Larson v. Western Underwriters, Inc.

Supreme Court of South Dakota · 1958 · Corporations

87 N.W.2d 883 (1958)

Updated August 22, 2026

CorporationsPiercing the corporate veilAlter egoContract settlementEquitable relief from accelerationbusiness conduitcorporate entitypersonal liability

Facts

Plaintiffs bought a house from Western Underwriters, Inc. under a contract for deed requiring monthly payments, while the seller agreed to pay taxes and insurance and add them to the principal balance. The corporation had no office or bank account, its finances were handled entirely by defendant Jacobson individually, and its only assets were equities in three homes. Plaintiffs later learned that a recorded mortgage on the property was in default, although the contract for deed did not mention the mortgage, and they then sought a receiver and damages. During the litigation Jacobson obtained Mr. Larson's signature on a written statement about settlement, but it ended by stating the parties would see their attorneys to draw the necessary papers.

Issue

Whether the signed settlement statement was a binding agreement, whether plaintiffs' missed May payment and unpaid assessment put them in default so as to justify foreclosure, and whether the court could disregard the corporate entity and hold Jacobson personally liable. Also at issue was whether appointment of a receiver was proper given the corporation's handling of plaintiffs' payments and financial condition.

Rule

Whether an informal agreement expected to be reduced to writing becomes binding immediately or only upon later execution depends on the parties' intent as shown by the facts and circumstances. A court may disregard the corporate entity, for purposes of determining the rights and liabilities of the parties in the case, when the corporation is merely the alter ego or business conduit through which a person conducts personal business. Equity may refuse enforcement of an acceleration clause where the default was caused by inequitable conduct of the party seeking acceleration, and may also relieve against an unintentional, technical default without prejudice.

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In Omaha, Nina Patel and Owen Mercer are litigating over a failed home-renovation venture. During a meeting, they sign a handwritten note stating that Owen will transfer one lot, Nina will dismiss "some claims," and "our lawyers will prepare the final settlement papers covering the remaining terms and releases."

If Owen later argues that the handwritten note itself ended the lawsuit, what is the strongest argument against enforcement of the note as a binding settlement?

Explanation. Whether an informal agreement expected to be reduced to writing is binding immediately depends on the parties' intent as shown by the facts and circumstances. A writing that contemplates later necessary papers and leaves substantial matters unresolved is merely preliminary, not a complete binding agreement.