Court Opinion

ID: 9706784
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:51:25.504543+00
Date Added: 2024-06-11T18:22:24.944927
License: Public Domain

ERICKSTAD, Chief Judge,
respectfully dissents.
Although this writer, in Lembke v. Unke, 171 N.W.2d 837 (N.D.1969), and in two cases decided the year before that, Iverson v. Lancaster, 158 N.W.2d 507 (N.D.1968), and in Melland v. Johanneson, 160 N.W.2d 107 (N.D.1968), concluded that prior decisions of this Court must be overruled, notwithstanding the respect normally due precedent, I do not believe that it is proper to overrule Mandan Sec. Bank v. Heinsohn, 320 N.W.2d 494 (N.D.1982). Contrary to the compelling circumstances and the evolutionary growth of the law, over an extended period of time for the most part, which our Court discerned in Lembke, Iver-son, and Melland justifying overruling precedent, such factors are obviously nonexistent in the instant case.
In Heinsohn, the majority of this Court, speaking through Justice Paulson, when considering the same issue involved in this case and after discussing the California decisions of Union Bank v. Dorn, 254 Cal.App.2d 157, 61 Cal.Rptr. 893 (1967), and Riddle v. Lushing, 203 Cal.App.2d 831, 21 Cal.Rptr. 902 (1962), which held in essence that liability, as a guarantor, adds nothing to the primary liability of a principal obli-gor, held to the contrary:
“[A] partner who personally guaranties payment of a partnership debt has changed the nature of his obligation on the debt, and the anti-deficiency statute does not preclude recovery by the bank on the individual guaranty.”
Mandan Sec. Bank v. Heinsohn, 320 N.W.2d at 497.
The following quotation from Heinsohn indicates our reasoning at length:
“The first issue raised is whether or not the anti-deficiency statute contained in the Short-Term Mortgage Redemption Act precludes recovery against the individual partners on their guaranties of the partnership debt. The appellants argue that a partnership is not a separate legal entity and that the partners are therefore the primary obligors on the note, so that their individual guaranties add nothing to their primary liability on the note. *547Thus, they argue, the anti-deficiency statute precludes recovery on the individual guaranties. In support of this argument, the appellants cite two California cases, Union Bank v. Dorn, 254 Cal.App.2d 157, 61 Cal.Rptr. 893 (1967), and Riddle v. Lushing, 203 Cal.App.2d 831, 21 Cal.Rptr. 902 (1962).
“In Dorn and Riddle the respective courts held that a guaranty of a partnership debt signed by a partner in his individual capacity adds nothing to his primary liability as a principal obligor, and therefore recovery on the guaranty is precluded by the anti-deficiency statute. In Dorn, supra, 61 Cal.Rptr. at 894, the court stated:
‘... in the present case it clearly appears that the supposed guarantors against whom suit has been brought are nothing more than principal obli-gors under another name. It is settled that liability as a guarantor adds nothing to the primary liability of a principal obligor. (Valinda Builders, Inc. v. Bissner, 230 Cal.App.2d 106, 40 Cal.Rptr. 735) In our view, respondents, both as principal obligors and as supposed guarantors, are entitled to the full protection of Code of Civil Procedure, section 580d, just as the guarantors in Riddle v. Lushing, 203 Cal.App.2d 831, 834, 21 Cal.Rptr. 902, were entitled as primary obligors to the full benefits and protection of section 580b, the section which prohibits deficiency judgments on purchase money mortgages.’
“We disagree with the conclusions reached by the California courts in Dorn and Riddle....
“Although this Court has previously stated in dicta that a partnership is not a separate legal entity, 501 DeMers, Inc. v. Fink, 148 N.W.2d 820, 824 (N.D.1967), the nature of a partner’s liability on partnership debts is different than his individual liability on individual obligations. In Eastern Metals Corp. v. Martin, 191 F.Supp. 245, 249 (S.D.N.Y.1960), the United States District Court for the Southern District of New York stated:
‘The liability of a partner for the debts and obligations of the partnership has been defined and explained in Ruzicka v. Rager, 305 N.Y. 191, 111 N.E.2d 878, 882, 39 A.L.R.2d 288, from which the following is quoted:
“To some degree the individual liability of a partner is not the ordinary individual liability of one who obligates himself as an individual. Rather, the individual liability of a partner is merely an incident of the partnership liability. Judge Pound writing for the court in Hartigan v. Casualty Co. of America (227 N.Y. 175, 178, 124 N.E. 789, 790, supra) phrased the conception clearly and concisely as follows: ‘When a partnership is established, the liability of the individual partners is an incident of the partnership merely, not a separate and independent liability.’ We think the Hartigan case and Geitner v. United States Fidelity & Guar. Co., 251 N.Y. 205, 167 N.E. 222 [ (1929) ] point this up very clearly.
