Dewey v. Lutz

• Decision Date: 02 October 1990
• Docket Number: No. 890185,890185
• Citation: 462 N.W.2d 435
• Parties: William J. DEWEY, Sarah L. Dewey, and Daniel G. Dewey, Plaintiffs, Appellees and Cross-Appellants, v. Curtis M. LUTZ, Marvin D. Lutz, Paul A. Richter, and First State Bank of Regent, Defendants, Appellants and Cross-Appellees, and Stella M. Lutz and John Holm, Defendants. Civ.
• Court: North Dakota Supreme Court

Page 435

462 N.W.2d 435

William J. DEWEY, Sarah L. Dewey, and Daniel G. Dewey Plaintiffs, Appellees and Cross-Appellants, v. Curtis M. LUTZ, Marvin D. Lutz, Paul A. Richter, and First State Bank of Regent, Defendants, Appellants and Cross-Appellees and Stella M. Lutz and John Holm, Defendants.

Civ. No. 890185.

Supreme Court of North Dakota.

Oct. 2, 1990.

Greenwood, Greenwood & Greenwood, P.C., Dickinson, for plaintiffs, appellees, and cross-appellants; argued by Dann E. Greenwood. Appearance by Brenda L. Selinger, Dickinson.

Keogh Law Office, Dickinson, for defendants, appellants, and cross-appellees Curtis M. Lutz and Marvin D. Lutz; argued by Robert A. Keogh.

Wheeler Wolf, Bismarck, for defendant and appellant Paul A. Richter; argued by Albert A. Wolf, Bismarck.

Larry L. Boschee (argued) and Lawrence A. Dopson (no appearance) of Pearce & Durick, Bismarck; Gregory G. Gustin (no appearance), Federal Deposit Ins. Corp., Chicago, Ill.; and Gregory G. Gore (argued), Federal Deposit Ins. Corp., Washington, D.C., for Federal Deposit Ins. Corp., Receiver of First State Bank of Regent for appellant First State Bank of Regent.

MESCHKE, Justice.

Curtis Lutz, Marvin Lutz, Paul Richter, and First State Bank of Regent [Bank] appealed orders denying their post-trial motions and appealed the judgment on a jury verdict awarding William, Sarah, and Daniel Dewey actual and punitive damages for fraud and deceit. The Deweys cross appealed the rate of pre-judgment interest on their actual damages. We affirm.

The Deweys inherited an 800 acre farm in Slope County when their mother died in 1983. The farm had been leased to Marvin Lutz for several years. The Deweys retained attorney Peter Etzell in Mankato, Minnesota, to probate their mother's estate and he obtained an appraisal of $245,000 for the farm as of December 30, 1983. An addendum to the appraisal valued the farm at $209,000 as of June 30, 1984. The Deweys decided to sell the farm in early 1984 and contacted Marvin Lutz, who expressed an interest in buying it. The Deweys hired a Mankato realtor, Paul Butzer, to negotiate the sale to Marvin.

In August 1984 the Deweys and Marvin agreed to a purchase price of $210,000, and Marvin paid $1,500 earnest money. Marvin's inquiry at the Federal Land Bank about a loan to purchase the property was unsuccessful because Marvin was in poor financial condition and was going through bankruptcy. Marvin intended that his son, Curtis Lutz, then age 20 and attending college in Arizona, would own the land and farm it. But Curtis's application for a Federal Land Bank loan was also denied.

Marvin then approached Paul Richter, the president and majority owner of the Bank, about financing the purchase. The Lutzes had engaged in numerous financial transactions with Richter and the Bank in the past. At the time, Marvin and his wife, Stella Lutz, owed the Bank more than $200,000 and the Bank held a third mortgage on the Lutzes' Arizona condominium. Richter agreed to finance Curtis's down payment and so informed Butzer, the Deweys' realtor. Marvin told his attorney, John Holm, that Richter would be lending Curtis the down payment, and Holm prepared a memorandum agreement to that effect.

By early November 1984, the Deweys understood that Curtis would make a down payment of $97,000, less the $1,500 earnest money paid by Marvin, with the purchase price balance of $113,000 carried by the Deweys on a second mortgage. The Deweys agreed not to record the second mortgage until Curtis obtained financing to cover the down payment and until the lender recorded a first mortgage. Curtis's $113,000 promissory note to the Deweys was to be personally guaranteed by Marvin. In On November 6, 1984, Marvin and Richter met in Holm's office. After Holm expressed concern about the ability of Marvin and Curtis to pay for the land, Richter suggested that he purchase the property instead of Curtis, and that he lease the land back to Curtis with an option to purchase. Holm then changed the Lutz-Richter memorandum agreement to reflect that Richter would pay the $97,500 down payment rather than lend that amount to Curtis. The agreement also required Richter to obtain a loan to reimburse himself for the $97,500 down payment and to pay on various debts of the Lutzes. Holm neglected to change the agreement to reflect that the total purchase price of the land was $210,000.

addition, the Deweys understood that the total amount of the first mortgage and the second mortgage, together, could not exceed the $210,000 purchase price.

