Seasons, Inc. v. Atwell, 9872
| Citation | 86 N.M. 751,1974 NMSC 80,527 P.2d 792 |
| Decision Date | 18 October 1974 |
| Docket Number | No. 9872,9872 |
| Parties | SEASONS, INC., a corporation, Plaintiff-Appellee, v. William W. ATWELL and Elizabeth S. Atwell, Defendants-Appellants. |
| Court | Supreme Court of New Mexico |
Plaintiff-Appellee (Seasons), alleged owner and holder of a certain note and mortgage executed by Lincoln Hills, brought this action for foreclosure and other relief against Lincoln Hills and a number of other defendants including William W. and Elizabeth S. Atwell (the Atwells). Of the defendants, only the Atwells appeared below, and they are the only appellants here.
The Atwells had been co-owners of a sizeable tract of land near Ruidoso which was considered suitable for development, subdivision and sale. They conveyed their interest to their co-owners for cash, a note and the three lots with which we are here concerned. The land was then conveyed to Lincoln Hills. On April 24, 1968, Lincoln Hills executed the promissory note in question to Ruidoso State Bank. It was secured by a mortgage which encumbered '(a)ll unsold parcels in the Lincoln Hills Country Club Subdivision', which was said to be the entire subdivision except for fifteen described lots and two tracts 'which have heretofore been sold.' The Atwell lots were not excepted from the description.
On July 17, 1968, Lincoln Hills conveyed to the Atwells by warranty deed the three lots for which they had contracted, but by then the mortgage had firmly attached. Whether the conveyance of encumbered lots was in accordance with the Atwells' agreement of sale, and the significance of the encumbrance vis-a-vis the warranty covenants in the deed to the Atwells are issues which are not before us.
By a series of transfers and assignments, the note and mortgage passed to Seasons. It had meanwhile fallen into default and this action was filed.
The complaint sought foreclosure on the same land described in the mortgage excepting additional lots said to have 'been sold and released of record' and these included additional tracts of one-half acre by surveyed description and twenty-two lots.
The Atwells contend there is no substantial evidence in the record to support the trial court's finding that these 'additional exceptions' were released from the mortgage.
Their answer to the paragraph of the complaint containing the property description was a plea of want of knowledge which is tantamount to a denial. Section 21--1--1(8)(b), N.M.S.A.1953. No proof was adduced at trial touching the additional exceptions, except for a general statement that some unidentified lots had been released. The court's finding of fact No. 3 adopted the description in the complaint, stating that the mortgage covered the real estate so described, thus excluding the additional exceptions.
The Atwells argue that the mortgage may still have been in effect as to the additional exceptions, or some of them, and if so, the foreclosure should have included these tracts. Otherwise, to permit Seasons to foreclose on only part of the land subject to the mortgage would have the effect of casting an additional, unconscionable burden of debt upon the Atwells' lots.
It is perhaps significant that appellants cite to us no cases which bear upon this rather exotic proposition. Seasons stoutly claims that no rule of law or equity requires them to attempt to foreclose on property in which it claims no security interest. This has a reasonable ring to it.
In the absence of proof regarding the additional exemptions, the issue presented may be resolved by deciding whether the predicate for the Atwells' argument was well pleaded, and if so, which party bore the burden of proof.
The office of the pleadings is to give the parties fair notice of both claims and defenses and the grounds upon which they rest. See Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Could the Atwells' denial of allegations concerning the additional exceptions be reasonably regarded as giving Seasons any notice of the present contention? The amended answer includes eight affirmative defenses, but there is no mention of the legal point now argued. The question put tends to answer itself. While the particular defense now asserted is not specifically denominated as an affirmative defense by Rule of Civil Procedure 8(c) (§ 21--1--1(8)(c) N.M.S.A. 1953), that rule provides that the pleader must affirmatively assert 'any other matter constituting an avoidance or affirmative defense.' 2A Moore's Federal Practice, § 8.27 (3) (2d ed. 1974) states that an affirmative defense raises matters outside the scope of the plaintiff's prima facie case, and that any matter that does not tend to controvert the opposing parties' prima facie case as determined by applicable substantive law should be affirmatively pleaded and is not put in issue by a denial. Assuming the mortgage may still have been in effect as to the additional exceptions, proving the point would have constituted an avoidance or minimizing of the burden of foreclosure upon the Atwells' lots and, therefore, was in the nature of an affirmative defense which should have been pled. We hold that the Atwells should have affirmatively pleaded and, thereafter, proved a factual predicate for minimizing the burden of foreclosure upon their lots. Failing this, they cannot now be allowed to attack the trial court's finding as to the property covered by the mortgage based on lack of substantial evidence.
