Court Opinion

ID: 4692518
Source: CourtListenerOpinion
Date Created: 2021-06-03 15:12:49.808809+00
Date Added: 2024-06-11T09:02:06.016422
License: Public Domain

FILED
                                                                       IN THE OFFICE OF THE
                                                                    CLERK OF SUPREME COURT
                                                                            JUNE 3, 2021
                                                                     STATE OF NORTH DAKOTA

                  IN THE SUPREME COURT
                  STATE OF NORTH DAKOTA

                                 2021 ND 99

PLS Services, LLC,                                     Plaintiff and Appellant
      v.
Valueplus Consulting, LLC,                            Defendant and Appellee
      and
Clear Creek Retirement Plan LLC; John Wesley
Johnson P.S. Defined Benefit Plan; 2011-12
Opportunity Fund 6-1, LLC; and all persons
unknown claiming any estate or interest in, or
lien or encumbrance upon, the real estate
described in the Complaint; Robert L. Doremus
and Shannon M. Doremus DBA Sound
Investments Company; Dale John Huysman and
Anita Ruth Huysman; and Rusty Fields,                             Defendants

                                No. 20200270

Appeal from the District Court of Williams County, Northwest Judicial
District, the Honorable Paul W. Jacobson, Judge.

REVERSED AND REMANDED.

Opinion of the Court by McEvers, Justice.

Steven A. Lautt, Minot, ND, for plaintiff and appellant.

Trevor A. Hunter, Williston, ND, for defendant and appellee.
             PLS Services v. Clear Creek Retirement Plan
                             No. 20200270

McEvers, Justice.

[¶1] PLS Services appeals a district court’s amended summary judgment
dismissing its complaint against Valueplus Consulting, LLC, relating to a
mortgage priority dispute. We conclude the district court did not abuse its
discretion in certifying the summary judgment against PLS as final under
N.D.R.Civ.P. 54(b), but we conclude the court erred in granting summary
judgment. We reverse and remand.

                                     I

[¶2] In February 2014, PLS was assigned two mortgages executed on June
29, 2012, and recorded on July 10, 2012, against certain Williams County real
property owned by Clear Creek Retirement Plan LLC. The subject property is
legally described as:

     Lot 22R, Block 9, Madison Ridge Rearrangement #3, in Blocks 7, 9
     & 10 in the E½ Section 30, Township 154 North, Range 101 West
     of the 5th P.M., Williams County, North Dakota

The mortgages and assignments to PLS contained incorrect legal descriptions
and were therefore recorded in an errant tract index. The mortgages described
the property as: “Lot 22R, Block 9, Madison Ridge Rearrangement,” instead of
“Lot 22R, Block 9, Madison Ridge Rearrangement #3.” Lot 22R, Block 9,
Madison Rearrangement does not exist.

[¶3] Clear Creek and Valueplus executed a June 2012 purchase agreement
whereby Valueplus agreed to purchase the subject property from Clear Creek.
As part of the agreement, Clear Creek granted a $225,000 mortgage to
Valueplus on July 12, 2012, containing the same errant legal description as
the mortgages assigned to PLS. Valueplus executed a satisfaction of mortgage
on March 15, 2013. On March 14, 2013, Clear Creek granted another $225,000
mortgage to Valueplus containing the correct legal description of the subject
property. Valueplus did not purchase the property from Clear Creek, and the

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mortgage was satisfied by a November 2013 satisfaction of mortgage executed
by Valueplus.

[¶4] In January 2014, Fidelity Capital Services LLC assigned to Valueplus a
mortgage against the subject property. The mortgage contained the correct
legal description and was recorded in August 2013. In 2017, Valueplus sued
Clear Creek to foreclose the mortgage. PLS moved to intervene, asserting its
mortgages had priority. The district court denied PLS’s motion, and Valueplus
subsequently purchased the subject property in June 2019.

[¶5] In July 2019, PLS sued Clear Creek, Valueplus, and others, alleging it
had a superior interest in the subject property. PLS sought reformation and
foreclosure of its mortgages. Valueplus denied the allegation and moved for
summary judgment, arguing it purchased the property in good faith because it
was unaware of PLS’s mortgages containing an incorrect legal description. PLS
opposed Valueplus’ motion, asserting Valueplus was not a good faith
purchaser. PLS also argued it needed more time for discovery because
Valueplus moved for summary judgment less than one month after answering
the complaint.

