Open Road Trucking v. Swanson , 2019 ND 295 ( 2019 )

Filed 12/12/19 by Clerk of Supreme Court
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2019 ND 295Open Road Trucking, LLC, as Assignee of
Leland A. Swanson, as Assignee of Western
State Bank, Plaintiff and Appellant
v.
Leland A. Swanson, Defendant
and
James B. Lund, Defendant and Appellee
No. 20190091
Appeal from the District Court of Cass County, East Central Judicial District,
the Honorable Steven L. Marquart, Judge.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Opinion of the Court by VandeWalle, Chief Justice.
Bruce A. Schoenwald (argued) and Randolph E. Stefanson (on brief),
Moorhead, MN for plaintiff and appellant.
Sarah Aaberg (argued) and Sean T. Foss (on brief), Fargo, ND for defendant
and appellee.
Open Road Trucking v. Swanson, et al.
No. 20190091
VandeWalle, Chief Justice.
[¶1] Open Road Trucking, LLC, appealed from district court orders: (1)
denying Open Road’s application for a charging order lien against James Lund;
and (2) directing satisfaction of a judgment against Lund and Leland Swanson.
We conclude Open Road was entitled to take an assignment of the judgment
for the purpose of enforcing contribution against Lund. We affirm in part,
reverse in part, and remand.
I
[¶2] In September 2018, Western State Bank sued Swanson and Lund to
enforce commercial guaranties executed by Swanson and Lund. Swanson and
Lund consented to entry of judgment, and a $1,334,374.25 judgment was
entered against Swanson and Lund. The judgment stated Swanson and Lund
were jointly and severally liable.
[¶3] Swanson paid the judgment in full, and contemporaneously, Western
State Bank assigned the judgment to Swanson. The next day, Swanson
assigned his interest in the judgment to Open Road Trucking. The assignment
from Swanson stated it assigned his contribution interest against Lund for
$670,952.24, one-half of the judgment amount.
[¶4] Open Road applied for a $670,952.24 charging order under N.D.C.C. §
10-32.1-45 against Lund’s transferrable interests in five limited liability
companies. In response, Lund argued Open Road was not entitled to a charging
order because Swanson paid the full amount of the judgment debt to Western
State Bank and therefore, the judgment was satisfied. After a hearing, the
district court denied Open Road’s application for a charging order. The court
concluded Open Road was not entitled to a charging order because Swanson
paid the judgment and there remained no unsatisfied part of the judgment
under N.D.C.C. § 10-32.1-45(1).
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[¶5] In January 2019, an execution of judgment was issued against Lund for
the full amount of the judgment. Open Road also began a separate action
against Lund for contribution under N.D.C.C. § 9-01-08. Swanson then moved
for an order directing entry of a satisfaction of judgment. The district court
granted the motion, ruling the judgment against Swanson and Lund was
satisfied as a matter of law. The February 2019 order directing satisfaction of
judgment also cancelled any outstanding execution of judgment.
II
[¶6] Open Road argues the district court erred in denying its application for
a charging order against Lund. Open Road claims it could enforce Swanson’s
right of contribution against Lund under the assignment of the judgment from
Swanson.
[¶7] This case requires us to review the district court’s legal conclusions
relating to the judgment and Open Road’s application for a charging order. It
also involves an examination of various statutes relating to joint and several
obligations, contribution, and judgments. A district court’s legal conclusions
are fully reviewable on appeal. Estate of Conley, 2008 ND 148, ¶ 15, 753
N.W.2d 384. “The interpretation and application of a statute is a question of
law, which is also fully reviewable on appeal.” Id.[¶8] Under N.D.C.C. § 9-12-03, “[p]erformance of an obligation by one of
several persons who are liable jointly under it extinguishes the liability of all
persons who are liable jointly thereon.” Section 9-01-08, N.D.C.C., allows 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.”
