Garrett v. Stock

1

JAMES E. GARRETT, SANDRA A. GARRETT, LEVI E. GARRETT, Plaintiffs, v. RONALD STOCK, KRISTIN K. STOCK, Defendants.

No. 3:22-CV-03003-RAL

United States District Court, D. South Dakota, Central Division

July 7, 2023

OPINION AND ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT

ROBERTO A. LANGE CHIEF JUDGE

Plaintiffs Janies E. Garrett, Sandra A. Garrett, and Levi E. Garrett (Garretts) sold their Sully County farmland to Defendants Ronald Stock and Kristin K. Stock (Stocks) with an agreement to lease back the land. Docs. 1, 5. The Garretts' failure to pay rent owed and the Stocks' conduct thereafter led to a state court case where the Stocks prevailed after a jury trial and from which the Garretts have appealed. In this federal diversity jurisdiction case, the Garretts claim that the Stocks breached a Real Estate Purchase Agreement, Farm Lease Agreement, and Escrow/Closing Agreement by settling a dispute with neighboring farmers resulting in movement of a fence line. Doc. 1 ¶¶ 4-27. The Garretts also claim that they were fraudulently induced into signing the contracts. Id. ¶¶ 28-33. The Stocks answered the Complaint, asserting the defense that the Garretts materially breached the agreements first by failing to make the 2021 lease payment due and counterclaimed for delinquent rent from the Garretts. Doc. 5. After the state jury trial verdict, the Stocks filed a Motion for Partial Summary Judgment, Doc. 27, arguing that the jury finding for the Stocks in state court has res judicata effect in this litigation, Doc. 28.

Because whether the Stocks or the Garretts materially breached the agreements is the essential issue in this litigation, the jury verdict constitutes a final judgment the parties are the same, and the jury trial gave the parties a full and fair opportunity to litigate the issue, this Court grants the Motion for Partial Summary Judgment, Doc. 27 subject to reconsideration if the Supreme Court of South Dakota vacates or reserves the jury verdict.

I. Facts

On June 20, 2019, the Garretts and the Stocks entered into three different agreements (Agreements):^[1] (1) a Real Estate Purchase Agreement, Doc. 30-1, (2) a Farm Lease Agreement, Doc. 30-2, and (3) a Closing/Escrow Agreement, Doc. 30-3. Doc. 32 ¶ 1. Under these Agreements, the Stocks purchased Sully County farmland from the Garretts for just over $10 million, and leased the land back to the Garretts for five years at $650,000 per year, granting the Garretts an option to repurchase the property at any time during the lease term provided all contractual conditions were met, Doc. 30-1 ¶¶ 4, 6-7,14, 22; Doc. 32 ¶¶ 3, 5; see also Docs. 30-2 to 30-3. The Garretts' attorney drafted all of these Agreements. Doc. 32 ¶ 2. Under the terms of the Agreements, the Garretts would make a single annual lease payment to their selected escrow agent, BankWest, Inc., to be distributed to RaboBank, which financed the Stocks' purchase of the property. Id. ¶¶ 4, 7.

The Garretts' leasehold interest and right to repurchase were contingent upon the Garretts paying the annual lease payment. Id. ¶ 8. Upon the payment of rent, the Garretts would enjoy peaceable and quiet title; the Stocks agreed not to sell, assign, or convey the ground other than the mortgage at RaboBank, and further agreed not to make changes to the property. Id. ¶¶ 10-12. By the terms of the agreements, the Garretts' annual lease payment was due on June 20 each year of the lease. Id. ¶ 14. The Farm Lease Agreement also provided that, in case of a default:

[Garretts] have the right to cure the default or breach upon the same being corrected upon sixty (60) days notice... .[if such] nonpayment of rent shall continue for sixty (60) days after written notice thereof is given by the Lessor to the Lessees, then this lease shall terminate at the option of the [Stocks]. . . . [A]ny notices required or permitted hereunder shall be made by the escrow agent effective upon delivery to the parties.

Doc. 30-2 at 7.

The Garretts did not pay their annual lease payment in 2021 or 2022. Doc. 32 ¶ 15. On August 27,2021, Ron Stock gave actual notice to the Garretts via certified mail, signed for by Levi Garrett, stating that the Garretts were in default for having not paid their 2021 rent in June and giving them 45 days to cure. Doc. 31 at 2-3. Shortly after sending this letter, the Stocks in September 2021 settled a lawsuit with neighboring property owners regarding a claim of encroaching fence lines. Doc. 32 ¶ 16. The Garretts argue that because notice did not come from the escrow agent and did not give them the contractual 60 days from the receipt of notice to cure their default, they were then excused from their responsibility to cure their failure to pay rent when the Stocks settled the lawsuit. Id.; Doc. 30-7.

