Unpublished Disposition, 887 F.2d 1089 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 887 F.2d 1089 (9th Cir. 1989)

Nos. 88-1793, 88-1869.

United States Court of Appeals, Ninth Circuit.

Before BRUNETTI and NOONAN, Circuit Judges, and HARRY L. HUPP, District Judge* .


Appeal of plaintiffs/appellants/cross-appellees from judgment in favor of defendants/appellees/cross-appellants, and cross-appeal of defendants/appellees/cross-appellants from denial of award of attorneys fees. Affirmed.


This is a diversity action arising from a real estate transaction in which appellants Jon R. Stuart, Michael Tidwell, and William W. McClure (hereafter "the Stuart Group") transferred real property to appellees Lawrence G. Malanfant and Phyllis M. Malanfant (hereafter "the Malanfants"). The property was transferred from the Stuart Group to Southern Equities Financial Corporation (hereafter "Southern") which compensated the Stuart Group with three promissory notes guaranteed by Surety Insurance Company of California (hereafter "Surety"). The property was transferred to the Malanfants, who received from the Stuart Group a "waiver letter" stating in relevant part, "notwithstanding the terms of the letter agreement or any other circumstances, we shall in no event have any recourse to you in connection with the debts secured by the bonds." The Malanfants then signed a "blanket indemnity agreement" in favor of Surety under which they agreed to indemnify Surety if Surety became liable on the bonds. Southern defaulted on the promissory notes, and the Stuart Group demanded payment under the bonds from Surety. Surety was then in receivership, and the liquidator of Surety demanded payment from the Malanfants under the blanket indemnity agreement, but the Malanfants refused to indemnify Surety. Surety assigned to the Stuart Group its rights against the Malanfants under the indemnity agreement. This action arose when the Malanfants refused to honor the indemnity agreement notwithstanding demands of the Stuart Group.

The district court granted summary judgment in favor of the Malanfants on the ground that the language in the waiver letter providing that the Stuart Group "shall in no event have any recourse to you [the Malanfants] in connection with the debts secured by the bonds" made "the assignment of the indemnity agreement by Surety to the Plaintiffs ... ineffective as to the Defendants." The district court denied the Malanfants' request for attorneys' fees on the ground that the case "presented a close question of contractual interpretation."


We review of the district court's granting of summary judgment de novo. Pope v. Savings Bank of Puget Sound, 850 F.2d 1345, 1356-57 (9th Cir. 1988). We review the district court's denial of attorneys' fees for abuse of discretion. Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181, 1184-85 (1985) (en banc).


Notwithstanding that "black letter law" provides that an assignee "stands in the shoes of the assignor," see e.g. Arizona Title Insurance & Trust Co. v. Realty Investment Co., 6 Ariz.App. 180, 430 P.2d 934, 936 (1967); 3 S. Williston, Contracts section 432 (3d ed. 1978), the Stuart Group waived its right to assert claims as assignees by agreeing "In no event [to] have any recourse" against the Malanfants. While the black letter rule, that an assignee acquires no greater rights than the assignor, is clear, In re Estate of Pitt, 1 Ariz.App. 533, 405 P.2d 471, 480 (1965), no controlling or persuasive authorities support appellants' implicit argument that the rights of an assignee cannot be less than those of the assignor where there has been a waiver by the assignee. Appellants rely on treatise authority for the proposition that "a claim good in the hands of the assignor which is good against the original debtor is ordinarily equally good and free from defenses in the hands of his assignee", 6 Am.Jur.2d section 102 (1963). However, the existence of the waiver letter removes this action from the category of "ordinary" assignments. There is no rule that rights acquired by assignment cannot be subject to a waiver by the assignee. Several authorities from other jurisdictions support this view. See Allstate Financial Corp. v. Dundee Mills, Inc., 800 F.2d 1073, 1075-76 (11th Cir. 1986) (assignee's conduct may result in waiver of its rights under secured transaction provision of UCC dealing with rights against assignees); State v. Hogg, 311 Md. 446, 535 A.2d 923, 934-35 (1988) (conduct of assignee which preceded assignment could be used as defense in action brought by assignee on assigned claim). Appellees reliance on Stephens v. Textron, Inc., 127 Ariz. 227, 619 P.2d 736, 739 (1980), wherein the court stated that " [a]n assignment cannot alter the defenses or equities of a third party," is unavailing. The court in Stephens merely held that an assignee could have no greater rights than those of the assignor. Stephens does not consider a waiver of rights by the assignee.

