Delzer v. United Bank

Decision Date16 January 1997
Docket NumberNo. 960093,960093
PartiesRay DELZER and Betty Jean Delzer, Plaintiffs and Appellants, v. UNITED BANK of Bismarck, Defendant and Appellee. Civil
CourtNorth Dakota Supreme Court
Anderson. Ray H. Walton, P.C., Bismarck, on brief
OPINION

MESCHKE, Justice.

¶1 Ray Delzer and Betty Jean Delzer appeal a dismissal of their long-running action against United Bank for deceit and breach of a contract to loan money. We reverse and remand for entry of judgment for Delzers on the jury verdict for compensatory damages and for exemplary damages as reduced by the trial court.

¶2 Delzers ranched near Bismarck. In 1979, Delzers and United Bank entered into a loan agreement for Delzers to pledge all of their assets and their son's equipment as collateral for repayment of money to be loaned by United Bank. Delzers contend United Bank orally agreed to lend them $300,000--an operating loan of $150,000, to be followed by additional loans totaling $150,000 for the purchase of cattle. Delzers executed a promissory note for $150,000, and the Bank advanced that amount. The Bank never advanced any funds to purchase cattle. As a result, Delzers contend, they were unable to pay their debts, they lost their ranch when the holder of the first mortgage foreclosed, and they lost all of the other assets pledged as security for the United Bank loan.

¶3 Delzers sued United Bank on May 24, 1985. In Delzer v. United Bank, 459 N.W.2d 752 (N.D.1990) (Delzer I ), we reversed a summary judgment of dismissal and remanded for trial. In Delzer v. United Bank, 484 N.W.2d 502 (N.D.1992) (Delzer II ), we again reversed a summary judgment dismissing Delzer's action against United Bank.

¶4 After the remand in Delzer II, the trial court bifurcated liability and damages. After a trial on liability, the jury returned a verdict finding that (1) United Bank did not make a binding oral contract to lend $150,000 to Delzers for the purchase of cattle as part of an agreement to loan a total of $300,000, and (2) United Bank knowingly deceived Delzers into giving all their property as security for a $300,000 loan when the Bank knew it was only going to loan them $150,000. The trial court ruled the jury's findings were inconsistent, granted United Bank's motion for judgment notwithstanding the verdict on Delzers' deceit claim, and conditionally granted a new trial on that claim if the judgment notwithstanding was reversed on appeal. In Delzer v. United Bank, 527 N.W.2d 650 (N.D.1995) (Delzer III ), we reversed the judgment notwithstanding on the deceit claim, affirmed the grant of a new trial, and remanded for a new trial on both the contract and the deceit claims. This opinion on Delzers' appeal from the outcome of that new jury trial on remand makes our fourth opinion written in this protracted litigation. 1

¶5 After the remand in Delzer III, the case was again tried to a jury. The jury verdict found that (1) United Bank breached an "oral contract to lend $150,000 to [Delzers] for the purchase of cattle as part of an agreement to loan the total sum of $300,000;" and (2) "United Bank willfully deceived the Delzers by promising the Delzers $150,000 for cattle when United Bank had no intention of lending Delzers an additional $150,000 to purchase cattle." 2 The jury awarded no damages for United Bank's breach of contract, awarded damages of $538,000 for its deceit, and awarded exemplary damages of $3,000,000.

¶6 United Bank moved for judgment as a matter of law on the deceit claim or, alternatively, for a new trial. The trial court held that United Bank (1) "shall be granted a judgment as a matter of law and [Delzers'] deceit and punitive damages claims shall be dismissed;" (2) "Alternatively, United Bank should be granted a new trial on all issues;" and (3) "Alternatively, the Court will reduce the exemplary damage award so it does not exceed two times the amount of compensatory damages." The court entered a judgment of dismissal, and Delzers appealed.

I.

¶7 The trial court relied on Pioneer Fuels, Inc. v. MontanaDakota Utils. Co., 474 N.W.2d 706 (N.D.1991), and on Delzer III to grant United Bank judgment as a matter of law on Delzer's deceit and punitive damage claims, explaining:

The underlying evidence presented by the [Delzers] to show breach of contract and deceit is the same alleged promise to lend money for cattle. Under Pioneer Fuels and Delzer III, a deceit claim falls as a matter of law when the jury finds both breach of contract and deceit on the same evidence. [United Bank] shall be granted a judgment as a matter of law and [Delzers'] deceit and punitive damages claims shall be dismissed.

