Brunsoman v. Scarlett

• Decision Date: 16 January 1991
• Docket Number: No. 900234,900234
• Citation: 465 N.W.2d 162
• Parties: Willard C. BRUNSOMAN, Jr., Plaintiff and Appellee, v. Robert K. SCARLETT, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 162

465 N.W.2d 162

Willard C. BRUNSOMAN, Jr., Plaintiff and Appellee, v. Robert K. SCARLETT, Defendant and Appellant.

Civ. No. 900234.

Supreme Court of North Dakota.

Jan. 16, 1991.

Kelsch, Kelsch, Ruff & Austin, Mandan, for plaintiff and appellee; Thomas F. Kelsch (argued).

Zuger, Kirmis, Bolinske & Smith, Bismarck, for defendant and appellant; Jerry W. Evenson (argued).

LEVINE, Justice.

Robert K. Scarlett appeals from a partial summary judgment declaring that Scarlett owed Willard C. Brunsoman, Jr., $203,291.40 on a contract for deed and ordering a jury trial to determine the fair value of the subject property for purposes of applying the provisions of the anti-deficiency judgment law. Following a jury trial, judgment was entered awarding Brunsoman a deficiency judgment of $56,825.56. The questions before us are whether procedural protections of the anti-deficiency judgment statutes may be waived by a mortgagor or vendee after default, and if so, whether they were waived. We agree with the trial court that waiver is permissible, but hold that there was not a valid waiver in this case. We therefore reverse.

In July 1979, Brunsoman leased land in Bismarck to John Larson and Roger Ledebuhr. Larson and Ledebuhr obtained a $135,000 loan from First Federal Savings & Loan Association of Bismarck [First Federal] secured by a note and mortgage. The loan proceeds were used to construct an office building on the leased property. In order to facilitate construction financing, Brunsoman executed a subordination agreement in favor of First Federal.

In April 1984, Larson and Ledebuhr assigned the lease to Scarlett, who executed a first mortgage to First Federal for $133,300, the balance due on the previous mortgage. Brunsoman consented to the assignment and, instead of executing another subordination agreement to recognize First Federal's prior lien position, joined Scarlett in executing the new mortgage to First Federal. In July 1987, the parties entered into a contract for deed in which Scarlett agreed to purchase Brunsoman's property for a "total purchase price" of $150,000.

In January 1988, Scarlett defaulted on the contract for deed. After making payments in April 1988, Scarlett had paid approximately one-half of the $150,000 purchase price. In May 1988, the parties agreed that Brunsoman would hire a realtor in an attempt to sell the property. On June 3, 1988, First Federal sent Brunsoman and Scarlett notices before foreclosure showing a principal and interest balance due of $127,889.96. On June 20, 1988, William and Linda Paape offered to purchase the land and office building for $159,000 subject to certain contingencies.

On August 5, 1988, Brunsoman and Scarlett accepted the Paapes' offer and entered into an agreement with each other which stated in part that "both wish to mitigate, by the sale of the property to the buyer, any loss or liability, if any, that might arise between themselves under the contract for deed, without waiving or forfeiting any rights or defenses available to them under its terms." The parties further agreed to convey their interests to the Paapes or First Federal in order that the Paapes could obtain title to the property free and clear of all claims. Brunsoman acknowledged in the agreement that any sale proceeds left after paying the mortgage and closing costs would be credited against the balance due on the contract for deed.

The sale was closed on August 5 for the agreed-upon price of $159,000. Brunsoman paid the debt owed to First Federal and closing costs, and received $17,219.01, which was applied against the balance remaining on the contract for deed.

On November 3, 1988, Brunsoman sued Scarlett for a deficiency judgment. Brunsoman alleged that Scarlett had defaulted on the terms of the parties' July 1987 contract for deed and that the proceeds from the sale of the property left a deficiency between the amount Brunsoman claimed was due on the contract and the fair value of the property.

The trial court granted Brunsoman's motion for partial summary judgment, concluding among other things that the amount Scarlett owed to Brunsoman was $203,291.40, which consisted of the $74,044.57 balance due on the contract for deed plus the $129,246.83 amount of the mortgage balance paid to First Federal at the time of the sale of the property to the Paapes. The trial court also concluded that Brunsoman was entitled to have a jury determine the fair value of the land and office building, and to a deficiency judgment "if the fair value of the premises, after crediting closing costs, is determined to be less than the sum adjudged to be due on the debt against the premises, plus the costs of the action." In April 1990, a jury awarded Brunsoman a $56,825.56 deficiency judgment against Scarlett. Scarlett then filed this appeal from the trial court's partial summary judgment.

