Shiflet v. Marley

• Decision Date: 17 November 1941
• Docket Number: Civil 4361
• Citation: 58 Ariz. 231,118 P.2d 1107
• Parties: R. C. SHIFLET and LEONA M. SHIFLET, His Wife, Appellants, v. MAY B. MARLEY, Appellee
• Court: Arizona Supreme Court

118 P.2d 1107

58 Ariz. 231

R. C. SHIFLET and LEONA M. SHIFLET, His Wife, Appellants, v. MAY B. MARLEY, Appellee

Civil No. 4361

Supreme Court of Arizona

November 17, 1941

APPEAL from a judgment of the Superior Court of the County of Maricopa. G. A. Rodgers, Judge. Judgment affirmed.

Messrs Cox & Hibbert, for Appellants.

Messrs Woolf & Shute, for Appellee.

OPINION

LOCKWOOD, C.J.

This is an appeal by R. C. Shiflet and Leona M. Shiflet, his wife defendants, from a judgment in favor of May B. Marley, plaintiff. The facts shown by the record are not in serious dispute and may be stated as follows: In March 1931, plaintiff loaned to defendants $6,000, for which they executed a negotiable promissory note payable in three years and bearing interest at 8% per annum, payable quarterly. Concurrently, to secure the payment thereof, they gave plaintiff a mortgage on certain real property in Phoenix, which contained the usual covenants that mortgagors would keep the property insured, pay the taxes, and the like. In 1933 defendants conveyed the mortgaged property to Harry A. and Ethel Phillips, subject to the mortgage. In 1937 the latter conveyed the property to S. K. and Anna Phillips, also subject to the mortgage. In neither of these deeds did the grantees agree to assume or pay the debt. The original note, at the time of the last conveyance to S. K. and Anna Phillips, was long overdue, and they entered into the following agreement with plaintiff:

"That Whereas, on the 10th day of March, 1931, R. C. Shiflet and Leona M. Shiflet, husband and wife, executed a promissory note in favor of the party of the first part for the principal sum of Six Thousand Dollars ($6,000.00) payable three years after date and secured by a mortgage upon the following described real property, to-wit: (Description follows)

"And Whereas, the parties of the second part are now the owners of said real property as evidenced by deeds of conveyance duly executed, acknowledged, and recorded in the Recorder's office of said Maricopa County;

"And Whereas, said promissory note had not been paid and the said May B. Marley agrees to extend the time of payment thereof up to and until the 10th day of March, 1940, reducing, however, the interest payable on said sum from the amount provided for in said note to 6% per annum, interest payable monthly.

"Now, Therefore, in consideration of such extension, the said S. K. Phillips and Anna Phillips agree to pay said promissory note with interest thereon at the rate of 6% per annum, interest payable monthly, upon the said 10th day of March, 1940, reserving the right, however, to pay the principal sum of said note at any time prior to said date, together with interest thereon up to said date of payment.

"In Witness Whereof, the parties hereto have set their hands this 20th day of February, 1937.

"May B. Marley

"Party of the First Part

"S. K. Phillips

"Anna Phillips

"Parties of the Second Part."

Defendants had no knowledge of this agreement until after this action was begun, nor did they ever approve or ratify it.

Between the years 1932 and 1939 the state, county and city taxes had become delinquent in a large degree, and on December 4, 1939, plaintiff paid the accrued taxes, with the interest and penalties, in order to protect her interest in the property.

In November, 1939, there was a default in the payment on the principal and interest due on the note, as modified by the above agreement, and plaintiff filed her action in the superior court, setting up the note and mortgage, together with the amount due thereon, asking for a receivership and judgment against defendants and S. K. and Anna Phillips for the amount which it was alleged was due under the note and mortgage, with interest, attorney's fees, and for a foreclosure of the mortgage, with the usual deficiency judgment. The Phillips defaulted. The Shiflets set up in defense that S. K. and Anna Phillips had agreed with the defendants that they would assume and pay the mortgage, and that plaintiff, as a part thereof and without the knowledge of defendants, extended the time of payment and the rate of interest; that at the time the original mortgage became due the value of the premises was greater than the amount due thereon, so that had the mortgage been then foreclosed it would have sold for more than enough to pay what was due.

The prayer of defendants was that plaintiff take nothing against them by way of a deficiency judgment, and that the property alone be held liable for the indebtedness so far as they were concerned.

The question before us is whether, under the facts as above set forth, plaintiff was entitled to a deficiency judgment against defendants Shiflets.

It is urged on behalf of defendants that by the agreement between the Phillips and plaintiff, as above set forth, they ceased to be the principal debtors and became mere sureties for the payment by the Phillips of the indebtedness, and that the extension of time provided in said agreement released them.

It is the position of plaintiff that the suit was on a negotiable promissory note, and that an extension of time to one liable for the debt shown by such a note does not release another person primarily liable thereon, and that the Shiflets, upon all the facts, were still primarily liable upon the note.

Defendants rely upon the case of Seale v. Berryman, 46 Ariz. 233, 49 P.2d 997, 101 A.L.R. 613, while plaintiff insists the situation is governed by the rule laid down in Cowan v. Ramsey, 15 Ariz. 533, 140 P. 501, and Young v. Carr, 44 Ariz. 223, 36 P.2d 555.

We have examined the cases in question as applied to the contentions of the respective parties herein and find no conflict in the rules there laid down. In Cowan v. Ramsey and Young v. Carr, supra, we held that a party primarily liable on a negotiable instrument could only be released from such liability in one of the ways set forth in the statute, that is, (a) payment by or on behalf of the principal debtor, (b) payment by the party accommodated, (c) cancellation, (d) any other act which would discharge a simple contract for the payment of money, and (e) by the principal debtor becoming the owner at or after maturity, and that one primarily liable on such a note was not released by an extension of time given to another who was also primarily liable. We reaffirm that as the law of this jurisdiction. Section 52-184, Arizona Code 1939.

Defendants were undoubtedly primarily liable on the note sued on, and unless it was discharged in one of the ways mentioned above they were still liable thereon, and the extension of time for payment granted to the Phillips would not release them. The note was not paid, it was never cancelled, nor did the principal debtor become its owner at any time. Was the note then discharged by "any other act which would discharge a simple contract"? It seems to us that on the facts of this case, there is but one manner in which this could have been done,...