General principles of contract law are sufficient for this Court to determine that the agreement at issue was intended to be a waiver of rights acquired by assignment. See Smith v. Melson, Inc., 135 Ariz. 119, 659 P.2d 1264, 1266 (1983) (en banc) (construction of contracts is a question of law where terms are plain and unambiguous), Hadley v. Southwest Properties, Inc., 116 Ariz. 503, 570 P.2d 190, 193 (1977) (en banc) (where language of contract is clear and unambiguous, it must be given effect as it is written). The agreement provides that the Stuart Group will "in no event" have recourse against the Malanfants. The plain language of those terms is broad enough to encompass rights acquired by assignment. See Hadley, supra. Accordingly, the Stuart Group waived rights against the Malanfants acquired from Surety by assignment.

Authorities from other jurisdictions cited by appellant are unavailing. Some are inapposite, see e.g. Guaranty Deposit Bank of Cumberland v. Reedy, 272 S.W.2d 341 (Ky.1954). Others are factually distinguishable, see e.g. Federal Deposit Insurance Corp. v. Butcher, 660 F. Supp. 1274 (E.D. Tenn. 1987), Federal Deposit Insurance Corp. v. Dempster, 637 F. Supp. 362 (E.D. Tenn. 1986) (both involving the alleged negligence of the F.D.I.C. prior to acquiring by assignment the rights of insolvent institutions, and neither considering the issue of a waiver by the assignee prior to the assignment).

In their Reply, appellants place new emphasis on language in the waiver letter which waives recourse "in connection with the debts secured by the bonds." Appellants concede that they "waived any ability to seek recourse against the Malanfants on the promissory notes by virtue of the Waiver Letter," but argue that this suit seeks to enforce the indemnity agreement with respect to which there has been no waiver. The "debts secured by the bonds" means only the notes, they argue. This argument lacks merit. First, the Malanfants did not sign the notes; therefore, it is unclear what purpose a waiver concerning only the notes would serve for the Malanfants. Second, this action arises from the successive failures of Southern, Surety, and the Malanfants to make good on the notes. Accordingly, this action is "in connection with" the notes.


Under Arizona law, a "court may award the successful party reasonable attorney's fees" in breach of contract actions. Ariz.Rev.Stat.Ann. Sec. 12-341.01(A) (1982). "The language is permissive, leaving the awarding of attorneys' fees to the court's discretion". Grand Real Estate, Inc. v. Sirignano, 139 Ariz. 8, 676 P.2d 642, 648 (1983). The district court denied attorneys' fees to the Malanfants on the ground that a "close question of contractual interpretation" was presented. This demonstrates consideration of factors to be evaluated in awarding attorneys' fees. See Associated Indemnity Corp. v. Warner, 143 Ariz. 567, 694 P.2d 1181, 1184 (1985) (en banc). Accordingly, there was no abuse of discretion.


We affirm the judgment. Because the language of the waiver letter clearly precluded recovery by appellants, following the filing of supplementary documentation, appellees are entitled to recover attorneys fees and costs incurred in this appeal. Ariz.Rev.Stat.Ann. Sec. 12-341.01(A) (1982).


The judgment is affirmed. Appellees may recover costs and attorneys fees on appeal.



Of the Central District of California


This disposition is not appropriate for publication and may not be cited to by the courts of this circuit except as provided by Ninth Circuit Rule 36-3