Court Opinion

ID: 8044313
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:48:21.726949+00
Date Added: 2024-06-11T16:37:25.791714
License: Public Domain

Gunderson, J.,
dissenting:
I respectfully dissent. By its holding today, the majority creates the prospect, clearly contrary to legislative intent, that creditors will be able to effect a recovery from guarantors far beyond that to which they are entitled.
1. The statutory scheme involved, NRS 40.451 et seq., is specifically designed to prevent a creditor from subjecting obligors to a deficiency without first seeking a judgment from the district court within three months of foreclosure or trustee’s sale. The purpose of the procedure is to fix the value of the security and thereby prevent imposition upon the obli-gors. Here, the creditors did not comply with the statutory provisions. They therefore acknowledge that they are precluded from seeking any deficiency against the principal obligor. However, they seek to recover the total “deficiency” against a guarantor, whom they allege is not entitled to statutory protection. Such reasoning must be rejected because, first, it would indirectly subject the principal obligor to the same deficiency which could not be directly recovered.
It is an elementary tenet of law that once a guarantor pays the alleged deficiency under the note, he is then subrogated to the rights of the creditor to pursue the maker of the note (and the principal obligor) for any amounts paid on the maker’s behalf. Cf. Union Bank v. Gradsky, 71 Cal.Rptr. 64 (Cal.App. 1968). Under generally accepted principles, the maker-obligor could therefore be subjected by indirection to a debt which could not be recovered directly. Furthermore, to avoid this, if the maker-obligor were allowed to assert a defense against the guarantor under the deficiency statute — a defense created solely by the creditor’s failure to act — the result would be to subject the guarantor to a defense which he never contemplated, and which does not result from his own actions, but from the creditor’s neglect. This result clearly does not follow from the statute in question.
2. Moreover, concerning possible double recovery, I note *558this court held in McMillan v. United Mortgage Co., 82 Nev, 117, 412 P.2d 604 (1966), that a creditor could foreclose on a deed of trust at an-extra-judicial sale and still recover a deficiency. Therefore the legislature took remedial action in 1969 by adding NRS 40.451 et seq., to force a creditor to come to court within three months of foreclosure or trustee’s sale, and present evidence “concerning the fair market value, of the property sold as of the date of . . . sale.” NRS 40.457. Thus, obligors were assured that only one recovery would be effected against them. That is, the creditor could only recover one judgment, no greater than the amount of the outstanding indebtedness, less the value of the security.
The majority narrowly construes the statutory scheme to deny guarantors this protection. However, from the language adopted by the Legislature to describe the parties, it seems apparent that they truly intended to prevent imposition upon all “defendants” liable, and not simply protect mortgagors and trustors.
NRS 40.453 declares that it is against public policy for a document to contain a waiver of a right secured to a “mortgagor or trustor.” However, the statutory provisions dealing directly with deficiencies refer to “defendants personally liable for the debt.” NRS 40.459. See also NRS 40.457(1). It therefore seems inconsistent to only protect the principal obligors. Other courts, in construing similar statutes have held that guarantors are entitled to the same protection as the obligor. See North End Bank & Trust Co. v. Mandell, 155 A. 80 (Conn. 1931); Bedcro Realty Corp. v. Brooklyn Trust Co., 49 N.E.2d 992 (N.Y.App. 1943); State Bank of Albany v. Amak Enterprises, 353 N.Y.S. 857 (N.Y.App.Term. 1974). I submit there is no valid reason to construe this remedial legislation otherwise.