Alerus Fin. N.A. v. Marcil Grp. Inc.

• Decision Date: 18 October 2011
• Docket Number: No. 20110113.,20110113.
• Citation: 2011 ND 205,806 N.W.2d 160
• Parties: ALERUS FINANCIAL, N.A., Plaintiff and Appellee, v. The MARCIL GROUP INC., a North Dakota Corporation, Michael J. Marcil, an individual, and Arthur S. Rosenberg, an individual, Defendants and Appellants.
• Court: North Dakota Supreme Court

2011 ND 205

806 N.W.2d 160

ALERUS FINANCIAL, N.A., Plaintiff and Appellee,

v.The MARCIL GROUP INC., a North Dakota Corporation, Michael J. Marcil, an individual, and Arthur S. Rosenberg, an individual, Defendants and Appellants.

No. 20110113.

Supreme Court of North Dakota.

Oct. 18, 2011.

John Stephen Foster, Grand Forks, N.D., for plaintiff and appellee.

Joel Matthew Fremstad, Fargo, N.D., for defendants and appellants.

SANDSTROM, Justice.

[¶ 1] The Marcil Group, Inc. (“TMGI”), Michael J. Marcil, and Arthur S. Rosenberg appeal from a judgment awarding Alerus Financial, N.A., $2,520,383.07 based on guaranties they had given Alerus for a commercial real estate loan made to KRE, LLC. We affirm the judgment against TMGI and Marcil, concluding the district court correctly interpreted the law, correctly ruled there are no genuine issues of material fact precluding summary judgment, and did not abuse its discretion in denying their motion for additional time to conduct discovery.

I

[¶ 2] In November 2008, KRE received a $2,600,000 loan from Alerus to purchase commercial real estate in Fargo. Marcil and Rosenberg are respectively the chief executive officer and president of TMGI, which holds 51 percent of KRE's stock. KRE granted Alerus a first mortgage against the property purchased with the loan proceeds. TMGI, Marcil, and Rosenberg individually executed separate documents guaranteeing KRE's debt. Each guaranty contract provided in part:

2. SPECIFIC AND FUTURE DEBT GUARANTY. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and to induce you, at your option, to make loans or engage in any other transactions with the Borrower from time to time, I absolutely and unconditionally agree to all terms of and guaranty to you the payment and performance of each and every Debt, of every type, purpose and description that the Borrower either individually, among all or a portion of themselves, or with others, may now or at any time in the future owe you, including, but not limited to the following described Debt(s) including without limitation, all principal, accrued interest, attorneys' fees and collection costs, when allowed by law, that may become due from the Borrower to you in collecting and enforcing the Debt and all other agreements with respect to the Borrower.

A promissory note or other agreement, No. 759848001, dated November 14, 2008, from KRE LLC (Borrower) to you, in the amount of $2,600,000.00.

....

4. UNCONDITIONAL LIABILITY. I am unconditionally liable under this Guaranty, regardless of whether or not you pursue any of your remedies against the Borrower, against any other maker, surety, guarantor or endorser of the Debt or against any Property. You may sue me alone, or anyone else who is obligated on this Guaranty, or any number of us together, to collect the Debt. My liability is not conditioned on the signing of this Guaranty by any other person and further is not subject to any condition not expressly set forth in this Guaranty or any instrument executed in connection with the Debt. My obligation to pay according to the terms of this Guaranty shall not be affected by the illegality, invalidity or unenforceability of any notes or agreements evidencing the Debt, the violation of any applicable usury laws, forgery, or any other circumstances which make the indebtedness unenforceable against the Borrower. I will remain obligated to pay on this Guaranty even if any other person who is obligated to pay the Debt, including the Borrower, has such obligation discharged in bankruptcy, foreclosure, or otherwise discharged by law.

[¶ 3] In 2010, KRE defaulted on the promissory note. Alerus declared the entire balance of the loan due, commenced a foreclosure action against KRE, and indicated it would not seek a deficiency judgment against KRE but would instead pursue its available remedies against the guarantors. In January 2011, the district court granted Alerus's motion for summary judgment in the foreclosure action against KRE and scheduled a sheriff's sale of the property for early March 2011. KRE filed for bankruptcy shortly before the scheduled sale, and the sheriff's sale was cancelled.

