First National Bank & Trust Co. of Williston v. Scherr
456 N.W.2d 531
N.D.
1990
Check Treatment

*1 BANK AND FIRST NATIONAL TRUST WILLISTON, Plaintiff OF

COMPANY Appellee,

and SCHERR, Defendant Appellant,

and individually and

Albinus Scherr d/b/a Scherr, general &

partnership, Defendants. No. 890356.

Civ.

Supreme North Dakota. Court of

June Winkjer,

Kent A. Reierson McKen- Reierson, nett, Stenehjem, Murphy & Willi- ston, plaintiff appellee. for Gassmann, Valley City, for John T. de- appellant. fendant and WALLE, VANDE Justice. appealed Pius Scherr from a district denying order his motion relief to amend from a and his motion and remand his answer. We reverse proceedings. further background The factual of this case is stated First National Bank & Trust Co. Scherr, repeated will I] [Scherr necessary to extent decide issues 29, 1983, appeal. On the First Na Company Trust tional Bank & of Williston mortgage, obtained short-term executed Scherr, A in the name of “Scherr and Gen Partnership,” signed by Pius and eral Scherr. The covered Albinus planned property upon which the Scherrs to construct a Famous “various notes of various store herewith, as follows: The total of dates $100,000.00.” equal Be these notes 8, 1983, August May 1983 and tween Scherr, Pius, exe on behalf promissory four notes with the cuted $100,000. totaling Each note stated that *2 532 29, by April concerning

was secured the 1983 mort- sues of material fact existed 26, 1983, gage. authority obligate partnership On October Pius and Albi- the mortgage pay nus executed another on the unsecured notes. property promissory and a same note for After additional in the Bank’s $100,000. promissory That note stated against partnership, action Albinus and the 26, by

