S. LEEKER, Appellant,
HARRY MARCOTTE and RUTH MARCOTTE, Husband and Wife, and A. L. PECK and CARMEN PECK, Husband and Wife, Appellees
APPEAL from a judgment of the Superior Court of the County of Santa Cruz. W. A. O'Connor, Judge. Judgment reversed and case remanded, with instructions.
Mr. Duane Bird, and Mr. Samuel L. Pattee, for Appellant.
Messrs. Duffy & Robins, Mr. Charles L. Hardy and Mr. Leslie C. Hardy, for Appellees.
[41 Ariz. 119] LOCKWOOD, J.
This is an action by Harry Marcotte and Ruth Marcotte, husband and wife, and A. L. Peck and Carmen Peck, husband and wife, hereinafter called plaintiffs, against S. Leeker, hereinafter called defendant, asking for a declaratory judgment as to the validity and construction of certain written instruments, and the legal relations arising therefrom between the parties to this action. The case was tried to the court sitting without a jury, and judgment was rendered declaring the instruments in question to be null and void and of no legal effect between the parties, and from such judgment this appeal is taken.
[41 Ariz. 120] The facts of the case have in effect been agreed upon by the parties to be as follows: On January 1st, 1919, defendant and his wife, Rae Leeker, were the owners, as community property, of lot 13 in block 17 of the town of Nogales, with the building thereon. On that date defendant executed a lease of the upper floor of such building in favor of one Ben Evans, hereinafter called the lessee, to be used as a hotel. Defendant himself was in possession of the lower floor and using it in the mercantile business. Some months thereafter Evans came to defendant with a proposition that the latter lease to him part of the lower floor then occupied by defendant as aforesaid, as well as the upper floor, and that the premises be remodeled. After some discussion it was agreed between the parties that defendant would advance to Evans the money necessary for such remodeling, and when the work was finished give him a new lease covering both the upper floor of the building and a certain part of the lower floor. Evans was to repay the cost of remodeling, giving defendant a note payable in monthly installments and a bond signed by Peck and another guaranteeing the note; to carry tenants' insurance on the improvements, and to insert in the lease to be made a provision that if any default were made in the repayment of the
amount advanced, the lease could be canceled by defendant. The improvements were made in accordance with this understanding, and when they were finished it appeared that their cost amounted to a little over $24,000. Evans paid defendant the excess over $24,000 in cash, and on July 14th the two executed a certain written lease. This lease, so far as it is material in this case, reads as follows:
". . . That the said party of the first part does by these presents lease and demise unto the said party of the second part,
[41 Ariz. 121] "Those certain premises known as Hotel Evans, (Heretofore known as the National Hotel), consisting of the upper or second floor of that certain building located on Lot Thirteen (13) in Block Seventeen (17) of the Town of Nogales, Arizona, together with the lobby on the lower floor of said building, with sample rooms and heating plant in rear, together with all furniture and fittings, in said premises, for use as a hotel and purposes incidental thereto only, with the appurtenances, for the term of fifteen (15) years from the 15th day of July, 1919, at the monthly rent or sum of Four Hundred Fifty Dollars ($450.00) payable in Gold Coin of the United States of America, in advance, on the 1st day of each and every month during the said term, during the first seven (7) years of said term, and Six Hundred Dollars ($600.00) monthly in advance on the first day of each and every month thereafter during the remaining eight years of said term; and this lease is made in further consideration of the agreement of the party of the second part, which is hereby made by these presents, to repay to the party of the first part all sums heretofore advanced by him for the purpose of remodeling the said premises, the said sums amounting to the sum of Twenty Four Thousand ($24,000.00) Dollars, payment to be made in accordance with the provisions of that certain promissory note, under date of July 15, 1919, which is in the following words and figures:
"Installment Note "$24,000.00 Nogales, Arizona, July 15, 1919.
"As hereinafter agreed, after date, for value received, I promise to pay to the order of S. Leeker, the sum of Twenty Four Thousand Dollars, ($24,000.00) in United States gold coin, at the Nogales National Bank, Nogales, Arizona, with interest at the rate of six per cent. (6%) per annum from date until paid. And it is hereby agreed that the said amount of Twenty Four Thousand Dollars shall be paid in installments of not less than One Hundred and Fifty Dollars ($150.00) per month, together with interest upon the balance remaining unpaid, beginning August 15th, 1919, and on or before the 15th day of every month thereafter until the whole amount [41 Ariz. 122] of the principal and interest is paid; and should default be made in the payment of any installment at the time when the same is above promised to be paid, then the whole unpaid amount shall become immediately due and payable; and in the event default is made in any of the above payments, and said note is placed in the hands of an attorney for collection, or suit is brought on the same, then an additional amount of ten per cent (10%) of the amount found due shall be added to the same as collection fees.
"And it is further agreed that if any rent shall be due and unpaid or if default shall be made in any of the covenants herein contained, or in any payment due under said note, that it shall be lawful for the said party of the first part to re-enter the said premises and remove all persons therefrom. . . ."
And the note set forth in the lease was duly executed by Evans and delivered to defendant. This lease superseded the lease of January 1st, and Evans went into possession of the premises thereunder. On August 7th, 1919, Evans, as principal, and A. L. Peck and H. Dolson, as sureties, executed a bond to defendant in the sum of $24,000 conditioned for the payment of the note aforesaid. The payments set forth in the lease, both rental and on the note, were duly and promptly made by Evans in accordance with the terms thereof, until October 22, 1921, when a further agreement was entered into between Evans, the Marcottes, and Leeker. By the terms of this agreement Evans sold to the Marcottes the hotel business in question and "all the right, title and interest of the said party of the first part in and to that certain lease of those certain premises known as the Hotel Evans, and consisting of the upper or second floor of that certain building located on Lot Thirteen (13) in Block Seventeen (17) in the City of Nogales, Santa Cruz County, Arizona, together with the lobby on the lower floor of the said building, and [41 Ariz. 123] at 131 Morley Avenue, Nogales, Santa Cruz County, Arizona, together with sample rooms and heating plant in the rear of said lower floor of said building and all furniture and fittings in said premises belonging to the said party of the third part, which said lease was made and entered into on the 15th day of July, 1919, between the ...