Hellman v. Thiele, 11323

CourtUnited States State Supreme Court of North Dakota
Citation413 N.W.2d 321
Docket NumberNo. 11323,11323
PartiesTom HELLMAN, Edwin Egli, Terry Schantz, Harvey Wehri, Paul Wehri, Alvin Kottenbrock, Keith Krein, Kevin Krein, Don Baesler, Waldemar Alt, John Meyer, Dwayne Egli, Ron Egli, Henry Schatz, Jr., Walter Gietzen, Western Livestock Auction, Inc., Napoleon Livestock Auction, Wishek Livestock Market, Stockmen's Livestock Exchange, Inc., Turtle Lake Sales Pavilion, Kist Livestock Auction Co., Herreid Livestock Market, Lemmon Livestock, Inc., and Farmers Livestock Exchange of Bismarck, Inc., Plaintiffs, Appellants and Cross-Appellees, v. Lawrence THIELE and Donald Lembke, d/b/a Thiele Cattle Company, Defendants and Appellees, and Security State Bank of New Salem, Antone Goetz, Allyn Lennie, and Delores Maier, Defendants, Appellees and Cross-Appellants. Civ.
Decision Date29 September 1987

Vogel Law Firm, Mandan, for plaintiffs, appellants and cross-appellees; argued by Jos. A. Vogel, Jr.

Calvin J. Hoovestol, Waconia, Minn., for defendants and appellees.

Lindquist and Vennum, Minneapolis, Minn., and Wheeler, Wolf, Peterson, Schmitz, McDonald and Johnson, Bismarck, for defendants, appellees and cross-appellants; argued by J. Michael Dady. Appearance by Albert A. Wolf.

ERICKSTAD, Chief Justice.

The plaintiffs appeal from an order denying their motion to amend the complaint and from a partial summary judgment dismissing some of their claims against Security State Bank of New Salem, Antone Goetz, Allyn Lennie, and Delores Maier [hereinafter collectively referred to as "the Bank" ]. The Bank filed a cross-appeal. We affirm the order denying the motion to amend the complaint; affirm that part of the judgment which dismisses claims of the plaintiffs; dismiss that part of the cross-appeal which challenges denial of summary judgment; and remand for further proceedings.

This case arises from the ill-fated relationship between the Bank and Lawrence Thiele and Donald Lembke, doing business as Thiele Cattle Company ["Thiele"]. 1 Thiele maintained a business checking account at the Bank. Between 1979 and 1984 Thiele routinely purchased cattle with checks which created substantial overdrafts in its account, and, although there were exceptions, the Bank covered most of the overdrawn checks.

Fifteen of the plaintiffs are farmers and livestock producers who sold cattle to Thiele. The remaining nine plaintiffs are livestock auction markets and sales barns which sold cattle to Thiele. They allege that the Bank engaged in a pattern of paying Thiele's overdrafts, knowing Thiele was insolvent, in an effort to keep the business afloat long enough for the Bank to become fully secured on its various loans to Thiele. According to the plaintiffs' theory, the Bank accomplished this by withdrawing $1,000 per week from Thiele's checking account to pay other loans. The plaintiffs further allege that once the Bank reached a position of full security on its loans it abruptly quit paying Thiele's overdrafts, leaving them holding approximately $447,000 of worthless checks drawn on Thiele's account.

The plaintiffs sued the Bank, 2 alleging fraud, breach of a contract made for their benefit as third-party beneficiaries, failure to give notice of dishonor before its midnight deadline, and negligence. The plaintiffs subsequently moved to amend their complaint to include a separate claim based upon the Bank's alleged violation of the lending limit statute, Section 6-03-59, N.D.C.C. The trial court denied the motion, holding that there was no private right of action under the statute against a bank by a creditor of the bank's customer. The court did indicate, however, that evidence of a violation of the statute might be relevant to the other claims for relief.

Because the trial court had permitted the plaintiffs to amend other aspects of their complaint, the plaintiffs filed an amended complaint. This amended complaint, rather than pleading violation of the lending limit statute as a separate cause of action, included allegations of the violation within the cause of action for fraud. The Bank refused to answer these paragraphs of the amended complaint, claiming that the amendments went beyond the scope of the court's order allowing amendment. The plaintiffs brought a second motion to amend. The court again denied the motion, stating that it viewed the proposed amendment as an attempt to establish that violation of the statute constituted fraud per se.