[¶9] Here, Swanson and Lund executed a consent to entry of judgment. The
consent to entry of judgment and the subsequent judgment stated Swanson
and Lund were jointly and severally liable. Under N.D.C.C. § 9-12-03,
Swanson’s payment of the judgment debt to Western State Bank extinguished
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both Swanson’s and Lund’s liability to the bank. Swanson’s payment also
created a right to contribution from Lund under N.D.C.C. § 9-01-08.
[¶10] We have stated, “In the absence of proof of a contrary agreement, a co-
maker who is required to pay the entire obligation may seek contribution or
reimbursement from the other co-maker for one half of the amount paid.”
Estate of Egeland, 2007 ND 184, ¶ 9, 741 N.W.2d 724. The presumption of
equal liability may be rebutted, and a defendant has the burden to raise an
affirmative defense. Collection Ctr., Inc. v. Bydal, 2011 ND 63, ¶ 13, 795
N.W.2d 667. Here, the parties agreed to be jointly and severally liable under
the judgment, and nothing in the record shows Lund’s proportionate share of
the judgment was less than one-half of the amount.
[¶11] Judgments are governed by N.D.C.C. ch. 28-20. “Generally, a judgment
is assignable.” Bank of Steele v. Lang, 423 N.W.2d 504, 505 (N.D. 1988) (citing
N.D.C.C. § 28-20-20). After an assignment, the assignee stands in the shoes of
the assignor and acquires no greater rights than held by the assignor. Bydal,
2011 ND 63, ¶ 15, 795 N.W.2d 667.
[¶12] Lund argues the judgment was satisfied after Swanson’s payment of the
judgment, and there remains no unsatisfied amount of the judgment under the
charging order statute. Lund asserts Open Road can enforce contribution from
Lund through a separate action for contribution under N.D.C.C. § 9-01-08.
Open Road claims Swanson’s payment did not satisfy the judgment. Open Road
argues it can use the assigned judgment to enforce contribution from Lund.
Open Road asserts a charging order can be used to compel contribution.
[¶13] A creditor may file a satisfaction of judgment under N.D.C.C. § 28-20-24:
Any judgment rendered or docketed in any district court of
this state may be canceled and discharged by the clerk thereof,
upon the filing with the clerk of an acknowledgment of the
satisfaction thereof signed by the party in whose favor the
judgment was obtained, or by that party’s attorney of record,
executor or administrator, or assignee, and duly acknowledged in
the manner required to admit a deed of real property to record.
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Nothing in the statute or N.D.C.C. ch. 28-20 states a judgment is satisfied upon
full payment of the judgment.
[¶14] Swanson’s assignment of the judgment to Open Road stated he conveyed
his contribution interest against Lund for one-half of the judgment amount. To
enforce the assigned right to contribution, Open Road applied for a $670,952.24
charging order against Lund’s transferrable interests in five limited liability
companies. Lund resisted, claiming no judgment debt remained because
Swanson paid the full amount of the judgment.
[¶15] Charging orders are governed by N.D.C.C. § 10-32.1-45, providing:
1. On application by a judgment creditor of a member or transferee
and following notice to the limited liability company of the
application, a court may enter a charging order against the
transferable interest of the judgment debtor for the unsatisfied
amount of the judgment.
2. A charging order constitutes a lien on the transferable interest
of a judgment debtor and requires the limited liability company to
pay over to the person to which the charging order was issued any
distribution that would otherwise be paid to the judgment debtor.
3. The member or transferee whose transferable interest is subject
to a charging order may extinguish the charging order by
satisfying the judgment and filing a certified copy of the
satisfaction with the court that issued the charging order.
4. At any time before extinguishment under subsection 3, a limited
liability company or one or more members whose transferable
interests are not subject to the charging order may pay to the
judgment creditor the full amount due under the judgment and
thereby succeed to the rights of the judgment creditor, including
the charging order.
5. This chapter does not deprive any member or transferee of the
benefit of any exemption laws applicable to the transferable
interest of the member or transferee.
