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Smith v. Mangels

Supreme Court of Arizona

January 21, 1952

SMITH et ux.
v.
MANGELS et al

Order and judgment affirmed.

Udall & Udall, Tucson, for appellants.

Ashby I. Lohse, Tucson, for appellees.

Struckmeyer, Jr., Superior Court Judge. Stanford, Phelps, De Concini and La Prade, JJ., concur. Chief Justice Levi S. Udall, being disqualified, the Honorable Fred Struckmeyer, Jr., Judge of the Superior Court of Maricopa County, was called to sit in his stead.

OPINION

Struckmeyer, Jr., Superior Court Judge.

[73 Ariz. 204] This action was commenced by Elmer A. Smith and Icey M. Smith, his wife, as plaintiffs, appellants herein, against Ralph A. Mangels, real estate broker, Cora E. Atkinson, his saleswoman, and the United States Guaranty and Fidelity Company of

Page 169

Baltimore, Maryland, a corporation, surety for Mangels on his broker's license, to recover damages for failure to disclose certain material facts concerning the real estate transaction hereinafter set forth. The trial court directed a verdict in favor of the defendants at the conclusion of the plaintiffs' case and entered judgment thereon. From the order and judgment, plaintiffs appeal.

The record discloses that in June of 1948, appellants purchased the "Hob Knob" Cafe located in Tucson, Arizona. As part of the purchase price, they executed and delivered to William Bellios, the seller, their note and a chattel mortgage covering the cafe fixtures. This mortgage, herein referred to as the Bellios-Smith mortgage, [73 Ariz. 205] was not recorded in compliance with section 62-523, A.C.A.1939, which section provides that prior unrecorded mortgages are void as against subsequent mortgagees in good faith.

Thereafter appellants traded the cafe and fixtures to Cecil J. Foster and Sarah Margaret Foster, his wife, for the premises known as the "Bucking Bronco Motel" near Tucson. The Fosters assumed and agreed in writing to pay the balance of $ 750 due under the Bellios-Smith note and mortgage. Contemporaneous therewith, the Fosters executed and delivered a chattel mortgage covering the same fixtures to Mangels who acted as the mutual agent of both parties to the exchange. This latter mortgage was given with the knowledge and consent of the Smiths as payment for the Fosters' share of the real estate commission due to Mangels, and was recorded on the following day. The evidence strongly indicates that Mangels knew and the Smiths did not know that the Bellios-Smith mortgage was unrecorded.

Although the Fosters assumed and agreed in writing to pay the indebtedness secured by the Bellios-Smith mortgage, they subsequently defaulted. Bellios brought suit against the Smiths on the note without attempting to foreclose the chattel mortgage, and thereafter duly recovered a judgment.

The evidence tends to establish that payment of the judgment was beyond the immediate financial ability of the Smiths, and that as a result they were forced to liquidate the Motel at a loss. The claimed damages are $ 2,000 loss through sale of the Motel, $ 750 payment of the Bellios note, and $ 1,500, the amount of real estate commission paid to Mangels.

Appellants urge that Mangels, as their agent, owed to them the highest duty of good faith in his dealings; that this duty included the disclosure of all facts known to him and unknown to the Smiths; that it was known to Mangels and unknown to the Smiths that the Smith-Bellios mortgage was not recorded; that Mangels and Atkinson, as licensed real estate broker and saleswoman, respectively, familiar with deeds, mortgages and similar business transactions, knew, or should have known, that the legal effect of the nonrecordation of the Smith-Bellios mortgage gave him, Mangels, a superior position over them in the event of default by the Fosters in the payment of the ...


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