*1 you you, introduced before are the defendant convinced guilty beyond is a reasonable doubt.” is reversed and the cause remanded a new trial. 22517.
No. Company
Lawrence Warehouse v. Junction, United Harold of Grand Co., Bean Montelores J. W. Lancaster. (470 838) P.2d rehearing 8, Opinion Decided as modified June 1970. modified and denied June 1970. *2 J. Fairfield and Woods, Beise, Wallace, Charles & for Garrison, Ray, Ray, Norton William R. plaintiff in error.
Parga for Robert E. defendant Dyer, Parga, error Dove Creek State Bank. Anthony W. &
Smith, Turner, Williams Holmes, for in error defendant Williams,
Grand Junction. appearance
No defendants error Harold Tanner, and Marian Co., Montelores Bean and W. J. Lancaster.
En Banc.
opinion
Lee delivered the
Court.
Mr. Justice
This writ of error arises out of the retrial of a con-
troversy the first trial of which was
re-
reversed and
manded
in Dove
Court
Creek Bank v.
157 Colo.
We as follows: Lawrence Ware- Company house as “Lawrence”; Dove Creek as “Dove Creek”; United States Bank Junction Grand as “United Bank”; Tanner, Harold and Montelores Bean asCo. and W. Lan- “Tanner”; J. *3 caster as “Lancaster.” clarity, incorporate part
In the interests of we in this Court’s statement facts of contained in Dove Bank supra, v. as follows: “Many underlying controversy of the facts are un- disputed. The record discloses that Harold to- gether with his wife Marian under the name of the Company, through partnership, Montelores Bean and closely corporations, two held Tanner Creek, Inc. Company, engaged and Montelores Bean Inc., buying selling dry agricultural business of and com- — primarily modities Tanner had two warehouses beans. in the Dove Creek area, one located in Dove Creek and operations other also Cahone, and he conducted required elsewhere in the of state. nature the business financing, rather extensive and this connection Tanner particularly dealt Bank, with the Dove Creek State and president with one Bruce executive and Brandt, vice cashier thereof at times material to this case. The all Dove Creek Colorado Bank is of State chartered under the laws surplus capital $150,000.00. a total and of
with “Defendant Lawrence a national warehouse operates wherein it system stores commodities and certifies the of these items the issuance reception storage by In order to secure bank financing, Tanner leased his two warehouses at Cahone to Defendant Lawrence. Lancaster was employed as warehouse in control manager by Lawrence and placed of these warehouses. Defendant Buckingham inspected the warehouses as of his an examiner duties as part Lawrence. 1958,
“In the United States Bank the Dove Creek an State embarked on later to be proved what unfortunate Tanner undertaking respect Brandt, initiated enterprises. By agreement acting his as executive vice and cashier capacity president Bank, Bacon, Dove Creek State with one Herbert vice and cashier of president Bank, the United notes, endorsed Tanner sent them to the United States Bank and their guaranteed payment. These re notes were secured Lawrence warehouse ¡States The United which was a ceipts. correspon Bank, bank Bank, dent of Dove Creek State credited Under account the latter with the amounts involved. Bank received the Dove Creek arrangement col out of interest interest and out 1½% 1% 5% 6% lected the notes. — —
“The two banks and Tanner this course pursued conduct for a not inconsiderable until two period one dated $60,000.00, *4 notes Brandt, communications with these particular as receipts, be secured Lawrence warehouse these been the case with other Tanner and that notes, had in all in a manner respects notes were to be handled were, fact, There no Lawr- similar previous notes. *5 payable Dove Creek each the amount to of $60,000.00, by these notes Tanner; Bank and endorsed that State delivery Bank for endorsed Dove Creek were State security *6 “With its answer to the cross-claim of the United States Bank, filed a counterclaim Lawrence and ‘cross-com- Bank, Bean Dove Montelores plaint’ against Marian Harold and Tanner and Company, Lancaster. the ‘cross-complaint,’ alleged conspiracy of Dove Bank, Creek State Tanner and Lancaster to issue fictitious if warehouse and further that alleged receipts the United States recovered against Lawrence should recover from Dove Creek State Montelores, the Tanners and Lancaster. Dove the
“The Creek State filed reply denying and counterclaim allegations ‘cross-complaint’ amended Lawrence, and the United Bank filed an States answer to Dove Bank’s complaint alleging as an an additional defense agreement by the State Bank to liable for said in the event be notes maker defaulted.”
