author: BURKE, Judge.

text:
    GINTER et ux. v. GINTER et ux.
    No. 7371.
    Supreme Court of North Dakota.
    March 19, 1954.

      Day, Stokes, Vaaler & Gillig, Grand Forks, and Robert L. Burke, Grafton, for appellants.
    Shaft, Benson & Shaft, Grand Forks, for respondents.
   BURKE, Judge.

In this, action plaintiffs sought a judgment declaring that a deed, absolute upon its face, executed and delivered by them to the defendants, was in fact a mortgage.

The issues in the case were tried in the District Court of Walsh County and a judgment in favor of the defendants, for the dismissal of the action was entered. Plaintiffs have appealed from the judgment and have demanded a trial anew in this court.

In the late fall of 1938, the plaintiff, Ignace Ginter, was in serious financial difficulties. He owned 220 acres of land in Walsh County, of which 130 acres were tillable. This land was incumbered by two mortgages, one to the Federal Land Bank in the sum of $2,700 and one to the Land Bank Commissioner in the sum of $2,300. At that time payments in default on both mortgages totaled $715.18 and the unpaid delinquent taxes on the land amounted to $137.

On December 1st, Ignace appealed to .his brother, Hubert, for help by a -loan of money sufficient to enable him to cure the defaults. This loan, Hubert refused. The substance of the subsequent conversation between the brothers is in dispute but an agreement of some sort was reached and the following day, the plaintiffs, Ignace Ginter and his wife, and the defendants, Hubert Ginter and his wife, drove to Grafton. There, the plaintiffs executed and delivered do the defendants a warranty deed, which granted* fee title to Ignace Ginter’s land to the defendants as joint tenants. The* deed recites that the consideration was the sum of $1 and other valuable consideration and sets forth as existing encumbrances the two mortgages mentioned above. On the same day Hubert Ginter paid the delinquent taxes on the land and filed the deed for record. The next day, December 3rd, he paid the sum of $498.78 upon the mortgages. Each year thereafter he made regular payments upon the mortgages. On November 22, 1943, he made full settlement of the Land Bank Commissioner’s mortgage 'by a lump-sum payment of $997.98 and on October 22, 1944, he made final payment on the Federal Land Bank Mortgage by a lump-sum payment of $2,396.69. In 'all he made payments in excess of $6,000 for principal and interest upon the two mortgages.

The plaintiffs after executing the deed to the defendants remained upon the land as tenants of the defendants. The lease was an oral one and was the usual fifty per cent crop share contract, where the landlord furnished the seed, paid one half of the threshing expenses and received half of the crop as rent. This arrangement continued year after year from December, 1938, until October 1951, when defendants served a Notice of Termination of Tenancy upon plaintiffs. During the thirteen years plaintiffs occupied the land as tenants of defendants, Hubert Ginter, in addition to paying the interest and principal on the outstanding mortgages, paid all the taxes and insurance premiums on the property. He also arranged for clearing 27 acres of brush land, for some repairs on the buildings and the installation of R. E. A. electricity. Ignace Ginter and his sons assisted in the clearing and repair operations but all of the cash outlay in connection with these improvements was made by Hubert Ginter.- During all of this time Hubert1 also exercised complete control over the farming operations. He decided what crops should be planted, where they should be planted, ■ when seeding should begin and when harvesting should begin. ■' • • ■

As related so far the facts are. undisputed. There is however a direct- conflict .in the testimony of the parties concerning the conversations which took place immediately prior to the execution of the deed. Hubert Ginter testified that after, he had refused to make a loan to Ignace, Ignace said, “If you don’t want to borrow me no money, will you buy it?” and that he replied, “Yes”. He stated, “I just bought it, took it over for the mortgage”. He also testified that nothing was said concerning any right to repurchase or to rent the land. Ignace testified that Hubert agreed to pay the taxes and mortgage as consideration for the deed. There is thus no material dispute between the parties concerning this conversation. Both parties say that at that time nothing was said about a right of repurchase. Ignace said that it was the next day when Hubert and his wife came to his house and that Hubert promised to deed the land back to him if he paid to Hubert what he had invested in the land. He also said, that there was no mention of the date upon which payment was to be made, that interest was not mentioned, and that he was under no obligation to pay Hubert anything unless he wanted the land - back.

Mrs. Ignace Ginter testified “My understanding was we will get it back whenever we give him the money what he had paid in it,” and that Hubert told her husband, “ * * * You will always have a home, you are an old man.” She also stated that there was no talk about Ignace owing Hubert any money and that it was entirely up to her husband to decide whether they wanted the land back or not. If they wanted the land back they had to pay Hubert what he had invested in it, if they didn’t want it back' they owed him nothing.

Julian Ginter, son of the plaintiffs, testified, “As much as I can remember he (Hubert) says that he will take the place over whenever we; have money and we are able to' repay,, to pay back, that he can have the place back. .Says if he could not pay well he could live there as long, stay there as long as he lived.”

Several, other witnesses, neighbors and relatives of the plaintiffs, testified that Hubert had told them he would let Ignace have the place, back if he ,repaid him what he had in it.

In considering whether a deed was executed for purposes of a sale or for purposes' of security, and therefore a mortgage, the essential thing is to determine the intention of the parties at the time of the transaction. Mechtle v. Topp, 78 N.D. 789, 52 N.W.2d 842; Altenbrun v. First National Bank of Rock Lake, 47 N.D. 266, 181 N.W. 590, 908. The question then is: Did the. parties intend that the deed should be security for pre-existing indebtedness or where, as in this case, there was no pre-existing indebtedness, did they intend to create a debt contemporaneously with the execution of the deed and intend that the deed should be security for that debt? There can be no mortgage without a debt. Miller v. Smith, 20 N.D. 96, 126 N.W. 499; Dean v. Smith, 53 N.D. 123, 204 N.W. 987; State v. Crum, 70 N.D. 177, 292 N. W. 392; Mechtle v. Topp, 78 N.D. 789, 52 N.W.2d 842.

To -reach a conclusion as.to the intent of the parties we must look first to what the parties themselves say the nature of the transaction was. ■

Defendant, Hubert Ginter, states that when he refused to make a requested loan to Ignace, Ignace asked, “Will you buy the place”, and he answered, “Yes.” He said, “I just bought it, took it over for the mortgage.” Clara Ginter, wife of Hubert, testified that she understood the transaction to be as Hubert stated and so explained it to Stella Ginter, wife of Ignace. She said “I told her we were buying it for the mortgage,” and that Stella Ginter replied, “We are loosing it anyway.” Thus the testimony of the defendants was that the transaction constituted an outright sale without any conditions whatsoever. Plaintiff, Ignace Ginter, testified that he understood the difference between a deed and a mortgage; that he had agreed to give Hubert a deed to the land during the conversation at Hubert’s home, and. that at that time Hubert made no promises to him except to pay the indebtedness against the land. He stated, that it was the next day when defendants came to plaintiffs’ home that' Hubert said, “Anytime you can raise the money and pay me back I will give you the farm back.” •, Stella Ginter corroborated her husband in this respect, and they both said that there was no talk of a debt or interest or time within which any payment was to be made and that they considered themselves under no obligation to pay Hubert anything unless they decided they wanted the farm back. They also’ said that Hubert told them that Ignace could live on the land as long as he lived.

As we view it, the testimony of the plaintiffs indicates that they intended that the deed given to defendants should pass, title to the land and that no debt should be created by the transaction. The subsequent actions of the parties confirm, this view. Immediately after the deed was executed and recorded Ignace put his brother in possession of the land by attornment to him as a tenant or share cropper. Thereafter Hubert directed the operation of the farm even in the smallest detail. He took half of the crop and paid all of the taxes. He arranged for the clearing of brush and timber land and other improvements and made all the cash outlay in connection therewith. For thirteen years Ignace recognized Hubert as the owner of the land. He said that he asked Hubert to deed the land back to him in the fall of 1943, upon payment to Hubert of what he paid out, that Hubert refused and he did not protest against the refusal. Hubert denied that this offer ever was made. If we accept as true the testimony that such an offer and refusal were made, the situation is that Hubert after demonstrating to Ignace what his interpretation of the transaction was and after Ignace’s apparent agreement to that construction, paid out -approximately $3,-500 in settlement of the mortgages against the land.-

Construing the testimony in the light most favorable to the plaintiffs we are agreed that it shows no more or less than a conveyance with a right on the part of the plaintiffs to repurchase. Such a transaction does not necessarily give rise to a mortgage. Devore v. Woodruff, 1 N.D. 143, 45 N.W. 701; Miller v. Smith, 20 N.D. 95, 126 N.W. 499; McGuin v. Lee, 10 N.D. 160, 86 N.W. 714.

There is testimony in the record that Ignace Ginter had received an offer of $12,-000 for his farm shortly before he gave the deed to the land to his brother Hubert. Ignace said that the offer was made by John Osowski and John Osowski testified that he had made the offer and that at the time he made the- offer he considered that the land was worth that much to him. Plaintiffs urge strenuously that this testimony establishes that the amount given by Hubert for the deed was grossly disproportionate to the actual value of the land and this fact is evidence that the deed was a mortgage.. Other than the' testimony concerning the offer of Osowski, the only evidence bearing upon value is that of the defendants who both testified that at the time the deed was executed the land was worth between five and six thousand dollars.

In considering the question of value the triál court took judicial notice of the adverse conditions affecting agriculture in the years immediately prior to 1938. He took judicial notice of the statutes, rules and regulations governing Federal Land Bank and Land Commissioner loans. He stated “Under this dire situation (which existed with respect to agriculture) the Federal Government added the Land Bank Commissioner set-up as an adjunct to the Federal Land Bank to care for loans in éx-cess of 50% of the value of the land * * ’ The Féderal Land Bank and the Land Bank Commissioner mortgages upon the land were executed by plaintiff in July 1934. The Federal Land Bank mortgage secured the sum of- $2,700. The Land Bank Commissioner mortgage secured the sum of $2,300 or a total of $5,000. Thus it appears that the unavoidable inference is that the Federal Land Bank appraisers when they appraised the land appraised it as $5,400.

The trial court also took judicial notice of the federal statute which required revenue stamps to be affixed to deeds in an amount equal to 50 cents for each $500 of property value. Here, but one 50 cent stamp was attached to the deed. From this fact the trial court concluded that at the time the deed was executed, the parties appraised the land at a value which was not more than $500 in excess of the amount of the mortgages.