that it was secured the October 1983 Pius summary moved for relief from the mortgage and that the four renewed 60(b), N.D.R.Civ.P., judgment under Rule previous notes. grounds newly on the discovered evi- 27, 1983, neglect On Pius executed an- dence producing October Bank’s promissory other response requests pro- note with the Bank for documents in $65,000 [$65,000 following for the con- duction. Pius asserted that the note] “[f]inal Recipe struction provid- on Famous Chicken.” evidence and documents which were note, Only signed by and it did not ed Pius the Bank after I indicated parties $65,000 refer to a real estate or other that the intended the note security. 29, by April to be secured 1983 mort- 29, gage: April mortgage; 1983 Pius and Albinus defaulted on the Octo- deposition testimony presi- of the Bank’s 26, $100,000 $65,- ber note and on the dent, Sorenson, Duane that he intended the brought 000 note. The Bank a foreclosure sweep up all construction ad- Albinus, against action Pius and d.b.a. by vances made the Bank to build the Fa- Scherr, 26, Scherr & on the Recipe store; mous Chicken and the direct $100,000 mortgage and on the note and $65,000 loan worksheets for the note indi- judgment obtained a foreclosure on the Fa- cating a loan classification of 25” for property. mous The Bank “real estate.” Albinus, individually then sued Pius and Scherr, Scherr & to recover on d.b.a. also moved to amend his answer to $65,000 note, contending that Pius and include counterclaims for “breach of con- tract”, personally fiduciary duty”, Albinus were liable for the bal- “breach of a “negligent misrepresentation”. ance due on that note. The defendants Pius es- answered, $65,000 contending sentially alleged parties note that the intended $65,000 was secured a real estate note to 29, anti-deficiency judgment mortgage, sought therefore the stat- and he an off- precluded suing setting judgment $99,000. utes from on the upon note after it had foreclosed The trial court concluded that the unambiguously note indicated that it was granted summary judg- The trial court unsecured and that extrinsic evidence of I, ment for the Bank. In af- parties permissi- the intent of the not summary judgment against firmed the ble. The newly court concluded that the Pius, concluding “extrinsic, that the note un- discovered evidence was cumula- tive, ambiguously indicated that it was unse- and inadmissible” and “[n]ot produce cured and therefore extrinsic evidence of nature to a different result.” The parties permissi- the intent of the was not court thus concluded that Pius failed to good reversed and remanded the sum- ble. We cause under Rule N.D.R. Civ.P., mary judgment against Albinus and the to vacate the denied concluding partnership, disputed appealed.1 is- Pius’s motions. He court, appellate Additionally, remaining In his brief to this Pius ac- there are claims against partnership the Bank knowledged bankruptcy Albinus and the that he filed for had situation, this action. In that a certification appeal. after he filed his notice of After oral 54(b), N.D.R.Civ.P., ordinarily under Rule is court, in this filed an or- necessary jurisdiction to confer on this court. lifting bankruptcy der from the the auto- Zerr, (N.D. E.g., Peterson v. stay bankruptcy matic of the code U.S.C. [11 1989). case, court, response In this the trial purpose appeal. See § for the of this Binek 362] query remaining to a as to whether Ziebarth, against partnership claims Albinus and the had “newly entitled to relief discovered contends that he is asserted evidence” and 60(b)(ii) newly under Rule some evidence of the was not (iii), argues He N.D.R.Civ.P.2 Hegg, discovered [Erdahl that, indicates newly discovered evidence which could have [Evidence when the Bank obtained the October proceeding disclosure been discovered kept mortgage, newly evidence]], it is also discovered *3 place priority in to retain over provide that Bank did clear the not the other lien claimants that Bank’s and $65,- the direct loan worksheet for the with Sorenson, president, the earlier intended 000 note before our decision in Scherr “sweep secure up” to and all that the and the worksheet was within advances to the Famous construction build production scope request of his for of doc- Recipe He property. Chicken contends uments. “thinking” that and the failure Sorenson’s produce The failure to disclose or to 1983 satisfy the cou- scope materials the of a within pled for the 25” notation “real with request or order constitutes “misconduct” direct estate” on the loan worksheet 60(b)(3), meaning within the of F.R. Rule $65,000 inference the note raises an that Inc., Cryovac, Civ.P.3 Anderson v. 862 on the advance the note was construction Cir.1988); (1st F.2d 910 Rozier v. Ford property and Famous Co., (5th Cir.1978). In Motor 573 F.2d 1332 mortgage. the 1983 secured “misconduct,” order to the fail constitute argument contends that his the ure to disclose need not intentional. be prior upon appeal was based his erroneous Anderson, swpra. moving party The must understanding that the first demonstrate “misconduct” clear the note when in mortgage secured convincing and evidence must then and fact that note to the Bank intended prevented that “misconduct” that April 29, losing fully party fairly preparing from and argues summary judgment He that thus Rozier, presenting supra. its case. or against improper him was because there 60(b)(2) Unlike Rule which has con fact been disputed issues of material re- were require newly to of strued discovered evi garding parties. the intent probably it dence be such would A for relief un- motion from result, change 60(b)(3) Rule has not N.D.R.Civ.P., 60(b), der is addressed Rule require in been construed withheld court and to the discretion the trial will of a nature formation to be as to alter an appeal not on absent abuse be disturbed Anderson, Rozier, supra; supra. result. Bank of discretion. Federal Land St. Instead, focus is on whether or not the Bagge, Paul N.W.2d losing prevented the withheld information an of discretion as We have defined abuse fully or party fairly preparing and unreasonable, arbitrary, an or unconsciona- presenting case. its by the Id. ble attitude trial court. dispute The Bank does not is Pius did not clear that produce diligence all of failed to the direct loan worksheet due to discover exercise severed, any following proceeding claims action or for the indicated that those were been (ii) newly against on the reasons: evidence Pius and remained "front ... discovered diligence been for trial.” Whether we treat trial due could not have burner 54(b) as a Rule in time to a new trial court’s statement certification discovered move for Lankin, (iii) 59(b); (whether State Bank under fraud denom- [Vorachek Rule Citizens ], extrinsic), misrepresenta- or as a severance of the inated or intrinsic 21, N.D.R.Civ.P., tion, against par- Pius under Rule or action other misconduct of an adverse Wallace, ty-” Paul v. Land Saint [Federal (N.D.1985)], appeal is 366 N.W.2d 444 N.D.R.Civ.P., 60(b)(iii), Rule is identical properly us. before 3. F.R.Civ.P., 60(b)(3), look to Rule N.D.R.Civ.P., 60(b)(ii) (iii), provides: Rule construing federal relevant federal caselaw E.g., upon guidance construing just, are rule for our rule. such terms as "On motion Bratcher, (N.D. party’s legal Gajewski relieve a or a the court representative 1976). or from a final order language decided and does uous until after of a contract [Production Foss, dispute that the worksheet was within Credit Ass’n (N.D.1986)], extrinsic evidence is ad- scope request production. Pius’s missible an action to reform a written therefore conclude evidence We Ell, instrument. Ell v. clearly convincingly establishes (N.D.1980). Extrinsic evidence is admissi- produce the Bank failed to the direct loan only alleged ble not mis- establish and that the Bank’s failure to worksheet take but also to correct the instrument to produce constitutes “misconduct” within parties. conform to the intention of the Id. 60(b)(iii), meaning of Rule N.D.R.Civ.P. Although in I we held that inquiry next or not the Our whether unambiguous note was clear and prevented fully Pius from nondisclosure on its face and therefore extrinsic evidence fairly preparing presenting case. his permissible was not to contradict the clear I, In Scherr was that the note, unambiguous terms of that ambiguous note was as to whether *4 permissi- nevertheless extrinsic evidence is 26, by it secured ble to that the note did not reflect the case, In this his fraud, parties true intent of the because of $65,000 note that the was a construction mistake, a mutual or a unilateral mistake 29, by April advance which was secured by Pius which the Bank knew about. Id. which stated that it secured parties question The intent of the is a of herewith, *5 (N.D.1988); Biby, Federal Asbridge, Paul

Land St. v. (N.D.1987); Production Cred- Foss, 391 N.W.2d 622

it Ass’n of

(N.D.1986)], a'gree go Pius should have

at the merits of the case.

