Maestro Music, Inc. v. Rudolph Wurlitzer Co.

• Decision Date: 14 July 1960
• Docket Number: No. 6595,6595
• Citation: 88 Ariz. 222,354 P.2d 266
• Parties: MAESTRO MUSIC, INC., a corporation, J. F. Cacioppo, Jr., and Lillian Marie Cacioppo, husband and wife, Appellants, v. RUDOLPH WURLITZER COMPANY, a corporation, Appellee.
• Court: Arizona Supreme Court

Page 266

354 P.2d 266

88 Ariz. 222

MAESTRO MUSIC, INC., a corporation, J. F. Cacioppo, Jr., and Lillian Marie Cacioppo, husband and wife, Appellants, v. RUDOLPH WURLITZER COMPANY, a corporation, Appellee.

No. 6595.

Supreme Court of Arizona.

July 14, 1960.

Rehearing Denied Sept. 26, 1960.

Cusick, Watkins & Frey, Tucson, for appellants.

Darrow & D'Antonio, Tucson, for appellee.

BERNSTEIN, Justice.

Maestro Music, Inc. (hereinafter called 'Maestro') and J. F. Cacioppo, Jr. (hereinafter called 'Cacioppo') (hereinafter collectively called 'appellants') appeal from a judgment entered against them by the Superior Court of Pima County in favor of The Rudolph Wurlitzer Company (hereinafter called 'Wurlitzer') in the sum of $36,638.68, together with attorney's fees and interest.

Pursuant to written agreements, Maestro, during the years 1952 and 1953, acted as distributor of coin-operated phonographs and accessory merchandise manufactured by Wurlitzer. The territory covered by this distributorship, at first, included Arizona, New Mexico and West Texas but subsequently was restricted to Arizona.

By separate instrument, Cacioppo, then president of Maestro, fully guaranteed all obligations and indebtednesses then or thereafter owing from Maestro to Wurlitzer. Cacioppo waived notice of presentment, protest and demand of all obligations covered by the Guaranty, which provided that

'Wurlitzer may settle, adjust, or release in whole or in part, or extend the time for payment, or release security for, any claim against [Maestro] * * *, or may release in whoe or in part any other obligor, endorser or guarantor of any obligation covered by this guaranty, without the consent of [Cacioppo] * * * or notice thereof to [Cacioppo] * * *, and without affecting, impairing or diminishing the obligations of [Cacioppo] * * *.'

On or about December 18, 1952 Maestro sold to George Greene, doing business as American Music Company (hereinafter called 'Greene'). 15 Wurlitzer phonographs and other equipment which were delivered to Greene in Odessa, Texas. Maestro received in payment herefor a negotiable promissory note executed by Greene in favor of Maestro in the sum of $17,995.17. The note provided for interest at 6% per annum on the unpaid balance and 'a reasonable sum (15%, if lawful) as attorney's fees, if placed in the hands of an attorney for collection after maturity.' The phonographs and equipment were covered by a Purchase Money Chattel Mortgage, recorded in Texas. Thereafter and prior to December 31, 1952, Maestro endorsed the note to the order of Wurlitzer and by such endorsement Maestro

'hereby waive(s) presentment and demand for payment, protest and notice of non-payment and protest, and consent(s) that the holder hereof may, without notice to and without releasing the liability of [Maestro] * * * hereunder as unconditional endorser(s), compound or release and right against, and grant extension(s) of time to the maker(s).'

Wurlitzer paid Maestro the face amount of the note minus a sum which was retained by Wurlitzer in a reserve fund pending full payment of the note.

In early 1954, while Greene was in default on the note, the phonographs and equipment held by him were transferred, at Wurlitzer's instigation, to J. A. and M. V. Stevenson, doing business as Mel O Dee Music Company (hereinafter called 'Stevenson') in Salt Lake City, Utah. Greene paid Wurlitzer $1,500. Of this sum, $1,000 was paid to the distributor serving Utah because delivery was made into his territory; the balance of $500 was credited to Maestro's account. Stevenson executed an Assumption Agreement whereby he assumed liability for the balance of the note endorsed to Wurlitzer. There was testimony at the trial that Maestro and Cacioppo knew of and approved the transfer of the phonographs and the allocation of the $1,500.

