806 N.W.2d 160
N.D.2011Background
- TMGI, Michael J. Marcil, and Arthur Rosenberg guaranteed KRE, LLC’s $2.6 million loan from Alerus for commercial real estate, with TMGI owning 51% of KRE.
- Alerus foreclosed on KRE in 2010 after default; sheriff sale was planned but canceled due to KRE's bankruptcy.
- Alerus filed a separate action against TMGI, Marcil, and Rosenberg to enforce the guaranties; guarantors asserted defenses including misinterpretation of NDCC § 32-19-06.1 and issues of severability and damages.
- District court granted Alerus summary judgment; ruled guaranties create secondary liability and are not subject to anti-deficiency protections; found no genuine issues of material fact.
- Rosenberg filed for bankruptcy during the appeal; remaining defendants’ appeal challenges were denied, and judgment against TMGI and Marcil affirmed.
- Court concluded NDCC § 32-19-06.1 does not apply to guaranties, that there was no improper split of causes of action, and that the guaranties were not unenforceable adhesion contracts; denied additional discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 32-19-06.1 apply to guaranties enforcing deficiencies? | TMGI, Marcil argue it applies to guaranties as a deficiency action. | Alerus claims guaranties fall outside § 32-19-06.1; statute targets foreclosures. | Statute does not apply to guaranties; not an anti-deficiency protection. |
| Is there improper split of claims by separate guaranty and foreclosure actions? | Actions are distinct; no double recovery violation. | Separation of actions violates rule against splitting causes of action. | No improper split; separate actions permitted for guaranty vs. mortgage. |
| Are guaranties contracts of guaranty or surety, affecting liability scope? | Guaranties create secondary liability; possible broader interpretation. | Guaranties are contracts of guaranty, not surety, thus secondary liability. | Contracts are guaranties (secondary liability). |
| Are the guaranties unenforceable adhesion contracts or procedurally unconscionable? | Guaranties arestandard forms; risk of adhesion. | Guarantors are experienced; waivers and terms are enforceable. | Not unenforceable adhesion contracts. |
| Do fraud, mistake, waiver, or estoppel defenses defeat summary judgment? | Plausible defenses exist to defeat enforcement. | Affidavits are vague; no explicit misrepresentations or fraud details. | No genuine issues of material fact; defenses fail. |
Key Cases Cited
- First Int'l Bank & Trust v. Peterson, 2011 ND 87 (ND) (standard for summary judgment; de novo review)
- Lucas v. Riverside Park Condo. Unit Owners Ass’n, 2009 ND 217 (ND) (summary judgment and factual inferences on appeal)
- Mueller, 294 N.W.2d 643 (ND 1980s) (guarantors not protected by anti-deficiency statutes)
- Anseth, 503 N.W.2d 568 (ND 1993) (separate guaranty obligations distinct from debt; anti-deficiency statute)
- State Bank of Burleigh County v. Porter, 167 N.W.2d 527 (ND 1969) (guaranty of payment; no subrogation required before actions)
- Christianson, 494 N.W.2d 165 (ND 1992) (foreclosing lender may pursue guaranty without limiting to deficiency)
- Symington, 2010 ND 56 (ND) (parol evidence may be used only when ambiguity or fraud/mistake)
- Hildenbrand v. Capital RV Ctr., Inc., 2011 ND 37 (ND) (split action doctrine context; caution against duplicative suits)