Collection Ctr. Inc. v. Bydal

• Decision Date: 22 March 2011
• Docket Number: No. 20100093.,20100093.
• Citation: 795 N.W.2d 667,2011 ND 63
• Parties: COLLECTION CENTER, INC., Plaintiff and Appelleev.Michael J. BYDAL, Defendant and Appellant.
• Court: North Dakota Supreme Court

795 N.W.2d 667

2011 ND 63

COLLECTION CENTER, INC., Plaintiff and Appellee

v.Michael J. BYDAL, Defendant and Appellant.

No. 20100093.

Supreme Court of North Dakota.

March 22, 2011.

Michael J. Geiermann, Bismarck, N.D., for plaintiff and appellee.Mark Andrew Grainger, East Grand Forks, MN, for defendant and appellant.SANDSTROM, Justice.

[¶ 1] Michael Bydal appeals from a summary judgment awarding Collection Center, Inc. (“Collection Center”) $129,958.15. We conclude Bydal failed to show the existence of genuine issues of material fact regarding Collection Center's assigned claims for contribution and the district court did not err in striking Bydal's amended counterclaim. We affirm.

I

[¶ 2] Bydal and William Reimer are shareholders in Eduit Corporation, a successor corporation to Technology Central, Inc. At all relevant times, Reimer was president of the corporations. Sometime between 2002 and 2003, Technology Central ceased operations and Eduit Corporation was formed to take over Technology Central's business, including its assets and liabilities. At one time Steve Stremick was also a shareholder in Technology Central with Reimer and Bydal. In May 2003, Stremick withdrew from Technology Central.

[¶ 3] In June 2003, Security First Bank made a personal loan to Reimer and Bydal, as co-makers of a note for $200,941.15 with the stated purpose of this loan being to pay off debts of Technology Central. In July 2004, the Bank loaned Eduit Corporation $194,001.69, which was used to pay off five prior loans the Bank had made to Technology Central. The July 2004 loan was personally guaranteed by Reimer and Bydal, as co-guarantors. In June 2006, Reimer paid the Bank a $76,654.34 balance due on the June 2003 loan and a $127,568.57 balance due on the July 2004 loan. The Bank assigned its right, title, and interest in the notes to Reimer, and he subsequently assigned all his right, title, and interest in both loans to Collection Center, a collection agency.

[¶ 4] In September 2006, Collection Center sued Bydal to collect the debts Reimer had assigned to Collection Center. Bydal timely answered and counterclaimed for punitive damages, alleging Collection Center's complaint was without basis in law or fact, was brought to harass Bydal, was an abuse of process and malicious prosecution, and violated N.D.R.Civ.P. 11. Collection Center replied, denying the allegations in Bydal's counterclaim.

[¶ 5] In August 2008, Collection Center sought to amend its complaint against Bydal to allege two claims for contribution under N.D.C.C. § 9–01–08. Collection Center's amended complaint sought judgment against Bydal for one-half of the balances due on the two notes that Reimer had satisfied and assigned to Collection Center. The court granted Collection Center's motion to amend its complaint.

[¶ 6] Bydal thereafter filed an amended answer and an amended counterclaim. Bydal's amended counterclaim eliminated his claims for abuse of process and malicious prosecution, and his request for punitive damages. Instead, Bydal's amended counterclaim asserted Reimer had breached a duty of loyalty in that as president of the corporations, Reimer had breached his fiduciary duties to monitor, oversee, and supervise the business activities of the corporations. Bydal's amended counterclaim alleged that “[a]s a result of Reimer's breach of fiduciary duties, [Bydal] is entitled to the recovery of losses, including lost profits and costs and disbursements, the amount of which to be later determined.” Bydal did not seek leave to amend his counterclaim.

[¶ 7] Collection Center moved for summary judgment and to strike Bydal's amended counterclaim. The district court granted Collection Center summary judgment on the contribution claims and also struck Bydal's counterclaim.

[¶ 8] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27–05–06. Bydal'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

[¶ 9] By summary judgment, the district court decided Collection Center's claims for contribution. Summary judgment is “a procedural device for promptly resolving a controversy on the merits without a trial if there are no disputed issues of material fact and inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law.” Davidson v. State, 2010 ND 68, ¶ 11, 781 N.W.2d 72. In an appeal from a summary judgment, we view the evidence in the light most favorable to the party opposing the motion and give that party the benefit of all favorable inferences that can be reasonably be drawn from the record. Lucas v. Riverside Park Condos. Unit Owners Ass'n, 2009 ND 217, ¶ 16, 776 N.W.2d 801. “The degree of response required of a party opposing a motion for summary judgment is set by the scope of the motion.” Zueger v. Carlson, 542 N.W.2d 92, 94 (N.D.1996).

