The Valley National Bank of Phoenix v. Shumway

• Court: Arizona Supreme Court
• Writing for the Court: Morgan, J.
• Citation: The Valley National Bank of Phoenix v. Shumway, 163 P.2d 676, 63 Ariz. 490 (Ariz. 1945)
• Decision Date: 26 November 1945
• Docket Number: Civil 4731
• Parties: THE VALLEY NATIONAL BANK OF PHOENIX, a National Banking Association, Appellant, v. ANDREW SHUMWAY, Executor of the Estate of Spencer B. Shumway, Deceased, Appellee

163 P.2d 676

63 Ariz. 490

THE VALLEY NATIONAL BANK OF PHOENIX, a National Banking Association, Appellant, v. ANDREW SHUMWAY, Executor of the Estate of Spencer B. Shumway, Deceased, Appellee

Civil No. 4731

Supreme Court of Arizona

November 26, 1945

APPEAL from a judgment of the Superior Court of the County of Maricopa. Dudley W. Windes, Judge.

Judgment modified and as modified affirmed.

Messrs Gust, Rosenfeld, Divelbess & Robinette, for Appellant.

Mr. H M. Van Denburgh, for Appellee.

Morgan J. Stanford, C. J., and LaPrade, J., concur.

OPINION

Morgan, J.

This action involves a guarantee of payment of accounts executed by the deceased, Spencer B. Shumway, in favor of appellant. Shumway died pending this appeal, and Andrew Shumway, executor, has been substituted as appellee. The action was instituted by the bank as plaintiff against the guarantor Shumway as defendant. The parties will be referred to as plaintiff and defendant. The facts so far as pertinent are as follows:

The defendant was a stockholder, director and vice-president of Clem Lumber Company, Inc., a corporation, which will hereafter be referred to as the company. He was an endorser on a $ 10,000 obligation owed by the company to plaintiff. On May 23, 1940, plaintiff entered into an agreement with the company for the purchase of accounts receivable. On the same date, the defendant executed in favor of the plaintiff an instrument denominated "Guarantee of Payment of Accounts." This instrument referred to the agreement for purchase of accounts between plaintiff and the company as pertaining to "certain accounts owing by various persons to said Lumber Company, Inc." It recited that the defendant is the owner and holder of considerable capital stock of the company and that it was to his interest as such stockholder that the sale of said accounts be made. The following provisions appear: Guarantor "hereby guarantees each and every and all accounts that heretofore have been or hereafter may be assigned by" the company to the plaintiff. The bank was specifically given the right "in the event any of said accounts be not paid when due, to demand payment thereof" and the defendant, upon such demand being made, was required within ten days from date of demand to "pay the balance due on any of said accounts." Upon payment, he would become subrogated to any rights or securities held by plaintiff in connection with the accounts.

Out of the first proceeds from sale of accounts, the company's obligation, upon which defendant was an endorser, was paid. On July 9, 1940, forty-seven days after the guarantee agreement was made, the defendant sold his stock in the corporation to the company, receiving contracts of the face value of $ 3,200. He resigned as director and vice-president. He advised the plaintiff he was no longer connected with the company, but did not give any notice of termination of the guarantee agreement. The plaintiff continued to purchase accounts from the company until December 23, 1940, when it went into chapter 11 Bankruptcy Arrangements, under which it continued to operate its business. On July 3, 1942, the bank held unpaid accounts amounting to $ 19,087.98, and the company put up $ 12,000 face value of its contracts to apply on the payment of accounts assigned to the bank. This agreement was assented to by defendant through his attorney. A later agreement, dated October 9, 1942, was entered into between the plaintiff and the defendant, under and whereby the company paid the plaintiff the sum of $ 5,000 in cash and secured a release of these securities. All these agreements were entered into without prejudice to the respective rights, liabilities and claims of the plaintiff and defendant. In the last agreement it was specifically provided that $ 2,155.25 should be applied to the payment of certain designated accounts, reducing the total shortage to $ 16,932.73. This left $ 2,844.75 unallocated to any particular account.

The trial court found the following accounts included in the total of $ 16,932.73 to be fictitious: W. E. Theis $ 2,832.74, W. E. Theis $ 5,373.47, United States $ 2,466.77. The court further found that an account of the defendant included in the above total was actually $ 246.70 less, and that there had been paid on what is known as the Edith Gordon account $ 149.15. The aggregate of such items, amounting to $ 11,068.83, was deducted from $ 14,087.98 (the amount claimed in the complaint), leaving a balance of $ 3,019.15, for which judgment was entered in favor of the plaintiff.

In its motion for new trial, the plaintiff pointed out that the $ 11,068.83 should have been deducted from $ 16,932.73, the actual balance on all accounts which had been assigned to it by the company. This on the ground that the $ 2,844.75 unallocated by the agreement of October 9, 1942, should have been applied on accounts which the court had found to be fictitious and for the payment of which the court had held the defendant was not liable. The motion was overruled. Plaintiff appealed and cross appeal was filed by defendant.

Plaintiffs first assignment is that the court erred in denying its request for findings of fact and conclusions of law. The case was submitted and taken under advisement on November 26, 1943. On February 17, 1944, the court filed "Memorandum Opinion," making findings and directing judgment as heretofore indicated. Following this, and on the same day, request for findings of fact and conclusions of law was made by plaintiff.

Rule 52(a), Rules of Procedure for Superior Courts, Section 21-1028, Arizona Code Annotated 1939, does not require that requests for findings of fact and conclusions of law must be made prior to submission of the case. We think that if such a request is made seasonably after trial and before the court has ordered judgment, under the rule it might be error for the court to deny the request. Where, however, as here, the cause has been determined and order for judgment has been entered, the request comes too late.

Other assignments of error have been made by plaintiff and may be summarized as follows: (1) That the court erred in holding the guarantee agreement did not cover invalid or fictitious accounts sold by the company to the plaintiff; (2) in holding that under the guarantee the defendant was liable only on the actual balances due and unpaid on the accounts; and (3) in failing to allow the plaintiff to apply the unallocated portion of the $ 5,000 payment on the accounts which the court found were not covered by the guarantee.

The defendant's assignments were to the effect that the court erred in allowing judgment on any item sold by the company to the plaintiff subsequent to the time the defendant severed his connections with the company and advised the bank to that effect, and in rendering a judgment in any sum against the defendant.

It is obvious that the guarantee which refers to "certain accounts owing by various persons" means "accounts receivable." The phrase "accounts owing" is tantamount to "accounts receivable." It is settled that accounts receivable are contract obligations owing to a person on an open account. West Virginia Pulp & Paper Co. v. Karnes, 137 Va. 714, 120 S.E. 321; Black's Law Dict. 3rd Ed. p. 28. By the terms of this agreement, defendant's liability was limited to "pay the balance due on any of said accounts." If there was no balance due, patently there would be no liability on the part of the defendant.

We have examined the evidence carefully and believe the trial court was wholly justified in finding that the Theis and United States accounts were invalid and fictitious. The evidence indicates that there never was anything due on the Theis accounts at the time of their assignment or at any time. The account referred to as the United States account seems to have been based upon an order, upon which no delivery was ever made and nothing ever became due. The instrument of guarantee did not in terms, and does not by implication guarantee the validity of any accounts which might be assigned by the company to the plaintiff. The guarantee presupposes the assignment of actual accounts receivable upon which something might be due and payable. The assignment and validity of these accounts are not guaranteed but only the payment of the accounts themselves. While the guarantee did not refer to the accounts as "accounts...