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First Dakota Nat'l Bank v. Graham

Supreme Court of South Dakota

May 13, 2015

FIRST DAKOTA NATIONAL BANK, Plaintiff and Appellant,
v.
DAVID GRAHAM, JUSTIN GRAHAM, DONALD GRAHAM and DENNIS GLATT, Defendants and Appellees

Considered on Briefs March 23, 2015.

APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA. THE HONORABLE SUSAN M. SABERS, Judge.

STEVEN K. HUFF, SHEILA S. WOODWARD of Johnson, Miner, Marlow, Woodward & Huff, Prof. LLC, Yankton, South Dakota, Attorneys for plaintiff and appellant.

THOMAS J. NICHOLSON of Nicholson, Tschetter, Adams & Nicholson, Sioux Falls, South Dakota, Attorneys for defendant and appellee David Graham.

JASON KW KRAUSE of Dorothy & Krause Law Firm, PC. Sioux Falls, South Dakota, Attorneys for defendant and appellee Justin Graham.

CLAIR R. GERRY of Gerry & Kulm Ask, Prof., LLC, Sioux Falls, South Dakota, Attorneys for defendant and appellee Donald Graham.

JAMES E. MCMAHON, LISA PROSTROLLO of Murphy, Goldammer & Prendergast, LLP, Sioux Falls, South Dakota, Attorneys for defendant and appellee Dennis Glatt.

KERN, Justice. GILBERTSON, Chief Justice, and ZINTER, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 293

KERN, Justice

[¶1] In this contract action, the lender seeks to enforce separate commercial guaranties against the individual guarantors. The guaranties were executed to secure the indebtedness of the borrower. The guarantors moved for summary judgment, claiming that the guaranties were unenforceable because no indebtedness existed after the lender bought the mortgaged property at a foreclosure sale for the full amount and extinguished the borrower's obligation. The circuit court agreed and granted the guarantors summary judgment. We affirm.

BACKGROUND

[¶2] Huron Hospitality II, LLC owned and operated the Crossroads Hotel & Event Center (the Hotel) in Huron, South Dakota. In 2008, Huron Hospitality obtained a loan from First Dakota National Bank for $2,960,000 in exchange for a promissory note and mortgage on the Hotel. To further secure the obligation, First Dakota obtained separate commercial guaranties from the Huron Hospitality shareholders: Donald Graham, Justin Graham, Dennis Glatt, and David Graham (the Guarantors). Guarantor David Graham managed and operated the Hotel.

[¶3] In July 2012, Huron Hospitality failed to make timely payments on the note. First Dakota gave Huron Hospitality and the Guarantors notice of the default. Neither Huron Hospitality nor the Guarantors cured the default. However, on July 3, 2012, Guarantor Glatt and his wife wrote to First Dakota expressing concern over David Graham's management of the Hotel. Specifically, they stated that " David cannot manage this property/investment any longer and [we] are looking for help in the resolution of this." The Glatts listed specific problems with Graham's ...


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