911 N.W.2d 296
N.D.2018Background
- Alerus loaned Diverse Energy Systems over $15 million; Diverse defaulted and filed bankruptcy in Sept. 2015. Erwin signed personal guaranties capping his exposure at $4 million.
- Alerus sued Erwin in May 2016 for breach of the guaranties and unjust enrichment, seeking payment based on Diverse’s indebtedness.
- Alerus moved for summary judgment Feb. 28, 2017, submitting evidence of unpaid principal and interest; Erwin opposed and submitted an affidavit asserting he was fraudulently induced to sign the guaranties.
- Erwin sought to amend his answer after the summary judgment hearing (May 26, 2017) to add fraud and related counterclaims; the district court treated the motion as denied and granted summary judgment for Alerus, entering judgment (later amended) for $5,265,653.09.
- The district court concluded Erwin’s affidavit contained inadmissible hearsay and that his proposed fraud claims were unsupported by admissible evidence; it also denied a Rule 56(f) continuance for additional discovery about application of collateral-sale proceeds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court abused discretion by denying Erwin’s motion to amend answer after summary-judgment briefing | Alerus: court action equated to denial; amendment would be futile because unsupported | Erwin: timely moved to amend; fraud claim could be a full defense; court failed to rule and preemptively rejected fraud | Denial affirmed: amendment was futile because proposed fraud claims lacked admissible evidence and would not survive summary judgment |
| Admissibility/weight of Erwin’s affidavit alleging Compton told Diverse’s CFO guaranties were not enforced | Alerus: affidavit is hearsay and insufficient to create genuine fact issue | Erwin: statements are operative facts or party admissions and not hearsay; offered to show inducement, not truth of collateral matter | Court correctly excluded/discounted affidavit as inadmissible hearsay or unsupported double-hearsay; no admissible evidence created a genuine dispute |
| Whether district court abused discretion by denying continuance under N.D.R.Civ.P. 56(f) to conduct discovery about sale proceeds applied to debt | Alerus: provided promissory notes and calculations; Erwin failed to identify with specificity needed facts or timely seek discovery | Erwin: proceeds application is solely in Alerus’ control and could reduce damages; settlement talks delayed discovery | Denial affirmed: Erwin delayed serving discovery, did not identify specific needed facts or show why they weren’t obtained, and guaranties did not obligate Alerus to exhaust collateral first |
| Whether omission of issues from notice of appeal bars review | Alerus: procedural omission; issues not properly before court | Erwin: raised appellate issues | Held: failure to list issue in notice of appeal does not preclude review; court considered merits where appropriate |
Key Cases Cited
- Yesel v. Brandon, 867 N.W.2d 677 (N.D. 2015) (motion to amend reviewed for abuse of discretion)
- Darby v. Swenson Inc., 767 N.W.2d 147 (N.D. 2009) (proposed amendment after discovery and pending summary judgment is futile unless supported by substantial evidence)
- Alerus Fin., N.A. v. Marcil Grp. Inc., 806 N.W.2d 160 (N.D. 2011) (Rule 56(f) requires specificity about needed discovery)
- Poppe v. Stockert, 870 N.W.2d 187 (N.D. 2015) (party invoking Rule 56(f) must identify particular information sought and explain how it would preclude summary judgment)
- Markgraf v. Welker, 873 N.W.2d 26 (N.D. 2015) (hearsay is generally inadmissible on summary judgment)
- Burk v. State, 890 N.W.2d 535 (N.D. 2017) (denial of Rule 56(f) continuance reviewed for abuse of discretion)