Rossi v. Hammons

• Decision Date: 11 June 1928
• Docket Number: Civil 2667
• Citation: 34 Ariz. 95,268 P. 181
• Parties: ALEXANDER ROSSI, Appellant, v. A. T. HAMMONS, as Superintendent of Banks, in Charge of the Liquidation of the ARIZONA BUILDING AND LOAN ASSOCIATION, a Corporation, Appellee
• Court: Arizona Supreme Court

268 P. 181

34 Ariz. 95

ALEXANDER ROSSI, Appellant, v. A. T. HAMMONS, as Superintendent of Banks, in Charge of the Liquidation of the ARIZONA BUILDING AND LOAN ASSOCIATION, a Corporation, Appellee

Civil No. 2667

Supreme Court of Arizona

June 11, 1928

APPEAL from a judgment of the Superior Court of the County of Pima. Albert M. Sames, Judge. Judgment affirmed.

Mr George O. Hilzinger, for Appellant.

Mr Elwood B. Frawley, for Appellee.

OPINION

McALISTER, J.

The Arizona Building & Loan Association having become insolvent A. T. Hammons, as superintendent of banks, took possession of its assets in 1923 and later filed suit against Alexander Rossi for the recovery of $5,000 which, it is alleged, the association wrongfully paid him for twenty-five shares of its permanent guarantee stock.From this judgment and the order denying his motion for a new trial the defendant appeals.

This association, it appears from the bill of exceptions, was organized in 1902 for the purpose of transacting business of the general nature of that usually engaged in by such associations, its capitalization being $1,000,000 divided into 5,000 shares of the par value of $200 each. Its articles of incorporation were amended in 1908 by the insertion of clauses permitting it to perform certain acts which it is contended had the effect of constituting it also a savings bank and by increasing its capital stock to $2,000,000 and authorizing its board of directors to provide from this a permanent guarantee stock.

Pursuant to this authorization provision for one thousand shares of such stock was made in 1909 and the sale of 250 shares thereof to remain as the fixed and permanent capital of the association was ordered in 1917. Twenty-five of these were purchased by appellant for $5,000 in 1918 and held by him until November 16, 1922, when they were resold to the association for the amount he had given for them and the association's warrant in payment therefor was delivered to him and paid, though such payment was neither authorized nor ratified by the board of directors and the stock was sold in violation of the by-laws which provided that it could be withdrawn or disposed of after five years but only after six months' notice to the board of directors had been given. The signature of the president of the association did not appear upon the warrant, though appellant offered evidence tending to prove that this requirement had been disregarded habitually by the treasurer.

The association was insolvent January 1, 1920. Its deficit at that time was $14,495.86 and by August 1, 1922, had increased to $31,512.48, both of these amounts being reflected in the books of the association. At all times from 1905 until November 16, 1922, appellant was a member of the board of directors, though he gave testimony tending to prove that he had no actual knowledge of the financial condition of the association and there was nothing in the evidence showing any actual intention on his part to defraud it, its stockholders or creditors, except in so far as the facts stated render his action fraudulent in law.

It is further disclosed by the bill of exceptions that on April 1, 1924, L. H. Hofmeister, who had been theretofore appointed receiver of the said association, brought an action against this appellant on identically the same cause of action set up in this case and in his complaint alleged, as appellee has here, that "this action is brought for the benefit of all creditors, stockholders and others interested in said association"; that appellant demurred to that complaint upon the ground that Hofmeister, receiver, had not the legal capacity to sue and as grounds for demurrer his counsel submitted to the court the proposition that the plaintiff in this action was the proper person to bring the suit and upon this ground the demurrer was sustained by the court.

Upon the answers of the jury to certain interrogatories and the other facts as found by the court judgment was entered for the plaintiff in the sum of $5,000 with interest thereon at six per cent per annum from the day on which the stock was sold to the association, and it is from this judgment that defendant appeals.

The order of the court overruling appellant's demurrer to the complaint which was interposed upon two grounds, first, that appellee did not have the legal capacity to sue, and, second, that the complaint did not state facts sufficient to constitute a cause of action, is the first error assigned. Under it and the second assignment, which bases error upon the order rendering judgment for the plaintiff, are discussed the propositions upon which appellant relies for a reversal. His main contention is that the superintendent of banks is not the proper party plaintiff because, first, building and loan associations are not banks within the meaning of the banking act (chapter 31, Session Laws of Arizona 1922), and, second, that act does not confer upon him the right to take charge of insolvent and unsafe building and loan associations and liquidate their affairs as it does banking institutions.

Appellee takes the position that, due to certain clauses in its articles of incorporation, the Arizona Building & Loan Association was permitted to carry on the business of a savings bank and for this reason should have been held to be one, but it is unnecessary to determine whether this is true or not for the reason that if it had this right under its charter this fact alone would not be sufficient to make it a savings bank when the primary purpose of its organization was to carry on the business of a building and loan association. Before such a result could follow it would be necessary to show that it actually transacted business of this character or held itself out as doing so. And while it is true that a building and loan association, which actually holds "itself out to the public as receiving money on deposit, whether evidenced by certificate, promissory note, or otherwise" (section 54, Banking Code), even in the absence of charter permission to transact such business, may be considered as carrying it on anyway and, therefore, as subject to the liquidation as well as other provisions of the Banking Act, yet in view of the fact that the record in this case is free from even suggesting that this association either did a business of this kind or held itself out as doing it, this section of the Banking Act is wholly without application and furnishes no basis for holding the association to be a savings bank.

Appellee however, takes the further position that even though this association cannot be held to be a bank it was the intention of the legislature in the enactment of the Banking Code to place all building and loan associations under the supervision of the superintendent of banks as completely as it did banking institutions. There is, however, no reference to them in the liquidation provisions of the act, section 43, but in view of certain other provisions which it is contended strongly indicate a legislative intent to give the superintendent of banks authority over them for all purposes, it is argued that this omission was merely inadvertent and not intentional. For instance, it is pointed out that section 9 provides that all building and loan associations are subject to examination by the superintendent of banks; that section 10 directs him to visit and examine every such association at least twice each year; that section 14 requires him to issue each association a license to...