Filed 1/23/20 by Clerk of Supr eme Court



### I N T H E S U P RE M E C O U R T S T A T E O F N O R T H D A KO T A

2020 ND 6

Michael M cDougall and Bonita McDougall, Plaintiffs and Appellants

v. AgCoun try Farm Credit Services, PCA, Defendant, Third

- Party Plaintiff, and Appellee

and Any person in possession, and All persons unknown, claiming any estate or interest in, or lien or encumbrance upon, the real estate

described in the Third Party Complaint, Third

- Party Defendants

No. 20190140

Appeal from the District Court of Towner C ounty, Northeast Judicial District, the Honorable Donovan J. Foughty , Judge.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

. Opinion of the Court by VandeWalle , Justice.

Kip M. Kaler (argued) and Patrick J. Sinner (appeared) , Fargo, ND

, for plaintiffs an d appellants.

J ohn D. Schroeder, Grand Forks, ND

, for defendant, third

- party plaintiff and appellee.1 McDougall v. AgCountry F arm Credit Services, PCA No. 20190140

VandeWalle , Justice.

[¶1] Michael and Bonita McDougall (“McDougalls”) appealed from a judgment dismissing their deceit and unjust enrichment claims against AgCountry Farm Credit Services , PCA and granting summary judgment in
favor of AgCountry on its claims to enforce assignment of rents and to foreclose a mortgage. We conclude the district court er red by concluding the McDougall s ’ deceit claim was precluded by the statute of fraud s . We reverse the judgment as to the deceit and unjus t enrichment claims, affirm the judgment on the remaining claims, and remand.

I

[¶2] T he McDougalls owned agricultural property (“ h ome q uarter”) described

as:

The North half of the Southeast Quarter (N1/2SE1/4) and the South Half of the Northeast Quart er (S1/ 2NE1/4), Section Twenty

f ive (25), Township One Hundred Sixt y

- two (162), Range Sixty

seven West (67W) 5 th P.M., Towner County, ND.

The McDougalls’ son and daughter

- in

- law, Kent and Erica McDougall

, owned
the h ome q uarter at one time, but sold the property to the McDougalls in 2011

. The McDougalls alleged Kent and Erica McDougall continued to use and live on the property after the 2011 sale.

[¶3] Kent and Erica McDougall conducted a farming operation and received some of the financing for the farming operation from AgCountry. In 2015 and 2016, Kent and Erica McDougall sought to refinance their debt through AgCountry and to borrow additional funds

. The McDougalls allege d Kent and Erica McDougall’s AgCountry loan officer

, Dean Aanderud

, told Kent and
Erica McDo ugall that he was working on refinancing their existing loans and obtaining a new loan and that the prospects for receiving financing “looked good

. ” The McDougalls further alleged that Aanderud advised Kent and Erica McDougall that t hey needed a loan exte nsion to continue working on the2

refinancing and suggested they offer more c ollateral to secure their debt and
that Kent McDougall agreed to speak to the McDougalls about transferring the
h ome q uarter to use as collateral with the understanding that AgCountry would agree to lend additional funds. The McDougalls claimed Kent and Erica
McDo ugall ’s loans became delinquent and AgCountry executives internally expressed co ncern about the delinquencies and its ability to be paid for the existing debt

.
[¶4] O n Ma rch 31, 2016
, Kent and Erica McDougall signed various loan agreement modifications for their AgCountry loans , which extended the installment payments on some of the loans and the maturity dates on other
loans

. T hey also signed a mortgage on most of the ho me q uarter to secure the
loans . O n April 5, 2016
, the McDougalls transferred the home q uarter to Kent and Erica McDougall. The McDougalls allege d Kent McDougall called AgCountry on April 6, 2016

, to check on the progress of the refinancing and
the new lo an and learned Aanderu d no longer worked at AgCountry. They alleged that on April 7 , 2016, an AgCountry executive told Kent and Erica McDougall “we should have had this discussion a long time ago and been sat
down to talk about our financial situation” an d “things weren’t looking good