“The difference in the relationship of a partner as such and as an individual to creditors, e.g., the unavailability of partnership assets for execution on individual claims and the priorities of firm and individual creditors upon insolvency, further illustrate the general principle that a person who holds membership in a partnership acts, serves and is obligated in two distinct and differing capacities (See Partnership Law, §§ 51, 71; Debtor and Creditor Law, Consol.Laws, c. 12, § 277.)”
‘The liability of the partners for an obligation of the partnership, arising from a breach of contract by the partnership, is joint. That is the situation in the case at bar. Neither Shulman nor Martin entered into a separate obligation to perform the partnership contract made by Eastern with Martin Enterprises.’
“The nature of a partner’s liability for partnership debts is set forth in § 45-06-07 of the North Dakota Century Code [§ 15, Uniform Partnership Act]:
‘45-06-07. Nature of partner’s liability. — All partners are liable:
*5481. Jointly and severally for everything chargeable to the partnership under sections 45-06-05 and 45-06-06.
2. Jointly for all other debts and obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract.’
“In the case at bar, the partners have each entered into separate obligations to perform the partnership contract. The effect of these separate obligations is to make the partners’ liability joint and several, rather than joint. The partners are jointly and severally liable on their individual guaranties, and this liability is distinct from their joint liability on the underlying partnership debt. The partners have incurred liability in two separate and distinct capacities and we do not agree with the California courts in Dorn and Riddle that a partner’s liability on his individual guaranty ‘adds nothing to the primary liability’ of the partners.
“We therefore conclude that the guaranties of the individual partners are valid, separate obligations to pay the partnership debt, and recovery on the guaranties is not precluded by the anti-deficiency statute. The anti-deficiency provision in the Short-Term Mortgage Redemption Act is contained in § 32-19.1-07, N.D.C.C.:
‘32-19.1-07. No deficiency judgment allowed. — When any mortgage has been foreclosed under this chapter, the mortgagee or any party claiming by, through, or under said mortgagee shall not be entitled to any judgment for deficiency.’
“In Bank of Kirkwood Plaza v. Mueller, 294 N.W.2d 640, 643 (N.D.1980), we held that anti-deficiency statutes do not preclude recovery from a guarantor:
‘The action in the instant case against the guarantors, on the other hand, is 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. A contract of guaranty is defined as follows:
“The contract of a guarantor is his own separate contract. It is in the nature of a warranty by him that the thing guaranteed to be done by the principal shall be done, and not merely an engagement jointly with the principal to do the thing.... [Citations omitted.] A liability such as this, 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.” Northern State Bank v. Bellamy, 19 N.D. 509, 125 N.W. 888, 890 (1910).
‘See also § 22-01-01, NDCC.
‘Thus, although the guarantors may be required to pay the notes in the instant case, the liability is not predicated on the notes or the mortgages, as in [First State Bank of Cooperstown v. Ihringer, 217 N.W.2d 857 (N.D.1974)], but on the separate contract of guaranty.’ ”
Heinsohn, 320 N.W.2d at 496-498.
Justice VandeWalle, in his dissent in Heinsohn, among other things, distinguished between an individual guaranteeing a partnership debt secured by a mortgage and an individual guaranteeing a corporate debt secured by a mortgage, and, in conclusion, adopted the rationale of the Dorn and Riddle decisions.
I quote, in part, from Justice Vande-Walle’s dissent:
“In' this instance the mortgagor is a partnership, not a corporation. Apparently the majority opinion concludes that Section 45-06-07(2), N.D.C.C., which provides that a partner may enter into a separate obligation to perform a partnership contract, is sufficient to differentiate between a person who signs a mortgage as a partner and executes a guaranty as an individual. I do not agree. The conclusion creates a difference too fine for me to accept. I do agree with the rationale of the decisions cited but not followed in the majority opinion, i.e., Union Bank v. Dorn, 254 Cal.App.2d 157, 61 Cal.Rptr. 893 (1967), and Riddle v. Lushing, 203 Cal.App.2d 831, 21 Cal. *549Rptr. 902 (1962), that liability as a guarantor adds nothing to the primary obligation of a principal obligor.”
