Federal Land Bank of Saint Paul v. Wallace, 10765

• Decision Date: 17 April 1985
• Docket Number: No. 10765,10765
• Citation: 366 N.W.2d 444
• Parties: The FEDERAL LAND BANK OF SAINT PAUL, Plaintiff and Appellee, v. Billy J. WALLACE and Rosemarie Wallace, Defendants, Cross-Claimants, and Appellants, v. The FIRST NATIONAL BANK OF ELLENDALE, Defendant and Cross-Defendant. Civ.
• Court: North Dakota Supreme Court

Page 444

366 N.W.2d 444

The FEDERAL LAND BANK OF SAINT PAUL, Plaintiff and Appellee, v. Billy J. WALLACE and Rosemarie Wallace, Defendants, Cross-Claimants, and Appellants, v. The FIRST NATIONAL BANK OF ELLENDALE, Defendant and Cross-Defendant.

Civ. No. 10765.

Supreme Court of North Dakota.

April 17, 1985.

Ronald G. Splitt, of Kessel, Splitt & Kessel, LaMoure, for plaintiff and appellee.

Paul T. Crary, Walhalla, for defendants, cross-claimants, and appellants.

Joseph A. Turman, of DeMars, Turman & Johnson, Ltd., Fargo, for defendant and cross-defendant.

VANDE WALLE, Justice.

Billy J. Wallace and Rosemarie Wallace, defendants and cross-claimants, appealed from the summary judgment ordered by the district court of Dickey County which granted foreclosure of a real-estate mortgage in favor of the Federal Land Bank of Saint Paul. We affirm.

On January 15, 1980, Billy and Rosemarie Wallace, farmers in Dickey County, borrowed $590,000 from the Federal Land Bank of Saint Paul (hereinafter Federal Land Bank). To secure the loan, the Wallaces were required to mortgage certain real estate used in their farming operation.

Subsequent to mortgaging their real estate the Wallaces had financial difficulties occasioned in part by drought, low crop yields, increasing production costs, and rising interest rates. The Wallaces found themselves unable to make the scheduled payment of March 1, 1982, and on April 16, 1982, the Federal Land Bank by agreement with the Wallaces re-amortized the $590,000 loan. The re-amortization agreement required the Wallaces to make a payment of approximately $61,000 on December 1, 1983. The Wallaces failed to make the December 1 payment.

On February 29, 1984, the Federal Land Bank brought a foreclosure action in district court naming the Wallaces and the First National Bank of Ellendale (hereinafter First National Bank) as defendants. The First National Bank had a recorded real estate mortgage dated April 21, 1982, on the Wallaces' real estate for the sum of $135,000. The Federal Land Bank claimed that First National Bank's mortgage was made subsequent to and expressly subject to its $590,000 mortgage.

The First National Bank filed an answer generally denying Federal Land Bank's complaint. Thereafter, both banks entered into an agreement stipulating that (1) the Federal Land Bank's real estate mortgage was superior, (2) First National Bank consented to entry of judgment by default, and (3) the judgment of the Federal Land Bank would provide the First National Bank with the right of redemption within the statutory one-year period from the date of the judicial sale.

The Wallaces answered, generally denying the complaint, and listed fifteen separate defenses to the foreclosure action. In their answer, the Wallaces counterclaimed, alleging that the Federal Land Bank's foreclosure action had severely damaged them by the loss of present and future income and wealth and loss of expansion and operation of their farming business. The Wallaces prayed for a total of $70,000,000 in actual, compensatory, and punitive damages. The Federal Land Bank replied, generally denying the Wallaces' counterclaim.

The Wallaces also cross-claimed against the First National Bank, alleging that under Title 15, U.S.C., the two promissory notes they had signed on April 6, 1983, and the accompanying security agreements were invalid and unenforceable for lack of consideration. The Wallaces claimed that the actions of the First National Bank in executing and filing the security agreements constituted the wrongful taking of their property rights and reduced their ability to obtain financing elsewhere for their farming operation. Again, the Wallaces requested $70,000,000 in total damages.

