IN THE SUPREME COURT
STATE OF NORTH DAKOTA
| STOCKMAN BANK OF MONTANA, a | ) | |||||||
| Montana banking corporation, | ) | |||||||
| ) | ||||||||
| Plaintiffs/Appellant | ) | |||||||
| ) | ||||||||
| vs. | ) | |||||||
| ) | ||||||||
| AGSCO, INC., a North Dakota corporation, | and | ) | ||||||
| Capital Harvest, Inc., d/b/a Capital Harvest Finance | ) | |||||||
| Company, a North Dakota corporation, individually ) | ||||||||
| and as agent for AGSCO, Inc., | ) | |||||||
| ) | ||||||||
| Defendants/Appellees | ) | |||||||
| ) | ||||||||
| Farmers Union Oil Company of Williston, a North | ) | |||||||
| Dakota cooperative association, Mon-Kota, Inc., a | ) | |||||||
| Montana corporation, Betaseed, Inc., a Minnesota | ) | |||||||
| corporation, Central Insurance Agency, a North | ) | |||||||
| Dakota Corporation, Steven D. Cayko, a/k/a Steve | ) | |||||||
| Cayko, Perry Elletson a/k/a Perry E. Elletson, Ron | ) | |||||||
| Gross, a/k/a Ronnie Gross, Edward P. Ochs, a/ka | ) Supreme Court No. 20070357 | |||||||
| Eddie Ochs, Tom Ochs, Mark Brunelle, Kelly | ) | |||||||
| Brunelle and Bill Sheldon, | ) | |||||||
| ) | ||||||||
| Defendants | ) | |||||||
| ) | ||||||||
| and | ) | |||||||
| ) | ||||||||
| Farmers Union Oil Company of Williston, a North | ) | |||||||
| Dakota Cooperative association, | ) | |||||||
| ) | ||||||||
| Third-Party Plaintiff | ) | |||||||
| ) | ||||||||
| vs. | ) | |||||||
| ) | ||||||||
| Hardy Farms, Inc. and Jim Hardy, | ) | |||||||
| ) | ||||||||
| Third-Party Defendants. | ) | |||||||
__
BRIEF OF DEFENDANTS/APPELLEES
ON APPEAL FROM JUDGMENT DATED NOVEMBER 29, 2007
CIVIL NO. 2003-C-012
IN DISTRICT COURT NORTHWEST JUDICIAL DISTRICT MCKENZIE COUNTY
THE HONORABLE GERALD H. RUSTAD PRESIDING
| David J. Eilertson (ID# 05587) | ||||||
| General Counsel Brown Corporations | ||||||
| 1168 12th Street NE | ||||||
| P.O. Box 13458 | ||||||
| Grand Forks, ND 58208-3458 | ||||||
| Attorney for Defendants/Appellees | ||||||
TABLE OF CONTENTS
| Table of Authorities ii | ||
| Statement of Facts..¶1 | ||
| Law and Argument.¶5 | ||
| I. | Standard of Review ...¶5 | |
| II. | Applying the judgment rate is contrary to law and would unduly benefit Stockman Bank ¶6 | |
| III. | Because there was no judgment against AGSCO pre-judgment interest is inapplicable ...¶9 | |
| IV. | If the Plaintiff is entitled to interest they should be in no better position than if the money had not been paid to AGSCO .¶15 | |
| Conclusion ..¶17 | ||
TABLE OF AUTHORITIES
| Paragraph(s) | |||||||||||
| NORTH DAKOTA SUPREME COURT CASES: | |||||||||||
| Hirschkorn v. Severson, | |||||||||||
| 319 N.W.2d 475 (N.D. 1982)..9 | |||||||||||
| Midland Diesel Service & Engine Company v. Sivertson, | |||||||||||
| 307 N.W.2d 555 (N.D. 1981) .10 | |||||||||||
| Stockman Bank of Montana v. AGSCO, Inc., | |||||||||||
| 2007 ND 26 .1, 2, 3, 8 | |||||||||||
| Walters v. Kiker, | |||||||||||
| 482 N.W.2d 626 (N.D. 1992) .6, 10 | |||||||||||
| OTHER CASES: | |||||||||||
| State Farm Fire & Cas. Co. v. Tashire, | |||||||||||
| 386 U.S. 523, 87 S.Ct. 1199, 1205, 18 l.Ed.2d 270, (1967) ...6 | |||||||||||
| Muchmore equipment, Inc. v. Grover, | |||||||||||
| 334 N.W.2d 605 (Iowa 1983) .12, 13 | |||||||||||
| OTHER AUTHORITIES | N.D.C.C. § 32-03-04...9 | ||||||||||
| N.D.C.C. § 32-03-055 | |||||||||||
| N.D.C.C. § 32-11-021 | |||||||||||
| N.D.C.C. ch. 32-11..6 | |||||||||||
| N.D.C.C. § 47-14-05..9, 10 | |||||||||||
| Rule 67 N.D.R.Civ.P.1, 6, 14 | |||||||||||
STATEMENT OF FACTS
¶1 Most of the facts herein are detailed in Stockman Bank of Montana v. AGSCO, Inc., 2007 ND 26, 728 N.W.2d 142. During 2002, Jim Hardy and Hardy Farm, Inc. (Hardy Farm) bought chemical from AGSCO, Inc. receiving extended terms through Capital Harvest, Inc. (collectively referred to herein as "AGSCO"). Id. at ¶¶ 4-5. During 2002, Hardy Farm experienced difficulty paying its creditors. Id. at ¶ 6. Plaintiff, Stockman Bank a creditor of Hardy Farm, deposited checks from the proceeds of the sale of Hardy Farm crops in the amount $1,120,642.65 with the District Court in McKenzie County under rule 67 of the North Dakota Rules of Civil Procedure and North Dakota Century Code section 32-11-02. Id. The court was charged with determining who had priority to the crop proceeds. Id. On March 31, 2003, the Court deposited the funds in an interest bearing account with an initial rate of 1.5% per annum. (App. p. 24).
