Court Opinion

ID: 9677732
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:58:13.873798+00
Date Added: 2024-06-11T18:16:58.060013
License: Public Domain

VANDE WALLE, Justice,
dissenting.
I respectfully dissent. The majority opinion provides a method to adroitly avoid the antideficiency statute, Section 32-19.1-07, N.D.C.C., at least with regard to partnerships. Because the majority opinion holds that a partnership debt is a separate obligation from that of the debt of the individual partners, it also concludes that the guaranty of the individual partners is a separate obligation to pay the partnership debt and is not precluded by the terms of the antide-ficiency statute. Therefore, a partnership seeking a loan may be required to provide a mortgage on real property as well as the individual guaranty of the individual partners. In periods of economic “good times” with increasing property prices any default will no doubt be covered by the mortgage security. In periods of recession and deflating prices for real estate we may assume the lender will turn to the individual borrowers (guarantors), unless they are judgment-proof, at which time they may resort to the mortgage security for payment. On its face this arrangement may seem equitable. However, North Dakota’s experience with mortgage foreclosures led our Legislature to enact the antideficiency statutes. The history, purpose, and intent of these statutes has been well documented in First State Bank of Cooperstown v. Ihringer, 217 N.W.2d 857 (N.D.1974), and I will not repeat that background here. It is sufficient to note that the statutes clearly reflect the concern of this State with antideficiency judgments. Both the majority opinion written by Justice Vogel and the opinion concurring in part and dissenting in part written by Justice Teigen concluded that the mortgagee may proceed in an action at law to enforce payment of the debt against any person obligated thereunder who is not the mortgagor or purchase contractor or their successors. Ihringer was concerned with the provisions of Chapter 32-19, N.D. C.C., which permit antideficiency judgments under certain limited conditions. Here, we are concerned with Section 32-19.1-07, a provision of the short-term redemption chapter, which prohibits deficiency judgments altogether.
*502In Bank of Kirkwood Plaza v. Mueller, 294 N.W.2d 640 (N.D.1980), we held that the bank could proceed on the guaranty, separate and apart from the mortgage. In that case the mortgagor was a corporation and, as the facts recited therein indicate, none of the guarantors signed the mortgages and only one guarantor signed the notes. I concede that there is language in that opinion which indicates that a contract of guaranty is separate and apart from the liability which arises from the mortgages or the notes secured thereby. We indicated that we would not extend the antideficiency statutes to include guarantors under their protection. But Bank of Kirkwood Plaza involved a corporation as a mortgagor. Neither that case nor any of the cases cited in support therein involve a guaranty which has been executed by the same individuals who signed the note and mortgage. A corporation is, of course, a legal entity separate and apart from the individual directors, officers, or shareholders of the corporation. I agree that the antideficiency statutes do not protect separate guarantors — those who have not executed the note or mortgage as individuals — but I do not read the decision in Bank of Kirkwood Plaza to hold that mortgagors who also executed a separate guaranty are not within the protection of the antideficiency statutes. To the extent that the decision is so construed, I disavow it. While the majority decision in this instance stops short of stating that individual mortgagors who are also required to sign a guaranty before receiving a loan are not protected by the antidefi-ciency statutes, it indicates, by the quotations from the Bank of Kirkwood Plaza decision, that such may be the holding of the majority if the case were squarely presented to us.
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.Rptr. 902 (1962), that liability as a guarantor adds nothing to the primary obligation of a principal obli-gor.
When the status of a partnership, as opposed to a corporation, is considered with the intended effect of the antideficiency statutes, I cannot conclude that the individual partners can be proceeded against on the basis of their individual guaranties after having executed the note and mortgage as partners. Such a result is a mere circumvention of the protection intended to be afforded by the antideficiency statutes. Notes and mortgages are often contracts of adhesion and if we permit a lender to merely require an individual guaranty from the mortgagees as a condition of the loan and thereby obviate the protection of the anti-deficiency statutes, we do violence to the intent and purpose of the antideficiency statutes.