Opinion
No. 22642
Considered On Briefs On August 25, 2003
Opinion Filed October 1, 2003
Appeal From The Circuit Court Of The Fifth Judicial Circuit Roberts County, South Dakota. Honorable Jon S. Flemmer Judge.
JEFFREY T. SVEEN, JULIA M. DVORAK of Siegel, Barnett and Schutz, L.L.P. Aberdeen, South Dakota Attorneys for plaintiff and appellee.
EUGENE PAULSON Heartland Organic Foods, Inc. Rosholt, South Dakota, Pro se.
[¶ 1.] Eugene Paulson (Paulson), acting pro se on behalf of himself and Heartland Organic Foods, Inc. (Heartland), appeals from a judgment entered against Paulson and Heartland. Paulson and Heartland also appeal the dismissal of their counterclaim against Sunflour Railroad, Inc. (Sunflour).
FACTS
[¶ 2.] Paulson and Heartland own property adjacent to a railroad right-of-way. Paulson and Heartland's grain elevator encroaches on the right-of-way. Prior to July 2000, Soo Line Railroad owned the right-of way. Paulson and Soo Line had a lease agreement that allowed Paulson and Heartland to leave the elevator on the right-of-way. In July 2000, Sunflour purchased the right-of-way via Quit-Claim Deed. On March 16, 2001, Sunflour notified Paulson and Heartland that the lease with Soo Line was not binding upon Sunflour and that the elevator must be removed. Sunflour informed Paulson and Heartland that until the elevator was removed, Sunflour would charge $500 per month rent. Paulson and Heartland refused to remove the elevator or pay rent and Sunflour brought suit to force removal and payment of damages plus pre-judgment interest in connection with rent.
[¶ 3.] Paulson and Heartland brought a counterclaim alleging that Sunflour owed rent of $500 per month because Sunflour was using a siding track that encroached on their property.
[¶ 4.] The trial court entered judgment in favor of Sunflour for $9,000 for rent plus pre-judgment interest and ordered Paulson and Heartland to remove their elevator from Sunflour's property. The trial court found that it did not have jurisdiction to enter a judgment in favor of Paulson and Heartland on the counterclaim for the reasons stated in Issue 2.
Because the record available for our review assumes joint ownership and joint liability, and Paulson and Heartland argue nothing to the contrary, we assume judgment was properly entered against both.
[¶ 5.] Paulson and Heartland raise several issues on appeal. Because our standard of review for this case has been significantly restricted by the state of the record, we present the issues as:
1. Whether the circuit court's findings supported the judgment against Paulson and Heartland.
2. Whether the circuit court's findings supported dismissal of the Defendants' counterclaim for lack of jurisdiction.
3. Whether Sunflour and its attorney committed fraud by raising the issue of federal preemption and by attempting to enforce the circuit court's judgment.
The circuit court is affirmed on Issue 1, reversed on Issue 2 and we decline to reach Issue 3.
STANDARD OF REVIEW
[¶ 6.] Paulson failed to order a transcript of the circuit court proceedings. It is well settled that the appellant bears the responsibility of presenting an adequate record on appeal. Specialty Mills, Inc. v. Citizens State Bank, 1997 SD 7, ¶ 16, 558 N.W.2d 617, 623, n6 (citing Baltodano v. North Cent. Health Serv., Inc., 508 N.W.2d 892, 894-95 (SD 1993)). By failing to order the transcript in a timely manner, the appellant waives the right to a transcript. Id. "Where the record contains no transcript, the record on appeal is confined to those pleadings and papers transmitted from the circuit court." Selway Homeowner's Association, Inc. v. Cummings, 2003 SD 11, ¶ 15, 657 N.W.2d 307, 312 (citing Baltodano, 508 N.W.2d at 894). Finally, "[w]hen confronted with incomplete records, our presumption is that the circuit court acted properly." Specialty Mills, Inc., 1997 SD 7, ¶ 16, 558 N.W.2d at 623, n6.
[¶ 7.] Our review is further limited because Paulson also failed to propose findings of fact and conclusions of law and failed to object to Sunflour's proposed findings of fact and conclusions of law. The Court is now "significantly limited `to the question whether the findings support the conclusions of law and judgment.'" Selway Homeowners Association, 2003 SD 11, ¶ 14, 657 N.W.2d at 312 (quoting Huth v. Hoffman, 464 N.W.2d 637, 638 (SD 1991)).
