Zink v. Enzminger Steel Llc

• Decision Date: 21 June 2011
• Docket Number: No. 20100359.,20100359.
• Parties: Doug ZINK and Ted Keller, Plaintiffs and Appellantsv.ENZMINGER STEEL, LLC, Defendant and Appellee.
• Court: North Dakota Supreme Court

798 N.W.2d 863

2011 ND 122

Doug ZINK and Ted Keller, Plaintiffs and Appellants

v.ENZMINGER STEEL, LLC, Defendant and Appellee.

No. 20100359.

Supreme Court of North Dakota.

June 21, 2011.

Doug Zink, self-represented, Carrington, N.D., plaintiff and appellant.Ted Keller, self-represented, Carrington, N.D., plaintiff and appellant.Steven T. Ottmar, Jamestown, N.D., for defendant and appellee.SANDSTROM, Justice.

[¶ 1] Doug Zink and Ted Keller appeal from the district court judgment dismissing their complaint, denying their motions, and awarding Enzminger Steel attorney's fees and costs.¹ We reverse and remand the district court judgment dismissing Zink's complaint with prejudice, because he was not given notice of the court's order demanding proof of a partnership and an opportunity to respond. We also reverse and remand the dismissal of the complaint with prejudice as to Keller, and hold that the complaint is dismissed without prejudice. Finally, we reverse the district court's award of attorney's fees and costs to Enzminger Steel.

I

[¶ 2] Enzminger Steel contracted with Doug Zink to supply components for a new grain drying site. This contract lists Zink as the purchaser of Enzminger Steel's materials. Zink and his son, Jeremy Zink, signed this contract. Doug Zink and Keller contend, however, that they had formed a partnership for the purposes of constructing and operating this grain drying site. They further allege that it was this partnership, not the Zinks separately, that entered into the contract with Enzminger Steel.

[¶ 3] Sometime after construction of the grain drying site had begun, Zink and Keller allege they learned that certain unsuitable components had been used in the site's construction. As a result, Zink and Keller refused to make any further payments under the contract to Enzminger Steel. Two separate breach of contract actions followed, one brought by Enzminger Steel and one brought by Zink and Keller. The latter action is before us on appeal. The breach of contract issues have yet to be reached, however, because this case was dismissed on procedural grounds.

[¶ 4] After the two actions had begun, Zink and Keller moved to strike Enzminger Steel's answer and counterclaim to their complaint. Enzminger Steel moved for a protective order stemming from alleged discovery abuses, and also moved to join Jeremy Zink as a party to this action. The district court held a hearing on these motions.

[¶ 5] Keller represented himself at the hearing, but neither of the Zinks attended although they had been served notice. Doug Zink contends he did not attend because he did not oppose any of the motions scheduled to be considered at the hearing. When the hearing began, the district court immediately voiced its concern with what it felt was Keller's unauthorized practice of law. The court criticized Keller for preparing pleadings for the Zinks and attempting to represent them, and also for the motion to strike, which the court concluded was frivolous. Keller maintained that he and Doug Zink were partners, but that his appearance in court was only on behalf of himself, not Zink or this partnership.

[¶ 6] The district court repeatedly questioned whether this alleged partnership between Zink and Keller was a ruse to allow Keller to practice law without a license. When Keller stated that he and Zink were sharing pleadings, the court responded, “That means you are practicing law without a license,” and “I know you think you are an attorney but you are not.” Keller later told the court that he and Zink had entered into an unwritten partnership agreement to share profits and losses. The court replied, “[T]he agreement that you are in is to share profits off this lawsuit which is not allowed. What they want to do is to have you be their attorney and I am not allowing that.”

[¶ 7] Despite the absence of the Zinks, the district court verbally ordered that it would dismiss the action brought by Keller and Doug Zink unless either could prove the existence of a partnership within four days. If documents were produced proving the existence of a partnership, Keller would be joined as a party to the action brought by Enzminger Steel. If these documents were not produced, the court stated the action brought by Zink and Keller would be dismissed and Enzminger Steel would be awarded its attorney's fees because the pleadings were made in bad faith.

[¶ 8] Neither Zink nor Keller produced any documents proving the partnership within the time required by the court. The district court entered an order denying all of the motions in this case, and dismissed the action brought by Zink and Keller with prejudice. Additionally, Enzminger Steel was awarded its costs and attorney's fees because the court concluded that Zink's and Keller's pleadings were “made in bad faith and in blatant disregard of the law.” Judgment was subsequently entered repeating the earlier terms of the order, but updated to include monetary figures for the award of costs and attorney's fees.

