Title: Blanton v. Federal Deposit Ins. Corp.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Blanton v. Federal Deposit Ins. Corp.1985 WY 151706 P.2d 1111Case Number: 84-263Decided: 10/02/1985ARCH B. BLANTON AND BERTHA F. BLANTON, APPELLANTS (DEFENDANTS), 

RALPH HALL; CASPER CONCRETE COMPANY (DEFENDANTS), 

v. 

FEDERAL DEPOSIT INSURANCE CORPORATION, IN ITS CORPORATE CAPACITY, AND RECEIVER FOR THE WESTERN NATIONAL BANK, APPELLEE (PLAINTIFF).
Supreme Court of Wyoming
ARCH B. BLANTON AND 
BERTHA F. BLANTON, APPELLANTS (DEFENDANTS), 

RALPH HALL; CASPER 
CONCRETE COMPANY (DEFENDANTS), 

v. 

FEDERAL DEPOSIT INSURANCE 
CORPORATION, IN ITS CORPORATE CAPACITY, AND RECEIVER FOR THE WESTERN NATIONAL 
BANK, APPELLEE (PLAINTIFF).

 
 
Appeal from the District 
Court, NatronaCounty, Dan Spangler, 
J.

 
 
Ronald A. 
Kastanek, Casper, for appellant.

Barry G. 
Williams and Richard Williams of Williams, Porter, Day & Neville, P.C., 
Casper, for appellee.

Before THOMAS, C.J., and 
ROSE, ROONEY, BROWN and CARDINE, JJ.

BROWN, 
Justice.

[¶1.]     This case involves a 
complex series of transactions among three main parties: appellants Arch and 
Bertha Blanton (hereinafter appellants), Ralph Hall (hereinafter Hall), and the 
Western National Bank (hereinafter the bank). The action began when the bank 
sought foreclosure of a mortgage it held on certain real property which 
appellants sold to Hall. Appellants held a second mortgage on the same property 
and filed a counterclaim alleging misrepresentation by the bank and seeking 
priority for their mortgage over that of the bank's mortgage. The trial court 
granted, inter alia, summary judgment on the bank's foreclosure action against 
Hall and dismissed appellants' counterclaim. This appeal ensued. It should be 
noted that subsequent to the commencement of the action, the bank went into 
receivership and is represented on appeal by the Federal Deposit Insurance 
Corporation.

[¶2.]     Hall did not appeal the 
decision of the trial court. Appellants raise the following 
issues:

"A.

"Did the trial court err 
in denying appellants' motion to amend their counterclaim?

"B.

"Did the trial court err 
in granting appellee's motion to dismiss the counterclaim of appellants either 
in its original form or as set forth in appellants' motion to amend 
counterclaim?

"C.

"Did the court err in 
determining that appellee was entitled to foreclose its real estate mortgages as 
referenced in the judgment being appealed subject to the priorities set forth in 
the findings in said judgment?

"D.

"Did the court err in 
determining the priority of the real estate mortgages held by appellee and 
appellants as set forth in the findings of the judgment being 
appealed?"

[¶3.]     Inasmuch as we find 
error in the trial court's dismissal of appellants' counterclaim as well as the 
trial court's denial of appellants' motion to amend their counterclaim, we will 
reverse and remand. Therefore, we need not address appellants' third and fourth 
issues regarding the court's determination that the bank was entitled to 
foreclose its mortgage subject to the priorities of the mortgages set forth in 
the judgment, as well as the determination of the 
priorities.

[¶4.]     The facts reveal that 
on June 27, 1980, appellants and Hall met with a representative of the bank 
regarding the sale of a salvage yard business from appellants to Hall. 
Appellants and Hall had reached an agreement whereby Hall agreed to assume and 
pay off a preexisting mortgage incurred by appellants on the real property upon 
which the salvage yard was located. Additionally, Hall would execute a $125,000 
promissory note, secured by a mortgage, in favor of appellants. According to 
appellants, however, in order for Hall to obtain financing from the bank, the 
bank required a first mortgage on the real property to secure its loan to Hall. 
Appellants then agreed to allow the bank to record a first mortgage on the 
property if there would be a one-time loan to Hall of an amount less than 
$200,000, that the loan would be used to pay off the preexisting mortgage 
incurred by appellants, and that the remainder of the loan would be used for the 
purchase of inventory to operate the salvage yard 
business.

