municipal Corporation, Plaintiff and Appellant, v. BIG SKY, LLC and DOYLE ESTES, Individually, Defendants and Appellees.

#28205

#28227

SUPREME COURT OF THE STATE OF SOUTH DAKOTA

ARGUED JANUARY 9, 2018

June 13, 2018

#28205, #28227-a-DG

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA

THE HONORABLE WARREN G. JOHNSON Retired Judge

JOHN K. NOONEY

ROBERT J. GALBRAITH of

Nooney & Solay LLP

Rapid City, South Dakota

Attorneys for plaintiff

and appellant.

DONALD A. PORTER

JESS M. PEKARSKI

CHRISTOPHER A. CHRISTIANSON of

Costello, Porter, Hill, Heisterkamp,

Bushnell & Carpenter LLP

Rapid City, South Dakota

Attorneys for defendants

and appellees.

GILBERTSON, Chief Justice

[¶1.] The City of Rapid City filed an action against real-estate developers Big Sky LLC and Doyle Estes (collectively, "Developers"), seeking to recover the prospective cost of repairing roads in the Big Sky development outside Rapid City. A jury returned a general verdict in favor of the Developers. The City appeals the general verdict, arguing the circuit court erred by: (1) denying the City's motion for summary judgment on the issue of liability; (2) excluding evidence of the Developers' litigation and settlement with their subcontractors; (3) granting Estes's motion for judgment as a matter of law; (4) instructing the jury on period-of-limitation, waiver, and estoppel defenses; and (5) refusing to instruct the jury on nuisance. We affirm.

Facts and Procedural History

[¶2.] This case involves the development of real property known as the Big Sky subdivision, which is located within the extraterritorial jurisdiction of Rapid City. The Developers acquired real property in this area and applied to the City for approval of 15 subdivision plats. Under the City's municipal code, a plat will not be approved unless the subdivider completes the construction of certain public improvements or offers a bond guaranteeing such construction. The Developers either completed the improvements or provided bonds for each of the 15 plats, and the City approved these plats between 1998 and 2005.

[¶3.] Following approval of the plats, the City identified several deficiencies in the public improvements installed by the Developers' contractor and subcontractors. In particular, some of the subdivision's streets had settled significantly since their construction. The City indicated it would not assumeownership of the public improvements until the deficiencies were corrected. The Developers did not correct the identified deficiencies, and the City did not conduct subsequent inspections. The bonds posted by the Developers expired without the City attempting to collect on them. Eventually, litigation ensued.

[¶4.] The procedural history of this case is complex and involves several parties. In May 2003, Big Sky filed a complaint against J. Scull Construction Service Inc., the subcontractor that worked on Phases 1 through 3 of the subdivision. And in March 2007, Big Sky filed a complaint against R.C.S. Construction Inc., the subcontractor that worked on Phase 4. Big Sky alleged that Scull and R.C.S. breached their contracts with Big Sky by failing to properly compact the soil underlying the streets in Phases 1 through 4. Big Sky and Scull settled shortly after Big Sky filed its complaint against R.C.S.

[¶5.] In January 2008, the City filed a separate complaint against the Developers, seeking specific performance and an injunction requiring the Developers to complete the repairs. The circuit court granted summary judgment to the Developers on the City's complaint, reasoning that the expiration of the bonds absolved the Developers of their obligation to complete the public improvements. This Court reversed the grant of summary judgment and remanded in City of Rapid City v. Estes, 2011 S.D. 75, 805 N.W.2d 714. On remand, the Developers filed a third-party complaint against Rapid Construction LLC, the general contractor. Rapid Construction, in turn, filed a fourth-party complaint against Dream Design International Inc., the Developers' engineering firm. And to bring things full circle, Dream Design International counterclaimed against the City. The court thenconsolidated the Developers' action against R.C.S. with the City's suit against the Developers. In April 2016, the City amended its complaint to allege nuisance as an additional cause of action.

[¶6.] The various parties settled most of the foregoing litigation. As noted above, Big Sky settled with Scull in 2007. Big Sky also settled its complaints against R.C.S. and Rapid Construction. Rapid Construction settled with Dream Design International. And finally, the Developers and the City settled in regard to all disputed project phases other than Phases 1 through 4. So prior to trial, Scull, R.C.S., Rapid Construction, and Dream Design International were each removed as parties, and the issues were narrowed to the dispute between the City and the Developers regarding Phases 1 through 4 of the subdivision.¹ Citing this Court's decision in Estes, the City moved for summary judgment on the issue of the Developers' liability for these phases. The circuit court denied the motion.

