Western Coach Corp. v. Rexrode
| Decision Date | 13 August 1981 |
| Docket Number | No. 1,CA-CIV,1 |
| Citation | 634 P.2d 20,130 Ariz. 93 |
| Parties | , 32 UCC Rep.Serv. 1016 WESTERN COACH CORPORATION, an Arizona Corporation, Plaintiff-Appellant, v. Harry H. REXRODE and Dorothy C. Rexrode, his wife and each of them, Defendants-Appellees. 4975. |
| Court | Arizona Court of Appeals |
Two principal issues are raised by this appeal: (1) Whether a seller under a secured transaction which assigns its seller's interest with recourse may maintain an action against the buyer under a theory of subrogation for payments made on the buyer's behalf, and (2) whether a guarantor who takes possession of a debtor's collateral is subject to the statutory requirements and liabilities imposed by A.R.S. § 44-3151(A).
This action arises out of an amended complaint whereby plaintiff-appellant, Western Coach Corporation (Western), sought to recover from defendants-appellees, Harry H. Rexrode and Dorothy C. Rexrode (Rexrode), money allegedly paid by Western for the following items:
(1) Installment payments made by Western on behalf of Rexrode to Fidelity Acceptance Corporation under a contract of sale wherein Western was the seller and Rexrode was the buyer.
(2) Cost of moving and storing a mobile home which was the subject of the contract of sale.
(3) Cost of refurbishing the mobile home.
(4) Cost of insurance of the mobile home.
(5) Attorney's fees and court costs.
Rexrode, without filing an answer to the amended complaint, moved to dismiss the amended complaint for failure to state a cause of action and filed a counter-claim seeking damages from Western for conversion of the mobile home. The trial court granted Rexrode's motion to dismiss. Rexrode then moved for summary judgment on its counterclaim based upon the theory that Western, as a secured party had repossessed the mobile home in question and had failed to sell it within the statutory time period imposed by A.R.S. § 44-3151(A) 1 and therefore Rexrode was entitled to the penalties exacted by A.R.S. § 44-3153(A). 2
The trial court granted the motion for summary judgment and entered judgment against Western for approximately $7,400. Western has appealed both the granting of the motion to dismiss the amended complaint and the granting of summary judgment in Rexrode's favor.
The facts set forth in Western's complaint, which because of the posture of this litigation we deem to be true, are that on June 30, 1969, Rexrode agreed to purchase from Western a 1969 Sarasota mobile home for the total time balance of $12,367.20, after a down payment. This balance was to be paid in 120 monthly installments. Western, as seller, retained a security interest in the mobile home as collateral for the payment of the balance of the purchase price. Western, according to its amended complaint, advised Rexrode that it would not be able to carry the balance of the purchase price and that the contract would be financed through Fidelity Acceptance Corporation (Fidelity). )
On the face of the retail installment contract was a clause entitled "Seller's Assignment Warranty and Repurchase Agreement" by which Western assigned to Fidelity "all right, title and interest in and to the within contract and to the property covered thereby ...." In addition to certain warranties, the assignment clause specifically provided: "The undersigned (Western) guarantees payment of the full amount remaining unpaid hereon ...."
Rexrode made payments under this contract until August 13, 1977, and then defaulted. The sum of $2,815.49 was still due and owing under the contract at the time of default. The complaint alleged that at the time of default, Rexrode had abandoned the mobile home, it was in a state of disrepair and Rexrode had removed all of the furnishings. Western took possession of the mobile home, moved it to its own lot, and completely refurbished it at a cost of $2,437.10. In addition, Western made monthly payments to the financing assignee in the sum of $864.48.
In the meantime, Fidelity has assigned the contract, including the security interest, to Old Kent Bank, which assigned it to Delta Investment Corporation, which in turn assigned the contract to Gulf Homes, Inc. (Gulf). The president of Western is also the president of Gulf. Following the assignment to Gulf, Western ceased making payments and Gulf repossessed the mobile home from Western. On October 10, 1978, Gulf conducted an auction at which it purchased the mobile home for the sum of $1,250.
Western then brought this action against Rexrode. Gulf in a separate action sought a deficiency judgment against Rexrode. In the Gulf action certain discovery was undertaken, which Rexrode used in support of its motion for summary judgment on its counterclaim against Western. The Gulf action was subsequently dismissed and is not a concern in this appeal.
Western's amended complaint was based upon a theory of subrogation arising out of its status as a guarantor of Rexrode's obligation to Fidelity. The trial court dismissed the amended complaint on the theory that the original contract between Western and Rexrode provided that in the event of Rexrode's default, Western, as seller, was granted the remedy of acceleration of the debt, repossession of the security, sale of the security and a deficiency judgment following sale. In the trial court's opinion, these remedies were exclusive, thus barring a remedy based upon subrogation.
We need not here determine whether the contractual remedies afforded Western as a seller were or were not exclusive. See Zancanaro v. Cross, 85 Ariz. 394, 339 P.2d 746 (1959). Here, Western sought recovery against Rexrode, not as a seller under a secured installment contract, but rather as a guarantor of Rexrode's debt seeking reimbursement for the payment of a portion of that debt. Rexrode does not argue that the agreement between Western and Fidelity did not give rise to Western becoming a guarantor of Rexrode's debt to Fidelity. Nor does Rexrode contest that pursuant to that guaranty, Western made payments on Rexrode's behalf on Rexrode's obligation.
Given then the admitted status of Western as a guarantor of Rexrode's debt, the general rule allowing the guarantor reimbursement from the principal debtor is set forth in Dykes v. Clem Lumber Co., 58 Ariz. 176, 180, 118 P.2d 454, 455 (1941):
The general rule of law in regard to guaranty is that where one has entered into a contract of guaranty at the request of a principal debtor and has been compelled to pay his principal's debt, there is an implied promise of reimbursement, and on the payment of the debt the guarantor has an immediate right of action against the principal for the amount which he has thus been compelled to pay.
Rexrode argues, however, that since Western was the original seller and by contract its remedies as a seller were limited, it could not by assignment relieve itself of these limitations. This argument is completely immaterial in the context of the contractual relationships established between the parties to this transaction. On the one hand, a set of contractual liabilities and obligations arose out of the parties' status as buyer and seller. These obligations and liabilities insofar as Western as the seller was concerned were assigned to Fidelity. On the other hand, a complete, separate and distinct set of contractual liabilities and obligations exist between Rexrode and Western arising out of Western's position as a guarantor of Rexrode's underlying obligation. There is nothing in this contract or the law which requires that the rights possessed as a seller preclude the exercise of rights which a seller may possess by reason of it also being a guarantor.
While not directly addressing the rights of the parties arising out of their distinct and separate relationships, Rexrode...
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