Courts may take judicial notice of United States Statutes and administrative rules and regulations made pursuant thereto. Regional Agricultural Credit Corporation of Minneapolis v. Stewart, 69 N.D. 694, 289 N.W. 801. While courts may not take judicial notice of the value of a tract of land, they may use what judicial knowledge they have in evaluating the conflicting ■ testimony as to value which is in the record. Nelson v. City of Sioux City, 208 Iowa 709, 226 N.W. 41; Moore v. Michaelson, 152 Wis. 352, 140 N.W. 28; Detroit Citizens St. Ry. Co. v. Common Council of City of Detroit, 125 Mich. 673, 85 N.W. 96, 86 N.W. 809, 84 Am.St.Rep. 589.

Upon a consideration of the record and the matters of which he took judicial notice, the trial judge said: “Under all the circumstances present I am unable to give any weight to the testimony of John Osow-ski in determining the reasonable value of the land.” He thereupon found the value of the land as of the date of the transaction to have been not in excess of $5,400. This valuation is in accord with the defendants’ testimony as to value. The trial court’s finding is entitled ■ to appreciable weight. State ex rel. Halvorson v. Simpson, 78 N.D. 440, 49 N.W.2d 790; Larson v. Cole, 76 N.D. 32, 33 N.W.2d 325. And we are satisfied that upon the éntire record it should he sustained and adopted as the finding of this court.

Upon the question of whether the transaction under consideration created a debt plaintiffs rely greatly upon the decision of this court in the case of Mechtle v. Topp, 78 N.D. 789, 52 N.W.2d 842, 850, wherein we said:

“In this case when Topp advanced the money to the sheriff to redeem Mechtle’s land from foreclosure, there instantly arose an implied obligation on the part of Mechtle to repay the mon'ey so advanced.”

Plaintiffs argue that upon the same reasoning it should be said that when Hubert Ginter satisfied the mortgages upon the land described in the deed given to him by Ignace, an implied obligation on the part of Ignace to repay the money so disbursed arose. The argument might be valid if the quesion of whether a debt'was created depended upon circumstances alone or upon conflicting testimony. Here, however, as has been pointed out, all parties in their testimony disavow the creation of any debt. We cannot say that circumstances imply that which the parties deny.

It appears therefore that plaintiffs conveyed the land in question to the defendants by warranty deed; that the consideration paid by defendants was the reasonable value of the land; that there was a. promise on the part of defendants to re-convey the land to plaintiffs, when and if the plaintiffs ever decided they wanted the land back and paid to defendants what they had invested in the land but that the parties intended that no debt should be-created for which the deed would stand as security.

Upon consideration of the whole record" we have concluded that plaintiffs have-failed to establish that this deed was executed and delivered as a mortgage. The judgment of the trial court is therefore affirmed.

MORRIS, C. J., and SATHRE and GRIMSON, JJ., concur.


source: Caselaw Access Project

author: GRIMSON, Judge.

license: Public Domain

text:
    HUWE v. SINGER et al.
    No. 7411.
    Supreme Court of North Dakota.
    March 19, 1954.
    Dean Winkjer, Williston, Roy L. Sanford, Minneapolis, Minn., for appellants.

      E J. Mcllraith, Minot, for respondents.
   GRIMSON, Judge.

This matter comes before the cotirt upon an appeal from an order denying an application to vacate a default judgment, and for leave to answer. It appears that an action to quiet title to the Southeast Quarter (SE1^) of Section Twenty-five (25) and the Northeast Quarter (NE^ and the Southwest Quarter (SWj4) of Sec.’Twenty-six (26), and the Southeast Quarter (SEt4) of the Northwest Quarter (NW-¼) of Sec. Thirty-four (34), Township One Hundred Sixty-three (163), Range Ninety-five (95), Divide County, North Dakota, was commenced on the 23rd day of May 1951. Service was made by publication upon all the unknown defendants as well as some of the named defendants. No answer or appearance was made by any of the defendants. Judgment was entered by default on the 10th day of December 1951, quieting title in the plaintiff. On the 28th day of November 1952 an affidavit of merits and a verified answer alleging plaintiff’s title was based on defective tax proceedings were presented to the court on behalf of Dougald F. Kennedy and Leah Berglund, claiming to be owners of a part interest in the Northeast Quarter (NEj4) 'of Section Twenty-six ,(26), Township One Hundred Sixty-three (163), Range-Ninety-five (95), and to come under the classification of unknown defendants. Upon that: affidavit and answer an order was issued by the cour-t on that day directing the plaintiff to show cause on the 8th day of December 1952, at 2 o’clock P.M., “why the judgment in the above entitled action should not be vacated and the defendants authorized to enter an answer.” In response thereto a return to ,the order to show cause was made by the attorney for the plaintiff, who was also á party in interest, claiming matters in avoidance of the defective tax proceedings so that the suggested answer would have no effect on the ultimate determination of the action. A hearing was had and briefs filed on behalf of both sides.'' The district court thereupon denied the application, and from that denial this appeal is taken.

These proceedings are brought under Section 32-1713, NDRC 1943, which reads as -follows:

“A defendant in an action to determine adverse claims, proceeded against by name or as an unknown party, or his representative, on application and sufficient cause shown at any time before trial, must be allowed to defend on such terms as may be just, and any such defendant or his representatives upon good cause shown, and on such terms as may be just, may be allowed to defend after trial and ■ within one year after the rendition of judgment therein, but not otherwise.”

This' court has on numerous occasions passed on the requirements of an application for opening a default judgment. While many of those cases have been under the general statute, - Section 28-2901, ND RC 1943, the procedure is the same and the principles regarding the diligence in seeking the opening of a judgment and the necessity of a sufficient cause are the same. The burden is oh the applicant to show diligence in seeking relief and to show'good'cause for opening the judgment. Wheeler v. Castor, 11 N.D. 347, 92 N.W. 381, 61 L.R.A. 746; Hart v. Hone, 57 N.D. 590, 223 N.W. 346.

"‘[3] Iff order to do that this court has from early' statehood held that an affidavit of merits, together with a verified answer must be presented by the applicant. In Sargent v. Kindred, 5 N.D. 8, 63 N.W. 151, this court held: “On motion by defendant to be relieved from a judgment- entered against him because of his default, 'he must present an-affidavit of'merits as well as a verified- hnswér, or his motion must be denied.” Gauthier v. Rusicka, 3 N.D. 1, 53 N.W. 80; Sargent v. Kindred, 5 N.D. 8, 19, 63 N.W. 151; Kirschner v. Kirschner, 7 N.D. 291, 75 N.W. 252; Minnesota Thresher Mfg. Co. v. Holz; 10 N.D. 16, 84 N.W. 581; Wheeler v. Castor, 11 N.D. 347, 92 N.W. 381, 61 L.R.A. 746; .Racine-Sattley Mfg. Co. v. Pavlicek, 21 N.D. 222, 130 N.W. 228; Warren v. Resaake, 54 N.D. 65, 208 N.W. 564.

In this affidavit facts must be stated positively. Allegations merely on information and belief are not sufficient. 31 Am. Jur., Judgments, Sec. 783, p. 313; Anno. L.R.A.1916F, p. 848; Columbus Mutual Life Ass’n v. Plummer, 86 Ill.App. 446; Jenkins v. Gamewell Fire Alarm Co., 3 Cal. Unrep. 655, 31 P. 570; Superior Consol. Land Co. v. Dunphy, 93 Wis. 188, 67 N.W. 428. The affidavit should be made by the defendant or one having personal knowledge of the facts. People’s Ice’ Co. v. Schlenker, 50 Minn. 1, 52 N.W. 219. If not made by applicant a good and sufficient reason must be set forth to show why the party himself does not make it. Davis v. Solomon, 25 Misc. 695, 56 N.Y.S. 80, 28 Civ.Proc.R. 420; Bailey v. Taaffe, 29 Cal. 422; Kirschner v. Kirschner, 7 N.D. 291, 75 N.W. 252.

In the case at bar the affidavit of merits is made by an attorney for the applicants. No reason is assigned why the applicants themselves do not make the affidavit. The attempted showing of diligence in making this application after discovering the judgment is based on the information from one of the parties. It does say that the affiant has examined an abstract of title to the NEi/i of Sec. 26, Tp. 163, R. 95, Divide County, and found one John Michael to be the record owner thereof. Then the affiant states the interest of these applicants in that property entirely on information and belief. 'Clearly the affiant.had no personal knowledge thereof.

The affiant does say that he “examined the files of the Auditor ' of ■ said ■ Divide County with reference to the tax deed proceedings upon which plaintiff’s cause of action is founded, and that affiant, .believes the proceedings are fatally defective for the reasons set forth in the answer of Dougald F. Kennedy and Leah R. Berglund, attached hereto and made a part of this affidavit, and that affiant has advised the said Dougald F. Kennedy that in his opinion they have a valid and meritorious defense to the complaint herein.”

In the proposed answer which is made a part of the affidavit the defense of the applicant is based upon irregularities in the tax deed proceedings upon which a tax deed was issued Mar. 2, 1940. Through that deed plaintiff claims title.

A somewhat similar affidavit is discussed in Bailey v. Taaffe, supra, as follows:

“The affidavit is also manifestly insufficient on the question of merits. The affidavit is not made, as it should have been, by the defendant, but by his counsel, who does not state that he knows .what the defence is, and that, in his opinion, it is a substantial one, but, on the contrary, contents himself with saying that from the examination of the defendant’s title, so far as he has made such examination, he verily believes that it is better than the plaintiff’s. Whether he knows anything about the plaintiff’s title is not stated. Whether the examination made of the defendant’s title was very elaborate or very meagre is likewise not stated. Nor is it stated’that the defendant has ‘fully and fairly’ stated his whole case to him, and, in view of such statement, what his professional opinion is touching the defence.”

