Norton v. Steinfeld

• Decision Date: 19 May 1930
• Docket Number: Civil 2864
• Citation: 36 Ariz. 536,288 P. 3
• Court: Arizona Supreme Court
• Parties: C. W. NORTON, W. F. NORTON, JOHN STANLEY and LOUISE NORTON (Substituted in Place of NORTON LAND & CATTLE COMPANY, a Corporation), Appellants, v. ALBERT STEINFELD and JOHN B. WRIGHT, Appellees

288 P. 3

36 Ariz. 536

C. W. NORTON, W. F. NORTON, JOHN STANLEY and LOUISE NORTON (Substituted in Place of NORTON LAND & CATTLE COMPANY, a Corporation), Appellants, v. ALBERT STEINFELD and JOHN B. WRIGHT, Appellees

Civil No. 2864

Supreme Court of Arizona

May 19, 1930

APPEAL from a judgment of the Superior Court of the County of Pima. Joseph S. Jenckes, Judge. Reversed and remanded.

Messrs Curley & Pattee, for Appellants.

Messrs Kingan & Darnell and Mr. Francis M. Hartman, for Appellees.

OPINION

McALISTER, J.

This action was brought by the Norton Land & Cattle Company, a corporation, on February 26th, 1926, against Albert Steinfeld to recover damages in the amount of $199,937.87 for an alleged breach of guarantee, but some time after it was filed the corporation was dissolved and its stockholders, except one, John B. Wright, who was made a defendant, were substituted as plaintiffs. Judgment was rendered in favor of the defendant and the plaintiffs have appealed.

It appears that in June, 1920, the Norton Land & Cattle Company hereinafter called the Company, sold to N. C. Bernard and William Bernard for $245,000 twenty-one hundred acres of land, 3,100 head of cattle, 100 head of horses and mules, and other personal property, all located in Pinal county, Arizona, and that only a small part of the consideration was paid in cash, the remainder being taken care of in this way: $90,000 by the purchasers agreeing to liquidate this sum in mortgages standing against the property; $33,000 by their executing a second mortgage on the land in this amount; the balance by putting up as security therefor certain stocks and promissory notes. Not very long thereafter the Bernards became heavily indebted to the Consolidated National Bank of Tucson, an institution of which the defendant was the president and a large stockholder, and as a result of their embarrassed financial condition negotiations were had looking toward a resale and reconveyance of the property to the Company, but, due to range conditions at that time, it was unwilling to repurchase the property unless it was assured that it would have funds with which to run the business for three years and also guaranteed that the collection of the indebtedness against the property, which the Company would be compelled to assume in case of repurchase, would not be enforced within a like period of time. Hence, as an inducement to the Company to repurchase, it was alleged that the defendant, Albert Steinfeld, "personally guaranteed and agreed that the collection of said indebtedness should not be enforced by the owners or holders of such indebtedness , or any thereof, for said period of three years, and that such advancements would be made by the said Consolidated National Bank or by some other person or corporation, and that such repayment thereof would not be enforced for such period of three years"; that pursuant to this agreement the Bernards reconveyed the property to the Company October 1st, 1921; that the Company released a second mortgage of $33,000 on the real estate given it by the Bernards and allowed a third one held by the Consolidated National Bank to become a second mortgage, surrendered to the Bernards certain collateral they had turned over to it to secure part of the purchase price and expended in cash $16,000 of its own funds.

It was further alleged that in violation of this agreement and with the knowledge and approval of the defendant the Tucson Land & Cattle Company, of which he was also president and a large stockholder, commenced in the superior court of Pima county, Arizona, an action to foreclose the chattel mortgages held by it on the personal property of the Company and in April, 1923, obtained judgment in its favor for more than $100,000; that an execution was issued and levied pursuant thereto and the property sold for $60,000, leaving a deficiency judgment against the Company of $68,899.87; that in January, 1923, the Consolidated National Bank and the Tucson Land & Cattle Company, both of which had theretofore loaned money to the Company, refused to advance it any additional funds and that in consequence of this it was unable to pay the interest then due on the first mortgage of $33,000 held by the Fidelity Savings & Loan Association on its real estate and that as a result of its failure to meet this interest the said Fidelity Savings & Loan Association declared the principal of its note and mortgage due, demanded payment, instituted foreclosure proceedings in March, 1923, obtained judgment foreclosing the mortgage lien and caused the real estate of the Company to be sold, and as a result thereof the Company lost all its property.

Among the defenses interposed by the answer is the plea that the action was barred by paragraph 711, Revised Statutes of 1913, Civil Code, in that the suit to foreclose the mortgage lien of the Fidelity Savings & Loan Association was filed on November 10th, 1922, and not in March, 1923, as alleged in the complaint, and that the filing of that action constituted a breach of defendant's guarantee that the collection of the indebtedness due by the Company would not be enforced for three years and set in motion the three-year statute of limitations which had run more than three years prior to February 26th, 1926, the date on which this action was instituted.

The matter was heard on the plea in bar and after the defendant had introduced in evidence the complaint, the summons and the decree in the case of the Fidelity Savings & Loan Association against the Company showing that that action was filed in the superior court of Pima county on November 10th, 1922, that service of summons was had three days later and that the decree was entered on March 28th, 1923, the court upheld the defendant's contention that the filing of this complaint was a breach of his guarantee, that it set in motion the statute of limitations and that this had the effect of barring plaintiffs' cause of action after three years from November 10th, 1922. Following this ruling judgment for the defendant was rendered and the plaintiffs have brought the case here for review.

There are eight assignments but they are each directed to the proposition that the court erred in holding that the defendant's contract was breached when the action to foreclose the mortgage of the Fidelity Savings & Loan Association was filed on November 10th, 1922, and that the effect of the filing of that action was to set in motion the statute of limitations. In support of this proposition appellants contend that the mere filing of the complaint of the Fidelity Savings & Loan Association did not breach appellee's guarantee but that this result followed only after a sale of the property under the judgment, for the reason that he could have performed his agreement any time before sale and as long as it remained within his power to do this he was not guilty of breaching it. If the commencement of the suit did constitute a breach of this agreement plaintiffs' cause of action accrued on November 10th, 1922, and is barred, since it was not instituted within three years from that date, but it is otherwise if the term, enforced collection, means the completed act.

It occurs to us that a proper construction of appellee's agreement leads to the conclusion that a mere filing of that action was not an enforcement of the collection of the indebtedness but only a start to enforce and that the importance and consequences of a completed enforcement could not attach thereto. There are a number of proceedings to be taken between the institution of an action and the termination of it, all of which take time, and necessarily it was impossible for the Company to know when the one in question was filed whether appellee would permit it to go to trial or have it dismissed, or whether he would allow it to go to judgment and pay the amount found due before sale thereunder. In either way could he have prevented the enforcement of collection and as long as this was within his power it cannot be said that he breached his guarantee. His agreement in substance was that the indebtedness would be carried three years and that he would stand between the Company and its creditors in so far as enforcing its collection was concerned but he did not guarantee that no action would be filed or that an attempt to enforce collection would not be made. The undertaking, therefore, was not breached until the property had been sold and the consideration paid, that is, until collection had been enforced.

Appellee argues, however, that if the guarantee were not...