The Bank moved for summary judgment. The trial court granted summary judgment dismissing all of the plaintiffs' claims except fraud. On the fraud count, the court denied summary judgment as to six plaintiffs 3 who had communicated with the Bank regarding Thiele's financial status. The court granted summary judgment on the fraud count against the remaining eighteen plaintiffs, who had had no contacts with the Bank regarding Thiele's financial status. The court expressly determined that there was "no just reason for delay" and pursuant to Rule 54(b), N.D.R.Civ.P., directed the entry of a final judgment.

The plaintiffs appeal, alleging that the court erred in granting summary judgment and in denying their motion to amend the complaint. The Bank has filed a cross-appeal, contending that the court erred in denying their motion for summary judgment on the fraud claim by the remaining six plaintiffs and in refusing to award attorneys fees under Section 28-26-31, N.D.C.C.

I. DENIAL OF MOTION TO AMEND

The plaintiffs contend that the trial court erred in denying their second motion to amend the complaint. The proposed second amended complaint would have added four paragraphs detailing their allegation that the Bank exceeded its legal lending limit to Thiele on 367 separate occasions. They contend that violation of the lending limit, although not fraud per se, is evidence of "fraudulent intent and conduct on the part of the Bank."

Amendment of pleadings is governed by Rule 15, N.D.R.Civ.P. A motion to amend a pleading is submitted to the "informed, careful judgment and discretion of the trial court," and we will not reverse an order denying a motion to amend absent an abuse of that discretion. E.g., Galloway v Forum Publishing Co., 138 N.W.2d 798, 801 (N.D.1965).

The court's two orders on the motions to amend, when read together, indicate that the court did not prohibit the plaintiffs from introducing evidence of a violation of the statute, but only held that violation of the statute did not create either a private right of action or, standing alone, a cause of action based upon fraud.

In its order on the first motion, the court held that a bank customer's creditor could not maintain a private right of action against the Bank for violation of the lending limit statute. The plaintiffs did not appeal from this order, nor do they challenge this conclusion on appeal. The court went on, however, to clarify that evidence of a violation of the statute might be relevant in connection with the other claims for relief.

On the second motion to amend, the trial court viewed the proposed amendment as an attempt to establish that violation of the statute constituted fraud per se:

"The proposed amendment, in essence, alleges that exceeding the lending limit amounts to fraud. I do not agree. The proposed amendment is therefore denied."

We do not find that the court abused its discretion in denying the motion to amend, particularly when viewed in the context of its earlier statement that evidence of a violation of the lending limit statute might be relevant in connection with the other claims. The plaintiffs concede that violation of the statute is not fraud per se, and the court's orders apparently would permit them to introduce evidence of a violation if it aids in establishing one of the elements of fraud. 4

II. SUMMARY JUDGMENT

All of the plaintiffs contend that the trial court erred in granting summary judgment dismissing their claims for breach of contract, and those plaintiffs whose fraud claims were dismissed contend that the court erred in dismissing their fraud claims.

Summary judgment is a procedural device available for the prompt and expeditious disposition of controversies without trial when, after viewing the evidence in a light most favorable to the opposing party and giving that party the benefit of all favorable inferences, there is no genuine dispute as to either the material facts or the inferences to be drawn from undisputed facts. Hillesland v. Federal Land Bank Association of Grand Forks, 407 N.W.2d 206, 210 (N.D.1987).

A. Breach Of Contract Intended To Benefit The Plaintiffs

The plaintiffs contend that they were the intended third-party beneficiaries of a contract between the Bank and Thiele whereby the Bank agreed to pay all of Thiele's overdrafts. 5 They further claim that they are entitled to damages for breach of that contract by the Bank.

Section 9-02-04, N.D.C.C., provides:

"Third-party beneficiary may enforce contract.-- A contract made expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it."

We have construed this statute to mean that a party only incidentally benefited by performance of a contract is not entitled to maintain an action to enforce it:

"Section 9-02-04, N.D.C.C., has been construed many times. In Parlin v. Hall, 2 N.D. 473, 52 N.W. 405, 407 (1892), this court said:

" '... The mere fact that one not a party to an agreement may be benefited by its performance does not bring him into contractual relations with the promisor in the agreement. He must have been the party intended to be benefited by the promise, and there must have existed at the time thereof such an obligation on the part of the promisor towards the third person as gives him at least an equitable right to the benefits of the promise....'

"This court said in Syllabus No. 4, Farmers' State Bank v. Anton, 51 N.D. 202, 199 N.W. 582 (1924):

" 'The mere fact that a third party may derive a...

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