Sargent County Bank v. Wentworth

BANK, SARGENT COUNTY Appellee,

Plaintiff and Beth

John WENTWORTH Wentworth, Defendants

R. Appellants.

Civ. No. 920100.

Supreme of North Dakota. Court Snyder (argued) and James J. J.

Robert Wolf, Bis- (appearance), of Wheeler Coles marck, appellants. Ap- for defendants and by John and Beth Wentworth. pearances MESCHKE, Justice. appeal Beth R. and Wentworth

John County judgment awarding Sargent from a nearly deficiency judgment of Bank a $216,000 dismissing against them and their against the Bank. We re- counterclaims for a new trial before a and remand verse judge. different trial requires pro- of this case Resolution background. the tracted recitation of large farm and operated a 1968, Sargent County. Since the ranch Bank, the Vogel, did business with Haggart (argued), of W. Todd 1970, Knutson, primarily dealt with its loan Brantner, Kelly, Bye, & and after Weir president, D. Dean Rocks- Ltd., appellee. Ap- officer and vice Fargo, plaintiff and 1980s, Klefstad, During the the Wentworths President of wold. pearance by Harlan Bank, from the received numerous loans1 Sargent County Bank. 13,May principal in the h. Note dated 1986 court found that the Wentworths had 1.The trial $4,077.45,representing operat- following of an promissory notes that amount ing executed the bearing signature of "Beth R. loan the subject of this action: are the typed under the words "Went- Wentworth" 6, principal March in the a. Note dated 1984 Ranch.” ... worth $225,000,representing renewal of amount of 19, principal in the i. Note dated 1986 existing operating loans the then chattel $8,275.79,representing operat- of an amount ing signature bearing "John E. Went- the bearing signature the of "Beth R. loan worth.” ... typed the words “Went- Wentworth" under worth Ranch.” ... 30, September in the b. Note dated 1985 $7,800, representing principal re- amount of 17, j. principal dated June in the Note 1986 for a Gleanor combine newal of loan $7,000,representing operating an amount of loan bearing signature the of “Beth R. Wentworth” bearing signature "Wentworth Ranch the typed Ranch.” the words "Wentworth under typed words John E. Wentworth" under the "Wentworth Ranch." ... 16, prin- c. cipal dated December 1985in the Note 30, principal Note dated June 1986in the k. amount of loan worth” under the Ranch.” ... l. Note dated amount of ing $106,400, representing renew- amount $10,000representing operating an bearing operating loans and al of 1985 signature bearing signature of “John E. Went- under the of "John E. Wentworth” typed words “Wentworth typed words "Wentworth Ranch.” ... 30, prin- in the d. Note dated December cipal erating 1985 28, July principal in the 1986 $16,377,representing op- an amount of $5,634.39,representing operat- an signed by “John E. Wentworth." loan signature bearing loan of "John E. typed under the words "Went- Wentworth” 30, January princi- in the e. Note dated 1986 worth Ranch.” ... m. Note dated cipal operating $11,550, oper- representing pal an amount of prin- September 1986in the ating signed by Wentworth.” ... loan "John $9,393.91, representing an amount of February prin- 1986in the f. Note dated signature bearing "John loan $3,000, oper- cipal representing an amount typed "Went- E. Wentworth” under the words signature ating bearing of "John loan worth Ranch.” ... typed "Went- under the words E. Wentworth” n. Note dated November principal operating 1986 in the $5,250, representing ... worth Ranch.” g. pal amount of an princi- bearing signature in the Note dated March 1986 of "John loan $11,000, oper- representing typed words "Went- amount E. Wentworth" under bearing signature ating “John loan and worth Ranch.” ... prin- typed in the words "Went- o. Note dated December cipal Wentworth" under worth Ranch." ... $4,430, oper- representing an amount of worths, Bank, agree- security apply secured four and FmHA to which were ments.2 the March 1984 note. February statutory the Bank’s In February December 1983 and $225,000 lending per customer. limit stamped notes were not “renewed” at that 6, 1984, the Wentworths owed

