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Alerus Financial, N.A. v. Erwin

Supreme Court of North Dakota

May 8, 2018

Alerus Financial, N.A., Plaintiff and Appellee
v.
Charles D. Erwin, Defendant and Appellant

          Appeal from the District Court of Grand Forks County, Northeast Central Judicial District, the Honorable Donald Hager, Judge.

          Heather L. Marx (argued) and Thomas G. Wallrich (on brief), Minneapolis, MN; and Peter W. Zuger (appeared), Fargo, ND, for plaintiff and appellee.

          Angelyne E. Lisinski (argued), Columbus, OH; Richard A. Schwartz (appeared), Houston, TX; Jon R. Brakke (appeared) and James M. Cailao (on brief), Fargo, ND, for defendant and appellant.

          OPINION

          Crothers, Justice.

         [¶ 1] Charles Erwin appeals from an amended judgment entered in favor of Alerus Financial, N.A., for $5, 265, 653.09. Erwin argues the district court abused its discretion by failing to rule on his motion to amend his answer and entering judgment without allowing him to conduct discovery on Alerus' damage claims. We affirm the amended judgment.

         I

         [¶ 2] Starting in 2012 Alerus made a series of loans totaling more than $15 million to Diverse Energy Systems, LLC. The loan agreement specified "Events of Default, " including the failure to pay the indebtedness, the insolvency of the borrower or guarantor or the commencement of bankruptcy proceedings. Erwin was Diverse's chief executive officer, and he signed multiple personal guaranties, promising to be personally responsible for payment of up to $4 million of Diverse's debt owed to Alerus. In September 2015 Diverse filed for bankruptcy.

         [¶ 3] In May 2016 Alerus sued Erwin for breach of contract and unjust enrichment, alleging Diverse was in default under the loan agreement and Erwin failed to make payment on the amount due under the guaranties. Alerus alleged Diverse's indebtedness exceeded $12 million and under the guaranties Erwin was liable for at least $4 million in principal and interest. On September 6, 2016, Erwin filed an answer to Alerus' complaint.

         [¶ 4] On February 28, 2017, Alerus moved for summary judgment, arguing Diverse defaulted on its loan obligations and Erwin breached the guaranty contracts by failing to pay the amounts due under the guaranties. Alerus also filed an affidavit in support of its motion from an Alerus employee, which it claimed showed the total outstanding principal and interest on the loans to Diverse.

         [¶ 5] On April 3, 2017, Erwin opposed Alerus' motion for summary judgment, arguing disputed factual issues existed about Alerus' damages and about Erwin's share of Diverse's liability to Alerus under the guaranties. Erwin also argued the guaranties were unenforceable because Erwin was fraudulently induced to execute the guaranties. He claimed that Alerus' employee, Mike Compton, told Diverse's chief financial officer, Todd Hass, that Alerus never pursued enforcement of guaranties and that Erwin relied on Compton's statements in executing the guaranties. Erwin filed an affidavit in support of his brief and argued his affidavit established a factual basis for claims of fraud, deceit, intentional misrepresentation, constructive fraud, and breach of fiduciary duty. Erwin indicated he would seek leave to amend his answer to include the fraud related counterclaims.

         [¶ 6] On May 22, 2017 the district court conducted a summary judgment hearing. On May 26, 2017, Erwin moved to amend his answer to include counterclaims for breach of contract, actual fraud and intentional misrepresentation, and negligent misrepresentation. On June 1, 2017 the court granted Alerus' motion. The court ruled no genuine issues of material fact existed, Erwin breached the guaranty contracts by failing to pay Alerus upon Diverse's default, Alerus' total damages for Diverse's default was $12, 899, 248.89, and Erwin's share of Diverse's indebtedness was $4 million plus interest. The court concluded Erwin failed to adequately plead the alleged fraud as an affirmative defense. Judgment was entered in favor of Alerus for $5, 265, 653.09, including interest, fees and costs. The judgment was later amended.

         II

         [¶ 7] Erwin argues the district court abused its discretion by failing to rule on his motion to amend his answer before granting summary judgment. He claims that he timely moved to amend his answer to include a counterclaim for fraud, that his fraud claim could present a full defense to Alerus' claims, and that the court ignored his motion to amend his answer and faulted him in its order granting summary judgment for failing to plead fraud. He also argues the court preemptively rejected his fraud claim and improperly excluded his evidence.

         A

         [¶ 8] Alerus contends Erwin's arguments about his motion to amend are not properly before this Court on appeal and should not be decided because Erwin failed ...


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