Republic Nat. Life Ins. Co. v. Rudine

• Decision Date: 15 February 1983
• Docket Number: CA-CIV,No. 1,1
• Citation: 137 Ariz. 62,668 P.2d 905
• Parties: REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a corporation, Plaintiff-Appellant, v. Roger S. RUDINE, also known as Roger S. Rodine, and Thomas Caprino, individually and as general partners of R and C Trust Company, a partnership, Defendants-Appellees. 5539.
• Court: Arizona Court of Appeals

Page 905

668 P.2d 905

137 Ariz. 62

REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a corporation, Plaintiff-Appellant, v. Roger S. RUDINE, also known as Roger S. Rodine, and Thomas Caprino, individually and as general partners of R and C Trust Company, a partnership, Defendants-Appellees.

No. 1 CA-CIV 5539.

Court of Appeals of Arizona,

Division 1, Department B.

Feb. 15, 1983.

Rehearing Denied April 5, 1983.

Review Denied June 8, 1983.

Holland & Postal by Robert W. Holland, Phoenix, for plaintiff-appellant

Treon, Warnicke & Roush, P.A. by Ronald E. Warnicke, Gerrie Apker Kurtz, Charles D. Roush, Phoenix, for defendants-appellees.

OPINION

FROEB, Presiding Judge.

The parties in this case were locked in dispute over amounts due under a note secured by a deed of trust. In the face of an approaching deadline, they entered into a stipulation that pending claims be dismissed with prejudice and judgment was entered accordingly. The following day, the party whose claims were dismissed moved to set the judgment aside on the ground of duress. The motion was granted and this appeal followed. We vacate the order and reinstate the judgment.

The undisputed facts necessary to the resolution of the appeal are as follows. Roger S. Rudine (also Rodine) and Thomas Caprino, individually and as partners of R and C Trust Company, a partnership (referred to hereafter as "R and C"), purchased the Westward Ho Hotel in Phoenix on December 20, 1977, from Republic National Life Insurance Company (referred to hereafter as "Republic"). The unpaid portion of the purchase price was represented by a note in the amount of $2,270,000.00 secured by a deed of trust under which Republic was the beneficiary and Lawyers Title of Arizona was the trustee. Within the year, specifically on September 14, 1978, R and C gave an option to purchase the hotel to Westward Ho Associates (hereafter referred to as "option purchasers"). The option was later exercised and a closing of the sale conditioned upon conveyance of clear title was scheduled for February 12, 1980. Earlier, on January 10, 1979, Republic declared R and C in default of payment under the note and accelerated the unpaid balance ¹ as immediately due and owing. Republic also demanded possession of the hotel, which was refused. R and C attempted to cure their default by tendering two cashier's checks to Republic on January 15, 1979, and again on January 19, 1979, the first check covering the installments in default plus late fees, and the second check in the amount of $500.00 for reasonable attorney's and trustee's fees. Republic refused the tendered amounts and filed suit for possession of the hotel. ² Republic also noticed a non-judicial trustee's sale of the hotel for April 29, 1979. Through a series of restraining orders and preliminary injunctions, the trustee's sale of the hotel was prevented and R and C remained in possession. R and C filed their answer to Republic's suit on February 20, 1979, and asserted two counterclaims which are the subject of this appeal. In substance, the two counterclaims sought injunctive relief and monetary damages alleging that Republic had breached the deed of trust by wrongfully declaring R and C in default and by acting maliciously and in reckless and wanton disregard of R and C's contract rights.