[¶6] The district court granted Valueplus’ motion, concluding Valueplus was
a good faith purchaser of the property and did not have actual knowledge or
constructive notice of PLS’s mortgages. The court also concluded PLS’s claims
against Valueplus were frivolous and ordered PLS to pay Valueplus’ costs,
including attorney’s fees. The court entered summary judgment ordering PLS
to immediately release its lis pendens against the subject property and pay
Valueplus $16,623 in costs and fees. On PLS’s motion, the court subsequently
amended the summary judgment, certifying the judgment against PLS as final
under N.D.R.Civ.P. 54(b).

                                     II

[¶7] Before reaching the merits of the appeal, we must first determine
whether the district court appropriately certified entry of a final judgment
under N.D.R.Civ.P. 54(b). Rule 54(b), N.D.R.Civ.P., preserves our long-
standing policy against piecemeal appeals, and provides:

                                     2
      If an action presents more than one claim for relief, whether as a
      claim, counterclaim, crossclaim, or third-party claim, or if multiple
      parties are involved, the court may direct entry of a final judgment
      as to one or more, but fewer than all, claims or parties only if the
      court expressly determines that there is no just reason for delay.
      Otherwise, any order or other decision, however designated, that
      adjudicates fewer than all the claims or the rights and liabilities of
      fewer than all the parties does not end the action as to any of the
      claims or parties and may be revised at any time before the entry
      of a judgment adjudicating all the claims and all the parties’ rights
      and liabilities.

[¶8] We review a district court’s decision to grant N.D.R.Civ.P. 54(b)
certification under an abuse-of-discretion standard. Tharaldson Ethanol Plant
I, LLC v. Vei Glob., Inc., 2014 ND 94, ¶ 15, 845 N.W.2d 900. A court abuses its
discretion when it acts in an arbitrary, unreasonable, or unconscionable
manner, when its decision is not the product of a rational mental process
leading to a reasoned determination, or when it misinterprets or misapplies
the law. Id.

[¶9] The district court must weigh the competing equities and take into
account judicial administrative interests in deciding whether to grant
certification under N.D.R.Civ.P. 54(b). Tharaldson, 2014 ND 94, ¶ 16. “A Rule
54(b) certification should not be routinely granted and is reserved for cases
involving unusual circumstances where failure to allow an immediate appeal
would create a demonstrated prejudice or hardship.” Citizens State Bank-
Midwest v. Symington, 2010 ND 56, ¶ 9, 780 N.W.2d 676. We have outlined a
list of factors a court should consider, including:

      (1) the relationship between the adjudicated and unadjudicated
      claims; (2) the possibility that the need for review might or might
      not be mooted by future developments in the district court; (3) the
      possibility that the reviewing court might be obliged to consider
      the same issue a second time; (4) the presence or absence of a claim
      or counterclaim which could result in setoff against the judgment
      sought to be made final; (5) miscellaneous factors such as delay,
      economic and solvency considerations, shortening the time of trial,
      frivolity of competing claims, expense, and the like.

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Tharaldson, at ¶ 16.

[¶10] “We have recognized that a Rule 54(b) certification may be appropriate
if the certified judgment completely decides an entire claim.” Symington, 2010
ND 56, ¶ 10. “We have also held that a district court does not abuse its
discretion in granting a Rule 54(b) certification if the issues raised in the
appeal will not be mooted by future developments in the district court.” Id.
(citing Public Service Comm’n v. Wimbledon Grain Co., 2003 ND 104, ¶ 12, 663
N.W.2d 186; Hansen v. Scott, 2002 ND 101, ¶ 15, 645 N.W.2d 223; Symington
v. Walle Mut. Ins. Co., 1997 ND 93, ¶ 8, 563 N.W.2d 400).

[¶11] The district court addressed the factors to consider in granting
N.D.R.Civ.P. 54(b) certification, and it found “each of the factors weigh[ed] in
favor of certification.” The court found the only claim between PLS and
Valueplus was the priority of their interests in the subject property. The court
found none of the unadjudicated claims involved the property; rather, PLS’s
claims alleged breach, fraud, negligence, and unjust enrichment claims against
other parties, for which PLS sought money damages. The court found the
results of the unadjudicated claims will have no bearing on the priority dispute
between PLS and Valueplus. The court found the priority dispute will not be
mooted by the decision on PLS’s remaining claims. The court found a decision
on the remaining claims would not offset the priority dispute between PLS and
Valueplus. The court found PLS may suffer a harsh result because the
summary judgment required PLS to release its lis pendens, and Valueplus may
sell the property before PLS’s remaining claims are resolved.