. ” On April 7, 2016, Kent and Erica McDougall deeded the h ome q uarter back to the McDougalls

.
[¶5] In 2018, the McDougalls sued AgCountry, request ing the district court
declare the mortgage on the home quarter is void. They also sought damages on claims of deceit, conversion, estoppel, and unjust enrichment. The McDougalls claim ed AgCountry asked Kent and Erica McDougall for
addi tional collateral to refinance their debt and advance a new loan knowing the only other collatera l they may have access to was the property owned by the McDougalls, AgCountry created a scheme to acquire that property, and AgCountry knew or should have known it would not refinanc e their debt or make a new loan. The McDougalls alleged that AgCountry ma de misrepresentations to Kent and Erica McDougall intending those communications be relayed to the McDougalls to persuade them to make the home quarter available to AgCountry as additional collateral and that the McDougalls relied on AgCountry’s misreprese ntations

.3

[¶6] AgCountry answered and counterclaimed, seeking to foreclose the mortgage on the property and enforce an assignment of rents arising from the property

.
[¶7] AgCountry moved for summary judgment , arguing the McDougalls’
claims fail ed as a matter of la w based o n the undisputed material facts

. AgCountry argued the McDougalls’ claims were barred by a prior judgment in an adversary proceeding in Kent and Erica McDougall’s bankruptcy action under the doctrines of res judicata or collateral estoppel

. They also argued that the claim for deceit should be dismissed because AgCountry did not make any misrepresentations to the McDougalls and the claim was pre cluded by the
statute of frauds and that the claim for unjust enrichment should be dismissed
because the McDougalls have adequate remedies at law and AgCountry’s actions were justified. AgCountry argued it was entitled to summary judgment
on its claims.

[¶8] The McDougalls responded and also mov ed for summary judgment. They argued res judicata and collateral estoppel do not preclude their claims

, thei r deceit claim wa s not barred by the statute of frauds, and summary judgment should be granted in their favor based on the prior determination of facts by the bankruptcy court

. They also argued that AgC ountry committed deceit by making assertions it had no reasonable grounds to believe were true
or b y suppressing the truth and that they justifiably relied on AgCountry’s misrepresentations

.
[¶9] After a hearing, the district court granted summary judgment in f avor of AgCountry on all of the McDougalls’ claims, concluding the McDougalls ’ claims were not barred by collateral estoppel, but the McDougalls could not prove two elements o f their unjust enrichment claim and the statute of frauds barred
their deceit cla im. The court also granted summary judgment in favor of AgCountry to foreclose the mortgage on the home quarter and for assignment of rents for 2017 and 2018. The court reserved ruling on the assignment of
rents for 2016. After briefing from the parties , the court entered an order on the reserved issues, concluding AgCountry was not seeking an awa rd of rent
for 2016. Judgment was entered.4 II

[¶10] Our standard of review for summary judgments is well established:

Summary judgment is a procedural device under N.D .R.Civ.P. 56(c) for promptly resolving a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. The party seeking summary judgment must demonstrate there are no genuine issues of material fact and the case is appropriate for judgment as a matter of law. In deciding whether the district court appropriately granted summary judgment, we view the evidenc e in the light most favorable to the opposing party, giving that party the benefit of all favorable inferences which can reasonably be drawn from the record. A party opposing a motion for summary judgment cannot simply rely on the pleadings or on unsupport ed conclusory allegations. Rather, a party opposing a summary judgment motion must present competent admissible evidence by affidavit or other comparable means that raises an issue of material fact and must, if appropriate, draw the court’s attention
to re levant evidence in the record raising an issue of material fact. When reasonable persons can reach only one conclusion from the evidence, a question of fact may become a matter of law for the court to decide. A district court’s decision on summary judgment is a question of law that we review de novo on the record.