The Atwells secondly contend the trial court erred in granting judgment to Seasons against Lincoln Hills, Inc. because one of the various assignments of the note and mortgage which ultimately ended up with Seasons was improper and thus invalid.
The record shows that in the chain of transfers of the note and mortgage, an Odessa, Texas bank assigned to a Mr. Nunley, an Odessa attorney and member of Nunley & Wilson, a law partnership. Mr. Nunley was acting as agent for an undisclosed principal, Mrs. Rumbaugh, then sole stockholder of Lincoln Hills. During the attorney-client relationship, the Lincoln Hills directors resolved to convey a onefourth interest in the encumbered land to Nunley & Wilson as security for fees, and the officers of the company were authorized and directed to prepare a deed. Whether this was actually done does not appear.
The note and mortgage were later assigned to Mrs. Rumbaugh and it is this assignment which the Atwells attack. The salient features of the document are: (1) a recitation that the assignor is the 'owner and holder' of the note; (2) that it purports to 'sell, transfer and convey' to the assignee the note and mortgage 'and all liens and titles held by him in and to said lands'; (3) an execution in the form:
NUNLEY & WILSON
By: S/ Richard K. Nunley
(4) an acknowledgment reciting that Mr. Nunley executed the document 'individually and in the capacity therein stated.'
Mr. Nunley identified the document as being an assignment of his interest in the note and mortgage to Mrs. Rumbaugh. He offered in open court to execute another assignment to Mrs. Rumbaugh to set at rest any doubt as to the efficacy of the first one.
The court found, as one link in the chain of assignments ending in Seasons, that Mr. Nunley, individually, and as a partner in Nunley & Wilson, validly assigned the note and mortgage to Mrs. Rumbaugh, and concluded that Seasons was entitled to judgment.
The Atwells argue that the assignment to Mrs. Rumbaugh disclosed upon its face that it was from Nunley & Wilson and not from Richard K. Nunley, individually; that Nunley & Wilson did not own the note and mortgage; and that, as a matter of law, based solely upon the document, title did not pass to Mrs. Rumbaugh. They assert the acknowledgment is separate and independent from the assignment and cannot cure its infirmities, citing 1 Am.Jur.2d Acknowledgments, § 80 (1962).
The facts before us raise no question as to the due execution of the document, that is to say, its execution by a person competent to execute it. Neither is a question presented as to its genuineness. Its execution by Mr. Nunley is not questioned, his signature is not claimed to be spurious, nor is anything said to have been added to or deleted from it following execution. The sole question relates to the construction of the document--did it pass title or did it not? An assignment and the language of an assignment may be informal as long as it shows an intention on the part of the owner of a right or interest in property to transfer it. S & W Trucks, Inc. v. Nelson Auction Service, Inc., 80 N.M. 423, 457 P.2d 220 (1969). We are thus concerned with the intent of the assignor and this is to be gleaned, if possible, from the document itself. So construed, there appears to be little, if any, question that Mr. Nunley intended to pass legal title to the note and mortgage to his client. The document seems appropriate in form to accomplish the dual function of releasing the inchoate security interest in the encumbered property which was held by the law firm and of transferring the note and mortgage, legal title to which was held by Mr. Nunley. This would be bolstered by his testimony, were it necessary to look further. The trial court correctly decided the issue.
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