[¶ 8.] 1. WHETHER THE CIRCUIT COURT'S FINDINGS SUPPORT THE JUDGMENT AGAINST PAULSON AND HEARTLAND.
[¶ 9.] As a threshold matter, we note that Paulson has appeared pro se throughout these proceedings on behalf of Heartland and himself. In South Dakota, a director, officer or shareholder of a corporation who is not a licensed attorney is not permitted to appear pro se to represent a corporation. Wold Family Farms, Inc. v. Heartland Organic Foods, Inc., 2003 SD 45, ¶ 27, 661 N.W.2d 719, 726, n4 (citing Rosebud Federal Credit Union v. Mathis Implement, Inc., 515 N.W.2d 241, 244 (SD 1994) (Miller, C.J., concurring specially)). Although he was entitled to appear pro se on his own behalf, as an officer and shareholder for Heartland, Paulson should not have been permitted to represent the corporation. Heartland was therefore technically in default for failure to appear. See SDCL 15-6-4(a); 15-6-55(a); 15-6-55(b). Had Sunflour filed the statutorily mandated notice of default, the circuit court could have entered a default judgment against the corporation. Id. Neither the circuit court nor the parties appear to have been aware that Paulson could not represent Heartland, and therefore this issue was not before the circuit court.
[¶ 10.] This Court has not been presented with the question of how to proceed in this scenario. Other courts addressing the issue have refrained from allowing the corporation to benefit from the wrongful representation. See e.g. Jardine Estates, Inc. v. Koppel, 24 N.J. 536, 133 A.2d 1 (1957). We agree with this view. Remanding this case or vacating the judgment would permit Heartland and Paulson to re-litigate these issues and would be a waste of judicial resources. Under the facts of this case, we hold that the parties are now bound by the prior proceedings and we will proceed to the merits of the appeal.
We urge circuit courts and members of the bar to be aware of this common law rule so that in the future, corporations are adequately represented.
[¶ 11.] The circuit court found that Sunflour purchased a railroad right-of-way running through Victor, South Dakota from Soo Line Railway. Soo Line Railway had a lease with Defendants which allowed Defendants' grain elevator to encroach on Soo Line's property. The court found that Sunflour was not bound by that lease and that on March 16, 2001, Sunflour notified Paulson that the elevator had to be removed from the property. Sunflour further advised that until the elevator was removed, Sunflour would charge rent of $500 per month. The court concluded that the notice became effective on May 1, 2001, the first day of the month following thirty days from the notice. See SDCL 43-8-8. Having found that Sunflour owned the land, that the elevator was on Sunflour's land, that Sunflour was not bound by the lease between Soo Line and Defendants, and that Paulson and Heartland had notice, the court properly supported its conclusion that Sunflour was entitled to rent and pre-judgment interest.
[¶ 12.] The circuit court also held that damages by way of rent were an inadequate remedy because of the continuing trespass. This supports the court's order that Paulson and Heartland remove the elevator.
[¶ 13.] The trial court is affirmed on Issue 1.
[¶ 14.] 2. WHETHER THE CIRCUIT COURT'S FINDINGS SUPPORTED DISMISSAL OF PAULSON AND HEARTLAND'S COUNTERCLAIM FOR LACK OF JURISDICTION BASED ON THE DOCTRINE OF PREEMPTION.
[¶ 15.] The trial court concluded that the Surface and Transportation Board (STB) had exclusive jurisdiction over Paulson and Heartland's counterclaim pursuant to 49 U.S.C. § 10501. The statute provides in part that the STB has exclusive jurisdiction over the "construction, acquisition, operation, abandonment, or discontinuance of a spur[.]" 49 U.S.C. § 10501(b)(2) (emphasis supplied). Based on its finding that, "Defendant's counterclaim for rent . . . if allowed, could force the Plaintiff to abandon its use of a spur[,]" the trial court held that it did not have jurisdiction to entertain the counterclaim.
[¶ 16.] The state of the record, the trial court's findings and the parties' briefs offer no guidance on this issue. Paulson and Heartland offer no applicable authority for their argument that the trial court erred. Likewise, Sunflour offers only a very general statement of law from one case to support the assertion that the trial court properly found preemption. A review of 49 U.S.C. § 10501 and case law concerning the statute raises questions as to whether the trial court properly found its jurisdiction preempted based on the doctrine of preemption.
