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Commercial Standard Ins. Co. v. Cleveland

Supreme Court of Arizona

October 21, 1959

COMMERCIAL STANDARD INSURANCE COMPANY, Appellant,
v.
O. M. CLEVELAND and M. W. Douglas, Appellees. O. M. CLEVELAND, Cross-Appellant,
v.
M. W. DOUGLAS, Cross-Appellee.

Page 211

Page 212

[86 Ariz. 290] Struckmeyer, Whitney & Perry, Phoenix, for appellant.

Carl W. Divelbiss and Melvin J. Owens, Phoenix, for appellee, O. M. Cleveland.

Lewis, Roca, Scoville & Beauchamp, Phoenix, for appellee, M. W. Douglas.

FRANK E. THOMAS, Superior Court Judge.

This is an appeal from a judgment in favor of the defendants-appellees, O. M. Cleveland and M. W. Douglas, and against the plaintiff-appellant, Commercial Standard Insurance Company, entered upon motion of the defendants after the close of plaintiff's evidence in an action to recover an amount allegedly owed plaintiff upon a written contract. The parties will be referred to here as they appeared in the lower court.

The defendant O. M. Cleveland has appealed a judgment by the court entered against him in favor of the defendant M. W. Douglas on Douglas' cross-complaint against him.

[86 Ariz. 291] The rather involved facts giving rise to this action are essentially as follows: During the year 1949 and prior thereto, defendants were partners operating their partnership business of general insurance agents.

During the above year said defendants, who were agents for the plaintiff insurance company, encountered serious financial difficulties necessitating additional operating capital. Plaintiff expressed willingness to assist defendants in their financial plight. After considerable discussions, plaintiff and defendants arrived at a solution of defendants' dilemma by securing a loan from the Valley National Bank in the sum of $16,000. The loan was secured on agreement of plaintiff with the bank to indemnify the bank by its bond for the repayment of the loan if said defendants did not pay. Plaintiff executed its indemnity bond to the Valley National Bank. For securing this financial assistance, it was, after various changes, ultimately agreed that defendants were to pay plaintiff the sum of $4,000. Said indebtedness was acknowledged by defendants in writing on several occasions.

At this point clarification of the issues involved herein require amplification of the details of the above-mentioned loan of $16,000. Said loan was evidenced by a promissory note bearing four per cent interest, signed by the defendants, and on its due date was paid in full by said defendants.

It is apparent that to induce the Valley National Bank to make a loan to defendants, plaintiff executed an indemnity bond to the bank, for which the full and regular fee of two per cent was charged by plaintiff to defendants, and by defendants paid

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to plaintiff. This premium charge, amounting to $320, was in addition to the $4,000 which is attempted in this action to be charged against the defendants by plaintiff. It thus appears that for the execution of the indemnity bond to the bank, plaintiff seeks to recover from defendants $4,000 over and above the regular premium charge for the execution of the indemnity bond.

The above-mentioned partnership, composed of the two defendants, was subsequently dissolved, and one of the partners, O. M. Cleveland, acquired the assets and assumed the liabilities of the partnership, agreeing with M. W. Douglas that he would, 'indemnify and save harmless (M. W. Douglas) from any and all liability, claim, demand, damages or expenses for and on account thereof.'

Complaint was filed by the plaintiff against the defendants on February 18, 1955, praying for judgment in the amount of $4,000 together with costs and a reasonable sum for attorney's fees.

The defendants filed separate answers to the complaint, and defendant Douglas filed a cross-claim against defendant Cleveland,[86 Ariz. 292] praying that he have judgment against Cleveland in the amount of any judgment obtained by the plaintiff against him. The cross-claim further demanded costs and attorney's fees.

It further appears from the record that on January 8, 1957, while the case was pending in Superior Court, plaintiff's attorney orally contacted the attorney for defendant Cleveland and notified him he intended to take certain depositions in Fort Worth, Texas, on January 10th. Cleveland's attorney found himself unable to go to Fort Worth personally and, therefore, contacted a Fort Worth law office and requested it to appear on behalf of Cleveland. This was done, and a statement for $75 for this service was forwarded to Cleveland's attorney. This amount was subsequently included in the cost bill, to which the plaintiff has entered its objection.

Finally, on February 24, 1955, after suit being instituted by plaintiff, Cleveland addressed a letter to Douglas, acknowledging that in the event a judgment was rendered on plaintiff's complaint against Douglas, he, Cleveland, would have to pay it. In this letter Cleveland tendered the services of his attorney, Carl Divelbiss, to Douglas, to represent both defendants in the action. The letter contained an offer by Cleveland to pay Mr. Divelbiss' fees in full. This offer was rejected on March 2, 1955, by a letter from Douglas' attorney, wherein he stated that because of a conflict of interest it was ...


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