Heinsohn, 320 N.W.2d at 502.
Justice Meschke, in writing for the majority of the Court today, apparently not only adopts the rationale of Dorn and Riddle and Justice VandeWalle’s dissent in Heinsohn, all without specific reference thereto, but expands thereon by reference in footnotes three and five to our law relating to guarantors. The implication seems to be that an obligation of a guarantor cannot be larger, nor more burdensome, than that of the principal, and that if a guarantor is not protected by the anti-deficiency statute, his obligation becomes more burdensome than that of the principal, and, consequently, his obligation must be treated the same as the principal’s obligation from the standpoint of deficiency judgments. I do not agree that the obligation, in the sense of section 22-01-12, N.D.C.C., has been made more burdensome, but if that is true, then it would seem to me that the majority opinion in this ease authored by Justice Meschke would result in an overruling of not only Mandan Security Bank v. Heinsohn, 320 N.W.2d 494, but also of Bank of Kirkwood Plaza v. Mueller, 294 N.W.2d 640, as the obligation of an individual guaranteeing a corporate mortgage debt would likewise seem to become more burdensome than the obligation of the principal.
My view is that this issue was carefully reviewed in Heinsohn as recent as 1982 and that, as the Legislature has not acted in five subsequent legislative sessions to change the law as we construed it in Hein-sohn, we should adhere to our opinion in Heinsohn. We should assume that the Legislature is cognizant of our interpretation of the law and that the Legislature is in agreement, otherwise it would have acted to change the law by now.1 If we do *550not do so, the law, as adopted by the majority opinion, albeit to be applied prospectively, will have an immediate deleterious, if not a disastrous, effect upon the credit available to partnerships and possibly family corporations who are trying in desperate times to secure needed credit.
I think the opinions in Mueller and Hein-sohn are as correct, just, and wise today as when they were decided, and, as we said therein, we should not extend the scope of the anti-deficiency statutes beyond that which is clear from the statutes.2
The Legislature has clearly demonstrated that it can and will act quickly in response to a construction of a statute by this Court when it believes that the construction is not consistent with its views of what the law means or what the law should mean. A few dramatic evidences of this are the actions of the Legislature, in effect, overruling Colling v. Hjelle, 125 N.W.2d 453 (N.D.1964) and Stout v. N.D. Workmen’s Compensation Bureau, 236 N.W.2d 889 (N.D.1975).
The majority opinion in Colling held: “In this case, at the time the hearing was held Maurice Colling had been acquitted of the charge for which he was placed under arrest. The officer had no warrant. The crime charged was one for which a lawful arrest could be made only if committed in the presence of the officer. The acquittal established that the crime charged had not been committed either in the presence of the officer or otherwise. That determination was made by a court. It could neither be reversed nor ignored in a hearing before an administrative official who conducted the hearing, presented the evidence, questioned the witness, and made the quasi-judicial determination that resulted in the order revoking the operator’s license. We agree with the trial court that the order of revocation issued by the State Highway Commissioner was properly reversed. The order of the district court is affirmed.”
Colling, 125 N.W.2d at 459.
The dissent in Colling urged that the law should be as follows:
“Our general law of arrest, as it relates to a misdemeanor, permits a police officer, without a warrant, to arrest a person for a public offense committed in the officer’s presence. Whether the arrest is legal should depend upon whether the officer had reasonable grounds to believe that the offense had been committed in his presence by the person arrested and should not depend upon whether the person was subsequently convicted or acquitted of the charge for which he was arrested. ‘The reasonable grounds’ or, as stated by some courts, ‘the probable cause’ which will justify an arrest for a misdemeanor without a warrant must be a judgment based upon the officer’s personal knowledge acquired at the time through the senses or inferences properly to be drawn from the testimony of the senses.” [Emphasis added.]
Colling, 125 N.W.2d at 467.
In 1967 the Legislature, in Chapter 258 of the 1967 Session Laws, amended subsee*551tion 1 of section 29-06-15, N.D.C.C., to read:
“29-06-15. Arrest without warrant. A peace officer, without a warrant, may arrest a person:
1. For a public offense, committed or attempted in his presence; and for the purpose of this subsection a crime shall be deemed committed or attempted in his presence when what the officer observes through his senses reasonably indicates to him that a crime was in fact committed or attempted in his presence by the person arrested.” [Emphasis added.]
This scenario and the amending legislation is a graphic demonstration of how the Legislature can react, and of how it does react, when it is convinced the Court has misconstrued a statute.
