Wang v. Wang, s. 16295

• Decision Date: 01 November 1989
• Docket Number: Nos. 16295,16299,s. 16295
• Citation: 10 UCCRep.Serv.2d 890,447 N.W.2d 519
• Parties: 10 UCC Rep.Serv.2d 890 Victor J. WANG, Plaintiff and Appellant, v. Robert L. WANG, Defendant, Third Party Plaintiff and Appellant, v. ROSEBUD FEDERAL CREDIT UNION OF WINNER; Farmer's Cooperative Oil Association of Winner; Albert Schramm and Larry Meiners, Third Party Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 519

447 N.W.2d 519

10 UCC Rep.Serv.2d 890

Victor J. WANG, Plaintiff and Appellant, v. Robert L. WANG, Defendant, Third Party Plaintiff and Appellant, v. ROSEBUD FEDERAL CREDIT UNION OF WINNER; Farmer's

Cooperative Oil Association of Winner; Albert

Schramm and Larry Meiners, Third Party

Defendants and Appellees.

Nos. 16295, 16299.

Supreme Court of South Dakota.

Argued Feb. 13, 1989.

Decided Nov. 1, 1989.

David L. Claggett, Spearfish, for appellant Victor Wang.

Bryce Flint of Jackley & Flint, Sturgis, for appellant Robert L. Wang.

Lonnie R. Braun of Costello, Porter, Hill, Heisterkamp & Bushnell, Rapid City, for appellees Rosebud Federal Credit Union, Albert Schramm and Larry Meiners.

Donald E. Covey of Covey Law Office, Winner, for appellee Farmer's Co-op. Oil Ass'n of Winner.

GERKEN, Circuit Judge.

This is the third appeal arising out of the transactions that gave birth to Wang v. Wang, 393 N.W.2d 771 (S.D.1986) (Wang I ) and Wang v. Wang, 440 N.W.2d 740 (S.D.1989) (Wang II ). Robert Wang (Robert) and Victor Wang (Victor) have separately appealed from the same summary judgment. We affirm.

On January 18, 1978, Victor executed a promissory note to the Rosebud Federal Credit Union (RFCU) due and payable on January 19, 1979. The note was secured by financing agreements on various items of Victor's property. At this time RFCU and its affiliate Farmer's Cooperative Oil Company (Co-op) of Winner, South Dakota, had a written agreement providing that Co-op would guarantee patrons' notes to RFCU to the extent that the proceeds were used for Co-op purchases. Albert Schramm (Schramm), an officer of both RFCU and Co-op, co-signed Victor's note without an indication that he did so in a representative capacity.

On January 18, 1979, Victor was unable to meet his obligation under the note and, upon demand by RFCU, Co-op paid $43,344.00 under the terms of the guaranty agreement. In July 1980 Robert became involved with the note and security agreement. Negotiations with the manager of RFCU, Larry Meiners (Meiners), culminated in an agreement to sell Robert the note and security agreements for $8,000.00. Schramm signed the assignment agreement on behalf of RFCU and Meiners signed as a witness. Shortly after this assignment Robert made demand upon Schramm, as co-maker, to pay the amounts then claimed due on the note.

In August 1981 Robert brought suit against both Victor and Schramm to recover on the note by virtue of the assignment. The jury returned a verdict finding Victor liable on the note and absolving Schramm from liability. Robert appealed from the verdict for Schramm. In Wang I, supra, this Court determined that Schramm's signature on the note was "bare." Without any showing that he signed in a representative capacity Schramm could be held personally liable as a co-maker. On retrial judgment was entered against Schramm in the amount of $42,900.00.

While the appeal in Wang I was in process, Robert sold the collateral to himself for $100.00 on January 18, 1985. After this foreclosure sale, Robert, in September 1987, brought suit against Victor and Schramm to recover a deficiency judgment. The jury returned a verdict against Schramm in the amount of $42,900.00. Schramm's appeal from the verdict and judgment for Robert constitutes Wang II, supra. The substance of that decision was that Robert constructively (defacto) elected strict foreclosure under the facts of the case and by the following actions:

(1) Robert took and maintained exclusive control and possession of the collateral from the time he purchased the note in July 1980:

(2) Robert continuously held the collateral on his property and told Victor not to remove it and to stay away;

(3) It was not until over a year later, in August 1981, that Robert filed suit to collect on the promissory note; and

(4) Robert did not undertake the sale of the collateral until December 1984, some four and one-half years after taking possession.