Although not mentioned statement foregoing an amendment to the answer of United pleadings, was a victim of States Bank it fraud alleged prac- Creek; that Dove Creek knew ticed upon delivered to United Bank were States false and that there no commodities as described were be were represented receipts; valid; and that the United States Bank purchased *7 your Question answer to No. 1 is answer ‘No’do not Question No. 2. you
“Question preponderance Do No. 2: find from a the evidence that or at before the time Lawrence Ware- receipts house Nos. E9901 and E9902 delivered Tanner to Bruce Brandt said Bruce Brandt knew should have known that the beans as described receipts present support were not in the warehouse to receipts? the
“ANSWER orYes No.
“Answer: No. you
“Question preponderance No. 3: Do find from a evidence that at or before the time Lawrence Warehouse Nos. E9901 and E9902 were delivered to Bruce Brandt Tanner told Bruce as described in the beans Brandt the present in were not the ware- support receipts? house to the
“ANSWER Yes or No.
“Answer: No. you preponderance of
“Question Do from a 4: find No. Bank released that at time S. evidence U. January accepted *8 judgment $83,026.84 for reversal favor of Dove Creek.
I. Lawrence’s main contention for reversal is failing grant the trial court erred its motion judgment notwithstanding directed verdict and for jury’s special verdict. Lawrence contends the answers to interrogatories supported 2 Nos. are and 3 not judgment evidence claims agree. that a of dismissal of Dove Creek’s granted. Lawrence should We have been any A review the entire record fails to reveal competent, upon substantial, jury credible evidence which a interrogatories could return the answers it did to contrary 2Nos. and 3. The answers are to the evidence regard arbitrary capricious. and we them as In such Accessory Supply circumstances a cannot stand. Kayser, v. 160 Colo. Co. 481; 417 P.2d Burns-Moore Watson, v. 91, 101 Colo. P. 335. charge
Lawrence’s defense was its based imputed through fraudulent conduct to Dove Creek agent president, and officer, Brandt, who was the vice operating cashier and chief officer of Dove Creek -State charge Bank. The essence of Lawrence’s of fraud was that charge bank Brandt, officer in loan the Tanner conspired accounts, with Tanner for the fabrication of false warehouse in order to obtain the renewal $60,000 of the two overdue notes which had sold the United States Bank. undisputed evidence showed reason of
speculative pinto losses in the bean market Tanner enter- prises heavily had become indebted to Dove Creek and desperate were in financial of As June 1959 condition. approximately Tanner owed Dove $500,000 capital $200,000 which was unsecured. The combined surplus only of Dove Creek State Bank was $150,000. product This excessive overloan situation was the negotiations Tanner’s with Brandt who all of handled Dove Creek’s loans to Tanner. It was not shown that United States Bank was aware of condition, July of 1959 Tanner’s account with United a zero showed balance. July 29,
On 1959,the first two $60,000notes sold Although to United States Bank Dove Creek. Brandt *9 by represented that warehouse these notes were secured receipts, purportedly there held, which Dove Creek by receipts, in fact no such all was admitted which deposition. in Brandt notes matured in his When these by notes new October of loans were renewed 1959, the represented to be which Brandt secured likewise receipts possession. such No warehouse receipts in Dove Creek’s *10 no commodities to them, cover and instructed Brandt to hold the while he went to Texas to the borrow money pay delinquent to off the notes. Tanner in fact go purpose did to Texas but was unsuccessful in this mission. testimony, addition to Tanner’s there was the evi- Blythe of Buckingham
dence witness who testified that subsequent collapse Brandt, at a time the to of the enterprises, concerning in a discussion Brandt’s testimony financial difficulties, admitted that Tanner’s — in federal court was he, correct Brandt, that had been told there necessary beans for the and that it was knowledge for him to claim lack of because problems of his at the bank and at home.
