Guardian State Bank v. Stangl

• Decision Date: 13 July 1989
• Docket Number: No. 20158,20158
• Citation: 778 P.2d 1
• Parties: GUARDIAN STATE BANK, a Utah corporation, Plaintiff and Appellant, v. F.C. STANGL III, Defendant and Appellee.
• Court: Utah Supreme Court

Page 1

778 P.2d 1

GUARDIAN STATE BANK, a Utah corporation, Plaintiff and Appellant, v. F.C. STANGL III, Defendant and Appellee.

No. 20158.

Supreme Court of Utah.

July 13, 1989.

Stephen B. Mitchell, Salt Lake City, for plaintiff and appellant.

Harold G. Christensen, George A. Hunt, Salt Lake City, for defendant and appellee.

STEWART, Justice:

Guardian State Bank ("Guardian") appeals a judgment against it on defendant Stangl's counterclaim.

Stangl was a fifty-percent shareholder in, and an officer and director of, Sargetis Fine Cars, Inc., a car dealership in Price, Utah, which Stangl co-owned with John Sargetis. In August, 1979, the dealership obtained a loan of $150,000 from Empire State Bank, the predecessor of Guardian. The dealership executed a promissory note (the "Sargetis note") for $150,000 payable on demand. Stangl and Sargetis executed continuing guaranties of all debts and obligations owed Guardian by the dealership.

The dealership made periodic payments until the spring of 1980 and then went out of business and assigned its remaining assets to the National Association of Credit Men ("NACM") as a trustee for the benefit of creditors. In April, 1981, Russell Webb, the president of Guardian, met with Stangl at Guardian's offices to discuss the delinquent loan. Webb told Stangl that as a guarantor he would have to pay the original note. Stangl responded that he could not pay the full amount at that time, but that he would pay the note. Stangl requested a repayment program whereby he would execute a new promissory note with one-half payable within either sixty or ninety days and the remainder payable within a year. Stangl observed that if he were simply to pay off the note, he might lose his right to recover by way of subrogation against the dealership on those assets held for liquidation by NACM. Although Stangl was advised by his attorney, Bruce Maak, that he might have possible defenses to his liability on the Sargetis note and could elect to litigate his liability if he desired, Stangl requested Guardian to trade the Sargetis note for a new note that Stangl would issue so that he could collect on the dealership assets and possibly from Sargetis. Webb agreed to trade the Sargetis note for a new note from Stangl.

Thereafter, Maak and Guardian's attorney, Jerry Dearinger, met to effectuate the agreement between Stangl and Guardian. Maak requested that Guardian transfer its rights under the Sargetis note to Stangl upon Stangl's payment of the note. The transaction was to be structured as a purchase by Stangl of the Sargetis note. In May, 1981, Stangl paid Guardian $8,104, the interest then owed on the Sargetis note and executed a new promissory note (the "Stangl note") in favor of Guardian for $132,000, the unpaid balance of the Sargetis note. The Stangl note was to be repaid in two equal installments on July 10, 1981, and July 11, 1982. The note stated that Stangl gave Guardian the note for the purchase of the Sargetis note. Guardian assigned to Stangl the guaranty of the Sargetis note, indorsed the Sargetis note, and gave it to Stangl. Inexplicably, Guardian indorsed the Sargetis note in blank.

In trying to recover some of the dealership assets, Stangl discovered that Ford Motor Credit Co. had a blanket security interest on the assets of the dealership. As a consequence, he collected nothing from the dealership's assets. In 1982, Stangl made no payment on the Stangl note, and in the fall of 1982, Guardian demanded payment. Stangl refused to pay; instead, he presented Guardian with the Sargetis note and demanded that Guardian pay him the full amount of that note.

Guardian then filed an action against Stangl seeking to recover on the Stangl note. Stangl admitted liability on the Stangl note in his answer but filed a counterclaim alleging that he was entitled to recover the amount due on the Sargetis note. Guardian replied to the counterclaim by alleging mistake of fact and fraudulent misrepresentation on Stangl's part in inducing Guardian to indorse the Sargetis note in blank. Guardian also filed a third-party complaint against the attorneys who handled the exchange of the Sargetis and Stangl notes, claiming that if Guardian was liable to Stangl on its indorsement of the Sargetis note, the attorneys were liable to Guardian for negligence. In addition, Guardian sought a declaratory judgment that it was not liable on the Sargetis note.