The dispute continued between the parties. The option purchasers exercised their option to purchase the hotel on January 30, 1980, and set February 13, 1980, as the closing deadline date because their financing commitment thereafter would be withdrawn by the lender. Faced with this deadline, R and C intensified their efforts to resolve the default and obtain release of the lien. Republic continued to insist on its terms for release of the lien as it had set forth in its October 8, 1979, letter. Although R and C contested the amounts demanded by Republic, the main stumbling block remained the demand that the counterclaims be dismissed. R and C's situation became more pressing when the option purchasers filed suit against them for specific performance of their agreement or, in the alternative, One Million Dollars in damages. Before the February 13, 1980, deadline, R and C made several unsuccessful tenders to Republic but refused to dismiss the counterclaims. Finally, on February 13, literally minutes before financing was to be withdrawn, R and C entered into a stipulation tendering all sums demanded and agreeing to dismissal of their counterclaims. In exchange, Republic agreed to release its lien on the hotel. The stipulation was made in court before a court reporter and provided for entry of the judgment dismissing the counterclaims. The judgment was entered, Republic released the hotel from the lien of the deed of trust, and the sale to the option purchasers closed.

Although presented in the context of a rule 60(c) motion to vacate order, the issue before us first requires a resolution based upon contract principles. In order to decide the merits of the rule 60(c) motion, the enforceability of the stipulation must first be decided. See Lamb v. Arizona Country Club, 124 Ariz. 239, 240, 603 P.2d 510, 511 n. 2 (App.1978).

At the heart of R and C's claim of duress is their argument that Republic had no legal justification to demand anything more than payment of all sums due under the deed of trust, Best Fertilizers of Arizona, Inc. v. Burns, 116 Ariz. 492, 570 P.2d 179, rev'd on other grounds, 117 Ariz. 178, 571 P.2d 675 (App.1977), which R and C contend was tendered and rejected. R and C argue that Republic wrongfully took advantage of the deadline they were faced with to force upon them dismissal of the counterclaims. On the other hand, Republic has steadfastly maintained that it had the right to demand dismissal of the counterclaims prior to releasing its lien against the hotel. Republic's position is based upon the following provisions of the deed of trust:

TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTORS [R AND C] AGREE:

....

3. To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; to pay all costs and expenses of Beneficiary and Trustee, including the cost of evidence or title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear or be named and in any suit brought by Beneficiary or Trustee to foreclose this Deed of Trust.

4. To pay: (a) before delinquent, all taxes and assessments affecting said property; (b) when due, all encumbrances, charges and liens, with interest, which may hereafter be placed against the property or any part thereof and which appear to be prior or superior hereto; (c) all costs, fees and expenses of this Trust, including without limiting the generality of the foregoing, the fees of Trustee for issuance of any Deed of Partial Release and Partial Reconveyance or Deed or Release and Full Reconveyance, and all lawful charges, costs and expenses in the event of reinstatement of, following default in, this Deed of Trust or the obligations secured hereby.

Should Trustors fail to make any payments or to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do but with notice to or demand upon Trustors, and without releasing Trustors from any obligation hereof, may: (a) make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; (b) appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; (c) pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; (d) and in exercising any such powers pay necessary expenses, employ counsel and pay his reasonable fees.

5. To pay immediately and without demand all sums expended by Beneficiary or Trustee pursuant to the provisions hereof, together with interest from date of expenditure at the same rate as is provided for in the note secured by this Deed of Trust or at the highest legal rate, which ever be the greater rate. Any amounts so paid by Beneficiary or Trustee shall become a part of the debt secured by this Deed of Trust and a lien on said premises or immediately due and payable at option of Beneficiary or Trustee. [Emphasis added].

Republic maintains that any sums incurred for attorney's fees in successful defense of the counterclaims would be recoverable from R and C and would be secured by the lien of the deed of trust. Since it was entitled to insist upon dismissal of the counterclaims before releasing its lien, Republic argues there can be no duress as a matter of law. Therefore, it argues, the stipulation for dismissal of the counterclaims and for entry of judgment was enforceable and the stipulated judgment should not have been set aside by the trial court.

We find it unnecessary to construe the provisions of the deed of trust to decide whether Republic's interpretation of its terms is correct. We hold that Republic was entitled to adhere to its interpretation of the deed of trust in demanding dismissal of the counterclaims and that duress did not thereby result which would justify voiding the stipulation.

Arizona has adopted the definition of duress set forth in Restatement of Contracts § 492:

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