Tharaldson Ethanol Plant I, LLC v. Vei Global, Inc.

• Decision Date: 06 May 2014
• Docket Number: No. 20130325.,20130325.
• Citation: 845 N.W.2d 900,2014 ND 94
• Parties: THARALDSON ETHANOL PLANT I, LLC and Tharaldson Financial Group, Inc., Plaintiffs and Appellants v. VEI GLOBAL, INC., f/k/a Valley Engineering, Inc., Defendant and Appellee and VEI Global, Inc., f/k/a Valley Engineering, Inc., Defendant, Third–Party Plaintiff and Appellee v. Dougherty Funding, LLC, Third–Party Defendant.
• Court: North Dakota Supreme Court

845 N.W.2d 900

2014 ND 94

THARALDSON ETHANOL PLANT I, LLC and Tharaldson Financial Group, Inc., Plaintiffs and Appellants

v.VEI GLOBAL, INC., f/k/a Valley Engineering, Inc., Defendant and AppelleeandVEI Global, Inc., f/k/a Valley Engineering, Inc., Defendant, Third–Party Plaintiff and Appellee

v.Dougherty Funding, LLC, Third–Party Defendant.

No. 20130325.

Supreme Court of North Dakota.

May 6, 2014.

Matthew T. Collins (argued) and Nathan Sellers (on brief), Minneapolis, MN, for plaintiffs and appellants.

Jeffrey W. Coleman (argued) and Gregory S. Schwartz (on brief), Minneapolis, MN; James S. Hill (appeared) and Rebecca S. Thiem (on brief), Bismarck, N.D., for defendant and appellee.

SANDSTROM, Justice.

[¶ 1] Tharaldson Ethanol Plant I, LLC (“Tharaldson Ethanol”) and Tharaldson Financial Group, Inc. (“Tharaldson Financial”) appeal from a judgment and amended judgment ordering Tharaldson Financial to pay VEI Global, Inc., $1,150,000 plus interest, and from an order granting certification under N.D.R.Civ.P. 54(b). We dismiss the appeal, concluding the district court should not have directed entry of a final judgment under N.D.R.Civ.P. 54(b).

I

[¶ 2] VEI provided design and construction management services for an ethanol plant owned and operated by Tharaldson Ethanol. In April 2009, Tharaldson Ethanol and VEI reached a settlement on disputed fees, agreeing Tharaldson Ethanol would pay VEI $1,350,000 for all work VEI performed through February 28, 2009. The agreement also provided Tharaldson Financial would enter into a $1,350,000 promissory note payable to VEI, and a copy of the note was attached and incorporated into the agreement. Tharaldson Financial signed the promissory note, promising to pay VEI $1,350,000 with interest, under the following terms:

A. The sum of $200,000.00 shall be paid on or before April 20, 2009.

B. The principal sum of $100,000.00 plus all accrued interest on July 1, 2009 and $100,000.00 on the first day of each month thereafter until the principal amount owed, plus all accrued interest has been reduced to $150,000.00 (Final Payment).

C. The Final Payment will only be made if Tharaldson Ethanol Plant I, LLC achieves an ethanol production rate equal to or exceeding 30,821,918 gallons of 2% denatured ethanol over a 90 day period. VEI agrees to waive the Final Payment if Tharaldson Ethanol Plant I, LLC is unable to achieve said ethanol production rate prior to April 1, 2011.

Tharaldson Ethanol deposited $1,350,000 in VEI's bank account. VEI paid Tharaldson Financial $1,350,000. Tharaldson Financial and Tharaldson Ethanol claim Tharaldson Financial made a $1,350,000 equity contribution to Tharaldson Ethanol. Tharaldson Financial made the first payment of $200,000 as required by the terms of the promissory note, but did not make any further payments on the note.

[¶ 3] In a complaint dated August 28, 2012, Tharaldson Ethanol and Tharaldson Financial sued VEI, claiming VEI negligently designed and constructed the ethanol plant. The complaint sought damages for breach of warranty, breach of contract, and negligence claims; and sought a declaratory judgment that Tharaldson Ethanol and Tharaldson Financial do not owe VEI anything under the settlement agreement or promissory note because of damages VEI caused by its breaches of contract and warranty and other wrongful acts. VEI answered and counterclaimed, including a breach of contract claim against Tharaldson Financial for failing to make payments on the promissory note.

[¶ 4] On April 12, 2013, VEI moved for partial summary judgment, arguing it was entitled to enforce the promissory note and recover $1,000,000 from Tharaldson Financial under the terms of the note. The brief in support of the motion stated VEI was reserving all other issues, including whether it was entitled to the final payment of $150,000 under the terms of the promissory note. VEI also argued offset and recoupment were not available defenses to enforcement of the note, because Tharaldson Financial does not have an interest in Tharaldson Ethanol's claims against VEI.

