Greenwood v. American Family Ins. Co., 11233

• Decision Date: 16 December 1986
• Docket Number: No. 11233,11233
• Parties: Michael GREENWOOD, Robert Norby and Dakminn Industries, Inc., Plaintiffs and Appellants, v. AMERICAN FAMILY INSURANCE COMPANY and Lincoln Huseby, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 108

398 N.W.2d 108

Michael GREENWOOD, Robert Norby and Dakminn Industries Inc., Plaintiffs and Appellants, v. AMERICAN FAMILY INSURANCE COMPANY and Lincoln Huseby Defendants and Appellees.

Civ. No. 11233.

Supreme Court of North Dakota.

Dec. 16, 1986.

John C. McNulty (argued) and Marcy S. Wallace and Charlotte M. Reed, of McNulty & Wallace, St. Paul, Minn., and Randolph E. Stefanson, of Stefanson, Landberg, Plambeck & Geeslin, Moorhead, Minn., for plaintiffs and appellants.

Pamela J. Hermes (argued) and Carlton J. Hunke, of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for defendant and appellee American Family Ins. Co.

Ronald H. McLean (argued) and Maureen Holman, of Serkland, Lundberg, Erickson, Marcil & McLean, Ltd., Fargo, for defendant and appellee Lincoln Huseby.

VANDE WALLE, Justice.

Plaintiffs Michael Greenwood and Robert Norby appeal from an order denying their motion to vacate a summary judgment of dismissal against them and from an order denying their motion to amend the complaint. We affirm.

Plaintiff Dakminn Industries, Inc. (Dakminn), appeals from a summary judgment of dismissal against it and from an order denying its motion to amend the complaint. We reverse and remand to allow Dakminn to amend its complaint and for a trial on the merits.

Greenwood is Dakminn's president and Norby is its vice president. James Ziebart, whose death in August 1982 gave rise to this lawsuit, was a key employee of the company. Dakminn is a closely held corporation engaged in research and development of concrete housing.

During 1981 Dakminn sought to obtain a $135,000 capital loan from the Union State Bank (the Bank) to begin manufacturing operations. As a condition to giving Dakminn its loan, the Bank required personal guarantees from Greenwood, Norby, and Ziebart. It also required that each of them secure credit life insurance. The three filed applications for life insurance through American Family's insurance agent, Lincoln Huseby. At Huseby's request Greenwood submitted a $300 corporate check as a premium prepayment on the policies which were to provide $135,000 of life insurance coverage for each applicant. What occurred after the applications were submitted is disputed by the parties. Following Ziebart's death, American Family denied that an insurance policy had been issued for Greenwood, Norby, or Ziebart and it denied any obligation to pay a life benefit for Ziebart's death.

Greenwood, Norby, and Dakminn then filed this lawsuit for damages against American Family and Huseby asserting fraud, negligent misrepresentation, and breach of contract. American Family and Huseby subsequently moved the court for summary judgments of dismissal. On August 1, 1985, the trial court entered a summary judgment of dismissal against Greenwood and Norby for failing to appear or otherwise resist the summary judgment motions, and on January 9, 1986, the court denied a motion to vacate that judgment. On January 9, 1986, the trial court entered a summary-judgment against Dakminn, dismissing its action against American Family and Huseby with prejudice on the merits.

On appeal Greenwood and Norby assert that the trial court abused its discretion in refusing to vacate the summary-judgment dismissal against them.

A motion for relief from a judgment or order is permitted under Rule 60(b), N.D.R.Civ.P., which provides in relevant part:

"On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment or order in any action or proceeding for the following reasons: (i) mistake, inadvertence, surprise, or excusable neglect; ... or (vi) any other reason justifying relief from the operation of the judgment."

The standard under which we review a trial court's denial of a motion to vacate a judgment is accurately set forth in Fleck v. Fleck, 337 N.W.2d 786, 789-790 (N.D.1983):

"The function of this court in reviewing a trial court's denial of a motion to set aside a regularly entered judgment is not to determine if the trial court was substantively correct in entering the judgment from which relief is sought, but is to determine if the trial court abused its discretion in ruling that sufficient grounds for disturbing the finality of the judgment were not established.... An abuse of discretion on the part of the trial court is never assumed, but must be affirmatively established.

