Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-02182/USCOURTS-ca10-90-02182-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 

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FI LED 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

United States Court of Appeals 

Tench Ci!:'ruit 

JUN 2 8 1991 

UNITED STATES OF AMERICA, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

DAVID W. HANSEN, doing business as ) 

The Buckskin; ROY W. HANSEN, doing ) 

business as The Buckskin; KIM K. ) 

HANSEN; MARLENE HANSEN; VIDAL ) 

CANDELARIA, doing business as American ) 

Trading Company, also known as Bill ) 

Candelaria; URSULA CANDELARIA, ) 

) 

Defendants, ) 

) 

and ) 

) 

DANE D. FOWLER; DEBBIE L. FOWLER, ) 

) 

Defendants-Appellants. ) 

ORDER AND JUDGMENT* 

.ROBERT L. HOECKER 

Clerk 

No. 90-2182 

(D.C. No. CIV 83-554-M) 

(D. N.M.) 

Before ANDERSON, BARRETT, and BRORBY, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 90-2182 Document: 010110128267 Date Filed: 06/28/1991 Page: 1 
' 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

Defendants Dane D. Fowler and Debbie L. Fowler appeal from an 

order of the district court holding they had no colorable claim to 

the real property and business chattels, including New Mexico 

Liquor License No. 388, which are the subject of this action. 

On appeal, the Fowlers argue that the SBA discharged all 

obligors on a note secured by real property and business chattels 

when it entered into an agreement which settled the personal 

liability of defendants Vidal and Ursula Candelaria. The Fowlers 

further argue that the district court's findings of fact were not 

supported by the evidence and its conclusions of law were not 

supported by the law or the evidence. The Fowlers conclude they 

were entitled to judgment as a matter of law. We affirm. 

The Candelarias signed a promissory note for $155,000 secured 

by a mortgage on real property and further secured by a security 

interest in the Candelarias' business chattel including a liquor 

license. Several years later, the holder of the note assigned the 

note and all security instruments to the Small Business 

Administration (SBA). Two years later, the Candelarias agreed to 

sell their business to the Hansen defendants. As part of the 

agreement, the Hansens assumed the Candelarias' obligation under 

the note. To secure the note, the Hansens signed a new security 

agreement in the business chattel including the liquor license. 

The agreement did not relieve the Candelarias of their personal 

liability on the note and title to the real property remained with 

the Candelarias. The following year, the Fowlers paid Bill Hansen 

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$7,500.00 for a one-third interest in the secured real property 

and business chattel. 

Payments were not made on the note and the SBA commenced this 

action to enforce the government's lien on the secured properties. 

The Fowlers cross-claimed alleging an equitable lien on the 

properties in the amount of $7,157.51 based on their alleged 

one-third ownership. Before trial, the SBA settled its claim 

against the Candelarias for $35,000. 

The district court held that the SBA's settlement with the 

Candelarias did not relieve the Hansens of their liability and the 

SBA held a first and paramount lien in the business chattel. The 

court held that title to the real property had not vested in the 

Hansens and further, they had forfeited any future right to the 

property by their failure to make payments on the loan. 

Consequently, the Fowlers, asserting their claim through the 

Hansens, had no colorable claim to the real property. 

The Fowlers argue that the SBA did discharge all obligors on 

the note when it settled with the Candelarias. Therefore, because 

the Hansen's obligations were discharged, the Fowlers have an 

enforceable lien on the real property and business chattel, 

including the liquor license. Although the Fowlers raised this 

argument to the district court, on appeal they cite for the first 

time to N.M. Stat. Ann.§ 55-3-601 et . .§filh, which governs the 

discharge of negotiable instruments. Ordinarily, we will not 

address arguments which have not been presented first to the 

district court for its consideration. Baker v. Penn Mut. Life 

Ins. Co., 788 F.2d 650, 663 (10th Cir. 1986). We will briefly 

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address this argument, however, because the substance of the 

argument was made to the district court. Citation to statutory 

authority does not aid the Fowlers' position. 

The Fowlers cite specifically to 

§§ 55-3-603(1), 55-3-605, and 55-3-601(3)(b). 

N.M. Stat. Ann. 

Section 55-3-603(1) 

provides that the "liability of any party is discharged to the 

extent of his payment or satisfaction to the holder." Official 

Comment 3 explains that "(p]ayment to the holder discharges the 

party who makes it from his own liability on the instrument, and a 

part payment discharges him pro tanto." Official Comment 5 

further clarifies that "(p]ayment discharges the liability of the 

person making it." Although Comment 5 goes on to identify three 

circumstances in which the liability of other parties is 

discharged, those circumstances are not present here. See 72 

C.J.S. Principal and Surety § 35 (1987), and discussion below 

regarding section 55-3-601(3)(b). 

The SBA agreed to accept $35,000 in "full settlement of the 

[Candelarias'] personal liability and of the real estate 

mortgage." SBA's Addendum of Exhibits, Ex. 19. The settlement 

contained no provision for release of any party other than the 

Candelarias, nor does section 55-3-603(1) mandate the discharge of 

all parties following satisfaction of one party's personal 

liability. The Fowler's citation to Farmington National Bank v. 

Basin Plastics, Inc., 615 P.2d 985 (N.M. 1980) is inapposite 

because there the bank compromised and settled the entire note 

balance. Here, the SBA settled only as to one party's personal 

liability to the extent of its secured property. 

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Section 55-3-605 provides that the holder of a note may 

discharge a party by the holder's renunciation of its rights even 

without consideration. The SBA's settlement with the Candelarias 

does not amount to such a renunciation. 

Pursuant to section 55-3-601(3)(b), the liability of all 

parties may be discharged when a party having no right of recourse 

on the note is discharged. 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 party becomes the principal and "the original debtor 

occupies the position of surety as to the party assuming the debt" 

with a resulting right of recourse. Smiley v. Wheeler, 602 P.2d 

209, 212-13 (Okla. 1979)(emphasis in original)(footnote omitted); 

see 72 C.J.S. Principal and Surety§ 35 (1987). In Sunwest Bank, 

because the creditor was not a party to the assumption contract, 

the original debtor remained liable as the principal on the note 

despite the creditor's release of the party assuming the note. 

785 P.2d at 741. Here, the SBA was a party to the assumption 

agreement. Therefore, the Candelarias occupy the position of 

surety on the note and have a right of recourse against the 

Hansens. 

The Fowlers argue that three of the district court's findings 

of fact were erroneous. We review the district court's findings 

under the clearly erroneous standard. Fed. R. Civ. P. 52(a). The 

findings as to which the Fowlers claim error summarize various 

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. . ~ 

written agreements which were entered into evidence and which were 

submitted as part of the record on appeal. Our review of the 

agreements reveals no reversible error in the district court's 

summaries thereof as contained in its findings of fact. 

The Fowlers also argue that the district court's conclusions 

of law were erroneous and, therefore, it should have adopted their 

proposed conclusions of law. As noted above, the district court 

ruled correctly. 

The judgment of the United States District Court for the 

District of New Mexico is AFFIRMED. 

Entered for the Court 

James E. Barrett 

Senior Circuit Judge 

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