White v. T.P. Motel, L.L.C.
2015 N.D. LEXIS 148
| N.D. | 2015Background
- T.P. Motel, an LLC co-owned by Ross and Susan White, entered a contract for deed in Feb 2012 with Glen and Loretta White requiring $2,500 monthly payments starting Mar 15, 2012; some payments were missed early but resumed in June 2012.
- Susan and Ross separated in Jan 2013; Susan moved to California and filed for divorce; payments missed in Jan–Feb 2013, resumed March 2013; Glen and Loretta served notice of default Feb 2013 and sued to cancel the contract when default was not cured.
- Both Ross (as manager) and Susan (individually and purportedly on behalf of T.P. Motel) filed answers; Ross’s answer admitted default and sought cancellation, while Susan filed an answer plus counterclaims alleging fraud, collusion, and breach of fiduciary duty by Ross and Glen/Loretta.
- The North Dakota district court denied Susan’s motion to intervene, relying on California divorce-court orders concerning management, and later granted plaintiffs’ motion for judgment on the pleadings, cancelling the contract; the court excluded Susan’s filings because she was not permitted to intervene.
- The North Dakota Supreme Court reversed: it held the district court improperly treated matters outside the pleadings as a Rule 12(c) motion (requiring conversion to summary judgment with Rule 56 procedures) and erred in denying intervention as a matter of right under N.D.R.Civ.P. 24(a)(2).
Issues
| Issue | Plaintiff's Argument (Glen & Loretta White) | Defendant/Intervenor's Argument (Susan White / T.P. Motel) | Held |
|---|---|---|---|
| Whether the district court properly granted judgment on the pleadings under N.D.R.Civ.P. 12(c) | Pleadings (including T.P. Motel’s answer admitting default) establish no genuine issue and entitle plaintiffs to cancellation | Susan asserted factual disputes (fraud/collusion, payments, account records) and submitted affidavits and exhibits outside the pleadings | Court reversed: district court relied on matters outside pleadings and should have treated motion as summary judgment under Rule 56 and complied with Rule 56 notice/timing requirements |
| Whether Susan White could intervene as a matter of right under N.D.R.Civ.P. 24(a)(2) | California orders gave Ross management; intervention would prejudice his management rights and Full Faith and Credit required deference to CA court | Susan, 50% LLC member, has an interest in the subject matter, would be impaired by cancellation, and alleged Ross inadequately represented T.P. Motel (collusion, improper payments) | Court held Susan satisfied Rule 24(a)(2) elements and district court erred denying intervention; remanded to allow her to intervene for claims not tied to CA divorce |
| Whether district court was required to consider existing out‑of‑state (California) orders when ruling on intervention and representation adequacy | Plaintiffs and Ross argued CA divorce court controls management and the ND court must give it full faith and credit | Susan argued CA orders did not extinguish her membership interest or preclude her from intervening to protect non‑marital claims and LLC interests | Court stated it would not disturb CA court’s jurisdiction over marital issues but found district court misapplied Full Faith and Credit to bar intervention without addressing adequacy of representation or taking allegations as true |
| Whether Susan’s counterclaims/claims based on alleged fraud and mismanagement could proceed in ND action after intervention | Plaintiffs sought only cancellation; argued T.P. Motel (via Ross) conceded default so no need for further adjudication | Susan sought to litigate fraud/collusion and fiduciary‑duty issues impacting the LLC’s defense to cancellation | Court remanded: Susan may intervene and pursue counterclaims and other non‑divorce-related allegations; CA divorce court remains the forum for marital claims |
Key Cases Cited
- Kouba v. State, 687 N.W.2d 466 (N.D. 2004) (standard of review for Rule 12(c) judgment on the pleadings)
- Fisher v. Fisher, 546 N.W.2d 354 (N.D. 1996) (liberal construction of Rule 24 and review standards for intervention)
- Chiglo v. City of Preston, 104 F.3d 185 (8th Cir. 1997) (elements required for intervention of right under Fed. R. Civ. P. 24(a)(2))
- United States v. Union Elec. Co., 64 F.3d 1152 (8th Cir. 1995) (interpretation of the required ‘‘interest’’ for intervention)
- S.E.C. v. Flight Transp. Corp., 699 F.2d 943 (8th Cir. 1983) (describing the ‘‘interest’’ test as a practical guide to include concerned parties)