[¶ 17.] The jurisdiction granted to the STB in 49 U.S.C. § 10501 is both exclusive and preemptive. Courts have consistently held that the preemption clause of subsection (2) has a broad scope. See e.g. Dakota, Minnesota Eastern RR Corp. v. South Dakota, 236 F. Supp.2d 989 (DSD 2002); City of Auburn v. United States, 154 F.3d 1025, 1030 (9th Cir 1998); Wisconsin Central Ltd. v. City of Marshfield, 160 F. Supp.2d 1009, 1013 (WDWis 2000). Despite its breadth, the jurisdiction of the STB does not foreclose every conceivable state claim. It is generally held that the exclusive and preemptive jurisdiction granted to the STB is over attempts to impose economic regulation on rail transportation. See e.g. Cedarapids, Inc., v. Chicago, Central Pacific R.Co., 265 F. Supp.2d 1005, 1011 (ND Iowa 2003). The holdings are supported by the statute, which provides in part that, "the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law." 49 U.S.C. § 10501 (b)(2). Therefore, the question before the court was whether allowing a state law claim for rent, which may or may not lead to abandonment of a track, would constitute "regulation" of the railroad. This question was presumed affirmatively rather than supported or answered specifically in the court's findings of fact and conclusions of law.
[¶ 18.] The statute does not define the term "regulate," however, Black's Law dictionary defines it as "the act or process of controlling by rule or restriction." Black's Law Dictionary 1289 (7th ed 1999). The court's finding that imposition of rent "could" force Sunflour to "abandon" the track is insufficient to establish that imposition of judgment on a state law claim for rent constitutes "regulation" under 49 U.S.C. § 10501. Having raised the issue of preemption, it was incumbent upon Sunflour to support the assertion. See e.g. Eldridge v. City of Greenwood, 331 S.C. 398, 503 S.E.2d 191 (1998) (the party asserting preemption bears the burden of proof). Sunflour failed to meet its burden either here or below. The trial court's single finding on this issue is insufficient to support its conclusion of preemption and therefore the issue must be remanded for the court to make the appropriate findings.
[¶ 19.] The trial court is reversed on Issue 2.
[¶ 20.] 3. WHETHER SUNFLOUR AND ITS ATTORNEY COMMITTED FRAUD BY RAISING THE ISSUE OF FEDERAL PREEMPTION AND BY ATTEMPTING TO ENFORCE THE CIRCUIT COURT'S JUDGMENT.
[¶ 21.] For the first time on appeal, Paulson alleges that Sunflour engaged in fraudulent activity by raising the issue of federal preemption under 49 U.S.C. § 10501(b) at trial and by attempting to enforce the circuit court's judgment. This Court does not decide issues which are raised for the first time on appeal. Fullmer v. State Farm Ins. Co., 514 N.W.2d 861, 866 (SD 1994) (citing Hawkins v. Peterson, 474 N.W.2d 90, 95 (SD 1991) (additional citations and quotations omitted)). Therefore, we decline to reach Issue 3.
[¶ 22.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and MEIERHENRY, Justices, concur.
[¶ 1.] At issue in this appeal is the failure of the trial court to determine a value of the husband's insurance business when dividing the marital estate in the divorce action. We reverse and remand.
[¶ 2.] Diane Guthmiller filed a divorce action against Kevin Guthmiller. The main issue for the trial court was valuation and distribution of the marital estate, which consisted of a comprehensive list of 286 marital assets and debts. The parties agreed that the divorce would be granted on grounds of irreconcilable differences. They also agreed to joint legal custody of the three children with Diane having physical custody. Neither party sought alimony. The trial court placed a value on each asset and debt except for one of the assets — Kevin's insurance business known as "Guthmiller Insurance."
[¶ 3.] Guthmiller Insurance consists solely of Kevin as a self-employed insurance agent for American Family Insurance. As an agent for American Family, Kevin only owns his office furniture while American Family owns the insurance policies, the office equipment and supplies of the business. He also depreciates his personal vehicle as a business expense. His source of income from the business is based on the commissions he receives from the sale of insurance policies. He receives commissions on premiums for new policies he sells and commissions from premiums collected from renewals of insurance policies sold in prior years. During a previous eight-year period, the annual renewal premiums ranged from $42,800 to $68,000. His annual net earnings from the business from new and renewal premiums averaged $30,000 a year.
