62 Colo. 277 | Colo. | 1916
delivered the opinion of the court.
W. A. Dregman, as plaintiff in Case No. 8196, and W. E. Stemen and A. K. Clarke, as plaintiffs in Case No. 8197, instituted their respective suits in the District Court against The Morgan County National Bank of Eort Morgan, M. L. More and J. H. Boediger. The two cases were consolidated and, upon trial, judgments were entered in favor of the defendants, and the defeated parties have brought their respective cases here for review on error. We will dispose of the matters involved in one opinion.
The suits are in equity. They had their inception in the sale of certain bonds of the Badger Creek Irrigation
The Morgan County National Bank is a national banking institution of which defendant More was its president, and defendant J. H. Boediger its cashier. More, since the institution of the suits, died, and Susie M. Boediger, as his administratrix, has' become a party defendant in his stead. The plaintiffs were the owners of the greater portion of the outstanding stock of the Badger Creek Beservoir Company* a Colorado corporation, organized for the purpose of acquiring certain water rights on Badger Creek, a natural stream in Morgan County, and for constructing an irrigating system for watering certain lands lying contiguous to such stream. In the spring of 1909 the lands were organized into an irrigation district, Dregman actively participating in the organization. Thereupon a bond issue upon the district of $250,000 was voted for purchasing, water rights, and constructing the irrigation system. At the
In the aforesaid construction contract Dregman is referred to as the “contractor” and the Irrigation District as the “District.” This contract, inter alia, contained the following provisions, to-wit:
“It is further understood and agreed that for the convenience of both parties hereto that the said bonds of the said district hereinabove mentioned shall hereafter, and when the said bonds shall have been voted and confirmed by a decree of the District Court pursuant to*283 law, be placed in trust in the hands of the Morgan County National bank as collateral security for the said twenty thousand dollars personal bonds hereinbefore mentioned, the said district bonds to be held in trust by the said Morgan County National bank, and to provide for the sale of said two hundred four thousand dollars of the bonds of said district, and to make provision for the application of the proceeds thereof in such a manner as to not only give greater security to the district in the performance of this construction contract but also to provide adequate means for the speedy payment of estimates and completion of the said works, reservoir and ditches of the said district.
And for the purpose of effectuating the execution thereof, it is further mutually agreed by and between the parties hereto and for and in consideration of the better fulfillment and complete performance of the covenants and agreements in this construction contract contained, as well as the mutual benefits therefrom to be derived, and the final and total payment to the contractor of bonds for the par value of two hundred four thousand dollars ($204,000.00), as hereinbefore provided, it is agreed that the two hundred four thousand dollars ($204,000.00), of the bonds of the district, when confirmed as aforesaid by the District Court of Morgan County, shall at once thereafter be placed in the said The Morgan County National Bank of Port Morgan, Colorado, in trust, the said bonds, or the proceeds derived from the sale thereof, as the case may be, to be by said trustee held, disposed of and disbursed for the following uses and purposes, and in the following manner and upon the following terms, to-wit:
That the contractor from and after the delivery of the said bonds to the trustee shall be deemed to be the owner thereof and shall have the exclusive right to at
All the remainder of the proceeds of said bonds paid to said trustee shall be disbursed and paid out to the contractor from time to time in payment for labor, materials, engineering services and other and incidental expenses upon monthly estimates as in this construction contract and hereinafter provided for; no part thereof to be otherwise disbursed until the full completion of the terms of the construction contract, at which time the remainder of such funds in the hands of the trustee or in bonds remaining in the hands of the trustee and unused shall be paid over and delivered to the contractor or his order, but only upon the written order therefor executed by the Board of Directors of the district as more fully hereinafter expressed. * * *
It is further agreed that all charges, if any, by the trustee herein named for any services by it rendered, shall be- borne by the contractor, and that when this contract shall be executed and delivered to the trustee along with the bonds herein specified, the contractor shall be
“It is understood and agreed that the trustee, The Morgan County National Bank, shall be guided by this ■construction contract in the discharge of its duties; that ■a copy of this contract shall be deposited with said trustee; that both parties hereto have the privilege of examination thereof at any time, the said copy so furnished to the said trustee to be returned to the secretary of the district when this contract is complete. ’ ’
The Dregman-Stemen-Clarke contract referred to the aforesaid construction contract and contained, inter *alia, the following provisions relative to the delivery and sale of the $21,000 in bonds, to-wit:
“It is hereby agreed by and between the respective parties hereto that the said bonds when ready for delivery shall be delivered to the Morgan County National Bank, Port Morgan, Colorado, as trustee of said bonds for the sale thereof, and by the said Morgan County National Bank to be delivered to the parties of the first part, and said parties of the first part to immediately redeliver, or cause to be re-delivered, to the said bank, to be held as a trustee for the sale of the said bonds, to be by it pooled with all other bonds, of said district and delivered to it for the purpose of sale, and all of said bonds to be sold upon the same terms, and conditions, .and for the same price obtained for other bonds of said district so left in the hands of said trustee for sale; and that thereafter when the sale of such bonds is made, then the proceeds received from the sale of said bonds so sold less the necessary commissions, if any be paid, shall be construed to be net proceeds and shall be turned over*286 to the parties of the first part, to be divided by them in pursuance to their own agreement.”
