Phoenix Arbor Plaza, Ltd. v. Dauderman

785 P.2d 1215, 163 Ariz. 27, 39 Ariz. Adv. Rep. 50, 1989 Ariz. App. LEXIS 202
CourtCourt of Appeals of Arizona
DecidedJuly 18, 1989
Docket1 CA-CV 88-165, 1 CA-CV 88-191
StatusPublished
Cited by12 cases

This text of 785 P.2d 1215 (Phoenix Arbor Plaza, Ltd. v. Dauderman) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phoenix Arbor Plaza, Ltd. v. Dauderman, 785 P.2d 1215, 163 Ariz. 27, 39 Ariz. Adv. Rep. 50, 1989 Ariz. App. LEXIS 202 (Ark. Ct. App. 1989).

Opinions

OPINION

CLABORNE, Judge.

This appeal invites us to examine a choice of law issue concerning the liability of a California spouse who failed to sign a guarantee executed in Arizona securing the performance of the terms of an Arizona [28]*28lease of Arizona property. The sole issue on appeal is whether the trial court erred in applying Arizona law to determine the liability of a California guarantor’s spouse and the California marital community property.

We find no error and affirm.

An Arizona partnership, Nautilus Plus, leased space in an Arizona shopping center from Northwest Associates Limited Partnership (Northwest). Gordon Hall and Jerry Dauderman executed personal guarantees of performance of the lease by Nautilus Plus. Each guarantee was appended as an exhibit to the lease document between Nautilus Plus and Northwest. At the time of the execution of the lease and the guarantees, Jerry L. Dauderman and his wife, Roberta, were residents of California. In 1985 Northwest sold the Arizona shopping center to Phoenix Arbor Plaza, Ltd. (appellant) and assigned the lease agreement and the guarantees to the appellant. A default for failure to pay rent under the lease agreement occurred after October 1985.

On April 30, 1986, appellant filed a complaint against Gordon and Dolores Hall, husband and wife, and Jerry L. and Roberta Dauderman, husband and wife, seeking to enforce each guarantee. Roberta Dau-derman (Roberta) moved for summary judgment. She claimed that since she did not personally sign the guarantee, neither she personally nor the community property of the Daudermans could be liable under Arizona law. Appellant responded, arguing that because the Daudermans were residents of California, California law should apply. California law would subject Roberta and the Dauderman community property to liability under the guarantee.

The trial court granted summary judgment in favor of Roberta, dismissed the complaint against her and awarded her costs and attorney’s fees. The remaining issues went to trial, the trial court found in favor of appellant and against Gordon Hall and Jerry Dauderman. After the final judgment was lodged, the Daudermans unsuccessfully objected to the form of judgment.

Appellant filed a notice of appeal from the portion of the judgment dismissing the complaint with prejudice as to Roberta and awarding her attorney’s fees. The Dauder-mans filed a notice of appeal from the order denying their objection to the form of the judgment. At the time of oral argument, the appellant took the position that this court’s recent opinion in Lorenz-Auxier Financial Group, Inc. v. Bidewell, 772 P.2d 41 (App.1989) controlled the issue and that we should reverse on that basis.

ARIZONA LAW GOVERNS THE RIGHTS AND LIABILITIES OF THE PARTIES TO THE GUARANTEE

The parties acknowledge there is no factual dispute and the question is which law should govern the rights of the parties. They agree that if Arizona law applies, Roberta and the Daudermans’ community assets are not liable for the guarantee executed by Jerry L. Dauderman. See A.R.S. § 25-214(C); Consolidated Roofing & Supply Co., Inc. v. Grimm, 140 Ariz. 452, 457-58, 682 P.2d 457, 462-63 (App.1984). If California law applies, Roberta and the Daudermans’ community assets are liable. See Cal.Civil Code § 5120.110(a) (West 1983).

The trial judge expressed two reasons for choosing Arizona law. First, he felt the lease gave weight to the provision of the lease which specified that it was to be construed according to the laws of the State of Arizona. Second, the judge reasoned as follows:

Even if there were no choice of law provision, the court is of the opinion that, applying traditional conflicts of law principals [sic] Arizona is the state with the most significant relationship to the guarantee issue. Where the landlord is located in Arizona, and where the contract was negotiated, executed and performed in the state, it is appropriate, in order to promote uniformity and consistency, to apply Arizona law.

The trial court’s first reason was in error. The guarantees of Dauderman and Hall were separate documents and were attached to the lease agreement as [29]*29exhibits. Although each party pointed to the lease as evidence of which law should apply to the guarantee, it is clear that each document described the duties and obligations of different people. The lease dealt with duties and obligations of landlord and tenant. The guarantees dealt with the undertakings of the guarantors. These contracts involved completely different parties. The lease was between Northwest and Nautilus Plus. The guarantee was between Northwest and Jerry Dauder-man. A guarantee is a contract secondary or collateral to the principal contractual obligations which it guarantees. See Howard v. Associated Grocers, 123 Ariz. 593, 595, 601 P.2d 593, 595 (1979). We therefore conclude that the choice of law provision in the lease is not part of the guarantee and, therefore, is not controlling. In any event, the choice of law provision would not be binding on Roberta because she did not sign the lease. Lorenz-Auxier Financial Group, Inc. v. Bidewell, at 44.

We commence the examination of Roberta’s liability and its effect on the Dauder-man marital community property. In examining whether Roberta’s liability should be decided according to California or Arizona law, we will look to the pronouncements of the Arizona courts and to the Restatement (Second) Conflict of Laws. Restatement (Second) of Conflict of Laws §§ 6, 194 (1971).

Arizona has generally taken the position that if a contract is executed and performed in Arizona, Arizona law applies. See Aries v. Palmer Johnson, Inc., 153 Ariz. 250, 735 P.2d 1373 (App.1987); Taylor v. Security National Bank, 20 Ariz. App. 504, 514 P.2d 257 (1973). This general view is consistent with the Restatement (Second) of Conflict of Laws § 194 concerning surety (or guarantee) agreements.

Section 194 provides:

The validity of a contract of suretyship and the rights created thereby are determined ... by the law governing the principal obligation which the contract of suretyship was intended to secure, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.

Restatement (Second) of Conflict of Laws § 194 (1971). The comment to this section explains the rationale behind the general principle:

In the absence of an effective choice of law by the parties, the validity of the suretyship contract and the rights created thereby will usually be determined by the law which governs the principal obligation. In the nature of things, the two contracts will usually be closely related and have many common elements.

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Phoenix Arbor Plaza, Ltd. v. Dauderman
785 P.2d 1215 (Court of Appeals of Arizona, 1989)

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Bluebook (online)
785 P.2d 1215, 163 Ariz. 27, 39 Ariz. Adv. Rep. 50, 1989 Ariz. App. LEXIS 202, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phoenix-arbor-plaza-ltd-v-dauderman-arizctapp-1989.