Case Name: UNITED BANK & TRUST COMPANY, a Corporation, Appellant, v. W. W. JONES, Appellee
Court: Arizona Supreme Court
Jurisdiction: Arizona
Decision Date: 1926-10-05
Citations: 30 Ariz. 557
Docket Number: Civil No. 2501
Parties: UNITED BANK & TRUST COMPANY, a Corporation, Appellant, v. W. W. JONES, Appellee.
Judges: 
Reporter: Arizona Reports
Volume: 30
Pages: 557–568

Head Matter:
[Civil No. 2501.
Filed October 5, 1926.]
[249 Pac. 747.]
UNITED BANK & TRUST COMPANY, a Corporation, Appellant, v. W. W. JONES, Appellee.
Mr. William B. Misbaugh and Mr. Paul Celia, for Appellant.
Mr. Frank J. Duffy, Mr. M. L. Ollerton and Mr. Thomas J. Elliott, for Appellee.

Opinion:
ROSS, J.
(After Stating the Facts as Above). We will speak of the parties as designated in the lower court. The defendant assigns as error the court's failure to require plaintiff to give security for costs upon the filing of its motion therefor, and in refusing to dismiss the case upon its motion.
These motions are based upon paragraph 643 of the Civil Code, which provides in general terms that, if. it be shown that the plaintiff is a nonresident or has not property but of which costs can be made, the court shall order that he give security for costs, and that for a failure to file such bond within ten days after the order for it the case shall stand dismissed.
On the motion for a new trial the learned trial judge in a written opinion summarized the facts concerning this assignment as follows:
"The motion to require plaintiff to give security for costs was filed February 28th, 1925. So far as I can find from the record, after February 28th, 1925, the judge presiding in this case made no order in open court relating thereto until the 5th day of June, 1925. On the 2d day of March, 1925, the judge presiding directed a letter to Mr. M. L. Oilerton, of Phoenix, Arizona, of counsel for the plaintiff, in which it was stated that the defendant had filed an affidavit for cost hond. It was then contemplated that the case would be tried about March 13th to 16th. There is no way in which this letter of the judge can be construed as an order of the court to file a cost bond. It does not purport to be an order; it is nothing more than a direction to counsel for the plaintiff as to what the probable order will be, and it was considered unnecessary for the judge to make a special trip to Tucson from his home in Safford for the purpose of making this order. Moreover, if the letter did purport to be an order, it would be of no effect for the reason that it does not come within the provisions of chapter 38 of the Session Laws of the Sixth Legislature. The only order made upon the plaintiff to file a cost bond was made on June 5, 1925, and the cost bond was filed forthwith. I see no merit whatever in the contention that the case should have been dismissed for failure of the plaintiff to file cost bond."
The statute does not provide that the court must, immediately upon the filing of a showing for the necessity, together with a motion to require it, make the order for a cost bond, but leaves that to the discretion and convenience of the court. The delay in making the order was due, it appears, to the fact that the judge who tried the case was not the local judge and- was not present and could not act on motion at an earlier date. The object of the statute is to protect the defendant in his costs and not to penalize the plaintiff for a delay that he did not cause and could not help. The plaintiff may await the court's order, however long delayed, and, if no order requiring him to give bond for costs is made, he is not bound to give one. If he obey the order when made, as plaintiff did, it would be error to dismiss Ms case. Miami Copper Co. v. Strohl, 14 Ariz. 410, 130 Pac. 605; Potter v. Kearney, 26 Ariz. 409, 226 Pac. 212.
It is contended the facts set ont in the complaint are insufficient to constitute a cause of action. In stating the allegations of the complaint, we have purposely- omitted many adjectives employed by the pleader characterizing' what defendant did as fraudulent and false, regarding them as surplusage in most instances. It is the acts of commission or of omission set out in the pleading as violative of defendants' duties as pledgee that do or do not give rise to a cause of action in favor of the pledgor or make a case of fraud. There is no question that the pledgee, in exercising the power of sale conferred by the agreement, must do so in all good faith towards the pledgor who has entrusted him with the power. The extent of his interest is to get out of the pledge what he has put into it, or what has been agreed he shall have, and when the event has happened authorizing him to sell for that purpose he may do so, but it must be a bona fide sale and not a colorable one merely. The confidence imposed in the pledgee must not be abused or arbitrarily or improvidently exercised without regard to the rights of the pledgor. It is said in Foote v. Utah Commercial & Savings Bank, 17 Utah 283, 54 Pac. 104:
"The sale must be fair, and the contract must be construed bemgnantly for the debtor's interest as well as that of the pledgee."
In Montague v. Dawes, 14 Allen (Mass.), 373, this very fair and reasonable rule was laid down:
"One who undertakes to execute a power of sale is bound to the observance of good faith and a suitable regard for the interests of his principal. He cannot shelter himself under a bare literal compliance with the conditions imposed by the terms of the power. He must use a reasonable degree of effort and diligence to secure and protect the interests of the party who intrusts him with the power. A stranger to his proceedings, finding them all correct in form, and purchasing in good faith, may not be affected by his unfaithfulness. But whenever his proceedings can be set aside without injustice to innocent third parties, it will be done upon proof that they have been conducted in disregard of the rights of the donor of the power. When a party who is intrusted with a power to sell attempts also to become the purchaser, he will be held to the strictest good faith and the utmost diligence for the protection of the rights of his principal. If he fail in either, he ought not to be permitted thereby to acquire any irrevocable rights which he can set up against the party whose interests he has sacrificed."