This applies very well to the affidavit in the case at bar. There is no statement as to the thoroughness of the examination. There is no statement as to whether or not facts exist from which the alleged defense may be made nugatory. There is no statement that the applicant has “fully and fairly” stated his whole case to the affiant. The opinion of affiant as to the merits of the defense is based solely on his examination-of the tax sale proceeding. In Hart v. Hone, 57 N.D. 590, 223 N.W. 346, 348, Judge Christianson in passing on an application to open up a default judgment under Section 8156, C.L.1913, now Section 32-1713, N.D.R.C. 1943, supra, says:

“It imposes, in all cases, upon a party seeking to be relieved from a default judgment, the burden of showing good cause why such relief should be granted; and such good cause unquestionably includes at least a prima facie showing that the defendant has a good meritorious defense. In other words, ■one who seeks to be relieved from a default judgment in an action to quiet ■title has the burden of presenting a ■ prima facie showing, ‘that, if he had presented his defense, it would have prevailed, so that the judgment, as it ■stands, works injustice’ (1 Black on Judgments (2d Ed.) § 374), and that, if the judgment is vacated and the ■defendant allowed to defend, the trial may and probably will result in a judgment in his favor. * * ⅜ Minnesota. Thresher Mfg. Co. v. Holz, 10 N.D. 16, 84 N.W. 581; Johannes v. Coghlan, 23 N.D. 588, 137 N.W. 822. * * * One of the fundamental requirements is that he made a showing that he has a meritorious defense.”

In Sargent v. Kindred, 5 N.D. 8, 63 N.W. 151, 154, Judge Corliss says:

“When a suitor is forced to ask a favor of the court, he must make out a strong case of injustice. It is not sufficient to show that his default was taken. It is not even enough for him to be able to swear to an answer setting forth a defense. The averments of the answer may all be true, and yet there may exist facts, to the knowledge of the defendant, which entirely destroy the force of the defense. He may know of matters in avoidance of such defense. . In such a case he should not be re- . lieved from the judgment, for the judgment is just. When he prays for such relief he should satisfy, the court by his oath that such condition does not exist, — that he not only has a defense, but that he knows of no matter which will render that defense nugatory.”

In 1 Freeman on Judgments, 5th Ed., Sec: 286, p. 564, it is said:

“A verified answer has been held not to obviate the necessity for an affidavit of merits. The reasoning upon which this view is based is, that while an answer might be true, and the matters set forth in it might, upon their face, seem to form a sufficient defense to the complaint, yet they might be affected by other matters in avoidance well known to the defendant, but which he was under no obligation to state in his answer; that in order to authorize the interposition of the court, something more ought to be required than an exhibition of facts which, if neither explained nor avoided, would present an obstacle to plaintiff’s recovery; that to bring a case completely within the statute, it must appear prima facie that the defendant, in addition to having an answer to the complaint, has a defense which is sufficient and meritorious when viewed in all the light which can be thrown upon it by all the facts involved in the action.” See also Fowzer v. Huey & Phillips Hardware Co., Tex.Civ.App., 99 S.W.2d 1100; Cragin v. Henderson County Oil Development Co., Tex. [Com.App.] 280 S.W. 554, 555; Frizell v. Northern Trust Co. of Chicago, 144 Kan. 481, 61 P.2d [1344] 1346.

Clearly the affidavit of merits in the case at bar is insufficient. It fails to bring before the court, positively, the necessary requirements for the opening of a default judgment.

The order of the district court is affirmed.

MORRIS, C. J., and BURKE and SATHRE, JJ., concur.


text:
    LUMSDEN v. MICHAEL et al.
    No. 7419.
    Supreme Court of North Dakota.
    March 19, 1954.
    Dean Winkjer, Williston, for appellants.
    Geo. P. Homnes, Crosby (E. J. Mcllraith, Minot, on brief), for respondent.
   GRIMSON, Judge.

This is a companion case to Huwe v. Singer, N.D., 63 N.W.2d 399, just decided and involves identical procedure. A default judgment was taken in an action to quiet title to the Northwest Quarter (NWj4) of Section Twenty-five (25); West Half (W½) of the Northwest Quarter (NWj4) 1 Northeast Quarter (NEj4) of the Northwest Quarter (NWJ4) and the Northwest Quarter (NWj4) of the Northeast Quarter (NEj4) of Section Thirty-four (34), and the North Half (N%) of the Southeast Quarter (SE%) of Section Twenty-seven (27) Township ¡One Plundred Sixty-three (163), Range Ninety-five (95). Service by publication was made on all unknown defendants. No answer or appearance was made by any of the defendants. Judgment was entered by default on the 11th day of December 1951. On the 28th day of November 1952 an affidavit of merits and a proposed answer on. behalf of Dougald F. Kennedy and Leah Ruth Berglund who claim to come under the designation of unknown defendants as the owners of a part interest in the Northwest Quarter (NWj4) of Section Twenty-five (25), Township One Hundred Sixty-three (163), Range Ninety-five (95) in Divide County, North Dakota, was filed with the court. An order to show cause why the judgment should not be vacated and the defendants authorized to answer, was issued by the court returnable Dec. 8, 1952. A return to said order to show cause was made on behalf of the plaintiff. Upon the hearing thereon the court denied the application. From that denial this appeal is made.

The law governing applications for the vacation of default judgments in cases like the one at bar is fully stated in the case of Huwe v. Singer, supra, and reference thereto is made.

The affidavit of merits in the instant case is made by an attorney for the applicants and, with the exception of the description of the land, is identical with the affidavit made in the case of Huwe v. Singer, supra.

The diligence of the applicants in making the application after they discovered the entry of the judgment and their interest in the land here involved is set forth on information and belief. It is apparent that the attorney had no personal knowledge of the facts in the case. In these respects neither applicant makes any positive affidavit nor is there any reason given why the attorney instead of the applicants makes the affidavit of merits.

On the merits the affidavit states that the attorney has examined the files of the auditor of Divide County with reference to the tax proceedings on which plaintiff’s title is based and from said examination he states that he believes such tax proceedings are defective and that he has advised the applicants “that in his opinion they have a valid and meritorious defense to the complaint herein.” There is no statement in the affidavit that the applicants have informed the attorney fully of the facts concerning their case and clearly the advice to the applicants is not based upon a full statement of the facts concerning the tax title. The pro-' posed answer which is made a part of the affidavit sets forth alleged irregularities in the notice of the expiration of redemption and the service thereof as well as in the sale of the property. The answer further shows that a tax deed was issued Oct. 2, 1940, and the property subsequently conyeyed to plaintiff’s grantor.

Plaintiff filed a return to the order to show cause resisting the motion and setting forth some facts by affidavit which if proven would make the proposed defense nugatory. In Warren v. Resaake, 54 N.D. 65, 208 N.W. 564, 565, it is said that in a case like this “it is not enough that there be an answer setting forth a defense. It must appear that in light of all the facts in the case he has a meritorious defense. In other words, it must appear, not only that there are certain' facts which, standing by themselves, constitute a defense, but it must further appear that the defendant knows of no matter which will render the proposed defense nugatory.” See also State Bank of Menagha v. O’Laughlin, 37 N.D. 532, 164 N.W. 135. The court upon a consideration’ of the affidavit and proposed answer of the applicant and the return of the plaintiff denied the motion.

An application for the opening of the default judgment is addressed to the sound discretion of the trial court. An order granting such motion will not be disturbed unless an abuse of discretion is shown. Union Storage & Transfer Co. v. Smith, N.D., 58 N.W.2d 782; Beehler v. Schantz, 71 N.D. 409, 1 N.W.2d 344; Johannes v. Coghlan, 23 N.D. 588, 137 N.W. 822; Wheeler v. Castor, 11 N.D. 347, 92 N.W. 381, 61 L.R.A. 746; Hart v. Hone, 57 N.D. 590, 223 N.W. 346; Keeney v. City of Fargo, 14 N.D. 419, 105 N.W. 92; Olson v. Sargent County, 15 N.D. 146, 107 N.W. 43; Colean Manufacturing Co. v. Feckler, 16 N.D. 227, 112 N.W. 993. Clearly, there is no abuse of discretion shown in the instant case.

The record supports the decision of the court in denying a motion to vacate the judgment.

The order of the district court denying the motion to vacate the judgm'ent and to be allowed to answer is affirmed.

MORRIS, €. J., and BURKE and SATHRE, JJ., concur.


text:
    ROBINSON v. STATE.
    No. 7376.
    Supreme Court of North Dakota.
    April 2, 1954.
    Rehearing Denied April 21, 1954.

      Francis Murphy, Fargo, for appellant.
    ■ Paul M. Sand, Asst. Atty. Gen., 'Bismarck, for’respondent.
   BURKE, Judge.

By this action plaintiff seeks to enforce a contract alleged to have been made by his attorney with the Assistant Attorney General representing the defendant, in connection with the settlement of a suit brought by the plaintiff ag'ainst a third party tort feasor.

In May 1939, plaintiff suffered an injury in the course of an insured employment. As a result of the injury he suffered a permanent disability. He filed a claim with, the North Dakota Workmen’s Compensation Bureau. This claim was allowed and by June 19¾ 1951, the Compensation Bureau had paid the plaintiff on account of medical and hospital expenses and temporary disability the sum of $4,767.84.

Some time prior to June 19th, 1951, plaintiff brought an action in the United States District Court for the District of Minnesota, in his own name and in the name of the Compensation Bureau, against three individuals and a corporation whose negligence he alleged was proximate cause of his injuries. The trial of this action was set to commence upon June 20th, 1951, at Winona, Minnesota. On June 19th, 1951, P. W. Lanier, Sr., one of the attorneys for the plaintiff in that action, entered into negotiations with the defendants therein, in attempt to reach a settlement. The negotiations had proceeded to a point where it became apparent that a substantial settlement could be made, when Mr. Lanier called the attorney for the Compensation Bureau by telephone to discuss the compromise settlement. He testified, in this case, that he told Mr. Sand; attorney for the Compensation Bureau, that he was satisfied he could settle the law suit at a figure which would be somewhere between $7,500 and $12,500 and that he would accept such a settlement if the Compensation Bureau would waive its right to subrogation to the extent of compensation already paid and apply plaintiff’s recovery solely against compensation to which the plaintiff would be entitled in the future. He testified that he also told Mr. Sand that if the Compensation Bureau accepted this proposal the plaintiff would pay all the attorneys’ fees in the negligence action. According to Mr. Lanier’s testimony Mr. Sand left the telephone for a minute or two, then returned and said, “That’s satisfactory; go ahead and settle the case.” Or as Mr. Lanier later stated: “The settlement is accepted; settle the case on that figure.”