At the conclusion of the meeting, Richter gave Holm a personal check for $97,500. Holm mailed a $95,500 check to Butzer to complete the down payment. The remaining $2,000 paid by Richter was given to Marvin. Holm prepared a warranty deed conveying the land from Curtis to Richter, and Marvin traveled to Arizona where Curtis signed the deed on November 13, 1984. This deed was returned to Holm. In the meantime, Etzell, unaware of the deal between Curtis and Richter, mailed Curtis the Deweys' second mortgage and promissory note for his signature. Curtis also signed that mortgage and note on November 13, 1984, and returned them to Etzell.

After receiving the signed deed conveying the land from the Deweys to Curtis, Holm forwarded that deed to Richter, along with the signed conveyance from Curtis to Richter, to be recorded "in the time frame and manner in which you feel is appropriate." Richter, on December 13, 1984, recorded the conveyance from the Deweys to Curtis after signing the consideration paragraph as Curtis's "agent" to certify that the full consideration was $210,000. At the same time, Richter recorded the conveyance from Curtis to himself.

Richter obtained a $172,000 loan from the Federal Land Bank and, in January 1985, deposited the proceeds of $159,500 with the Bank. Richter disbursed the funds as follows: $97,500 to reimburse himself for the November 6 down payment; $5,199.55 to pay fees for the Lutzes' Arizona condominium; $29,682.55 to an Arizona bank to reduce the first mortgage on the Lutzes' condominium; $20,800.45 to the West River State Bank in Hettinger, in which Richter held an interest, as payment on a promissory note from Marvin; and $5,317.45 to the Bank for interest due on a promissory note from Stella.

The Federal Land Bank mortgage securing the $172,000 loan to Richter was recorded on January 24, 1985. The Deweys' mortgage securing Curtis's $113,000 promissory note was not recorded until July 1985. The Deweys received no further payments from Curtis, Marvin, or Richter.

The Deweys sued Curtis, Marvin, Stella, Richter, the Bank, Butzer, Etzell, Holm, and the Federal Land Bank, alleging, among other things, that they had fraudulently schemed to deprive the Deweys of any security interest in their property. Richter and the Bank crossclaimed against the Lutzes, Butzer, and Holm. The Lutzes crossclaimed against Richter and the Bank. The trial court severed all crossclaims.

Prior to trial, the Federal Land Bank was dismissed from the action and the Deweys settled with Butzer. During the trial, the Deweys settled with Etzell. At the conclusion of the Deweys' case-in-chief, the trial court allowed the Deweys to amend their complaint to allege deceit in addition to fraud.

The jury returned a special verdict that Stella and Holm had not committed fraud or deceit and were not part of any fraudulent or deceitful scheme. The jury determined that Curtis had committed deceit; that Marvin and Richter had each committed fraud and deceit; and that Marvin, Richter, and the Bank had participated in a common scheme to defraud and deceive the Deweys. The jury found Curtis, Marvin, Richter, and the Bank jointly and severally liable to the Deweys for $113,000 in actual Richter and the Bank moved for judgment notwithstanding the jury verdict, or in the alternative, for a new trial. The Lutzes also moved for a new trial. The trial court denied the motions. These appeals followed.

damages and awarded interest at 10 percent. The jury also awarded the Deweys punitive damages of $3,300 against Curtis, $10,000 against Marvin, $25,000 against Richter, and $25,000 against the Bank. The trial court entered judgment on the jury verdict but reduced the actual damages by the amounts Deweys received from their settlements with Butzer and Etzell, and reduced the interest on that award to six percent.

AMENDMENT OF COMPLAINT

Curtis, Marvin, and Richter argue that the trial court abused its discretion in allowing the Deweys to amend their complaint during the trial to allege a cause of action for deceit. This issue was not raised by the appellants in their post-trial motions. In Andrews v. O'Hearn, 387 N.W.2d 716, 728 (N.D.1986), we said:

"It is well settled that where a motion for a new trial is made in the lower court the party making such a motion is limited on appeal to a review of the grounds presented to the trial court." Zimbelman v. Lah, 61 N.D. 65, 67, 237 N.W. 207, 208 (1931). This restriction of appealable issues applies not only to review of a denial of the motion for a new trial, but also to the review of the appeal from the judgment itself or from a denial of a motion for judgment notwithstanding the verdict.... [Footnote omitted.]

Because these appellants failed to raise this alleged error in their motions for a new trial and for judgment notwithstanding the verdict, we conclude that they waived the issue on appeal.

SUFFICIENCY OF THE EVIDENCE

Curtis, Marvin, and Richter assert that the evidence was insufficient to support various "special findings of fact" by the jury. The challenged findings determined that Curtis committed deceit in the sale of the land to Richter "and his nondisclosure of the same to the" Deweys; that Marvin committed fraud and deceit in the execution and delivery to the Deweys of the promissory note and mortgage; that Richter committed fraud and deceit "in causing a mortgage to Federal Land Bank of St. Paul to...