The complaint does show that at the time of the purported sale of the collateral by defendant the plaintiff's note was past due and that he was not in the state. It also shows that the collateral had a market value of $2,000, plus interest; that defendant, although advertising the collateral to be sold at public sale, conducted its sale privately, and at such sale bought it in for less than one-fifth of its actual value. In other words, that the pledgee sold to itself collateral worth $2,000 plus for $400, that it did not notify the plaintiff that it was advertising the collateral for sale, and, further, upon inquiry by the plaintiff prior to the sale as to the status of his note and collateral, the defendant falsely informed plaintiff the collateral had already been sold.
It seems to us that this presents a state of facts, if established by the evidence, which should entitle the plaintiff to recover, and that therefore the general demurrer was properly overruled.
It is claimed it was error to admit in evidence, over objection, a letter dated Tucson, June 28, 1923, by E. L. Anderson to plaintiff Jones in Los Angeles, in answer to a telegram from Jones inquiring the status of Ms note and collateral; the objection being that Anderson was not shown to be an officer or agent of the defendants nor authorized by defendants to write such letter. This letter was not admitted until a letter dated Tucson, July 23, 1923, from Dunn, the president of the defendant bank, to Jones in Los Angeles, was introduced, in which appears this language:
"I had Mr. Anderson write you regarding the sale of this note, but we have not heard from you."
It being made to appear that Anderson was authorized by the bank's president to write the letter of June 28th, it was clearly admissible.
In the form of a demurrer to the evidence, at the close of plaintiff's case, defendant questioned its sufficiency to establish the allegations of the complaint. Treating it as a motion for judgment (the method employed in this jurisdiction) when there is a failure of evidence and the case is being tried before the court without a jury, we think it was very properly overruled.
It seems defendant went through the form of selling- collateral twice. Two days after plaintiff's note fell due, the president of the defendant bank took the former's note and the collateral to the front door of the bank and "announced he would sell (collateral) to the highest bidder." He stated it was for $2,000, and was given to secure note of $350, given by plaintiff, Jones. He received no offer, and thereupon bid it in for defendant bank for the face value of the Jones note and accrued interest. The defendant, upon the advice of its attorney, however, abandoned this sale as ineffective to pass title. In this it is obvious it made no mistake. The sale was neither public nor private. While the offer was to the public and to the highest bidder, no notice of sale had been given; no attempt to sell at private sale was ever made. Notwithstanding, when on the 28th of June plaintiff inquired as to the status of this paper and his note, Anderson, at the instance of Dunn, defendant's president, wrote plaintiff, who was in Los Angeles, as follows:
"Mr. Dunn informs me that he had already sold your note for $2,000 that you gave to secure the $350.00 note. . I inquired of him as to who bought the note, and he told me that was none of our business. . . . Upon pressing the matter, Dunn said the matter was closed, and as it now stands, someone owns our $2,000 note."
After causing this misinformation to be sent to plaintiff, on July 3, 1923, defendant bank commenced proceedings for a public sale, and on that day posted in three public places, in Tucson, notices of intention to sell collateral on July 20th, at 11 o'clock, at defendant's banking house, and caused said notice to be published in one issue of a local newspaper, the evident purpose being to comply with the statute requiring the pledgee, in all cases where the parties have not otherwise agreed in writing, to give such public notice for fifteen days prior to date of sale, and also personally to give the pledgor fifteen days' written notice of such sale. Paragraph 4143, Civil Code 1913. The defendants, as the record shows, fully complied with the statute in all particulars, except as to the giving of notice of proposed sale to plaintiff. Apparently no effort was made to comply with the law in that regard.
On July 20th, the hour not shown, in the lobby of the defendant bank, Mr. Dunn "offered it (collateral) for sale when people were passing in and out," and, there being no bids, he struck it off to the defendant for $400.
The agreement empowered the defendant bank to sell at public or private sale. It chose to make the sale public, and was therefore required to conform to the statutory rules governing- public sales. Foote v. Utah Commercial & Savings Bank, supra. It did not do it. It failed to notify the plaintiff,., and we think, in view of the statement contained in the Anderson letter to plaintiff, to the effect that the collateral had already been sold, there was every reason, aside from the legal one, that notice of sale should have been given the plaintiff.
It is next contended that the damages were excessive. The court took evidence on that question which was conflicting, the plaintiff testifying that it was worth its face value and two or three others stating that it was worth no more, or worth less, than the $400 paid. The trial court found the value to be as claimed by the plaintiff. We think this finding is well supported by the evidence and also the pleadings. The collateral contract itself recites that "the market value" of the note "is now $2,000." The defendants' answer does not put this value in issue. Its denial was in these words:
"Deny that the said note was of the value of $2,000. . . . Deny that the collateral note for $2,000 . . . was, at the times set forth, of the value of $2,000. ."
These denials are perfect negative pregnants; they are admissions that the note might have been worth $1,999, or worth more than $2,000.
It was shown at the trial that defendants had collected the face of collateral note, together with interest.
We are satisfied that the trial court committed no error, and that the judgment should be affirmed. It is accordingly so ordered.
MoALISTEE, C. J., and LOCKWOOD,-J., concur.