Wells, Jr., v. 1st American Bank West

• Decision Date: 25 August 1999
• Docket Number: 990017
• Citation: 598 N.W.2d 834,1999 ND 170
• Parties: Charles W. Wells, Jr., on behalf of himself and all other individuals similarly situated, Plaintiff and Appellant v. First American Bank West, n/k/a Bremer Bank, N.A., and Balboa Life and Casualty Insurance Company, Defendants and Appellees1999 ND 170 IN THE SUPREME COURT STATE OF NORTH DAKOTA Filed
• Court: North Dakota Supreme Court

Charles W. Wells, Jr., on behalf of himself and all other individuals similarly situated, Plaintiff and Appellant v First American Bank West, n/k/a Bremer Bank, N.A., and Balboa Life and Casualty Insurance Company, Defendants and Appellees

No. 990017

1999 ND 170

IN THE SUPREME COURT STATE OF NORTH DAKOTA

Filed 8/25/99 by Clerk of Supreme Court

Appeal from the District Court of Ward County, Northwest Judicial District, the Honorable Glenn Dill III, Judge.

REVERSED AND REMANDED.

Opinion of the Court by Sandstrom, Justice.

Mike Miller, Solberg, Stewart, Miller & Johnson, P.O. Box 1897, Fargo, N.D. 58107_1897; Lawrence E. Abernathy III, Lawrence E. Abernathy, P.A., P.O. Box 4177, Laurel, Miss. 39441-4177; and Ronald S. Goldser (argued), J. Gordon Rudd, Jr., and Hart L. Robinovitch, Zimmerman Reed, P.L.L.P. 901 North Third Street, Minneapolis, Minn. 55401; for plaintiff and appellant.

Richard P. Olson (argued), Olson Burns Lee, P.C., P.O. Box 1180, Minot, N.D. 58702-1180; and Robert R. Weinstine, Darron C. Knutson, and M. Catherine Powell, Winthrop & Weinstine, P.A., 60 South Sixth Street, Minneapolis, Minn. 55402; for defendant and appellee First American Bank West, n/k/a Bremer Bank, N.A.

Jon W. Backes, McGee, Hankla, Backes & Dobrovolny, P.C., P.O. Box 998, Minot, N.D. 58702-0998; and Ernest E. Vargo (argued) and Kyle B. Fleming, Baker & Hostetler LLP, 1900 East Ninth Street, Cleveland, Ohio 44114-3485; for defendant and appellee Balboa Life and Casualty Insurance Company.

Sandstrom, Justice.

[1] Charles Wells appeals from the judgment of the district court dismissing the action against First American Bank West ("First American") on March 27, 1998, and the judgment dismissing the action against Balboa Life and Casualty Insurance Company ("Balboa") on November 16, 1998. The court found no disputed issues of material fact in either suit and dismissed on the pleadings, finding the actions barred by the statute of limitations. Because the discovery of Wells's cause of action involves disputed questions of fact, the dismissal on the pleadings was inappropriate. We reverse and remand.

I

[2] Charles Wells bought a 1989 Pontiac Sunbird automobile on September 12, 1989, and financed the car through First American. The terms of the loan agreement required he acquire and maintain comprehensive and collision insurance on the vehicle and, in the alternative, authorized First American to purchase insurance for him if he did not do so. Wells did not maintain the insurance, and First American purchased the insurance from Balboa, a co_defendant in this case.

[3] Balboa provides collateral protection insurance, also known as force placed insurance. Insurance is force placed when a lender compels a borrower to maintain physical damage insurance and charges the premium to the borrower if the borrower does not comply. First American force placed insurance on Wells for the period August 10, 1990, through August 10, 1991, and charged him $1,431 for the insurance. The cost was added to the balance of the loan. In a letter addressed to Wells, dated November 16, 1990, First American informed him of the force placed insurance and stated, "This policy is for collision and comprehensive coverage only."

[4] Wells filed suit on September 16, 1997, claiming the $1,431 added to his loan balance for the collateral insurance included charges for additional coverage not authorized under the terms of the contract. According to Wells's complaint, the charge of $1,431 was "for numerous coverages including, but not limited to, secured interest protection and gap coverage, the purchase of which are not authorized by their agreement."

[5] The complaint further stated Wells believed certain "notices of insurance requirements, and/or certificates of coverage evidencing insurance coverage" may have been mailed to Wells. Wells admitted in his appellate brief that he in fact received two such notices dated November 6, 1990, and November 16, 1990, respectively. The November 6, 1990, letter from First American specifically advised Wells the "premium cost of $1,431.00 . . . will be added to your loan." When First American actually purchased the collateral insurance, it sent Wells a second letter dated November 16, 1990, which again stated "the premium of $1,431.00 has been added to the balance of your loan." The letter stated the excess coverage was for "collision and comprehensive coverage only." Wells commenced suit in September 1997 for breach of contract against First American, tortious interference with a contractual relationship against Balboa, breach of duty of good faith and fair dealing against First American and Balboa, unjust enrichment against Balboa, and civil conspiracy, after having watched a television show warning consumers that extra insurance is often added when insurance is force placed.

