First National Bank & Trust Co. of Williston v. Scherr
First National Bank & Trust Co. of Williston v. Scherr
Concurring Opinion
concurring specially.
I join in this opinion only because we are dealing with summary judgment and not a
Construing Pius’ proposed amended pleading as one for “reformation” is, of course, being kinder and gentler than even the author of that exhortation could have anticipated, but in light of the sound policy undergirding Rule 60(b)(3) and in light of our bias against summary judgment in general and nondisclosure in particular, I concur.
Opinion of the Court
Pius Scherr appealed from a district court order denying his motion for relief from a judgment and his motion to amend his answer. We reverse and remand for further proceedings.
The factual background of this case is stated in First National Bank & Trust Co. v. Scherr, 435 N.W.2d 704 (N.D. 1989) [Scherr I] and will be repeated to the extent necessary to decide the issues in this appeal. On April 29, 1983, the First National Bank & Trust Company of Williston obtained a short-term mortgage, executed in the name of “Scherr and Scherr, A General Partnership,” and signed by Pius and Albinus Scherr. The mortgage covered property upon which the Scherrs planned to construct a Famous Recipe Chicken store and secured “various notes of various dates herewith, as follows: The total of these notes to equal $100,000.00.” Between May 2, 1983 and August 8, 1983, Pius, on behalf of Scherr and Scherr, executed four promissory notes with the Bank totaling $100,000. Each note stated that it
On October 27, 1983, Pius executed another promissory note with the Bank for $65,000 [$65,000 note] for the “[f]inal construction on Famous Recipe Chicken.” Only Pius signed the note, and it did not refer to a real estate mortgage or other security.
Pius and Albinus defaulted on the October 26, 1983 $100,000 note and on the $65,-000 note. The Bank brought a foreclosure action against Pius and Albinus, d.b.a. Scherr & Scherr, on the October 26, 1983 mortgage and on the $100,000 note and obtained a foreclosure judgment on the Famous Recipe Chicken property. The Bank then sued Pius and Albinus, individually and d.b.a. Scherr & Scherr, to recover on the $65,000 note, contending that Pius and Albinus were personally liable for the balance due on that note. The defendants answered, contending that the $65,000 note was secured by a real estate mortgage and therefore the anti-deficiency judgment statutes precluded the Bank from suing on the $65,000 note after it had foreclosed upon the mortgage.
The trial court granted summary judgment for the Bank. In Scherr I, we affirmed the summary judgment against Pius, concluding that the $65,000 note unambiguously indicated that it was unsecured and therefore extrinsic evidence of the intent of the parties was not permissible. We reversed and remanded the summary judgment against Albinus and the partnership, concluding that disputed issues of material fact existed concerning Pius’s authority to obligate the partnership to pay unsecured notes.
After additional discovery in the Bank’s action against Albinus and the partnership, Pius moved for relief from the summary judgment under Rule 60(b), N.D.R.Civ.P., on the grounds of newly discovered evidence and the Bank’s neglect in producing documents in response to requests for production. Pius asserted that the following evidence and documents which were provided by the Bank after Scherr I indicated that the parties intended the $65,000 note to be secured by the April 29, 1983 mortgage: the April 29, 1983 mortgage; the deposition testimony of the Bank’s president, Duane Sorenson, that he intended the mortgage to sweep up all construction advances made by the Bank to build the Famous Recipe Chicken store; and the direct loan worksheets for the $65,000 note indicating a loan classification of “type 25” for “real estate.”
Pius also moved to amend his answer to include counterclaims for “breach of contract”, “breach of a fiduciary duty”, and “negligent misrepresentation”. Pius essentially alleged that the parties intended the $65,000 note to be secured by the April 29, 1983 mortgage, and he sought an offsetting judgment of $99,000.
The trial court concluded that the $65,000 note unambiguously indicated that it was unsecured and that extrinsic evidence of the intent of the parties was not permissible. The court concluded that the newly discovered evidence was “extrinsic, cumulative, and inadmissible” and was “[n]ot of a nature to produce a different result.” The court thus concluded that Pius failed to show good cause under Rule 60, N.D.R. Civ.P., to vacate the judgment and denied Pius’s motions. He has appealed.
A motion for relief from a judgment under Rule 60(b), N.D.R.Civ.P., is addressed to the discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Federal Land Bank of St. Paul v. Bagge, 394 N.W.2d 694 (N.D. 1986). We have defined an abuse of discretion as an unreasonable, arbitrary, or unconscionable attitude by the trial court. Id.