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"A mere recitation of the grounds set forth to Rule 60(b), N.D.R.Civ.P., without specific details underlying such assertions, is not sufficient to afford relief."

In reviewing a court's ruling under Rule 60(b), N.D.R.Civ.P., we are limited by the abuse-of-discretion standard, and we will not overturn the trial court's decision merely because it is not the one we might have made had we decided the original motion. State Bank of Burleigh County Trust Company v. Patten, 357 N.W.2d 239 (N.D.1984).

In reviewing the court's refusal to vacate the judgment of dismissal against Norby and Greenwood we do not have before us a transcript of the hearing on the motion. Norby and Greenwood apparently did not submit a brief on the motion to the trial court. Their written motion states that it is based upon Dakminn's affidavits and memoranda submitted in opposition to the summary-judgment motion against Dakminn. Dakminn's documents relate primarily to the merits of its claims and, with one exception, do not refer to possible grounds for relief under Rule 60(b), N.D.R.Civ.P. The exception is Greenwood's affidavit which, although not expressly referring to Rule 60(b), N.D.R.Civ.P., does state that bankruptcy proceedings for Dakminn made it necessary to obtain permission from the bankruptcy court for funds to retain counsel to represent Dakminn as well as Greenwood and Norby and that obtaining such approval affected Greenwood's ability to "move the case forward in the expeditious manner that I wish." Greenwood's affidavit also states that he and Norby were not represented at the summary-judgment hearing "for I was informed by the attorneys handling Dakminn's Chapter 11 ... that the summary judgment motion would necessarily, due to the overriding authority of the Bankruptcy Court, be temporarily stayed," and because "we had not been able to retain substitute counsel" subsequent to the trial court's approval of the withdrawal of their prior counsel.

John McNulty, Greenwood and Norby's counsel on this appeal, also filed an affidavit stating that prior to the hearing on the summary-judgment motion he advised defendant's counsel that Greenwood and Norby would not be making an appearance at the hearing because they had not been able to make satisfactory arrangements to retain his firm as counsel for them. His affidavit also states that he requested defendant's counsel to grant plaintiffs a voluntary continuance but the request was denied. No explanation is provided as to why Greenwood and Norby did not request the trial court, rather than opposing counsel, for a continuance.

Other than the foregoing statements in Greenwood and McNulty's affidavits, the trial court was not furnished with any explanation of Greenwood and Norby's failure to appear or oppose the summary- judgment motion against them. Consequently, we conclude that Greenwood and Norby have failed to demonstrate that the trial court abused its discretion in denying the motion to vacate.

Dakminn, Greenwood and Norby assert on appeal that the trial court abused its discretion in denying their motion to amend the complaint. Having upheld the trial court's summary judgment of dismissal against Greenwood and Norby it is necessary to discuss this issue only as it relates to plaintiff Dakminn.

The motion to amend contained two substantive changes to the original complaint. The first was to allege that the Bank and Ziebart's estate, the named beneficiaries on Ziebart's insurance application, had assigned to the plaintiffs, subsequent to the filing of the original complaint, all of its rights against American Family and Huseby. The second change to the complaint was to add, as a theory of recovery, an allegation of negligent delay by American Family in notifying Ziebart that his application for life insurance had been denied.

Pursuant to Rule 15(a), N.D.R.Civ.P., a party may amend its pleading by leave of court, and such leave "shall be freely given when justice so requires." The propriety of permitting an amendment under the rule is a discretionary matter for the trial court, and its decision will not be overturned by this court unless there is an abuse of discretion. Bender v. Time Insurance Company, 286 N.W.2d 489 (N.D.1979); Crosby v. Sande, 180 N.W.2d 164 (N.D.1970).

Although the trial court stated that it was denying Dakminn's motion to amend the complaint because it was not timely, we believe the following statement by the trial court in its memorandum opinion, dated December 12, 1985, provides the primary underlying basis upon which the court denied the motion:

"The issue is moot in view of the granting of summary judgment as to Dakminn and in view of denying vacation of the judgments rendered against Greenwood and Norby."

The trial court obviously determined that because summary judgment of dismissal against the plaintiffs was appropriate there remained no valid complaint to be amended. As will be subsequently discussed in this opinion, the trial court erred in granting a summary judgment of dismissal against Dakminn. Consequently, we conclude that the trial court erred in relying on the dismissal as a...