[¶12] Nothing in the record indicates Valueplus intended to sell the property
before the district court resolved PLS’s remaining claims. Nonetheless, the
court’s remaining analysis is sufficient to understand the rationale for its
decision and supports certification. The court completely decided the priority
dispute between PLS and Valueplus, which is the lone claim between the
parties. PLS’s remaining claims do not involve interests in the property, are
not logically related legally and factually, and are not closely intertwined to its
claim against Valueplus. PLS’s priority claim against Valueplus will need to
be decided and will not be mooted by the court’s decisions on PLS’s remaining

                                        4
claims. The resolution of the remaining claims will not result in a setoff against
PLS’s priority claim. Those factors weigh in favor of certification, and we
conclude the court did not abuse its discretion in granting the N.D.R.Civ.P.
54(b) certification to allow immediate appellate review of the priority claim.

                                      III

[¶13] Our standard of review for a district court’s grant of summary judgment
is well established:

      Summary judgment is a procedural device for the prompt
      resolution of 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. A party moving for summary
      judgment has the burden of showing there are no genuine issues
      of material fact and the moving party is entitled to judgment as a
      matter of law. In determining whether summary judgment was
      appropriately granted, we must view the evidence in the light most
      favorable to the party opposing the motion, and that party will be
      given the benefit of all favorable inferences which can reasonably
      be drawn from the record. On appeal, this Court decides whether
      the information available to the district court precluded the
      existence of a genuine issue of material fact and entitled the
      moving party to judgment as a matter of law. Whether the district
      court properly granted summary judgment is a question of law
      which we review de novo on the entire record.

Thompson-Widmer v. Larson, 2021 ND 27, ¶ 10, 955 N.W.2d 76 (quoting THR
Minerals, LLC v. Robinson, 2017 ND 78, ¶ 6, 892 N.W.2d 193).“This Court has
repeatedly held that summary judgment is inappropriate if the [district] court
must draw inferences and make findings on disputed facts to support the
judgment.” Farmers Union Oil Co. of Garrison v. Smetana, 2009 ND 74, ¶ 10,
764 N.W.2d 665. The court may not weigh the evidence, determine credibility,
or attempt to discern the truth of the matter when ruling on a summary
judgment motion. Martin v. Marquee Pac., LLC, 2018 ND 28, ¶ 10, 906 N.W.2d
65.

                                        5
                                       IV

[¶14] PLS argues the district court erred in concluding Valueplus was a good
faith purchaser of the subject property.

[¶15] “A party’s status as a good faith purchaser without notice of a competing
interest is a mixed question of fact and law.” Sundance Oil & Gas, LLC v. Hess
Corp., 2017 ND 269, ¶ 12, 903 N.W.2d 712. We have stated the facts necessary
to decide whether a party has attained the status of a good faith purchaser
without notice constitute findings of fact. Id. Conversely, a district court’s
ultimate determination a party acted in good faith constitutes a conclusion of
law. Id.

[¶16] This Court has defined a good faith purchaser as follows:

             Good faith is “an honest intention to abstain from taking
      any unconscientious advantage of another even through the forms
      or technicalities of law, together with an absence of all information
      or belief of facts which would render the transaction
      unconscientious.” N.D.C.C. § 1-01-21. A good-faith purchaser must
      acquire rights without actual or constructive notice of another’s
      rights. [Farmers Union Oil Co. v.] Smetana, 2009 ND 74, ¶ 16, 764
      N.W.2d 665. Actual notice consists of express information of a fact,
      N.D.C.C. § 1-01-23, and constructive notice is notice imputed by
      law to a person not having actual notice. N.D.C.C. § 1-01-24. A
      person who has “actual notice of circumstances sufficient to put a
      prudent person upon inquiry as to a particular fact and who omits
      to make such inquiry with reasonable diligence is deemed to have
      constructive notice of the fact itself.” N.D.C.C. § 1-01-25; Erway v.
      Deck, 1999 ND 7, ¶ 10, 588 N.W.2d 862. Whether a party acted in
      good faith is a question of fact. Smetana, at ¶ 15. “The record of
      any instrument shall be notice of the contents of the instrument,
      as it appears of record, as to all persons.” N.D.C.C. § 47-19-19. This
      Court long ago recognized that the language in N.D.C.C. § 47-19-
      19 provides constructive notice of the contents of a recorded
      instrument to all purchasers and encumbrancers subsequent to
      the recording. First Nat’l Bank v. Big Bend Land Co., 38 N.D. 33,
      37, 164 N.W. 322 (1917). See Wheeler v. Southport Seven Planned
      Unit Dev., 2012 ND 201, ¶ 17, 821 N.W.2d 746; Bangen v.
      Bartelson, 553 N.W.2d 754, 758 (N.D. 1996).