As of March time, explained, because the $225,000 Bank a total of in chattel Wentworths were pay unable to $200,000promissory on a note loans based $6,910.94 in accrued interest at time. 5, 1983, $25,000 dated December and on a Also, the Bank claimed that it decided not February promissory note dated to enter the March note into its books Administration Farmers Home [FmHA] accounting ized by service used the Bank guarantee program suggested and a loan at the time was to accept unable a variable guarantee to the Wentworths. Because involving multiple rate note annual install- guaranteed by FmHA the amount result, payments. ment As a the Bank per not count toward the Bank’s customer apparently kept track of the interest accru- limit, lending the Bank could continue its $225,000 payments al and made on the debt financial assistance to the Wentworths. February based on the December 1983 and Bank, According to the this was the first notes, 1984 which the Bank continued on applied time Rockswold had for a FmHA its books. application pro- guarantee. part As 1984, In early the December Wentworths cess, guarantee the Bank certified that the $43,801.50. pro- sold 177 calves for These necessary for the continuation of a ceeds were turned over to the Bank on farming ranching operation. or At viable 17, 1984, applied December to be toward time, equity the Wentworths had an 6, payment the March 1985 annual due on $60,000 their cushion of more than between guaranteed Bank, the FmHA note. The the of their debt and value collateral. however, apply pro- decided instead 6, 1984, On March John Wentworth ceeds to the interest due on the December $225,000, signed promissory rep- a note for notes, February 1983 and 1984 in- without resenting the same debts covered FmHA, forming either the February 1983 and 1984 notes. December applied only princi- and the balance to the percent guaranteed FmHA soon 90 of this $225,000 pal owing debt. On De- designated note. The note a variable inter- 17, 1984, signed cember John Wentworth a payable in est rate and was seven annual single-maturity, prin- in the 15-month note $52,476.38 each, installments $208,177.37, cipal reflecting amount 6, first installment due on March 1985. As principal payment amount of the made on primary security to FmHA for the loan $225,000 date, the Bank debt. On designated guarantee, the Bank 200 of the finally and marked the December 1983 Feb- stock and six val- Wentworths’ cows bulls ruary 1984 notes “renewed.” $120,000, equipment and farm val- ued at $212,500. Bank, According to the The 1984 note recited ued at December on livestock security this was the intended the Went- “FHA Guaranteed Loan 90% second, 24, 1984, bearing signature granted ating May the Bank a loan of "Beth dated security crops Wentworth.” ... Wentworths' 1984 interest in the $200,000 a estate, The Wentworths had also executed together grown on with their certain real 5, 1983, $25,- promissory a note dated December third, proceeds 27, 1985, products. March and dated 24, 1984, promissory February note dated security granted the Bank a interest in $208,177.37 promissory and a note dated De- crops grown on certain the Wentworths’ 1985 cember estate, together proceeds real with their and 13, 1986, fourth, products. The dated security agreement, July 2. The first dated granted security interest in the the Bank a security granted the Bank a interest in all crops grown on certain real Wentworths’ 1986 estate, of the Wentworths’ then-owned or thereafter- acquired vehicles, livestock, prod- together proceeds with their equipment, farm proceeds products. supplies, ucts. and their from 1985 or meet their operating debt forth a variable and set equipment” Bank, obligations. The financial per- rate, listed as which was interest however, funds for loaned Wentworths date, rate then the same of that cent as expenses planting and for and har- living note. Accord- March 1984 under the effect vesting crop. Bank, note December 1984 ing to the and was the Bank’s books placed on March During March 1985 and keep of interest track used thereafter and turned the sold cull cows guar- the FmHA payments on accrual These cull proceeds over to the Bank. time, Went- John loan. At anteed security for the part of the cows were expected Bank that he worth advised applied guarantee, FmHA and the March income before no additional have on, directly principal proceeds pay- the installment apply toward of, guaran- the FmHA to the “back end” date for the $52,476.38 on that due ment of The Bank claimed that this ac- teed loan. Although the December note. March 1984 practic- in accordance with FmHA tion was 15-month single-maturity, note was procedures handling pro- es and note, that the Went- contended security. These ceeds from the sale of default, told absent worths were not counted toward the an- proceeds were $52,476.38, only an installment payments nual installment called note, would by the March 1984 as called for March 1984 note. 6, March 1986. due on 20, 1986, past By April the Wentworths’ made the payment was additional No $143,- operating to the Bank was due debt March due on the installment Wentworths addition, In the owed 095.03. Wentworths 1985, shortfall of 6, leaving a total 6, past pay- 1986 installment a due March The $8,674.88 installment. due on that $52,476.38 guaran- FmHA ment of the Wentworths, agreed FmHA Bank, and the 1986, During April the teed loan. Went- the of the balance of collection to defer $52,- crop for sold their 1985 calf worths installment, or collection and no foreclosure $7,596.91 for They also received 128.48. or en- by the Bank undertaken action was grain. the of some John Wentworth sale couraged by FmHA. Bank on proceeds these over to the turned $52,- 21, 1986, April requested and that the and the time the Wentworths Between applied by proceeds in calf sale 128.48 agreement on security the Bank executed pay- delinquent the installment the Bank to 1985, granting the Bank a secu- March guaranteed loan. on the FmHA ment due crops, rity interest the Wentworths’ the Bank made Instead, that and December Rockswold told Wentworth totaling apply proceeds calf operating loans to the Wentworths the would the Bank 16, 1985, $148,700. past operating the By entirely December to the due debt. $42,300 Bank, operat- According on the 1985 the repaid had Wentworths unpaid ing the Wentworths to The balance loans had enabled operating loans. crop, calf and because the $106,400 produce in a new note was renewed income se- due March calves were considered “normal This note was that amount. policy proce- FmHA and previous- curity” under Although the Wentworths dures, object to the the FmHA did not operating debt from carry-over ly had some proceeds to applying the calf sale carry-over Bank operating debt year year, ex- operating the loans for larger than it much at the end of 1985 was payment on penses, ahead of the scheduled losses caused because of had ever been The did guaranteed loan. Wentworths making harvest damage and conditions hail 6, 1986 installment not make the March impossible. loan, guaranteed the FmHA payment on Bank did The and the Wentworths on that payments they and made no other budget for the 1986 operating an establish debt. claims, because, Bank crop year and the In Wentworths to demonstrate were unable working a farm counselor began repay their they be able how restructuring sought pre- The Bank also an order for prepared proposal who collateral, judgment possession of the un- August In debts. all of Wentworths’ Chapter seeking 32-07. In der NDCC proposal for re- rejected FmHA order, attorney, Brakke, the Bank’s Jon R. claiming anticipated structuring, person- filed a factual affidavit in which he unrealistic and crop yields were ally validity prom- attested to the of the 15 a reasonable likelihood plan did not show issory evidencing agreed their cow to sell the Wentworths Wentworth, Sargent County Bank v. the cattle herd in December 1986 because delays Due to N.W.2d 562 The Wentworths did profitable. were filings by bankruptcy from successive the $55,- proceeds of not turn over the sale Wentworths, the Bank did not obtain did to Bank.3 The Wentworths 367.72 the collateral until late 1988. In sell all of the 6, March 1987 installment not make the meantime, the FmHA entered into a settle- $52,476.38 FmHA due on the concerning agreement the Bank ment guaranteed note. guarantee. approved discovery, FmHA May In In extensive early after liquidation for of the Went- allow- plan Bank’s moved for an order the Wentworths Bank, According pleadings to the their to assert collateral. them to amend worths’ “laggard” alleging in Bank against considered the Bank FmHA a counterclaim deceit, fraud, con- then sued the and taking action. The Bank actual constructive version, The security inter- and fraud on the court. Went- to foreclose its Wentworths livestock, compensatory punitive and crops, sought equipment, farm worths est jury trial. The damages and demanded a securing prom- series of 15 proceeds and amendment, except default, trial court allowed sought a defi- issory notes on the court. allegation of fraud for the ciency judgment to the extent debt allegation trial court reasoned that The of the collateral. exceeded the value the court fraud on answered, alleging, among Wentworths misapplied had things, non-compulsory that the Bank counterclaim is a separate ac- payments operating loans rath- handled their to could best be loan, Further, alleges that amendment guaranteed FmHA tion. er than to the part of Mr. Brakke so, artificially on the doing had certain acts the Bank which, might require him to granted, if FmHA defaults. created the proceeds FmHA pro- applied these The Bank did not turn over these 3. The Wentworths guaranteed August note. under a court order. ceeds until hardship financial on it. The court takes proceeding bar him from testify and thus file judicial notice of the fact its on As this case this action. further in weighs fifty pounds. case now about age, appears to years of over two now Further, amendment attorneys such an for Bank are to allow me that delay would of the claims of the Went- further now aware cause which would subsequent discovery if re- worths so of discretion. an abuse may a substantial veals that there ruling the de- court deferred The trial testimony of Mr. conflict between pretrial confer- until the jury for trial mand Bank, employees Brakke and the ence. is some other valid reason for there to the Bank moved In December disqualification, attorneys for the include the March complaint to amend its position. should reconsider their for the as an alternate basis 1984 note assigned for The case was then trial The trial court indebtedness. Wentworths’ Hoberg. The Judge O. Bank filed Gordon complaint amend its the Bank to allowed change judge, a demand were indebted allege that the Wentworths reassigned Eckert to the case. The $192,764.10, in the amount of to the Bank subsequent demand Wentworths’ $63,105.85 “pursu- plus accrued interest judge against Judge Eckert change of promissory note dated December ant to a by Judge denied John T. Paulson. $208,- 17, 1984, original amount of in the September pretrial At the conference prom- installment or a rate 177.37 variable 1991, Judge Eckert ruled that Went- 6, 1984, in the March issory note dated trial, jury not entitled to a worths were $225,000, or a combina- original amount of reasoning that their counterclaims were ac- the December tion both not true counter- tually defenses and were notes.” March independent causes of action. claims on In the Wentworths moved summarily This court denied Went- en- disqualify the Bank’s counsel and the petition for a writ of mandamus to worths’ Brantner, Knutson, Kelly, Weir Vogel, tire compel jury trial. Ltd., Bye, representing firm from & law trial, the One week before call they intended to Eckert, again disqualify Judge moved on their attorney Brakke as a witness be- asserting “prejudged that he had this time argued that contin- half. counterclaims.” The the merits of [their] of the Bank the law representation ued motion was denied. firm result in a conflict of interest would spanning At trial seven and one-half requiring disqualification under North Haggart days testimony, attorney repre- By of Professional Conduct. Dakota Rules attorney the Bank. Parts of time, sented of the same law this another member deposition testimony read Brakke’s were firm, Haggart, handling the W. Todd was by the counsel into the record Wentworths’ The trial denied case for the Bank. court attempt impeach in an to Bank officials. motion, reasoning: In March the trial court issued I and affidavits have reviewed briefs lengthy findings detailed and conclu- and support opposition in in of and submitted essentially adopted the Bank’s sions that and to to the motion have been unable explanations theory of the case. The and detect, point, any at this conflict between deficiency judg- court awarded the Bank of Mr. and the testi- the affidavit Brakke $216,000 against ment of the Wentworths any of the Bank’s mony of witnesses counterclaims. and dismissed their disqualifi- is in such conflict that a which attorneys cation of the Bank’s would be trial court ruled that the March 1984 fact that required. I also consider the notes were valid and note and held, however, litigation going has on for a that this been enforceable. The court find that to re- 1984 note unenforcea- long period of time and the December was recognized “im- attorneys at The court that was quire the Bank to seek new ble. or for the Bank to hold concurrent undoubtedly proper work a this late date would debt, representing parallel prejudgment possession notes the same motion for that the Bank did not sell or but reasoned in July collateral June and Attorney 1987. any parties, to third transfer of the notes Bye represented Eckert, Judge who was attempt not to collect the debt more did one of 20 named defendants Williams once, carry did not more than indebted- State, 405 N.W.2d 615 Attor- actually ness on its books than was owed ney Brakke was also named aas defendant The trial court found by the Wentworths. Although in that case. Williams was de- Bank “had no intent to harm or in cided prior this court on any way injure by holding the Wentworths proceedings case, the initial in this parallel representing of the found that the Bank’s sale collateral in When this action was commenced in commercially “was reasonable all re: applied to the court and appealed. spects.” The Wentworths possession received an order for immediate Bank’s attor- on an of the based affidavit appealed, the they After affidavit, Brakke ney, Brakke. In the repre- learned that Eckert had been authenticity, based on his swore to the by Bye, Kermit Edward a member sented belief, knowledge of the De- firm, personal the Bank’s law at the time when of the trial court ulti- judge granted the heard and the Bank’s cember 1984 note4 that strongly disapprove practice Conduct 3.7 suc- We of the of an Dakota Rules of Professional cinctly explains why: filing attorney on behalf of a factual affidavit Porter, Combining and witness client. See Porter v. the roles of advocate his opposing party prejudice and can in- The comment to North can the 243 n. 1 explains The this rule the comment to was unenforceable. mately determined a disqualification when conflict of of basis counsel learned Wentworths’ When the interest note, they exists: of the March 1984 the existence they be call- court that would of roles ad- notified the Whether the combination [of at moved improper trial and involves Brakke as a witness vocate and witness] respect his firm from the him and law conflict interest with disqualify of by application The the of the Bank. client is determined of representation continued interest, concerning im- the conflict alleged that Brakke would rules 1.7, 1.8, importantly, most Rules and 1.9. testimony of the Bank’s witness- peach the likely to example, For if there is be sub- and be promissory rights litigation. party's the affidavits [citations omitted]. in the A witness included in However, timely objection, testify required personal on the otherwise to basis of without is knowledge, may by be expected to evidence considered while an advocate is inadmissible given by explain on and comment evidence court.... Fossum, v. may Co-op. Williston Credit Union 427 It not be clear whether a state- others. Here, 804, by the Went- advocate-witness be taken N.W.2d 806 ment an should object analysis proof. to Brakke’s affidavit on proof as an worths did not as or Furthermore, hearing hearsay grounds at the judicial ordinarily requires competency action or possession. on immediate

