Evans v. Colorado Savings Bank, Civil 3260

• Decision Date: 21 March 1933
• Docket Number: Civil 3260
• Citation: 41 Ariz. 504,19 P.2d 1062
• Parties: W. A. EVANS and SOPHIA EVANS, Appellants, v. COLORADO SAVINGS BANK, a Corporation, Appellee
• Court: Arizona Supreme Court

19 P.2d 1062

41 Ariz. 504

W. A. EVANS and SOPHIA EVANS, Appellants, v. COLORADO SAVINGS BANK, a Corporation, Appellee

Civil No. 3260

Supreme Court of Arizona

March 21, 1933

APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Judgment affirmed.

Mr. G W. Shute and Mr. Charles Bernstein, for Appellants.

Mr. D V. Mulhern and Mr. B. H. Gibbs, for Appellee.

OPINION

ROSS, C. J.

This is an action to recover the balance of a promissory note, the history of which is as follows: On February 15, 1928, at Phoenix, Arizona, the appellants, W. A. and Sophia Evans made and delivered their promissory note for $14,987, payable on or before November 15, 1928, to E. J. McDermott, with interest at seven per cent per annum. In due course, on March 10, 1928, and before the note was due, McDermott indorsed it to the appellee, who paid full value for it.

At or before the time of its transfer to appellee it was also indorsed by Clarence Underhill, of Colorado Springs Colorado.

On July 3, 1928, there was paid and credited on the principal of the note the sum of $13,152, and on February 28, 1929, $386.85, leaving a balance of $1,448.15, which, with accrued interest to July 28, 1931, together with attorneys' fees, is sued for.

Appellant W. A. Evans, McDermott and Underhill when said note was made were partners in a cattle ranch located in Arizona and, although the note appears to be that of appellants, the money borrowed was in fact for the use and benefit of the partnership; and the above payments on the note were made out of partnership funds.

On May 8, 1929, Underhill and McDermott gave to appellee their notes for $10,947.31, included in which was the above balance on the Evans note and other indebtedness of McDermott and Underhill to appellee, with the understanding that the Evans note should be held as collateral security to partially secure Underhill and the appellee. The McDermott and Underhill notes were renewed August 23, 1929, January 13, 1930, May 29, 1930, October 8, 1930; and for a balance of $8,489.45 on May 4, 1931, and the Evans note continued to be held as collateral security to partially secure Underhill and appellee.

The appellants contended in the trial court that the transaction of May 8, 1929, changed their obligation to the appellee from a primary to a secondary one, and that since the note was past due when accepted or retained as collateral to McDermott's and Underhill's debt to the appellee, the latter took it with notice and subject to all the defenses appellants had against McDermott and Underhill growing out of their partnership. In other words, that from the time it accepted or retained the Evans note as collateral the appellee was not a holder in due course.

This contention of appellants was...