Brunsoman initially asserts that Scarlett's appeal should be dismissed because Scarlett appealed from the partial summary judgment rather than from the final judgment entered after the jury returned its verdict for a deficiency judgment. We disagree.

Attempted appeals from orders for judgment or memorandum decisions, which are generally interlocutory and not appealable, will be treated as appeals from subsequently entered and consistent final judgments, if they appear in the record. E.g., Olson v. Job Service North Dakota, 379 N.W.2d 285, 287 (N.D.1985). The partial summary judgment in this case, although interlocutory and not appealable when entered without a Rule 54(b), N.D.R.Civ.P., certification, is reviewable in an appeal from the final judgment entered on the jury verdict. E.g., Wells County Water Resource Dist. v. Solberg, 434 N.W.2d 577, 579 (N.D.1989). We believe the principle in Olson v. Job Service North Dakota is equally applicable when a party has attempted to appeal from an otherwise interlocutory ruling that has been made reviewable by the entry of a final judgment. Accordingly, we treat Scarlett's appeal as an appeal from the final judgment entered on the jury verdict and proceed to consider the merits.

The parties agree that the anti-deficiency judgment statutes, NDCC Secs. 32-19-06 ¹ and 32-19-07, ² apply in this case. In First State Bank of Cooperstown v. Ihringer, 217 N.W.2d 857, 864 (N.D.1974), this court held that under these statutes a mortgagee or vendor has three options upon default:

"(1) foreclose without asking for a deficiency judgment, or (2) foreclose, asking for a deficiency judgment in a separate action after the sale of the property, and obtain a judgment for only the difference between the mortgage debt plus costs and the fair value determined by a jury against both mortgagors and nonmortgagors personally liable on the note, or (3) sue on the note without foreclosure but with recovery limited to the difference between the amount due on the note plus costs and the fair value of the property determined by a jury."

Brunsoman contends that his action is in the form of a deficiency judgment action on a contract for deed which falls within either option two or three. More specifically, he asserts that under the terms of the August 5, 1988, agreement Scarlett agreed "to waive the need for Brunsoman to foreclose and sell the property at a sheriff's sale, and there was no prejudice, because the balance owing was applied against the debt and the amount of the sale did not determine the property's fair value."

The trial court essentially concluded that the parties' August 5, 1988, agreement ³ constituted both a reservation of Brunsoman's right to seek a deficiency judgment against Scarlett and a waiver of some of Scarlett's procedural defenses under NDCC Sec. 32-19-06. In ruling that Brunsoman could seek a deficiency judgment, the trial court reasoned from the bench:

"The only thing that really convinces me to go one way or the other is the agreement of 8-5-88 of Brunsoman and Scarlett in which they both agree that they do not waive or forfeit any right to defenses they have under the contract for deed. Scarlett agrees to that in paragraph one. Brunsoman agrees to that in paragraph 2. In paragraph 3 they provide how the money is going to be credited, so they are definitely contracting to a sale. And they end up at the bottom of paragraph 4 with recital of this resale will not affect the respective rights of the parties. Now, I don't see anything ambiguous here when they are talking about the rights of the parties. They are talking about all of the rights that are available to anybody on a foreclosure or a cancellation or any kind of a suit in relation to this contract for deed. In other words, they left all rights of defenses to each other. One of those rights is a right on the part of the vendor to have a deficiency judgment. It is true that it is virtually impossible to now fit it into the statute, but by signing this agreement they have waived--they waived a lot of things. They waived the service of Summons and Complaint, the Answer, the trial, the findings of fact, they waived the Sheriff's Sale, and I think we have to pick it up sometime after the sale and then fit it into the statute. And I think that the plaintiff has done that in this case and therefore can proceed."

Scarlett asserts that the trial court erred because our anti-deficiency judgment law does not allow a mortgagor or vendee to waive any rights granted under its provisions.

Statutory rights or benefits may generally be waived by the party entitled to such benefits unless such a waiver is against public policy or the statute declares or implies that they may not be waived. First State Bank v. Anderson, 452 N.W.2d 90, 92 (N.D.1990); Production Credit Ass'n v. Henderson, 429 N.W.2d 421, 423 (N.D.1988); NDCC Sec. 1-02-28.

Scarlett asserts that Sec. 32-19-06 specifically forbids a debtor's waiver of rights because of the statutory language, "[t]he court under no circumstances shall have power to render a...