' After speaking with Mr. Sand, Mr. Lanier called one of his partners, Mr. P. W. Lanier, Jr., for the purpose of having him secure the plaintiff’s consent to the compromise settlement. That consent having been secured, Mr. Lanier settled the tort action for the sum of $9,750 and received a check in that amount payable to the plaintiff, his attorneys and the-North Dakota Workmen’s Compensation Bureau.

On June 22hd, 1951, Mr. P. W. Lanier, Jr., forwarded this check to the Compensation Bureau with a letter in. which he said:

“In accordance with the understanding had between the Bureau and P. W. Lanier, Sr. of this firm, I am submitting herewith final statement as to the present accounting and understanding between Ray Robinson and the Bureau:
“1. Our records show that the Bureau has expended the amount of $4,767.84. That amount is to be written off by the Bureau and not charged against the account of Ray M. Robinson.
“2. Full and final settlement with defendants $9,750.00 Expenses 105.57
Balance $9,644.43
Attorneys’ fees, Lanier
& Lanier 3,214.81
Balance to Ray Robinson $6,429.62
“It is the understanding had between Ray Robinson and the Bureau that the $6,429.62 will be applied on future payments due him by the Workmen’s Compensation Bureau and until such payments exceed said sum of $6,429.62 the Bureau shall be be relieved of paying.”

To this letter, Mr. Sand,, attorney for the Compensation Bureau replied upon July 2, 1951. In this reply he stated:

“At the request of the. Commissioners, I am herewith returning draft No. 0-28315- not indorsed. The Bureau wishes you to secure the endorsement of Lanier attorneys and Ray M. Robinson, and return the draft to the Bureau. Upon receipt of the endorsed draft, the Bureau' will promptly issue checks to the attorney as set forth in your letter of June 22nd, and will deduct the amount expended by the Bureau and issue a check for the Balance to Ray M. Robinson.”

While this letter does not directly deny the existence of the agreement as asserted in Mr. Lanier’s letter of' June 22nd, it implies either a denial or a repudiation of such an agreement. Thereafter, in August, 1951, after many conferences between Mr. Lanier, Sr., Mr. Sand, Mr. Robinson and the Workmen’s Compensation Commissioners a temporary arrangement for the disbursement of the proceeds of the check was made with the understanding that plaintiff was to bring suit for the balance claimed to be due him according to his alleged contract.

Accordingly this action was instituted. Plaintiff in his complaint demanded judgment for a balance of $3,178.51. In its answer the defendant denied that its attorney had entered into the alleged agreement, denied that the Workmen’s Compensation Commissioners had ever approved such an agreement and alleged that the attorney for the Bureau was without power to compromise any of the rights of the Bureau without such approval. The case went to trial upon these two issues. Mr. Sand testified that his long distance telephone conversation with Mr. Lanier in Winona related primarily to an approval of Mr. Lanier’s contract for attorney’s fees and that subrogation was not mentioned. Two of the Workmen’s Compensation Commissioners testified that they had never given their approval to any agreement affecting subrogation.

The trial court made no finding as to the existence of the agreement as averred by Mr. Lanier and as denied by Mr. Sand. It found that Mr. Sand as attorney, for the Bureau.was without power to compromise his client’s rights without the consent of his client and ordered. judgment for the dismissal of the action. Plaintiff has appealed from the judgment which was entered pursuant to this order and has demanded a tidal anew in this court.

In view of the decision of the trial court we shall direct our attention, first, to the issue raised as to the power of an assistant attorney general as attorney for the Workmen’s Compensation Bureau. Has he the power to compromise a substantial right of the Bureau, without securing the consent of the Workmen’s Compensation Commissioners ?

The right involved in this case is the Bureau’s right to subr-ogation under Section 65-0109, NDRC 1949 Supp. which provides :

“When an injury or death for which compensation is payable under the provisions of this title shall have been sustained under circumstances creating in some person other than the fund a-legal liability to pay damages in respect thereto, the injured employee, or . his dependents may claim compensation under this title and obtain damages from, and proceed, at law to recover damages against, such . other person. If compensation is claimed and awarded under this title, the fund shall be sub-rogated pro tanto to the rights of the injured employee or his dependents to the extent of the amount of the compensation paid. * * * ”

In the instant case, as has been pointed out, the Bureau had expended $4,767.84 upon this claim. The agreement for which plaintiff contends would include, a waiver of the right of subrogation to this amount. Subsequent payments and awards up to the present time by the Bureau upon this claim amount to $2,338.38. Thus by the alleged agreement the Bureau would have compromised a right to subrogation in the amount of $7,106.12 for $2,338.38, in so far as the liability so far established shows. This is not conclusive as the plaintiff may be entitled to additional awards in the future.

Section 65-0201, NDRC 1943 provides:

“The North Dakota workmen’s compensation bureau shall be maintained for the administration of the provisions of this title. Such bureau shall consist of three workmen’s compensation commissioners who shall be appointed by the governor. * * * ”

Section 65-0112, NDRC 1943 provides:

“Upon the request of the bureau, the attorney general shall institute and prosecute the necessary actions or proceedings for the enforcement of any of the provisions of this title or for the recovery of any money due the fund or of any penalty provided for in this title, and shall defend all suits, actions, or proceedings brought against the bureau or any member thereof in his official capacity. * * * ”

A consideration of these two statutes reveals that the entire executive control of the administration of the functions of the Bureau' is’vested in the Workmen’s Compensation Commissioners, and that; this executive control is extended to any litigation that the Bureau may have. The Attorney General is directed to institute or defend any action on behalf of the Bureau upon the request of the Bureau. He may not take such action upon his own initiative. By statute, in so far as his representation of the Bureau is concerned, his role is-that of the attorney only. He may advise but the power of control of litigation is vested in the Bureau. In view of these statutes we have reached the conclusion that the relationship of the Attorney General and the Workmen’s Compensation Bureau with respect to litigation in which the Bureau is involved is no more or less than the ordinary relationship of attorney and client and that it should be governed by the rules which govern that relationship.

Ordinarily an attorney employed to represent a client with respect to litigation has no power to compromise the rights of his client. 7 C.J.S., Attorney and Client, § 105, page 928. He may not waive or surrender any substantial rights of his client without his consent. 5 Am.Jur., Attorneys at Law, § 70, p. 300. See also, Regional Agricultural Credit Corporation of Minneapolis v. Stewart, 69 N.D. 694, 289 N.W. 801; Business Service Collection Bureau v. Yegen, 67 N.D. 51, 269 N.W. 46; Mongeon v. Burkebile, N.D., 55 N.W.2d 445.

Plaintiff in this case, however, contends that if the relationship of the Bureau and the Attorney General was simply that of attorney and client, the rule that an at7 torney has power in an emergency to compromise a client’s claim, applies. We can see no emergency here. Mr. Sand, the Assistant Attorney General, who represented the Bureau occupies offices in the same suite as the Compensation Commissioners. The Commissioners were, available for consultation at all times. Their consent or refusal to consent to the compromise could have been speedily obtained.

We hold therefore that the Assistant Attorney- General, representing the Bureau in the third party action was without power to compromise or surrender any of the rights of the Bureau in that action without the Bureau’s -consent.

, The judgment of the District Court is therefore affirmed.

MORRIS, C. J., and SATHRE and GRIMSON, JJ.,- concur.


author: MORRIS, Chief Justice.

text:
    L. W. WENTZEL IMPLEMENT CO. v. STATE FINANCE CO.
    No. 7428.
    Supreme Court of North Dakota.
    March 1, 1954.

      Day, Stokes, Vaaler & Gillig, Grand Forks, for plaintiff and appellant. ■
    Lyche & Lyche, Grand Forks, for defendant and respondent.
   MORRIS, Chief Justice.

This is an action to recover on a promissory note from an endorser thereof. The note, dated December 19, 1949, was executed by one Vernon S. Hoppe in favor of Elmer T. Nygren in the sum of $1700 and bearing interest at six per cent. It was due October 1, 19S0. On December 27, 1949, Nygren borrowed $300 from the defendant and as collateral security for this loan turned over to the defendant the Hoppe note, on the back of which he placed the following signed endorsement:

“For value received I hereby sell and assign this promissory note and attached chattel mortgage to the State Finance company, Grand Forks, N. Dak. This note being secured by the attached chattel mortgage which in turn is sold and assigned to the State Finance Company.”

In November 1949 Nygren had purchased an au’tomóbile from’ the plaintiff, the purchase of which had been financed by the Commercial’ Credit Corporation. That obligation was guaranteed by the plaintiff. Nygren defaulted in his payments on the automobile and the plaintiff ultimately made good on its guarantee to the Commercial Credit Corporation.

In the meantime the plaintiff discovered that the defendant held Hoppe’s $1700 note as collateral security to Nygren’s $300 loan. The plaintiff then sent its bookkeeper, Mr. Nelson, to the defendant’s office to pay the amount due on Nygren’s loan, which was $286.82. Nelson gave the defendant’s manager a check for that amount and procured the note, upon which was placed the following endorsement:

“February 3, 1950.
“For' value received we hereby sell and assign this promissory note and chattel mortgage to the L. W. Wentzel Implement Co., Crookston, Mima. This note being secured by the attached chattel mortgage which in turn is sold and assigned to the L. W. Wentzel Ini-plement Co.
“Signed
“State Finance Co.
“O. K. Fossum
“Mgr.”

Nygren defaulted on the. payments on the automobile. Hoppe never paid his note and. filed a petition in bankruptcy. The plaintiff seeks to recover the face of the Hoppe note with interest from the defendant and alleges that it was delivered to the plaintiff for value prior to maturity and that the maker has been discharged in bankruptcy proceedings. The defendant in its original answer under which the case was tried denies that it endorsed the note to th'e plaintiff and alleges that on or about February 3, 1950, by virtue of an arrangement with Nygren the plaintiff paid off the balance owing on Nygren’s loan from the defendant and thereupon undertook to release its interest in the note and mortgage and to assign that interest to the plaintiff but did not intend to endorse the note or guarantee payment thereof, as the plaintiff well understood, and that if the language employed purports to be an endorsement or guarantee it is the result of mutual mistake of the parties, and that the defendant is entitled to have the note reformed so as to correct and overcome the mutual mistake. The defendant also alleges there was no consideration passing from the plaintiff to the defendant for the endorsement. The defendant amended his answer setting up further defenses of material alteration and failure of the plaintiff to present the note for payment as required by Chapter 41-07, NDRC 1943.