6. This section provides the exclusive remedy by which a person
seeking to enforce a judgment against a member or transferee
may, in the capacity of judgment creditor, satisfy the judgment
from the transferable interest of the judgment debtor.
a. No other remedy, including foreclosure of the transferable
interest or a court order for directions, accounts, and
4
inquiries that the debtor member might have made, is
available to the judgment creditor that is attempting to
satisfy the judgment out of the judgment debtor’s interest in
the limited liability company.
b. No creditor of a member or transferee has any right to
obtain possession of or otherwise exercise legal or equitable
remedies with respect to a property of the company.
7. This section applies to single member limited liability companies
and limited liability companies with more than one member.
[¶16] The district court concluded that because Swanson paid the judgment in
full, there was no “unsatisfied amount of the judgment” under N.D.C.C. § 10-
32.1-45(1). The court denied Open Road’s application for a charging order.
[¶17] This Court has not addressed the effect of an assignment of a judgment
from a judgment creditor to a judgment debtor. We have not considered
whether a judgment debtor who pays a judgment debt is limited to a
contribution action against co-debtors for their proportionate share of the
judgment debt. Or whether, in lieu of bringing a separate action for
contribution, a judgment debtor may take an assignment of the judgment in
the original action for the purpose of enforcing contribution against judgment
co-debtors.
[¶18] California and Nebraska allow a judgment debtor who has paid more
than his or her proportion of a judgment to take an assignment of the judgment
to compel contribution. In Duke v. Superior Court, 226 Cal. Rptr. 3d 807, 815-
16 (Cal. Ct. App. 2017) (citations omitted), the court explained:
A judgment debtor who has paid more than his or her
proportion of a judgment has three options for enforcing the right
to contribution: statutory contribution, assignment, or an action on
implied contract for contribution.
....
In addition to bringing a [statutory] noticed motion to compel
contribution or repayment, a joint judgment debtor may take an
assignment of the judgment. However, by taking assignment of the
5
judgment, the judgment debtor is entitled to use the assignment
only for purposes of enforcing contribution.
[¶19] In Duke, the court discussed earlier cases explaining the principle of
allowing a judgment debtor to take an assignment of the judgment to enforce
contribution. 226 Cal. Rptr. 3d at 816-17 (citing Williams v. Riehl, 59 P. 762(Cal. 1899); Nat’l Bank v. Los Angeles Iron & Steel Co., 84 P. 468 (Cal. Dist. Ct.
App. 1906); Tucker v. Nicholson, 84 P.2d 1045 (Cal. 1938)).
[¶20] In Williams, 59 P. at 763, three judgment debtors paid a judgment and
took an assignment of the judgment. The debtors sought execution of the
judgment against another co-debtor who had paid nothing. Id. The California
Supreme Court explained its rationale for allowing a judgment debtor to take
an assignment of a judgment and enforce the judgment by execution against a
judgment co-debtor:
Equality is equity. The moment one co-surety or joint judgment
debtor pays the debt of his principal, he has a right to recover from
his cosurety or joint judgment debtor his proportionate share. The
law gives him this right, and also imposes upon his co-surety the
duty of paying his proportionate share. The obligation is as binding
upon the co-surety as if created by promissory note or contract. It
would be no defense for a defendant, when sued upon a promissory
note or other written contract, to set up that the plaintiff held
collateral securities or property for the purpose of indemnifying
himself. Why should it be a defense in this kind of an action? Why
should the plaintiff, in an action for contribution, after having paid
out his money, be compelled to wait until he can realize upon some
collateral indemnity, which may require years, while his co-surety,
who was as much bound in law and morals as himself by the bond,
has paid nothing? This would not make the burdens of the co-
sureties equal.
Id. at 764. The court concluded, “The respondents, by paying the plaintiff, and
taking an assignment of the judgment, only became entitled to use it for the
purpose of enforcing contribution from their co-sureties or payment from their
principal.” Id. at 764-65. “They were only subrogated to the rights of the
plaintiff for the purpose of using the judgment in order to protect themselves
6
and their co-sureties, and for the purpose of compelling contribution.” Id. at
765.
