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Donato v. Fishburn

Supreme Court of Arizona

December 29, 1961

M. T. DONATO and Iris E. Donato, his wife, Appellants,
v.
Kenneth Harold FISHBURN, d/b/a City Sheet Metal, Appellee.

[90 Ariz. 211] Botsford & Turner, Scottsdale, for appellants.

Wilson & Books, Phoenix, for appellee.

McFATE, Judge of the Superior Court.

This is an appeal from a judgment of the trial court sitting without a jury, declaring that a certain peomissory note signed by M. T. Donato was the community obligation of the maker and his wife, Iris E. Donato, and entering judgment accordingly. The appellants contend that the note was the sole and separate obligation of M. T. Donato.

The facts in the case are as follows:

Prior to executing the note referred to, Mr. Donato was president and owned 60% of the capital stock of Period Homes, a California corporation. He and two other individuals had organized this corporation for the purpose of constructing homes for sale. The stock was held by the Donatos as their community property. At the time the note was executed the corporation was in serious financial difficulty. It had [90 Ariz. 212] constructed 32 homes which it was unable to sell and it was indebted to the extent of approximately $30,000.00 to various construction firms. One of these creditors was the appellee Fishburn, d/b/a City Sheet Metal, who was entitled to enforce a mechanic's lien against the houses. The filing of such a lien would have forced the corporation into bankruptcy, according to Mr. Donato, inasmuch as the company was unable to pay its debts.

In consideration of appellee's agreement not to file his mechanic's lien against the property of the corporation, Donato made, executed and delivered to him the Promissory

Page 246

note which is the subject of this litigation, in the principal amount of $2,711.00, payable 90 days after date with interest at 6% per annum.

Other motivating factors which led Donato to enter into the agreement were as follows: Up until the time the corporation commenced to have financial trouble he personally had a good credit rating and he did not want that credit rating or feeling of trust in him destroyed; what he hoped to do eventually was to get his money back which he had invested in the corporation and he wanted the opportunity and time to make the attempt. It also appears that if he could have retrieved the situation he would have benefited financially by way of salary and further remuneration from the corporation.

On re-direct examination Donato testified as follows:

'Q. Alright. So the agreement was then that you would sign a note in lieu of the lien? A. Individually; and at that time, one of the men in City Sheet Metal wanted Mrs. Donato to sign and, of course, there was other stockholders who didn't want to sign, but I felt that I should.

'Q. You said they wanted Mrs. Donato to sign. Did Mrs. Donato sign? A. No; no, she didn't.

'Q. But, Fishburn or somebody from City Sheet Metal asked you to have her sign? A. Yes; yes, they wanted Mrs. Donato on the note.

'Q. And did you agree or ...


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