Anderson v. Marvin Zimbelman, Melanie Zimbelman, His Elec., Inc.

• Decision Date: 13 February 2014
• Docket Number: No. 20130207.,20130207.
• Citation: 2014 ND 34,842 N.W.2d 852
• Court: North Dakota Supreme Court
• Parties: Craig ANDERSON, as assignee of First Western Bank and Trust, Plaintiff and Appellee v. Marvin ZIMBELMAN, Melanie Zimbelman, HIS Electric, Inc., Roger Sundsbak, George Bitz, Northern Livestock Auction, Mike Bryn dba Mike's Body Paint & Glass, State of North Dakota, acting through the State Tax Commissioner, and all other persons unknown claiming any estate or interest in, or lien or encumbrance upon, the property described in the Complaint, Defendants Roger Sundsbak, George Bitz, and Northern Livestock Auction, Appellants.

842 N.W.2d 852

2014 ND 34

Craig ANDERSON, as assignee of First Western Bank and Trust, Plaintiff and Appellee

v. Marvin ZIMBELMAN, Melanie Zimbelman, HIS Electric, Inc., Roger Sundsbak, George Bitz, Northern Livestock Auction, Mike Bryn dba Mike's Body Paint & Glass, State of North Dakota, acting through the State Tax Commissioner, and all other persons unknown claiming any estate or interest in, or lien or encumbrance upon, the property described in the Complaint, DefendantsRoger Sundsbak, George Bitz, and Northern Livestock Auction, Appellants.

No. 20130207.

Supreme Court of North Dakota.

Feb. 13, 2014.

James Cailao (argued), Bismarck, ND, and Jon R. Brakke (on brief), Fargo, ND, for plaintiff and appellee.

Sean Thomas Foss, Fargo, ND, for appellants.

CROTHERS, Justice.

[¶ 1] Roger Sundsbak, George Bitz and Northern Livestock Auction (collectively “Northern Livestock”) appeal a district court judgment granting Craig T. Anderson's motion for summary judgment and denying Northern Livestock's motion to amend their counterclaim. Anderson is First Western Bank & Trust's (the “Bank”) assignee. Northern Livestock argues the district court erred as a matter of law by entering summary judgment in favor of Anderson, by failing to enter summary judgment in favor of Northern Livestock's counterclaim for specific performance and by failing to provide sufficient findings of fact and conclusions of law to permit appellate review of its decision denying Northern Livestock's cross-motion for summary judgment. We affirm.

I

[¶ 2] Marvin and Melanie Zimbelman executed three mortgages on real property in McHenry County in favor of First Western Bank & Trust. The first mortgage secured a promissory note to the Bank for $150,750 and was recorded March 13, 2006. The second mortgage secured a promissory note to the Bank for $131,240 and was recorded on May 15, 2007. The third mortgage secured a promissory note to the Bank for $327,400 and was recorded on December 31, 2008. As of February 25, 2013, the Zimbelmans were indebted on all three mortgages in amounts exceeding the combined principal balance of the three notes.

[¶ 3] Northern Livestock obtained an interest in the real property by a judgment against Melanie Zimbelman for $727,495.41, docketed on September 12, 2008. On September 18, 2009, Northern Livestock executed on its judgment, directing the McHenry County Sheriff to satisfy the September 12, 2008 judgment against Melanie Zimbelman out of her property. The McHenry County Sheriff issued a notice of levy for Melanie Zimbelman's property on October 14, 2009. The Bank bid $495,000 at a Sheriff's sale on November 10, 2009 and received a certificate of sale for the property. However, the Bank did not pay $495,000 to the Sheriff, and the Sheriff returned the execution unsatisfied. The Bank paid $5,097.50 in commission and fees for the sale.

[¶ 4] The Bank and Sundsbak signed an agreement regarding the real property on December 13, 2010, and Bitz signed the agreement on January 5, 2011. The agreement stated the Bank paid fees and commissions to the McHenry County Sheriff, but did not pay the balance of their bid. It also stated the certificate of sale was issued with the knowledge and consent of Northern Livestock. The parties agreed Northern Livestock's judgment was subject and subordinate to the Bank's mortgages. The parties agreed Northern Livestock would assign any claim or interest they had in the certificate of sale to the Bank in exchange for the Bank releasing any claim it had against Northern Livestockfor reimbursement of the fees and commissions paid to the Sheriff. The parties stipulated foreclosure of the mortgages would extinguish Northern Livestock's judgment lien.