[¶ 5] After VEI filed its motion for partial summary judgment, Tharaldson Ethanol assigned Tharaldson Financial a 50% interest in its claims against VEI. On May 9, 2013, Tharaldson Ethanol and Tharaldson Financial filed a response opposing VEI's motion for summary judgment. Tharaldson Ethanol and Tharaldson Financial argued summary judgment was not appropriate, because Tharaldson Financial has an interest in Tharaldson Ethanol's claims against VEI, Tharaldson Financial may assert recoupment and setoff defenses against VEI's claim for enforcement of the promissory note, and there are genuine issues of material fact regarding the defenses.

[¶ 6] On May 16, 2013, VEI responded to Tharaldson Ethanol and Tharaldson Financial's opposition to the motion for summary judgment. VEI argued no factual issues exist, it loaned $1,350,000 to Tharaldson Financial in exchange for the promissory note, Tharaldson Financial has defaulted on the note, and VEI is entitled to judgment in the amount of $1,150,000 with interest under the terms of the promissory note.

[¶ 7] On July 8, 2013, the district court granted VEI's motion for partial summary judgment, finding there were no genuine issues of material fact and VEI was entitled to judgment as a matter of law. The court determined recoupment and setoff defenses do not apply and Tharaldson Financial owes a debt to VEI under the terms of the promissory note. The court ordered VEI was entitled to judgment against Tharaldson Financial in the amount of $1,150,000, with interest.

[¶ 8] On July 22, 2013, the court entered a judgment consistent with its order for partial summary judgment. VEI sent the court a letter dated July 24, 2013, requesting the court amend the judgment and clarify that the judgment is final as to VEI's claim for payment under the terms of the promissory note against Tharaldson Financial pursuant to N.D.R.Civ.P. 54(b). Tharaldson Ethanol and Tharaldson Financial objected to VEI's request for an amended judgment, arguing VEI failed to present any evidence it will suffer prejudice or hardship absent N.D.R.Civ.P. 54(b) certification and certification was not appropriate. VEI responded to Tharaldson Ethanol and Tharaldson Financial's objection, arguing it would suffer a harsh economiceffect if certification were not granted.

[¶ 9] On August 21, 2013, VEI moved to alter or amend the judgment under N.D.R.Civ.P. 59(j) or, alternatively, for reconsideration. VEI sought to make its previous request for N.D.R.Civ.P. 54(b) certification, contained in the July 24, 2013, letter, a formal motion. Tharaldson Ethanol and Tharaldson Financial responded to VEI's motion and reasserted their previous objections to VEI's request for certification.

[¶ 10] On September 27, 2013, the district court granted VEI's request for N.D.R.Civ.P. 54(b) certification. The court found there would be an extended period of litigation before the entire case would be final, VEI would have a large debt that would go unpaid if certification were denied, the payments due under the terms of the promissory note were already years in arrears, the loss of the funds would be a substantial detriment, the unresolved claims involved only VEI and Tharaldson Ethanol, the promissory note was a separate transaction involving only Tharaldson Financial and VEI, it was unlikely the issues related to the promissory note would ever need to be reconsidered as part of any subsequent appeal, and the possibility that future developments at the district court level would make the issues related to the promissory note moot was not a sufficient basis for denying certification.

[¶ 11] On September 27, 2013, the district court entered an amended final judgment, stating the court issued N.D.R.Civ.P. 54(b) certification and the judgment was a final judgment that may be enforced or appealed. On October 2, 2013, the court entered another amended judgment, directing entry of final judgment under N.D.R.Civ.P. 54(b).

[¶ 12] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27–05–06. The appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction over final judgments under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28–27–01, and a preliminary issue in the case involves the finality of the judgment.

II

[¶ 13] Before reaching the merits of the appeal, we must first determine whether the district court appropriately directed entry of a final judgment under N.D.R.Civ.P. 54(b) without first deciding ancillary claims. Tharaldson Ethanol and Tharaldson Financial argue the court erred in granting certification under N.D.R.Civ.P. 54(b), because this is not an unusual or compelling case justifying certification and VEI failed to demonstrate prejudice or hardship would result if an immediate appeal were not allowed.

[¶ 14] Rule 54(b), N.D.R.Civ.P., preserves our long-standing policy against piecemeal appeals, and provides:

If an action presents more than one claim for relief, whether as a claim, counterclaim, crossclaim, or third-party claim, or if multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay. Otherwise, any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicatingall the claims and all the parties' rights and liabilities.

We have held N.D.R.Civ.P. 54(b) certification “should not be routinely granted and is reserved for cases involving unusual circumstances where failure to allow an immediate appeal would create a demonstrated prejudice or hardship.” Pifer v. McDermott, 2012 ND 90, ¶ 8, 816 N.W.2d 88 (quoting ...