Giovanelli v. First Federal Sav. and Loan Ass'n of Phoenix, 1

• Decision Date: 19 September 1978
• Docket Number: CA-CIV,No. 1,1
• Parties: G. S. GIOVANELLI and J. M. Giovanelli, husband and wife, Don C. Chandler and Barbara R. Chandler, husband and wife, E. M. Arndt and Corrine H. Arndt, husband and wife, Appellants, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PHOENIX, a corporation, Appellee. 3276.
• Court: Arizona Court of Appeals

Page 763

587 P.2d 763

120 Ariz. 577

G. S. GIOVANELLI and J. M. Giovanelli, husband and wife, Don C. Chandler and Barbara R. Chandler, husband and wife, E. M. Arndt and Corrine H. Arndt, husband and wife, Appellants, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PHOENIX, a corporation, Appellee.

No. 1 CA-CIV 3276.

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

Sept. 19, 1978.

Rehearing Denied Nov. 3, 1978.

Review Denied Nov. 21, 1978.

Tanner, Jarvis, Owens & Hoyt, Ltd. by Melvin J. Owens/Wallace O. Tanner, Phoenix, for appellants

Jennings, Strouss & Salmon by Anthony J. Palumbo, Phoenix, for appellee.

OPINION

DONOFRIO, Judge.

This appeal is brought from the granting of a motion for summary judgment in favor of First Federal Savings and Loan Association of Phoenix, appellee/plaintiff below, and against appellants/defendants below.

Briefly, the facts can be stated as follows:

On March 30, 1971 appellants, Chandler, Arndt and Giovanelli signed a "Continuing Guaranty" ¹ with appellee First Federal on behalf of Emerald Properties, Inc. (Emerald). This document was executed for the purpose of guaranteeing certain loans to be made to Emerald by First Federal. These loans would not have been consummated if appellants had not executed the guarantee.

In August 1971, Emerald borrowed $29,200 from First Federal. The proceeds of this loan were to be used by Emerald in building a condominium on Lot 16, Villa San Marcos, Scottsdale, Arizona. The loan agreement provided for disbursement of loan proceeds in regular draws, as construction proceeded. It, also, provided for a retention of $2,960.00 in an "A" account, and the remaining funds to be disbursed from a "loan-in-process account." Lawyers Title acted as escrow agent for the parties, and the loan was secured by a first mortgage on Lot 16, as well as by the hereinbefore mentioned guarantees.

The following illustrates plaintiff's loss. First Federal's loan settlement statements shows various disbursements in the form of draws made by Emerald and deductions for interest due First Federal continuing until December 30, 1971, at which time there was a balance of $5,346.92 in the "loan-in-process" account, and $2,960.00 in the "A" account. Upon completion, the condominium was sold by Emerald to a Mr. Pinkney for cash, and Lawyers Title, also, acted as escrow agent for the sale. The escrow closing statement is dated February 14, 1972, and it shows that the final proceeds from the sale of Lot 16, after paying the loan and other escrow expenses, were paid to Lawyers Title. Since the buyer did not assume the loan to First Federal, First Federal's mortgage was released of record, and Lawyers Title forwarded to First Federal $21,318.79, the amount it assumed was required to pay off First Federal's loan. Computations on the escrow closing statement show a deduction for the loan proceeds still held by First Federal, to-wit $5,346.92 in the "loan-in-process" account and $2,960.00 in the "A" account.

At, or about, the same time Lawyers Title was disbursing the $21,318.79 to First Federal, it appears (from First Federal's loan settlement statements) that First Federal was forwarding the balance of the "loan-in-process" and "A" accounts to Lawyers Title.

In other words, Lawyers Title was making a deduction for the funds held by First Federal at, or about, the same time First Federal was forwarding these funds to Lawyers Title. First Federal agrees that due to a mistake in the disbursing department of First Federal, First Federal released an excess of $6,346.92 in construction funds to the Emerald account. Apparently, assuming this amount had been retained by First Federal for repayment of the loan, Lawyers Title made the misapplication of funds to the financially troubled Emerald.

No explanation has ever been made by First Federal as to why the mortgage was released or as to why steps were not taken immediately to recover the funds which were paid by their mistake to Lawyers Title. Correspondence dated January 23, 1973, from Mr. Rubin, counsel for First Federal, to Mr. Ownes, counsel representing defendants stated:

"In response to your letter and specifically to Paragraph 3, you ask the question of why we accepted a Lawyers Title check of $21,318.79 without demanding a return of funds which were passing the other way. The only honest explanation I can give of this is I don't know. As you know, during this particular time, Lawyers, First Federal and Emerald were all scurrying to complete the project in Scottsdale and to disburse all of our funds before Emerald could file its Chapter XI proceedings back east. I can only assume at this point that the explanation lies in the fact of everyone working furiously to complete the above and having this overlooked."