Because Robert elected strict foreclosure he was barred from obtaining a deficiency judgment. Judgment in Robert's favor was reversed and the matter remanded with instructions to enter judgment in favor of Schramm.

In January 1986, between Robert's 1981 suit on the note and his 1987 suit for deficiency, Victor started an action against Robert alleging that Victor's signature on the 1978 promissory note was a forgery. Victor alleged that as a result of this forgery and the subsequent events referred to above, he suffered loss of property, income and reputation. In February 1986 Robert, by third-party complaint, sued RFCU, Co-op and Schramm alleging forgery on the promissory note and deceit in assignment of the note. Robert sought damages in tort and indemnity for all amounts adjudged due Victor from him. The third-party defendants moved for summary judgment seeking dismissal of both complaints. The trial court granted summary judgment against Victor on the basis that Victor had ratified the note and granted summary judgment against Robert on the basis that he had elected his remedy in contract and could not now proceed in tort. It is from these orders that Robert and Victor appeal.

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. Groseth Intern., Inc. v. Tenneco, Inc., 410 N.W.2d 159 (S.D.1987). The evidence must be viewed most favorably to the non-moving party and reasonable doubts should be resolved against the moving party. Wilson v. Great Northern Railway Co., 83 S.D. 207, 157 N.W.2d 19 (1968). The non-moving party, however, must present specific facts which demonstrate a genuine, material issue for trial. Ruane v. Murray, 380 N.W.2d 362 (S.D.1986). When no genuine issue of fact exists, summary judgment is looked upon with favor and is particularly adaptable to expose sham claims and defenses. Wilson, supra. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper. Ruple v. Weinaug, 328 N.W.2d 857 (S.D.1983).

We first address the trial court's granting summary judgment against Victor. The issue is a simple one. Did the trial court err in granting summary judgment to the third-party defendants on the theory that Victor had ratified the promissory note in question?

The trial court's grant of summary judgment was based on Victor's signing the bottom of the note and acknowledging receipt of it, as well as failing to defend the contract action on the basis that it was a forgery and allowing the property to be repossessed and sold.

Victor claims that the trial court erred when it found that he ratified the forgery by signing the bottom of the note and acknowledging receipt of it. Victor contends that he did not have the intent to ratify or the full knowledge of the material facts required for ratification. Bank of Hoven v. Rausch, 382 N.W.2d 39 (S.D.1986). He contends that he lacked these prerequisites since the dollar amount of the promissory note and the items of collateral to be listed on the security agreement were left blank.

Victor further contends that the trial court erred when it found that he ratified the note by failing to defend the contract action on the basis that it was a forgery, and by allowing the property to be repossessed and sold. Victor contends that since he did not learn the note was a forgery until February 1985, he could not be deemed to have ratified it before that time.

These contentions fail to focus on the factors necessary for ratification. The documents involved in this case fall within the purview of the Uniform Commercial Code. Wang I, supra. SDCL 57A-3-404, in pertinent part, provides: "Any unauthorized signature is wholly inoperative as that of the person whose name is signed unless he ratifies it or is precluded from denying it." An "unauthorized" signature is "one made without actual, implied or apparent authority and includes a forgery." SDCL 57A-1-201(43).

This court has defined ratification as follows:

Ratification is the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act, as to some or all persons, is given effect as if originally authorized by him[.] (emphasis added)

Bank of Hoven, supra, 382 N.W.2d at 41. The affirmance required to establish ratification may be either express or implied from conduct showing an election to treat an unauthorized act as authorized, or by conduct which can be explained only if there was such an election. Bank of Hoven, supra.

Victor's conduct in the present case provides more than a sufficient basis upon which the trial court could find that no material issue of fact existed as to whether Victor ratified the promissory note. The trial court's finding is supported by the following conduct:

(1) Victor saw the note and security agreement contained his purported signatures and all the information included on the document by July 3, 1980;

(2) Since 1981, Victor has been a party to litigation seeking to enforce his obligation on the note;

(3) Through two trials and one appeal, Victor has remained in default concerning his liability on the note, even though he has been represented by counsel at various times since 1981;

(4) Victor was notified of Robert's sale of the collateral in early 1985, and failed to attend or respond in any way;

(5) Victor testified, under oath, at the first trial on the note that he had signed the note he now claims is a forgery;

(6) Victor made no protest of his name being signed to the note in this case for at least five and one-half years.

This evidence is such that a reasonable person could only draw one conclusion from all the facts and inferences...