871 Co., practicing Energy Technology them alone & v. Shell Oil 777 any one of when 690, (D.C.D.Ill.1991); doing by F.Supp. these 693 prohibited from so Jones v. be would 350, rules, City Chicago, F.Supp. 610 360 n. 3 ...” of (D.N.D.Ill.1984). dangers in obvious an A of interest arises when conflict allowing party herent in a to call adverse testimony prejudicially attorney’s importance counsel as a witness and the of his client’s factual contradict or undermine right to have the counsel of one’s Dittmer, 873 Lamborn v. assertions. See choice, Goetz, requires scrutiny see careful 522, (2d Cir.1989); F.2d 531 Sellers Su disqualification facts before is com Court, Maricopa County, 154 Ariz. perior pelled. Security General Ins. v. Su Life 292, (Ct.App.1987); 299 Rule 742 P.2d Court, perior 149 Ariz. 718 P.2d North Dakota Rules of Profes 1.7 of the (1986). proceeded 988 The trial court cau held Courts have sional Conduct.5 here, tiously properly so. than attorney an is to be called other when client, disqual on of his a motion behalf disquali A trial court’s decision a supported by showing ification must be only fication motion will be reversed attorney give evidence materi will abuse of discretion. Under the Goetz. being the determination of the issues al to case, circumstances of this we do not be litigated, that the evidence is unobtainable the trial court its lieve abused discretion elsewhere, testimony is or and that refusing disqualify to firm Brakke’s law may prejudicial testifying attor during representing from trial. Estates, ney’s client. Inc. v. Cottonwood Haggart Attorney represented the Builders, Inc., 128 Ariz. 624 Paradise during Attorney trial. Brakke did (1981). also ABA/BNA P.2d See trial, appear parts not at the but his Lawyers’ Manual on Con Professional deposition testimony were read into the (1984), cases collected duct 61:507 attorney. record the Wentworths’ therein. Brakke testified that he not shown the however, he com recognize, that March 1984 installment note when also

We generally disqualify to menced the action. Rockswold and another courts view motions officer, McLaen, D. opposing extreme caution be Bank Steven testified counsel with gain point that disqualification can be used to at one both December cause 1984 note were evi advantage oppos and to harass the note and March tactical Goetz, and were Thompson v. 455 dence of the Wentworths’ debt party. See (N.D.1990); Brakke denied hav Freeman v. valid and enforceable. N.W.2d Co., ing made the decision as to which note to 689 F.2d Chicago Musical Instrument (7th Cir.1982). Thus, he showing sue on. He testified that worked bring action disqualify opposing preparing to prejudice needed to Rockswold the file information he received stringent than when the and that counsel more not include the March testifying on of his client from Rockswold did attorney is behalf he did Rockswold testified that parties may attempt 1984 note. because adverse the com simply not meet or talk to Brakke about opposing lawyers as witnesses call collection action. mencement disqualify them. Greater See Rockford (c)A lawyer represent a client if the part shall not of Rule 1.7 of the North 5. The relevant might representation adverse- of that client directs: Rules of Professional Conduct Dakota ly lawyer’s responsibilities to affected RULE OF INTEREST: GENERAL CONFLICT (a) person, byor client or to a third another lawyer represent a client A shall interests, lawyer's own unless: consider, recommend, lawyer’s ability repre- (1) reasonably lawyer believes the carry of action on behalf out course affected; adversely sentation will not be adversely by the law- will be affected client (2) consultation. consents after The client yer’s responsibilities another client or to a multiple representation clients in a When lawyer’s undertaken, person, own interests. third single the consultation matter is (b) represent lawyer implications a client when explanation A shall not include shall likely lawyer’s representation the advan- are to ad- own interests of the common the versely tages involved. representation. and risks affect the 872 erroneous, was however, ment to their counterclaim he sent the testified, that

