Rosenberger v. Son, Inc.

491 N.W.2d 71 (N.D. 1992)

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Nature of the Case

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Facts

Pratt agreed to purchase the Rosenbergs’ Dairy Queen on February 8, 1980. The terms of the sale included the franchise, inventory, and equipment. The price was $62,000 with a $10,000 down payment and $52,000 due in quarterly payments at 10 percent interest over 15 years. The sales contract contained a provision that prohibited the buyer from prepayment in the first five years of the contract. Pratt assigned her rights and delegated her duties under the sales contract to Son, Inc. on October 1, 1982. The assignment had a consent to assignment clause, which was signed by the Rosenbergs. The assignment agreement also had a save harmless clause in which Son promised to indemnify Pratt. Pratt them moved away and had no further dealings with the business. Son, then assigned the contract to Merit Corporation on June 1, 1984. There was no consent clause for the Rosenbergs to sign. Rosenberg did have knowledge of the assignment and apparently acquiesced. Rosenberg accepted a large payment from Merit reducing the principal balance due to $25,000. Merit them pledged the equipment and inventory as collateral to a loan from Valley Bank and Trust. Payments from Merit to Rosenberg continued until June 1988 when payments stopped with a balance of $17,326.24 plus interest. Merit filed for bankruptcy. The assets were repossessed by the Bank and Rosenberg (P) sued Son (D) and Pratt (D1). The trial court granted summary judgment for Ds. It concluded that once D1 assigned her contract, she became a guarantor and under law any alteration in the original obligation exonerates a guarantor. The moving of the business, the assignment to Merit, and the pledging of assets all constituted alterations. P appealed.