Opinion ID: 1378146
Heading Depth: 2
Heading Rank: 1

Heading: Community Debt.

Text: The general rule is that a debt contracted for during marriage is presumptively a community debt and the burden of showing otherwise is on the party so asserting. Malcolm v. Malcolm, 75 N.M. 566, 408 P.2d 143 (1965); Strong v. Eakin, 11 N.M. 107, 66 P. 539 (1901). Unless Lillian Abraham rebuts the presumption, she is also liable for the indebtedness. The money advanced to Abe Abraham by FNBIA and represented initially by the note of November 13, 1978, was to be used by Abe Abraham in his jewelry business. The debt for materials bought by a spouse for use in that spouse's business is a community debt. Id. The November 1978 note was renewed in May 1979 and again on October 1979. FNBIA claims that the transactions of May and October 1979 constituted mere extensions of the original note and that a renewal note, absent an agreement to the contrary, does not extinguish the initial debt. Lillian Abraham, on the other hand, contends that the subsequent renewal transactions of May and October 1979 constituted new contracts because they provided a different rate of interest than the original note. Lillian Abraham also asserts that because she and Abe Abraham were divorced at the time of the October 1979 transaction, she is not bound by the contract entered into by Abe Abraham and FNBIA at that time. Before proceeding further, this Court must resolve a preliminary issue. FNBIA claims that the issue of whether the October 1979 transaction represented a material change in the original contract or became a new contract, is raised for the first time on appeal and cannot be considered by the Court at this time. However, the record reflects no doubt about the issue having been presented in the trial court. It is undisputed that the Abrahams were divorced prior to the October 1979 renewal. In addition, the notes were introduced as exhibits, and they indicated the differences in the amount of interest rates charged in the renewal notes of May and October 1979. There are numerous cases in this and other jurisdictions which hold that an appellate court may sustain a judgment of a trial court for reasons other than those relied upon by the trial court. The case of Thomas v. Gardner, 75 N.M. 371, 404 P.2d 853 (1965), held that even though the trial court based its decision upon other grounds, the judgment will be affirmed if it can be sustained upon correct legal principles. Similarly, Scott v. Murphy Corporation, 79 N.M. 697, 448 P.2d 803 (1968), held that the trial court will be upheld if it is right for any reason. This issue is properly before us on appeal. As applied to a note, the term renewal means the re-establishment of a contract evidenced by the note for another period of time. 11 Am.Jur.2d Bills and Notes § 307 (1963). The Court in Bank v. McClellan, 9 N.M. 636, 58 P. 347 (1899), relied on by FNBIA, characterized a renewal as a mere change of notes from time to time, which evidences the same indebtedness ... . Id. at 644, 58 P. at 349. FNBIA is correct when it argues that a renewal note, absent an agreement to the contrary, does not extinguish the initial debt. See, e.g., Easton v. Ash, 18 Cal.2d 530, 116 P.2d 433 (1941). However, a party to a note may be discharged on his obligation if a material alteration is made in the renewal without his consent. See Ruby v. Talbott, 5 N.M. 251, 21 P. 72 (1889). A material alteration of an instrument is one that changes the legal effect of that instrument. E.g., Fitzgerald v. Lawson, 96 N.H. 447, 78 A.2d 527 (1951). Rate of interest is a material term in a contract. See, e.g., Belt v. Stover, 157 Okl. 176, 11 P.2d 519 (1932). Although the prior notes of November 1978 and May 1979, signed by Abe Abraham alone, were binding on Lillian Abraham under community property law, Lillian was not liable on the renewal note of October 1979. The record shows that the renewal note of October 1979 was executed by FNBIA and Abe Abraham only. Interest provided for in the May 1979 note was 10.5%. The rate of interest provided for in the October 1979 note was 13%. Rate of interest was a material change from prior notes and a new indebtedness resulted. We hold that this new indebtedness could not bind Lillian Abraham without her signature or consent, since it arose after her divorce from Abe Abraham.