McLaen conjunction disagree Brakke considered agreements to we when security notes and Bank’s disqualify the action. motion to of for commencement testi- rely on inconsistent that attorneys. The trial court considered also he regarding whether going McLaen on for a mony litigation had “been this note when March 1984 of the require aware period was time” and that to long of commenced. the action was attorneys at such a late to retain new undoubtedly a financial “would work date validity of the attesting to the Brakke’s Goetz, at hardship on it.” See 455 N.W.2d and created an awkward notes promissory deny the for In its decision to demand 588. But we believe confusing situation. trial, noted that the trial court jury that correctly determined court trial af- a action heard conflict that fraud-on-the-court “will be not “in such testimony was attorneys dispositions Bank’s the trial.” While disqualification ter Questions the va- required.” possible, the trial court might have been to the directed

873 claim, 39(c). of Bank’s there would no 1972); The foreclosure need for NDRCivP in a farmer’s livestock indemnification. security interest a equitable action triable equipment is an and Although money the Wentworths seek jury. Production to the court without counterclaims, damages in their these dam- Rub, 537- v. Ass’n Credit ages merely are incidental to the defenses action, a (N.D.1991). equitable In an 538 out of the and arise seizure of collateral legal defenses denom- party who raises place part took as the Bank’s main not entitled to a counterclaim is inated as Brakken, foreclosure action. 468 See trial on those defenses. jury have a 636; at N.W.2d Production Credit Ass’n Rub, 474 Adolph Trust v. N.W.2d Rub Rub, 475 N.W.2d at 538. The Went- before, in have ruled We worths’ counterclaims were incidental to Rub, 481 St. Paul v. Farm Credit dependent upon primary claim that (N.D.1992), even N.W.2d jury did not entitle them to a trial. There- monetary dam- a counterclaim seeks when fore, the Wentworths not entitled to a were jury trial if ages, party is not entitled to a jury trial in this case. damage claim is incidental to and de- primary claim for which a pendent upon a Ill jury is not allowed. trial $225,000 The Wentworths assert that the $1,000,000 sought The by the March 1984 note debt evidenced conversion, damages in for constructive discharged must be because it was fraudu- fraud, for actual fraud and deceit. lently in 41-03- altered violation of NDCC from the They sought also indemnification However, which, if there is evidence they required Bank in the event that were believed, supports contrary the trial court’s paid by FmHA the amount FmHA to pay findings question. guarantee. on the The Went- the Bank party’s liability A on an instrument $1,000,000 sought exemplary in also worths discharged if the holder’s alteration of damages. the instrument is both material and fraudu conversion, In their counterclaim 41-03-44(2)(a) says: lent. NDCC the Bank had mis- alleged that against any person As other than a sub- applied payments to loans other than sequent holder in due course: action guaranteed FmHA loan and that this holder which is a.Alteration loan, guaranteed the default on the caused discharg- fraudulent and material both leading illegal seizure of their live- any party thereby contract is es whose machinery. The counterclaims stock and changed party assents or is unless fraud, fraud, actual for constructive defense; asserting the precluded from misapplied alleged that deceit fraudulently that the Bank payments, loan in is defined NDCC A material alteration executing the December induced them into 41-03-44(1): note, falsely repre- and that the Bank is mate- Any of an instrument alteration guaranteed FmHA that the note sented to any contract of changes rial which autho- so that FmHA would default including any respect, party thereto allegedly also liquidation. rize These acts change in: such seizure of the resulted the unlawful par- or relations a. number machinery. Wentworths’ livestock ties; independent are not These counterclaims instrument, by com- incomplete An b. are, effect, legal defenses to claims but authorized; than as pleting otherwise counterclaim, action. Each the foreclosure a defense to the proven, if would constitute adding to it writing signed, by c. The as Likewise, the action. Bank’s foreclosure any part of it. by removing only claim is incidental to indemnification an instru question whether against the debt the defenses fraudulently materially and successfully defended the ment has been the Wentworths fact, Second, governed by assuming is one of altered that execution of the Bank, December 1984 note materially First National 52(a). altered the NDRCivP Robertson, 430, March purposes 1984 note for 41- Hettinger v. 442 NDCC N.W.2d 03-44, discharge no resulted unless (N.D.1989). the al- finding clearly A of fact is 431 teration was purposes fraudulent. For is no evidence to erroneous when there “ 41-03-44, ‘requires] NDCC fraud a dis- it, when, although there some support or purpose honest and deceitful acquire it, court, reviewing support evidence more than one was entitled to under the evidence, the entire is left with a defi- on signed by note as the makers rather than nite and firm conviction that a mistake has ” Robertson, only misguided purpose.’ a Id. made. been (quoting 442 N.W.2d at 432 Thomas v. Os- born, Wash.App. 13 536 P.2d 13 The trial court found that Here, (1975)). the trial court found that any “Bank at no time made material or deceive, the Bank “at no time intended to any negotiable other alteration of instru mislead or defraud” the by The ment.” Wentworths assert that when holding parallel the two notes. In the next Rockswold had John Wentworth execute section, we conclude that there is evidence note, single-payment the December 1984 supports finding, this if believed. materially fraudulently this altered the terms of the March 1984 installment note. record, On this we conclude that NDCC accept argument We are unable to this discharge 41-03-44 did not the Wentworths two reasons. obligations from their under the March 1984 note.