If the moving party meets its initial burden of showing the absence of a genuine issue of material fact, the party opposing the motion may not rest on mere allegations or denials in the pleadings, but must present competent admissible evidence by affidavit or other comparable means to show the existence of a genuine issue of material fact. Rule 56 requires the entry of summary judgment against a party who fails to establish the existence of a material factual dispute as to an essential element of the claim and on which the party will bear the burden of proof at trial. When no pertinent evidence on an essential element is presented to the trial court in resistance to the motion for summary judgment, it is presumed that no such evidence exists. This Court has repeatedly cautioned that mere speculation is not enough to defeat a motion for summary judgment, and a scintilla of evidence is not sufficient to support a claim.

Barbie v. Minko Constr., Inc., 2009 ND 99, ¶ 6, 766 N.W.2d 458 (internal quotations and citations omitted). “ ‘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.’ ” Lucas, at ¶ 16 (quoting Barbie, at ¶ 5) “ ‘Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.’ ” Id.

III

[¶ 10] Bydal argues the district court erred in granting Collection Center summary judgment on the contribution claims. Bydal's argument requires a brief description of the law for contribution by a co-maker and a co-guarantor of loans and the effect of the assignments in this case.

A

[¶ 11] Section 9–01–08, N.D.C.C., authorizes a right to contribution between joint obligors: “A party to a joint obligation or to a joint and several obligation who satisfies more than that party's share of the claim against all obligors may require a proportionate contribution from all the parties joined with that party.” (Emphasis added.) In In re Estate of Egeland, 2007 ND 184, ¶¶ 8–11, 741 N.W.2d 724, we considered the meaning of “proportionate contribution” under N.D.C.C. § 9–01–08. We said absent proof of a contrary agreement, “ ‘a comaker [of a negotiable instrument] who is required to pay the entire obligation may seek contribution or reimbursement from the other comaker for one half of the amount paid.’ ” Egeland, at ¶ 9 (quoting 12 Williston on Contracts § 36:15, at 676 (4th ed.1999)). We explained, however, disproportionate contribution may be allowed if the parties have agreed to a different allocation on their liability or “one of the comakers has received a disproportionate benefit from the transaction.” Egeland, at ¶ 9. We concluded it was proper under N.D.C.C. § 9–01–08 “to consider the benefit received by ... joint obligors in determining a proportionate contribution between them.” Egeland, at ¶ 11.

[¶ 12] We have also explained that “ ‘guarantors who pay more than their proportionate share of an obligation are entitled to contribution from other guarantors who are jointly and severally liable for the contribution.’ ” Albrecht v. Walter, 1997 ND 238, ¶ 10, 572 N.W.2d 809 (quoting Citizens State Bank v. Bossard, 226 Mont. 75, 733 P.2d 1296, 1298 (1987)). “A guarantor may compel contribution by a coguarantor by an action at law or in equity.” Albrecht, at ¶ 10. “A paying co[-]guarantor may be denied contribution for the wrongful nature of his conduct or for fraudulently inducing another to become a co-obligor.” Id.

[¶ 13] In Albrecht, 1997 ND 238, ¶¶ 11–14, 572 N.W.2d 809, we specifically considered two competing approaches for assessing guarantor liability, observing that “[s]ome courts have held a guarantor may pay off an obligation, take an assignment of guaranty contracts and the promissory note, and enforce a co-guarantor's guaranty,” while “[o]ther courts have held a paying guarantor may not sue on the note, but is limited to contribution.” (Emphasis added.) We concluded the rationale for the contribution approach was persuasive and held “a coguarantor may purchase an assignment of a note and the guaranties, but the initial relationship as coguarantors will operate as a matter of law to restrict the recovery and will govern the rights of the coguarantors.” Id. at ¶ 14 (emphasis added). We further held that “all of the defenses to an action for contribution are available to the coguarantor.” Id. Thus, “[w]hen two or more persons have bound themselves as guarantors, they are generally presumed to be equally liable for a proportion of liability on the note guaranteed, and in the event that one of them has paid more than his or her share of the amount owed, he or she is entitled to demand contribution from the others.” 38A C.J.S. Guaranty § 166 (2008). The presumption of equal liability may be rebutted, and a defendant has the burden of proof regarding an affirmative defense. Id.

[¶ 14] As applied to the arguments raised in this...