Also, there further of Brandt’s was knowl- evidence edge president Bacon, from witness Herbert vice who testified Brandt admitted to shortly him the before first renewal note became due payable that he was there were beans in dubious that support to existence the warehouse concerning Additionally, into admitted evidence question knowledge copy Brandt’s a Dove complaint in Court Creek’s the United States District Indemnity Company America Insurance of North sought damages in a suit Dove to recover which fidelity complaint on its officers’ In this bond.
specifically sought recovery grounds of fraud perpetrated by with transactions Brandt in connection question, other involvements. addition to fraudulent foregoing bearing upon Brandt’s
The direct evidence knowledge duty concerning validity inquire to light receipts, weighed when warehouse existing July when the the circumstances original negotiated, admitted and the $60,000notes were renegotiation fall of fraudulent of said notes only men that reasonable can lead one conclusion: is, evidence, but inference from the that could draw one constructively, had knowl- and Dove Creek Brandt, upon edge of to cast them fraud, or sufficient reason duty investigate inquiry fact whether in of further actually supported represented as commodities therein. jury’s in favor of verdict rendered n should have been set aside
Creek the conclude trial motion. We court Lawrence’s chargeable the fraudulent con Creek is just agent, officer duct its chief executive Brandt, chargeable false as issuance of the Lawrence is for the manager agent. receipts by Lancaster, its pari being in delicto nor Neither Dove Creek by participation in scheme reason of their the fraudulent collateral, should be allowed to fabricate false *11 against recoup prevail their other in their to efforts judgment consequent in favor of Dove Creek losses. The against as must be reversed. Inasmuch Lawrence as a matter of law Lawrence the trial court concluded Tanner and on its cross-claims from should recover adjudged against of in it favor the amounts Lancaster Dove Creek reversed the having we, United States Bank, against judgment Dove in favor of Creek Lawrence, must also reverse the hereinbefore judgment” entered as “additional which was referred to judgment in favor of reason of the D'oveCreek Lawrence, have now reversed. which we
II. alleges Bank error the trial court’s judgment against of entry for in favor $83,026.84 of it asserting Dove Creek’s fraud should Creek, recovery. Tanner bar it from It will be recalled that when payment of and it was notes, defaulted the renewal recovery by fore- then discovered that not be made could receipts, of closure the United States due amount Dove Creek’s account debited owing, including attorney’s Creek Bank v. fees. right supra, United of Court denied the as inasmuch Bank to make such setoff States loan exceeded the statutory held It was there maximum. agreed, arrangement to Creek that an which Dove policy contrary public guarantee to loan an excessive was guarantee accordingly,- upon such a and, based setoff Pringle speaking permissible. for was not Justice Mr. said: Court “* * * right Bank had that United States It follows charge Creek State to the account the Dove statutory loan of the Tanner in excess have known that amount the loan maximum, if it should knew lending statutory of the Dove limit exceeded the Bank.” president Bank, of United States Bacon, Herbert vice capital-surplus of Dove structure knew of the admitted he Having knowledge, not if he Bank. such actually he should of the excess loan $60,000, aware banking insti- of a state been, he an officer have as was relating presumed known the have law tution and is being public policy lending forbids so, limits. Such guarantee loan, not- of the excess enforcement withstanding of Dove Creek existence fraud to be and nonactionable as which we deem collateral Dove Creek under these circumstances. having al-
We observe here that United States ready recovered one-half the amount due it means of the setoff the account recovered Creek, of Dove owing obligations by way the balance Tanner’s judgment against for $83,026.84. *12 judgment
The in favor of Dove Creek State Bank against United States Bank is affirmed. judgment
The in favor of Dove Creek State Bank Company Lawrence Warehouse is reversed and this claim is ordered dismissed. judgment judg- to herein as “additional referred Company
ment” in favor of on Warehouse Tanner, Mon- cross-claim Harold Company telores Bean Lancaster is reversed W. J. judgment and the cross-claim based which said is ordered dismissed. Day Pringle
