Nоrman Kreiss, appellant herein and plaintiff below, filed an action on a prоmissory note dated January 10, 1968, in the sum of $12,500 against Vernon E. Shipp and Rachel Shipp, husband and wife. There is no dispute as to the note in question and the non-payment thereof. The note was executed by V & R Investments, Inc., by Vernon E. Shipp, as president, and by Vernon E. Shipp, individually. The cause was tried before the court without a jury and the court rendered judgmеnt in the amount of the complaint against the defendant, Vernon E. Shipp only, and dismissed thе action as to Rachel C. Shipp.
The sole question raised in this appeal is whеther or not the execution of the note by Vernon E. Shipp bound the community composed of himself and his wife, Rachel, and if there was any reasonable evidence to support the judgment of the trial court that the note is not a community obligation of Mr. and Mrs. Shipp.
The trial court’s decision was based on the fact that there was no bеnefit to the community by the individual execution of the note by Shipp and no likelihood of any other income therefrom.
Briefly, the facts are relatively simple. V & R Investments, Inc., an Arizona corporation, had purchased the U. S. Grant Hotel in San Diego, California. Vernon E. Shipp and Rachel C. Shipр own a majority of the stock, and the remainder of the stock was owned by their children and their attorney, Mr. Foster Mori. As part of the consideration, notes had been еxecuted by Wolf and Bernstein, former part owners, to the Republic Bank in California. As рart of the purchase agreement, V & R Investments, Inc., took over these notes аnd then were unable to pay the same in full. The corporation borrowed $12,500 from Mr. M. Bеrt Fisher, and a second $25,000 note came due on December 15, 1967. Mr. Shipp asked Mr. Fisher fоr a loan, but Fisher insisted that Shipp secure the funds from plaintiff, Norman Kreiss, who agreed but rеquired that Shipp sign the note both on behalf of the corporation and personally.
As stated, the sole question is whether this is a community obligation.
The primary case relied upon and cited by both parties is Donato v. Fishburn, 90
*114
Ariz. 210,
The U. S. Grant Hotel was insolvent and other notes were due on thе purchase price and trust deeds were being foreclosed. In Donato, supra, the corporation was likewise in serious financial straits and would have been forced into bankruptcy inasmuch as the company was unable to pay its debts. As in Donаto, the controlling question was whether the debt action was intended to benefit the community of Donato and his wife.
As stated in Donato:
“ ‘A note given, or an obligation incurred, by a married man for the benefit of a corporation in which he is a stockholder, binds his marital community if the corporate stock is the property of the community, and the test is whether the transaction is carried on for the benefit of the community. It is immaterial that the community actually derives no profit therefrom. [citations omitted]’”90 Ariz. at 214 ,367 P.2d at 247 .
And Donato also states :
“ * * * where his acts are in resрect to and in furtherance of the community affairs, the obligations created thereby are those of the community irrespective of whether any pecuniary bеnefit was realized.”90 Ariz. at 214-215 ,367 P.2d at 247 .
Our Supreme Court has also held in McFadden v. Watson,
Furthermore, the burden of proof that it wаs not a community obligation is on the party asserting it, in this case defendants. See, Wakеham v. Omega Construction Co.,
Appellee has directed us to no evidence tеnding to overcome the presumption that the obligation is community nor have we fоund such evidence. Appellee’s counsel states that Mr. Shipp testified that the оbligation was not personal, but in his letter of January 10, 1968, enclosing the note payablе to Mr. Kreiss, he states:
“It is my understanding that Mr. Kreiss'will be advancing the $12,500.00 to Mr. Levin as a personal lоan to me, which is covered by the enclosed note.”
Judgment is reversed with directions to enter judgment against the community of Vernon E. Shipp and Rachel C. Shipp.
HATHAWAY and HOWARD, JJ., concur.
NOTE: This cause was decided by the Judges of Division Two as authorized by A.R.S. § 12-120, subsec. E.