[¶21] In Tucker, 84 P.2d at 1047 (citations omitted), the California Supreme
Court further held:
The assignment [of the judgment] may be taken in the name of the
judgment debtor, or, as in the instant case, in the name of a third
party. Whether the judgment debtor proceeds . . . by taking an
assignment of the judgment, the payment to the judgment creditor
does not operate as a satisfaction of the judgment as between the
debtor paying it and those jointly liable with him. The judgment is
kept alive in equity to be used by the debtor paying to recover from
his coobligors the proportions they should pay, and he may have
execution against them.
[¶22] In Exchange Elevator Co. v. Marshall, 22 N.W.2d 403, 413 (Neb. 1946)
(quoting Nelson v. Webster, 100 N.W. 411, 414 (Neb. 1904)), the court stated:
The same contention [that a judgment debtor could bring a
separate action for contribution] was disposed of in Nelson v.
Webster, supra. There it was held that “When the person seeking
payment has conclusively shown that he was the surety (here a
joint debtor who had paid his proportionate share of the debt), that
he paid the full amount of the debt (here a substantial part of the
balance), and that the judgment against the defendant had been
assigned to him, there is nothing further necessary to be proved to
authorize him to compel payment.” It was held that no good could
result from compelling the paying debtor first to maintain a
separate suit to establish that which he had already established.
So here, all that could be done in another action has already been
done. [The judgment co-debtor] “has had his day in court and
should pay the debt without further litigation.”
[¶23] Minnesota, North Carolina, Georgia, and Maryland have statutes or
rules allowing a judgment debtor to use a judgment to enforce contribution
from co-debtors when the judgment debtor has paid more than his or her share
of the judgment. See Minn. Stat. § 548.19; N.C. Gen. Stat. § 1B-7; Ga. Code
Ann., § 9-13-78; Md. Rules 2-614.
7
[¶24] We are persuaded by the authorities discussed above. A judgment debtor
who has paid more than his or her proportionate share of the judgment should
not have to bring a separate action against co-debtors to compel contribution
from them. A co-debtor is already obligated to pay under the original judgment;
the interests of justice are not served by requiring the paying debtor to obtain
another judgment for contribution against a co-debtor.
[¶25] Accordingly, we hold that, in addition to a separate action for
contribution under N.D.C.C. § 9-01-08, a judgment debtor, or an assignee of
the judgment debtor, may take an assignment of the judgment for the purpose
of enforcing contribution against co-debtors. The payment to the judgment
creditor does not satisfy the judgment as between the debtor paying it and
those jointly liable. The judgment may be used by the paying debtor to recover
proportionate amounts from his or her co-debtors, and the paying debtor may
enforce the judgment by execution or other lawful means.
[¶26] Applying our holding to this case, we conclude the judgment was not
satisfied as between Swanson and Lund, and Open Road was entitled to take
an assignment of the judgment from Swanson to enforce Swanson’s right of
contribution from Lund for one-half of the judgment amount. The “unsatisfied
amount of the judgment,” as used in N.D.C.C. § 10-32.1-45(1), means Lund’s
proportionate share of the judgment amount. In this case, Lund has not
presented any evidence contesting the amount of his proportional share of the
unsatisfied amount of the judgment. Additionally, any execution sought
against Lund shall only be for his proportionate share.
[¶27] We reverse the district court’s order denying Open Road’s application for
a charging order, and remand for entry of a charging order against Lund’s
transferrable interests in the limited liability companies. We reverse the part
of the court’s February 2019 order directing entry of satisfaction of the
judgment. We affirm that part of the order cancelling any execution of
judgment for the full amount of the judgment.
8
III
[¶28] The parties’ remaining arguments are either unnecessary to our opinion
or without merit. The orders are affirmed in part, reversed in part, and
remanded.
[¶29] Gerald W. VandeWalle, C.J.
Jon J. Jensen
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
9