Construing proposed Pius’ amended is,

pleading as one “reformation”

course, gentler being kinder and than even could

the author of that exhortation have

anticipated, light policy but the sound 60(b)(3) light

undergirding Rule against summary gen-

our bias particular, con-

eral nondisclosure

cur. allegations specific facts him the Bank We also note that unilateral mistake about which prayer did indicating relief knew. specifically request mis- a mutual mistake or unilateral reformation, his breach of may take which the other knew about sought "such and further contract claim other issue. sufficient to make reformation an Smith proper.” just and relief as Although Court deem [the] Bear, (2d Cir.1956); Roeder v. 237 F.2d requested have an Roeder, (1953); Cal.App.2d P.2d 581 equitable equitable remedy, a district (1969); Hills, Idaho P.2d 981 Nab remedy

jurisdiction provide a where none C.J.S., Instruments, 75§ see 76 Reformation of sufficiently pleadings at law exists whenever Onstad, (1952); see MacMaster give party’s right relief notice (N.D.1957) [pleadings did not seek refor- Harring judgment. Harrington v. demand for allege specific entitling the mation or facts ton, (N.D.1985); A & A Metal 365 N.W.2d 552 pleader reformation were insufficient]. I-S, Inc., Bldgs, v. notes “various of various dates inappropriate fact summary which is as The total of those notes to follows: party and the who seeks refor- $100,000.00.” equal The worksheet indi- clearly convincingly prove mation must that the cates note was 25” that the written contract does not state the supports meant which “real estate” parties. intent of the Id. theory Although Pius’s case. The worksheet have been the cata- Bank asserts that the notation on the work- lyst entirely approach for an different to necessarily sheet “would not mean the col- this case in which the evidence of the intent estate”, lateral real whether the work- parties of the would be admissible. Under sheet, itself, by is cumulative or irrelevant circumstances, these we conclude that the significance misconstrues its because prevented failure to disclose the worksheet timely discovery could led of have fully fairly preparing Pius from or president, the intent of the Bank’s Soren- presenting his case. We therefore con- son, keep as well as the Bank’s decision to clude the trial court abused its discre- place. denying tion Pius’s motion to vacate the support argu- There is evidence to judgment. by note ment that the was secured We reverse the order of the district court and did not proceedings and remand for consistent parties of the reflect the intent because opinion with this with leave for Pius to mistake, a mutual or a mistake amend his answer.5 Fraud, which the Bank knew about. mutu- mistake, al one or unilateral mistake ERICKSTAD, C.J., and GIERKE and party party the other about which knows MESCHKE, JJ., concur. grounds are for reformation of a written LEVINE, Justice, concurring specially. 32-04-17, contract under Section N.D.C.C.4 Although join opinion only extrinsic evidence not be I in this are because we unambig- dealing summary judgment used to contradict the clear and with and not a 32-04-17, N.D.C.C., provides: 4. Section express that intention so far as it can be done rights prejudice acquired by without third “Revision contract or mistake.— for fraud When, persons good through faith and for value." fraud or mutual mistake of parties, of one or a mistake express opinion 5. no about suspected, time knew or other at the sufficiency proposed plead- of Pius’s amended truly express written does not contract ing, alleges specific parties, may we note that it facts to state intention of the be revised on application party aggrieved as to either a mutual mistake or a of a so agree the work on the merits. trial and was ERICKSON, have been disclosed individually sheet should Charlene Slind consti- this nondisclosure not. Whether North Dakota and on Behalf depends whether it Bureau, misconduct on tutes Compensation Plain- Workers fully pre- fairly prevented Appellant, tiff and presenting his Pius could case. paring deposed president and have the bank SCOTSMAN, INC., Defendant “feeling” learned his Appellee. the first mort- note was reviewing He didn’t and were we gage. No. Civ. 890381. motion, I post-trial would affirm trial Supreme Dakota. Court North ground that other court’s decision on the same would have revealed June the nondisclosed work sheet facts summary But failed reveal. because traditionally has been disfavored trend, believe, softened, [though this see, e.g., First Nat’l Bank & Trust Co. of Jacobsen, Williston Kocourek, (N.D.1988); Gress (N.D.1988); Northwestern Savings Loan Ass’n Federal &