The bonds called for by these contracts, together with $2,000 additional bonds of the same issue, not involved herein, were entrusted to, and received by, the aforesaid bank in one lot, but neither the bank nor any of its officers made any attempt at that time to find a purchaser for the bonds. Thereafter, at the suggestion of one Dailey, a prospective sub.-contractor on the project, Dregman, about the middle of June, after unsuccessful efforts upon his part to sell the bonds, called upon Roediger in the bank, and he agreed to sell the same, Dregman contending that Roediger agreed that the efforts of himself and the bank in selling the bonds would be without charge, as the irrigation project would be a great benefit to the community. This was denied by Roediger. It was, however, agreed that if Roediger secured a prospective buyer, Dregman would give him an option upon the bonds. Dregman testified that he told Roediger that he could not take less than seventy-five cents on the dollar of the face value of the bonds, but wanted all he could get. Thereupon Roediger, on the stationery of the Morgan County National Bank, having thereon the names and the official designation of the various officers of the bank, including that of Roediger as cashier, wrote the National City Bank of New York stating, inter aim, that, “We are offering for sale” the aforesaid bonds, and signed the same in his official capacity. This letter was referred to Bert Clarke & Company of Chicago, who thereupon wrote to the “Morgan County National Bank, Fort Morgan, Colorado,” referring to the aforesaid letter as having received “your letter.” Roediger replied to the Bert Clarke letter, saying, inter alia, “We beg to acknowledge receipt of yours,” etc., and stating, “We can offer you these bonds, subject to prior
Afte'r the receipt of the bonds by the Commercial National Bank of Chicago, Bert Clark & Company paid into that bank, to the credit of the Morgan County National Bank for all such- bonds, the following: August 3, 1909, for $112,500 face value of bonds with interest, $96,806.25; August 5, 1909, $2,000 face value of bonds with interest, $1,721.66; August 13, 1909, $25,000 face value of bonds with interest, $21,545.75; August 28, 1909, $50,000 face value of bonds with interest, $43,233; September 13, 1909, $10,000 face value of bonds with interest, $8,670; September 23, 1909, $3,000 face value of bonds with interest, $2,607; December 1, 1909, $8,500 face value of' bonds with interest, $7,225; February 28, 1910, $16,000 face value of bonds with interest, $13,832,
Bregman contends that he never knew of the delivery and payment of the bonds on the aforesaid dates until he ascertained such facts in July, 1911, but was, at the time such payments were made, told by Roediger that Bert Clark had been unable to “make good”; and that relying upon such representation and being under the necessity, by the terms of his construction contract, to begin work at once, and having no money for such purpose, not knowing the fact of the aforesaid payments, did, at Roediger’s request, on August 7, 1909, enter into a partnership contract with him, wherein Dregman was designated as the “party of the first part” and Roediger ‘■‘party of the second part'”.for the construction of said irrigation system, in compliance with the terms of the construction contract; that such partnership contract, inter alia, recites that:
“Whereas, the said W. A. Dregman has filed his bond in the sum of $20,000 payable to said Irrigation District as provided in said contract, and now desires to proceed with the work of construction at once and prior to the sale of the irrigation district bonds; and
Whereas, party of the first part desires to secure the necessary and proper funds in cash to proceed at once with said construction work and not await the sale of said bonds for that purpose; therefore:
The party of the first part * * * agrees to take second party into partnership in the entire enterprise and to share equally with him all profits and losses arising therefrom, and hereby assigns and conveys unto second party an undivided one-half interest in said construction contracts and all profits and benefits arising thereunder; and also assigns to second party one-half of
In consideration of the foregoing, second party agrees to furnish all money needed to carry into effect all agreements and covenants made by the party of the first part with the Badger Irrigation District to enable the immediate prosecution of all the construction work, and for making payments from time to time on monthly estimates as the construction work progresses, the said money to be furnished by second party for all purposes named in said construction contract uzztil such time hereafter as said bonds shall be sold and the proceeds therefrom realized for the purpose of cozitinuing said work.”
