Jett v. Phillips & Associates

• Decision Date: 31 December 1969
• Docket Number: Civ. A. No. C-806.
• Citation: 307 F. Supp. 432
• Parties: Charles C. JETT, Plaintiff, v. PHILLIPS & ASSOCIATES, an unincorporated association; Joseph J. Phillips; Jack R. Alexander; Henry C. Roth; Richard A. Williams; Henry Chapman and Leslie J. Gottwald, Defendants.
• Court: U.S. District Court — District of Colorado

307 F. Supp. 432

Charles C. JETT, Plaintiff, v. PHILLIPS & ASSOCIATES, an unincorporated association; Joseph J. Phillips; Jack R. Alexander; Henry C. Roth; Richard A. Williams; Henry Chapman and Leslie J. Gottwald, Defendants.

Civ. A. No. C-806.

United States District Court D. Colorado.

December 31, 1969.

Edward H. Sherman, Denver, Colo., for plaintiff.

John R. Hickisch, Denver, Colo., for defendants Williams, Chapman, and Gottwald.

Edward J. McHugh, Denver, Colo., and Walter H. Rubinstein, Cleveland, Ohio, for defendant Roth.

CHILSON, District Judge.

MEMORANDUM OPINION AND ORDER

The plaintiff seeks judgment on a promissory note against the defendants, Phillips & Associates, an unincorporated association, Joseph J. Phillips, Jack R. Alexander, and Henry C. Roth, as the makers of the note, and against Henry Chapman, Richard A. Williams, and Leslie J. Gottwald, as guarantors of the note.

At the close of the trial, the Court dismissed the action as to the defendant, Joseph J. Phillips, who is deceased, and no substitution having been requested or made. Also, the Court dismissed the action as to Phillips & Associates, an unincorporated association for lack of jurisdiction because the plaintiff Jett, was also a member of the defendant, Phillips & Associates, and since the citizenship of an unincorporated association is that of its members, there was no diversity of citizenship between the plaintiff, Jett, and the defendant, Phillips & Associates.

The Court entered the default of the defendant, Alexander, for his failure to appear after being served with process and found that Alexander and Roth, as makers of the note, are jointly and severally liable to the plaintiff for principal, interest, and attorneys fees according to the tenor of the note.

The Court finds that the amount due and owing plaintiff on said promissory note for principal and interest as of this date is the sum of $18,791.30; that the sum of $3400 is a reasonable attorneys fee, and the plaintiff is entitled to judgment against the defendants, Alexander and Roth in the total amount of $22,191.30.

Upon conclusion of the evidence and arguments of counsel, the matter was continued for the filing of briefs on the question of the plaintiff's right to recover from the defendants, Williams, Chapman, and Gottwald. The briefs have been filed and considered by the Court, and the Court is now advised.

There is little dispute in the essential facts. Prior to August 16, 1967, Phillips told plaintiff that he had an agreement to lease a desirable location in California, for the construction of a Dutch Inn and that $16,000 was needed initially to acquire a franchise from Dutch Inns of America, Inc., and for other expenses. Phillips proposed that plaintiff loan the $16,000 and that a loan would later be obtained from a financial institution for construction of the inn and to repay the $16,000 to the plaintiff. In consideration for making the loan, plaintiff would receive a 15% interest in the enterprise.

On August 16, 1967, the plaintiff and the defendants Phillips, Roth, and Alexander, met at the office of plaintiff's attorney in Denver, Colorado, at which time plaintiff's attorney prepared the note which is the subject matter of this action and a memorandum agreement whereby the plaintiff, in consideration of making the loan, would receive a 15% interest in the enterprise.

Upon execution of the note and the agreement, plaintiff delivered to Phillips, Roth, and Alexander, a cashier's check drawn on the First National Bank of Springfield, Colorado, in the amount of $16,000, payable to Phillips & Associates, Phillips, Alexander, and Roth. The cashier's check was subsequently endorsed by these payees and cashed presumably by Phillips. Although the record is silent as to what happened to the $16,000, it was not used to acquire the franchise, and the enterprise never came to fruition.

Some days after the execution of the note and agreement, a second memorandum agreement was prepared, but back-dated to August 16, 1967, the date of the first agreement. By the second agreement, Williams, Chapman, and Gottwald agreed to guarantee the payment of the note. This agreement was not executed by Williams, Chapman, and Gottwald until some considerable time after August 16, 1967. At the time of the execution of the promissory note and the first agreement, Williams, Chapman, and Gottwald had not agreed to participate in the enterprise.

The plaintiff, as the holder of the note, was not a party to the second agreement, and the Court finds that Williams, Chapman, and Gottwald executed the second agreement with the intent and purpose...