Mr. and Mr. Justice Justice dissenting. participating. not Mr. Justice Groves Pringle Justice Mr. dissenting: respectfully I dissent. my
In view, Dove Creek Bank v. 157 Colo. 263, 402 P.2d is determinative of this There case. stating we remanded the case for a new trial that the issue of whether Bruce Brandt, who was an officer knowledge had there support commodities the warehouse to knowledge or charge he whether had of the facts sufficient duty inquiry him with the of further into the question jury. situation awas for the That became the disputed law of this case. The issues of fact were sub- jury by way mitted to the for determination of the four special interrogatories. special interrogatories These jury negative. were answered my view, this court cannot substitute its jury that of the jury’s and this court is bound disputed determination affirm. fact, issues of would and I Day say authorizes me to that he joins Mr. Justice in this dissent. amounts of principal 1959, were 30, and the other dated October July 29, understand- received the banks. It was the eventually of its dealings the United States because ing
Notes
issued to secure these ence warehouse they made Bank States and possession matured the United when for their a condition of warehouse upon made demand Brandt, turn, renewal. ultimately notes to- two renewal forwarded accompanied ware- Bank receipts. receipt existence house Each certified the pounds of Pinto Beans’ at the Cahone 900,000 ‘U.S. 1No. warehouse. due the first of the renewal notes became “When delivery paid, for was not was made demand because the commodities commodities which was refused represented ware- as were not house signaled beginning of the end This pyramid. liabil- financial Lawrence denied of the Tanner liability ity. Bank on The Dove Creek State denied Bank thereafter set renewal The United States notes. principal two of the interest on the off the share the account of the renewal notes * * Bank complaint against Lawrence, United Dove Creek’s eight claims Lancaster, asserted States Tanner and judgments of the court on all claims trial relief. except fourth claims to the third and were affirmed as Creek Bank in Dove which were reversed the decision supra, is with the retrial of the third v. and it Lawrence, concerned. and fourth with which we are here claims analysis pleadings as to these We set forth the supra: Lawrence, claims as found in Dove Bank v. These “THIRD AND FOURTH FOR RELIEF: CLAIMS except separate promis- two claims were identical that a sory separate receipt in- note and claims were stated volved each. These Company, Harold Montelores Bean Lancaster, Bank. Tanner and the United States alleged United “The that the Dove Creek State agreed participate Tanner; in loans to had agreement, January pursuant to such 1960, notes, Bank received from Tanner two
for said to United that as Bank; States from received Bank demanded and United States maturity receipts; that warehouse Lawrence the two charged improperly Bank of the notes the United States in the amount of Dove Bank the account Creek State attorney’s principal, Dove Creek State and fees. interest charge right from Bank a to recover said claimed doing, it prevented from so but if United States right failure for the recover from Lawrence claimed a . honor its warehouse of Lawrence to States “In its Lawrence denied that the United answer, warehouse or from it the two Bank demanded received January 1960, alleged that on about pursuant conspiracy Lawrence, the a to defraud receipts issued Creek State Bank received them to Bank and transmitted to the United States latter bank. com- to the Bank filed an answer “The United States plaint answer, Lawrence. In a cross-claim any agreement participate United Bank.denied States purchased from two notes it in loans to admitted pursuant alleged endorse- to the that Dove Creek and entitled, Bank thereon was of Dove Creek State ments charge maturity nonpayment, to Dove Creek State Bank’s account. ¡States against Lawrence, the United “In its cross-claim commodities on Lawrence for Bank claimed demand alleged re- warehouse listed the two alleged if fusal to deliver. The bank Lawrence it, Bank recovered from United States State recover from Lawrence. Bank would be entitled to alleged that the cross-claim, Lawrence answer to this Bank and the engaged joint enterprise in which each bank in a agent and that the other, United was the Bank was with charged participation conspiracy of Dove Creek and Tanner to defraud the issuance of knowledge they fictitious.