Ozi the next day after the partnership contract was entered into, Roediger wrote Bert Clark and Company saying, inter alia-. “Please do not izifonn aziyone in this heck of the woods that you have purchased these bonds for a short time. I wish to get the contractor to construct the gates better thazi called for in plans and specificatiozis required by the state engineer.” In explanatiozz of this letter Roediger testified that it was a subcontractor, and not the contractor, whom he wished to keep izi igzaorance of the sale of the bonds, though, as a matter of fact, at that time there had been no sub-contract let, but certain parties were negotiating contracts of that character. In the coznplaint it is alleged that the aforesaid partnership contract was entered into on August 7th, which fact is expressly admitted by Roediger, and the other defendants in their respective answers. Roediger, however, in his testimoziy claimed that before August 7th, that is, on about July 15th, he had a conversation with Dregman relative to the proposed partnership, at which time Dregman offered him $15,000 if he would advance the money necessary to carry on the work, azid that he declined the offer, saying that he was
On August 26th, long after the bonds were sold, a. new contract for the sale thereof was entered into by Dregman and Roediger, the former claiming that it was. made because of the representations made to him by the latter, that Bert Clark had not been able to dispose-of the bonds, but could do so if given additional time, while Roediger contends that the new contract was made at the sole request of Dregman, that he might show it to-certain sub-contractors, and thus mislead them as to the times the money would be received and could be paid to-them. Roediger also testified that his sole purpose in making this new contract was to have inserted therein a clause referring to the partnership contract of August 7th, 1909, and declaring that the purchase of the bonds, under the agreement of August 26th should not be affected by the partnership contract, which was a separate and distinct transaction. With this exception, and the further fact that Roediger reserved the right to take up the entire issue of the bonds at any time after the date of the contract, the sole difference between the prior-contract and this one was a change in the amount of the monthly payments, the first payment under the latter contract being $25,000 instead of $50,000, and the second payment being $50,000 instead of $30,000, and subsequent-payments being $25,000 instead of $30,000 until the last payment, which was $52,000 instead of $27,000. There was no evidence that Dregman or anyone else ever showed the aforesaid contract of August 26th to any subcontractor. Defendants admitted that 85c on the dollar, face value of the bonds, accrued interest, and in
The court made some findings of fact and declined to make others requested by plaintiffs. It is unneces-' sary, however, to consider these matters in detail, as the record requires us to affirm in part, and reverse in part the judgment in Case No. 8196, and to affirm the judgment in Case No. 8197. The court found that neither the bank nor More was a party to, or in any wise interested in, the option of sale, and subsequent contract and sale of the bonds entered into between Roediger and Dregman, and that the latter knowingly dealt with the former in relation thereto in his personal character, and not as & representative of the bank, and that Dregman was authorized to contract for the sale of the $21,000 face value of the bonds involved in case No. 8197 at the same price that he sold the $204,000 involved in case No. 8196, and that such was the understanding of the plaintiffs lierein, and that Dregman did sell all such bonds “to Roediger, personally, for the same price and upon the same terms and conditions as he sold his own.” The contracts under which all these bonds were placed with the Morgan County National Bank, as trustee, must be ■considered together. In fact, the one relating to the sale of the $21,000 of bonds is dependant upon, and in many important paticulars, governed by, the other. The latter - contract expressly provided that from the time of the delivery of the bonds to the bank, Dregman should be deemed to be the owner thereof, and should have the exclusive right to sell and dispose of the same or any part thereof, and upon such sale, at not less than
Roediger in no wise interested himself in the sale of the bonds until after Dregman and his associates had unsuccessfully endeavored to sell the same, and then only after being solicited to do so by Dregman. In relation to this matter Dregman testified as follows: “I heard Roediger testify that I had given him an option personally for those bonds, and the facts in that regard are, that, about the middle of June, Dailey came to me^ on the street and wanted me to go and see Roediger about the sale of the bonds. I had tried to place the bonds before that. I spoke to Carruth, cashier of the Savings Bank, and had the matter up with a man by the name of Haver in Denver. Went in to see Roediger about the middle of the month; do not remember the exact date; do not remember whether Dailey was with me or not. I told Roediger that Dailey had asked me to see him about the sale of the bonds, and asked if he thought he could do it. He said that he thought that he could, but that he could not do anything as long as other parties were trying to, and wanted an option. I told him as soon as he got a prospective buyer that looked good I would give him an option for a short time. He was in the bank in the cashier’s department, and I went there. He did all.
