Martin v. Marquee Pac., LLC, 20170256

• Decision Date: 22 January 2018
• Docket Number: No. 20170256,20170256
• Citation: 906 N.W.2d 65
• Parties: Andrew M. MARTIN, Plaintiff and Appellee v. MARQUEE PACIFIC, LLC, Jeremy Lott, and William Neff, Defendants and Artec Homes, LLC, Defendant, Third–Party Plaintiff, and Appellant v. Greyson Financial Services, Inc., Third–Party Defendant and Appellee
• Court: North Dakota Supreme Court

906 N.W.2d 65

Andrew M. MARTIN, Plaintiff and Appellee

v.MARQUEE PACIFIC, LLC, Jeremy Lott, and William Neff, DefendantsandArtec Homes, LLC, Defendant, Third–Party Plaintiff, and Appellant

v.Greyson Financial Services, Inc., Third–Party Defendant and Appellee

No. 20170256

Supreme Court of North Dakota.

Filed January 22, 2018

Sean T. Foss (argued), Fargo, ND and LaRoy Baird III (appeared), Bismarck, ND, for plaintiff and appellee Andrew M. Martin and third-party defendant and appellee Greyson Financial Services, Inc.

Philip J. Kaplan (argued) and Kristin B. Rowell (appeared), Minneapolis, MN, for defendant, third-party plaintiff, and appellant Artec Homes, LLC.

Jensen, Justice.

[¶ 1] Artec Homes, LLC ("Artec") appeals from the district court's amended judgment granting foreclosure in favor of Andrew Martin ("Martin"), and dismissing Artec's claims against Martin and Greyson Financial Services, Inc. ("Greyson"). We reverse and remand.

I

[¶ 2] This case is the fourth lawsuit relating to an unfinished real estate development referred to as Magic Meadows in Minot, North Dakota. Highpoint Properties, LLC ("Highpoint") originally owned 127 residential lots in the Magic Meadows development. In September 2011, Artec purchased an interest in twenty of the lots from Highpoint for $400,000. Highpoint continued to own the remaining 107 lots after the sale of the twenty lots to Artec.

[¶ 3] In the first and second lawsuits, Artec sued Highpoint alleging it could not build homes on the twenty lots because Highpoint failed to develop them. Artec obtained judgments against Highpoint totaling $428,761.90. As part of its efforts to collect on the judgments, Artec ultimately purchased all 127 of the Magic Meadows lots at the sheriff's sales in October 2014 and December 2015.

[¶ 4] In April 2013, while the first lawsuit between Artec and Highpoint was pending, Highpoint conveyed its interest in the remaining 107 lots to Marquee Pacific, LLC ("Marquee"). In June 2013, Greyson loaned $400,000 to Marquee in exchange for a mortgage against the remaining 107 lots. Greyson subsequently assigned the mortgage to Martin, Greyson's owner, in November 2014.

[¶ 5] In December 2013, Artec began the third lawsuit against Highpoint and Marquee after it discovered Highpoint transferred the remaining 107 lots to Marquee. Artec alleged that Highpoint's conveyance of the remaining 107 lots to Marquee was fraudulent. Highpoint and Marquee did not defend the lawsuit, and Highpoint's conveyance to Marquee was set aside. Greyson and Martin were not parties to the third lawsuit. Following that lawsuit, Artec owned all 127 lots subject to the mortgage on 107 lots originally held by Greyson and subsequently assigned to Martin.

[¶ 6] The fourth and current lawsuit was initiated by Martin against Marquee and Artec seeking to foreclose the mortgage on the 107 lots. Artec counterclaimed against Martin and subsequently brought a third-party complaint against Greyson, alleging they did not receive the mortgage from Marquee in good faith and for reasonably equivalent value, rendering the mortgage unenforceable.

[¶ 7] Martin and Greyson moved to dismiss Artec's counterclaim and third-party complaint, and Martin moved for summary judgment on the foreclosure claim. The district court concluded that because Greyson obtained its mortgage from Marquee before Artec sued to set aside the conveyance from Highpoint to Marquee in the third lawsuit, Greyson should have been made a party to that action. The court held Artec improperly split its cause of action because it did not join Martin and Greyson in the fraudulent transfer action. The court granted Martin's motion for summary judgment on the foreclosure claim after determining that dismissal of Artec's claims against Martin and Greyson eliminated Artec's only defense to the foreclosure claim.

II

[¶ 8] Artec argues the district court erred in dismissing its counterclaim against Martin and third-party complaint against Greyson under N.D.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief could be granted. In response, Greyson and Martin argue that even if the court improperly dismissed Artec's claims, its decision can be affirmed because there are no questions of material fact as to whether Greyson obtained the mortgage in good faith and for reasonably equivalent value.

