Rolin Mfg., Inc. v. Mosbrucker

Decision Date28 February 1996
Docket NumberNo. 950107,950107
PartiesRICO Bus.Disp.Guide 9035 ROLIN MANUFACTURING, INC., Plaintiff and Appellant, v. Jim MOSBRUCKER and Bank Center First, Defendants and Appellees. Civil
CourtNorth Dakota Supreme Court

John J. Gosbee (argued), Mandan, for plaintiff and appellant. Appearance by Ray Olin, President of Rolin Manufacturing, Inc.

Ralph A. Vinje (argued), Bismarck, for defendant and appellee Jim Mosbrucker.

Albert A. Wolf (argued), of Wheeler Wolf, Bismarck, for defendant and appellee Bank Center First.

NEUMANN, Justice.

Rolin Manufacturing, Inc. [Rolin], appealed from judgments dismissing its amended complaint against Jim Mosbrucker and Bank Center First [the Bank] under Rule 12(b)(v), N.D.R.Civ.P., for failure to state a claim upon which relief can be granted. We affirm in part, reverse in part, and remand.

In 1993, Rolin filed a twelve-page amended complaint against Mosbrucker and the Bank alleging that, on January 21, 1993, Mosbrucker tendered to Rolin three checks (for $5,000.00, $3,396.75 and $3,396.75) to pay for a trailer and for work done on rodeo equipment; the checks were drawn on Mosbrucker's account at the Bank; Mosbrucker promised there would be sufficient funds in the account to pay the checks when presented after his next two rodeos; Rolin relied on Mosbrucker's promises as Mosbrucker intended; and that, upon presentation, the checks were returned by the Bank for NSF. 1 The complaint also alleged that Mosbrucker did not disclose he was a debtor in a Chapter 12 bankruptcy case and had been a debtor in another Chapter 12 case that was eventually dismissed; that the approved plan for Mosbrucker's Chapter 12 case contained no provision for payment of the checks to Rolin; that Mosbrucker was convicted of the crime of issuing an NSF check; that Mosbrucker was convicted of the crime of removal of livestock from the state without brand inspection; that there were numerous outstanding and unsatisfied judgments against Mosbrucker; that at least two unsatisfied judgments for conversion had been adjudicated nondischargeable in bankruptcy; and that since Mosbrucker issued the checks to Rolin, another unsatisfied judgment for conversion has been entered against Mosbrucker.

The complaint also alleged that in the fourteen months before the three checks were issued, 115 checks drawn on Mosbrucker's checking accounts with the Bank were returned for NSF and that 619 other overdraft checks were honored by the Bank, resulting in overdraft fees of $8,357; from the time Mosbrucker tendered the three checks to Rolin until mid-May 1993, Mosbrucker issued 31 more NSF checks and 687 more overdraft checks, resulting in additional overdraft fees of $10,635 and that Mosbrucker continues the pattern of NSF checks and overdrafts. The complaint further alleged that Mosbrucker's actions constituted the crime of defrauding a secured creditor, which is punishable by imprisonment for more than one year; that the acts leading to the conversion judgments constituted the crime of fraud, punishable by imprisonment for over one year, at least one of which occurred after July 8, 1987; that "Several officers and employees" of the Bank "were sufficiently aware of Mosbrucker's activities, including his commission of the crimes that led to the conversion judgments, to have condoned or ratified" his activities; that Mosbrucker's actions "constitute a pattern of racketeering activity as described in NDCC Ch. 12.1-06.1;" and that Mosbrucker "illegally controlled or conducted a criminal enterprise, especially one fed and supported by his pattern of NSF and overdraft checks." Finally, the complaint alleged:

"40. The actions of [the Bank], based on the knowledge of its officers and employees had to have had of Mosbrucker's activities, constitute a combination as described in NDCC Ch. 12.1-06.1.

"41. Persons in commerce, and Rolin in particular, rely on the existence of a checking account as some indicia that the financial institution, by allowing the checking account to remain open, is not aware of a long-standing pattern of activity by the depositor that makes reliance on the depositor's checks unwise and dangerous to the payee.

"42. [The Bank] knew or should have known that, by allowing Mosbrucker to continue to present checks drawn on [the Bank], innocent people would be lulled into a false sense of security that Mosbrucker was honest, or at least had not engaged in a long-standing history of writing NSF checks.

"43. Because of its intimate connection with Mosbrucker's business affairs and its knowledge of Mosbrucker's history of NSF checks, [the Bank] was a partner by estoppel with Mosbrucker in his enterprises."

