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Higgins v. Arizona Sav. and Loan Ass'n

Supreme Court of Arizona

October 11, 1961

Fred HIGGINS and Helen Higgins, his wife, Appellants,
ARIZONA SAVINGS AND LOAN ASSOCIATION, an Arizona Corporation, in Receivership, by and through D. O. Saunders, as Superintendent of Banks of the State of Arizona, and Ex-Officio Receiver; Ray B. Lucas and Albert B. Colby, Special Deputies Superintendent of Banks of the State of Arizona, and Co-Receivers of the Arizona Savings and Loan Association, Appellee.

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In Banc.

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[90 Ariz. 57] Kenneth Biaett and Dalls P. Richeson, Phoenix, for appellants.

Darrell R. Parker, David J. Perry, C. A. Muecke and Edwin Thurston, Phoenix, for appellee.

UDALL. Justice.

[90 Ariz. 58] Appellants, Fred and Helen Higgins, applied in writing on March 11, 1955, to appellee, Arizona Savings and Loan Association (hereinafter referred to as the Association), for a loan of $94,800. The purpose of the loan was to refinance certain property then subject to two first mortgages, one second mortgage and a federal tax lien. The amount was sixty percent of ghe property's appraised value of $158,200 as determined by a Mr. Archer, a qualified appraiser engaged by the Association. His signed written appraisal was dated Cotober 21, 1954. At several times in September and October of 1954, Fred Higgins had met with Max Marcus, a mortgage loan broker, and Jerome Smrt, head loan officer of the Association, to discuss the possibility of such a loan. At these meetings Smrt insisted that the land across the street from the Higgins property would have to be cleared of certain trees, shacks and a junkyard before a loan could be considered.

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Higgins assured Smrt that the land would be cleared as requested.

On March 11, 1955, Smrt took a one month leave of absence during which time appellants' loan application was 'processed' by Betty Jaegers, Smrt's secretary, and Marion Dick, then manager of the Association's Tucson branch and assistant secretary of the Association. James Hubbard, head of the Association's collection and delinquent loans department, during the month of March 1955 signed the following documents at the request of Miss Jaegers: a loan settlement statement setting forth the terms of the loan; a check for $89,937.85 to the Phoenix Title and Trust Company, the escrow agent involved; and one of two escrow instructions relative to the Higgins loan.

These documents were all delivered to the escrow agent. Hubbard also signed a cover letter of March 30, 1955, to Mr. Higgins indicating enclosure of a loan account book (signed by Hubbard) and a bank-by-mail envelope. The letter also advised him that the first payment on the loan would be due on May 1, 1955. Subsequently appellants received two notices that the May 1st payment was due. Appellants made no payments to the Association save a deposit of one dollar necessary to qualify them as members. On March 30, 1955, an entry on an Association loan card (entitled 'Definite Contract Loan') indicated a balance due on the Higgins loan of $94,800.

Smrt, upon his return on April 11, 1955, discovered the extent to which the Higgins loan had been 'processed' and, on May 19, 1955, retrived the Association's check from the escrow agent. Smrt testified that his reason for doing so was that property across the street from that of appellants' was not being cleared of trees, shacks and a junkyard as Higgins had represented would be done.

On July 7, 1955, the District Director of the Internal Revenue Service notified the [90 Ariz. 59] escrow agent of its intention to release the Higgins property from a federal tax lien pending notification of satisfaction of all other loan requirements by Higgins. The latter had previously satisfied all other requirements for the loan, including obtaining releases of mortgages and satisfying an outstanding judgment, except those, such as payment of city taxes (normally paid out of the loan proceeds) and execution of a note and mortgage in favor of the Association, which would have been taken care of at the closing. It was at this time (after July 7th) that Higgins first learned that the check had been taken back by the Association on May 19th.

On July 14, 1955, an officer of the Phoenix Title and Trust Company was informed by Smrt that the Higgins loan would probably be transacted through ten small escrows which could be more easily resold than one large loan. But, in a letter dated August 25, 1955, Smrt informed appellants that:

'Your application for a first mortgage loan in the amount of $94,800.00 * * * has been given careful and sustained consideration by the Association. Alternate appraisals have been obtained and after full consideration of the many factors involved, we find that we are unable to approve and make this loan.

