Sunwest Bank of Farmington v. Kennedy, No. 18124

Docket NºNo. 18124
Citation1990 NMSC 4, 109 N.M. 400, 785 P.2d 740
Case DateJanuary 12, 1990
CourtSupreme Court of New Mexico

Page 740

785 P.2d 740
109 N.M. 400
SUNWEST BANK OF FARMINGTON, a New Mexico banking
corporation, Plaintiff-Appellee,
v.
Don KENNEDY, Sharon Kennedy, Edith Kennedy, and Estate of
Troy Kennedy, Deceased, and/or the Heirs-at-Law of
Troy Kennedy, Defendants-Appellants.
No. 18124.
Supreme Court of New Mexico.
Jan. 12, 1990.

[109 NM 400] F.D. Moeller, Farmington, for defendants-appellants.

Tansey, Rosebrough, Gerding & Strother, James B. Payne, Farmington, for plaintiff-appellee.

OPINION

BACA, Justice.

Defendants Kennedys appeal the district court of San Juan County's grant of summary judgment to plaintiff Sunwest Bank of Farmington (Sunwest). The other defendants to the action have not contested the judgment. We affirm.

FACTS

In September 1982, the Kennedys borrowed $165,000 from Valley Bank, the predecessor of Sunwest, for the use of Kennedy, Inc., a corporation owned by the Kennedys, with its principal asset a car dealership. At the time that the promissory note was issued, in addition to assuming primary liability on the note, the Kennedys each signed an "Unconditional and Continuing Guaranty" with the bank, obligating

Page 741

[109 NM 401] them to "pay any and all liabilities, obligations or indebtedness, of any kind or nature" of the corporation.

The original term of the note was one year, although the parties contemplated annual renewals allowing the loan to be repaid over a ten-year period; it was extended twice, in September of 1983, and September of 1984. In December 1984, the Kennedys sold their interest in the corporation to the other defendants in this suit, James Copeland, James Clark, Charlie Craven, and Santex, Inc. Copeland, Clark, and Craven also executed personal guarantees on the payment of the note.

In August 1985, Kennedy, Inc., now doing business as Copeland-Craven Pontiac, Oldsmobile-Nissan, Inc., executed a modification of the note, contemplating a three-year amortization, and, because Copeland and Clark had bought out the interests of Craven and Santex, Inc., Sunwest released Craven from his personal guarantee. These actions were accomplished without notice to the Kennedys.

The note subsequently went into default, leaving an amount owed of $104,730.30. Sunwest then brought this suit to collect.

The issue we consider on this appeal is whether the bank, by releasing Craven from his personal guaranty of the note and by extending the terms of the note without notice to the Kennedys, affected a discharge of the Kennedys' liability on the note.

In determining whether summary judgment was proper, the evidence on appeal is considered in a light most favorable to the party opposing the motion. Green v. General Accident Ins. Co. of Am., 106 N.M. 523, 527, 746 P.2d 152, 156 (1987).

A. Did Craven and Santex, Inc. Become Co-Makers of the Note by Subsequently Guaranteeing the Indebtedness?

The Kennedys argue that, by the terms of the "Assumption of Indebtedness" agreement signed by Craven and Santex, Inc., those parties became co-makers or co-debtors with the Kennedys. Thus, they contend that, because Sunwest subsequently released Craven and Santex from their obligation as guarantors, the Kennedys also were released to the extent of their right of contribution.

The Kennedys correctly state the law that such a release by the holder of a note operates to discharge the obligations of subsequent parties and co-debtors who are jointly and severally bound, absent the approval of the maker. See Wood v. Eminger, 44 N.M. 636, 641, 107 P.2d 557, 562 (1940). The applicability of this argument, however, is premised upon Craven and Santex being elevated to the status of co-maker or co-debtor.

The Kennedys also correctly define a maker as the party that "engages that he will pay the instrument according to its tenor at the time of his engagement." NMSA 1978, Sec. 55-3-413(1). In accordance with this definition, the Kennedys contend that Copeland and Craven, when they assumed the indebtedness, became makers by agreeing to be co-equal with the Kennedys. They argue that Copeland and Craven specifically agreed to become liable "as if the Transferee had executed such instruments as of the dates thereof as the principal obligor[,]" purportedly citing to the record, but without citation. Sunwest, however, has directed our attention to that language in the record. By the "Agreement for Assumption of Indebtedness," Kennedy, Inc. assumed the debt vis-a-vis...

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3 cases
  • Schiffer v. United Grocers, Inc.
    • United States
    • Supreme Court of Oregon
    • July 15, 1999
    ...44 N.M. 636, 107 P.2d 557, 560 (1940) (release of one codebtor releases the other codebtors); Sunwest Bank of Farmington v. Kennedy, 109 N.M. 400, 785 P.2d 740, 741 (1990) (stating that "release of one releases all" is general rule regarding release of a 6. West Virginia: Rutherford v. Ruth......
  • F.D.I.C. v. Moore, 20903
    • United States
    • New Mexico Supreme Court of New Mexico
    • July 7, 1994
    ...the Moores would not guarantee payment if further extensions were granted. They cited as authority Sunwest Bank of Farmington v. Kennedy, 109 N.M. 400, 402, 785 P.2d 740, 742 (1990) (stating that a surety may be discharged when the holder grants an extension of a note without authorization ......
  • U.S. v. Hansen, 90-2182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 28, 1991
    ...Here, the Candelarias as sureties on the note have a right of recourse against the Hansens. In Sunwest Bank of Farmington v. Kennedy, 785 P.2d 740, 741 (N.M.1990), the court implied that New Mexico would follow the majority rule which holds that when a third party assumes a debt, the third ......

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