First, there is no indication the record negotiable instrument, see NDCC that a IV 41-03-02(l)(a) 41-03-04, physically was argue The Wentworths the trial Compare Liberty any altered in manner. failing court erred in to find the Bank Hemisphere, State Bank v. Mich.App. 98 guilty fraud, deceit, and conversion. (1980) (borrower’s 243 N.W.2d Fraud and deceit are card, treated as ledger altered, account which bank questions fact, and the trial court’s de materially was not instrument termination on those matters will not set altered, fraudulently discharge appeal aside on clearly unless erroneous. obligations). borrower’s The cases relied Brakken, Likewise, 468 N.W.2d at 636. Wentworths, Robertson and Ste- property whether conversion of another’s Barnes, vens 43 N.D. 175 N.W. 709 question occurred is a for the trier of fact. (1919), support do not the idea that Napoleon Auction, See Livestock Inc. v. physical transaction was a In alteration. Rohrich, Robertson, signed after a note had been debtors, two of three the bank inserted on According Wentworths, the Bank the face of the note the dates of three engaged fraud, in an extensive course of agreements security that had conversion, been execut- designed deceit to maxim- ed to secure various other promissory gain loans, ize its operating on the and then notes, previously all of which had paid been to collect on the FmHA guaranteed note. in full. Barnes did not construe They the same assert that the Bank’s failure to mark and, event, in any statute the case involved the December 1983 note February and the physical separation of an order and note. 1984 note “renewed” when John Went- principal $225,000 owed plus accrued part sidered as of its con- [the] interest, while the value of the livestock They argue tract Wentworths.” that machinery collateral was estimated to single-payment, the December 1984 15- $290,000,leaving be approximately $60,000 perpetuate month note was executed “to in equity between the debt and the value of the Bank’s ‘double set’ of financial records the lending collateral. The Bank’s per limit appear only which made it had $225,000. customer at the time was obligations short term debt with the Bank.” Bank contended that it did not seek the They argue further that the Bank made guarantee solely FmHA improve to its own misrepresentations fraudulent to position, only but to enable the Went- FmHA their payments by and converted worths to money they borrow the needed to applying operating them to loans “to artifi- operate continue to their farm and ranch. note, cially create a on the FmHA default Rockswold contended that he had obtaining approval FmHA thus for the sei- experience no guarantees, with farm loan liquidation zure and of the Wentworths’ and that this one guaran was of the first They argue collateral.” that the Bank im- Sargent tees handled County the FmHA arranged properly private for a sale of explained office. Bank officers when by fraudulently collateral representing to the March 1984 note was executed and the FmHA that the Wentworths were “militant pay Wentworths were unable to the inter public farm radicals” and that a auction est owed on the December 1983 and Febru would result in “trouble.” All of these notes, ary 1984 computer the Bank’s ac Bank, according actions the to the counting service could not handle the new Wentworths, grand constituted a scheme to variable-rate, note, multiple-maturity so the they defraud them of all that owned. put Bank did not the March 1984 note on books, placed its but the back of its presumed, Fraud is never but must Bank, According file. to the once FmHA clear, proved by evidence that is satis approved guarantee, the the Bank loaned factory, convincing. Buehner v. Hoe operating money to the Wentworths. ven, (N.D.1975). However, may inducement and reliance Furthermore, alleged the Bank that noth- inferred when there is nondisclosure of a ing was concealed from the Wentworths material fact. Adams v. Little Missouri signed because John Wentworth the notes. Association, Bank, Minerals N.W.2d 683 According to the on December the allega While Wentworths’ principal, John that he knew owed theory support notes, tions and of the case could knew the interest rates of the earlier findings part $208,177.37 of fraud and deceit on the and knew the amount of the Bank, presented signed the Bank evidence that note he on that date. One of Canceling returning damage thereby, 1. to the maker of loss or suffered and if the original obligation intentional, renewal so re- comply failure so to shall be was newed; or guilty of a class A misdemeanor. Marking causing to be marked across that, although The trial the Bank court ruled legible the face of the renewed instrument in statute, unintentionally "may have violated” ink, thereon, writing typewritten or to be holding parallel the increase, alter, not notes in this case did import the word "renewed” or words of like the amount of debt or affect and effect. Bank, any owed default, did not cause or create firm, Any taking person, corporation, or bank right repos- did the Bank’s not affect any such renewal note or contract without default, following of collateral and did session complying provisions with the of this section the Wentworths harm. cause any person shall be liablé to or concern for all note, that note was March 1984 because it was testified that experts

the Bank’s had calf in default. The Wentworths apply the also Bank to for the appropriate the re- due on March pay interest and the installment failed proceeds to sale inter- applied principal because to the and their mainder underlying debt operating owed and loan. Even outstanding est was argued The Bank guaranteed. applied the debt proceeds had been the calf referred to 1984 note the December note, payment was mini- guaranteed Wentworth and that gúarantee, FmHA meet the called-for mally insufficient to by Rocks- told acknowledged that he was installment, contended. Accord- not fit 1984 note did March wold Bank, resulting failure to ing to the De- computer and that into the Bank’s then have operating loan would pay the “in-house bank- 1984 note was cember the terms of a default under caused money. ing” purposes to track default and note guaranteed to that he intended 1984 note testified in the March Rockswold clause acceleration when March the loan until renew declared: $52,- of expect another he would upon shall be in default The Borrower expect to have 476.38, he did not and that any of any of one or more the occurrence that date. due on note come the whole (1) following events: the Borrower of the officers, single-pay- According to Bank due, any amount pay, when shall fail to ment, note was used because 15-month hereunder, any required other indebt- the Bank’s term loans all of that was how Lender of the Borrower to the edness trial court’s at the time. The handled were any parties; third ... o[r] finding, although the December that note, agreement re- Although 15-month the lender’s single-payment, note was apply proceeds understood quired Bank and the Wentworths that the Bank the the $52,- only payment of an installment in accordance that the sale of collateral from 6, 1986, is due on March 476.38 would be guar- the priorities the lien on which with Bank's by the version supported based, expert FmHA the Bank’s antee was facts. proceeds calf could be testified that the operating loans in accordance applied to initially sued Although the Bank priorities. The local FmHA the lien promissory on the 15 1987 to foreclose also testified in this case officer involved books, including the December on its present- in the record. The evidence dence in disqualification directions believed, Bank, supports by ed 3(C) merely guidelines; they are not Rule finding did not that the Bank trial court’s mandatory. are Matter Estate Riso fraud, deceit, conversion its commit 404, vi, (N.D.1988). N.W.2d 407 Our 429 dealings the Wentworths. with primary preservation pub is the concern integrity in the respect

lic and confidence V judicial system, only “can which appear justice maintained if satisfies assert Ec- The Wentworths justice.” Hampton, Baier v. 440 ance of to either disclose to them that kert’s failure (N.D.1989). 712, 715 Even without attorney Ker- N.W.2d being represented by he was bias, firm, disqualification can es- law intentional Bye, mit a member of the Bank’s ma- obligation col- In 1985 and 1986 the Wentworths sold an secured a lien or e. Of chinery, and bulls to- had sales of cull cows undertaking. lateral gether calf sales. If the with two substantial Although Wentworths assert that the Bank applied proceeds had been to the 1985 or 1986 case, payments misapplied in this NDCC 9-12- (Plain- guaranteed payments due on the loan only applies when the is tendered 07 5), payments would have tiffs Exhibit voluntarily. See State Bank the debtor due on March exceeded the two installments 6, Nester, 95, Streeter v. 97 6, would have and March 1986. This 1985 acquired by the Wentworths Because the funds however, meant, money operating less for the proceeds constituted from the sale of calves advanced and the Bank would not have loans property under one of from the sale of secured money operating for loans after the initial security agreements, is not clear the Bank’s it 17, December 1984. In 1985 calf sale of applies here. See Galla- whether NDCC9-12-07 oper- Bank continued to lend the Wentworths Darrah, Savings Mont. & Bank v. 153 tin Trust regular ating money Without the on a basis. 288, (1969) (construing stat- P.2d 289 456 operating the Wentworths would have loans 9-12-07). to NDCC Even if NDCC utes identical ranching to continue and farm- been unable circumstances, applies under these 9-12-07 ing. remedy of the statute is to treat violation that, if be- There is evidence in the record having incorrectly applied payment as been lieved, finding. supports this Hagen Dwyer, applied See v. 36 as directed. (1917). Furthermore, 162 N.W. 701 The trial unmarked note is N.D. a renewed but applying agreed only to "sur- with the Bank that if the bank is unable court uncollectible thereof’ or proceeds Wentworths directed would all notes taken in renewal calf as the render satisfactorily indemnify unwilling the maker under the terms have resulted in a default still liability "against NDCC 41-03-81. It guaranteed thereon.” note. proved loss. arguable no is that the also that: The trial court found 878 office, appearance justice. Only attorney general’s void. satisfy the