'While the property offered as security is good property, certain surrounding circumstances, location, street conditions, and the ratio of the desired loan to reasonable market value, as determined by alternate appraisals make it impossible for our favorable consideration of this loan.'

The escrow agent was directed by Smrt to cancel the ten escrows on September 18, 1955. Appellants were unable to secure a loan elsewhere, and in April of 1956 the property was sold at sheriffs' sales. Whereupon appellants instituted suit against the association claiming as damages their lost equity in the property and expenses incurred in unsuccessful attempts to secure another loan.

This case was first tried to a jury in February of 1957 when, at the conclusion

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of plaintiffs' case, the Association's motion for directed verdict was granted upon the ground that A.R.S. § 6-410 (1956) [1] had not been compiled with. Section 6-410, subd. A., par. 1. provided, inter alia, that associations such as appellee should make no loans '* * * except upon the report in writing of two appraisers giving the conservative market value of the property to be mortgaged.' On appeal this court held that 'whether the Association, on the record presented, was estopped to deny its compliance with said section' was a question [90 Ariz. 60] of fact which should have been submitted to the jury. Higgins v. Arizona Savings and Loan Association, 1958, 85 Ariz. 6, 9, 10, 330 P.2d 504, 506, 507. Accordingly, the judgment was reversed and a new trial ordered. The second trial in May of 1959 resulted in a verdict for the defendant Association. This is an appeal from the judgement entered thereon and from the order denying a motion for a new trial.

Appellants' twenty-five assignments of error comprise three main contentions: first, that the evidence disclosed a contract to make a loan as a matter of law and hence the trial court erred in submitting that issue to the jury; second, that the trial court committed reversible error in admitting certain items in evidence and not excluding certain testimony of appellee's witnesses; and third, that conduct of appellee's counsel at trial was so improper as to deny appellants a fair trial.

Question of Existence of Contract

The trial court properly submitted for jury determination the issue of whether an agreement to lend had been made. Preparation and signing of the loan settlement statement, the escrow instructions, the loan account book and the check, though strongevidence of appellee's intention to make a loan, were not conclusive of that fact. There was substantial testimony introduced by each side regarding appellee's insistence that property near appellants' land be cleared of trees, shacks and a junkyard. From this the jury could have inferred that clearance of such property was regarded by the parties as a condition precedent to any loan appellee might agree to make. Moreover, on the record presented the jury could have found that the documents prepared by appellee in connection with the Higgins loan application were routine steps taken concurrently with negotiations by the parties as to the terms and conditions of the loan. Under such circumstances the trial court was not compelled to find that the evidence conclusively established existence of an agreement to lend. As this court stated in Firchau v. Barringer Crater Co., 1959, 86 Ariz. 215, 222, 344 P.2d 486, 490-491:

"* * * where the existence and not the validity or construction of a contract or the terms thereof is the point in issue, and the evidence is conflicting or admits of more than one inference, it is for the jury to determine whether the contract did in fact exist, * * *."

Therefore, appellants' first three assignments of error are without merit.

Appellants' assignment twenty-two is that the trial court erred in instructing the jury on the law of estoppel. It is contended that the instruction, although admitted to be a correct statement of the law and in accordance with the decision of this [90 Ariz. 61] court on the first appeal (see 85 Ariz. 6, 9-10, 330 P.2d 504), should not have been given because the evidence disclosed that as a matter of law the Association was estopped to plead noncompliance with the statutory requirement of two signatures on the appraisal. The evidence presented on this issue, however, was controverted. Therefore, as this court held in the previous appeal, whether the Association was estopped to plead noncompliance was a question properly submitted to the trier of fact.

Evidentiary Questions

Appellants' assignments of error four, five, seven and twenty-four are that the

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trial court improperly allowed witnesses Goodson (an escrow officer of the Phoenix Title and Trust Company), Smrt and Dick to testify as to negotiations concerning clearing of the land near appellants' property. Such testimony, it is asserted, was received in violation of the parol evidence rule. The rule was defined by this court ...

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