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BURNELL OLESEN AND
MARY E. OLESEN,

Plaintiffs and Appellees,
v.
TOWN (CITY) OF HURLEY,

Defendant and Appellant.

[2004 SD 136]
South Dakota Supreme Court
Appeal from the Circuit Court of
The First Judicial Circuit
Turner County, South Dakota

Hon. David R. Gienapp, Judge

SAMUEL M. GOODHOPE of
Moore, Rasmussen, Kading, and Kunstle
Sioux Falls, South Dakota
Attorneys for plaintiffs and appellees.

TIMOTHY W. BJORKMAN of
Bjorkman & Fink
Bridgewater, South Dakota
Attorneys for defendant and appellant.

Considered on Briefs on June 1, 2004
Opinion Filed 12/29/2004

#22934 ECKRICH, Circuit Judge
[¶1.] City of Hurley (City) appeals 1) the trial court's determination that it was not entitled to summary judgment on the issue of sovereign immunity and 2) the trial court's grant of partial summary judgment to Burnell and Mary E. Olesen (Olesens) holding that City's operation of a restaurant was an ultra vires act. We affirm.
FACTS
[¶2.] Olesens operated Little Philly's Café in Hurley, South Dakota from the mid-1980s until 1998. From 1995 until this lawsuit commenced in 1998, the City sold food within the confines of the Hurley Municipal Bar. [1] Little Philly's and the bar were the only two competing food service establishments in Hurley.[2] City's restaurant served alcohol; whereas Olesens' did not.
[¶3.] The parties co -existed peacefully together until 1995 when City expanded its food preparation and service facilities. The expansion allowed City to offer full course meals. City's menu included lunch and supper - offered six days a week - featuring steaks, salads, potatoes, a variety of hot sandwiches, various appetizers, and other hot food. The expansion of City's menu was a substantial departure from its past offerings of potato chips, chislic, and snack food.
[¶4.] On April 28, 1998, Olesens filed a complaint against City alleging City's operation of its restaurant was an ultra-vires act that unfairly competed with their business. City denied the allegations in the Olesens' complaint. At this time, City was insured with EMC Insurance Company (EMC).
[¶5.] Thereafter, on March 25, 2000, the trial court granted Olesens' motion for partial summary judgment determining that as a matter of law City's service of food in its restaurant was an ultra-vires act. However, the question of damages was left for a jury determination. Following a lengthy hiatus, the case was scheduled for a jury trial to commence on April 2, 2003.
[¶6.] On March 10, 2003, three weeks before trial, City filed a motion for summary judgment.[3] City's summary judgment motion, filed after five years of litigation, alleged that City was immune from liability pursuant to SDCL 21-32A-1 and 3. This was the first time the sovereign immunity defense was raised. The only evidence presented by City in support of its motion for summary judgment was an affidavit from the City Finance Officer Tracy Hummel. This affidavit provided in pertinent part: "The City of Hurley received a letter from EMC, our insurance company, dated March 29, 2000, in which EMC informed the City it was withdrawing its insurance defense and any potential indemnity on the Olesens' claim for the reason that the trial court . . . had granted the Olesens summary judgment as to liability on the grounds that the City's conduct was ultra-vires as a matter of law.

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