Three other transactions are involved on this appeal. In each, Maestro sold to Stevenson certain Wurlitzer phonographs and equipment which were secured by conditional sales contracts recorded in Arizona. Stevenson delivered to Maestro three negotiable promissory notes, in the same form as the Greene note, above, in face amounts totalling $66,878.29. Maestro endorsed these notes, in the same manner as it did not Greene note, and received the face value thereof less a reserve fund. Maestro assigned the conditional sales contracts to Wurlitzer, thereby providing that

'we [Maestro] guarantee the payment promptly when due of the amount of each and every installment payable thereunder and the payment on demand of the entire unpaid balance in the event of any default by the buyer without first requiring assignee to proceed against said buyer. We agree that assignee may audit our books and records relating to all paper assigned to it and may in our name endorse said note(s) and all remittances received, and without notice to us and without affecting our liability may release any and all rights against, enter into consolidating contracts with, and grant extensions of time of payment to the buyer. We waive presentment and demand for payment, protest or notice of nonpayment and protest, and subordinate to any rights assignee may now or hereafter have against the buyer any rights we may now or hereafter have by reason of payment to assinee of any installments payable on the contract or otherwise.'

Thereafter, Stevenson made payment on the above four notes directly to Wurlitzer, which in October 1954, because of Stevenson's financial difficulties, agreed to extend the maturity dates of the notes by accepting less per month than originally required. On or about June 28, 1955, following Stevenson's continuing defaults on the notes, Wurlitzer and Stevenson entered into a letter agreement which provided, in substance, that Stevenson would deliver and turn over to Wurlitzer at their then location the 100-odd coin-operated phonographs and equipment covered by the above mortgage and conditional sales contracts, and Wurlitzer would pay Stevenson the sum of $5,000. The agreement also provided that it constituted a 'mutual release' of all claims and demands between Stevenson and Wurlitzer 'of whatsoever nature,' including any actions on the notes, and that Wurlitzer reserved all claims and demands it may have against any other persons or corporations who may be liable on said notes, 'including but not limited to endorsers and guarantors.'

Stevenson turned over the phonographs and equipment, as agreed, to Wurlitzer, which paid Stevenson the sum of $5,000. There was testimony that the agreement was fair and reasonable, and, by providing for the equipment to be turned over at each location, saved Wurlitzer from having to incur substantial repossession expenses. The record shows that Maestro was informed of this transaction and was offered an opportunity to repurchase the notes from Wurlitzer if Maestro preferred to make its own arrnagements with Stevenson. The record does not show that Maestro approved or consented to the Wurlitzer-Stevenson letter agreement or the $5,000 payment.

Thereafter, Wurlitzer sold the repossessed phonographs to one or more of its distributors, and commenced this action against appellants. Wurlitzer computed its claim as follows: the unpaid balance of the original Greene note, $8,114.51 (which included credit for the proceeds of the sale of the phonographs and equipment covered by said note, the reserve fund, and $500 of the $1,500 paid to Wurlitzer by Greene); the unpaid balance of the three original Stevenson notes, $23,540.28 (which included credit for the proceeds from the sale of the phonogrphs and equipment covered by said notes, and the reserve fund); the cost of repossessing the phonographs $5,220.05 ($3,000 of which represented Maestro' alleged share of the $5,000 payment to Stevenson to repossess the phonographs, only about three-fifths of which were covered by the four notes involved on this appeal; the balance of $2,220.05 represented attorney's fees and other repossession expenses). The total of $36,874.84 was reduced by the sum of $236.16, representing unearned carrying charges, leaving a net claim of $36,638.68, which, together with 15% attorneys fees and interest, was awarded in the judgment.

The judgment was supported by Findings of Fact and Conclusions of Law entered by the Superior Court following a trial held before the court without a jury. The court found, in sum, that Wurlitzer was holder in due course of each of the four negotiable promissory notes; that Maestro had eaived presentment, demand for payment and protest, and all notices thereof, and had consented to Wurlitzer's compounding or releasing any right against the maker of each note; that the notes were in default in the sums claimed by Wurlitzer; that the reserve funds and the proceeds of the sale of the phonographs, after deducting the expenses thereof, had been applied in reduction of the notes; that Maestro is liable for the net balance of the notes; and the Cacioppo is liable as guarantor of Maestro's obligation. The court also found that the instant transactions were undertaken by Maestro 'voluntarily' and not 'under duress or by reason of coercion.'

Appellants Maestro and Cacioppo have assigned eight errors on this appeal, some of which may be disposed of briefly. They claim that Wurlitzer's operations were against public policy and amounted to business compulsion. Such contentions were rejected explicitly and implicitly by the Findings of Fact. On the basis of the record herein, we hold that there is no merit to the assignment of error based on such contentions.

Maestro and Caciopo also contend that the transactions involving two of the notes were usurious, for the reason that the face amount of these notes, which bear interest at 6% per annum, includes interest totalling more than 10% of the total price of the phonographs and equipment, as computed in the conditional sales contracts securing these two notes. We reject this contention...