Nokota Feeds, Inc. v. State Bank of Lakota

• Citation: 210 N.W.2d 182
• Decision Date: 13 August 1973
• Docket Number: No. 8889,8889
• Parties: NOKOTA FEEDS, INC., a corporation, Plaintiff and Appellant, v. STATE BANK OF LAKOTA, Defendant and Respondent. Civ.
• Court: United States State Supreme Court of North Dakota

Page 182

210 N.W.2d 182

NOKOTA FEEDS, INC., a corporation, Plaintiff and Appellant, v. STATE BANK OF LAKOTA, Defendant and Respondent.

Civ. No. 8889.

Supreme Court of North Dakota.

Aug. 13, 1973.

Syllabus by the Court

1. A promise to 'finance' another, without more, is not a direct promise to answer for the debt, default, or miscarriage of another, within the statute of frauds.

2. An instruction to a jury need not use the language of a statute, court decision, or the evidence, provided it correctly states the law.

3. A promise to 'finance' another, if the promisor agreed to be liable directly and made the promise for his own benefit, is outside the statute of frauds and need not be in writing.

4. Nondirection, unless it amounts to misdirection, is not reversible error, in the absence of a request to instruct correctly.

5. A motion for directed verdict is to be denied unless the evidence is such that reasonable men, without weighing the credibility of witnesses or otherwise considering the weight of the evidence, could not disagree upon the conclusion to be reached.

6. A motion for judgment notwithstanding the verdict should be granted by the trial court only if the verdict is contrary to the clear weight of the evidence and a miscarriage of justice will thereby be prevented.

Duffy & Haugland, Devils Lake, for plaintiff and appellant.

Idean M. Locken, Lakota, for defendant and appellee.

VOGEL, Judge.

The appeal is from a jury verdict in favor of the defendant State Bank of Lakota in an action for a balance due the plaintiff-appellant for turkey feed and supplies furnished to Floyd D. Eaton, who originally was a codefendant. Eaton confessed judgment at the commencement of the trial, and is not a party to the appeal.

The claim against the bank was based on an alleged guaranty of payment of sums due the plaintiff from Eaton. It is undisputed that the defendant bank agreed to 'finance' Eaton in his turkey-raising business, but the parties are in sharp disagreement as to the legal significance of a promise to 'finance.' As will be seen, the court instructed the jury that the bank would be liable only if it gave an original obligation or promise, and would not be liable if it gave a 'collateral promise.' A 'collateral promise' was defined as one where there is a promise to answer for the obligation of another under circumstances making the promisor liable only in the event of a default by the party having the primary obligation to pay the debt. Such a promise, the court instructed, must be in writing and, since it is undisputed that the promise here was not in writing, the plaintiff could not recover if the promise were collateral. To these instructions the defendant objected and preserved its objection on this appeal, by motion for directed verdict and alternative motion for judgment notwithstanding the verdict or for a new trial. The court also instructed the jury that in determining whether the promise was original or collateral it could consider the surrounding circumstances and the intention of the parties.

We turn first to the evidence before the jury, the sufficiency of which was attacked by the plaintiff.

It is undisputed that Eaton made arrangements with the bank to finance his turkey-raising operation. The bank agreed to advance up to $3.25 for each of not more than 10,000 turkeys in each lot of turkeys to be raised outdoors by Eaton, up to four lots per year, with a maximum loan at any one time of $75,000. At one point during the second year of the agreement Eaton had exceeded his limit of financing per turkey on one lot, and the bank cut off future financing. At about the same time, the bank discovered that Eaton had not paid the plaintiff, Nokota, for feed it had furnished to Eaton. A meeting was thereupon held between the parties to this appeal and Eaton and it was agreed that the turkeys would remain on the Eaton farm, rather than being repossessed and taken elsewhere, that Nokota would supply the feed required to bring them to maturity, and that the proceeds would be disposed of as agreed. The agreement as to division of the proceeds was put into writing, in the form of a letter dated December 30, 1970, from the vice president of the bank to the plaintiff, Nokota Feeds, Inc., and agreed to in writing by Eaton and his wife. The letter, Exhibit 2, states that Nokota Feeds is advised that the bank has a security interest in all the turkeys in question, and continues:

'Whereas the Nokota Feeds Inc., of Devils Lake, No. Dak., has agreed to finish the feeding out of these turkeys, we the State Bank of Lakota will agree to forward to the Nokota Feeds Inc., and Floyd D. Eaton and Bessie T. Eaton the remittance received from the sale of these turkeys less our Note No. 27948 in the amount of $10,392.33 plus interest on this note from September 15, 1970.'