The complaint sought "judgment in the amount of $6,793.50, with interest from the date of the Rolin checks," "damages arising from Mosbrucker's willful and fraudulent misrepresentations in an amount of at least $50,000.00," "treble damages and attorney's fees under NDCC Ch. 12.1-06.1," and "judgment of joint and several liability against both Mosbrucker and [the Bank] on all counts."

The trial court granted the defendants' motions to dismiss under Rule 12(b)(v), N.D.R.Civ.P., for failure to state a claim upon which relief can be granted. Rolin has raised a number of issues on appeal.

In determining a motion to dismiss under Rule 12(b)(v), N.D.R.Civ.P., the court's scrutiny of the complaint is fairly relaxed and deferential to the pleader. A complaint should not be dismissed under Rule 12(b)(v), N.D.R.Civ.P., for failure to state a claim upon which relief can be granted, unless it appears beyond doubt that the plaintiff can prove no facts which would entitle him to relief. Varriano v. Bang, 541 N.W.2d 707 (N.D.1996). On appeal, we view the complaint in the light most favorable to the plaintiff. Id.

The complaint alleges that Mosbrucker gave Rolin three checks as payment for a trailer and rodeo equipment repairs, and that two of the checks were returned NSF and have never been paid, for which Rolin seeks damages of $6,793.50. Viewing the complaint in the light most favorable to Rolin and accepting the well-pleaded allegations as true, the complaint does state a claim for the unpaid value of the goods and services Rolin provided Mosbrucker in the amounts promised in the unpaid instruments. Therefore, we agree with Rolin that the district court erred in entirely dismissing the complaint against Mosbrucker.

Rolin contends the complaint also states a claim for deceit under § 9-10-03, N.D.C.C. Deceit is defined by § 9-10-02, N.D.C.C.:

"1. The suggestion as a fact of that which is not true by one who does not believe it to be true;

"2. The assertion as a fact of that which is not true by one who has no reasonable ground for believing it to be true;

"3. The suppression of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or

"4. A promise made without any intention of performing."

Rolin's complaint alleges Mosbrucker promised there would be sufficient funds in his account to honor the checks when presented after his next two rodeos; Rolin relied on the promise, as Mosbrucker intended; Mosbrucker was a debtor in a Chapter 12 bankruptcy case when the checks were issued; Mosbrucker had liabilities of almost $900,000; Mosbrucker anticipated disposable income of $11,610 in 1992; Mosbrucker knew it was impossible to comply with his Chapter 12 plan and pay the checks. Viewing the complaint in the light most favorable to Rolin and accepting the well-pleaded allegations as true, we agree that Rolin's complaint states a claim against Mosbrucker for deceit.

The complaint also alleges Mosbrucker issued a large number of NSF checks and a large number of overdraft checks which were paid, but which resulted in substantial overdraft charges. Rolin contends the complaint states a negligence claim against the Bank for failure to close Mosbrucker's account, arguing that people "rely on the mere existence of a checking account as some indicia of financial responsibility" and that the Bank should have closed Mosbrucker's checking account when it "became aware of Mosbrucker's extraordinary history of writing bad checks."

Rolin has not cited any authority for the proposition that a bank has a duty to close the account of a prolific writer of NSF or overdraft checks. Banks generally are under no duty to warn others of the financial condition of their depositors. Cunningham v. Merchants' Nat'l Bank, 4 F.2d 25 (1st Cir.1925); 5A Michie on Banks and Banking, § 11 (1994 Repl.Vol.).

"Despite any prior course of dealings between the parties, a bank retains discretion to honor or dishonor a check that creates an overdraft. In exercising its discretion, a bank makes a business decision that typically turns on factors such as the size of the overdraft and the bank's opinion of its customer."

Fasolino Foods Co., Inc. v. Banca Nazionale del Lavoro, 761 F.Supp. 1010, 1021 (S.D.N.Y.1991). "When a bank honors a customer's overdraft, it makes an unsecured loan to that customer, and thus, absent an agreement to the contrary, a bank need not honor a customer's overdrafts even if it had previously done so." Thiele v. Security State Bank, 396 N.W.2d 295, 298 (N.D.1986). A "bank is generally not liable to the holder [of a check] unless and until it accepts or certifies the check." Torkelson v. Bank of Horton, 208 Kan. 267, 491 P.2d 954, 957 (1971). A bank generally has no duty to disclose a customer's financial condition, but a duty to give full, accurate and truthful information may arise if a bank responds to an inquiry about a customer's credit status or if there is a fiduciary relationship. First Nat'l Bank & Trust Co. v. Brakken, 468 N.W.2d 633 (N.D.1991); Ostlund Chem. Co. v. Norwest Bank, 417 N.W.2d 833, 836 (N.D.1988).

In Hellman v. Thiele, 413 N.W.2d 321 (N.D.1987), persons who sold cattle to Thiele received checks that...

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