Wolff v. First National Bank of Winslow

• Decision Date: 27 January 1936
• Docket Number: Civil 3630
• Citation: 47 Ariz. 97,53 P.2d 1077
• Parties: E. J. WOLFF and P. D. ETCHANDY, as Surviving Partners of SAWYER-OTONDO SHEEP COMPANY, a Copartnership, and E. J. WOLFF and P. D. ETCHANDY, as Individuals, Appellants, v. THE FIRST NATIONAL BANK OF WINSLOW, ARIZONA, Appellee
• Court: Arizona Supreme Court

53 P.2d 1077

47 Ariz. 97

E. J. WOLFF and P. D. ETCHANDY, as Surviving Partners of SAWYER-OTONDO SHEEP COMPANY, a Copartnership, and E. J. WOLFF and P. D. ETCHANDY, as Individuals, Appellants, v. THE FIRST NATIONAL BANK OF WINSLOW, ARIZONA, Appellee

Civil No. 3630

Supreme Court of Arizona

January 27, 1936

APPEAL from a judgment of the Superior Court of the County of Navajo. P. A. Sawyer, Judge. Judgment affirmed.

Messrs Favour & Baker and Mr. A. M. Crawford, for Appellants.

Mr. J P. Clark and Mr. W. E. Ferguson, for Appellee.

OPINION

LOCKWOOD, C.J.

The First National Bank of Winslow, Arizona, a corporation hereinafter called plaintiff, brought suit against E. J. Wolff and P. D. Etchandy, as surviving partners of Sawyer-Otondo Sheep Company, a copartnership, and E. J. Wolff and P. D. Etchandy, as individuals, hereinafter called defendants, on a certain written guaranty of the indebtedness of one C. W. Ross. The case was tried to a jury, which returned a verdict in favor of plaintiff, and from the judgment rendered on such verdict and the order overruling a motion for a new trial, this appeal was taken.

There are some sixteen assignments of error which are grouped by defendants under seven propositions of law, as required by our rules. We shall consider these propositions in the manner which seems to be the most logical.

The theory of plaintiff's case, as it appears from its complaint, is that on the 16th day of November, 1929, it loaned to one C. W. Ross the sum of $3,500, and took as security therefor a chattel mortgage on certain property of Ross and a continuing written guaranty executed by the Sawyer-Otondo Sheep Company, a copartnership consisting of E. J. Wolff, P. D. Etchandy, and E. A. Sawyer, hereinafter called the company, for any and all indebtedness of Ross, past, present, and future, to plaintiff up to the amount of $3,500. The consideration for such written guaranty was the loan to Ross, and the reason given to plaintiff by the guarantors for their willingness to make the guaranty was that the company was at the time indebted to Ross on the purchase of certain lands which it intended to use in its sheep business, but that not desiring to pay him the cash for such land immediately, it had arranged with him that payment might be deferred if it could obtain for him the loan from plaintiff on the faith of its guaranty, as aforesaid. The indebtedness of Ross not being paid, after plaintiff had taken all steps possible to collect it from him, this action was brought on the guaranty.

The theory of defendants, as shown by their pleadings, is that the written guaranty was executed by E. J. Wolff without the knowledge, approval, or permission of his copartner Etchandy; that it was not given for nearly a year after the loan had been made to Ross, and then was at the request of plaintiff, and relying upon its statement that the indebtedness was secured by a valid chattel mortgage which included certain grazing permits of Ross in the Federal Reserve Forest,which would be of great value to the company if it could secure the same, so that if it was eventually compelled to make its guaranty good, it could recoup by securing the grazing permits covered by the mortgage. That when plaintiff attempted to foreclose its chattel mortgage, it appeared that the mortgage did not cover the grazing permits, so that no foreclosure could be had thereof and the consideration for the guaranty had, therefore, failed. They also claimed that plaintiff had changed the debt from an individual one of Ross to a joint one of Ross and his wife, and that this released the guarantors.

