Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-92-01166/USCOURTS-ca10-92-01166-0/pdf.json

Parties Involved:
Jo Ann R. Sondrup
Appellant
Richard W. Sondrup
Appellant
United States of America
Appellee

Document Text:

FIL1,D UNITED STATES COURT OF APPEAL'Snit.ed States Court of AppealF Tenth Circuit 

FOR THE TENTH CIRCUIT 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

RICHARD W. SONDRUP; JO ANN R. SONDRUP, 

Defendants-Appellants. 

ORDER AND JUDGMENT* 

JAN 2 9 1993 

ROBERT L. HOECKER Clerk . 

No. 92-1166 

(D.C. No. 90-8-2279 ) 

(D. Colo.) 

Before LOGAN and MOORE, Circuit Judges, and LUNGSTRUM,** District 

Judge. 

**Honorable John W. Lungstrum, District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

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. 

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

submit ted without oral argument. 

The case is therefore ordered 

* 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 . 1 0th Cir. R. 

36.3. 

Appellate Case: 92-1166 Document: 010110165475 Date Filed: 01/29/1993 Page: 1 
Defendants appeal from the district court's order entering 

judgment in favor of plaintiff on i ts claim seeking to recover 

the balance due on a loan guaranteed by the Small Business 

Administration (SBA) . Reviewing the district court's decision de 

novo, see Dillon Family & Youth Servs .• Inc. v. Department of 

Human Servs. , 965 F.2d 932, 933 (10th Cir. 1992 ) (district court's 

interpretation of unambiguous contract reviewed de novo ) , and 

after considering the record and the parties' arguments on appeal, 

we affirm. 

The parties stipulated to the following facts: In 1978, 

defendants executed a promissory note, secured by a mortgage on 

real property, payable to the Bank of Laramie (Bank). The SBA 

guaranteed the loan. In 1983, defendants sold the real property 

securing the note to third parties. As part of that transaction, 

the third parties agreed to assume the promissory note and 

mortgage. According to the terms of the assumption agreement, the 

SBA and the Bank "indicated their concurrence in 

the . transaction and assumption." Appellants' Opening Br., 

Ex. D. 

The third parties subsequently defaulted on the note. The 

SBA, having acquired the Bank's interest in the note and the 

mortgage, foreclosed on the real property securing the note. 

After application of the proceeds of the foreclosure sale to the 

debt, there remained approximately $55,00 0 due on the note. 

The SBA eventually settled its claims against the third 

parties and released them from any further liability on the note. 

In doing so, however, the SBA did not obtain defendants' consent 

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Appellate Case: 92-1166 Document: 010110165475 Date Filed: 01/29/1993 Page: 2 
nor did it expressly reserve in the release documents its rights 

against defendants. The SBA then commenced this action, seeking 

to collect from defendants the remaining balance due on the note. 

Defendants argue that, as a result of the assumption 

agreement, they became sureties on the note, while the third 

parties became the principal debtors. Defendants contend that, 

when the SBA released the third parties from further liability 

under the note, without defendants' consent and without reserving 

its rights against them, the SBA also discharged defendants from 

any further liability. 

Absent contrary contractual provisions, see Wilson v. J.W. 

Crowdus Drug Co . , 222 S.W. 223, 224 (Tex. Ct. App . 1920 ) , an 

assumption agreement, by operation of law, creates a suretyship 

between the parties to that agreement. See. e.g. , Hemenway v . 

Miller, 807 P.2d 863, 866 (Wash . 1991) . The mortgagor becomes the 

s urety of the debt and the party assuming the obligation becomes 

the principal debtor. See. e.g., Matthews v . Saleen, 812 P.2d 

1186, 1188 (Colo. Ct. App. 1991). When the mortgagee has notice 

of and approves the assumption agreement, the mortgagee is also 

bound t o recognize the surety relationship between the mortgagor 

and the party assuming the debt . See, e.g., Hemenway. 807 P.2d at 

866; Everts v. Matteson, 132 P.2d 476 , 483 (Cal. 1942 ) . The 

parties, however, are 

differently through the 

Wilson , 222 S .W. at 224 ; 

(1987); s ee generally 

free to def ine their relationship 

express terms of their cont rac ts. See 

72 C.J.S. Principal and Sure ty § 35 

Restateme nt of Security § 83 cmt. e 

(1941) (contract between mortgagor and grantee u s ually p r esc r ibes 

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Appellate Case: 92-1166 Document: 010110165475 Date Filed: 01/29/1993 Page: 3 
parties' duties following assumption) ; United States v. Immordino, 

534 F.2d 1378, 1380 (10th Cir. 1976) (guaranty agreement provided 

that release of some coguarantors by SBA did not release the 

others). 

Unless the parties provide otherwise, an assumption agreement 

also transfers personal liability from the mortgagor, who then 

becomes the surety, to the third-party purchaser, who, as the 

principal debtor, becomes primarily liable. See Southwest Sav . & 

Loan Ass ' n v. Ludi, 594 P.2d 92, 93 (Ariz . 1979 ) ; see also 

59 C.J. S . Mortgages § 416 (1949). In this case, however, the 

assumption agreement expressly stated that defendants would remain 

personally liable on the note, even after the assumption. In 

light of this express language, the district court did not err in 

concluding, as a matter of law, that no surety relationship was 

created by the assumption agreement. Therefore, defendants ' 

remaining arguments, which rely upon the existence of a 

suretyship, must fail. 

The decision of the United States District Court for the 

District of Colorado is AFFIRMED. 

Entered for the Court 

James K. Logan 

Circuit Judge 

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Appellate Case: 92-1166 Document: 010110165475 Date Filed: 01/29/1993 Page: 4