The evidence to support a direct promise of the bank is sparse. Edgar S. Brien, manager of the plaintiff at the time Eaton started his turkey-raising operation, testified that O. K. Anderson, the president of the bank, said that he would 'finance this entire operation.' He answered 'Yes' to a leading question, not objected to, as to whether the president of the bank assured him or promised him that the bank would 'see to it' that the feed that Eaton purchased would be paid for. Later, he said that the president stated that the bank would advance Eaton the money, and he didn't know if he used the word 'guarantee' but he said the bills would be paid by Mr. Eaton. He admitted that all of the bills were sent directly to Eaton, and the account was on the books of Nokota Feeds in the name of Eaton alone. He admitted that he had testified earlier, in a deposition, as follows:

'Question: In your talk with Mr. Anderson did he tell you he was going to see that your bills were paid?

'Answer: Yes, he said they were going to finance.

'Question: Finance, but he did not say that he would see that your bills were paid?

'Answer: But you are splitting hairs, aren't you?'

The president and major stockholder of the plaintiff, Arthur Lanz, testified that he demanded payment from the vice president of the bank in February 1971. The vice president in answered, rather unresponsively, that the bank would 'cut off the money and they were through, words to that effect.'

He also testified that he once asked the senior Mr. Anderson, the president of the bank, whether he would guarantee payment of Eaton's bills and 'in my book he did' guarantee payment. The conversation was, he said, 'Can I be sure of this money? How firm is this deal?' and the response was, 'You don't have to worry.' However, he also admitted stating, in a deposition prior to trial, that nobody had ever told him that the bank would see that Eaton's bills were paid, and that Anderson did not tell him at any time that he would guarantee payment of any supplies or merchandise purchased at Nokota Feeds.

Both of the bankers, the senior Anderson, who was president, and the younger Anderson, who was vice president, admit agreeing to 'finance' Eaton, but deny promising to pay any particular bills directly through the bank. Their commitment, they say, was to lend money to Eaton pursuant to their agreement with him. They point out that they paid no bills directly, were not billed by Nokota, and specified no requirements as to the source of feed to be purchased by Eaton.

It is apparent from the foregoing that there was a question of fact for the jury as to the nature of the agreement by the bank to finance Eaton.

Even if we were not required to view the evidence most favorably to the successful party, we believe the greater weight of the evidence favors the bank. At best, the plaintiff's contention that the bank promised that it 'would see to it' that the feed would be paid for and that the bills 'would be paid' is language indicating a collateral promise, not a direct promise to pay. Gidley v. Glass, 41 N.D. 542, 171 N.W. 93 (1919); City of Highland Park v. Grant-Mackenzie Co., 366 Mich. 430, 115 N.W.2d 270 (1962).

Further, a promise to 'finance' another 'means simply to loan it money.' Needles v. Kansas City, 371 S.W.2d 300 (Mo.1963).

Since the question of the statute of frauds was raised by the pleadings, the court instructed the jury that in the absence of a written agreement, the bank would be liable only if it agreed to be directly liable for the payment of the feed bill, but not if it merely agreed to be liable in case of default by Eaton. The court's instructions were based upon the statutes of this State and prior decisions of this court.

The statutory provisions which the trial judge condensed into his instructions include the following:

'9--06--04 (N.D.C.C.). Contracts invalid unless in writing--Statute of frauds.--The following contracts are invalid, unless the same or some note or memorandum thereof is in writing and subscribed by the party to be charged, or by his agent:

'2. A special promise to answer for the debt, default, or miscarriage of another except in the cases provided for in section 22--01--05;

'22--01--04 (N.D.C.C.). Guaranty to be in writing--Exception--Consideration need not be...