Continental Nat. Bank v. Evans, 10327

• Decision Date: 30 September 1971
• Docket Number: No. 10327,10327
• Citation: 107 Ariz. 378,489 P.2d 15
• Parties: CONTINENTAL NATIONAL BANK, a national banking association, Appellant and Cross-Appellee, v. Robert J. EVANS et al., Appellees and Cross-Appellants.
• Court: Arizona Supreme Court

Page 15

489 P.2d 15

107 Ariz. 378

CONTINENTAL NATIONAL BANK, a national banking association, Appellant and Cross-Appellee, v. Robert J. EVANS et al., Appellees and Cross-Appellants.

No. 10327.

Supreme Court of Arizona, In Division.

Sept. 30, 1971.

Rehearing Denied Oct. 27, 1971.

Murphy, Posner & Franks, by John R. Franks, Phoenix, for appellant and cross-appellee. Lawrence C. Cantor, Phoenix, for appellees and cross-appellants.

CAMERON, Justice.

This is an appeal from a judgment in favor of plaintiffs, Robert Evans and Andrew and Mary Evans, mother and father of Robert Evans, against the defendant Continental National Bank, which judgment was rendered after a jury verdict and acceptance of remittitur by the plaintiffs, Andrew and Mary Evans.

Defendant, Continental National Bank, appealed as to Andrew and Mary Evans. Robert Evans, Andrew Evans and Mary Evans also appealed, but it would appear from the briefs filed herein that they have abandoned their appeal. We are therefore concerned only with the judgment as it affects the Continental National Bank and Andrew and Mary Evans, husband and wife.

We are called upon to determine:

1. Did the plaintiffs, Andrew and Mary Evans, have sufficient interest to maintain an action against defendant bank for sale by the bank of stock transferred to Robert Evans and held by the bank as collateral for a loan to Robert Evans?

'2. Was it proper for the trial court to permit amendment of pleadings to conform to the evidence?

3. Was there sufficient evidence to support a judgment for punitive damages?

Viewing the evidence most favorably to the prevailing party, Lane Title and Trust Company v. Brannan, 103 Ariz. 272, 440 P.2d 105 (1968), the facts necessary for a determination of this matter on appeal are as follows. A loan was made by the bank to Robert Evans on 4 February 1965 in the amount of $8,500. 303 shares of Jefferson National Life Insurance Company stock owned by Andrew and Mary Evans were deposited with the bank as security, and a 'General Collateral Pledge Agreement' signed by all three parties. The pledge agreement contained the following provisions:

'12. At the option of the bank and with or without demand or notice all or any part of the secured credit shall become due and payable immediately irrespective of any agreed maturity upon the happening of one or more of the following events: '* * * (3) any actual or reasonably anticipated deterioration, impairment, decline or depreciation in the value or market price of the collateral or any part thereof which in the sole judgment of the bank causes the collateral to become unsatisfactory as to character or value, * * *.

'13. Upon or at any time after the happening of any of the defaults specified in the preceding paragraph the bank at its option may declare terminated any agreement for the granting of further credit to us or any of us.

'27. Any person signing this agreement as an accomodation pledgor does so without personal liability and solely for the purpose of pledging and does pledge to the bank, as security for the credit of other signers, only the property described in the receipt given him by the bank.'

Title to the stock was transferred to the name of Robert Evans for this purpose. On 4 Febuary 1966, the loan was renewed for the same amount.

Andrew Evans testified that the bank's representative told him that the bank would notify him and his wife before the stock would be sold. Mrs. Evans testified that the stock certificate had been signed over to Robert and given to the bank at the request of the officer of the bank. On 26 August 1966, an officer of the bank wrote to Robert Evans as follows:

'Mr. Robert J. Evans

7530 Clearwater Parkway

Phoenix, Arizona

'Dear Mr. Evans:

'In view of the recent decline in the stock market we have been reviewing the margin on loans secured by stock and would appreciate you contacting Mr. Charles Young, one of our Bank's Commercial Loan officers, in connection with the margin on your loan. You may call him at 277--5577, extension 207. Thank you very much.

Sincerely,

_ _

Administrative Vice President'

R. F. Stone

dg

On 31 August 1966, Andrew and Mary Evans went to the bank and met with Young. Mr. Young testified that he told them that additional security was needed and that Andrew Evans asked for 60 days to get the security:

'Q So when they left you had not rejected the sixty days they asked for?

'A Other than saying something had to be done about the situation.

'Q But other than that you didn't reject the sixty days they asked for?

'A No.

'Q Nevertheless, the stock was sold within nine days?

'A Yes.

'Q Without any further notice to them?

'A There were no further conversations with them, no.'

Mr. Thayer Lindauer, attorney, testified that on behalf of the Evanses he discussed the situation with Mr. Young of the bank on two occasions around the end of August and early September. As to the first conversation, Mr. Lindauer testified:

'A * * * And Mr. Young said, well, the bank was concerned that no decision had been made, and that he would let me know if the bank was going to go along with the situation, or if the bank wanted additional security, and he said they would. And I think that is as accurately as I can remember it.

'Q Did he tell you that they would be notified before any sale of any stock would be taking place?

'A That I would be notified. He apparently talked to Andy Evans before, but he told me he would let me know and give us opportunity to post additional security.

'Q Let you know when they were going to sell the security?

'A Yes, because they hadn't made a decision as far as I know at that point. The market was still falling at that point.

'Q And did you ever receive a notice after that from Mr. Young or the bank itself, or any employee thereof that they were going to sell the security?

'A No, I did not.'

The bank applied the proceeds of the sale and the amount found in Robert's checking account to the amount due upon the note, leaving the amount of $2,010.69 plus interest still due and owing by Robert Evans to the bank.

The jury returned a verdict of $1,000 in favor of Andrew and Mary Evans for general damages, and $15,000 punitive damages. The court ordered a remittitur, the remittitur was accepted, and the judgment was signed in favor of Andrew and Mary Evans for $78.24 general damages and $7,500 punitive damages. The defendant, Continental National Bank, on their counterclaim, recovered

$2,010.69 plus $250 attorney's fees against the plaintiff Robert Evans. DID ANDREW AND MARY EVANS HAVE SUFFICIENT INTEREST TO MAINTAIN THE ACTION?

The appellant bank contends that appellees, Andrew and Mary Evans, had no title interest in and to the stock nor right to immediate possession thereof at the time of the sale of the stock by the bank and therefore had no standing to bring the action. With this we disagree.

The testimony supported the contention that the stock was previously owned and pledged by Andrew and Mary Evans, and was transferred to the name of Robert at the request of the bank. The evidence supports the contention that equitable title, however, remained with Andrew and Mary Evans. The stock, as pledged originally, was owned exclusively by Andrew and Mary Evans, and the note for which the stock was pledged was in the name of Robert Evans. The bank, after accepting the stock as collateral, requested that Andrew and Mary Evans transfer legal title to Robert Evans. Although the name on the stock certificate itself was changed to Robert, it was apparent that the appellees as between themselves did not consider title to be exclusively in Robert, but merely legal title to be in his name as security until the loan was repaid. The bank had full knowledge of these facts and cannot now rely exclusively upon the named owner of the stock to defeat the interest of the plaintiffs, Andrew and Mary Evans.

With this special or equitable interest, Andrew and Mary Evans had standing to enter into an oral contract with the bank by which the bank would forbear selling the stock in return for which Andrew and Mary Evans would provide additional security should it be needed. We believe that there was standing to sue when the bank breached...