The material facts of the case, stated as we must assume them to be, are as follows: In the spring of 1929, Wolff, Etchandy, and Sawyer were copartners under the firm name of Sawyer-Otondo Sheep Company. The sole business of the company was the raising and marketing of sheep and their products, Sawyer and Wolff managing its financial business, while Etchandy's part was primarily the handling of the sheep on the range. At this time C. W. Ross was in the cattle business in a small way near the range used by the company. He had some land under lease; had initiated a homestead right on other lands; and had secured a grazing permit in the Sitgreaves National Forest for something in excess of 100 head of cattle, with the privilege of increasing the number of cattle under the rules of the Forest Service. The company believed that if it could acquire Ross' land, both leased and homestead, and particularly his forest grazing rights, they would be of considerable value to it, and had entered into some negotiations with him in regard to the matter, but he placed a price on the property higher than the company desired to pay at the time. However, on August 20, 1929, it did succeed in making a contract with him for the purchase of his lease and homestead rights, the price being fixed at $1,500, of which $500 was paid him in advance at the signing of the contract of purchase, and the balance was to be paid when he had built a dirt reservoir on part of the land, and was able to deliver title thereto; the date of final payment thus being uncertain. Some time prior to the 16th of November, 1929, according to the testimony of R. C. Kaufman, the president of plaintiff, E. A. Sawyer, one of the partners of the company, came to plaintiff's place of business and stated that he desired to make arrangements for a loan for Ross upon the credit of the company, giving as a reason therefor that it owed Ross some money; that it was not convenient at that time for it to take it out of its bank account; that it did not wish to borrow the money directly; and that Ross would be just as well satisfied for the loan to be made in this manner as for the company to pay him immediately. Plaintiff agreed to make such loan if the company wanted to guarantee it. A few days thereafter, Ross came to plaintiff to secure the loan, and Kaufman informed Sawyer and Wolff that plaintiff was ready to go ahead with it if they were ready to make the guaranty. Sawyer said that the guaranty would be made, but that he wanted plaintiff to take a mortgage on Ross' cattle for the protection of the company, and that Ross would give plaintiff a description of the property to be mortgaged. He also stated that Wolff would sign the guaranty on behalf of the company. The terms being thus agreed on, Ross executed a note for the $3,500 and a chattel mortgage covering his cattle and range rights, and Wolff signed the guaranty, whereupon plaintiff gave Ross credit for the $3,500. The note was dated and executed on the 16th of November, 1929, the time at which the details of the loan and guaranty were finally agreed upon, while the guaranty was actually executed on that date or a very shorttime thereafter. Ross failed to pay the note when it became due, and it was renewed from time to time. On July 2, 1932, the principal of the debt having at that time been reduced to $2,925, another joint and several renewal note was taken, signed by C. W. Ross and Ethel May Ross, his wife, and a new chattel mortgage to secure the same was executed by the Rosses, covering certain cattle and their brand and "all range rights and water rights." The debt not being paid, suit was finally brought against the Rosses and the company. There were two causes of action set up in the complaint, the first on the original note and mortgage and the guaranty, and the second on the renewal of 1932. Judgment was rendered against Ross individually on the original note and for a foreclosure of the chattel mortgage securing it, on the first cause of action; no judgment being taken against Mrs. Ross or the guarantors. Thereafter execution was issued and the property covered by the chattel mortgage sold for the sum of $50, which was applied on the judgment, and demand was then made upon defendants, upon their guaranty, for the payment of the amount of the judgment still due, being $3,432.92. E. A. Sawyer had died before the bringing of either action, and defendants Wolff and Etchandy, under the statute, were administering and closing up the partnership business of the company.

It is true that defendants introduced evidence controverting Kaufman's testimony in regard to the negotiations and promises leading up to the loan, and tending to show that Sawyer and Wolff had merely told him in the first place that they thought the loan was a good one, but that the guaranty had not been executed until nearly a year after the loan had been made to Ross, and then at the request of plaintiff, and in consideration of and relying on its statement that it held as security for the loan a valid mortgage on the Forest Reserve permit aforesaid, which was worth to the company much more than the amount of their guaranty and would protect them if they were forced to pay it, and that when it appeared on the foreclosure of the chattel mortgage that it was not valid as against such permit, the consideration for their guaranty had failed and they were, therefore, not bound thereby. They also contended that none of them had consented to the taking of Ethel Ross on the renewal notes, and that such action released the guaranty. However, the jury, by its verdict, obviously adopted Kaufman's statement of the conditions under which the guaranty was given and refused to accept defendants' theory, and the evidence being in conflict, we are bound to accept the facts as necessarily found by the jury. Do these facts, as a matter of law, justify the verdict?

It is urged by defendants that one partner may not bind the partnership by his guaranty in its name of the debts of a third party, unless his action is either approved in advance or ratified thereafter by the other partners, or else such agreement...