In Stout v. N.D. Workmen’s Compensation Bureau, supra, our Court overruled the Workmen’s Compensation Bureau which had denied a claim for death benefits resulting from a heart attack precipitated by work-connected, usual exertion as distinguished from unusual exertion. In so doing, we said:
“We affirm [the district court judgment], secondly, on the basis that the Bureau’s distinction between ‘unusual exertion’ and ‘usual exertion,’ under which it makes awards in eases such as this where the exertion is ‘unusual’ but not where it is ‘usual,’ is an arbitrary distinction which we decline to follow. In Suedel v. North Dakota Workmen's Compensation Bureau, 218 N.W.2d 164, 175 (N.D.1974), the majority of this court said ‘we leave for another day’ the question of the survival of the unusual-exertion rule in this State, while the minority was of the opinion that the rule had not previously existed in this State. Be that as it may, we now state the rule to be that no such distinction is to be observed in this State. In so ruling, we join the majority of jurisdictions and become a part of the trend toward the so-called usual-exertion rule.”
Stout, 236 N.W.2d at 892.
Our decision in Grace v. North Dakota Workmen’s Compensation Bureau, 395 N.W.2d 576 (N.D.1986), discloses how the Legislature, in its 1977 session, reacted to our 1975 decision in Stout by amending the law to require the proof of “unusual stress.” In Grace, we said:
“Section 65-05-05, N.D.C.C., provides for the payment of compensation and other benefits to employees who have ‘been injured in the course of their employment.’ The term ‘injury’ as used in Section 65-05-05, has been construed by this Court to mean ‘compensable injury’ as defined in Section 65-01-02(7), N.D.C.C. [Now section 65-01-02(8), N.D.C.C.] The relevant part of the definition that controls this case reads:
‘If an injury is due to heart attack or stroke, such heart attack or stroke must be causally related to the worker’s employment, with reasonable medical certainty, and must have been precipitated by unusual stress.’ Section 65-01-02(7), N.D.C.C.
“Section 65-01-02(7) was amended by the North Dakota Legislative Assembly in 1977. The 1977 amendment reflects the legislative response to this Court’s holding in Stout v. North Dakota Workmen’s Compensation Bureau, 236 N.W.2d 889 (N.D.1975). In Stout we held that heart attacks occurring within the course of employment that were precipitated by usual exertion were compensable. 236 N.W.2d at 892.
“The legislative history of the amendment indicates that, after Stout, claims for heart attacks increased significantly. Legislative Council, Standing Committee Minutes, 1977, S.B. 2158. Mr. Richard J. Gross, former counsel for the Bureau, testified before committee that the number of heart attack claims rose 500 percent after Stout. To substantially reduce a projected 17 percent increase in premiums resulting from Stout, the legislature enacted Senate Bill 2158 in the 1977 legislative session requiring that a heart attack or stroke be precipitated by unusual stress in order to be compensa-ble. See Chapter 579, Sec. 2, 1977, N.D.Sess.Laws.
*552“The ‘usual exertion’ rule of Stout is no longer a correct statement of law. As we have stated previously, unusual stress ‘is now required by statute....’ Nelson v. North Dakota Workmen’s Comp. Bureau, 316 N.W.2d 790, 794 n. 2 (N.D.1982).”
Grace, 395 N.W.2d at 579-80.
Although there was no dissent in Stout to alert the Legislature as there was in Colling, legislative history following Stout discloses how quickly the Legislature can and will act if it deems it necessary and proper. Accordingly, I would leave to the Legislature the policy-making that is involved in determining the future evolution and growth of the law in this area involving deficiency judgments in situations where individuals have guaranteed the corporate or partnership mortgage debt.
Justice Meschke’s citations to such recent cases as Hagan v. Havnvik, 421 N.W.2d 56 (N.D.1988), and First National Bank & Trust of Williston v. Ashton, 436 N.W.2d 215 (N.D.1989) demonstrate that our Court has not, even while recognizing the exceptions involved in Mueller and Heinsohn, ignored the need to protect debtors when justice and law so requires.