Over objection of the plaintiff the defendant was permitted to file a second amended answer and counterclaim. In the counterclaim the defendant alleges that:

“the parties intended to assign the note in question from the defendant to the plaintiff, it being specifically understood that the defendant should have -no further liability, and it was intended that the assignment should be merely for the purpose of transferring title to the plaintiff that the writing was made upon the note by the defendant, and such writing was in no manner intended to create any liability on the part of the defendant; that through mutual mistake both parties believed the language used to constitute an assignment rather than an endorsement, and neither party at the time of the transaction understood the language used to be an endorsement; that through their mutual mistake both parties believed the language used, to-wit: ‘sell and assign’ to constitute an assignment rather than an endorsement; that if there is any endorsement of said note by the defendant, the same was made through mutual mistake of the parties, ■ both believing . the same to be an assignment rather 'than an endorsement.” .

The defendant then adds to its prayer for relief a demand

“For a reformation of said note to ■ correct any mutual mistake and eliminate any fraud.”

The trial court held against the defendant on the issues of material alteration and failure to present the note for payment. His rulings with respect thereto are clearly correct and no questions regarding them are presented on this appeal. The question as to the proper pleading to be considered by this court on trial de novo presents no serious problem here. The plaintiff argues that the allowance of the last amendment by the trial court was error. But as we view the case the last amended answer introduced no new issues and merely added a prayer for relief through reformation. The facts .upon which this prayer was based, had been pleaded in. the former answers.

The original answer, while containing no specific prayer for reformation, did allege:

“That if any of the language employed purports by any construction to be an endorsement or guarantee, it is the result of mutual mistake of the parties.”

And it is further alleged:

“That the defendant is entitled to have the instrument reformed so as to correct and overcome the mutual mistake and to eliminate the fraudulent additions.”

These allegations were incorporated in the amended answers.

The action instituted by the plaintiff being for the recovery of money only upon the liability of endorser upon a promissory note was legal in its nature. Relief by way of reformation of an instrument is equitable but that does not mean that equitable relief cannot be granted in a legal action or that equitable defenses may not be interposed. In this state the distinction as to form between actions at law and suits in equity has been -abolished. Section 32-0109, NDRC 1943 provides that there shall be but one form of action for the enforcement or protection of private rights and the redress of private wrongs. Section 28-0741 NDRC 1943 requires that in the construction of a pleading for the purpose of determining its effect its allegations shall be liberally construed with a view to rendering substantial justice between the parties.

In French v. State Farmers’ Mutual Hail Ins. Co., 29 N.D. 426, 151 N.W. 7, 9, L.R.A.1915D, 766, this court held that an insurance contract may be reformed and a recovery had thereon in the same action. It was also held:

“Under the provisions of section 7482, Comp.Laws 1913 (Section 28-0737 NDRC 1943), the court has the right,- in a proper case, to grant an amendment- of the pleadings even after judgment. The propriety of the granting of such amendments rests within the sound discretion of the trial court and will not be reviewed by this court, except in a case where such discretion has been abused.”

This court went on to state:

“As we view the matter, however, the principle of estoppel should not be applied in a case where there is a misde-scription of the property intended to be covered by the policy, but it is rather a case coriling within the rule that parol evidence may be admitted for the purpose of showing that, by reason of a mistake, a written instrument does not truly express the intention of the parties. While there are cases holding that such evidence is only admissible in a Court of equity, ‘yet this rule is by no - means universal, and, in fact, the weight of authority supports the doctrine that evidence of this character is also admissible in an action at law.’ ” See also Pipan v. Aetna Ins. Co., 55 N.D. 585, 214 N.W: 901; Fotheringham v. Lockhart, 30 S.D. 394, 138 N.W. 804.

In his order. >for amendment the trial oourt clearly sets forth his reasons for allowing it, as follows:

“The defendant, on April 24, 1953, upon notice duly served, moved the Court for permission to amend its Answer a second time, designated as Second Amended Answer and Cross-Complaint. The only purpose of it appears to be to designate the defense of mutual mistake set out in the original Answer and the first Amended Answer, upon which, in both cases defendant asked for reformation, as a Cross-Complaint, it appearing largely a matter of form rather than of substance, although it adds two additional paragraphs, one of which is simply a reallegation of the earlier paragraphs, and one merely an amplification of facts relating to the intention of the parties, and the alleged so-called mutual mistake. While the grounds for reformation should properly be in the form of a Cross-Complaint, the case was tried upon all the issues raised by the Answer. No Demurrer was interposed to such provisions, nor did the defendant object that no Reply had been served. The case, nevertheless, was tried as if the same had been denied formally by a Reply and all the allegations thereof were in issue. Perhaps there is no particular need for an Amendment, but no new issue is actually raised by such Amended Answer and its general form is better. It does conform to the facts attempted to be proved and does not change the claim or defense substantially.”.

We agree with the trial court in this statement and it is clear to us that he did not abuse his discretion in allowing the amendment.

Over the objection thát oral testimony could not be introduced to vary'the terms of a written instrument, Mr. Fossum, manager of the State Finance Company,-was permitted to give the-following testimony, in substance: Mr. Nygren- made an application for a- loan of; $300 and’ as- security .offered the Hoppe note. This note was accepted by the defendant as collateral security 'for the loan. Some time later Fossum received a phone call from the Wentzel Implement Company wherein a representative of the company inquired whether Fossum was holding the $1700 Hoppe note as collateral and advised that plaintiff wanted to pay off the amount due from Nygren and requested that Fossum “assign this seventeen hundred dollar note to them as collateral that I was holding.” The next step appears to be that Fossum asked Nygren whether it was agreeable to him if the plaintiff paid off his account and Fossum would turn over the note he was holding as collateral to the Wentzel Implement Company and Nygren repliedyes. This was either the same day or the day after Fossum had received the call from the plaintiff company. The third step in the transaction, according to Fossum, occurred when a Mr. Nelson, who was the bookkeeper and an officer of the plaintiff, called at Fossum’s office and informed him that he was from the Wentzel Implement Company and that he was there to pay off the Elmer Nygren account. Nelson gave Fossum a check on behalf of the plaintiff company payable to the State Finance Company in the sum of $286.82, which was the balance of the Nygren account, “and requested that I assign the note in question to the Wentzel Implement Company.” Nygren’s note for $300, representing his debt to the State Finance Company, was then cancelled and turned over to him. The transaction between Nelson and Fossum took place on February 3, 1950. Fossum heard nothing further about the matter until over two and one-half years later when plaintiff’s attorney phoned him to the effect that he had the $1700 note for collection. Fossum then states: “Well, in our conversation I found out that I had neglected to put in the words 'Without recourse’ in the assignment.” Fossum then went to the office of L. W. Wentzel, president of the plaintiff company, who advised Fossum that the matter had been turned over to the' plaintiff’s attorney and Fossiim says: “He admitted to me that it was an assignment, that -he knew that he was — that he was taking over this note to be' used as collateral for this deal he had with Nygren”, and that Wentzel stated he would have taken over the note whether the words “Without recourse” had been in the assignment. Fos-sum further stated that he had typed and signed the endorsement or assignment on the back of the note.

L. W. Wentzel, the president of the Wentzel Implement Company, was called for cross-examination under the statute and over the obj ection that the testimony tended to vary the terms of a written contract, testified, in substance, as follows: Nygren was dealing with the plaintiff for an automobile and called at Wentzel’s office approximately in the first part of February 1950.

“Q. (By Mr. Lyche) The agreement at this time was made between you and Nygren to obtain this note from the State Finance Company, is that right? A. Yes.
“Q. I suppose he told you he owed some money to State Finance Company? A. Yes.
“Q. And that the Finance Company would have to be paid off first before the Hoppe note, could foe released'or something to that effect? A. Yes.
“Q, And then did you agree to advance him the money to pay off the State Finance Company? A. No.
“Q. Did you put up the money that paid off the State Finance Company?" A. We paid the Finance Company directly, — State Finance Company— through my bookkeeper.”
“Q. How did that automobile enter into the transaction? A. He brought oyer some money I believe inNovember of 1949 and he was in default of payment so we purchased this note from, the State Finance Company in February. . ,
"Q. And what relation did that have to the car and Nygren? Was that extra security on his ‘ obligation on the car ? A. No, it really wasn’t. We bought the note there so that we would have it.in our possession.
“Q. So you would have it in your possession in case he didn’t pay for the car, was that it? A. You might say so, yes.”

Still later in his testimony Wentzel says:

“And I forget just how we did find out he had the note, sold a note to the State Finance Company at Grand Forks, but we did find out and we sent my bookkeeper over to purchase the note at that time.”

Mr. Wentzel did not testify on direct examination and did not deny the statements attributed to him by Fossum. The only two witnesses in the case are Fossum and Went-zel.

The trial court found that the defendant did not own the Hoppe note and had no legal right to sell it. He further found that neither of the parties intended that the defendant should either guarantee the Hoppe note as an endorser or sell it but understood that it was to be released to Ny-gren and assigned to the plaintiff by him and as a shortcut it was assigned direct to the plaintiff; that the plaintiff did not ask the defendant to pay the note until a year and a half or more after it had become due and that the defendant was not advised of the nonpayment of the note at the time the plaintiff received notice of the filing of a petition in bankruptcy by the maker some three months before this action . was instituted. The court also found that the parties-intended only that the defendant should assign the note to the plaintiff and that the language used in the endorsement was understood by both parties at the time to be an assignment and it was intended by them to be such and that the parties used this language through mutual mistake and that the defendant is entitled to have the instrument reformed so as to cure the mistake and make it reflect the actual intent and understanding of the parties by adding and inserting therein the words “Without recourse” immediately following the words “for value received.”

