1997 -NMCA- 20, Levenson v. Haynes, 16838

CourtCourt of Appeals of New Mexico
Citation1997 NMCA 20,123 N.M. 106,934 P.2d 300
Docket NumberNo. 16838,16838
Parties, 1997 -NMCA- 20 Carol S. LEVENSON, Plaintiff-Appellant, v. Rozella HAYNES, Individually, as Beneficiary, Distributee, Trustee, and Personal Representative of the Estate of Kenneth Haynes, Defendant-Appellee.
Decision Date11 February 1997
OPINION

DONNELLY, Judge.

¶1 Plaintiff, Carol S. Levenson, appeals from a decision of the trial court, denying her suit to enforce a guaranty against Rozella Haynes, individually, and in her official capacity as the trustee and personal representative of the Estate of Kenneth Haynes, her deceased husband. Plaintiff has raised nine issues on appeal. We consolidate Plaintiff's several issues as follows: (1) whether the trial court erred in modifying the ruling of a prior judge; (2) whether the trial court erred in finding that there were material changes in the commercial lease that voided a guaranty; (3) whether the findings of the trial court are supported by substantial evidence; and (4) whether the trial court erred in dismissing Plaintiff's claim against the Estate of Kenneth Haynes, and Plaintiff's claims against Defendant in her capacity as personal representative, beneficiary, distributee, and trustee of the decedent's estate. We affirm.

FACTS AND PROCEDURAL POSTURE

¶2 The business dealings between the parties, which gave rise to this litigation, are complex and involve a series of interrelated transactions. Following negotiations between the parties, Rozella Haynes (the Guarantor) and Kenneth Haynes, her husband (the Guarantors), entered into a "build and sell" agreement with Plaintiff and her former husband, Robert Levenson, on August 21, 1980, whereby the Guarantors agreed to build a commercial building in Albuquerque, New Mexico, and Plaintiff and Robert Levenson agreed to purchase the building for the sum of $1,100,000. Contemporaneous with this agreement, Supermarkets of New Mexico, Inc. (Supermarkets) entered into a lease to rent the property effective upon completion of the building.

¶3 As an inducement to Plaintiff and Robert Levenson to enter into the lease with Supermarkets, the Guarantors, who owned a controlling interest in the Supermarkets corporation, personally guaranteed compliance with the terms of the lease by Supermarkets or any of its assignees. Plaintiff and Robert Levenson also granted to Kenneth Haynes an option to purchase the land and store premises for $785,000, which option could be exercised during a six-month period in the fifteenth year following the commencement of the lease term.

¶4 Following execution of the lease, Supermarkets assigned its interest in the lease to Bag 'n Save, a subsidiary. In 1981 Kenneth Haynes assigned his interest in the option to Marken, a partnership consisting of his brother, Martin Haynes, and himself. Thereafter, in April 1983 Bag 'n Save assigned its rights in the lease to BNS Foods, a subsidiary of Furr's, Inc. BNS subsequently changed its name to Rubus Realty Company (Rubus).

¶5 Under the terms of the lease, Supermarkets and its subsequent assignees were obligated to pay Plaintiff and Robert Levenson rent for the leased premises on a triple net rental basis, the sum of $13,500 per month for a period of thirty-six months, and thereafter, during the initial term of the lease, the lesser amount of either $16,000 per month, or an amount equal to "($2,000.00) more than the [Lessors'] monthly installment of principal and interest on the permanent financing the [Lessors use] to purchase the leased premises, (the 'Permanent Mortgage')." The lease additionally specified that:

The Permanent Mortgage presently contemplated by [Lessors] is to be supplied by American Savings and Loan Association [hereinafter American] ... and will have a variable interest rate ranging from a minimum of 13% per year to a maximum of 16% per year, the rate to be redetermined every 3 years. The redetermination will set the rate at the "prime commercial rate" then being charged by [American]. Such prime commercial rate is to be one percentage point in excess of the prime fixed rate for 80% or better loan-to-value loans being charged by [American] at the time of redetermination.