[¶ 9] On appeal, Zink and Keller argue the district court abused its discretion by denying the various motions in this case, ordering them to prove that a partnership existed, and awarding attorney's fees and costs to Enzminger Steel. They also contend the judge was biased.

[¶ 10] 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 under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28–27–01.

II

[¶ 11] Zink and Keller argue the district court erred by ordering them to produce documents proving the existence of a partnership. When they did not produce these documents, the district court dismissed their complaint with prejudice.

[¶ 12] The procedure used to dismiss this case is unusual because the district court's demand for proof of the partnership came on its own volition, not on a motion from the adverse party. We have previously upheld a district court's ability to dismiss a case with prejudice in the absence of a motion when the complaint is inadequate. See Ennis v. Dasovick, 506 N.W.2d 386, 389 (N.D.1993) (“A trial court may, on its own initiative, and in the cautious exercise of its discretion, dismiss a complaint for failure to state a valid claim....”); Albrecht v. First Federal Savings & Loan Ass'n, 372 N.W.2d 893, 894–95 (N.D.1985) (district court did not err in dismissing without a prior motion a complaint that was “patently frivolous”). “This power must be exercised sparingly and with great care to protect the rights of the parties,” and “[a] trial court should dismiss under Rule 12(b) only when certain it is impossible for the plaintiff to prove a claim for which relief can be granted.” Ennis, at 389 (citations omitted). Here the district court demonstrated its concern with the possible fraud being perpetrated on the court, and demanded proof of a partnership before it would allow the proceedings to continue.

[¶ 13] The court's oral order to Zink and Keller to produce evidence of a partnership served as the direct basis for the eventual order and judgment dismissing their complaint. The court's order demanding proof of the partnership essentially functioned as a motion to dismiss under N.D.R.Civ.P. 12(b)(6). This order, however, demanded proof outside of the pleadings in the form of partnership documents. Under N.D.R.Civ.P. 12(d), when a motion to dismiss includes matters outside of the pleadings, then the motion is treated as one for summary judgment. See, e.g., Skogen v. Hemen Township Board, 2010 ND 92, ¶ 10, 782 N.W.2d 638 (dismissal without trial but with consideration of matters outside of pleadings must be treated as summary judgment); Davidson v. State, 2010 ND 68, ¶ 11, 781 N.W.2d 72 (district court considered matters outside of pleadings, necessitating review under summary judgment standard); Livingood v. Meece, 477 N.W.2d 183, 187 (N.D.1991) (motion to dismiss must be treated as motion for summary judgment when consideration of matters outside of pleadings is required).

[¶ 14] Accordingly, we review the district court's dismissal under the standards for summary judgment, “which is a procedural device for promptly resolving a controversy on the merits without a trial if there are no disputed issues of material fact and inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law.” Davidson, 2010 ND 68, ¶ 11, 781 N.W.2d 72. “This Court reviews the evidence in a light most favorable to the opposing party and determines if summary judgment was appropriately granted as a matter of law.” Minn–Kota Ag Products, Inc. v. Carlson, 2004 ND 145, ¶ 5, 684 N.W.2d 60. Summary judgment is appropriate only when there are no genuine issues of material fact. Beckler v. Bismarck Pub. Sch. Dist., 2006 ND 58, ¶ 7, 711 N.W.2d 172.

[¶ 15] Zink and Keller were separately named parties in the complaint, and the circumstances surrounding the dismissal were different for both. Accordingly, the court's judgment dismissing the complaint is reviewed for both Zink and Keller separately.

A

[¶ 16] Doug Zink was not present during the hearing in this case. He received notice of the hearing, but contends he did not attend because he did not oppose any of the motions scheduled to be considered. There was no prior notification that the district court was going to demand proof of Zink and Keller's alleged partnership, or that their complaint would be dismissed if such proof was not presented. The first time this issue was raised was during the hearing itself.

[¶ 17] In City of Jamestown v. Snellman, 1998 ND 200, 586 N.W.2d 494, we considered whether or not a judge could dismiss a criminal case without a prior motion from the defendant. Noting that the question was one of first impression in the criminal context, we explored similar court action in the civil context. Citing federal precedent, we noted...