Lawrence v. Valley National Bank

467 P.2d 763, 12 Ariz. App. 51
CourtCourt of Appeals of Arizona
DecidedNovember 10, 1970
DocketI CA-CIV 1000, I CA-CIV 931
StatusPublished
Cited by11 cases

This text of 467 P.2d 763 (Lawrence v. Valley National Bank) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lawrence v. Valley National Bank, 467 P.2d 763, 12 Ariz. App. 51 (Ark. Ct. App. 1970).

Opinion

*52 HOWARD, Chief Judge.

A civil action was instituted by plaintiff-appellee, Valley National Bank, hereinafter referred to as the “Bank,” to recover the unpaid balance on a promissory note. The defendants-appellants are Lawrence, Stegall, Brown and their wives, individually and as co-partners d/b/a Lawrence, Stegall and Brown.- The note was in the sum of $496,834.41 and the unpaid balance was $84,527.04 plus interest and attorneys’ fees. Brown and his wife defaulted in the action. The appellants filed a third party complaint against Arizona-Colorado Cattle Co., Inc., hereinafter called the “Cattle Co.,” claiming that the “Cattle Co.” was either liable directly to the “Bank” on the indebtedness or was liable by way of indemnity to the appellants. The “Cattle Co.” filed an answer setting up the execution of certain instruments by way of defense.

Lawrence and Stegall as partners started a ranching and cattle business in 1956. In 1957, Jack Cooke joined them and they operated as Lawrence, Stegall and Cooke to furnish lands and Brown to locate cattle which they were to buy. The written agreement was entitled Joint Venture Agreement and the profits and losses were to be shared on a two-thirds for Lawrence, Stegall and ' Cooke and one-third for Brown basis.

Later Lawrence, Stegall and Cooke incorporated but continued the joint venture under the same terms. Then the corporation was dissolved and Lawrence and Ste-gall as partners continued the joint venture with Brown. In 1961, Lawrence, Stegall and Brown and their wives signed a “Certificate of Partnership” for the “Bank.” It authorized any partner to bind the partnership and the partners jointly and severally for any amounts, and the partners agreed to remain bound until the “Bank” was given sixty days written notice of the revocation of authority.

On February 1, 1963 the partnership assets of Lawrence and Stegall were transferred to a new corporation, Lawrence & Stegall Ranches, Inc,, hereinafter referred to as the “Corp.” which was formed by Lawrence, Stegall, Wray ánd two others. On June 3, 1963 the corporation borrowed approximately five million dollars secured by a mortgage and trust agreement, the trustee of which was the “Bank.” The Trust Agreement stated that the “Corp.,” Lawrence & Stegall Ranches, Inc., now owned all real and personal properties and assets of the partnership except for certain incidental property not pertinent to our inquiry.

Thereafter, the corporation operated on an enlarged scale. Brown would buy cattle and issue drafts through the “Bank” on the Lawrence, Stegall and Brown account. The “Bank” would honor the drafts and when the draft account, based upon a line of credit, reached a certain size, a promissory note would be signed.

On September 2, 1964 the promissory note sued upon herein, was prepared as a partnership note.' At the bottom thereof was typed “ARTHUR J. STEGALL, JR., M. TAYLOR LAWRENCE, JR., AND V. D.' BROWN, A PARTNERSHIP DBA STEGALL, LAWRENCE & BROWN BYand it was signed by M. T. Lawrence, Jr. It was secured by a chattel mortgage on Lawrence, Stegall and Brown cattle and by cattle owned by the “Corp.” Appellants claim that the “Bank” was kept closely advised of the changing membership of the joint venture.

Financial reports prepared by the “Corp.’s” accountants were supplied to the “Bank.” One of the reports contained, for example, a note to Financial Statement of December 31, 1963, page 7, stating:

“Included with the accounts of Lawrence & Stegall Ranches, Inc. are the Company’s interests in two joint ventures — Ste-gall, Lawrence & Brown Joint Venture (two-thirds). * * *”

There was testimony that an officer of the “Bank,” Mr. Jacobson, was advised by an officer of the “Corp.” in September,’ 1964 that the promissory note recently signed by Lawrence on behalf of the Lawrence, Stegall and Brown partnership, *53 ■should have been signed on behalf of the joint venture consisting of the “Corp.” and Brown.

Proceeds from the sale of joint venture ■cattle in the inventory of the “Corp.” were deposited in the “Corp.’s” bank account and checks were drawn thereon in payment or reduction of the Lawrence, Stegall and Brown debt to the “Bank.” The joint venture did not have a bank account. The “Corp.” shared the profits and losses of the joint venture. Lawrence and Stegall did not participate in either the profits or losses of the joint venture after the transfer of the partnership assets to the “Corp.” on February 1, 1963.

In 1964 the cattle market became depressed and remained so for a long time. Heavy losses ensued and Lawrence and Stegall entered into an agreement to sell all of their capital stock in the “Corp.” to others, among whom was Wray, one of the founders of the “Corp.,” who had resigned as an officer and director shortly before the sale.

The sale was evidenced by an agreement dated February 27, 1965 together with subsidiary and supporting documents and mutual releases. The new management took over and changed the name of the corporation to Arizona-Colorado Cattle Co., Inc. The Lawrence, Stegall and Brown cattle in the inventory of the “Corp.” were sold by the cattle company and the proceeds were used to reduce the debt of the joint venture to the “Bank.” The cattle company thereafter paid to the “Bank” $185,000.00 representing approximately two-thirds of their existing joint venture debt due the “Bank.” It did not pay the one-third attributable to Brown. Thereafter, the “Bank” filed this lawsuit.

The complaint alleges that the partnership and the partners individually, are responsible for the balance due on the promissory note signed by Lawrence on behalf of the partnership.

The answer admits Lawrence signed the note sued upon. It is alleged that with the knowledge and approval of the “Bank,” Lawrence and Stegall sold their two-thirds interest to the “Corp.” That in consideration of the sale, the “Corp.” assumed and agreed to pay all of the debts of the partners, including their direct liability and any contingent obligations which might arise from the failure of Brown to pay his one-third share. The answer further asserts that this transaction constituted a dissolution of the original joint venture and created a new joint venture with the “Corp.” in the place and stead of Lawrence and Stegall. That the “Bank” engaged in a course of dealings with the new joint venture and, by reason thereof, Lawrence and Stegall as individuals had been discharged of their liabilities and that the “Corp.,” having assumed the debt, is the obligor.

The trial court found in favor of the plaintiff-“Bank” against the defendants-partners, making findings of fact and conclusions of law. Judgment was also rendered in favor of the third party plaintiffs-partners and against the third party defendant-“Cattle Co.”

Defendants appeal from the judgment and claim first that Findings of Fact numbered 3, 4, 5, 6, 7, 11 and 12 are not supported by the evidence.

The “Bank” contends that the Findings of Fact are not so “clearly erroneous” as to be set aside. The Findings of Fact in dispute are as follows:

“3. None of the individuals signing said Certificate of Partnership ever revoked the authorities granted by said Certificate, as required by the terms set forth therein.
4.

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Cite This Page — Counsel Stack

Bluebook (online)
467 P.2d 763, 12 Ariz. App. 51, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lawrence-v-valley-national-bank-arizctapp-1970.