First Nat. Bank of Fargo v. Ketcham

• Decision Date: 24 June 1983
• Docket Number: No. 10312,10312
• Parties: FIRST NATIONAL BANK OF FARGO, a national banking association, Plaintiff and Appellee, v. Eileen E. Gross KETCHAM, Defendant and Appellant, The unknown heirs, devisees, and creditors of James C. Gross, deceased, First Federal Savings and Loan Association, Kent Conrad * as Tax Commissioner of the State of North Dakota, and all persons unknown, claiming any estate or interest in, or lien or encumbrance upon, the real estate described in the complaint, Defendants. Civ.
• Court: North Dakota Supreme Court

Page 140

336 N.W.2d 140

FIRST NATIONAL BANK OF FARGO, a national banking

association, Plaintiff and Appellee, v. Eileen E. Gross KETCHAM, Defendant and Appellant,

The unknown heirs, devisees, and creditors of James C.

Gross, deceased, First Federal Savings and Loan Association,

Kent Conrad ^* as Tax Commissioner of the

State of North Dakota, and all persons unknown, claiming any

estate or interest in, or lien or encumbrance upon, the real

estate described in the complaint, Defendants.

Civ. No. 10312.

Supreme Court of North Dakota.

June 24, 1983.

Conmy, Feste, Bossart, Hubbard & Corwin, Fargo, for plaintiff and appellee; argued by Wickham Corwin, Fargo; Kim E. Brust and Charles A. Feste, Fargo, on brief.

Stefanson, Landberg & Alm, Moorhead, Minn., for defendant and appellant; argued by Randolph E. Stefanson, Moorhead, Minn.

PEDERSON, Justice.

This is an appeal from a judgment for the First National Bank notwithstanding a jury verdict for Ketcham. The Bank sued Ketcham on note number 96142, dated February 2, 1979, in the amount of $13,415.62 plus 10% interest, secured by a second mortgage on Ketcham's home. After the Bank proved a prima facie case, which was in effect conceded, the Bank rested and the trial proceeded with Ketcham attempting to prove her counterclaim that the note and mortgage were void and of no legal effect.

At the close of Ketcham's evidence, the Bank moved for "dismissal" ¹ [of Ketcham's counterclaim] or, in the alternative for a "directed verdict" ² on grounds which could be characterized as (1) insufficiency of the evidence, and (2) no right to relief as a matter of law. ³ The Bank's motion was not granted. The jury returned a verdict for Ketcham and judgment was entered on the verdict. In accordance with Rule 50(b), NDRCivP, the Bank then moved for vacation of the judgment and for judgment in accordance with its motion for a directed verdict. ⁴ A new trial was prayed for in the alternative. ⁵

The trial court granted those parts of the Bank's motion seeking the vacation of the judgment and entry of judgment for the Bank notwithstanding the verdict. The trial court denied the alternative motion for new trial. Only Ketcham appealed; however the Bank, without cross-appealing, asserts error in the denial of the motion for new trial, which it can do under Rule 50(c)(1). ⁶ We affirm the judgment entered notwithstanding the verdict.

Eileen Ketcham, formerly Eileen Gross, and her former husband, James C. Gross, obtained numerous individual and joint, short-term, unsecured, commercial loans from First National Bank, starting in 1971, continuing after Eileen and James were divorced in 1978, and ending upon James's death on December 21, 1979.

Eight of the notes introduced were for less than $4,000. Seven of these were for terms of six months or less, and one was an installment loan for 18 months. All eight were unsecured and all were covered by Credit Life Insurance.

Four of the notes were for sums over $12,000, and all were converted from single payment to installment payments. Note number 76577, dated January 30, 1973, was a $17,000 note at 8% interest for a term of one year, was unsecured but was co-signed by James Gross's parents and Eileen's father. The note contained an election of insurance coverage and was marked as follows:

"(X) I DO NOT want Credit Life or Sickness & Accident Insurance."

Note number 83557, dated February 13, 1975, for $15,121.10 at 9 1/2% interest for a term of one year, was unsecured but was co-signed by Eileen's father. This note also contained the election:

"(X) I DO NOT want Credit Life or Sickness & Accident Insurance."

An unnumbered note, dated April 11, 1977, for $12,929.66 at 9 1/2% interest for a term of one year, was unsecured and apparently was not co-signed. (The original note was not introduced--the original may have borne a number and co-signers.) This note also contained the election:

"(X) I DO NOT want Credit Life or Sickness & Accident Insurance."

Note number 96142, the subject of this suit, dated February 2, 1979, for $13,415.62 at 10% interest, due on June 20, 1985, was secured by a second mortgage on the Gross home in Fargo. This note also contained the election:

"(X) I DO NOT want Credit Life or Sickness & Accident Insurance."

