Sterling Development Group Three, LLC v. Carlson
2015 ND 39
| N.D. | 2015Background
- In 1999 PRACS (founded by Carlson) leased buildings from Sterling Development Group Three and Eight; Carlson signed personal guarantees for rent obligations.
- PRACS was sold to Cetero in 2006; Sterling consented; Carlson ceased daily involvement and joined Cetero’s board.
- Cetero later suspended operations and in 2012 its trustee rejected the East Grand Forks leases, stopping rent payments; Sterling sued Carlson under his guarantees for over $600,000.
- At bench trial the district court found the original leases had been altered without Carlson’s knowledge or consent (notably the janitorial arrangement), and ruled Carlson exonerated from liability under N.D.C.C. § 22-01-15.
- The court also awarded Carlson $7,069.30 in costs and disbursements; Sterling appealed both the dismissal and the costs award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alterations to the underlying leases exonerated Carlson under N.D.C.C. § 22-01-15 | Sterling: No material alteration occurred — lease provisions still made tenant responsible for cleaning | Carlson: Lease obligations were altered (Sterling stopped providing janitorial services; PRACS/Cetero began providing them) without his knowledge/consent, exonerating him | Court: Alteration occurred (janitorial practice changed) and Carlson lacked knowledge/consent; guaranty exonerated |
| Whether Carlson actually or impliedly consented to the alterations | Sterling: Carlson had actual or implied knowledge/consent | Carlson: He had no actual or implied knowledge; no proof he voted/attended approving meetings | Court: No evidence Carlson knew or approved; finding not clearly erroneous |
| Whether the district court abused discretion awarding deposition, document conversion, and transcript costs | Sterling: These costs exceed permitted items and are not taxable | Carlson: Costs were necessary expenses for obtaining evidence and preparing closing brief | Court: Costs for deposition transcripts, converting documents for trial, and trial transcript for closing brief were allowable; no abuse of discretion |
| Whether expert fees for an expert who did not testify are taxable | Sterling: Expert did not testify, was unqualified or biased; fees should not be taxed | Carlson: Statute allows recovery of expert fees even if expert did not testify | Court: Following precedent, expert fee taxable even if expert did not testify; witness was qualified and any bias goes to weight, not admissibility |
Key Cases Cited
- Ag Servs. of America, Inc. v. Midwest Inv. Ltd. P’ship, 585 N.W.2d 571 (1998) (explains guarantor exoneration when creditor alters principal's obligation without guarantor's consent)
- Biteler’s Tower Serv., Inc. v. Guderian, 466 N.W.2d 141 (1991) (defines contract alteration)
- Tri-Continental Leasing Corp. v. Gunter, 472 N.W.2d 437 (1991) (materiality of alteration irrelevant to exoneration under statute)
- Pratt v. Heartview Found., 512 N.W.2d 675 (1994) (expert fees may be taxed even if expert does not testify)