[¶5.]     The bank then loaned 
Hall $175,000 on June 27, 1980. Hall executed a mortgage in favor of the bank 
and the mortgage was recorded on July 3, 1980. The loan was used to pay off the 
preexisting mortgage and a portion of the loan was used for operating capital, 
but a portion of the loan was also used to pay off preexisting notes owed by 
Hall to the bank. Then, on or about September 17, 1981, the bank again loaned 
Hall the principal sum of $83,570.64 and another mortgage was executed by Hall 
to secure the loan; on April 19, 1983, the bank made an additional unsecured 
loan to Hall in the principal sum of $58,000. Herein lies the problem: 
Appellants claim the bank was guilty of misrepresentation when it made two 
subsequent loans to Hall after agreeing to make only one loan of less than 
$200,000.

[¶6.]     Hall subsequently 
defaulted on all three loans. The bank filed suit to foreclose its two mortgages 
and to determine the priority of other encumbrances, including the mortgage held 
by appellants. The bank also filed suit on the unsecured note. Specifically, the 
complaint filed by the bank sought the following:

Count I: To foreclose the 
mortgage secured by the June 27, 1980, loan to Hall in the amount of 
$175,000.

Court II: To foreclose 
the mortgage secured by the September 17, 1981, loan to Hall in the amount of 
$83,570.64.

Count III: To obtain 
judgment on the April 19, 1983, unsecured loan to Hall in the amount of 
$58,000.

Count IV: To have the 
mortgage held by appellants in the amount of $125,000 adjudged inferior to that 
of the bank's.

Count V: To have a 
certain materialmen's lien on the property held by Casper Concrete Company 
adjudged inferior to any rights of the bank to the 
property.

Casper Concrete 
admitted in its answer that the mortgage of the bank was superior to its 
materialmen's lien and participated no further in the 
action.

[¶7.]     Both appellants and 
Hall filed answers and counterclaims to the bank's complaint. Both parties then 
filed motions to amend their counterclaims. The bank moved to dismiss the 
counterclaims for failure to state a cause of action and for summary judgment as 
against Hall. The bank's motions were granted by the trial court in its decision 
letter:

"The above matter has 
come before the Court upon a Motion for Summary Judgment and a Motion to Dismiss 
the Counterclaims. The Court finds that there is no genuine dispute as to any 
material fact, that the plaintiff [bank] is entitled to judgment as a matter of 
law, and that the counterclaims do not state a cause of action. Therefore, the 
motions of plaintiff are granted."

[¶8.]     Appellants' first two 
issues will be considered together: Whether the trial court erred in denying 
appellants' motion to amend their counterclaim, and whether the trial court 
erred in granting the bank's motion to dismiss appellants' counterclaim either 
in its original form or as presented in appellants' motion to amend their 
counterclaim.

[¶9.]     Appellants' first 
counterclaim is nearly 20 pages in length and alleges, among other things, that 
the bank breached its agreement with appellants by loaning Hall more than the 
one-time-only loan they agreed to. Furthermore, the counterclaim alleges that 
had appellants known the bank was going to make more loans to Hall than the one 
agreed upon, they would never have agreed to place their mortgage second in 
priority to the bank's. The counterclaim also alleges the bank wrongfully took 
possession of and sold certain machinery, tools and equipment belonging to the 
salvage yard business and that the bank's conduct amounted to a "wrongful, 
willful and/or knowing interference with the legitimate salvage yard 
business."

[¶10.]  After appellants filed their first 
counterclaim, demand was made upon the bank for production of documents. Upon 
reviewing the documents, appellants filed a motion to amend their counterclaim, 
alleging that the bank further breached its agreement with Hall and the 
appellants by forcing Hall to use the proceeds of the June 27, 1980, loan of 
$175,000 to first pay off preexisting debts Hall had with the bank not related 
in any way with the salvage yard business, instead of using the proceeds to 
purchase additional salvage to be sold in the normal course of business. These 
allegations are also contained in an affidavit by Hall filed concurrently with 
the motion to amend appellants' counterclaim.

[¶11.]  As noted earlier, the trial court denied 
appellants' motion to amend their counterclaim and dismissed appellants' first 
counterclaim, finding the counterclaim failed to state a cause of action. We 
find the trial court erred in dismissing appellants' counterclaim and in denying 
appellants' motion to amend their counterclaim and reverse as to these 
issues.