¶8 We addressed punitive damages and tort arising out of a breach of contract in Pioneer Fuels, 474 N.W.2d at 709-10 (citations omitted):

Exemplary damages are not ordinarily recoverable in actions arising out of a breach of contract. Exemplary damages may be recoverable if the breach of contract is or is accompanied by an independent willful tort. Tortious conduct must exist independently of the breach of contract and there must be proof of actual damages resulting from the independent tort.

We affirmed a judgment as a matter of law because "Pioneer did not show that MDU committed an independent tort, separate and distinct from its breach of contract." Id. at 710. We also pointed out that a mere breach of contract, without more, will not support liability in tort. Id. at 710. As we explained in Delzer III, 527 N.W.2d at 654: "Pioneer Fuels stands for the principle that, where there is a breach of contract, there must be some additional, independent facts not connected to the manner of the breach of contract to support tort and exemplary damage claims."

¶9 When someone fraudulently induces another to enter into a contract by making a promise with no intention of performing it, that conduct is actionable fraud. Las Palmas Assoc. v. Las Palmas Center Assocs., 235 Cal.App.3d 1220, 1 Cal.Rptr.2d 301, 310 (1991). The law recognizes that fraud has such an adverse effect on commercial transactions that punitive damages "may be awarded where a defendant fraudulently induces the plaintiff to enter into a contract." Id. 1 Cal.Rptr.2d at 311. As Foster v. Dwire, 51 N.D. 581, 199 N.W. 1017, 1021 (1924), explained, "[t]he real gist of the fraud in such a case is not the breach of the agreement to perform, but the fraudulent intent of the promisor and the false representation of an existing intention to perform, where such intent is in fact nonexistent."

¶10 Delzers' contract claim is, essentially, based upon the following elements: (1) When United Bank made Delzers a $150,000 operating loan, the Bank also promised to loan them an additional $150,000 for the purchase of cattle; (2) in reliance on that promise, Delzers pledged all of their assets and their son's equipment as collateral; (3) United Bank breached the contract by failing to loan the $150,000 for the purchase of cattle; and (4) Delzers were injured by the Bank's breach of the contract. Delzers' deceit claim is based upon the same elements as the contract claim, plus the additional element that when United Bank promised to loan Delzers an additional $150,000 for the purchase of cattle, the Bank did not intend to perform its promise. 3 That is an "additional, independent fact[ ] not connected to the manner of the breach of contract." Delzer III, 527 N.W.2d at 654. United Bank's promise to loan money for the purchase of cattle, made without any intention of performing it, was "[t]ortious conduct ... exist[ing] independently of the breach of contract." Pioneer Fuels, 474 N.W.2d at 710. As Delzer III, 527 N.W.2d at 654, observed, "[t]he problem present in Pioneer Fuels--the only evidence presented to support the tort claim was evidence of the breach of a contract--is not present here."

¶11 We conclude that the trial court erred in granting United Bank judgment as a matter of law on Delzers' deceit and punitive damages claims.

II.

¶12 United Bank contends there is no evidence Delzers sustained any damages from United Bank's deceit and, therefore, the trial court correctly granted judgment of dismissal as a matter of law. As we explain in the next part of this opinion, we conclude there was evidence of damages to Delzers.

III.

¶13 The trial court alternatively granted United Bank a new trial on all issues, ruling that the jury verdict on the deceit claim was against the weight of the evidence. In reaching that conclusion, the trial court relied on three things: (1) all the loan documents were for $150,000; (2) Ray Delzer's October 30, 1979, letter and a follow-up note to Chuck Cowan that the trial court thought showed that the line of credit was for $150,000 and that Delzers hoped to buy cattle later with their own money; and (3) a bankruptcy document that the trial court thought showed that Delzers did not rely on a promise by United Bank of money for cattle.

¶14 In Delzer I, we reversed a summary judgment for United Bank, holding that there were genuine issues of material fact on the meaning of the ambiguous $150,000 line of credit agreement and on whether there was a separate oral agreement for United Bank to extend an additional line of credit to Delzers for the purchase of cattle. In Delzer II, 484 N.W.2d at 506-07, we said that the letter to Cowan, "however awkward for the Delzers to explain, is only one more item of extrinsic evidence to be weighed by the finder of fact," and we again reversed a summary judgment for United Bank and remanded for trial. Similarly, the bankruptcy document, wherein Delzers said they "presented a multitude of livestock programs in recent years to the United Bank of Bismarck, none of them which the bank would...

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