Dragstra v. Northwestern State Bank of Orange City

• Decision Date: 15 December 1971
• Docket Number: No. 54685,54685
• Parties: Chris DRAGSTRA et al., Appellants, v. NORTHWESTERN STATE BANK OF ORANGE CITY, Appellee.
• Court: Iowa Supreme Court

Page 786

192 N.W.2d 786

Chris DRAGSTRA et al., Appellants, v. NORTHWESTERN STATE BANK OF ORANGE CITY, Appellee.

No. 54685.

Supreme Court of Iowa.

Dec. 15, 1971.

Dull Law Firm, Le Mars, for appellants.

Klay & Bastemeyer and Te Paske & Rens, Orange City, for appellee.

UHLENHOPP, Justice.

This appeal involves the sufficiency of an amended petition to vacate a summary judgment. See rules 252, 253, Rules of Civil Procedure. The amended petition was attacked by a motion to dismiss. Rule 104(b), R.C.P. Appellants are Rena Dragstra ('Rena'), who is the wife of Chris Dragstra ('Dragstra'), the children of Rena and Dragstra, and the guardian of those children. Appellee, who holds the judgment in question, is Northwestern State Bank of Orange City ('the Bank').

A motion to dismiss a petition is to be sustained only when 'it appears to a certainty plaintiff has failed to state a claim on which any relief may be granted under any state of facts which could be proved in support of the claims asserted by him.' Osbekoff v. Mallory, 188 N.W.2d 294, 299 (Iowa). We approach appellants' amended petition in that frame of reference. Since a motion to dismiss admits the facts alleged in the pleading attacked, we assume the truth of appellants' allegations--but only, of course, for the purposes of the motion.

Two petitioners are involved. The first is the Bank's original petition founded on notes and on a guaranty, on which two judgments which are involved here were rendered. The second is appellants' present amended petition to vacate the second of those judgments. We will speak of these pleadings as 'the Bank's petition' and 'appellants' amended petition'.

Dragstra was engaged in farming. He reached the limit of his credit. Rena owned considerable land. The Bank resired a guaranty of Dragstra's debts by Rena. The Bank therefore prepared a written guaranty to a limit of $50,000 covering Dragstra's past and future indebtedness. Dragstra indicated to the Bank that Rena preferred not to come to the Bank and that he would take the guaranty home for her signature. He returned with the guaranty, indicating that she had signed it. The president of the Bank signed the guaranty as witness.

Thereafter the Bank extended credit to Dragstra--whether in the form of new loans or extensions of old ones, or both, is not clear.

At some time during the transactions, Dragstra and Rena acknowledged to the Bank that Rena never signed the guaranty.

Dragstra became insolvent. Rena and he conveyed her land to their children.

Subsequently, the Bank filed its petition against Dragstra, Rena, their children, and the guardian of the children. The petition was in four counts (divisions): Count I sought judgment against Dragstra in excess of $80,000 on his notes. Count II sought judgment against Rena for $50,000 on the alleged guaranty. In that count, the Bank alleged that Rena signed the guaranty. Count III sought to subject Rena's land to such judgment on the guaranty, as fraudulently conveyed. Count IV sought to foreclose the Bank's security interest in Dragstra's personalty. Dragstra, Rena, the children, and the guardian filed answer. They denied, among other things, that Rena signed the guaranty. The Bank was represented by Attorney Earl T. Klay ('Mr. Klay'), and Dragstra, Rena, the children, and the guardian were represented by Attorney Maurice A. Te Paske ('Mr. Te Paske'). (Attorney Maurice A. Te Paske is not the same person as the Bank's present co-counsel of the same surname.) Mr. Te Paske was authorized by his clients to try to negotiate a settlement of Dragstra's obligations to the Bank. He was not authorized to admit that Rena executed the guaranty or to approve any judgment based on the guaranty.

The Bank filed a motion for summary judgment. The motion was supported by the affidavit of Mr. Klay on personal knowledge. He swore that Dragstra owed certain notes and that the guaranty, executed by Rena, guaranteed those notes.

Mr. Te Paske filed a resistance to the motion. The resistance was signed only by him (and the notary). He swore, among other things, that Rena's obligation 'is limited to the 'loan guaranty agreement' executed by her'.

Thereafter summary judgment was rendered against Dragstra on the motion. The court adjudged Dragstra liable on the notes. That judgment is not in question, and we will not again refer to it.

Later the Bank filed a second motion for summary judgment. Dragstra's personalty had been sold on execution in the meantime, leaving a balance of $54,280.61. The second motion sought judgment against Rena for that amount on the guaranty and also sought to subject to the judgment the land which had been conveyed. Mr. Te Paske filed a resistance identical to the first one, again signing it himself.