¶2 In January of 2006, the Court signed an order granting AGSCO's motion for final summary judgment and decree with regard to the crop proceeds. Stockaman Bank, at ¶ 8. On January 27, 2006, the Clerk of District Court entered the Judgment in favor of AGSCO and released the funds on deposit in the amount of $287,406.30 to AGSCO. Id.
¶3 On appeal to the North Dakota Supreme Court, the Court remanded the case in part, (1) limiting AGSCO's lien to crops grown only in North Dakota and (2) for a determination of the amount of crops grown in North Dakota. Id. at ¶ 36. The parties stipulated as to the division of crops grown in North Dakota and Montana. (App. p. 18). On June 11, 2007, AGSCO remitted $127,810.07 to Stockman Bank representing the lien amount for which AGSCO collected on crops grown in Montana. (App. p. 21, 22).
¶4 The plaintiff brought a motion to determine whether Stockman Bank was entitled to interest on the money held by AGSCO from January 27, 2006 until it was remitted to Stockman Bank on June 11, 2007, and if they were entitled at what rate. (App. p. 21-22). Upon hearing the motion the Court awarded interest at the rate of one and a half percent on the money held by AGSCO. (App. 23-24).
LAW AND ARGUMENT
I. Standard of Review
¶5 Whether to grant interest in an action for the breach of an obligation not arising from contract . . . interest may be given in the discretion of court or jury. N.D.C.C. § 32-03-05. While the standard of review for issues of law is de novo, the issue of the rate of interest in this case of equity is closely tied to the court's discretion in initially allowing interest. The amount of interest owed where funds are taken out of the district court's possession and then returned to the district court is one of first impression in North Dakota.
II. Applying the judgment rate is contrary to law and would unduly benefit Stockman Bank.
¶6 Stockman Bank argues they are entitled to interest at the judgment rate. In this case there is no judgment against AGSCO or against Stockman Bank. This case at the onset was an interpleader action under Rule 67 of the North Dakota Rules of Civil Procedure and pursuant to North Dakota Century Code chapter 32-11. An interpleader action "whether pursuant to statute or rule, is a device for resolving multiple adverse claims to a fund or liability in one proceeding." Walters v. Kiker, 482 N.W.2d 626, 628 (N.D. 1992). The only issue to be decided by the district court in this case was who had priority to Hardy Farm's crop proceeds. The fund or the money from the sale of the crop was the outer limit of the controversy. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 534, 87 S.Ct. 1199, 1205, 18 l.Ed.2d 270, (1967). The fund itself is the target of all of the claimants. Id. Consequently there is no judgment entered against a claimant, but rather a decree or judgment dividing the fund. See id.
¶7 The facts in this case indicate, there was no judgment against AGSCO in favor of Stockman Bank or vice versa. Because there was no judgment against either of the parties, applying the judgment rate here makes no sense and at best is inapplicable. Neither party ever owed the other party. Even had there been a judgment against AGSCO in favor of Stockman Bank, that judgment would not have come about until such time that the parties stipulated to the amount of proceeds from crops grown in North Dakota June 7, 2007. (App. p. 19-20). Thus, had there been a judgment against AGSCO, Stockman Bank would only be entitled to the rate after June 7, 2007.
¶8 Stockman Bank claims that equity requires that the bank be compensated for the lack of use of the funds during the period AGSCO had possession of the funds. However, had the district court not issued the funds to AGSCO, the funds would not have been in the possession of Stockman Bank. They would have had no use of the funds until after the appeal was decided in Stockman Bank of Montana v. AGSCO, Inc., 2007 ND 26. Even after the appeal the district court was still charged with determining which proceeds stemmed from crops grown in Montana and North Dakota. Id. at ¶ 36. The earliest Stockman Bank would have had the funds is June 7, 2007. The money would have remained in the court ordered bank account earning interest at one and one half percent. Equity does not require Stockman Bank to be compensated for the loss of the use of funds for which it would not have received until June 7, 2007. Simply they were not entitled to those funds until the district court ruled or the parties stipulated to that effect.