First Federal made a demand for this sum ($6,346.92) from appellants/guarantors. ² When not paid they brought the instant suit and obtained summary judgment against appellants. This appeal followed.

Many questions are raised in the briefs. However, we believe the crucial issue is whether there is shown a valid defense of payment by appellants. If it's shown that there is a valid affirmative defense of payment, then the trial court was in error in its ruling and it must be reversed.

The trial court must consider all of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits before making its decision on a motion for summary judgment; that is, the entire record must be examined. Chanay v. Chittenden, 115 Ariz. 32, 563 P.2d 287 (1977). Likewise, the Court of Appeals, in ruling on the propriety of the summary judgment, must review the whole record to determine whether a material issue of fact exists. Morrell v. St. Luke's Medical Center, 27 Ariz.App. 486, 556 P.2d 334 (1976).

In determining this, the evidence and all reasonable inferences drawn therefrom will be viewed in a light most favorable to appellants, the party against whom the summary judgment was rendered. Poggi v. Kates, 115 Ariz. 157, 564 P.2d 380 (1977); Sax v. Kopelman, 96 Ariz. 394, 396 P.2d 17 (1964); Serna v. Statewide Contractors, Inc., 6 Ariz.App. 12, 429 P.2d 504 (1967).

Appellee contends that appellants are not entitled to the defense of payment as it was not raised before the trial court. Granted, that issues cannot be raised on appeal from the granting of summary judgment which were not raised by appellants in their affidavits, depositions or pleadings (Limberopoulos v. Tom Fannin and Associates, 17 Ariz.App. 35, 495 P.2d 475 (1972)), however, in the instant case we do not agree with appellee's contention that this defense was not raised.

Appellants, in at least three instances set forth the issue of payment:

1. The defense of payment was set out in the answer to plaintiff's complaint as follows:

"These Defendants allege the affirmative defense of payment, waiver, estoppel and failure to state a claim for relief."

2. In the response to a request for admission that the principal Emerald did not repay the loan, defendants responded as follows:

"Denied. Plaintiff had access to, or control of, the funds required to pay the loan in full. Plaintiff thus has been legally paid, at least to the extent necessary to release the Defendants on their guaranties."

3. In appellants' response to the motion for summary judgment they argued that:

"Plaintiff's memorandum attempts to distinguish between guaranties which are conditional and those which are unconditional or absolute. It concludes that the guaranties involved in this case were unconditional and are, therefore, presumably subject to no defenses. In other words, Plaintiff's position seems to be that defenses of negligence, release of security, and even actual or constructive payment do not apply where there is an 'unconditional guaranty' as distinguished from a normal guaranty."

Two prerequisites must be met before entry of summary judgment is appropriate: First, the record before the trial court must show that there is no genuine dispute as to any material fact and that only one inference can be drawn from those undisputed material facts, and second, based upon the undisputed material facts, the moving party must be entitled to judgment as a matter of law. Dutch Inns of America, Inc. v. Horizon Corp., 18 Ariz.App. 116, 500 P.2d 901 (1972). We now must consider the merits of appellants' defense of payment that would preclude the granting of summary judgment.

First, it is to be noted that we agree with the statement made in appellee's answering brief that the true import of an agreement and the mutual rights and obligations of the parties thereto, can only be gleaned from a review of the terms and conditions of the contractual agreement, and not by the label of the agreement alone. Kinter v. Wolfe, 102 Ariz. 164, 426 P.2d 798 (1967); Pacific Finance Corp. of California v. Burkhart, 56 Ariz. 383, 108 P.2d 380 (1940).

Appellants claim payment and appellee argues that there has been only partial payment. A question of payment is Generally one of fact, and is to be decided by the trier of fact. International Harvester Co. v. Davotvich,42 Ariz. 249, 24 P.2d 375 (1933), and Albert Steinfeld & Co. v. Wing Wong,14 Ariz. 336, 128 P. 354 (1912). However, the facts of the instant case are uncontradicted that Mr. Pinkney paid cash for the property and that the loan was satisfied. This loan included all of the funds advanced for the construction of the condominium and the amount of $6,346.92 sued for in this litigation was a part of this fund. The entire construction fund was presumably paid off when Mr. Pinkney paid his cash to Lawyers Title and it released the lien to give the purchaser clear title.

Not every record which discloses disputed facts precludes the entry of summary judgment if the disputed facts fail to negative the right of the prevailing party to summary judgment as a matter of law. Weber v. Bates, 3 Ariz.App. 420, 415 P.2d 135 (1966) (review...