¶6 In 1984 Robert Levenson was notified by American that it would raise the interest rate on its mortgage. Rubus and Kenneth Haynes were also notified of the proposed adjustment in the interest rate. Robert Levenson decided to prepay the mortgage held by American prior to any adjustment in interest and to obtain a new loan from Liberty National Bank (Liberty) in the principal amount of $1,250,000 at a fixed 10% rate of interest. The new loan was obtained on April 2, 1984. In negotiating the new loan and refinancing the amount of the note and mortgage, Robert Levenson and Plaintiff consolidated other debts owed by them, and the principal amount of the loan was increased. They used $1,106,450 of the proceeds from the new loan to pay off American, including a $35,000 prepayment penalty, and the balance was retained by Robert Levenson for his personal use.

¶7 Plaintiff and Robert Levenson did not use the new loan as the basis for calculating the adjusted monthly rental. Instead, they notified Rubus and the Guarantors of the refinancing and that the monthly rental would be $15,605.48, based upon a proposed adjustable rate increase in the American note, including an additional $2,000 per month. Rubus did not object to the refinancing or the adjustment in rent. No written consent to the refinancing, the increase in the amount of the principal or the change in the calculation of monthly rental payments, however, was ever given by the Guarantors. Shortly after the refinancing, American became insolvent and filed for bankruptcy. Kenneth Haynes died in 1985.

¶8 Plaintiff and Robert Levenson were divorced in 1988. Under the terms of the divorce decree, Plaintiff acquired all rights as lessor under the lease and guaranty agreement. In January 1993 Rubus, the current lessee, vacated the leased premises and notified Plaintiff that it intended to file for reorganization under Chapter 11 of the Bankruptcy Code. Following the initiation of the bankruptcy proceedings on March 16, 1993, the bankruptcy court rejected the lease held by Plaintiff. Plaintiff made a demand upon the Guarantor to honor the guaranty, but the Guarantor refused. Thereafter, Plaintiff filed suit seeking to enforce the guaranty based on the default of Rubus. The case ultimately proceeded to trial without a jury before Judge W. Daniel Schneider. The trial court, by a letter decision, announced that it found that the Guarantor was not liable on the guaranty. The trial court subsequently denied Plaintiff's motion for rehearing and entered judgment in favor of the Guarantor.

MODIFICATION OF PRIOR ORDER

¶9 The parties filed cross-motions for summary judgment. Plaintiff's motion asserted that the change in the monthly installment payment and increase in the principal amount of the new loan did not constitute a change in the lease. The Guarantor's motion asserted that there had been a "change, modification or alteration" in the lease which voided the guaranty because the terms of the permanent mortgage had been modified without the Guarantor's consent. Following a hearing, the judge initially assigned to hear the case denied both motions, ruling that there were "genuine issues of material fact herein," and that the change in the amount of the monthly rental payments did not void the guaranty.

¶10 The case was later assigned to Judge Schneider. Plaintiff argues that the ruling of Judge Schneider improperly vacated the order of the prior judge and improperly overturned his ruling that there had been no change in the lease. We see no error in the modification of the prior order under the circumstances presented here. The initial order entered by the first judge expressly found that material issues of fact precluded the granting of summary judgment, and the subsequent judgment entered by Judge Schneider was entered following a trial on the merits in order to resolve the disputed factual issues. The initial order denying the cross-motions for summary judgment was interlocutory in nature and was subject to modification or reconsideration following a trial on the merits in order to resolve the disputed issues. See Tabet Lumber Co. v. Romero, 117 N.M. 429, 431, 872 P.2d 847, 849 (1994) ("The grant or denial of a motion for summary judgment is an interlocutory order, and, therefore, the district court could properly reconsider its previous ruling notwithstanding the fact that a different judge had issued that ruling.") (citation omitted); cf. Melnick v. State Farm Mut. Auto. Ins. Co., 106 N.M. 726, 727, 749 P.2d 1105, 1106 (1988) (denial of motion for directed verdict is interlocutory in nature and trial court may revise or rescind such order at any time before entry of final judgment). See generally 7 James Wm. Moore et al., Moore's Federal Practice p 60.20 (2d ed. 1996) ("Interlocutory orders and judgments are not within the provisions of [Rule] 60(b), but are left within the plenary power of the court that rendered them to afford such relief from them as justice requires.").

WAS THERE A CHANGE IN THE LEASE?

¶11 Plaintiff argues that the trial court erred in its interpretation of the lease and in adopting its conclusion that there were changes in the lease not agreed to by the Guarantors, which voided the guaranty. In adopting its findings of fact, the trial court found, among other things:

8. Having been executed at the same time, the Build and Sell Agreement, the Lease, the Guarantee and the Option were part of the same transaction, and...

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