[¶ 9] A motion to dismiss under N.D.R.Civ.P. 12(b)(6) tests the legal sufficiency of the claim presented in the complaint. Nandan, LLP v. City of Fargo , 2015 ND 37, ¶ 11, 858 N.W.2d 892. On appeal, "we construe the complaint in the light most favorable to the plaintiff and accept as true the well-pleaded allegations in the complaint." Id. (quoting Brandvold v. Lewis & Clark Pub. Sch. Dist. No. 161 , 2011 ND 185, ¶ 6, 803 N.W.2d 827 ). This Court will affirm a judgment dismissing a complaint for failure to state a claim under N.D.R.Civ.P. 12(b)(6) if we cannot discern a potential for proof to support it. Nandan , at ¶ 11. We review a district court's decision granting a motion to dismiss under N.D.R.Civ.P. 12(b)(6) de novo. Id.

[¶ 10] This Court's standard of review of a district court's decision to grant summary judgment is well established:

[Summary judgment] is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.

Krenz v. XTO Energy, Inc. , 2017 ND 19, ¶ 17, 890 N.W.2d 222 (quoting Riverwood Commercial Park v. Standard Oil Co. , 2011 ND 95, ¶ 6, 797 N.W.2d 770 ). "Summary judgment is inappropriate if neither party is entitled to judgment as a matter of law or if reasonable differences of opinion exist as to the inferences to be drawn from the undisputed facts." Markgraf v. Welker , 2015 ND 303, ¶ 10, 873 N.W.2d 26 (quoting Northern Oil & Gas, Inc. v. Creighton , 2013 ND 73, ¶ 11, 830 N.W.2d 556 ). This Court has explained that "[d]eciding an issue on summary judgment is not appropriate if the court must draw inferences or make findings on disputed facts." Creighton , at ¶ 20. "The district court may not weigh the evidence, determine credibility, or attempt to discern the truth of the matter when ruling on a motion for summary judgment." Farmers Union Oil Co. of Garrison v. Smetana , 2009 ND 74, ¶ 10, 764 N.W.2d 665.

[¶ 11] Artec brought its claims against Martin and Greyson under N.D.C.C. ch. 13–02.1, the Uniform Voidable Transactions Act, formerly known as the Uniform Fraudulent Transfers Act. Artec claimed that under the UVTA, it was entitled to relief against Greyson and Martin unless they could prove they received the mortgage from Marquee in good faith and for reasonably equivalent value. Artec sought avoidance of the mortgage, alleging Greyson and Martin did not receive it in good faith and for reasonably equivalent value.

[¶ 12] In dismissing Artec's claims, the district court did not conclude Artec failed to state a claim on which relief could be granted. Rather, the court dismissed Artec's claims primarily because Artec did not join Greyson and Martin as defendants in the fraudulent transfer action against Highpoint and Marquee:

Both Martin and Greyson were indispensable parties in the third law suit, the fraudulent conveyance action. Rule 19, NDRCivPro, requires the joinder of all persons who claim an interest relating to the subject of the action, and who are so situated that disposing of the action in that person's absence may, as a practical matter, impair or impede the person's ability to protect their interest.

....

There is no question but that Marque[e] Pacific gave a mortgage to the Magic Meadows property to Greyson months before Artec initiated its fraudulent conveyance action against Marque[e] Pacific and High Point. Greyson's interest in the property, the mortgage, was filed of record before the fraudulent conveyance action was initiated. Before Greyson's, and ultimately Martin's interest in the property could be divested or otherwise voided in a fraudulent conveyance action, Artec was required to have named them as defendants in that action.

The fault for failure to join all necessary parties rests on Artec. Neither Greyson nor Martin can be bound by a judgment in a lawsuit affecting their rights and interests in the Magic Meadows property when they were not made parties, were given no opportunity to come to Court to protect their interest, and had no ability to appeal from a decision which would essentially strip them of their interest. The judgment of the third action, 51–2013–CV–1467, can have binding affect only on High Point and Marque[e], but cannot bind either Greyson or Martin.

Parties are generally prohibited from splitting their causes of action and engaging in piecemeal litigation. There is a strong policy in North Dakota against piecemeal litigation. Superpumper, Inc. v. Nerland Oil, Inc. , 2000 ND 220, 620 N.W.2d 159. A party with a single cause of action may not split that cause of action and maintain several law suits for different parts of that action. Lucas v. Porter , 2008 ND 160, 755 N.W.2d 88.

Artec had an opportunity to make its claim for

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