In the former opinion we stated that the written contract of sale between Roediger and Dregman required the former to pay the latter a designated sum for the bonds “and accrued interest from the date of the bonds to the date of the delivery of the same.” This was not correct. The contract required Roediger to pay Dregman the designated sum and accrued interest only from the date specified in the contract for the delivery of the bonds to the date of the delivery of the same. As all payments were made within the time provided for in the contract, there was no accrued interest payable to Dregman or to those whom he represented.
The court, as hereinbefore stated, found that Dregman, on account of his conduct with respect to the Federal suit, was estopped from prosecuting either cause of action. In this we think the court was in error, as that which was pleaded or proven in no wise constituted an estoppel. The allegations of the answers in that regard are that Bert Clark brought a suit in the Federal Court against the defendants herein, for the recovery of the purchase price paid by him for said bonds, because of certain fraudulent representations made to him by the defendants, including those made in a letter of July 1st, set forth in the amended complaint in this suit; that the issue was joined thereon, trial had, resulting in a verdict against the bank and Roediger, that the jury therein
“These conclusions are abundantly supported by authority. The rule which declares that when parties are in equal wrong the position of the defendant is the better, and that the courts will not allow their machinery to be used for the relief of one who has been defrauded in a corrupt or illegal transaction in which he participated, is based not upon statutory provisions, but upon general principles of public policy. It is therefore not for the sake of the defendant that the rule is enforced,.
‘And indeed in cases where both parties are in delicto, concurring in an illegal act, it does not always follow that they stand in pari delicto, for there may be, and often are, very different degrees in their guilt. One party may act under circumstances of oppression, hardship, undue influence, or great inequality of condition or age, so that his guilt may be far less in degree than that of his associate in the offense. And, besides, there may be on the part of the court itself a necessity of supporting the public interests or public policy in many cases, however reprehensible the acts of the parties may be.’
The same doctrine is recognized by Pomeroy:
‘Even where the contracting parties are in pari delicto, the courts may interfere from motives of public policy. Whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him. ’ 2 Pomeroy Eq. Jur., § 941.
In Reynell v. Sprye, 1 DeG. M. & G. 660, 679, it was said: ‘But where the parties to a contract against public policy, or illegal,'are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or, at least, the more excus
While the court declined to find whether the partnership contract of August 7th had been orally entered into in July, and only reduced to writing on the day it bears date, or whether the actual facts concerning the sale of the bonds had been concealed from Dregman by Roediger, we think such findings should have been made and ■entered, and that the evidence in relation to the matter warrants only the conclusion that the partnership contract was actually made on August 7th, and that the facts in relation to the prior payment for a large portion of the bonds was withheld from Dregman, and that such vfas the inducing cause of his entering into the partnership agreement. As to the making of the partnership ■contract, the pleadings raise no issue, but fix the date as August 7th, and the evidence convinces us that whatever conversation was had, if any, prior to that time between Roediger and Dregman in relation to a partnership, the former never consented to enter into such an agreement until he actually knew that the funds were in. hand from the sale of the bonds. Many witnesses testified that he had stated long after August 7th that the bonds had not been sold. The fact, as testified by some witnesses, that Dregman had stated that the bonds were sold, is of little moment, as the record shows that after July 8th — the date of the Roediger-Bert Clark contract of purchase — until a short time before the date of the partnership contract, it was the general understanding that the bonds had been actually sold, and the money would be forthcoming on August 3rd. Moreover, the request of Roediger to Bert Clark, on the day after the partnership contract was entered into, to keep secret from the people in the Fort Morgan community the fact