N.D. Private Investigative & Sec. Bd. v. TigerSwan, LLC , 2019 ND 219, ¶ 8, 932 N.W.2d 756 (quoting Heartland State Bank v. Larson , 2019 ND 129, ¶ 7, 927 N.W.2d 407).

III

[¶11] The McDougalls argue the district court erred in dismissing their deceit
claim. They contend the statute of frauds does not apply to preclude their
claim.

[¶12] Under N.D.C.C. § 9

- 10

- 03, “[o] ne who willfully deceives another with intent to induce that person to alter that person’s pos ition to that person’s5

injury or risk is liable for any damage which that person thereby suffers.”
Deceit is defined as :

1. The suggestion as a fact of that which is not true by one who does not believe it to be true; 2. The assertion as a fact of that whi ch is not true by one who has no reasonable ground for believing it to be true; 3. The suppression of a fact by one who is bound to disclose it, or who gives information of other facts which are likely to mislead or want of communication of that fact; or
4 . A promise made without any intention of performing.

N.D.C.C. § 9

- 10

- 02. Deceit requires the misrepresentation of facts, suppression of facts, misleading another, or promising without intending to perform. Schneider v. Schaaf

, 1999 ND 235, ¶16, 603 N.W.2 d 869. Proof of actual
da mage proximately caused by the misrepresentation or nondisclosure is an
essential element of a deceit claim. Id.

[¶13] In grant ing summary judgment in favor of AgCountry and dismissing the McDougalls ’ deceit claim , the district court r elied on Irish Oil & Gas, Inc.
v. Reimer , 2011 ND 22, 794 N.W.2d 715, and conclud ed the statute of frauds precludes the deceit claim . The court explained, “It is clear here that alleged promise is an oral agreement to loan money in excess of $25,000.00 in exchange for the Home Quarter mortgage, which falls under the statute of frauds.” The court said a majority of this Court held in Irish Oil that the “use of a deceit
claim to defeat the statute of frauds cannot stand.” The court concluded:

There is no dispute [the McDougalls’] claim relies on alleged oral promises made by AgCountry to [Kent and Erica McDougall] that fall under the statute of frauds in a contract context. After extensive review of the decision in Irish Oil , and finding no

su bsequent cases which shed more light on this issue, this Court concludes, as a matter of law, [that] which would prevent a breach of contract claim by [Kent and Erica McDougall], should also bar [the McDougalls’] deceit claim, particularly as title to real property is involved.

[¶14] In Irish Oil , 2011 ND 22, ¶¶ 2

- 6, 794 N.W.2d 715, an oil and gas lessee sued the lessors for breach of the leases, the lessee moved to amend its6

complaint to add a deceit claim against one of the lessors related to an alleged
oral agreement, and the district court denied the motion to a mend the

comp laint. This Court issued a divided decision in reviewing the district court’s
den ial of the lessee’s motion to amend its complaint. The Court’s opinion discussed a split in jurisdiction s on the issue of whether the statute of frauds
bars a deceit claim when it pre cludes a breach of contract claim. Id. at ¶¶ 39

- 50. Two justices agreed they would reverse the district court’s decision because
the statute of frauds is a rule of evidence th at gives rise to a defense in a contract action but does not preclude a deceit claim because it is not an action
on the contract. Id. at ¶ 51.

[¶15] In two separate dissenting opinions, t hree justices agreed to affirm the district court’s denial of the motion to amend. Irish Oil , 2011 ND 22, ¶¶ 65

- 75 , 794 N.W.2d 715

. The author of this opinion dissented from the Court’s opinion and stated that he would affirm the judgment , explaining he was “particularly concerned about the use of a deceit claim to defeat th e statute of frauds with regard to written instruments involving the title to real property.”
Id. at ¶ 65 (Justice Sandstrom concurred). Justice Kapsner also dissented, stating the proposed deceit claim was an “ end

- run around the statute of frauds ” and the lessee was a sophisticated dealer in mineral leases, who had a simple solution available by getting a written modification of the leases. Id. at ¶ 72. A majority of the Court affirmed the district court ’s den i al of the lessee’s
motion to amend i ts complaint.