                                        6
Sundance Oil & Gas, 2017 ND 269, ¶ 13 (quoting Desert Partners IV, L.P. v.
Benson, 2016 ND 37, ¶ 13, 875 N.W.2d 510).

[¶17] PLS claims that because Valueplus had a similar mortgage containing
the same errant legal description, Valueplus had or should have had notice of
PLS’s mortgages, and should have inquired further into PLS’s competing
interest.

[¶18] The district court concluded Valueplus acquired its interest in the
subject property in good faith because it had no actual knowledge or
constructive notice of PLS’s mortgages. The court concluded Valueplus did not
have constructive notice of PLS’s mortgages under this Court’s decision in
Hanson v. Zoller, 187 N.W.2d 47 (N.D. 1971). The court also found Valueplus
did not have actual knowledge on the basis of the affidavit of Rakesh Gupta,
Valueplus’ manager.

[¶19] In Hanson, 187 N.W.2d at 56, this Court “conclude[d] that a prospective
purchaser cannot be deemed to have constructive notice of instruments that
are not indexed in the tract index under the specific tract of real estate to which
they pertain.” “[T]here must be substantial compliance with those sections of
the recording laws that pertain to the matter of notice in order to give
constructive notice.” Id. “Failure to index an instrument in the tract index does
not constitute such compliance.” Id.

[¶20] Although Valueplus had a similar mortgage that included the same
errant legal description, under Hanson, Valueplus did not have a duty to
inquire further into PLS’s mortgages to determine the correct legal description
of the mortgaged property. The district court correctly concluded Valueplus did
not have constructive notice that PLS’s mortgages were intended to encumber
the subject property.

[¶21] The district court also found Valueplus did not have actual knowledge of
the mortgages assigned to PLS. In making this conclusion, the court appeared
to rely heavily on Rakesh Gupta’s affidavit. Gupta stated he had no knowledge
of the errant legal description on the July 2012 mortgage with Clear Creek.
Gupta stated Clear Creek, not Valueplus, handled the recording of the errant

                                        7
mortgage and subsequent satisfaction of the mortgage. Gupta stated he did not
learn of PLS’s mortgages until PLS attempted to intervene in Valueplus’ 2017
foreclosure action.

[¶22] Valueplus moved for summary judgment less than one month after
answering the complaint. PLS opposed Valueplus’ summary judgment motion
and requested a continuance under N.D.R.Civ.P. 56(f) for additional discovery
on whether Valueplus had knowledge of the mortgages assigned to PLS. A
party’s request for additional time for discovery under N.D.R.Civ.P. 56(f) is
within the district court’s sound discretion. Choice Fin. Grp. v. Schellpfeffer,
2006 ND 87, ¶ 9, 712 N.W.2d 855.

[¶23] Instead of addressing PLS’s request for additional discovery in its order
granting summary judgment, the district court concluded Gupta’s affidavit
was “uncontradicted” and Valueplus had no actual knowledge of PLS’s
mortgages. However, PLS did not have the opportunity to cross-examine the
statements made in Gupta’s affidavit or depose him. See Aho v. Maragos, 1998
ND 107, ¶ 4, 579 N.W.2d 165 (Stating “summary judgment under Rule 56 is
only appropriate if the nonmoving party has had a full opportunity to conduct
discovery to develop information essential to its position.”); Choice Fin. Grp.,
2006 ND 87, ¶ 15 (Stating that when the facts are in the moving party’s
possession a continuance of a motion for summary judgment for additional
discovery should be granted almost as a matter of course.). We conclude the
court abused its discretion by not addressing PLS’s Rule 56(f) request for
additional discovery in its order granting summary judgment. We reverse and
remand for further proceedings.

                                      V

[¶24] Because we are reversing the district court’s summary judgment in favor
of Valueplus, we reverse the court’s award of attorney’s fees to Valueplus.

                                       8
                                  VI

[¶25] The amended summary judgment is reversed and remanded for further
proceedings.

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

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