Sato v. First Nat. Bank of Ariz.
| Decision Date | 28 May 1970 |
| Docket Number | No. 1,CA-CIV,1 |
| Citation | 469 P.2d 829,12 Ariz.App. 263 |
| Parties | Carl K. SATO and Susie S. Sato, his wife, Appellants and Cross-Appellees, v. FIRST NATIONAL BANK OF ARIZONA, a national banking association, Appellee and Cross-Appellant. 1005. |
| Court | Arizona Court of Appeals |
E. Gene Wade, Mesa, for appellants and cross-appellees.
Streich, Lang, Weeks, Cardon & French, by William P. French, and Preston J. Steenhoek, Phoenix, for appellee and cross-appellant.
This appeal from the Coconino County Superior Court involves a foreclosure of a mortgage, the appointment of a receiver thereunder, the sufficiency of the court's findings of fact and the sufficiency of the evidence.
Plaintiff-appellee, FIRST NATIONAL BANK OF ARIZONA, sought foreclosure of its first mortgage on certain improved real property situated in Flagstaff, Arizona. Defendants CARL K. SATO and SUSIE S. SATO counterclaimed against plaintiff for an alleged wrongful appointment of receiver and asserted certain estoppels and modification agreements in defense to the foreclosure action. The matter was tried to the court which, on findings of fact and conclusions of law, entered judgment in favor of plaintiff on its foreclosure action and dismissed defendants' counterclaim. Defendants appeal from the judgment of foreclosure and dismissal of their counterclaim and the order appointing a receiver and the order denying defendants' motion to vacate the order appointing a receiver. Plaintiff cross-appealed from a portion of the judgment holding the defendants not personally liable for the mortgage debt.
On June 22, 1961, O'Malley-Pickrell Mortgage Co. executed and delivered to the plaintiff a promissory note in the face amount of $125,000.00, secured by a realty mortgage on an office building known as the Professional Burrus Building located in Flagstaff, Arizona. The note was payable in monthly installments of $1,055.00 on the tenth of each month, the monthly installments including interest at six percent per annum.
On April 27, 1964, the defendants agreed with O'Malley to exchange 30 acres of land located in Maricopa County for O'Malley's interest in the Burrus Building subject (according to defendants) to the mortgage. The indebtedness due plaintiff at that time was approximately $110,000.00 Payments were made regularly by the defendants until October, 1965. Following October, 1965, the monthly payments became spasmodic, sometimes running as late as 116 days. These delinquent payments continued for approximately nine months, during which time plaintiff advanced to defendants funds to pay 1964 real property taxes and made repeated attempts to require defendants to keep the note payments current. Early in 1965, plaintiff's manager in Flagstaff requested defendants to open a checking account at its Flagstaff branch and to deposit to this account rent receipts from the mortgage premises, giving plaintiff the right to draw on this account for note payments in order to keep the account current. Defendants agreed to this arrangement but failed to open such an account until several months later. When the account was opened it never contained sufficient funds to meet accruing installments and past-due defaults.
On May 27, 1966, the defendants and plaintiff's local manager met to discuss the status of the delinquent payments, delinquent taxes and the various complaints from tenants dealing with maintenance of the Burrus Building. At this meeting, defendants were informed that plaintiff could not allow these deficiencies to continue without instituting foreclosure proceedings. At this time defendants requested that they be given until July 31, 1966 to cure all defaults. This extension was refused, but defendants were informed the matter would be taken up with the local manager's supervisor. On May 31, 1966, plaintiff sent a letter to defendants, by certified mail, advising that unless all delinquencies and defaults were cured by June 10, 1966, the matter would be referred to an attorney on June 13, 1966, for the purpose of instituting foreclosure proceedings. The return receipt dated June 1, 1966, was signed 'Carl Sato.' No payments were forthcoming and plaintiff filed this action on June 22, 1966.
Concurrently with the foreclosure action, plaintiff filed a petition for appointment of a receiver. The trial court ordered the appointment of a receiver on June 27, 1966, after a hearing, but without notice to defendants. Notice of the appointment of the receiver was given to defendants following the hearing. On July 15, 1966, defendants filed an answer to plaintiff's complaint and a counterclaim. This counterclaim alleged the existence of a modification agreement concerning payment of plaintiff's note and the wrongful appointment of a receiver causing damages to defendants' reputation. The counterclaim prayed for exemplary damages in the sum of $10,000.00, attorneys fees in the sum of $9,696.33, actual damages, and the removal of the receiver forthwith.
In September, 1966, the receiver filed his first account and report. Defendants at this time filed their objections to the report and moved to have the order appointing receiver vacated on the grounds 'that said order was entered without notice.' No action was requested on defendants' motion until December 11, 1967, approximately one and one-half years after the filing of the motion. The motion was denied on December 12, 1967.
In October, 1967, the counter-claim was amended to allege that the appointment of the receiver caused defendants substantial loss of income in addition to damage of defendants' reputation.
Defendants raised three basic issues on appeal:
(1) That the appointment of a receiver without notice is void.
(2) That the findings of fact and conclusions of law propounded by the trial court do not comply with Rule 52(a) and (b), Rules of Civil Procedure, 16 A.R.S. (1956).
(3) That the evidence did not support the trial court's judgment.
Plaintiff by way of cross appeal questions the sufficiency of evidence to support the trial court's finding that the defendants did not personally assume the subject indebtedness.
Defendants' first contention is that the initial appointment of the receiver in this matter was void for failure to give notice to the defendants of the hearing for appointment, invoking the U.S. Constitutional protection of the 14th amendment dealing with due process. As defendants state in their brief:
If defendants are correct in this interpretation, then their other arguments concerning the trial court's action insofar as the receiver is concerned, would have some validity. However, in the case of the appointment of a receiver, we do not believe that the failure to give notice is a constitutional due process defect. It would appear that the majority of jurisdictions take the position that while the appointment of a receiver ex parte is only permissible in extreme cases where there exists a pressing emergency, such ex parte appointments are valid. American Armed Services Underwriters, Inc. v. Atlas Ins. Co., 268 Ala. 637, 108 So.2d 687 (1959); Head v. Roberts, 291 S.W.2d 483 (Tex.Civ.App.1956); Huggins v. Green Top Dairy Farms, 75 Idaho 436, 273 P.2d 399 (1954); Venza v. Venza, 94 Cal.App.2d 878, 211 P.2d 913 (1949); Industrial Machinery Co. v. Roberts, 225 Ind. 1, 72 N.E.2d 223 (1947); Hamilton v. Hood, 138 N.J.Eq. 485, 48 A.2d 819 (1946); Contra, Fred V. Gentsch, Inc. v. Burnett, 173 Neb. 820, 115 N.W.2d 446 (1962).
This lack of a constitutional due process requirement is also recognized in Rule 66(a), Rules of Civil Procedure, 16 A.R.S., (as amended in 1967), which provides an appointment of a receiver may be had without notice to adverse parties where 'there is substantial cause for appointing a receiver before service can otherwise be made.' The conclusion to be drawn from the...
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...has long passed, and we lack subject matter jurisdiction to consider its entry. Id.; see also Sato v. First Nat'l Bank of Ariz., 12 Ariz.App. 263, 266, 469 P.2d 829, 832 (1970) (holding failure to appeal order appointing a receiver precludes a party from later raising issue on appeal from f......
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