As a realist, I am cognizant that this dissent will likely remain a dissent and not convert other Justices to Justice Pederson’s and my view. It is possible, however, in light of the effect that other dissents have had, that it could influence future legislation. In that respect, it seems that to encourage credit and assure integrity in conjunction with guarantees of corporate or partnership mortgaged debt, both the lender-guarantee and the borrower-guarantor could be required to sign a separate large print affidavit that the lender-guarantee has explained to the borrower-guarantor, and the borrower-guarantor understands that by signing the guaranty the borrower-guarantor has waived all rights under the anti-deficiency judgment law or laws. The Legislature could provide that, if such a document were signed before a notary public or anyone authorized by law to take acknowledgments under oath or affirmation, such a signing would constitute a waiver of such rights. The effect would be to encourage the extension of maximum credit with the attendant risks being knowledgeably undertaken.

. At least as early as 1967, this Court, in Kline v. Landeis, 147 N.W.2d 897, 902 (N.D.1967), in construing a statute, said:
“The legislature, in failing to amend the statute in light of the court’s construction, has acquiesced in that construction, and thus has indicated that the construction is in accord with legislative intent."
In support thereof, we quoted from Barringer v. Miele, 6 N.J. 139, 77 A.2d 895, 897 (1951), quoting Commissioner of Banking and Insurance v. Moresh, 122 N.J.L. 77, 3 A.2d 638, 639 (1939), as follows:
"The construction of a statute by the courts, supported by long acquiescence on the part of the legislature, or by continued use of the same language, or failure to amend the statute, is evidence that such construction is in accordance with the legislative intent."
Kline, 147 N.W.2d at 902.
References were also made in Kline to decisions from Kansas, Nebraska, and Wisconsin.
Since Kline, this principle of law has been applied in Portland Credit Union v. Hauge, 169 N.W.2d 106 (N.D.1969); Skinner v. American State Bank, 189 N.W.2d 665 (N.D.1971); Erdle v. Dorgan, 300 N.W.2d 834 (N.D.1981); and State v. Gefroh, 458 N.W.2d 479 (N.D.1990).
Justice VandeWalle’s special concurrence in Erdle, 300 N.W.2d at 839, seems especially relevant:
"Because this court has previously determined these issues and because there was no legislative action to alter those decisions, I concur in the opinion written by the Chief Justice.”
In 1987, the Fiftieth North Dakota Legislative Assembly rejected a proposed amendment to § 22-01-01, N.D.C.C., which would have in effect overruled this Court’s holding in Heinsohn. House Bill 1566 would have changed § 22-01-01, N.D.C.C., in the following way:
"1. A 'guaranty' shall mean means a promise to answer for the debt, default, or miscarriage of another person, except that a promise made by a partner to answer for an obligation secured by a mortgage on real property granted by the partnership does not create a separate individual liability of the partner.”
This provision was given a do not pass recommendation by the House Judiciary Committee by a 13 to 1 vote. The measure was later defeated on the floor by an 82 to 10 vote.
In opposition to the 1987 bill, Jim Schlosser of the North Dakota League of Savings Institutions, said, "If you don’t want institutions to make high percentage loans to partnerships, which they won’t do without a personal guarantee, then pass this legislation.” Harry Argue, Executive Director of the North Dakota Bankers Association, speaking in opposition to the bill, said “that result of passage of this bill would be that the amount of high percentage loans would be severely restricted and lenders would look that much more frequently to using the corporate type of arrangement. It has become necessary to look at all types of situations that may arise, realizing that a financial institution's] first concern is the protection of its depositors)’] money.” See Hearings on H.B. 1566 before the House Judiciary Committee, Fiftieth Legislative Assembly of North Dakota (February 4, 1987). *550To the best of our knowledge there were no other attempts to set aside this Court’s holding in Heinsohn.
See also, 2A Sutherland Statutory Construction § 45.12 (4th ed.):
”[I]f the court interprets a statute and the legislature fails to take action to change that interpretation, it is presumed that the legislature has acquiesced in the court’s interpretation.”

. In Boettner v. Twin City Construction Company, 214 N.W.2d 635, 640 (N.D.1974), this Court embraced the philosophy of the trial court when, in being asked to enlarge the scope of a statute, said:
"Any such extension should properly be the product of legislative enactment rather than judicial fiat. If a codicil as suggested is to be added to the statute, the legislature should be its author — not the courts.”
See also Heddon v. North Dakota Workmen’s Comp. Bureau, 189 N.W.2d 634, 636 (N.D.1971).
This Court has in the past consistently adhered to the principle that the anti-deficiency provisions should not be extended beyond that which is clear from the statute. See United Bank of Bismarck v. Glatt, 420 N.W.2d 743, 745 (N.D.1988), and Brunsoman v. Scarlett, 465 N.W.2d 162, 167 (N.D.1991).