direct reliance valid ware- purportedly house receipts. Tanner, Tanner, We here note that Harold Bean Montelores Co. and J. W. Lancaster did not appear and defend claims relief or Creek’s either in the first cross-claims, case against any retrial, and default was entered them court. there In the first trial the court determined were disputed jury. jury issues fact to submit to the The findings was dismissed and the court fact, entered its judgments. jury conclusions law, Dismissal of the by the trial court was one of the fundamental errors causing requiring reversal and retrial. jury. In the retrial the issues were tried to a theAt conclusion of the Lawrence and United evidence, Bank each moved for a directed verdict. motions These special were terrogatories. The court then denied. four in- submitted interrogatories jury’s and the answers thereto are as follows: you preponderance “Question No. Do 1: find from a the evidence that at the time Lawrence re- Warehouse ceipts Nos. E9901 E9902 Lancaster delivered there were not in beans the Cahone Warehouse already as described in the which were not represented by outstanding receipts? “ANSWER orYes No. enough “Answer: There “If Beans, But not Beans.
notes it held and dated then upon part Lawrence 26, 1960,it did so reliance and E9902 which E9901 Warehouse Nos. said notes? delivered it with “ANSWER Yes or No. Yes.” “Answer: findings fact conclusions and court then entered judgments entered were thereafter of law, which as follows: Judgment and on third in favor of Dove Creek its 1. against $60,000 fourth and United States Bank claims attorney’s plus fees, or interest $22,526.84 and $500 total of $83,026.84. its Judgment on 2. in favor of United States against for the same amount. cross-claim Lawrence Judgment cross-claim 3. in favor of Lawrence jointly against and Tanners, Montelores Lancaster, severally, for the same amount. against Judgment Dove Creek and in favor of 4. for the same amount. Lawrence judgment on its favor of Lawrence 5. Additional against Lan- Tanners, Montelores cross-claim severally, jointly amount. caster, for the same mo- filed and the United each States notwithstanding judgment mo- tions for verdicts tions for a trial. All motions were denied. new judgment for $83,026.84 Lawrence seeks reversal of the not it favor Lawrence does Creek. contest in favor of United States admitting liability receipt on its warehouse the United Bank. The Bank seeks
And, last, existed. at the October when United States Bank made firm condition as matured, delivery receipts. Faced renewal the with this to it warehouse for the situation, his demand Brandt made receipts upon Tanner. supra, As in Dove Creek Bank stated v. the to resolved the trial was whether critical issue be at knowledge in the Brandt had there were the commodities support receipts, had he or whether warehouse to duty knowledge charge to him the of facts sufficient inquiry trial of only At first further into the situation. duty inquire knowledge or to was evidence of direct deposition which, that contained of Brandt knowledge flatly although he that he had denied subject of reason to believe the beans which were admitted existence, were not in he the warehouse testifying was where Tanner in a federal criminal trial there had been advised the defendant that he enough time to were not in the warehouse at beans support in New Brandt who was to Colo- not return Mexico at the time of the retrial did testify deposition to The same rado the retrial. again in the first However, into whereas read evidence. knowledge only matters of his these trial the evidence deposition, in his was the admissions contained testify (who at the first trial refused retrial Tanner rights) testify unequiv- did under his Fifth Amendment ocally requested furnish first Brandt that when no com- there were he told Brandt receipts; him to to cover that Brandt told modities receipts anyway; re- he furnish obtained ceipts by persuading manager, Lancaster, the warehouse receipts, by to issue assuring the false Lancaster that shortly he would borrow funds from sources in Texas pay obligations question; off the that he delivered again to Brandt and told there Brandt