[¶ 5] The Zimbelmans defaulted on the notes secured by the 2006, 2007 and 2008 mortgages. Because the Zimbelmans were unable to cure the defaults, the amounts due were accelerated. The Bank brought this action foreclosing the mortgages and naming Northern Livestock as a defendant because of its judgment lien. The Bank later substituted Anderson under an assignment agreement.

[¶ 6] Northern Livestock alleged that only the Bank's first two mortgages had priority over their judgment lien, while the third mortgage was subordinate. Northern Livestock also alleged that after paying the Bank's first two mortgages, the Bank's bid of $495,000 created a $210,977.93 surplus from the Sheriff's sale, proceeds which Northern Livestock was entitled to on debt, conversion, fraud and specific performance grounds. Anderson filed a motion for summary judgment claiming Northern Livestock waived their rights to the alleged surplus by subordinating their judgment to the Bank's mortgages in the 2010 agreement between Northern Livestock and the Bank. Northern Livestock alleged Anderson did not establish entitlement to judgment as a matter of law and summary judgment should be granted for their claim that Anderson should pay them the surplus from the 2009 sale. The district court granted Anderson's motion for summary judgment on the foreclosure claim and denied Northern Livestock's motion to amend their counterclaim.

II

[¶ 7] This Court's standard of review for summary judgment is well-established:

“Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.”

Arndt v. Maki, 2012 ND 55, ¶ 10, 813 N.W.2d 564 (quoting Saltsman v. Sharp, 2011 ND 172, ¶ 4, 803 N.W.2d 553).

[¶ 8] Northern Livestock argues summary judgment in favor of Anderson was improper because factual disputes existed regarding execution of the 2010 agreement, the agreement was not a valid and enforceable contract and even if the agreement was a valid contract, Anderson was not entitled to judgment as a matter of law.

A

[¶ 9] Northern Livestock seeks to avoid enforcement of the agreement by alleging it was actually and constructively fraudulently induced to enter into the 2010 agreement with the Bank. Actual fraud requires proof of intent to deceive. N.D.C.C. § 9–03–08. “An individual asserting fraud must prove it by clear and convincing evidence,” and “[f]raud is never presumed.” First Union Nat'l Bank v. RPB 2, LLC, 2004 ND 29, ¶ 22, 674 N.W.2d 1.Rule 56(e)(1), N.D.R.Civ.P., requires affidavits supporting summary judgment motions to “be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on the matters stated.” “Affidavits containing conclusory allegations on an essential element of a claim are insufficient to raise a genuine issue of material fact.” Perius v. Nodak Mut. Ins. Co., 2010 ND 80, ¶ 18, 782 N.W.2d 355.

[¶ 10] Northern Livestock presented only Sundsbak's affidavit to support its fraud claims. Sundsbak's affidavit asserts he and Bitz did not participate in drafting the 2010 agreement. Sundsbak's affidavit asserts an unnamed Bank representative told him the Bank's attorney “screwed up” and Bitz and Sundsbak needed to sign the agreement so the Bank could get the money from the sale to pay off its liens. Sundsbak claims he and Bitz thought the Bank was speaking as their representative because they personally banked with First Western, separate from Northern Livestock. Northern Livestock further alleges the agreement falsely stated Northern Livestock agreed to the issuance of the certificate of sale to the Bank and agreed all three Bank mortgages were superior to their interest.

[¶ 11] Sundsbak's affidavit does not demonstrate the existence of a genuine issue of disputed material fact. It is of no consequence that Sundsbak and Bitz did not participate in drafting the agreement. It is a true representation that a Bank representative said they “screwed up” and they needed Northern Livestock's signatures to get the money from the sale. Because of their individual transactions with the Bank, Sundsbak and Bitz misconstrued the duty the Bank owed them when it conducted business with Northern Livestock. That the agreement stated the certificate of sale was issued to the Bank with the knowledge and consent of Northern Livestock was a recital in the agreement that Sundsbak and Bitz knowingly signed and is based in a lack of objection from Northern Livestock when the certificate of sale was issued and the execution was returned unsatisfied. Finally, the statement that the judgment lien would be inferior to the Bank's mortgages is an operative term of the agreement, not a misrepresentation of fact that induced Northern Livestock to consent to the agreement. Therefore, Northern Livestock failed to establish genuine issues of material fact precluded summary judgment on its claim actual fraud prevents enforcement of the agreement.

[¶ 12] Constructive fraud requires a breach of duty leading to an advantage for the party misleading. N.D.C.C. § 9–03–09(1). “The duty, a breach of which supports an action for constructive fraud, is generally a result of the relationship between the parties,” and “[o]ne's implicit faith in another's honesty and...