In January 2022, the Garretts filed this lawsuit, claiming that settling of the fence line dispute deprived the Garretts of part of the land, removed the property's gates, and destroyed the property's fence constituting a breach of the three contracts.^[2] Doc. 1. The Garretts did not pay rent in 2022 either, prompting the Stocks to initiate an eviction action against the Garretts in June 2022 in the Sixth Judicial Circuit in South Dakota. Doc. 32 ¶ 17; Doc. 30-8. The Garretts claim that further breaches by the Stocks in 2022, namely plowing of fields the Garretts allegedly had already planted, excused them from paying rent in 2022. Doc. 33-6 at 7.

In December 2022, the forcible entry and detainer claim the Stocks brought in state court went to jury trial. Doc. 32 ¶ 22. After a two-day trial, the jury returned a verdict entitling the Stocks to immediate possession of the land, and a judgment of eviction was entered. Id.; Doc. 3013. The verdict form read simply: “We, the jury, duly empaneled to try the issues in this case: [] Find that the Plaintiffs are entitled to immediate possession of the land. [] √/ Yes No.” Doc. 33-5. The Garretts have appealed the jury's finding to the Supreme Court of South Dakota, and that appeal is pending. Doc. 31 at 5; Doc. 33-4.

In March 2023, the Stocks filed this Motion for Partial Summary Judgment requesting that this Court use the jury's finding in the state court proceeding to determine all but the issue of damages on the Stocks' counterclaim. Doc. 27. The Garretts oppose the motion. Doc. 31. For the reasons stated below, this Court now grants the Stocks' Motion for Partial Summary Judgment subject to reconsideration if the Supreme Court of South Dakota were to vacate or reverse the jury verdict.

II. Motion for Summary Judgment Standard

Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); McManemy v. Tierney, 970 F.3d 1034, 1037 (8th Cir. 2020). Rule 56(a) places the burden on the moving party to establish the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Id.; see also Celotex Corp, v. Catrett, 477 U.S. 317, 322 (1986). The nonmoving party must establish that a material fact is genuinely disputed by either “citing to particular parts of materials in the record” or “showing that the materials cited do not establish the absence ... of a genuine dispute[.]” Fed.R.Civ.P. 56(c)(1)(A), (B); see also Gacek v. Owens & Minor Distrib., Inc., 666 F.3d 1142,1145- 46 (8th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)).

A party opposing a properly supported motion for summary judgment “may not rest upon mere allegations or denials” in their pleading but “must set forth specific facts showing that there is a genuine issue for trial.” Gacek, 666 F.3d at 1145-46 (citing Anderson, 477 U.S. at 256); see also Moslev v. City of Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (stating that a nonmovant may not merely rely on allegations or denials). In ruling on a motion for summary judgment, the facts and inferences fairly drawn from those facts are “viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); Taylor v. Riojas, 141 S.Ct. 52, 53 n.l (2020) (per curiam); Intel Corp. Inv. Pol'v Comm, v. Sulvma, 140 S.Ct. 768, 779 (2020).

III. Discussion

The Stocks argue that the doctrine of res judicata precludes relitigation of the underlying issues, namely which party breached the Agreements. Doc. 28 at 6-7. The concept of res judicata includes both claim preclusion and issue preclusion. Taylor v. Sturgell, 553 U.S. 880, 892 (2008); Am. Fam. Ins. Grp, v. Robnik, 787 N.W.2d 768, 774 (S.D. 2010). Claim preclusion “forecloses ‘successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit[,]”' while “[i]ssue preclusion, in contrast, bars ‘successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment,' even if the issue recurs in the context of a different claim.” Taylor, 553 U.S. at 892 (quoting New Hampshire v. Maine, 532 U.S. 742 748-49 (2001)); see also Healy v. Fox, 46 F.4th 739, 745 (8th Cir. 2022). As the Supreme Court of the United States has stated: “[b]y ‘precluding parties from contesting matters that they have had a full and fair opportunity to litigate,' these two doctrines protect against ‘the expense and vexation attending multiple lawsuits, conserve judicial resources, and foster reliance on judicial action by minimizing the possibility of inconsistent decisions.'” Id. (cleaned up) (quoting Montana v. United States, 440...