Barnett v. Hitching Post Lodge, Inc.

Decision Date14 December 1966
Docket NumberNo. 7084,7084
Citation421 P.2d 507,101 Ariz. 488
PartiesPhillip BARNETT and Pacific National Bank of San Francisco, a National Banking Association, Appellants and Cross-Appellees, v. HITCHING POST LODGE, INC., a corporation, and the Bank of Douglas, as the Executor of the Estate of Ray C. Gilliland, Appellees and Cross-Appellants.
CourtArizona Supreme Court

Jennings, Strouss, Salmon & Trask, by Ozell M. Trask, William F. Haug, Phoenix, for appellants and cross-appellees.

Hughes & Hughes, John E. Madden (deceased), John Geoffrey Will, John S. Schaper, Phoenix, for appellees and cross-appellants.

LOCKWOOD, Justice.

Plaintiffs (appellants herein) are Phillip Barnett and Pacific National Bank, assignee. Defendants (appellees) are Hitching Post Lodge, a corporation, and the Bank of Douglas 1 as Executor of the estate of Ray Gilliland.

The plaintiff sought relief in two counts. The first count was for foreclosure of a mortgage in the sum of $108,000 executed by Gilliland encumbering the Hitching Post Lodge, a motel in Scottsdale, Arizona, title to which was in the name of Hitching Post Lodge, Inc., a corporation. This mortgage purported to be given to Barnett to secure a promissory note of like amount. The second count was in the alternative, to recover the reasonable value of legal services rendered by Barnett to Ray Gilliland. The complaint alleged that Barnett was an attorney licensed in California and that he had performed legal services reasonably worth the sum of $108,000.

The defendant (Gilliland's executor) counterclaimed seeking to recover monies paid Barnett under an alleged illegal contingent fee contract and also counterclaimed for an accounting. The defendant (Hitching Post Lodge) counterclaimed to quiet title and also sought to recover attorney's fees in a slander of title action.

The trial court sitting without a jury found in favor of defendant on plaintiff's complaint to foreclose the purported mortgage. 2 The court also found in favor of the defendant Hitching Post Lodge, Inc., quieting title on its counterclaim. However, the trial court found in favor of Barnett on the executor's two counterclaims, and also on defendant Hitching Post's counterclaim for attorney's fees on slander of title claim.

The trial judge concluded:

'I find that the note was never delivered.

'I find that there was an understanding between the plaintiff and Gilliland that the mortgage given to secure the note of $108,000.00 would not be foreclosed, but that said mortgage was given to protect Gilliland against a possible levy of execution by his wife on the Hitching Post Lodge property. Under these circumstances, plaintiff Barnett is estopped to now claim a mortgage lien against said property and his claim in this regard lacks equity.'

The appellants claim that these conclusions are not supported by the evidence. We have consistently held that this court will be bound by the trial judge's decision on matters of fact in a non-jury case as long as there is competent evidence in the record to support the finding. Gastelo v. Chavarria, 96 Ariz. 209, 393 P.2d 905 (1964).

Darrell R. Parker, the plaintiffs' own witness, testified that the decedent had come to him and requested that a second mortgage be drawn up on the Hitching Post Lodge in favor of Barnett. When asked why he wanted the mortgage the decedent stated that he wanted the property 'plastered' so that his estranged wife could not 'get her hooks into it'. This evidence is admissible as an exception to the hearsay rule. The state of mind of the decedent at the time of the execution of the mortgage is at issue. Therefore, his declarations evidencing a state of mind at a time close to the moment of the mortgage's execution gives rise to the inference that this state of mind continued. Udall, Evidence, § 173. Besides Mr. Parker's testimony, the defendants offered as witnesses Milton Cohen and Miss Patti Karger, California attorneys who had represented the decedent. These witnesses testified to the fact that Barnett had admitted to them that he had taken the mortgage on the property only to protect the decedent from having it attached by his estranged spouse. These statements are admissible as admissions of a party opponent, an exception to the hearsay rule. Schulze v. Ind. Comm., 94 Ariz. 35, 381 P.2d 577 (1963); Udall, Evidence § 178. There was thus sufficient evidence upon which the trial judge was justified in finding that this was not intended to be a bona fide mortgage on the Hitching Post property, but rather an attempt to fraudulently prevent the attachment of the property by the decedent's wife. Even though the decedent was involved in this fraudulent scheme, a court of equity would be justified in preventing the grantee-attorney, upon whose advice the fraudulent conveyance was executed, from taking advantage of the situation which his unethical counsel created. Prickett v. Prickett, 379 Ill. 181, 39 N.E.2d 984 (1942).