[6] Wells appeals from the judgments of the Northwest Judicial District Court dismissing the case. The district court had jurisdiction under N.D.C.C. 27-05-06. This Court has jurisdiction under N.D. Const. art. VI, 6, and N.D.C.C. 28-27-01.

II

[7] Wells argues there were material issues of fact in dispute that should have precluded the district court from dismissing the case on the pleadings. The district court found on the pleadings and ruled as a matter of law that no material facts were in dispute and the action was barred by the statute of limitations. See American State Bank and Trust Co. of Williston v. Sorenson, 539 N.W.2d 59 (N.D. 1995). When there is no dispute in the evidence about the facts, the question of whether the statute of limitations has run is for the court. Bormann v. Beckman, 19 N.W.2d 455, 460 (N.D. 1945). "Because determinations on the merits are generally preferred to dismissal on the pleadings, Rule 12(b)(v) motions are viewed with disfavor." Towne v. Dinius, 1997 ND 125, 7, 565 N.W.2d 762 (citing Kouba v. FEBCO, Inc., 543 N.W.2d 245, 247 (N.D. 1996)). Therefore, a court's scrutiny of the pleadings should be deferential to the plaintiff, unless it is clear there are no provable facts entitling the plaintiff to relief. Id. (citations omitted). We "will generally reverse a judgment dismissing a complaint for failure to state a claim whenever we can discern a potential for proof to support it." Id. While we defer to a district court's findings of fact, issues decided as questions of law are fully reviewable. Fisher v. American Family Mut. Ins. Co., 1998 ND 109, 5, 579 N.W.2d 599.

A

[8] The district court dismissed the case against First American and Balboa because it found no facts in dispute and, consequently, Wells's suit barred by the statute of limitations. In this case, however, we hold disputed facts precluded dismissal of the claim as barred by the statute of limitations. Under N.D.C.C. 28-01-16:

The following actions must be commenced within six years after the claim for relief has accrued:

1. An action upon a contract, obligation, or liability, express or implied, subject to the provisions of sections 28-01-15 and 41-02_104.

. . . .

An action for relief on the ground of fraud in all cases both at law and in equity, the claim for relief in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud.

N.D.C.C. 28-01-16.

[9] Because the statute is silent on when an action accrues, the determination is left to the court. Schanilec v. Grand Forks Clinic, Ltd., 1999 ND 165, 11 (citing Baird v. American Medical Optics, 713 A.2d 1019, 1025 (N.J. 1998)). In Osland v. Osland, 442 N.W.2d 907, 908 (N.D. 1989), this Court said that generally the statute of limitations begins to run from the commission of the wrongful act giving rise to the cause of action. We have also recognized, however, this rule is often harsh and unjust, which is why so many courts have adopted the discovery rule. Schanilec, at 11. "The discovery rule is meant to balance the need for prompt assertion of claims against the policy favoring adjudication of claims on the merits and ensuring that a party with a valid claim will be given an opportunity to present it." Id. (citing Buck v. Miles, 971 P.2d 717, 722 (Haw. 1999)). See also MDU Resources Group v. W.R. Grace and Company, 14 F.3d 1274, 1277 (8th Cir. 1994) (citing Wall v. Lewis, 366 N.W.2d 471, 473 (N.D. 1985); Iverson v. Lancaster, 158 N.W.2d 507 (N.D. 1968)) ("To determine the point at which any statute of limitations begins to run, North Dakota applies the discovery rule.").

[10] The discovery rule is an exception to the limitations and, if applicable, determines when the claim accrues for the purpose of computing limitations. The discovery rule postpones a claim's accrual until the plaintiff knew, or with the exercise of reasonable diligence should have known, of the wrongful act and its resulting injury. Courts generally apply the discovery rule when it would have been difficult for the plaintiff to have learned of the negligent act or omission that gave rise to the legal injury. Bates v. Texas State Technical College, 983 S.W.2d 821, 828 (Tex. Ct. App. 1998) (citing Computer Assoc. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996)). We have used an objective standard for the knowledge requirement under the discovery rule. BASF Corp. v. Symington, 512 N.W.2d 692, 695 (N.D. 1994). The focus is upon whether the plaintiff is aware of facts that would place a reasonable person on notice a potential claim exists, without regard to the plaintiff's subjective beliefs. Id. (citing Biesterfeld v. Asbestos Corp. of America, 467 N.W.2d 730 (N.D. 1991)).

[11] The appellants argue the discovery rule does not apply to contract actions. We think their arguments are misplaced and hold the discovery rule applies to a breach of contract claim. In Hebron Public School v. United States Gypsum Co., 475 N.W.2d 120 (N.D. 1991), this Court applied the discovery rule to N.D.C.C. 28-01-16(1) and held a cause of action does not...