sential to defendants, provided on behalf of the state Id. argument appeal. oral on Counsel appear may reasonable Because defendants, Eckert, including Judge other judge’s conduct of a trial person that the joined in the brief submitted the assis- impartial one of the might not be when attorney general NDRAppP under tant is, held, being trial is attorneys even as the 28(i). n. Id. at 625 14. This court dis- matter, judge in another representing appeal August missed the from the disqualification courts have held that 1986 order because it had moot. become required under these circum should be Noting complaint Id. at 617. that “the is City Potashnick v. Port stances. See amorphous vague so that it is difficult (5th Co., 609 F.2d 1101 Cir. Construction exactly plaintiffs’ discern what the claim 1980); Chandler, Texaco, Inc. v. 354 F.2d is,” complaint ruled that the we (10th Cir.1965); DeCamp v. 655 Good Sa pleadings were “so devoid of either facts or Hospital, 66 A.D.2d 410 maritan person law that a reasonable could not (1978); Reilly by Reilly N.Y.S.2d 671 expect judgment a favorable on them.” Id. Transp., Pa.Super. Pa. Southeastern July at 623. We affirmed the trial court’s (1984). inquiry here 479 A.2d 973 order, concluding only could, person a reasonable whether trial court acted within its discretion in facts, objective reasonably the basis of sanctions, entering but that sanctions were question Judge impartiality. Eckert’s “mandated” under the circumstances. Id. Williams, attorney, com- William S. appeal at 624. Because the was so “fla- along menced an action several others grantly groundless,” we awarded double shortly after he had been attorney costs and reasonable fees for the suspended practice from the law. expended by amounts the assistant attor- Williams named defendants the ac- general ney defending the state defen- tion, State, including Berg Vivian dants. Id. at 625. remanded We Supreme Disciplinary Board of the court district with instructions “to deter- Court, Agriculture Commissioner Sarah mine and enforce of costs and Vogel, Attorney Spaeth, General Nicholas attorneys’ fees.” Id. at 626. Williams Bar Association of the State North Dakota 4, 1987, by was decided this court on (SBAND), attorneys in several involved Judge approximately four weeks before Ec- disciplinary process, attorneys several who presided hearing kert over the to determine creditors, Brakke, represented attorney whether the Bank was entitled to immedi- Judge Attorney Bye appeared Eckert. possession ate of the Wentworths’ collater- Judge on behalf of Eckert. Other mem- al. represented attorney of that law firm bers However, another order en- had been According Brakke and SBAND. litigation. tered in the In Williams this State, Williams order, October the trial court en- 22, 1986, (N.D.1987), July on the trial court against plaintiffs tered sanctions 27 of the complaint in that case dismissed the with $10,209.34, in the amount of in- awarded against prejudice and ordered sanctions junctive against plaintiffs, relief of the two “ plaintiffs pleadings by ‘the filed any plaintiff and ordered that who filed a all of the Plaintiffs in this action were appeal notice of from that order was re- presented complete frivolous and such a quired appeal to file a bond for costs on absence of actual facts or law that a rea- in amount district court person thought could not have this sonable $2,000 appellant. for each Seven of the judgment render in the Plain- Court would plaintiffs appeal appealed, but did not file ” tiffs’ favor.’ bonds or briefs on the merits. Almost nine order, appealed Williams from that as plaintiffs’ months after the briefs were August due, general well as from an 1986 order attorney the assistant moved declaring plaintiffs’ attempt September appeal. to re- in 1987 to dismiss the Eckert, Judge Attorney Bye, move the case to federal court null and on was behalf sup- bility parties resolving of the crucial in was motion and submitted joined in the litigation. the motion. support plemental brief 7, 1987, summarily dis- we On October handling The Bank’s of’its credit rela- unpublished order. appeal missed was, best, tionship with the at Wentworths $9,199.92 judgment worst, bumbling clumsy. In March At it raises defen- in favor of the state fraud, deceit, entered illegality inferences of dants, represented by the assis- were who improprieties. The Bank failed to against 15 of the attorney general, tant promissory mark notes “renewed” when judgment did not award plaintiffs. This they replaced promissory another were Eckert. anything improperly paral- note. The Bank held two representing part Judge actual on the of hint of bias accepting in the Bank’s version impartiality Rather, the record reveals Eckert.10 version facts over the Wentworths’ of the meticulous consid- Judge Eckert exercised the facts. of pro- in rulings his these eration of all of complicated of this the nature Given ceedings. unin- Judge Eckert’s foreclosure action ordinary, had uncom- If this case been Brakke and entanglement with tentional straight foreclosure plicated, and forward through litiga- firm the Williams his law action, to if the case had been submitted tion, that a reasonable must conclude we difficulty in con- have no jury, we would could, objec- the basis of these person on person not cluding that a reasonable facts, Judge Ec- reasonably question tive Judge Eckert’s questioned reasonably have disqualification and that impartiality, kert’s disqualification was impartiality, and that required. was Mast, See, required. e.g., Desnick not of Judi of the Rules A violation 882-883 249 N.W.2d 311 Minn. presides judge who However, hardly an ordi- cial Conduct (1976). this was reversal of a result in the Rather, a case can the crédi- over nary foreclosure action. 10. Ireland’s Lumber bias. See Judge does not evidence Eckert Wentworths’ assertion Contractors, Progressive Yard v. "prejudged of their case is with the merits” had legal questions disagreement out merit. A Surrogate Judge Baier; RALPH J. ERICK- Matter Estate

judgment. of of judge even when the was Chief Justice at the time this can occur STAD This Risovi. of, knowledge or inadvertent surrogate case heard and served as has no actual overlooks, circumstance. disqualifying ly judge pursuant for this case to 27- NDCC Acquisi Liljeberg v. Health Services See 17-03. 847, 108 S.Ct. Corp., 486 U.S. tion BERT L. WILSON and VERNON R. (1988). Judge Eckert’s 100 L.Ed.2d 855 PEDERSON, Surrogate Judges, sitting in intentionally any not un conduct did show JOHNSON, JJ., place of LEVINE and dis- behavior, any implied be in nor can ethical qualified, who was a member of the Court frivolity litiga of Williams view of this case heard. when Rather, beyond the record shows tion. NEUMANN and Justice Justice SAND- fairly tried this question that Eckert STROM, being of members the Court Nevertheless, appearance of im case. heard, partici- when this case was did not judicial important to our propriety is so pate in this decision. justice, system in the interests may required judgment be reversal of PEDERSON, Surrogate VERNON R. impro intentional even bias without Judge, concurring specially. Baier; priety. Matter Estate See Risovi; Liljeberg, 486 U.S. at see also opinion authored Justice Meschke of 28 at 2205 a violation S.Ct. [for thoughtful scholarly and has con- 455(a), requires disqualifica U.S.C. which § justifi- vinced me that there are some valid judge’s impartiality might rea tion when a judgment. for a I cations reversal questioned, appropriate “it is sonably be join am that I should in convinced injustice parties consider the risk opinion equally I am that I but convinced case, particular in the risk that am left with a few unanswered bothersome produce injustice denial of relief will questions. cases, undermining and the risk premise I start that “when basic public’s judicial pro confidence in the borrow, you Psalms, you repay.” have to We conclude that this is such a cess”]. 21; Proverbs, Chapter Chapter 37-Verse 3- case. 28; Proverbs, Chapter Verses 27 and directly applied Lilje- We have not 22-Verse all seem to tell me that. Does case, berg test in this is a direct which proceed a lender have to with exactitude appeal judgment, though from a even there qualified” and be somehow “otherwise trial is no court record of the facts involv- payments collect are overdue? when What issue, disqualification and we have kinds of errors the court will hereafter judicial had to take notice of the facts prem- held to be alterations the basic NDREv 201. Neverthe- Williams. See standard, ise? A fair trial is the usual less, may appropriate consider especially practice; in criminal since when adopting Supreme Court's formulation litigants “perfect are civil entitled to a tri- possible Liljeberg test future al”? Is the cure farm foreclosure cases apply cases. Lilje- Even we were to Or, more onerous than the disease? does a case, berg test in this the result would be victory Fi- hollow make all worthwhile? peculiarities the same because of the of nally, merely dangling mythi- are we not this case and not because of intentional debtors, inviting cal carrot before the them part misconduct on the Eckert. ultimate, costly, on for battle Accordingly, judgment we reverse certain defeat at the end? and remand for new trial before a differ- designated. judge ent trial to be WALLE, C.J.,