The appellant sought not only to recover against the security, but in the alternative sought to recover on the note or for the reasonable value of his services to the decedent as against the estate. Although the trial court withheld judgment on Count II of the complaint, for the reasonable value of Barnett's services, we deem it appropriate to consider this count since we find as a matter law that the appellant has been barred by the non-claim statute (A.R.S. § 14--579) from asserting these claims against the estate.

It is undisputed that on March 5, 1957, Gilliland's executor published notice to creditors. From the date of first publication creditors have four months in which to file a claim against the estate. A.R.S. § 14--561. On April 10, 1957, Barnett and Pacific National Bank filed a claim which follows:

'To Phillip Barnett and/or Pacific National Dr. 1957 Account stated April 9, 1956, by and between C. Ray Gilliland, obligor, and Phillip Barnett, obligee $108,000.00.

Said sum is secured by Second Mortgage on realty executed by Hitching Post Lodge, Inc., (owned by decedent), as mortgagor, and Phillip Barnett, mortgagee, on April 9, 1956, which mortgage was recorded April 9, 1956, in Book 1873, pages 178--180, County Recorder, Maricopa County, Arizona. Saod mortgage is incorporated herein by reference. Decedent had paid $4,900.00 on account of the principal of said mortgage obligation prior to death. The first interest installment of 4% Per annum is due upon said mortgage April 9, 1957, in the sum of $4,222.09

This mortgage has been assigned to the Pacific National Bank.'

As the executor took no action on this claim for ten days, it is deemed rejected on April 20, 1957 by operation of law pursuant to A.R.S. § 14--564. See, Lowry v. Crandall, 52 Ariz. 501, 83 P.2d 1003, 120 A.L.R. 271 (1938); Certain-Teed Products Corp. v. Luke, 74 F.2d 384 (9th Cir., 1934). Therefore, the subsequent executor's notice of rejection on May 13, 1957 was of no effect.

Barnett filed an amended claim on July 5, 1957 for the same $108,000. This time, however, he attached the mortgage to his claim. Moreover, he sought in the alternative the reasonable value of his services.

Suit was filed on August 1, 1957, within three months of rejection of the amended claim but not within three months from rejection of the original claim. The question then presented is whether this action is barred by the non-claim statute, A.R.S. § 14--579. 3

The purpose of the requirement to file claims and of the limitations of time thereon is to inform the personal representative and the court of the valid claims against the estate to the end that the estate be administered expeditiously. See United States Gypsum Co. v. Shaffer, 7 Cal.2d 454, 60 P.2d 998 (1936); Haddock v. Williams, 378 P.2d 774 (Okl.1963).

Plaintiff contends that his first claim was 'fatally defective' and meaningless particularly because he did not attach a copy of the mortgage to the claim, and did not claim in the alternative for the reasonable value of his services, and therefore the three month period within which to bring suit began to run from the time of rejection of the amended claim. With this contention we are not in accord. The first claim filed on April 10, 1957 was sufficient to apprise the executor of the amount of the demand. See Davey v. Janson, 62 Ariz. 39, 153 P.2d 158 (1944); Syler v. Katzer, 12 Cal.2d 348, 84 P.2d 137, 119 A.L.R. 422 (1938). Moreover, it is sufficient to describe the mortgage, in a claim presented to an executor, by reference to the date, volume and page of the book where recorded as was done here, A.R.S. § 14--565, subsec. D. See also, Marston v. Denton, 60 Ariz. 178, 134 P.2d 158 (1943). Since the original claim was not materially defective, nor of doubtful sufficiency the amended claim therefore relates back to the date of the original claim. State ex rel. Steinfort v. District Court, 111 Mont. 216, 107 P.2d 890 (1940); Davis v. Superior Court, 35...

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