Still later Mr. Klay prepared a judgment entry finding and adjudging that the resistance to summary judgment stated Rena's obligation was limited to 'the loan guaranty agreement executed by her', that she was liable for $54,240.61 and interest, attorney's fees, and costs, that her real estate was fraudulently conveyed, and that special execution issue against such real estate. We will refer to this judgment as 'the first judgment'.

As of January 28, 1970, the second motion for summary judgment had not yet been set for hearing nor had notice of a hearing been given. On that day Mr. Klay appeared ex parte before the district court (Kelley, J.) and obtained rendition of the first judgment by the court. Mr. Klay did not file that judgment then.

On February 3, 1970, court was again held in the county (Kennedy, J.). Judge Kennedy was unaware of the unfiled first judgment. He therefore set the Bank's second motion for summary judgment for hearing for February 17, 1970. Evidently the clerk notified counsel accordingly.

On February 17, 1970, Messrs. Klay and Te Paske appeared. They entered the anteroom to the judges' chambers. Mr. Te Paske was unaware of the first judgment and Mr. Klay did not inform him of it. Mr. Klay had with him another judgment entry, this one undated and unsigned. We will call this 'the second judgment'. Pages 1, 3, and 5 were new, but pages 2 and 4 were those pages taken from the first judgment. Mr. Klay showed Mr. Te Paske the second judgment and told him that Judge Kelley had approved it, that he was going to present it to Judge Kennedy for signature, and that there was nothing Mr. Te Paske could do to prevent rendition of judgment. Mr. Te Paske relied on Mr. Klay's statement, reviewed the second judgment, and asked if it could be changed so that the Dragstra home would be taken last on execution rather than first. Mr. Klay agreed and the judgment was so changed.

The word 'Approved' was then written near the end of the second judgment just below the line for the judge's signature, and Mr.Klay and Mr. TePaske signed their names just below that word as attorneys for the respective parties.

Mr. Klay thereupon went before Judge Kennedy and presented the first judgment and also the second judgment which changed the order of execution and bore the approved of the attorneys. Judge Kennedy signed the second judgment and Mr. Klay filed it with the clerk.

(Mr. Te Paske later swore that 'it was not my intention to approve the judgment entry but only the changes altering the order of execution and that said approval was made only because I relied upon the statement of Mr. Klay that the judgment entry had already been approved by Judge Kelley and that there was nothing that I could do with respect to preventing the entry of the judgment which he had prepared.' At the bar of this court, one of the attorneys for the Bank stated it was true that the approval endorsed on the second judgment related only to the order in which execution should be levied. The approval itself, however, contained no such qualification. Moreover, in a later ruling Judge Kennedy stated that in rendering the second judgment he was entitled to rely on Mr. Te Paske's authority.)

On April 10, 1970, Rena learned that judgment had been rendered against her on the guaranty. At some time, which the pleading do not show, she retained her present attorney, Mr. Burton Dull.

On June 30, 1970, appellants filed their petition to vacate the second judgment. They were then unaware of the first judgment and their petition to vacate did not refer to it. They alleged that Rena did not sign the guaranty or authorize it in any way, that the Bank and its attorney, knowing the guaranty to be a forgery, committed a fraud upon the court in obtaining the judgment of February 17, 1970, and that Mr. Te Paske had no authority to admit Rena signed the guaranty or to consent to judgment on it.

The Bank filed a motion to dismiss appellants' petition to vacate.

On August 11, 1970, hearing was held before the trial court (Kennedy, J.) on the Bank's motion to dismiss, and Mr. Klay produced and filed the first judgment. The next day, with the trial court's permission, appellants amended their petition to vacate. They alleged the existence of the first judgment. They claimed that by virtue of its existence, Mr. Klay was able to represent to Mr. Te Paske that Judge Kelley approved the second judgment and Mr. Te Paske could not prevent rendition of judgment, and that Mr. Klay was thus able to obtain Mr. Te Paske's approval on the second judgment. The Bank renewed its motion to dismiss.

On September 17, 1970, the trial court sustained the Bank's motion to dismiss appellants' amended petition. Appellants' appealed.

The Bank does not seek to enforce the first judgment as a judgment but claims the second judgment is enforceable. Consequently the controversy relates to vacating the second judgment.

We think two basic questions are involved. First, does it appear to a certainty that appellants are not entitled to relief for irregularity or fraud under any state of facts which could be proved in support of their allegations? Second, was appellants' petition to vacate...