Daggs v. Phoenix Nat. Bank

• Decision Date: 16 April 1898
• Docket Number: Civil 622
• Citation: 5 Ariz. 409,53 P. 201
• Parties: R. E. DAGGS et al., Defendants and Plaintiffs in Error, v. PHOENIX NATIONAL BANK (a corporation), Plaintiff and Defendant in Error
• Court: Arizona Supreme Court

53 P. 201

5 Ariz. 409

R. E. DAGGS et al., Defendants and Plaintiffs in Error, v. PHOENIX NATIONAL BANK (a corporation), Plaintiff and Defendant in Error

Civil No. 622

Supreme Court of Arizona

April 16, 1898

ERROR to the District Court of the Third Judicial District in and for the County of Maricopa. A. C. Baker, Judge. Affirmed.

The facts are stated in the opinion.

A. J Daggs, for Plaintiffs in Error.

A national bank may not charge more than seven per cent interest on any contract they may enter into in this territory. As it has contracted for ten per cent interest in this case, it has forfeited its right to recover any interest on the three notes sued on. If there is no rate fixed by law in this territory, then the laws of the United States fixing the rate to be charged by national banks governs, and contracting for a higher rate forfeits the right to collect. Danforth v. Bank, 48 F. 271; Johnson v Bank, 74 N.Y. 329, 30 Am. Rep. 302. In Danforth v. Bank supra, Atchison, J., in speaking of the operation of the United States statute (secs. 5197, 5198) upon national banks said: "The clause operated directly upon the bank and affects its power. The statutory franchise to recover interest is lost by the commission of the illegal act. Being without right to demand interest, the offending bank cannot recover interest against any one." Also, Bank v. Johnson, 104 U.S. 271.

The counterclaim of plaintiffs in error, of $1,145.65, duly verified, is not denied under oath; it stands admitted as correct. Judgment should have been given on that counterclaim. Rev. Stats. Ariz., 671, 735, subd. 11.

The counterclaim of plaintiffs in error, of the five-thousand-dollar note is a non-negotiable note on its face. Our statute (par. 122) gives life to this instrument by assignment.

Paragraph 123 gives the right to the assignee to bring an action on it in his own name and to hold the assignor as a surety by diligence in its collection.

Paragraph 125 recognizes the liability of the assignor upon this instrument, as by the assignment this note becomes the debt of the assignor, -- Rollins v. Hope, 18 Tex. 446, -- and for that reason it is not within the statute of frauds nor the rule of caveat emptor.

Where the maker of a note is insolvent the assignor is liable to suit without even joining the maker. Rev. Stats. Ariz. 688.

The assignor thus becomes primarily liable as an assignor. Flemming v. Powell, 2 Tex. 231; Moore v. Brown, 15 Tex. 129; Wood v. McMeans, 23 Tex. 481; Cook v. Southwick, 9 Tex. 615; Randon v. Barton, 4 Tex. 289.

This counterclaim of the plaintiffs in error stands admitted on the record by the failure of the defendants in error to reply according to section 671, subdivisions 9, 10; nor was there any proof of any character offered against this part of the answer of plaintiffs in error. Burtlett v. Stearns, 33 Cal. 468; Silvey v. Neary, 59 Cal. 97.

A party cannot disprove an allegation which he has admitted by not denying it. Bacon v. Cropsy, 7 N.Y. 195. An admitted averment is therefore not in issue. Bacon v. Cropsy, supra.

It is therefore error to admit evidence upon matters not in issue. Fortisque v. Crawford, 105 N.C. 29, 10 S.E. 910; Miller v. Miller, 89 N.C. 209.

A general denial is not sufficient; the plaintiff must answer as the defendant would have to answer plaintiff. Where there is no answer to a counterclaim the counterclaim is admitted.

L. H. Chalmers, for Defendant in Error.

Section 5197 of the Revised Statutes of the United States allows national banks to charge the rate of interest allowed by the state to natural persons generally, and a higher rate if state banks are authorized to charge a higher rate. Tiffany v. National Bank, 18 Wall. 409.

Parties may agree upon any rate of interest in this territory. Rev. Stats. Ariz., sec. 2162. Under statutes permitting persons to contract for any rate, national banks have the same privilege. Hinds v. Marmolejo, 60 Cal. 229; Bank v. Bruhn, 64 Tex. 571, 53 Am. Rep. 771; Rockwell v. Farmers Bank, 4 Colo.App. 562, 36 P. 905; Wolverton v. Bank, 11 Wash. 94, 39 P. 247; Yakima Nat. Bank v. Knipe, 6 Wash. 348, 33 P. 834; Guild v. Bank, 4 S. Dak. 566, 57 N.W. 499.

