Brownlow v. Aman

Decision Date02 August 1984
Docket NumberNo. 83-1239,83-1239
Citation740 F.2d 1476
PartiesLonnie BROWNLOW, Hugo Buerger, III, John Gassaway and Evelyn Gassaway, Plaintiffs-Appellees, v. Joe E. AMAN, Ron G. Crane, Gordon Crane, Ronald Raymond Edwards, Lowell L. Foster, Ralph E. Kellogg, Paul E. Ketterling, T. Donald Reynolds and Gordon Sams, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Robert Dunlap, Colorado Springs, Colo., for plaintiffs-appellees Brownlow and Buerger.

Edwin J. Lobato, Alamosa, Colo., for plaintiffs-appellees Gassaway.

William J. Brauner, Caldwell, Idaho, for defendants-appellants.

Before BARRETT, DOYLE and McKAY, Circuit Judges.

BARRETT, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Circuit R. 10(e). The cause is therefore ordered submitted without oral argument.

The nine appellants are part of the seventeen defendants against whom money judgments were entered following jury verdicts in favor of the four plaintiffs-appellees in a diversity action based on breach by virtue of nonpayment of promissory notes. Each of the plaintiffs reside in Colorado and each of the appellants reside in Idaho.

The facts will be recited as succinctly as possible to aid in discussing the contentions on appeal. The appellants are members of the Bible Missionary Church in Caldwell, Idaho, and Boise, Idaho. They desired to obtain a loan for construction of a new church building, but had been unable to do so. One of the parishioners, appellant Roscoe E. Kellogg, was acquainted with some fund raisers in Georgia, one of whom was John Harrell, who proved to be a cruel, malicious con man. Rev. Donald R. Plemons, on behalf of the Church, mailed a loan application to Harrell's group in Georgia. In response, Harrell came to Caldwell, Idaho, in September, 1978, with the pretense of assisting the Church in its loan application. On one such visit, Harrell was accompanied by an attorney from Atlanta, Georgia.

At a meeting held on September 7, 1978, between him and twelve or thirteen church members, Harrell distributed various papers and told the members present that they were each required to complete the papers simply to help expedite the desired insurance loan, but that none of them were assuming any personal financial obligation. None of the appellants realized, however, that they had executed a promissory note for a specific sum of money or that it involved the purchase of land in Colorado by deed of trust. Harrell stated further at the meeting that he would return in about two weeks to finalize the loan papers. Of course, he did not do so. Harrell was never heard from following the September 7 meeting except by a telephone call to him from Rev. Plemons, who testified that after receiving some "deposit slips" regarding purchase of land in Colorado, he was told by Harrell not to worry about it and that somebody was crooked or something was wrong. The appellants and other defendants who executed the papers testified that they were not completed and were substantially in blank. The plaintiffs, however, presented evidence to the contrary, and the matter was resolved by the jury adverse to the appellants.

In October, 1978, the appellants and other defendants who had executed the promissory notes were contacted by the plaintiffs as holders in due course of the various notes entitled "Note Secured By Deed of Trust" and advised that the plaintiffs had purchased, by assignment, a 75.45061% interest in the notes from the original payee, Land Endowment Southwest, Inc., of Ft. Worth, Tarrant County, Texas. The Plaintiffs accepted the substitute collateral without notice of any defenses to the notes. The plaintiffs informed the appellants and other defendants further that the initial lump-sum payment was due on October 15, 1978, in each case amounting to at least the principal sum of $30,000.00 plus interest. The initial payment was treated as part payment of the entire purchase price. Monthly payments were provided for the payment of the principal balance and interest, approximately $50,000.00. Essentially, the nature of the alleged transaction was that the various promissory notes were executed and delivered as partial payment by the appellants and other defendants for the purchase of certain real property situated in Costilla County, Colorado. The promissory notes were identical and each contained a paragraph reading: "THIS NOTE is given as part payment for the purchase price of real property and is secured by a Deed of Trust of even date herewith between the undersigned Purchaser(s) and the PUBLIC TRUSTEE of Costilla County, Colorado, the terms and conditions of which Deed of Trust are hereby made a part of this note by reference." (Appendix, Exhibits A through P, pp. 24-39.) The genuineness of the signatures of the appellants and other defendants on the several notes was stipulated. It was stipulated further that the plaintiffs were holders in due course.

