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Bank of Douglas v. Robinson

Supreme Court of Arizona

December 31, 1954

The BANK OF DOUGLAS, an Arizona corporation, Appellant,
J. W. ROBINSON, E. I. Whiting, and Whiting Brothers Lumber Yards, Inc., a corporation, Appellees.

Rehearing Denied March 1, 1955.

Page 418

[78 Ariz. 232] Darnell, Robertson, Holesapple & Spaid, Tucson, Ryley, Carlock & Ralston, Phoenix, for appellant.

Udall & Udall, Tucson, for appellees.

LOCKWOOD, Superior Court Judge.

Appellees, J. W. Robinson, E. I. Whiting, and Whiting Brothers Lumber Yards, Inc., a corporation, hereafter referred to as plaintiffs, brought suit against The Bank of Douglas, an Arizona banking corporation, hereafter referred to as 'the Bank', for cancellation of six promissory notes made payable to the Bank, and signed 'Whiting Brothers, by J. W. Robinson', in the aggregate amount of $45,850. The defendant Bank resisted the action and filed a counterclaim against the plaintiffs in the amount of $38,050, for the alleged balance due on the same notes.

The case was tried to a jury, to which were submitted forms of general verdicts, and seven special interrogatories. On the former the jury returned a general verdict in favor of the plaintiffs on their complaint and against the Bank on its counterclaim, [78 Ariz. 233] and answered the interrogatories in each instance favorably to the plaintiffs. The court entered judgment for the plaintiffs, and from the judgment, and from the orders of the court denying defendant Bank's request for findings of fact and conclusions of law, motions for dismissal of plaintiffs' complaint, to set aside the verdict, to set aside the judgment, for judgment notwithstanding the verdict, from order denying motion for new trial, and for equitable relief, the Bank instituted this appeal.

The facts appear as follows:

One Edward Moore, a contractor, was engaged in numerous home-building enterprises in and about Tucson, Arizona. He had obtained financing from the Bank, through its Tucson branch. His indebtedness had reached such proportions that in the fall of 1950 certain bank officials had advised him that the Bank would not make any further advances until he had completed the houses already under construction. However, the Bank did in fact continue to advance him money until some time in July of 1951. Although his account fluctuated somewhat, it was over $96,000 by July 10 of that year.

Some time in the summer of 1950 Moore began purchasing quantities of building materials from plaintiff Whiting Brothers Lumber Yards, Inc., which conducted its business operations in Tucson, and of which Mr. E. I. Whiting was president and chairman of the board of directors. Moore became indebted to the plaintiff corporation in an amount in excess of $135,000 by mid-June of 1951.

While it appears that plaintiff E. I. Whiting took an active part in the operation of the Tucson lumber yard and the affairs of the plaintiff corporation, plaintiff Robinson was employed in Tucson as office manager and in charge of the business operations in the absence of Mr. Whiting, who resided in St. Johns, Arizona.

About the middle of June, 1951, plaintiff E. I. Whiting employed one A. B. Angle, a business consultant, to make a survey of Moore's construction business. Mr. Whiting, together with Mr. Angle, called at the Bank several times and discussed the indebtedness of Moore both to the Bank and

Page 419

to plaintiff corporation. On June 30, 1951, plaintiff corporation and Moore entered into a written agreement whereby Angle was employed as a 'coordinator' to exercise some control over Moore's business for the purpose of allowing him to complete his construction program and pay off his indebtedness to the plaintiff corporation-in other words, to help 'pull him out of the hole' and keep him from becoming insolvent until he could complete his construction operations as then contemplated.

On the same day the coordinator agreement was signed, plaintiff E. I. Whiting and Angle went to the office of the Bank and conferred with Mr. John L. Emery, a vice-president of the Bank. Mr. Whiting had earlier indicated he wished to 'open an account' with the Bank for the purpose [78 Ariz. 234] of borrowing some money to use in connection with his business with Moore, and had furnished to the Bank three financial statements, one for himself, one concerning plaintiff corporation, and a third for another Whiting corporation. It appears that the Whitings are engaged in numerous business ventures of varying nature. Whiting told Mr. Emery he would have Robinson come in and complete the matter, if he needed a loan. The Bank shortly thereafter established an open line of credit in the amount of $50,000 for 'the Whitings', and on July 3, 1951, Robinson signed a note to the Bank in the amount of $29,450, the signature being 'Whiting Brothers, Inc., by J. W. Robinson'. The Bank deposited said amount to a general account for Whiting Brothers. This transaction took place, although the usual signature cards and corporate resolutions had not yet been furnished as required by the Bank under its banking practice. The evidence is contradictory as to whether E. I. Whiting was present when this note was actually executed, though he admits that it was authorized.

Two signature cards and two forms of corporate resolution were subsequently furnished to the Bank. One signature card, dated July 10, 1951, bears signatures of E. I. Whiting and E. F. Whiting; the other, dated July 13, 1951, bears the signatures of E. I. Whiting, E. Farr Whiting, and J. W. Robinson. Each of the cards is headed 'Whiting Brothers Lumber Yards, Inc.' and each refers to a resolution supporting the signatures. The card bearing Robinson's signature also bears the word '(Special)'. One resolution, bearing date July 10, 1951, authorizes E. I. Whiting, E. Farr Whiting or Virgil B. Whiting to borrow money and execute notes to the Bank; the other, dated July 30, 1951, authorizes 'Whiting Brothers Lumber Yards, Inc., Special Account: E. I. Whiting, E. Farr Whiting, Virgil B. Whiting, J. W. Robinson. Each authorized to sign singly', in borrowing of money and executing of notes to the Bank, and further authorizes said persons to 'make assignments of contracts and notes to the Bank of Douglas, and to sign notes to the Bank of Douglas, and to sign notes supporting such contracts and assignments'.

Two accounts were set up by the Bank, one designated the general account, and the other the 'special' account. From time to time plaintiff Robinson executed 60-day notes to the Bank, signed in the same form as the $29,450 note hereinabove referred to. Each note was secured by an assignment of mortgage loan proceeds payable to 'Whiting Brothers' from Western American Mortgage Company, which had financed buyers of Moore's houses through mortgages. These proceeds were those to which Moore would have been entitled originally from the mortgages just referred to, and which he had assigned to Whiting or Whiting Brothers to secure their materialman's liens on such houses.

[78 Ariz. 235] The Bank credited the first $29,450 loan, together with a later loan in the amount of $6,300 dated July 27, 1951, to the general Whiting Brothers Account, and the other notes signed by plaintiff Robinson to the 'special' account. Both of the abovementioned notes were paid from proceeds of mortgages held by Western American Mortgage Company, originally assigned to Whiting Brothers, and by the latter to the Bank.

In addition to the notes sued on, two other notes, for $6,300 and ...

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