First National Bank answered the Wallaces' cross-claim generally denying the allegations and specifically alleging that the cross-claim failed to state a cause of action upon which relief could be granted. First National Bank specifically denied that Title 15, U.S.C., was applicable and that the notes and mortgage were unenforceable. First National Bank further denied the allegation that there was a lack of consideration, arguing that it advanced all monies represented in the promissory notes.

First National Bank cross-claimed against the Wallaces alleging that they were indebted to it in the sum of $67,466.10 plus accrued interest on original promissory notes for a total of approximately $201,410. First National Bank had obtained security for these notes by having the Wallaces execute certain security agreements with livestock and crops as secured collateral and subsequently, on April 21, 1982, by having the Wallaces execute a $135,000 mortgage on their real estate. The Bank alleged that the Wallaces had defaulted in payment of the loans and prayed for judgment in the amount of $67,466.10 plus accrued interest and for foreclosure of the Bank's security interest in the secured collateral.

On March 15, 1984, the Wallaces filed a notice of lis pendens and on March 19, 1984, filed a common-law lien for $2,000,000 on their mortgaged property.

On April 26, 1984, the Federal Land Bank moved the district court for summary judgment in its foreclosure action. On May 9, 1984, First National Bank moved the court for summary judgment on the Wallaces' cross-claim and for severance of the Wallaces' cross-claim from the mortgage-foreclosure action pursuant to Rule 42(b), N.D.R.Civ.P. First National Bank contended that there was no just reason to delay the Federal Land Bank foreclosure action and that if the court failed to sever the Wallaces' cross-claim from the foreclosure action there would be erosion of any equity it would potentially have in the mortgaged property.

The district court held a hearing on the Federal Land Bank motion for summary judgment and on First National Bank's motion for severance on May 21, 1984. The Wallaces appeared personally and represented themselves without counsel.

The affidavits in support of the Federal Land Bank's motion for summary judgment affirmed that the Wallaces were in default on the $590,000 loan from the Federal Land Bank. The Wallaces did not deny their default but raised matters generally alleging a violation of their rights and arguing that there was a conspiracy against them between the Federal Land Bank and the First National Bank. The court determined that there was nothing in the Wallaces' affidavit that indicated that there would be any material issue of fact in the foreclosure action. The court stated that the Wallaces' assertions were simply conclusions unsupported by any sworn statements which would give rise to a set of facts and circumstances constituting a defense against the nonpayment of their notes to the Federal Land Bank. The court therefore granted summary judgment in favor of the Federal Land Bank and ordered that the notice of lis pendens be cancelled and that any common-law liens filed by the Wallaces be expunged. The court also granted First National Bank's motion for severance.

The First National Bank moved the district court on July 23, 1984, for summary judgment on the Wallaces' cross-claim, for summary judgment on First National Bank's cross-claim against the Wallaces, and in the alternative for an order compelling delivery of collateral. The Wallaces were represented by counsel at this second hearing.

The district court dismissed all claims by the Wallaces except the allegation that the Bank had breached a fiduciary duty owed to the Wallaces by failing to lend the Wallaces certain monies.

The district court did order summary judgment for First National Bank on its cross-claim against the Wallaces. The court also stated that pursuant to Rule 54(b), N.D.R.Civ.P., there was no reason for delay of entry of final judgment in the matter pending final resolution of the remaining issue before the court, that being the issue as to breach of fiduciary duty by the Bank. The court also ordered the Bank's security interest foreclosed and that the sheriff secure possession of the collateral for the Bank. The Wallaces did not appeal the summary judgment granted in favor of the First National Bank.

The Wallaces appealed the summary judgment in favor of the Federal Land Bank's foreclosure action. The Wallaces raise three issues on appeal. The Wallaces contend that the district court erred in granting summary judgment when there were genuine issues of material fact presented. Secondly, the Wallaces contend that severance of their cross-claim against First National Bank was untimely and detrimental to their defense. Lastly, the Wallaces argue that the district court erred by not informing them of the precariousness of proceeding without counsel before the court.

Before reaching the merits of the Wallaces' contentions, however, the peculiar posture of this case causes us to consider whether or not the summary judgment in favor of the Federal Land Bank is appealable.

Rule 54(b), N.D.R.Civ.P., provides that if more than one claim for relief is presented in an action, or if multiple parties are involved, the trial court may direct entry of final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. Multiple claims for relief were presented in this...