SKW Real Estate Ltd. Partnership v. Gold

702 N.E.2d 1178, 428 Mass. 520, 1998 Mass. LEXIS 708
CourtMassachusetts Supreme Judicial Court
DecidedDecember 16, 1998
StatusPublished
Cited by8 cases

This text of 702 N.E.2d 1178 (SKW Real Estate Ltd. Partnership v. Gold) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SKW Real Estate Ltd. Partnership v. Gold, 702 N.E.2d 1178, 428 Mass. 520, 1998 Mass. LEXIS 708 (Mass. 1998).

Opinion

Greaney, J.

We granted the plaintiff’s application for further appellate review to consider whether two promissory notes executed by the defendants in their capacities as general partners of Northeast Glen Limited Partnership (limited partnership) constituted obligations distinct from guaranties they executed in their individual capacities which obligated them to pay all of the partnership’s debts. The plaintiff contends that the obligations are distinct so that, on default of the limited partnership’s obligations under the notes and the foreclosure of the related [521]*521mortgage, the plaintiff’s failure to comply with the notice required by G. L. c. 244, § 17B, did not preclude commencement of an action against the individual defendants as guarantors.2 A panel of the Appeals Court divided on the issue, with two Justices concluding that, because the defendants’ guaranties “substantively do no more than duplicate [their] already existing liability” as makers of the notes, whether the plaintiff brought an action on the notes or the guaranties, the plaintiff was compelled to comply with the statutory notice provisions. JER SKW Servs., Inc. v. Gold, 44 Mass. App. Ct. 243, 249 (1998). We conclude that the defendants’ obligations pursuant to the guaranties were separate and distinct from their obligations under the notes, and thus the guaranties are enforceable without regard to § 17B.3

The pertinent facts are as follows. In September, 1991, the defendants, in their capacity as general partners of the limited partnership, executed and delivered to Shawmut Bank, N.A., two promissory notes (in the amount of nearly two million dollars) secured by a mortgage on certain commercial property in [522]*522Westfield. Each of the defendants, in his individual capacity, executed contemporaneously with the promissory notes a guaranty reaffirming his obligation to pay all of the limited partnership’s debts pursuant to guaranties each had executed in April, 1988. By the terms of those documents, the defendants jointly and severally “unconditionally guarantee[d]” to Shaw-mut “full and prompt payment at maturity of all present and future obligations” of the general partners of the limited partnership.

The plaintiff purchased from Shawmut the notes, guaranties, and all related mortgage documents. After the limited partnership defaulted on its obligations under the notes and mortgage, the plaintiff4 commenced an action in the Superior Court against the defendants as guarantors of the limited partnership’s obligations, for the “full amount of the mortgage due.” Prior to filing its complaint, the plaintiff twice demanded that the defendants pay amounts that might be due under the notes, but the defendants failed to make payment. State Street Bank and Trust Company thereafter sold the Westfield property at a foreclosure sale. A judge in the Superior Court denied the plaintiff’s motion for summary judgment and entered a judgment dismissing the complaint.5

The Appeals Court, relying principally on Seronick v. Levy, 26 Mass. App. Ct. 367, 371 (1988), agreed with the judge’s determination that the defendants’ liability as individual guarantors “merely duplicates” their liability as makers of the note, and thus the defendants’ guaranties are “surplusage.” JER SKW Servs., Inc. v. Gold, supra at 246-248. The court based its result on the fact that, although the defendants’ guaranties “could potentially enlarge the scope of [their] liability by exposing [523]*523them to liability for any future advances made to the limited partnership as well as for the amounts due on the notes,” because “no other advances were in fact made to the limited partnership^] [t]he defendants’ actual liability remains identical with respect to the notes and the guaranties.” Id. at 247. In such circumstances, the court wrote, “suit may only be brought subject to the statutory notice requirement.” Id. at 249. The dissent in the Appeals Court relied on the unconditional nature of the guaranties and the plain language of § 17B, to conclude that the statute “does not impose the obligation of notice” in circumstances “where the lender and the borrower separately agree that the borrower will be liable, in any event, for any unpaid balances then or thereafter due the lender.” Id. at 253 (Gillerman, J., dissenting). For the reasons more fully elucidated by the dissent, see id. at 251-253, we conclude that judgment for the plaintiff should be entered on its motion for summary judgment.

General Laws c. 244, § 17B, “was designed for the protection of mortgagors and those liable with them or through them on mortgage obligations.” Senior Corp. v. Perine, 16 Mass. App. Ct. 967, 967 (1983), quoting Palumbo v. Audette, 323 Mass. 559, 560 (1949). As the dissenting Justice in the Appeals Court explained, the provision “precludes an action for a deficiency on an ‘obligation secured by mortgage of real estate’ unless the required notice is sent to the person to be charged for the deficiency” (emphasis in original). JER SKW Servs., Inc. v. Gold, supra at 251 (Gillerman, J., dissenting). The statutory notice provision requires that the notice “state the mortgagee’s intention to foreclose the mortgage on property which ‘secure[s] a note (or other obligation) signed by you, for the whole, or part, of which you may be liable to me in case of a deficiency in the proceeds of the foreclosure sale’ ” (emphasis in original). Id. It has been said that “[tjhere is no statutory obligation on the part of a foreclosing mortgagee to notify guarantors because the liability of a guarantor does not flow from an ‘obligation secured by a mortgage of real estate’ but is independent of that obligation.” Seronick v. Levy, 26 Mass. App. Ct. 367, 372 (1988).

Some States have enacted “anti-deficiency” laws which operate to prohibit or limit deficiency judgments following foreclosure, and courts in those jurisdictions generally do not permit deficiency judgments against guarantors who were also makers. See, e.g., Union Bank v. Dorn, 254 Cal. App. 2d 157, [524]*524159 (1967); Valinda Bldrs., Inc. v. Bissner, 230 Cal. App. 2d 106, 111 (1964). See also Federal Deposit Ins. Corp. v. Singh, 977 F.2d 18, 25 n.10 (1st Cir. 1992), and cases cited. Massachusetts has no such law, and we are not persuaded by the defendants’ attempts to broaden the scope of § 17B to include such a policy. Section 17B is unambiguous: it does not provide a guarantor with the same protections afforded those primarily liable on a note, even if the guarantor was also the primary obligor of the instrument.6

In addition, the defendants’ guaranties, unlike those at issue in Seronick v. Levy, supra; Valinda Bldrs., Inc. v. Bissner, supra; and Riddle v. Lushing, 203 Cal. App. 2d 831, 836 (1962), clearly are broader than the notes.

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Bluebook (online)
702 N.E.2d 1178, 428 Mass. 520, 1998 Mass. LEXIS 708, Counsel Stack Legal Research, https://law.counselstack.com/opinion/skw-real-estate-ltd-partnership-v-gold-mass-1998.