The evidence discloses that when note number 76577 was executed in January 1973, there was a discussion with Bank officials about term life insurance on both James and Eileen. The evidence is confusing. A Bank notation states: "We have sold $100,000 life insurance to Jim and his wife." The testimony, however, discloses that coverage was rejected and James and Eileen purchased term life insurance in the amount of $50,000 and $25,000, respectively, from an independent insurance agency and, at least insofar as the $50,000 policy on James's life is concerned, the Bank was named as sole beneficiary and the policy was delivered to the Bank. There is no claim made that the same or any similar discussion of insurance took place when the three subsequent notes were negotiated.

The record discloses further that subsequent to the divorce in 1978 James, without the knowledge or consent of the Bank or of Eileen, first changed the beneficiary on the $50,000 policy to his son and, thereafter, quit paying premiums and the coverage was cancelled prior to James's death in December 1979. Eileen also terminated or converted her policy without notice to or consent of the Bank.

Generally, the borrower on a note contracts to repay the loan according to the terms of the instrument. See Farmers & Merchants National Bank of Hatton v. Lee, 333 N.W.2d 792 (N.D.1983). In this case, Eileen's counterclaim to the Bank's suit alleged that, in spite of the terms of the note, she was "lead to believe" that the Bank would see to it that the loan was covered by insurance on James's life, that she "relied" thereon, and thus the note and mortgage were "void and of no legal effect."

Because it may be useful to clarify the application of the rule in the trial courts, we believe that it is in the interest of judicial economy that we discuss, first, the Bank's assertion that "the trial court abused its discretion by concluding that the evidence warranted a judgment notwithstanding the verdict, but did not warrant the conditional grant of a new trial." Cited in support of this assertion is Okken v. Okken, 325 N.W.2d 264 (N.D.1982), in which Justice VandeWalle analyzed the relationship between alternative motions for judgment notwithstanding the verdict and for a new trial. Although a motion for judgment notwithstanding the verdict is to be measured both in the trial court and in this court "by a far more rigorous standard" ⁷ than a motion for a new trial, it does not necessarily follow that a motion for a new trial should always be assumed to be a "lesser included" remedy. If the judgment notwithstanding the verdict is granted on strictly a question of law, having no relationship whatsoever to sufficiency of the evidence, it is entirely possible that judgment notwithstanding the verdict may be entirely justified but a new trial would not be. We believe that this is such a case, even though the opposite is ordinarily true.

Rule 59(b) motions for a new trial are addressed to the sound discretion of the trial court. Okken v. Okken, supra, 325 N.W.2d at 269. The denial of a new trial in this instance has not been shown to be unreasonable, arbitrary, or unconscionable. A new trial would serve no useful purpose unless the parties changed their strategy, which is not allowed. Waletzko v. Herdegen, 226 N.W.2d 648, 653 (N.D.1975). No manifest abuse of discretion occurred.

When we examine the complaint, the answer and counterclaim, the grounds stated for a directed verdict, and the reasons given in the trial court's memorandum opinion for granting the Bank's motion for judgment notwithstanding the verdict, we reach the inescapable conclusion that Ketcham has neither alleged nor proved with competent evidence a defense to the equitable action of the Bank to foreclose a second mortgage on Ketcham's home given as security on the note. ⁸ The issues on appeal arise out of the defenses raised by Ketcham's answer and counterclaim.

Ketcham alleged that the Bank's negligence in failing to require insurance caused the failure to satisfy the mortgage, that the Bank is estopped from foreclosing the mortgage, and that the Bank waived its right to collect the note. Ketcham asserts that she was led to believe that the loan was covered by insurance and relied thereon. To the extent that her defense and counterclaim demanded cancellation or reformation of the note, Ketcham sought an equitable remedy. See 13 Am.Jur.2d Cancellation of Instruments Secs. 2 and 3, and 66 Am.Jur.2d Reformation of Instruments Sec. 10. See also, generally, 17 Am.Jur.2d Contracts Sec. 482. Under such circumstances, entitlement to a jury trial is questionable; however, neither party objected thereto in this case.

As we have consistently held in cases involving motions for directed verdict and for judgment notwithstanding the verdict, we view the evidence in the light most favorable to the party against whom the motion is made. Haggard v. OK RV Sales, 315 N.W.2d 475, 477 (N.D.1982); Rau v. Kirschenman, 208 N.W.2d 1, 4 (N.D.1973). Another rule that we apply when we are viewing the evidence is that one cannot claim the benefit of a more favorable version of relevant facts than he has made for himself. Testimony unfavorable to one's own contention can be a "judicial admission." See Malarchick v. Pierce, 264 N.W.2d 478, 480 (N.D.1978).

Ketcham testified that the preliminary discussion prior to the January 30, 1973 loan included a statement by the Bank's loan officer "... that we should have insurance to--life insurance on both our lives should something happen, that the note would be paid for." She acknowledged, however, that the transaction was completed and the loan made on January 30 and, even...