[¶16] This case is different than Irish Oil

. The McDougalls do not allege they had a contract with AgCountry. They are a third party to the alleged promise

. The McDougalls claim AgCountry falsely represented to Kent and Erica McDougall that it would give them a new operating loan if they had more
collateral and AgCountry never had any intention of performing the promise

. The McDougalls claim AgCountry knew Kent and Erica McDougall did not have any other collateral and it made the misrepresenta tions ab out the new operating funds with the inten t to induce the McDougalls to transfer the home

q uarter to Kent and Erica McDougall so the property could become additional
collateral to secure existing debt to AgCountry . The McDougalls claim they
relied on AgCountry’s misrepresentations and were deceived into transferring7

the home q uarter

. Their deceit claim is based on an alleged deliberate misrepresentation of fact. The McDougalls are not seeking to enforce the alleged promise either directly or indi rectly through the deceit claim. They are not requesting the court order AgCountry to lend Kent and Erica McDougall
more funds. The McDougalls are seeking damages for reliance on the alleged misrepresentations , not enforcement of the agreement.

[¶17] “ T he purpose and intent of the statute of frauds is to prevent fraud and perjury, and the statute should not be used as a defense where the effect would be to accomplish a fraud or to enable a party to enrich himself unjustly at the expense of another.” Wil helm v. Berger , 297 N.W.2d 776, 779 (N.D. 1980) ; see also Smestad v. Harris , 2012 ND 166, ¶ 13, 820 N.W.2d 363

. Under N.D.C.C. §§ 9

- 10

- 01, 9

- 10

- 02(4), and 9

- 10

- 03, “a promise made without any intention of performing it which does not meet the requirements of a contract between the parties may nevertheless satisfy the requirements of deceit, and the victim of that deceit may recover for any damage suffered.” Delzer v. United Bank of
Bismarck , 527 N.W.2d 650, 653 (N.D. 1995). Extra

- contractual statements, such as a promise of a future loan or to restructure a current loan, made without any intent of performing may be a basis for a claim of deceit. See State Bank of Kenmare v. Lindberg , 471 N.W.2d 470, 474 (N.D. 1991).

[¶18] This is consistent with other states t hat have recognized the statute of frauds may preclude some fraud or deceit claims. See 61 N.Y. Jur. 2d Frauds, Statute of § 322 (2019) (stating “where an oral contract unenforceable under the Statute of Frauds is made without intention of performance for the purpose of inducing the other party to act or refrain from acting to its damage, an action in fraud may be based thereon as long as the defrauded party does not seek to enforce the alleged oral agreement.”); Channel Master Corp. v. Aluminum Ltd.
Sales , Inc. , 151 N.E.2d 833, 836 (N.Y. 1958) (stating a tort action depends on the deliberate misrepresentation of fact relied on by the plaintiff to their detriment, and the policy of the statute of frauds is not directed at cases of dishonesty in making a pro mise)

. See also Stine v. Sanders , 987 S.W.2d 289, 295 (Ark. Ct. App. 1999); Tenzer v. Superscope, Inc. , 702 P.2d 212, 218

- 19 (Cal. 1985). If the McDougalls are able to present sufficient evidence to meet the elements of a claim of deceit and AgCountry is allowed to assert the statute of8

frauds to preclude that claim, the purpose of the statute of frauds would be
defeat ed.

[¶19] The district court granted summary judgment dismissing the McDougalls’ deceit claim because the court concluded the statute of frauds precluded the claim as a matter of law. We conclude t he statute of frauds does not preclude the McDougalls’ deceit claim and the court erred in its conclusion of law. There are genuine issues of material fact about the elements of the
deceit claim, and the court erred in granting summary judgment

.

IV

[¶20] The McDougalls argue the district court erred by dismissing their unjust
enrichment claim.