We agree with the trial court that if the endorsement be not considered an assignment but an unqualified endorsement carrying with it the liability of a general endorser, it does not express the intent of the parties and that as so construed the language was adopted through a mutual mistake. The plaintiff initiated the negotiations. culminating in the transfer of the $1700 .note. The transaction was largely for the plaintiff’s benefit. When its president learned that the defendant held a note payable to Nygren in the sum of $1700 as collateral security for Nygren’s $300 debt to the defendant, he undertook negotiations to obtain that note as security for the debt that Nygren owed on the automobile and which the plaintiff had guaranteed. The transfer was arranged with the consent of Nygren and it was agreed that the plaintiff would pay the debt due the defendant and secure a transfer of the collateral note to the plaintiff. The inherent nature of the transaction tends to support the defendant’s contention that the endorsement which on its face purports to be an assignment was that and nothing more and negatives the plaintiff’s contention that in order to collect $286.82 owed by Nygren the defendant sold the collateral note to the plaintiff for that amount and assumed the liability of an endorser to the full extent of $1700 and interest. It is significant that any assertion of liability against the defendant was long delayed. It is a fair assumption under the circumstances here presented that the possible liability of the defendant for the full amount of the collateral note did not occur to either Mr. Fossum, Mr. Nelson, or Mr. Wentzel until the latter turned over the note for collection.

The plaintiff stands squarely upon the proposition that it seeks to recover upon a written contract and that the contract cannot be contradicted or varied by parol evidence and that all of the evidence of the defendant relative to the transaction which culminated in the endorsement was inadmissible. Counsel for plaintiff cites Routier v. Williams, 52 N.D. 793, 204 N.W. 678, wherein this court held in the syllabus:

“2. A regular blank indorsement of a negotiable p-romissory note is an express contract in writing, by the terms of which the indorser agrees to pay the note to the holder thereof if the maker fails to do so, provided the note at maturity is duly presented to the maker, and due notice of nonpayment is given to the indorser.
“3. The contract evidenced by a regular blank indorsement of a negotiable note is subject to the general rule that the terms of a written contract may not be varied or contradicted by parol evidence.”

The note on its face contains the following provision:

“The makers, endorsers and guaran- . tors severally * * * waive demand, protest, and notice of protest and .notice of dishonor.”

The rule stated in Routier v. Williams, supra, is supported by the great weight of authority. Brannan’s Negotiable Instruments Law, 6th Ed., Section 66; 8 Am. Jur., Bills and Notes, Section 1096; Annotations 4 A.L.R. 803; 11 A.L.R. 637; 22 A.L.R. 527, 35 A.L.R. 1120, 54 A.L.R. 999, 92 A.L.R. 726; Bank of Conway v. Stary, 51 N.D. 399, 200 N.W. 505, 37 A.L.R. 1186. To the general rule thus stated there are - exceptions, especially as between the endorser and the endorsee. ' As one of these exceptions we find that parol evidence is admissible as between an endorser and an en-dorsee of a promissory note to show that the endorsement was merely to transfer legal title to the endorsee. Dickinson v. Burke, 8 N.D. 118, 77 N.W. 279; Sawyer State Bank v. Sutherland, 36 N.D. 493, 162 N.W. 696; Monroe v. State Bank, 181 Wis. 19, 193 N.W. 991, 35 A.L.R. 1115. The defendant urges that this exception is applicable to the facts of this case. The exception seems to apply where the transfer was with out consideration. In this case the transfer was primarily for the accommodation and benefit of the plaintiff but the defendant did receive payment of the balance due it on the Nygren debt and to that extent was benefited by the transaction.

It appears to us that the only theory upon which the parol evidence was admissible was that under the allegations of the defendant’s answer the endorsement, because of a mistake in its terms, did not set forth the true intention and agreement' of the parties and that the defendant was entitled to have it reformed so as to express that agreement. On this question Susquehanna S. S. Co. v. A. O. Andersen & Co., 239 N. Y. 285, 146 N.E. 381, 383, is in point. Judge Cardozo, speaking for the Court of Appeals of New York, says:

“On the trial the defendant attempted to prove the conversations preceding and accompanying the signing of the contract. The trial judge excluded the evidence upon the ground that antecedent conversations were merged in the writings. Defendant’s counsel then reminded the court that there was ‘a claim here for reformation,’ and that the evidence was ‘admissible under that defense if under no other.’ The ruling was not changed. Some point having, been made that there should have been, ‘a counterclaim in equity,’ defendant’s counsel asked that, if there was any objection to the form of the plea of reformation, the plaintiff be directed to state it to the end that the defendant might have an opportunity to amend. The direction was not given.
“We think the defendant’s answer may fairly be construed as setting forth a counterclaim in addition to a defense, if a counterclaim be necessary. The statement that ‘the defendant is entitled to have the said letter corrected so that it will express the true agreement’ is equivalent to a- demand that it be corrected by the coux't accordingly. True, the description of a counterclaim as a defense has been held to dispense with the need of a reply, since otherwise a pleader by his own misdescription might set a trap for his adversary. Acer v. Hotchkiss, 97 N.Y. 395, 408, 409; Equitable Life Assurance Society of the United-States v. Cuyler, 75 N.Y. 511; Bates v. Rosekrans, 37 N.Y. 409, 412. To obviate such dangers the plaintiff must have .the benefit of any denials or defenses that a reply could have stated. When that is done and the stage of trial is reached without previous motion challenging the pleading, an answer may be read in accordance with its substance rather than the label of its headings. Acer v. Hotchkiss, supra; National Gum & Mica Co. v. MacCormack, 124 App.Div. 569, 109 N.Y.S. 286.
“In the determination of the case before us we rest our judgment upon, a broader ground, since there is room for the contention that the defendant stood upon the defense and made no point that its answer was to be read as something else. The question is fairly here whether the facts establishing the need for reformation, even if not stated as a counterclaim, make out an equitable defense. The plaintiff produces a writing which in form is a contract, and asks the judgment of the court that it be enforced according to its terms. The defendant answers that enforcement is inequitable because fraud or mutual mistake has brought about the result that the writing is not a true expression of the meaning of the parties. This is good as a bar, and does not cease to be good because the defendant, if it had so chosen, might have asked for something more. There is noi dearth of subtle discussion as to the effect of mistake in advance of reformation. Cook, Equitable Defenses, 32 Yale' Law Jorunal, . 645; Pomeroy, Remedies and Remedial Rights, § 87 et seq.; Hinton, Equitable Defenses under Modern Codes, 18 Mich.L.R. 717. Much of it is an echo of precedents and distinctions formulated in an era when there was no such thing as an equitable defense in a trial at common law. Now, ‘a defendant may set forth in his answer as many defenses and counterclaims, or both,- as he has, whether they are such as Were formerly denominated legal or equitable.’ Civ.Prac.Act, § 262; Code Civ.Pro.' § 507; Code of Procedure, § 150.”

The section of the New York Code quoted by Judge Cardozo finds a counterpart in our Section 28-0715, NDRC 1943 which provides :

“The defendant may set forth by answer as many defenses and counterclaims as he may have, whether legal, equitable, or both. Each defense must be stated separately and must refer to the causes of action which it is intended to answer in such manner that it may be intelligibly distinguished.”

The endorsement in this case was in the form of an assignment to which the law, according to the majority rule, gives the effect' of an unqualified endorsement. Bran-nan’s Negotiable Instruments Law, 7th Ed., Section 31, page 601, Section 34, page 606, Section 38, page 624 ; 8 Am.Jur., Bills and Notes, Section 546. But the defendant set up in its answer that the language used was the result of a mutual mistake and did not express the intent of the parties which was that the defendant only “assigned” and did not guarantee payment in any form of the note and that the defendant is entitled to have the endorsement reformed to correct the mistake.

When the issue is whether or not a written instrument should be reformed because of a mutual mistake, parol evidence is admissible to show how the instrument should be corrected in order to conform to the agreement or intention of the parties. Forester v. Van Auken, 12 N.D. 175, 96 N.W. 301; 45 Am.Jur., Reformation of Instruments, 113; 76 C.J.S., Reformation of Instruments, § 83b.

The trial- court did not err in admitting parol evidence for the purpose of showing that the endorsement did not express the true agreement and intention of the parties and that it was not intended that the defendant should accept the liability of a general endorser. Neither did he err in determining that the defendant is entitled to have the endorsement reformed so- as to express the true agreement and intention of the parties. The judgment appealed from is affirmed.

BURKE, SATHRE , and GRIMSON, JJ-, concur.


author: G. BARRY ANDERSON, Judge

text:
    STATE of Minnesota, Plaintiff, v. Larry FOSTER, Defendant.
    No. C6-00-1948.
    Court of Appeals of Minnesota.
    May 29, 2001.
    Review Denied Aug. 15, 2001.
    Mike Hatch, Minnesota Attorney General, St. Paul, MN; and Amy J. Klobuchar, Hennepin County Attorney, Donna J. Wolfson, Assistant County Attorney, Minneapolis, MN, (for plaintiff).
    Keith M. Ellison, Hassan & Reed, LLP, Minneapolis, MN, (for defendant).
    Considered and decided by HARRIET LANSING, Presiding Judge, ROBERT SCHUMACHER, Judge, and G. BARRY ANDERSON, Judge.
   OPINION

G. BARRY ANDERSON, Judge

Defendant, charged with the crime of felon in possession of a firearm, a violation of Minn.Stat. § 624.713, subd. 1(b), 2 (2000), argues that his prior felony conviction for possession of cocaine is not a felony upon which to base a prosecution for felon in possession of a firearm because his prior conviction was deemed a misdemeanor by order of law. The district court certified the question of whether a prior felony, subject to a stay of imposition, which thus became a misdemeanor under Minn.Stat. § 609.13, subd. 1(2) (2000), subjects the offender to criminal liability for possession of a firearm. We answer the certified question in the affirmative.

FACTS

At approximately 3:25 p.m. on June 8, 2000, St. Anthony Police Officer Sunde ran a routine license plate check of a black Lincoln Navigator and discovered an outstanding felony warrant for the arrest of the registered owner, defendant Larry Foster. The officer stopped the vehicle, ordered Foster and his passenger out of the car, and conducted a search of the vehicle. Officer Sunde found a handgun wedged in between the driver’s seat and the center console.

When considering criminal charges against Foster, the prosecuting attorney discovered that Foster had been convicted of felony possession of cocaine in 1989. On March 17, 1992, however, the district court ordered Foster’s felony conviction reduced to a misdemeanor pursuant to Minn.Stat. § 609.13, subd. 1(2), which provides that despite a conviction for a felony,

[t]he conviction is deemed to be for a misdemeanor if the imposition of the prison sentence is stayed, the defendant is placed on probation, and the defendant is thereafter discharged without a prison sentence.