The record established the following facts: appellant Reverend Plemons is a graduate of Bible College with a degree of Bachelor of Theology; appellant Joseph Aman is a newspaper publisher with business interests; appellant Thomas Donald Reynolds is an accountant with a Bachelor of Arts Degree in Accounting; and appellant Ralph Kellogg has been a business man for a number of years with numerous employees. (R., Vol. VI, pp. 30, 31, 56, 95, 101, 70, 75.)

At trial, the appellants and other defendants uniformly testified that they did not realize what they were signing when Harrell presented the papers; they had no belief that the promissory notes and deeds of trust obligated them to purchase land in Colorado because each testified that the document submitted to each of them was basically blank on its face at the time of execution. However, one of the appellants, Ronald Raymond Edwards, testified outside of the presence of the jury that the document was complete at the time he executed it, with the exception of dates, tract identification, and acreage. Appellants Gordon Sams, Joseph Aman, Thomas Donald Reynolds, and Ralph Kellogg each testified that they had received a warranty deed for the Colorado property described in their respective "Note Secured by Deed of Trust." The plaintiffs had no knowledge of Harrell's contacts with the appellants, nor was there any association between Harrell and the plaintiffs. The appellants contended in the trial court, however, that the plaintiffs, as holders in due course, took assignment of the notes subject to any defense the appellants might have against the original payee on the ground that the transaction was void under Idaho law, the site of its alleged execution. The trial court rejected this contention.

The contention rejected was that the Harrell sale or offering did not comply with the provisions of Idaho Code Secs. 15-1801 et seq. and the Subdivided Lands Disposition Act of Idaho making it unlawful to offer or dispose of an interest in subdivided lands located without the State of Idaho without prior registration with the Idaho Real Estate Commission. The Idaho statute permits the obligor to declare, by election, the obligation voidable, rather than void. Because the appellants have at all times alleged the transaction to be a nullity and thus void, the trial court properly rejected the application of the Idaho statutes. However, the court did not err in limiting the appellants to the defense pleaded under Sec. 3-305 of the Uniform Commercial Code adopted both in Colorado and Idaho. Section 3-305(2)(b) provides that the illegality of the transaction must render the obligation of the party a nullity.

The appellants filed a pretrial Motion to Dismiss for lack of in personam jurisdiction, which was denied by the district court. The court granted the plaintiffs' motion for partial summary judgment on the issue of whether they were holders in due course. Following adverse verdicts, the appellants filed a motion for a new trial, which was denied by the court. This appeal followed.

On appeal, the appellants contend that the district court erred in (1) denying their Motion to Dismiss filed pursuant to Fed.R.Civ.P. rule 12(b)(2) for lack of in personam jurisdiction, (2) rejecting two of their proffered jury instructions, (3) ruling that they could not pursue inconsistent defenses, and (4) denying their motion for a new trial.

I.

The appellants contend that the district court erred in denying their motion to dismiss for lack of in personam jurisdiction pursuant to Fed.R.Civ.P. rule 12(b)(2). We disagree.

The appellants argue first that they never knew that they were purchasing land in Colorado in this transaction and further that there were not sufficient "minimum contacts" with the forum State of Colorado inasmuch as the promissory notes were executed in Idaho and were payable to Land Endowment Southwest, Inc., at Fort Worth, Texas. Further, the appellants point out that they made no payments on the notes, that they never went to Colorado to investigate the purchase of the land in Colorado, and that none of them have ever owned, used or possessed land in Colorado. In addition, the appellants argue that they have never intended to nor actually transacted any business in Colorado.

The relevant Colorado long arm statute is C.R.S. Sec. 13-1-124 (1973), which provides in part:

Jurisdiction of Courts. (1) Engaging in any act enumerated in this section by any person, whether or not a resident of the state of Colorado, either in person or by an agent, submits such person, and, if a natural person his personal representative to the jurisdiction of the courts of this state concerning any cause of action arising from:

....

(c) The ownership, use, or possession of any real property situated in this state ....

The Colorado long-arm statute was designed...

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