[¶7.] A jury trial was held January 23 through 27, 2017. During the trial, the circuit court excluded evidence offered by the City regarding Big Sky's litigation and settlement with Scull and R.C.S. Estes filed a motion for judgment as a matter of law, which the court granted because the City did not dispute that Big Sky was the sole owner of the properties at issue in Phases 1 through 4. And over the City's objection, the court instructed the jury on the Developers' period-of-limitation, waiver, and estoppel defenses. The court did not instruct the jury on the City'snuisance theory. The jury returned a general verdict in favor of the Developers, denying any relief to the City.

[¶8.] The City appeals, raising the following issues²:

1. Whether the City was entitled to summary judgment on the issue of the Developers' liability.

2. Whether the circuit court erred by excluding evidence of Big Sky's claims against, and settlements with, Scull and R.C.S.

3. Whether the circuit court erred by granting Estes's motion for judgment as a matter of law.

4. Whether the circuit court erred by instructing the jury on the Developers' period-of-limitation, waiver, and estoppel defenses.

5. Whether the circuit court erred by not instructing the jury on the City's public-nuisance claim.

Analysis and Decision

[¶9.] 1. Whether the City was entitled to summary judgment on the issue of the Developers' liability.

[¶10.] The City first argues the circuit court erred by denying the City's motion for summary judgment on the issue of the Developers' liability. In the City's view, the Developers' liability was established as the law of the case in Estes. In Estes, this Court held that the expiration of bonds given in lieu of completing public improvements did not release the Developers from the obligation of making thoseimprovements. 2011 S.D. 75, ¶¶ 1, 11, 15, 805 N.W.2d at 715, 718-19. In the opinion's concluding paragraph, this Court said: "Under the ordinances and specifications, Developers remain liable until the City accepts the improvements by a final acceptance letter." Id. ¶ 15, 805 N.W.2d at 719. On remand, the City moved for summary judgment, reasoning that "[b]ecause the Developers remain liable to the City until the City accepts the improvements by a final acceptance letter and because it is undisputed that the City never issued any final acceptance letters, it must also be undisputed that the Developers are liable to the City in this litigation."

[¶11.] The City's argument fails. In Estes, the circuit court granted the Developers' motion for summary judgment on the basis that "when the sureties expired, [the Developers] were no longer liable for the improvements under" the City's municipal code. Id. ¶ 9, 805 N.W.2d at 717. This Court's review of that decision was therefore confined to a question of law: interpreting the meaning of the controlling statutes and ordinances. See id. ¶ 12, 805 N.W.2d at 718. But on remand, as evidenced by the issues raised in this appeal, the Developers asserted several defenses that were not at issue in Estes. In particular, the circuit court determined there were genuine issues of material fact regarding the Developers' waiver defense. Because Estes had nothing to do with the defenses at issue in this appeal (i.e., period of limitation, waiver, and estoppel), the City was not entitled to summary judgment in regard to those defenses, and the court correctly denied the City's motion for summary judgment on the issue of the Developers' liability. See Nicolay v. Stukel, 2017 S.D. 45, ¶ 21, 900 N.W.2d 71, 79-80 (holding entitlement tosummary judgment on issue of liability requires entitlement to summary judgment on defendant's affirmative defenses).

[¶12.] 2. Whether the circuit court erred by excluding evidence of Big Sky's claims against, and settlements with, Scull and R.C.S.

[¶13.] Next, the City argues the circuit court erred by excluding evidence that Big Sky sued and settled with Scull and R.C.S. regarding their work on Phases 1 through 4. In both complaints, Big Sky alleged that it would "be caused and required to incur additional costs for engineering and other consulting services in the future and will be caused and required to incur additional costs for remedial work in the future necessary to further correct the defective and unworkmanlike performance of [Scull and RCS.]"³ According to the City, "Big Sky's allegations in that litigation are direct admissions by Big Sky of continuing obligations to the City." The Developers respond that "[t]he fact and terms of Big Sky's settlement with [Scull and R.C.S.] were clearly inadmissible under SDCL 19-19-408."

[¶14.] The admission of evidence relating to the settlement of a claim is governed by SDCL 19-19-408. With limited exception, evidence of ...