From 1994 to 2001, the renewal premiums he collected were as follows: Year Amount of Renewal Income 1994 $42,800.00 1995 $45,600.00 1996 $49,000.00 1997 $54,900.00 1998 $58,000.00 1999 $61,000.00 2000 $68,000.00 2001 $68,000.00 Eight year total $447,300.00.
[¶ 4.] Neither party presented expert testimony of the value of the insurance business. Diane testified that she estimated the value of Guthmiller Insurance at $62,177.80. She based her estimate on the average annual renewal premiums for the past eight years. Kevin, on the other hand, valued the business at zero. The only other testimony concerning value was from a representative of American Family who testified that in the event the contractual relationship between American Family and Kevin ended, the company would pay Kevin $33, 873.01 for the renewal premiums over a five or ten-year period.
[¶ 5.] At the conclusion of the testimony, the trial court determined that the marital estate was to be divided equally between the parties. In its findings, the trial court methodically valued each item and awarded the item to one of the parties, except for the insurance business. The court noted that neither party had presented expert testimony as to the value of Kevin's insurance business. Nevertheless, without placing a value on the insurance business, the trial court distributed 40 percent of Kevin's gross renewal income from Guthmiller Insurance for the next ten years to Diane, 60 percent to Kevin. Kevin appeals claiming that the trial court erred in its valuation and distribution of the business.
ISSUES
1. Whether the trial court erred in its valuation and distribution of the marital estate.
DECISION
[¶ 6.] This Court has previously held that failure to value a marital asset constitutes an abuse of discretion and is reversible error. As we stated in Guindon v. Guindon "[a] trial court must place a value upon all of the property held by the parties and make an equitable distribution of that property." 256 N.W.2d 894, 897 (SD 1977). A trial court's failure to place a value on a marital asset is an abuse of discretion. Id. "Failure to place a value on the property of the parties for purposes of equitable distribution is reversible error." Endres v. Endres, 532 N.W.2d 65, 68 (SD 1995) (citations omitted). Here, the trial court should have made a specific finding regarding the value of Guthmiller Insurance before making an equitable distribution. The court merely surmised that the business was worth "something" and then proceeded to distribute 40 percent of the future renewal premiums for the next ten years to Diane.
In valuing the business, the trial court stated on the record:
The insurance business, there's a dispute exactly how that is valued. Obviously, if it's a business that brings in a lot of return every year, which this clearly does, it shows that the renewals bring in the vicinity between forty and fifty thousand dollars every year, that has a clear value of some kind going into the future. I have no expert testimony upon which I can value that insurance business. I'm going to require that in full payment of the interest in that insurance business, which is a marital asset to be divided here, that for a period of 10 years that Mr. Guthmiller will pay to the plaintiff 40 percent of those renewals each year. That gives him some compensation for the activity that will be used in keeping those renewals going.
[¶ 7.] In this case, by not placing a value on the business, the trial court has created inequity in the property division contrary to its stated intent of dividing the marital estate one half to each party. For example, the court's manner of distribution is likely to result in substantial cash payments from the business to Diane over the next 10 years. Assuming the business collects renewal premiums commensurate with those collected over the last eight years, Kevin's gross renewals would be $50,000 to $60,000 annually. Forty percent of that would result in an annual payment to Diane of over $20,000 — a substantial amount for a business, which only nets Kevin $30,000 a year. Furthermore, the court still assumed that Kevin would continue to net $30,000 for purposes of child support calculation albeit he would be paying Diane 40 percent of his gross renewals. Kevin additionally claims that the trial court distributed the insurance business twice — once when the court awarded Diane forty percent of the gross renewals and the second time when it awarded him $33,873.01 as a retirement account based on those same renewals.
The renewals represented 59% of total receipts in 1999, 76% in 2000 and 85% in 2001.
[¶ 8.] The trial court abused its discretion by not assigning a value to the insurance business. We reverse and remand for the trial court to determine the value of Guthmiller Insurance and equitably divide the property with the supplemented value. The value should be based upon the evidence or within a reasonable range of values presented to it. DeVries v. DeVries, 519 N.W.2d 73, 76 (SD 1994). The trial court may set the value based on the current record or has the discretion to allow the parties to present additional evidence.
[¶ 9.] We have reviewed the other issues presented and find them to be without merit.
[¶ 10.] The parties' request for appellate attorney fees is denied.
[¶ 11.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and ZINTER, Justices, concur.