Minn.Stat. § 609.13, subd 1(2) (2000).

The state charged Foster with the crime of felon in possession of a firearm, a violation of Minn.Stat. § 624.713, subd. 1(b), 2 (2000), as a result of the discovery of the handgun in Foster’s vehicle. Foster moved for an order dismissing the complaint on the grounds that the state lacked probable cause sufficient to proceed to trial because the March 17, 1992 order reduced his felony drug conviction to a misdemeanor by operation of law. The district court certified a question to this court asking whether a defendant who has received a stay of imposition for a felony drug offense and successfully completes probation, resulting in reduction of the felony conviction to a misdemeanor under Minn.Stat. § 609.13, subd. 1(2), can be charged as a felon in possession of a firearm. The district court answered the question in the affirmative.

ISSUE

Where a defendant pleads guilty to a felony drug offense and receives a stay of imposition of sentence, then successfully completes probation resulting in the sentencing court entering an order restoring the defendant’s civil rights and by operation of law the conviction becomes a misdemeanor, and eight years later the defendant is alleged to be found in possession of a pistol, can the state proceed with a prosecution under Minn.Stat. § 624.713, subd. 1(b) (2000)?

ANALYSIS

Statutory construction is a question of law subject to de novo review. State v. Moore, 431 N.W.2d 565, 567 (Minn.App.1988). The object of statutory interpretation is to determine and give effect to the intent of the legislature. Minn.Stat. § 645.16 (2000). If the language of a statute is clear and unambiguous, this court must give effect to the statute’s plain meaning. State v. Furman, 609 N.W.2d 5, 6 (Minn.App.2000).

“Penal statutes are to be strictly construed with all reasonable doubts concerning legislative intent to be resolved in favor of the defendant.” State v. Wagner, 555 N.W.2d 752, 754 (Minn.App.1996). But the court is not required to give a statute the narrowest possible interpretation. Id.

Minnesota law precludes certain persons from possessing a pistol or semiautomatic military-style assault weapon, including persons convicted of a “crime of violence.” Minn.Stat. § 624.713, subd. 1(b), 2 (2000). A “crime of violence” is defined by statute, and includes “felony violations of * * * chapter 152.” Minn.Stat. § 624.712, subd. 5 (2000). Foster’s conviction for felony possession of cocaine is a felony violation of Minn.Stat. § 152.023, subd. 2, 3 (1988).

Foster argues that his possession of cocaine conviction is not a felony upon which to base a prosecution for the crime of felon in possession of a firearm because his drug conviction was deemed a misdemeanor by order of law. As support, Foster relies on State v. Olson, 451 N.W.2d 672 (Minn.App.1990). In Olson, a defendant challenged his conviction for possession of a pistol by an ineligible person, a violation of Minn.Stat. § 624.713. Id. at 673. The defendant claimed that his prior felony theft conviction was deemed a misdemeanor by law, and therefore, he was not guilty of a “crime of violence” that would make him ineligible, pursuant to Minn.Stat. § 624.713, to possess a pistol. Id. This court agreed, holding that a felony disposition deemed a misdemeanor pursuant to section 609.13 was not a “felony” for purposes of determining whether a prior crime was a “crime of violence” within the meaning of Minn.Stat. § 624.712, subd. 5. Id. at 674-75.

Subsequent to Olson, this court addressed a similar issue in State v. Moon, 455 N.W.2d 509, 511 (Minn.App.1990), rev’d 463 N.W.2d 517 (Minn.1990). In Moon, a defendant convicted of felony theft, later deemed a misdemeanor under section 609.13, argued that his prior theft conviction was not a “crime of violence” preventing the acquisition of a firearm. 455 N.W.2d at 510-11. Consistent with Olson, this court agreed, stating,

the [district] court erred in prohibiting [defendant’s] right to ship, transport, possess or receive firearms for 10 years after his * * * order of discharge. This conclusion is consistent with legislative intent not to impose the consequences of a felony — in this instance, the prohibition of the use of firearms — if the judge originally treated the offense as a misdemeanor.

Id. at 511. Upon review, however, the supreme court rejected this court’s reasoning. The supreme court concluded that a felony disposed of under section 609.13 was still a “felony” for purposes of the weapons laws. State v. Moon, 463 N.W.2d 517, 521 (Minn.1990). The supreme court reasoned:

Initially, we must address whether section 609.165, subdivision la [certain convicted felons ineligible to possess firearms], applies to a person who has been convicted of felony theft if the conviction is subsequently deemed to be for a misdemeanor pursuant to section 609.13. The answer depends on whether the legislature intended to impose the firearms restriction based on the nature of the offense for which the individual was convicted or based on the subsequent treatment of the offender.
⅝{ ⅝ ⅝ ⅜
A trial judge, exercising the sentencing discretion permitted under the guidelines, reasonably could conclude that a stay of imposition is appropriate for a particular defendant and that he or she should not be subject to the usual consequences of a felony conviction if he or she successfully completes probation. The legislature, however, reasonably concluded that, in order to protect the public safety, certain convicted criminals should be subject to the federal firearms prohibition even though their civil rights otherwise have been restored. In particular, the legislature mandated that persons convicted of felonious theft be subject to a 10 year firearms restriction upon restoration to civil rights.
⅜: ⅜ ⅝ ⅜
Section 609.13 does not preclude the legislature from imposing consequences, as it did in this case to protect the safety of the public, based on an offender’s commission of criminal acts which also constitute felonies. In enacting section 609.165, subdivision la, the legislature intended the nature of the offense rather than the subsequent treatment of the offender to be the basis for the imposition of the firearms restriction. We hold that the definitions of the offenses listed as crimes of violence in section 62⅛.712, subdivision 5, relate to the elements of the offense for which the defendant was originally convicted rather than the disposition subsequently imposed by the trial judge. Thus because Moon was originally convicted of felony theft, the trial court correctly imposed the firearms restriction upon his discharge from probation.

Id. at 520-21 (emphasis added).

Foster contends that Olson is dispositive to this case and notes that Olson has never been explicitly overruled. In addition, Foster attempts to distinguish Moon by pointing out that the defendant in Moon was not facing prosecution for a felony but only risked losing the privilege to possess a firearm. Foster correctly notes that the Olson case involves the same issue faced by Foster: a prosecution for felon in possession of a firearm, based on a prior felony reduced to a misdemeanor under section 609.13. Foster is also correct in stating that Olson has never been expressly overruled.

We conclude, however, that Foster’s attempts to distinguish Moon from Olson and the present case fail. Both Moon and Olson addressed the same issue albeit through different statutes: whether a pri- or felony conviction later deemed a misdemeanor would preclude firearm possession. Specifically, the Moon court analyzed whether section 609.165, which restricts firearm ownership for persons convicted of a “crime of violence” as set forth in section 624.712, subd. 5, applies to a person convicted of a felony later deemed a misdemeanor pursuant to section 609.13. The Olson court analyzed whether section 624.713, which restricts firearm possession for persons convicted of a “crime of violence” as set forth in section 624.712, subd. 5, applies to a person convicted of a felony later deemed a misdemeanor pursuant to section 609.13. Olson and Moon ultimately address the definition of “crime of violence” in MinmStat. § 624.712, subd. 5, which in turn uses the term “felony” or “felonious” to qualify certain prior convictions. As argued by the state:

It is wholly unreasonable to suggest that the Minnesota legislature intended that “crimes of violence” would be construed one way for purposes of § 609.165 and an entirely different way for § 624.713. This is particularly so when the two statutes speak to the very same subject: entitlement to possess firearms following conviction of a crime of violence.

We agree, and conclude that the supreme court’s decision in Moon implicitly overruled this court’s holding in Olson.

Foster also argues that Minn.Stat. § 609.13, subd. 1(2), clearly and unambiguously converts a felony into a misdemeanor such that the earlier felony no longer exists as a matter of law. Foster’s argument is based on the following statutory language:

Notwithstanding a conviction is for a felony
[t]he conviction is deemed to be for a misdemeanor if the imposition of the prison sentence is stayed, the defendant is placed on probation, and the defendant is thereafter discharged without a prison sentence.

Minn.Stat. § 609.13, subd. 1(2). Foster argues that as a result of this language, he no longer has a predicate felony on his record to base a felon in possession of a firearm charge. The Minnesota Supreme Court, however, specifically stated that “[sjection 609.13 does not require felony convictions where guilt is adjudicated, but sentencing is stayed, to be treated as misdemeanors in every conceivable situation.” Matter of Woollett, 540 N.W.2d 829, 833 (Minn.1995) (holding POST Board could bar applicant for peace officer license on grounds of a prior felony where applicant had prior felony disposed of under section 609.13). The supreme court, interpreting Moon, went on to say, “[w]e * * * determined that the legislature intended to apply the firearms restriction based upon the nature of the offense committed by the defendant, rather than the actual sentence imposed by the trial court.” Id.

Based on the reasoning of the supreme court in Moon and Woollett, we conclude that a person convicted of felony possession of cocaine that by operation of law becomes a misdemeanor pursuant to Minn.Stat. § 609.13, subd. 1(2), can be prosecuted for the crime of felon in possession of a firearm, a violation of Minn.Stat. § 624.713, subd. 1(b), 2, because the prior felony drug conviction constitutes a “crime of violence” within the meaning of Minn. Stat. § 624.712, subd. 5.

DECISION

Defendant, convicted of felony possession of cocaine that by operation of law became a misdemeanor pursuant to Minn. Stat. § 609.13, subd. 1(2) (2000), can be prosecuted for the crime of felon in possession of a firearm in violation of Minn.Stat. § 624.713, subd. 1(b), 2 (2000), because the prior felony possession of cocaine conviction constitutes a “crime of violence” within the meaning of Minn.Stat. § 624.712, subd. 5 (2000).

Certified question answered in the affirmative.


author: PETER J. LINDBERG, Judge

text:
    BROOKDALE PONTIAC-GMC, Appellant, v. FEDERATED INSURANCE, Respondent.
    No. C8-01-18.
    Court of Appeals of Minnesota.
    June 12, 2001.
    Review Denied Aug. 22, 2001.