[¶ 4] During this time, Alerus had also begun a separate action against TMGI, Marcil, and Rosenberg to enforce the guaranties. In their answer to the complaint, the guarantors specifically alleged that Alerus's “separate action on the guaranty is contrary to the plain language and requirements of [the provisions for deficiency judgments on commercial real property in] N.D.C.C. § 32–19–06.1” and that “it was the intention and agreement of the parties that [T]MGI be the primary guarantor and that Marcil and Rosenberg be secondary guarantors.” The guarantors also alleged in their answer that they “preserve and reserve any and all defenses, affirmative defenses, claims, counterclaims, and third party claims available to it, including but not limited to waiver, estoppel, duress, failure of consideration, fraud, illegality, unconscionability, payment, release, novation, election of remedies, unclean hands, splitting one's cause of action, and failure to comply with N.D.C.C. § 32–19, pending further discovery and investigation.”

[¶ 5] After Alerus moved for summary judgment, the guarantors moved to dismiss the action on the grounds that Alerus “has failed to comply with [N.D.C.C. § 32–19–06.1] and has otherwise unlawfully split its cause of action.” In response to the summary judgment motion, the guarantors argued that summary judgment should be granted in their favor and, alternatively, that “the pending motion be denied on the basis of existing questions of material fact and/or to allow additional discovery.” Marcil and Rosenberg also submitted virtually identical affidavits stating:

3. Before and during the time periods in question, I was involved with efforts to obtain literally tens of millions of dollars of financing for The Marcil Group. While I was agreeable to acting as a guarantor in these transactions, it was always my understanding that The Marcil Group would be primarily liable and that I would be secondarily liable. After initial discussions would be had with lenders by Mr. Kinzel, myself and/or Arthur Rosenberg, would generally meet with representatives of the lender in an effort to “seal” the deal. During these meetings, myself and/or Arthur Rosenberg would generally discuss the operations of The Marcil Group and the willingness of myself and/or Arthur Rosenberg to be secondarily liable.

4. As a person signing literally hundreds of different loan documents, I rely on the lender to be fair and accurate in presenting such documents to me for signature. I would not have agreed to sign the guaranties from Alerus had I understood that not only was I considered primarily liable, but that Alerus could sue me without even first having to sell the underlying property and giving credit to the guarantors for the fair market value of the building.

[¶ 6] The district court granted Alerus's summary judgment motion and denied the guarantors' motion to dismiss. The court concluded there were no genuine issues of material fact and held TMGI, Marcil, and Rosenberg jointly and severally liable for $2,520,383.07 under the terms of their guaranties. In June 2011, while this appeal was pending, Rosenberg filed for bankruptcy. Rosenberg's appeal is stayed pending discharge of his bankruptcy proceedings.

[¶ 7] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27–05–06. TMGI and Marcil's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28–27–01.

II

[¶ 8] TMGI and Marcil argue the district court erred in granting summary judgment in favor of Alerus enforcing their individual guaranties.

[¶ 9] The standard for summary judgment is well-established:

“ ‘Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.’ ” First Int'l Bank & Trust v. Peterson, 2011 ND 87, ¶ 7, 797 N.W.2d 316 (quoting Lucas v. Riverside Park Condo. Unit Owners Ass'n, 2009 ND 217, ¶ 16, 776 N.W.2d 801).

A

[¶ 10] TMGI and Marcil argue the district court erred in refusing to dismiss Alerus's action because it failed to comply with the provisions of N.D.C.C. § 32–19–06.1, which governs deficiency judgments on commercial property. The district court ruled the statute did not apply to Alerus's action to enforce the individual guaranties.

[¶ 11] Section 32–19–06.1, N.D.C.C., provides:

In an action involving the foreclosure of a mortgage on commercial real property, the plaintiff shall state in the pleading whether a deficiency judgment will be sought and if sought shall identify the parties claimed to be personally liable and demand a deficiency judgment against those parties. Within twenty days after the completion of the appraisal, the appraiser shall provide the plaintiff and file with the clerk of court a written report,...