Baltimore Life Ins. Co. v. Harn, 1

• Decision Date: 30 June 1971
• Docket Number: No. 1,CA-CIV,1
• Citation: 486 P.2d 190,15 Ariz.App. 78
• Parties: The BALTIMORE LIFE INSURANCE COMPANY, a Maryland corporation, Appellant, v. Hugh L. HARN et al., Appellees. 1331.
• Court: Arizona Court of Appeals

Page 190

486 P.2d 190

15 Ariz.App. 78

The BALTIMORE LIFE INSURANCE COMPANY, a Maryland corporation, Appellant, v. Hugh L. HARN et al., Appellees.

No. 1 CA-CIV 1331.

Court of Appeals of Arizona, Division 1, Department A.

June 30, 1971.

As Amended July 8, 1971.

Rehearing Denied Sept. 10, 1971.

Samuel R. Hutchison and William C. Penn, Phoenix, for appellant.

Evans, Kitchel & Jenckes by Joseph S. Jenckes, Jr. and Stephen W. Pogson, Phoenix, for appellees Harn.

A. Alexander Katz, Phoenix, for appellees Heller.

KENNETH C. CHATWIN, Superior Court Judge.

This case is before us on appeal from the dismissal of a complaint for mortgage foreclosure, for failure to state a claim upon which relief could be granted. In the judgment entered on November 3, 1969, dismissing the plaintiff's complaint, the trial court made the following statement:

'* * * the Court ruled on the 25th day of September, 1969 in an order reading: 'The motion of defendants Harn to dismiss Compaint was argued and submitted to the Court. IT IS ORDERED granting said motion.' The plaintiff has not filed a motion to amend its Complaint. It appears to the Court that plaintiff's Complaint does not state a claim for relief against any of the defendants and should therefore be dismissed as to all defendants. * * *.'

The facts, all of which must be taken as true, if well plead in the plaintiff's complaint, for purposes of reviewing the granting of the motion to dismiss, are not disputed by the defendants.

In 1964 the defendants Gene L. and Patricia Harn and Hugh L. Harn, the original mortgagors, borrowed $180,000 from Western American Mortgage Company. Western American was not a party to the foreclosure action. The loan was evidenced and secured by a promissory note and mortgage, both dated December 17, 1964. There were provisions in both the note and mortgage which permitted the debt to be accelerated and the mortgage foreclosed at the option of the mortgagee.

The provision of the note read:

'All sums due and payable under this Note and the mortgage or mortgages securing the same, * * * shall become due and payable without notice forthwith upon the conveyance of title to all or any portion of the mortgaged premises or property, or the vesting thereof in any other manner in, one other than to Mortgagor named therein.'

and the mortgage contained this language:

'This mortgage and all sums hereby secured, * * * shall become due and payable at the option of Mortgagee and without notice to Mortgagor forthwith upon the conveyance of Mortgagor's title to all or any portion of said mortgaged property and premises, or upon the vesting of such title in any manner in persons or entities other than, or with, Mortgagor.'

The defendants Harn do not deny that they agreed to these conditions when they obtained the loan.

The note was endorsed to the plaintiff, Baltimore Life Insurance Company, and the mortgage was assigned to it on February 10, 1965.

The defendants Harn subsequently made formal written and recorded conveyances of the mortgaged property to other persons. The plaintiff asserted that these conveyances were in direct and open violation of the defendants' written contractual promises which entitled the plaintiff to acceleration and foreclosure. In its complaint the plaintiff further alleged that it was the owner of the promissory note and realty mortgage and that the defendants owed the principal sum of $159,849.98 with interest at the rate of 8% Per annum from February 10, 1969, until paid, together with the sum of $5,795.50 as a prepayment penalty; foreclosure report in the sum of $326.25; and attorney's fees in the amount of $16,000.

Doris Diane Harn, holder of an undivided one-half interest in the property with Hugh L. Harn by a Joint Tenancy Deed, and the Hellers were also named as defendants in the complaint. The Hellers filed a cross-claim against the Harns in the event that judgment was entered against the Harns. The cross-claim was dismissed in the same order that dismissed the plaintiff's complaint. The plaintiff alleged that there were five transactions that were conveyances within the meaning of the note and mortgage agreements. It is not necessary to our decision to discuss each of these transactions in detail. We will confine our attention to the transaction which was most clearly a conveyance and should therefore be a default within the meaning of the agreements.

An agreement for sale and conveyance was executed and acknowledged by Hugh L. Harn, Patricia J. Harn and Gene L. Harn on November 14, 1968, to Seymour Heller and Josephine Heller. The agreement for sale was recorded on February 10, 1969. In the case of Baker v. Leight, 97 Ariz. 112, 370 P.2d 268 (1962), our Supreme Court held that an agreement of sale was a conveyance within the contemplation of an acceleration clause in a mortgage. In our opinion the agreement...