Dunham v. First Nat. Bank in Sioux Falls

• Decision Date: 06 October 1972
• Docket Number: No. 11030,11030
• Citation: 201 N.W.2d 227,86 S.D. 727
• Parties: L. T. DUNHAM, Plaintiff and Appellant, v. The FIRST NATIONAL BANK IN SIOUX FALLS, a national banking association, Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 227

201 N.W.2d 227

86 S.D. 727

L. T. DUNHAM, Plaintiff and Appellant, v. The FIRST NATIONAL BANK IN SIOUX FALLS, a national banking association, Defendant and Respondent.

No. 11030.

Supreme Court of South Dakota.

Oct. 6, 1972.

Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and respondent.

H. R. Jackson, of Whiting, Lynn, Jackson, Freiberg & Shultz, Rapid City, for plaintiff and appellant.

WOLLMAN, Judge.

This is an appeal from an order dismissing the complaint in an action brought by L. T. Dunham (Dunham) against the First National Bank in Sioux Falls (bank) for relief from a judgment secured more than one year prior to the commencement of the action. For the purposes of reviewing the trial court's ruling on the bank's motion to dismiss, we must assume that all facts properly pleaded in Dunham's complaint are true. Akron Savings Bank v. Charlson, 83 S.D. 251, 158 N.W.2d 523.

In the summer of 1969, Kaiser Enterprises, Inc., was engaged in a manufacturing venture at or near Chamberlain, South Dakota. On or about August 15, 1969, Dunham, Don H. Sticha and George Kaiser allegedly made, executed and delivered to the bank for valuable consideration a continuing guaranty in writing whereby they jointly and severally guaranteed and promised payment to the bank of any and all indebtedness of any kind then existing on said date, created on said date or incurred in the future by or for Kaiser Enterprises, Inc., to the bank. ¹ On or about August 27, 1969 the bank loaned Kaiser Enterprises, Inc., the sum of $110,000 on a promissory note executed by the corporation in that amount due November 26, 1969. The note was extended to December 31, 1969.

The promissory note went into default and the bank brought suit against Dunham, Sticha and Kaiser on the guaranty, the summons and complaint in said action being served on Dunham on or about February 16, 1970. Upon being served with the summons and complaint, Dunham contacted Sticha and informed him that he, Dunham, had not signed the guaranty which was the basis of the action against him and that his signature which appeared thereon was a forgery. Sticha then informed Dunham that any judgment would first have to be obtained against the corporation, Kaiser Enterprises, Inc., and go unsatisfied before a judgment could be obtained against Dunham, that negotiations were being made for the sale of Kaiser Enterprises, Inc., which sale would soon be completed and the proceeds therefrom used to satisfy the claims of the bank, and that therefore Dunham should make no claim that his signature on the guaranty was a forgery.

Sticha and Kaiser contacted Joseph H. Bottum, III, an attorney who was then practicing in Pierre, South Dakota, in regard to representing them and Dunham in the action brought by the bank on the guaranty. Dunham met with Mr. Bottum and the other two defendants on one occasion at a cafe in Minneapolis, Minnesota (Dunham has been a resident of West St Paul, Minnesota for a number of years) concerning Bottum's representation of the three defendants in the action. Dunham did not mention the matter of the forgery of his signature on the guaranty at this meeting because of the representations that had been made earlier by Sticha to Dunham that Dunham should not claim that his signature on the guaranty was a forgery because the judgment would be satisfied from the proceeds of the sale of the corporation's assets.

Mr. Bottum filed an answer on behalf of the three defendants, the substance of which does not appear in the record in this action. The trial of the bank's action against the three defendants was scheduled to be held in Sioux Falls, South Dakota, on April 20, 1970. On April 19, 1970, Mr. Bottum called J. Bruce Blake, an attorney at law in Sioux Falls, with the request that Mr. Blake appear at the trial the next day. According to Mr. Blake's affidavit filed in support of Dunham's complaint, Mr. Bottum informed Mr. Blake that Mr. Blake should make an appearance for him in order that the matter not be resolved by default judgment and that Mr. Blake should decline to waive findings of fact and conclusions of law. In accordance with these instructions, Mr. Blake appeared at the trial on April 20, 1970 and refused to waive findings of fact and conclusions of law. He subsequently reported the results of the trial by letter mailed directly to Mr. Bottum. On April 29, 1970, a judgment in the amount of $112,273.37, together with $43.20 costs, was entered against Dunham, Sticha and Kaiser. A copy of this judgment was served upon Mr. Blake as attorney for the three defendants. Mr. Blake admitted service and immediately notified Mr. Bottum of the entry of the judgment and provided him with the copies of the documents that had been served upon him. Mr. Blake never personally met any of the defendants, nor did he ever converse with them by telephone or correspond directly with any of them. All of his instructions were related verbally to him by Mr. Bottum. At no time did Mr. Blake report to any of the defendants personally nor did he provide any of the defendants with copies of the judgment since he had never received the mailing addresses for any of the defendants.

According to Dunham's complaint, as amplified by his supporting affidavit, he never received notice of the trial that was held on April 20, 1970, nor of the judgment that was thereafter rendered against him. The first knowledge that Dunham had of the judgment was when the bank commenced an action in United States District Court in Minnesota on or about May 20, 1970, for the enforcement of the South Dakota judgment against him and the other two defendants. Dunham contacted an attorney in Minneapolis and advised him of the situation. This attorney called the bank's attorney in Sioux Falls and informed him that Dunham's signature on the guaranty was a forgery. Dunham was thereupon referred to a law firm in Sioux Falls, South Dakota. He conferred with members of this firm as early as July of 1970 and several times thereafter regarding the matter of obtaining relief from the judgment of April 29, 1970. Dunham was continuously informed that any effort to obtain relief would be to no avail since there was then no evidence to corroborate his contentions that his signature on the guaranty was a forgery.

During the latter part of April or early part of May 1971, Dunham was informed by one William Cahoon, who was at one time the plant manager of Kaiser Enterprises, Inc., that he had seen Don Sticha sign Dunham's name to the guaranty which was given to the bank. An affidavit to this effect by Mr. Cahoon was filed in support of Dunham's complaint. The affidavits of three other ex-employees of Kaiser Enterprises, Inc. to the effect that they had seen Sticha sign Dunham's name to papers were made a part of the record by leave of court after the court had entered an order granting the bank's motion to dismiss.

Dunham's complaint that the bank's judgment of April 29, 1970 be vacated and that the bank's action against him be dismissed upon the merits was served on the bank on June 29, 1971. A hearing on the bank's motion to dismiss was held on July 6, 1971 and an order dismissing the complaint was entered the same day. Thereafter, a motion for rehearing was denied, although additional affidavits, including those referred to above, were filed pursuant to permission granted by the trial court. The appeal was perfected on September 3, 1971; present counsel for Dunham filed his notice of appearance on October 27, 1971.

Dunham's complaint for relief from the bank's judgment of April 29, 1970 is based upon that portion of SDCL 15--6--60(b) which provides that:

'* * * Section 15--6--60 does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notifed as provided by statute or to set aside a judgment for fraud upon the court.'

SDCL 15--6--60(b) is for all purposes herein the same as Rule 60(b) of the Federal Rules of Civil Procedure and was adopted as a part of the South Dakota Civil Rules of Procedure effective July 1, 1966. Prior to July 1, 1966, relief from judgments, orders or other proceedings taken against a party was governed by the provisions of SDC 1960 Supp. 33.0108 which provided that:

'The court may likewise, in its discretion, and upon such terms as may be just, allow an answer or reply to be...