III. Because there was no judgment against AGSCO pre-judgment interest is inapplicable.
¶9 Stockman Bank has argued that at the least they should be entitled to pre-judgment interest under North Dakota Century Code section 32-03-04. Where there is no specific contractual rate of interest, prejudgment interest should be calculated at the legal rate under N.D.C.C. § 47-14-05. See Hirschkorn v. Severson, 319 N.W.2d 475, 480 (N.D. 1982). Under N.D.C.C. § 47-14-05 the legal rate of interest is six percent. While clearly the judgment rate in this matter does not apply, it would also be unfair to reward Stockman Bank by putting them in a position greater than they would have been by awarding them interest or at the most interest at a rate above what the money would have received had it remained deposited with the Court.
¶10 Pre-judgment interest presupposes that a judgment exists against a party. Here the only issue to decide is how to divide what is in the court's possession. See Walters, 482 N.W.2d at 628. Any judgment and decree merely sets the priorities with regard to the money in the Court's possession. Id. Until the Court decides otherwise ownership is undecided. Quite simply the money was not Stockman Banks until the parties agreed as such. It is true that
'Every person who is entitled to recover damages certain or capable of being made certain by calculation, the right to recover which is vested in him upon a particular day, also is entitled to recover interest thereon from that day, except for such time as the debtor is prevented by law or by the act of the creditor from paying the debt.'
Midland Diesel Service & Engine Company v. Sivertson, 307 N.W.2d 555, 558 (N.D. 1981). However, in this case Stockman Bank did not have a vested right of recovery until judgment was rendered or until the parties reached an agreement. See id. AGSCO, did not owe any money to Stockman Bank. There was no legal indebtedness as contemplated under North Dakota Century Code section 47-14-05. The legal indebtedness did not occur until June 7, 2007. See id.
¶11 The interest rate that was decided upon by the court was not meant to make Stockman Bank whole. Rather, the amount made the fund whole. The interest rate decided upon by the court put the fund in the same position that it would have been had the money remained there during the course of the appeal. Until that time the Bank had no vested interest in the money and allowing interest would be inequitable. Id.
¶12 Stockman Bank relies on an Iowa case Muchmore equipment, Inc. v. Grover, 334 N.W.2d 605 (Iowa 1983). In Muchmore the defendant was ordered to pay punitive damages. Id. at 606. The defendant was garnished before the punitive damages were reversed by the Iowa Supreme Court. Id. at 606-7. The Iowa Supreme Court ruled that the defendant was entitled to interest on its money that was garnished from them for the punitive damages. Id. at 610.
¶13 Unlike the facts in this case, the defendant in Muchmore had a judgment against it personally to pay money to the plaintiff including punitive damages. Id. at 606-7. When the plaintiff garnished the money from the defendant, the defendant had a vested interest in that money. In this case, Stockman Bank was never ordered to pay money to AGSCO. The money deposited in the court did not belong to Stockman Bank until such time as the district court made that decree or all the parties agreed. Furthermore, the money that was paid over to AGSCO prior to the appeal did not belong to Stockman Bank. Stockman Bank had no vested right to the money until a determination was made otherwise or the parties agreed.
¶14 The whole point of depositing the funds with the court pursuant to Rule 67 of the North Dakota Rules of Civil Procedure is because ownership of the funds and the priority to the funds are in dispute. AGSCO did not use Stockman Bank's funds. The funds AGSCO received were in dispute until the parties stipulated or the Court ruled otherwise.
IV. If the Plaintiff is entitled to interest they should be in no better position than if the money had not been paid to AGSCO.
¶15 The plaintiff in this case requests that this Court order AGSCO to pay interest at the judgment rate on the money paid over to them in January of 2006. However a brief review of the facts would indicate that this would unfairly benefit the Plaintiffs and put them in a better position than had the money simply stayed in the interest bearing account. In effect AGSCO would be supplementing Hardy Farm by adding to the crop proceeds deposited with the district court.
¶16 The parties in this action both disagreed as to the amount and validity of AGSCO's crop lien. Had AGSCO not received the money from the Court, Stockman Bank would have still filed their appeal. The money in AGSCO's possession would have remained in the court mandated interest bearing account at an annual rate of 1.5%. At this rate the interest on the account for 500 days would amount to $2,626.23 a far cry from the requested $18,359.13. Stockman Bank should not be able to gain almost $16,000 and be put a better position than had AGSCO not received the money in January of 2006.
CONCLUSION
¶17 Appellees respectfully contends the decision of the District Court should be upheld.
Respectfully submitted this 15th day of February 2008.
| By: ____ |
| David J. Eilertson ID# 05587 |
| General Counsel Brown Corporations |
| 1168 12th Street NE |
| P.O. Box 13458 |
| Grand Forks, ND 58208-3458 |
| Phone: (701) 792-3530 |
| Fax: (701) 792-3533 |
| Attorney for: Defendants/Appellees |
| AGSCO Inc. and Capital Harvest, Inc. |