VANDE and RALPH J.

ERICKSTAD, VERNON R. PEDERSON WILSON, Surrogate Judges,

and BERT L.

concur. these The accrued interest on two paid because the Wentworths had not $6,910.94. learned of a totaled Rockswold computer- interest owed and because the

Notes

the indebtedness of to the Bank debts Wentworths’ Although the Wentworths to the Bank. apparently FmHA repaid. could ever be 1984 note December was listed the Wentworths would have believed affidavit, no mention was made of the year, negative cash flow for the substantial March 1984 note. equity in the farm’s current and that the had deteriorated intermediate assets 1, 1987, hearing A was held on June through leaving steadily Eckert, from 1982 L. to deter- before Robert se- virtually equity no in the assets that mine whether the Bank was entitled to possession immediate of the collateral. On cured the debt. 14, 1987, July the trial court issued restructuring rejected FmHA After granting posses- order the Bank immediate the Bank made three additional proposal, crop sion of various checks for and live- Wentworths, totaling over loans to the proceeds government payments stock $19,000, $6,324.59 govern- released remaining as well as the Wentworths’ live- them, payments principally for liv- ment equipment, pending stock and farm a final harvesting expenses. Went- determination of the merits of the fore- on Novem- met with Bank officers worths appealed. closure action. 6, 1986. ber appeal ap- for lack of We dismissed meeting, The Bank contends at this 54(b) order. pealability without a NDRCivP

concurrent Wentworths submit documentation that at- gain any same and did not advan- debt torney Bye’s representation Ec- tage by doing the Wentworths so.” over kert in proceedings those continued at least The court also found that the Bank’s hold- through September ing any concurrent notes “did not cause appeal, On the Wentworths assert that damage to the Wentworths.” loss judgment required reversal of the be- that the Bank did not The court found (1) refusing cause: the trial court erred in misapply any paid by of the monies Vogel, Brantner, Kelly, to order that the proceeds to the Bank. On the Knutson, Ltd., Bye, firm Weir & law calves, from the sale of 1985 the trial court disqualified serving from as the Bank’s tri- that, pro further reasoned even if those counsel; (2) deny- al the trial court erred in guar applied had to the FmHA ceeds been trial; (8) jury them a the trial court debt, the note nevertheless anteed would concluding erred in that the debt evidenced in default have been discharged the March 1984 note minimally have been short of the by a fraudulent alteration under NDCC 41- Also, installment amount. the court rea 03-44; (4) failing the trial court erred soned that because the Wentworths would fraud, deceit, guilty find the Bank pay operating then have been unable conversion; (5) Judge Eckert erred due, they ground loans when came another failing disqualify himself from the case. existed for default under the terms of the note. The court found no material breach any agreements by the Bank of I contemporaneously made with the FmHA argue The Wentworths the trial guarantee, loan even there had refusing court erred in to order that the breach, only party damaged been Brantner, Knutson, Vogel, Kelly, entire FmHA, which was satisfied when it Ltd., Bye, disqualified firm be Weir & law agreement reached a settlement with the serving from as the Bank's trial counsel Bank. The court found Went- circumstances, case. we Under prove had failed to that the Bank worths say disqualification cannot of the law them, defrauded or deceived or converted required. firm was property. of their The court also

the regarding es testimony stantial the conflict between presented a to admit he either forced lawyer the of the or a client and that or to the court disavow note to false firm, lawyer’s repre- the member of the 1984 note that the knowledge of the March problem improper. The can sentation is the ultimately concluded court trial lawyer arise is called as a whether According note. valid and enforceable client or witness on behalf of the is called Wentworths, a this situation created opposing party. Determining conflict interest between substantial not such a conflict exists is whether or requiring the Bank’s officials Brakke and responsibility lawyer primarily the of the entire law imputed disqualification Comment to Rule 1.7. If involved. See firm. lawyer may of a firm a who is a member Rules of of the North Dakota Rule 3.7 not act advocate and witness as both directs: Conduct Professional interest, 1.10 reason of conflict of Rule WITNESS LAWYER AS disqualifies firm also. not act at (a) lawyer A shall as advocate Therefore, if the conflict rules alone lawyer likely to be a in which is trial preclude testifying lawyer would from except necessary where: witness acting witness, as advocate and then both relates (1) testimony to an uncon- The testifying lawyer’s may no one in firm issue; tested as in the case. serve an advocate See (2) testimony relates to the nature States, 10 Syscon Corp. v. United Cl.Ct. legal in services rendered and value words, (1986). 202-203 In other case; preclude rules on conflict of interest would (3) Disqualification lawyer acting Brakke as advocate and wit from hardship the client substantial work trial, ness at it would likewise im of the distinctive value of proper Haggart to serve as Bank’s lawyer lawyer’s firm as counsel trial Geisler v. counsel. See Geisler case. particular Laboratories, F.Supp. Wyeth (b) may Wolfram, act as in a lawyer (D.Kan.1989); A advocate Legal C. Modern lawyer (1986). 1.10(a) 7.6, another in the law- Rule p. trial which Ethics at § yer’s likely to be firm is called as of the North Dakota Rules Professional precluded doing says: “Lawyers from so Conduct associated unless witness may represent knowingly interest. firm a client by a conflict of personal lawyer be made on knowl- [must] a conflict of interest between the affidavits edge; volve facts that would admissible client. set forth affirmatively party proper objection show opposing has evidence and testify may prejudice competent affiant matters the combination roles where

