Regan Farmers Union Co-op. v. Hinkel, 880216

• Decision Date: 21 March 1989
• Docket Number: No. 880216,880216
• Citation: 437 N.W.2d 845
• Parties: REGAN FARMERS UNION COOPERATIVE, Plaintiff and Appellee, v. Ray HINKEL, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 845

437 N.W.2d 845

REGAN FARMERS UNION COOPERATIVE, Plaintiff and Appellee, v. Ray HINKEL, Defendant and Appellant.

Civ. No. 880216.

Supreme Court of North Dakota.

March 21, 1989.

Christian S. White, IV (on brief) and Sheila Keller (argued), of Worthington Law Firm, Bismarck, for plaintiff and appellee.

Rauleigh D. Robinson, Bismarck, for defendant and appellant.

VANDE WALLE, Justice.

Ray Hinkel appealed from a judgment entered against him awarding Regan Farmers Union Cooperative (Regan) $11,441.96. We affirm.

In February 1976, Hinkel received a $22,000 advance from Regan on 5,550 bushels of durum owned by Hinkel and stored with Regan. The amount owed on the advance was to be paid out of the proceeds from the sale of the durum.

On June 14, 1977, Regan's manager, Richard Lee, sent a letter to Hinkel informing Hinkel that he had 5,302 bushels of durum stored with Regan and that storage and interest charges had accrued to $3,269.46. Lee also stated in the letter that the charges were to be paid by June 30, 1977. ¹

Regan sold the durum in July 1977, net of taxes, for $11,389.41. That amount was applied to Hinkel's outstanding balance. Apparently Regan did not contact Hinkel at that time and inform him that the durum had been sold. A grain draft was issued by Regan payable to the order of Hinkel. However, the draft was not endorsed by Hinkel; rather, it was merely endorsed "applied on advance" with no indication of who wrote the endorsement.

Over the next several years, Regan and Hinkel communicated with each other about the balance due on the advance, but Hinkel did not make any payments. Finally, in March 1984, Hinkel signed a note for $12,000 representing the amount due on the advance. He subsequently applied the proceeds from the sale of some sunflowers to pay a portion of the amount due under the note. When Hinkel failed to make further payments pursuant to the note, Regan brought this action.

Hinkel defended on the ground that Regan's claim was barred by either Section 28-01-16, N.D.C.C. (statute of limitations for contracts), or Section 41-02-104, N.D.C.C. (statute of limitations under the Uniform Commercial Code). In addition, Hinkel alleged that Regan fraudulently led him to believe that the durum still was in storage with Regan, and that had he known the grain had already been sold, he would not have signed the promissory note. Thus, he claims, there was no consideration given for the note. Hinkel also filed a counterclaim alleging that in 1979 he told Regan to sell the durum when the price rose to $5.40 or $5.50 per bushel; and, because Regan did not sell the durum when it reached that price, he sustained a loss of at least $29,161.

The trial court found that at the time Hinkel signed the promissory note he was aware or should have been aware that the durum had already been sold, and thus there was no fraud on the part of Regan. The trial court concluded that by signing the promissory note in 1984 Hinkel was precluded from raising the statute-of-limitations defense. Judgment was entered against Hinkel in the amount of $11,441.96.

On appeal, Hinkel argues that Regan's action is barred by the statute of limitations. ² He also argues that the promissory note is unenforceable because he was fraudulently induced to sign the note.

A statute of limitation is a limitation that precludes one from asserting a right of action unless suit is commenced within a specified time period. We have previously stated:

"It is a statute enacted as a matter of public policy, to fix a limit in which an action must be brought or the obligation will be presumed to have been paid. The statute is intended to run only against those who are neglectful of their rights, and fail to use reasonable and proper diligence in the enforcement thereof. They are based on the presumption of law that, from the lapse of time, it is fair to presume that the debt has been paid." Burleigh County v. Kidder County, 20 N.D. 27, 32-34, 125 N.W. 1063, 1065 (1910).

Section 28-01-36, N.D.C.C., provides:

"No acknowledgment or promise is sufficient evidence of a new or continuing contract, whereby to take the case out of the operation of this chapter, unless the same is contained in some writing signed by the party to be charged thereby, but this section shall not alter the effect of any payment of principal or interest."

In Hoffman v. Ness, 71 N.D. 283, 300 N.W. 428 (1941), we held that under this statute ³ an execution of a renewal note constituted a written acknowledgment of a prior debt, thereby starting the statute of limitations to run from the date of the renewal note. Thus, where a debtor signs a note indicating he owes a certain amount on a past debt, the debtor waives any statute-of-limitations defense he may have had prior to signing the note, and the statute of limitations begins to run anew from the date he signs the renewal note. See also Erenfeld v. Erenfeld, 196 N.W.2d 406 (N.D.1972); Hansen v. Fettig, 179 N.W.2d 739 (N.D.1970); Huus v. Huus, 75 N.D. 392, 28 N.W.2d 385 (1947). Because Hinkel signed a promissory note acknowledging he owed $12,000 to Regan, the statute of limitations began to run anew on the date he signed the note. And, since this action was brought within the specified time period, ⁴ the trial court was correct in holding that it was not barred by the statute of limitations.

Hinkel also argues that he was fraudulently induced to sign the promissory note, and therefore the note is unenforceable. The fraud alleged to have occurred is that Regan sold Hinkel's durum in 1977, but from 1977 until after this action was commenced it led Hinkel to believe that Regan still had possession of the durum; and had Regan sold the durum when it was supposed to, the proceeds from the sale would have been more than enough to pay off the advance.

Fraud is a question of fact and must be proved by clear and convincing evidence. Benefiet v. Hoiby, 370 N.W.2d 513 (N.D.1985). Findings of fact will not be set aside unless clearly erroneous. Rule 52(a), N.D.R.Civ.P.; D.G. Porter, Inc. v. Fridley, 373 N.W.2d 917 (N.D.1985).

The trial court found that at the time Hinkel signed the promissory note in 1984 he knew or should have known that his durum had already been sold, but nonetheless signed a note indicating he still owed $12,000. There is ample...