[¶21] In McColl Farms, LLC v. Pflaum , 2013 ND 169, ¶ 18, 837 N.W.2d 359, we explained the doctrine of unjust enrichment:

Unjust enrichment is a broad, equitable doctrine which rests upon quasi or constructive contracts implied by law to prevent a person from unjustly enriching himself at the expense of another. To recover under a theory of unjust enrichment, the plaintiff must prove: (1) an enrichment, (2) an impoverishme nt, (3) a connection between the enrichment and the impoverishment, (4) the absence of a justification for the enrichment and impoverishment, and (5) the absence of a remedy provided by law. The theory may be invoked when a person has and retains money or benefits which in justice and equity belong to another. For a complainant to recover, it is sufficient if another has, without justification, obtained a benefit at the direct expense of the complainant, who then has no legal means of retrieving it. The ess ential element in recovering under the theory is the receipt of a benefit by the defendant from the plaintiff which would be inequitable to retain without paying for its value.

(Citations and quotations omitted).

[¶22] The district court granted summary judgme nt dismissal of the McDougalls’ unjust enrichment claim. The court concluded evidence could9

show three of the five elements of unjust enrichment could be met, but the
court stated it could not conclude that there was an absence of justification for
the en richment or that there was an absence of a remedy provided by law. The

court concluded the repayment agreements for Kent and Erica McDougall ’s loans provided justification for the enrichment because the agreements extended the installment payments and mat urity dates on the loans in exchange for the mortgage on the home quarter. The court also concluded there was not an absence of a remedy provided by law because the McDougalls could have a claim in Kent and Erica McDougall ’s bankruptcy case or a claim
for breach of the warranties contained in the deed conveying the home quarter back to the McDougalls.

[¶23] The McDougalls argue the two

- month extension on Kent and Erica McDougall ’s loans was not a justification for the enrichment and impoverishment because the ex tension did not benefit the McDougalls and did not have any value to Kent and Erica McDougall. They argue the repayment agreements stated the property offered as collateral would secure all existing and possible future debt and also promised efforts would be made to refinance
all of the debt. T he McDougalls claim there was evidence the brief extension of the loans did not have any value to Kent and Erica McDougall, including an email from Kent McDougall to AgCountry stating that an extension of the
loans had no value to him without additional funds. The March 10, 2016, email from Kent McDougall to AgCountry stated they needed additional fun ds to care for their cattle; they had done everything they could to continue operating without additional funds, inclu ding maxing out their credit cards ; and “It does no good for me to refinance and pay down the operating debt if nothing will be
readvanced

. ” The McDougalls claim they only transferred the property on the promise of a new operating loan , they would not have transferred the property without that promise , AgCountry had no intention of loaning any additional funds, and therefore there was no justification for the enrichment and impoverishment

.
[¶24] The unjust enrichment claim is an alternative claim, and it is possible
the McDougalls may fail to prove any other potential claims, which would leave them without a remedy provided by law. See McColl Farms , 2013 ND 169, ¶10

20, 837 N.W.2d 359. If the McDougalls are not successful on their deceit claim after a trial on remand, it is possible there would be an absence of a remedy at
law and there may be sufficient evidence to support the unjust enrichment
claim.

[¶25] Vie wing the evidence in the light most favorable to the McDougalls, we
conclude genuine issues of material fact exist on the elements of the unjust
enrichment claim. T he district court erred by granting summary judgment.

V

[¶26] We have considered the remaining arguments and conclude they are either unnecessary to our decision or do not affect the outcome of the appeal. We conclude the district court erred by granting summary judgment dismissal
of the deceit and unjust enrichment claims. We reverse that part of the judgment dismissing the de ceit and unjust enrichment claim s, we affirm the judgment on the remaining claims, and remand for further proceedings
consiste nt with this o pinion

. [¶27] Gerald W. VandeWalle Daniel J. Crothers Lisa Fair McEvers Jerod E. Tufte Jon J. Jensen, C.J.