At the close of trial, Stangl and Guardian both moved for directed verdicts on the issue of Guardian's liability on its indorsement of the Sargetis note. Recognizing that it was "grossly unfair" to hold Guardian liable on its indorsement of the Sargetis note, the trial court nevertheless ruled, on the basis of essentially uncontroverted evidence pertaining to the issue, that Guardian had no defense of fraud and that unilateral mistake did not provide any kind of defense under the law. Therefore, Stangl was awarded a judgment on the note pursuant to its counterclaim in the amount of $194,021.01. The trial judge was of the view that Guardian had committed a unilateral mistake of law in indorsing the note but that the law afforded no relief on that ground. In addition, Stangl was held liable to Guardian on the Stangl note in the amount of $192,019.32. After the balances were offset against each other, judgment was entered in favor of Stangl in the net amount of $2,001.69. Guardian was also awarded a $106,711.55 judgment on its malpractice cross-claim against the attorneys who had represented it in the transaction with Stangl. That figure represented the amount of Stangl's judgment reduced by Guardian's forty-five percent comparative negligence.

On appeal, Guardian contends that the district court's assessment of liability against it on the Sargetis note was error for a variety of reasons, only one of which we need to address.

I. TIMELINESS OF APPEAL

We turn first, however, to Stangl's contention that Guardian's notice of appeal was not timely filed and that this appeal must therefore be dismissed.

The filing of post-trial motions, pursuant to Rules 50(b), 52(b) or 59 of the Utah Rules of Civil Procedure, terminates the time for filing a notice of appeal until an order is entered granting or denying such motions. Utah R.Civ.P., 73(a) (repealed 1985). ¹ But for the filing of post-trial motions, the notice of appeal was due by July 18, 1984. The motions were voluntarily withdrawn and therefore were not ruled on. The day after the withdrawal, August 17, 1984, Guardian filed a notice of appeal and also moved for an extension of time in which to file a notice of appeal. That motion was filed because of an ambiguity in the rules. Rule 73(a) of the Utah Rules of Civil Procedure (as well as Rule 4(b) of the current Rules of the Utah Supreme Court) provides that the time for filing a notice of appeal begins to run again when an order denying the post-judgment motion is entered. However, the rule does not address the situation where no order is entered because the pretrial motions are voluntarily withdrawn.

A voluntary withdrawal is tantamount to an order denying a post-trial motion. A voluntary withdrawal may reflect a more considered judgment regarding the validity of such motions. The decision may be the result of more research than was possible in the ten days allowed for filing such motions. Treating a voluntary withdrawal as an order denying the motion may save both judicial time and expense to the parties and therefore ought not to be discouraged.

Stangl's contention, that allowing the time for filing a notice of appeal to run from withdrawal of the post-trial motions can lead to abuse, is without merit. First, Rule 73(a) (and current Rule 4(b)) allows for an extension of time to file a notice of appeal which would have the same effect as the filing of a post-trial motion. Second, insisting on an actual order denying such motions would not deter sham filings made solely as a pretense to obtain more time for filing a notice of appeal. A party would only have to wait for an order denying a sham motion rather than withdraw the motion to achieve additional time. Finally, unless the withdrawal of a post-trial motion is considered the equivalent of an order denying such a motion, the effect of the rule is to penalize a party who elects to withdraw a motion in order to save time. In U-M Investments v. Ray, 658 P.2d 1186 (Utah 1982), this Court held that, under Rule 73(a), a pending post-trial motion under Rule 59 rendered ineffective a notice of appeal filed before disposition of the motion. We stated, "It seems only fair and equitable to require an appellant who ... files a motion under Rule 59 to file a simple notice of appeal within [the proper time] after his motion has been denied." 658 P.2d at 1187 (emphasis added). See also Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 61, 103 S.Ct. 400, 403, 74 L.Ed.2d 225 (1982) (under Rule 4(a) of the Federal Rules of Appellate Procedure, a notice of appeal filed while a post-trial motion is pending is "a nullity" and the effect "is as if no notice of appeal were filed at all"); Skagerberg v. Oklahoma, 797 F.2d 881, 883 (10th Cir.1986).

There is no suggestion of any improper purpose on Guardian's part in filing its post-trial motions. For these reasons, we hold that the notice of appeal was timely filed, irrespective of whether the order granting additional time for filing had a nunc pro tunc effect.

II. MISTAKE

Guardian asserts that its indorsement of the Sargetis note is unenforceable because the note and guaranty were delivered to Stangl solely for the purpose of enabling Stangl to recoup from third parties what he owed Guardian on his guaranty of the Sargetis note. Guardian further asserts that its indorsement of the note in blank erroneously created in Stangl a right never contemplated by the parties. Guardian also argues that Stangl gave no consideration for the Sargetis note and guaranty and that...