[¶12.]  Guidelines for pleading counterclaims are 
found in Rule 13, Wyoming Rules of Civil Procedure, which reads in 
part:

"(a) Compulsory counterclaims. - A pleading 
shall state as a counterclaim any claim which at the time of serving the 
pleading the pleader has against any opposing party, if it arises out of the 
transaction or occurrence that is the subject matter of the opposing party's 
claim and does not require for its adjudication the presence of third parties of 
whom the court cannot acquire jurisdiction, except that such a claim need not be 
so stated if at the time the action was commenced the claim was the subject of 
another pending action.

"(b) Permissive counterclaims. - A pleading 
may state as a counterclaim any claim against an opposing party not arising out 
of the transaction or occurrence that is the subject matter of the opposing 
party's claim.

* * * * * 
*

"(e) Counterclaim maturing or acquired after 
pleading. - A claim which either matured or was acquired by the pleader 
after serving his pleading may, with the permission of the court, be presented 
as a counterclaim by supplemental pleading.

"(f) Omitted counterclaim. - When a pleader 
fails to set up a counterclaim through oversight, inadvertence, or excusable 
neglect, or when justice requires, he may by leave of court set up the 
counterclaim by amendment."

[¶13.]  Rule 13(f) quoted above allows a party to 
amend a counterclaim by leave of court if he has failed to set up such 
counterclaim "through oversight, inadvertence, or excusable neglect, or when 
justice requires." Leave to amend pleadings is to be freely given under Rule 
15(a), W.R.C.P., unless the proposed amendment to the pleading will unduly 
prejudice the opposing party. Johnson v. 
Aetna Casualty & Surety Company of Hartford, Wyo., 608 P.2d 1299 (1980); and Rose v. Rose, 
Wyo., 576 P.2d 458 (1978). We have held that pleadings 
must show the operative facts involved to provide fair notice to the opposing 
party. In the Johnson case we said:

"The first question that 
we must address is whether the district court correctly dismissed this last 
complaint for failure to state a claim upon which relief can be granted. This 
court will only sustain such a dismissal if the complaint on its face shows that 
the plaintiff is not entitled to relief. A complaint is not subject to dismissal 
unless there is no doubt that the plaintiff cannot prove any set of facts that 
would entitle him to relief. State 
Highway Commission v. Bourne, Wyo., 425 P.2d 59, 63 (1967). Wyoming Rules of 
Civil Procedure are based upon the theory of notice pleading. Rule 8(a)(1), 
W.R.C.P. The plaintiff need only plead the operative facts involved in the 
litigation so as to give fair notice of the claim to the defendant. Harris v. Grizzle, Wyo., 599 P.2d 580, 583 
(1979). And, as we have stated before, pleadings must be liberally construed in 
order to do justice to the parties and motions to dismiss must be sparingly 
granted. Harris, supra, 599 P.2d  at 
583; Bourne, supra, 425 P.2d  at 63." 
Id., at 
1302.

[¶14.]  Of further enlightenment is the case of 
Simpson v. Western National Bank of 
Casper, Wyo., 
497 P.2d 878 (1972). In that case Simpson, a contractor, brought a check to the 
bank to be deposited in the account of Wyant, a subcontractor of Simpson's. 
Simpson was concerned with the financial stability of Wyant and made inquiry of 
a bank officer regarding the same. The bank officer assured Simpson that all was 
going to be all right and that the money would be used by Wyant to pay for 
materials in the construction project upon which Simpson and Wyant were working. 
The bank deposited the money in Wyant's account, but used the money to pay other 
debts owed by Wyant to the bank instead of paying for building materials as 
promised. When the bank brought action against Simpson for stopping payment on 
his check to Wyant, Simpson defended by alleging, inter alia, that the bank was 
not a holder in due course and had not received the check for deposit in good 
faith. Trial to a jury resulted in a verdict for Simpson, but the trial court 
granted judgment to the bank notwithstanding the 
verdict.

[¶15.]  On appeal, the bank claimed Simpson had 
failed to establish a prima facie case of fraud against the bank because he had 
failed to use the word "fraud" in his pleading. This court held that Simpson's 
answer was sufficient without specifically stating the word "fraud" since he 
alleged facts which, if proved, would establish fraud:

"Although the defendant 
did not use the term `fraud' in his answer, he did allege facts, in an 
affirmative defense, which would show fraud as a conclusion of law. Also, the 
record discloses clearly that the parties themselves and the trial court, 
throughout the trial, considered and treated defendant's affirmative defense as 
a defense of fraud. Nothing different is claimed on appeal." Id., at 879-880.

