Opinion ID: 2214876
Heading Depth: 3
Heading Rank: 3

Heading: Interpretation of Anti-Deficiency Statutes in other States

Text: ¶ 62 Our conclusion that a guarantor's liability under a guaranty of payment arises independent of the debt secured by the mortgage is supported by courts in other states interpreting their anti-deficiency statutes. Anti-deficiency statutes are statutes enacted to limit the rights of secured creditors to recover in excess of the security. Black's Law Dictionary 918 (8th ed.2004). Anti-deficiency statutes may prohibit the mortgagee from obtaining a deficiency in certain situations, such as when the sale is by power of foreclosure, the sale purchaser is the mortgagee, or the property is a purchase money mortgage. [16] ¶ 63 Although states have a wide variety of anti-deficiency legislation with a wide variety of statutory language, courts have generally refused to extend to guarantors the protection of such statutes. [17] This general pattern is illustrated by Bank of Kirkwood Plaza v. Mueller, 294 N.W.2d 640 (N.D.1980), where the defendants unconditionally guaranteed any obligation on a loan from a bank to a corporation. Id. at 641. The bank foreclosed, did not seek a deficiency judgment, and brought a separate suit against the guarantors. Id. at 642. The North Dakota Supreme Court was asked to interpret a statute that permitted mortgagees to seek a deficiency judgment against parties personally liable for that part of the debt. Id. at 643. The guarantors sought protection of the statute, which limited recovery in a deficiency judgment to the difference between the amount of the debt and the fair market value of the land. Id. at 642. ¶ 64 The court first distinguished an earlier case in which a party, who was not on the mortgage, had signed the note and was therefore personally liable on the debt. Id. at 643. The court then noted that the liability in the current case was not based on obligations imposed by the notes or the mortgages given to secure the notes, but on a separate and distinct contract of guaranty. Id. The liability, although it may result in requiring a guarantor to pay the note, is not predicated upon `the terms of the instrument,' but upon a contract entirely separate and distinct. Id. (quoting Northern State Bank v. Bellamy, 19 N.D. 509, 125 N.W. 888, 890 (N.D.1910)). The court declined to extend the scope of the anti-deficiency statutes beyond that which is clear from the statute. Id. (citing Fetzer v. Minot Park District, 138 N.W.2d 601 (N.D.1965)). Finally, concluding that the liability of the guarantors derives wholly from the guaranty agreement, the court proceeded to determine liability based on the terms of the agreement. Id. at 643-44. ¶ 65 The Mueller court's inquiry into who was personally liable for that part of the debt is similar to the underlying issue in this case. Like the statute interpreted in Mueller, Wis. Stat. § 846.103(2) applies only to those parties personally liable for the debt. Like the guarantors in Mueller, the Boyers were not liable according to the terms of the note, but rather were liable according to the terms of a wholly separate and distinct contract of guaranty. ¶ 66 Although Mueller is relevant because of the similarity in language between the North Dakota statute in that case and the language of Wis. Stat. § 846.103(2), other courts have reached similar conclusions based on different statutory language. They have refused to extend anti-deficiency protections on the same grounds on which the court in Mueller based its decision: namely, that a guarantor's liability arises not from the debt but from a separate guaranty contract. [18] Because this principle applies to § 846.103(2) as well, we find the interpretation of anti-deficiency statutes in other states persuasive in our interpretation of § 846.103(2).