      Mark D. Luther, St. Louis Park, MN, (for appellant).
    Gary Hoch, Richard L. Pemberton, Jr., Erica Gutmann Strohl, Meagher & Greer, P.L.L.P., Minneapolis, MN, (for respondent).
    Considered and decided by TOUSSAINT, Chief Judge, KALITOWSKI, Judge, and LINDBERG, Judge.
   OPINION

PETER J. LINDBERG, Judge

An individual purchased an automobile from appellant dealer by a contract cosigned with a signature that was later determined to be forged. The contract had been financed by a bank. When the buyer defaulted, the bank reassigned the contract to appellant pursuant to a master-dealer agreement, and appellant paid the balance due. Appellant then sought to recover from respondent insurance company under forgery provisions. The district court determined that coverage was excluded and granted summary judgment in respondent’s favor. _ Appellant contends that coverage exists under several provisions and asserts it was entitled to attorney fees pursuant to the policy.

FACTS

Appellant Brookdale Pontiac-GMC (Brookdale) is an automobile dealership and insured under a “garage general liability policy” through respondent Federated Insurance (Federated). Brookdale also purchased from Federated a supplemental insurance policy, which contains a provision to cover losses caused by

a credit application, rental agreement or lease agreement on which the name, social security number or signature of the applicant, rentee or lessee is false or forged.

An exclusion limits this “false-pretense” provision once the first periodic payment is made. The supplemental policy also contains a “catchall” provision that provides coverage for

any other criminal scheme, criminal trick or criminal devise which induces [Brookdale] to part with evidence of title to or possession of the covered “auto.”

Because Brookdale does not directly provide financing for its customers, it has entered into “master-dealer” agreements with several local financial institutions, including Firstar Bank. Under the terms of the master-dealer agreement, Brookdale agrees to pay off a customer’s financing contract if “[a]ny representation, warranty, or covenant, with respect to the Contract made by [Brookdale] is false or breached.”

On January 15, 1997, Brookdale sold a vehicle to Steven Early. Early and a man claiming to be his business partner, Hora-tius Williams, signed a credit application and an application for transfer of title. Brookdale obtained financing through Firstar on Early and Williams’s behalf.

Firstar received five payments made sporadically from March to October 1997. On November 10, 1997, Early wrote a letter to Firstar and stated that due to a miscommunication, he had erroneously included Williams’s name on the applications. Early requested that Williams’s name be disassociated from the loan. On November 13, 1997, Williams sent a letter to Firstar stating that Early had fraudulently used his name to obtain credit. On December 29, 1997, Williams filed a signed and notarized “affidavit of fraudulent transaction.”

On May 13, 1998, Brookdale paid the principal of the loan to Firstar pursuant to the master-dealer agreement. Brookdale subsequently resold the vehicle at an auction for a loss.

On May 26, 1998, Brookdale contacted Federated for reimbursement under the supplemental policy. After an investigation, Federated refused to reimburse Brookdale because Federated believed that the loss was not covered by the terms of the supplemental agreement. Specifically, Federated noted that because Early had made payments to Firstar, Brook-dale’s claim fell under the supplemental policy’s “first-payment” exclusions, which state that the policy “does not cover any ‘loss’ [under the false-pretense provision] after the first periodic payment is made.”

On December 17, 1999, Brookdale brought a declaratory judgment action against Federated. Both parties moved for summary judgment. The court granted Federated’s motion and denied Brook-dale’s motion. The court agreed with Federated that because Firstar received several payments, the first-payment exclusion prevents recovery. The court found that the false-pretense provision made no significant distinction among credit applications, rental agreements, or lease agreements. The court also found that because the catchall provision contains the modifier “other,” a criminal scheme must somehow differ from criminal acts already contained in other provisions. Since false pretenses were covered by another provision, the court found that Brookdale could not seek recovery under the catchall provision. This appeal follows.

ISSUES

I. Did the district court err in its interpretation of the insurance policy?

II. Is Brookdale entitled to attorney fees under the insurance policy?

ANALYSIS

I.

Summary judgment is properly granted when there are no genuine issues of material fact and either party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03; see also Peterson v. BASF Corp., 618 N.W.2d 821, 823 (Minn.App.2000). Because there are no disputed facts, we review the district court’s interpretation of the insurance policy de novo. See Zimmerman v. Safeco Ins. Co. of Am., 593 N.W.2d 248, 249 (Minn.App.1999), aff'd, 605 N.W.2d 727 (Minn. Feb.17, 2000) (interpretation of insurance policy is a question of law).

“[A]n insurer has the burden of proving that a policy exclusion applies,” and courts read such exclusions “narrowly against the insurer.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992) (citations omitted). Ambiguities in a policy are generally resolved in favor of the insured. Nathe Bros., Inc. v. American Nat’l Fire Ins. Co., 615 N.W.2d 341, 344 (Minn.2000).

The relevant portions of the supplemental policy are as follows:

We will pay for “loss” to a covered “auto” under this coverage that results from you voluntarily parting with the covered “auto” because of:
(3) a credit application, rental agreement or lease agreement on which the name, social security number or signature of the applicant, rentee or lessee is false or forged.
(4) any other criminal scheme, criminal trick or criminal devise which induces you, at that time, to part with evidence of title to or possession of the covered “auto”.
After First Periodic Payment. This policy does not cover any “loss” under coverage * * * (3) above, after the first periodic payment is made.

Brookdale first contends that the court incorrectly interpreted the false-pretense provision. Because “credit application” is separated by a comma from the words “rental agreement or lease agreement,” Brookdale argues that the policy’s drafter intended credit applications to be treated differently. Further, Brookdale contends that a credit application differs from the other types of enumerated agreements because one does not make payments on an application; rather, one is merely attempting to obtain credit. Therefore, Brookdale argues the first-payment exclusion only applies to rental or lease agreements.

But looking at the contract as a whole, we find that the terms “credit application,” “rental agreement,” and “lease agreement” must be construed as a list of similar terms. Medica, Inc. v. Atlantic Mut. Ins. Co., 566 N.W.2d 74, 77 (Minn.1997) (“The policy must be construed as a whole, and unambiguous language must be given its plain and ordinary meaning.”). Here, in each of the three lists within this provision, the drafter consistently did not place a comma after the penultimate word in any of the lists. Moreover, other lists in both the insurance policy and the supplemental policy reveal that, except in one provision, the drafter never placed a comma after the penultimate word. Although many writers place a comma between the second-to-last word in a list and the conjunction, this is more a stylistic preference than an absolute rule. See Heaslip v. Freeman, 511 N.W.2d 21, 23 (Minn.App.1994) (noting that The Chicago Manual of Style (13th ed.1982) and The New York Times Manual of Style and Usage (Lewis Jordan ed.1976) have differing opinions on whether a comma must be placed after the penultimate word in a list). Given the consistency within the policy, we do not believe the lack of the comma here holds special significance.

We also hold that there is no difference among credit applications and lease or rental agreements, and the three terms should be construed uniformly. Auto-Owners Ins. Co. v. Evergreen, Inc., 608 N.W.2d 900, 903 (Minn.App.2000) (noting that “courts should interpret insurance policies so as to give effect to all of their provisions” (citation omitted)); see also Wayne v. MasterShield, Inc., 597 N.W.2d 917, 920 (Minn.App.1999) (a phrase capable of several meanings is defined by the words with which the phrase is associated). In applying for credit, one is agreeing to make periodic payments to repay the financing institution just as one would make periodic payments on a lease or rental agreement. Once the first periodic payment was made, the exclusion applies and Brookdale can no longer make a claim under the false-pretense provision.

Brookdale also argues that the district court erred in interpreting the catchall provision. Because the agreement explicitly listed forgeries and false pretenses, the court interpreted the catchall provision to only apply to other types of criminal schemes, tricks, or devises that were not already covered by the agreement. Brookdale argues that the court erred in interpreting the words “any other” to mean any other crime not previously listed.

In interpreting contracts, we apply the principle of ejusdem generis, which states that “[g]eneral words are construed to be restricted in their meaning by preceding particular words.” Minn.Stat. § 645.08, subd. 3 (2000); accord Lefto v. Hoggsbreath Enters., 581 N.W.2d 855, 856 (Minn.1998). Here; there are no words within the catchall provision itself to help construe the term “any other.” It seems logical to turn to the false-pretense provision to determine what “other” crimes fall within the catchall because the false-pretense provision immediately precedes it. Because the false-pretense provision already includes forgery and false pretenses, we conclude that the catchall provision must refer to crimes other than those specifically enumerated. Therefore, the district court did not err in finding that the catchall did not include forgery or false pretense.

Alternatively, Brookdale argues that the “combination of actions” committed by Early is a swindle and therefore different from forgery and a false pretense: (1) Early falsely represented that he and Williams were buying the vehicle together and (2) Early committed four forgeries by signing Williams’s name on the purchase order, a title application, an installment contract, and the credit application. See Minn.Stat. § 609.52, subd. 4 (2000) (defining a theft by swindle as when a person “whether by artifice, trick, device, or any other means, obtains property or services from another person”). This is a distinction without a difference: Brookdale is merely trying to place a different label on Early’s forgeries and fraudulent acts so that they fall under the catchall provision but not under the false-pretense provision. Therefore, we hold that Brookdale does not have a claim under the catchall provision.

II.

Brookdale claims the insurance policy entitles it to recover “[a]ttorney fees incurred in forcing an insurer to meet its contractual obligations.” We review a district court’s decision to award or deny attorney fees for abuse of discretion. In re Estate of Van Den Boom, 590 N.W.2d 350, 354 (Minn.App.1999), review denied (Minn. May 26, 1999). To make a claim for attorney fees, Brookdale had to show that Federated breached the insurance contract in some respect. See American Standard Ins. Co. v. Le, 551 N.W.2d 923, 927 (Minn.1996) (holding an insured cannot recover attorney fees incurred in action to determine the question of coverage unless the insured can show a breach of contract). We agree with the district court that Federated did not breach the insurance policy. Therefore, the court did not abuse its discretion by denying attorney fees.

DECISION

Because we must construe the language in the false-pretense provision according to its plain meaning, we agree with the district court that Brookdales claim is excluded from coverage because Firstar had received the first payment. We also agree that Brookdale cannot bring a claim under the catchall provision because that provision cannot cover previously enumerated claims. Brookdale is not entitled to attorney fees because there has been no breach of the insurance policy, and thus, we affirm the district court.

Affirmed.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI, § 10.