lidity practical, logi- of the two problems these a resolved findings and con- called officers Bank’s cal, fashion. and sensible province of within the that were clusions of discretion on find no abuse We discrepancies Although court. the trial disqualification of that record and conclude sent the notes Bank officer which about required. firm not Brakke’s law had some the suit to commence Brakke value, compelling impeachment almost considering this lawsuit was II time of trial. old at years five the trial argue that The Wentworths material facts was testimony on Brakke’s denying jury them a trial. erred in court imputed Bank that prejudicial to the not so disagree. We man- firm was disqualification of law dated, of law. as a matter party is entitled to a Whether Moreover, upon not allow the case is jury depends trial court did trial whether complaint their equity. to amend or an action at the Wentworths an action at law court, Brakken, fraud on the an action for to assert Bank and Trust v. First Nat’l compulsory concluding this was not a 633, There is 635 468 N.W.2d so, court doing In the trial equi counterclaim.6 in an right jury to a trial no absolute a dis- possibility that such envisioned action, id., although may a trial court table in fu- may required qualification well be discretion, submit, questions in its factual action, cautioned the ture trial of that jury. v. advisory to an Lithun Grand accordingly. Com- attorneys See Bank’s 1, 307 Forks Public School Dist. No. (determining con- Rule 3.7 whether ment to 545, (N.D.1981); n. 4 Dober N.W.2d 549 responsibility of primarily flict exists Dist. Public School vich v. Central Cass involved). lawyer (N.D.1979); 190 No. Presbyterian Church Bolyea v. First argue that the Although the Wentworths of (N.D. Wilton, N.D., 160 N.W.2d amend- 196 to allow this court’s failure trial “clear, unequivocal convinc supported has been characterized "Fraud on the court" judicial specific ground Pfizer, ma- with the Inc.. As a "a scheme to interfere evidence.” as chinery cation, adjudi- impartial 60(b), performing the task of on the fraud for relief under NDRCivP opposing party by preventing the as setting usually aside of the in the court results fairly presenting case or defense.” his from Annot., judgment. generally Construction See Corp., Pfizer, 538 Inc. v. International 60(b) Rectifier Application Rule Provision Cir.1976). (8th "contem- The term F.2d Rule Does Federal Rules Civil Procedure egregious plates that it undermines conduct so Court to Set District not Limit Power Federal judicial process." integrity Stone v. the Stone, Court”, Judgment Upon Aside "Fraud (Alaska 1982). A 586 n. 7 647 P.2d Gunsch, (1974); A.L.R.Fed. 761 Goetz only by justified finding court is of fraud on the Bentz, (N.D. 1956); Rykowsky v. N.W.2d 548 egregious misconduct directed the most Yorke, (1920); Yorke v. 178 N.W. 284 N.D. itself, jury bribery judge as court such (1893). 55 N.W. 1095 3 N.D. counsel, must be of evidence fabrication

part two here were never of the worth executed the March 1984 note was same document and were not only fraudulent, executed at but criminal act un- the same time. der NDCC 41-03-80.7 The as- state, says: 7. NDCC 41-03-80 any shall take from debtor or other person obligated promissory upon negotia- or Renewal concern note—Cancellation and promissory marking negotiable return renewed ble note or note or other obli- thereof— firm, without, Penalty. person, corporation, gation, any No renewal thereof at the time, doing state or national bank business in this either: deceit sert that fraud and exist this case dressed its actions innocence and rebut- kept promis- allegations two sets of ted these of fraud and deceit upon sory notes for the same relied debt Wentworths. FmHA, ultimately guaranteed by and the explained that at the time the contract,” “true the March in- debt possibility of a FmHA guarantee loan note, stallment was “neither entered in the discussed in early the Wentworths Bank’s books fashion nor ever con-

ordinarily applied income can be that calf court concluded that the trial 1984 note operating expenses payment of loans for unenforceable, it argued payment due if there is a scheduled even entitled to immediate still have been guaranteed loan.8 on the on a originally it sued possession had trustee, ally otherwise direct- and as a unless Compare NDCC 8. 9-12-07: debtor, apply perfor- by the he shall ed the obli- there are several when Performance obligations all such mance to the extinction of under gations Application. When a debtor — application once equal proportion. An obligations act to another does an several be rescinded the creditor cannot made part, way performance, in whole or in of the debtor. without the consent equally applicable to two or more of which application party makes such neither 3.If obligations, performance must be such such herein; perfor- prescribed the time within applied as follows: applied extinction of If, mance must performance, time of the at the order, following and if obligations in the that such or desire of the debtor intention particu- obligation aof applied there is more than one to the extinc- performance should be class, in that class obligation to the extinction of all any particular lar is manifested tion of creditor, ratably. applied in such it must be perfor- due at time of a. Of interest manner. made, mance. application is then no such 2. If creditor, perfor- principal at the time b. Of due time after such within a reasonable may apply toward the extinc- mance. c. rity. performance, obligation matu- in date of obligation performance earliest any Of tion of debtor at the was due to him from the which obligation a lien or not secured except Of an performance, simi- d. of such time undertaking. obligations individu- collateral were due to him both lar which, if in an unrelated matter at the time of the presented evidence The Bank or, not believed, proceedings it did commencement of these on tended to show note, guaranteed motion, on the disqualify the default his himself from create own case, default occurred because requires presiding but over this reversal money enough did not have unique judgment. Under cir- payments. all of their debt make case, agree. cumstances of this we Also, legal action or support in order to The Rules of Judicial Conduct direct a defense, pro- must fraud and deceit have disqualification. judge’s decisions Rule Fraase, damages. actual Olson v. duced judge 2 demands that shall im- avoid “[a] (N.D.1988). While the N.W.2d propriety appearance improprie- and the improper it was trial court found that 2(A) ty in all his activities.” Rule thus notes for the Bank to have concurrent judge respect directs that shall “[a] debt, the court also found that same comply with the law and shall act in such a any or dam- impropriety did not cause loss promotes public manner that confidence in age to the Wentworths’ Wentworths. integrity impartiality judicia- banking expert was aware own 3(C)(1)(a) ry.” judge’s Rule makes a dis- by Wentworths as a damage sustained qualification “appropriate judge’s when the notes, parallel holding result of the Bank’s impartiality might reasonably ques- than “confusion.”9 tioned.” conflicting examined the evi- We have

promissory lel the same nothing litigation was The Williams applied payments The Bank loan debt. is a veri- nuisance lawsuit and more than a contrary to the instructions of the Went- frivolity purposes definition of table Brakke, attorney, The Bank’s worths. who 28-26-01, 11, and NDRCivP NDCC Judge Eckert’s codefendant jurisdiction. in this NDRAppP 38 sanctions Williams, validity attested to the of an lawsuit, with re- major portion promissory proceed- note in these invalid repre- were not gard to the defendants who ings. office, had attorney general’s sented 1, 1987 completed prior to the June been difficulties, Judge Despite these Eckert entitlement to imme- hearing on the Bank’s Bank, adopting virtu- ruled favor collat- of the Wentworths’ possession diate ally explanations all of its for its actions plaintiffs had essen- eral. Williams reasoning actions caused the that these appeal their from the Oc- tially abandoned Although Judge no harm. Ec- Obtaining dismissal order. tober supported by findings kert’s are some of insignificant part of appeal was an of that record, in the there is conflict- the evidence Attorney Bye to rest. putting that lawsuit support con- that could also evidence Judge Eckert in the appear before did findings many ques- of the factual trary The actual trial proceedings. Wentworth tions. against action of the main foreclosure repre- Judge Eckert had been Because occur until October did not during firm Bank’s law sented litigation had long after the Williams posses- for immediate proceedings initial of the volumi- completed. Our review been collateral, person a reasonable sion of the compiledin this case reveals no nous record question Judge Eckert’s reasonably could

Case Details

Case Name: Sargent County Bank v. Wentworth

Court Name: North Dakota Supreme Court

Date Published: May 17, 1993

Citation: 500 N.W.2d 862

Docket Number: Civ. 920100

Court Abbreviation: N.D.