Where a state fixes a certain rate as the legal rate, but authorizes parties to agree in writing for a higher rate, the national banks are permitted to charge the higher rate. Wiley v. Starbuck, 44 Ind. 298; Newall v. Bank, 12 Bush. 57.

OPINION

SLOAN, J.

-- On the twenty-eighth day of November, 1894, R. E. Daggs executed a mortgage on realty situate in Maricopa County, Arizona, and on four water-rights of the Consolidated Canal Company represented by certificates, to the defendant in error, to secure three promissory notes, aggregating the sum of $9,741.72, and signed by A. J. Daggs, plaintiff in error, each dated November 1, 1894, and payable on or before one year from the date thereof, and each bearing interest from date at the rate of ten per cent per annum. On the same day A. J. Daggs, plaintiff in error, executed a mortgage to the defendant in error upon real estate in said county to secure the said promissory notes, and on the same date executed another mortgage upon other real estate in said county to secure the same indebtedness. Separate suits were brought by the defendant in error on the 21st of February, 1896, to foreclose the three mortgages, which suits were subsequently, by order of the court, consolidated and tried as one. The answer of A. J. Daggs was the same in each of the suits, and set up a number of defenses. The first set up that the notes sued upon were usurious, in that the rate of interest charged was in excess of that allowed to be charged by a national bank in this territory under the provisions of sections 5197 and 5198 of the Revised Statutes of the United States, and for that reason the defendant in error had forfeited its right to collect any interest upon said notes. By way of counterclaim the answer set up that the defendant in error was indebted to plaintiff in error A. J. Daggs upon a certain promissory note, which reads as follows: "$5,000.00. No. 1,340. Due Sept. 1. Phoenix, Arizona, July 1, 1893. On the 1st day of September, 1893, without grace, we, or either of us, for value received, promise to pay to Thomas Armstrong, Jr., at the Phoenix National Bank, at their office in Phoenix, Arizona, five thousand dollars ($5,000) in United States gold coin, with interest at the rate of 1 1/4 per cent per month from until paid. In case of legal proceedings hereon, we or either of us agree to pay ten per cent of amount found due hereon as attorney's fees. Secured by chattel mortgage of even date herewith. W. A. and P. P. Daggs. W. A. Daggs. P. P. Daggs." And indorsed on the back as follows: "Thomas Armstrong, Jr. Sept. 30, 1893, interest from July 1st to Octo. 1st, 1893, $187.50; Dec. 30, 1893, interest from Oct. 1st, 1893, to Jan. 1st, 1894, $187.50; April, 1894, interest from Jan. 1st to Apr. 1st, $187.50." That the payee of said note, Thomas Armstrong, Jr., assigned the same in blank to the defendant in error; and on the twenty-eighth day of November, A.D. 1894, for a valuable consideration, in writing, the latter assigned the same to the plaintiff in error, A. J. Daggs; and that at the date of said assignment the makers of said note were, and ever since had been, and were then, notoriously insolvent; of all of which the defendant in error is charged to have had knowledge; and further, that no part of said note had been paid, and that there was then due thereon the sum of $7,076.91; and judgment thereon was prayed for for said amount, together with the interest thereon, according to the tenor and effect of said note. For a further defense, and by way of counterclaim, the answer set up that at the time of the execution of the three promissory notes sued upon the defendant in error and plaintiff in error A. J. Daggs entered into a contract in writing, wherein the former, as a part of the consideration of the said notes, expressly stipulated that the said notes should be received in payment for all its right, title, and interest in and to a certain chose in action wherein Hugh McCrum was plaintiff and W. A. and P. P. Daggs were defendants, and defendant in error was the intervener, which chose in action was based upon the note for five thousand dollars signed by said W. A. and P. P. Daggs, and which was set up and contained in the aforesaid counterclaim, and which was secured by a chattel mortgage executed by the payee named in said note; that the makers of said note were at the time, had been, and were then, actually and notoriously insolvent, all of which the defendant in error well knew; and that it was further agreed between the defendant in error and the plaintiff in error A. J. Daggs that the litigation and suit upon said note and mortgage should be carried on in the name of defendant in error until the said cause should be determined and settled, and that defendant in error should pay all costs of said litigation accruing prior to November 1, 1894; that A. J. Daggs, plaintiff in error, should bear all the costs accruing thereafter; that the said plaintiff in error had paid out and expended large sums of money in the prosecution of said suit -- to wit, $45.65 -- as costs in and about said suit, which had accrued prior to said November 1, 1894. Said plaintiff in error further alleged that the defendant in error had wholly failed and refused to allow its name to be used in the continuation of said suit, and had wholly failed and refused to sign an appeal-bond to the supreme court of the United States as principal, in violation of its said agreement, to defendant's damage in the sum of $10,122.55. As a further defense, the answer set up that as security to the said...