First Dakota Nat’l Bank v. Graham

Borrower, a hotel, obtained a loan from Bank in exchange for a promissory note and mortgage on the hotel. To further secure the obligation, Bank obtained separate commercial guaranties from individual Guarantors. Borrower subsequently defaulted on the note. Bank filed an amended complaint for foreclosure and receivership against Borrower. Borrower did not answer the complaint, and the circuit court entered a default judgment against Borrower and ordered that the mortgaged premises be sold at public auction. After obtaining the property, Bank filed a complaint against the Guarantors alleging that each Guarantor owed Bank over $3 million and other expenses associated with Bank having to run the hotel. The trial court granted the Guarantors summary judgment, concluding that Bank’s choice to bid the entire amount of Borrower’s obligation at the auction left no deficiency on Borrower’s obligation to Bank, and therefore, there was no indebtedness for the Guarantors to guarantee. The Supreme Court affirmed, holding that the guaranties were unenforceable because the Borrower’s obligation had been extinguished. View "First Dakota Nat’l Bank v. Graham" on Justia Law