[¶16.]  We then reinstated the jury verdict for 
Simpson finding there was ample evidence from which the jury could find fraud in 
that when the bank officer assured Simpson that all was going to be fine and 
that the money deposited would be used for building purposes, such statements 
were false and designed to mislead.

[¶17.]  In accord with these cases, we think 
appellants' counterclaim in this case is sufficient to provide notice to the 
opposing party of their claim and thereby withstand a motion for dismissal based 
upon failure to state a claim. Furthermore, we find appellants' motion to amend 
their counterclaim should have been granted under Rule 13, 
W.R.C.P.

[¶18.]  Reversed and remanded to the trial court 
for proceedings not inconsistent with this opinion.

ROONEY, Justice, 
dissenting.

[¶19.]  I would affirm. The result reached by the 
trial court was equitably and legally proper. It must be emphasized that only 
the $175,000 mortgage of the bank was allowed priority over appellants' 
mortgage. This was exactly that which was bargained for by the parties when the 
bank agreed to make the loan to make possible the sale of the business by 
appellants to Hall.

[¶20.]  Even if parol evidence were allowed to 
vary the terms of the written note and mortgage obligating the bank to make no 
additional loans to Hall, and accepting all of that said by appellants 
concerning the facts in this matter, appellants cannot possibly show any damage 
to them as a result of the bank's actions. Appellants complain about the bank's 
actions in making additional loans to Hall. If the loans had not been made, Hall 
would have defaulted much sooner. The loans kept Hall in business and enhanced 
the chance that he would be successful in paying his obligations to both 
appellants and the bank. The fact that this effort was unsuccessful is not the 
cause of damages to appellants.

[¶21.]  Appellants received that for which they 
bargained. The loan proceeds were used to pay off their existing mortgage, to 
provide operating capital for the business and to pay off other notes due from 
Hall to the bank. Additional loans were made by the bank to provide for 
inventory purchases and additional operating expenses. But appellants' mortgage 
was held by the trial court to be prior to anything owed to the bank except the 
original bank mortgage according to the bargain of the parties. Appellants 
cannot show injury from the transactions. They are in the same position as they 
would have been if the operation went as they claim it should 
have.

[¶22.]  Once it is recognized that the trial 
court properly disposed of the claim of the bank, granting the claim in part but 
refusing to allow priority to the bank for any of Hall's obligations to the bank 
except the first mortgage, the contentions in the counterclaim and amended 
counterclaim cannot be sustained. Certainly, appellants' mortgage cannot be 
granted priority over the bank's first mortgage on the basis of any loss of that 
bargained for, and it then follows that there cannot be any basis for a claim of 
fraud. It is almost to the contrary. Appellants got more than they bargained for 
inasmuch as the bank kept Hall in business much longer than he would have been 
if the subsequent bank loans were not made. Obviously, appellants expected and 
wanted Hall to make a go of the business so that they could receive the full 
sale price for it. Appellants are business people. They knew the risks involved 
in the transaction. One of the essential elements of fraud is reliance on a 
false representation "to one's damage." Anderson v. Foothill Industrial Bank, Wyo., 674 P.2d 232, 238 (1984); Johnson v. Soulis, Wyo., 
542 P.2d 867, 872 (1975). The counterclaim was properly dismissed since it shows 
on its face that appellants are not entitled to relief. Johnson v. Aetna 
Casualty and Surety Co., Wyo., 608 P.2d 1299, 1302 
(1980).

[¶23.]  The bank also points to the fact that in 
order to grant that requested in the counterclaim, i.e., give appellants' 
mortgage a priority over that of the bank, the agreement to allow the bank's 
mortgage first priority would have to be rescinded. It notes that one seeking 
such a rescission for alleged fraudulent misrepresentation must do so promptly. 
Meyer v. Ludvik, Wyo., 
680 P.2d 459, 466 (1984). Appellants had notice of the second bank loan and 
mortgage when it was recorded on September 19, 1981. Action seeking rescission 
was not taken until March 7, 1984. A period of two and one-half years between 
cause and effect cannot be "prompt." Although the ground for dismissing the 
counterclaim was not enunciated by the trial court, the trial court's ruling can 
be upheld on any legally supportable theory. Valentine v. Ormsbee 
Exploration Corporation, Wyo., 665 P.2d 452 
(1983).