Although it is clear that Pius did not exercise due diligence to discover all of the asserted “newly discovered evidence” and that some of the evidence was not newly discovered [Erdahl v. Hegg, 110 N.W.2d 355 (N.D. 1961) [Evidence which could have been discovered by disclosure proceeding is not newly discovered evidence]], it is also clear that the Bank did not provide Pius with the direct loan worksheet for the $65,-000 note before our decision in Scherr I and that the worksheet was within the scope of his request for production of documents.
The failure to disclose or produce materials within the scope of a discovery request or order constitutes “misconduct” within the meaning of Rule 60(b)(3), F.R. Civ.P.
The Bank does not dispute that it failed to produce the direct loan worksheet
Our next inquiry is whether or not the nondisclosure prevented Pius from fully and fairly preparing or presenting his case. In Scherr I, Pius’s argument was that the $65,000 note was ambiguous as to whether it was secured by the October 26, 1983 mortgage. In this case, his argument is that the $65,000 note was a construction advance which was secured by the April 29, 1983 mortgage which stated that it secured “various notes of various dates herewith, as follows: The total of those notes to equal $100,000.00.” The worksheet indicates that the $65,000 note was “type 25” which meant “real estate” and supports Pius’s theory in this case. Although the Bank asserts that the notation on the worksheet “would not necessarily mean the collateral was real estate”, whether the worksheet, by itself, is cumulative or irrelevant misconstrues its significance because it could have led to the timely discovery of the intent of the Bank’s president, Soren-son, as well as the Bank’s decision to keep the April 23, 1983 mortgage in place.
There is evidence to support Pius’s argument that the $65,000 note was secured by the April 23, 1983 mortgage and did not reflect the intent of the parties because of a mutual mistake, or a mistake by Pius which the Bank knew about. Fraud, mutual mistake, or unilateral mistake by one party about which the other party knows are grounds for reformation of a written contract under Section 32-04-17, N.D.C.C.
The worksheet may have been the catalyst for an entirely different approach to this case in which the evidence of the intent of the parties would be admissible. Under these circumstances, we conclude that the failure to disclose the worksheet prevented Pius from fully and fairly preparing or presenting his case. We therefore conclude that the trial court abused its discretion in denying Pius’s motion to vacate the judgment.
We reverse the order of the district court and remand for proceedings consistent with this opinion with leave for Pius to amend his answer.
. In his appellate brief to this court, Pius acknowledged that he had filed for bankruptcy after he filed his notice of appeal. After oral argument in this court, the parties filed an order from the bankruptcy court lifting the automatic stay of the bankruptcy code [11 U.S.C. § 362] for the purpose of this appeal. See Binek v. Ziebarth, 452 N.W.2d 327 (N.D. 1990).
Additionally, there are remaining claims by the Bank against Albinus and the partnership in this action. In that situation, a certification under Rule 54(b), N.D.R.Civ.P., is ordinarily necessary to confer jurisdiction on this court. E.g., Peterson v. Zerr, 443 N.W.2d 293 (N.D. 1989). In this case, the trial court, in response to a query as to whether or not the remaining claims against Albinus and the partnership had
. Rule 60(b)(ii) and (iii), N.D.R.Civ.P., provides:
"On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment or order in any action or proceeding for the following reasons: ... (ii) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (iii) fraud (whether denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party-”
. Rule 60(b)(iii), N.D.R.Civ.P., is identical to Rule 60(b)(3), F.R.Civ.P., and we may look to relevant federal caselaw construing the federal rule for guidance in construing our rule. E.g., Gajewski v. Bratcher, 240 N.W.2d 871 (N.D. 1976).
. Section 32-04-17, N.D.C.C., provides:
“Revision of contract for fraud or mistake.— When, through fraud or mutual mistake of the parties, or a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention so far as it can be done without prejudice to rights acquired by third persons in good faith and for value."
. Although we express no opinion about the sufficiency of Pius’s proposed amended pleading, we note that it alleges specific facts to state either a mutual mistake by the parties or a
Reference
- Full Case Name
- FIRST NATIONAL BANK AND TRUST COMPANY OF WILLISTON, Plaintiff and Appellee, v. Pius SCHERR, Defendant and Appellant, and Albinus Scherr Individually and D/B/A Scherr & Scherr, a General Partnership, Defendants
- Cited By
- 11 cases
- Status
- Published