Bemel Associates, Inc. v. Brown

• Decision Date: 26 December 1967
• Docket Number: No. 21629,21629
• Citation: 164 Colo. 414,435 P.2d 407
• Parties: BEMEL ASSOCIATES, INC., Donald Bemel, Milton Bemel and Eugene Bemel, Plaintiffs in Error, v. Robert C. BROWN, Fred Champlain, Mortgage Corporation of America and Inglis Mortgage Company, Defendants in Error.
• Court: Colorado Supreme Court

Page 407

435 P.2d 407

164 Colo. 414

BEMEL ASSOCIATES, INC., Donald Bemel, Milton Bemel and Eugene Bemel, Plaintiffs in Error, v. Robert C. BROWN, Fred Champlain, Mortgage Corporation of America and Inglis Mortgage Company, Defendants in Error.

No. 21629.

Supreme Court of Colorado, En Banc.

Dec. 26, 1967.

Rehearing Denied Jan. 15, 1968.

James B. Radetsky, Jules Ornstein, Denver, for plaintiffs in error.

Dawson, Nagel, Sherman & Howard, Michael A. Williams, Denver, for defendant in error, Inglis Mortgage Co. DAY, Justice.

A rather full recitation of the pertinent undisputed facts is necessary for an understanding of this writ of error.

The record discloses that Bemel Associates, Inc. of Rochester, Minnesota, through its agent Donald Bemel, a Denver resident, contacted Fred Champlain in Denver, Colorado, in February 1961 seeking a $700,000 loan to finance a proposed motel and filling station development in Rochester. Champlain recommended defendant in error, Robert C. Brown, as a mortgage broker who could handle the transaction. At the time Brown was operating out of the Inglis Mortgage Company suite in Denver having moved at least part of his furniture to that location. Inglis, a reputable lending agency, is also a defendant in error. Brown and Champlain at the time were operating under the name of Mortgage Corporation of America and Claimed to have placed several prior mortgages through Inglis.

It is further disclosed that Brown represented to Donald Bemel he could secure the loan through Inglis. Brown thereafter, in connection with the transaction, wrote to Bemel Associates on April 17, 1961, on Inglis' stationery stating that the Mortgage Corporation of America had become a subsidiary of Inglis. This particular letterhead bore both Inglis' printed address and phone number as well as Brown's Lakewood address and telephone number. Brown's testimony was that an Inglis secretary had given him the stationery he used. He later stated it was Inglis' office manager who gave him the stationery plus F.H.A., V.A. and other forms. However, the manager testified he did not know how Brown obtained the stationery. Brown also testified that he had used Inglis' secretaries to do some of his typing and that he had given Donald Bemel Inglis' telephone number as one of the offices where he could be reached. It was admitted by all parties that Brown received phone calls at Inglis' office. Brown also testified that H. Sanford Weaver, then President of Inglis, had asked him to move to Inglis' office with the end view of becoming its Denver manager and to seek mortgage prospects. A month or so after Brown moved, and when the Bemels' loan negotiations were in progress, Inglis, Brown and Champlain entered into a written mortgage brokerage agreement that in essence, as pertinent here, provided that each party was to be an independent contractor.

Later Brown and Donald Bemel made a trip to Rochester as a result of which Bemel Associates submitted a formal loan application to Brown on an Inglis from prepared by Brown. Bemel Associates was instructed by letter over Brown's signature to pay Inglis a standby fee of $7000 to be refunded if the loan was not obtained. That fee, however, was paid to Mortgage Corporation of America when Brown telephoned Bemel Associates in Rochester and requested that the check be made payable to Mortgage Corporation of America in Denver. Bemel did not question the change in the recipient of the free because of a letter from Brown which represented, in part, as follows:

'With reference to the above captioned loan, this is to inform you that the Mortgage Corporation of America, now a subsidiary of the Inglis Mortgage Company are willing to place the above captioned loan through are (our) investors * * *.'

When the $7000 check arrived in Denver, Brown and Champlain endorsed it for deposit to their own company's account and subsequently drew out the proceeds.

Though Brown at times, assisted by the President of Inglis, diligently attempted to procure the desired financing, he was unsuccessful. Thereafter, Bemel Associates demanded a refund of its standby fee which could not be produced by Brown, Champlain and the Mortgage Corporation of America. Thereafter Brown and Champlain agreed to and did, at the sole request of Donald Bemel, execute a $7000 promissory note to Bemel Associates as evidence of the indebtedness. On default of that note Bemel made a demand on Inglis for payment of the $7000 which demand was refused. This action has resulted from that refusal.

At the close of the trial Brown admitted liability on the $7000 note and moved that judgment be entered on the note, but that the fraud action be dismissed. Inglis moved for a dismissal in its favor. The court entered judgments On the note against Brown and also entered default judgment against Champlain and Mortgage Corporation of America who did not appear and who are not parties to this writ of error. The claim of fraud against Brown and Inglis was dismissed. Inglis then withdrew its cross-claim against Brown and Champlain.

Bemel asserts several grounds of error, but we consider only whether the court erred in dismissing the fraud action against Brown and Inglis.

In Morrison v. Goodspeed, 100 Colo. 470, 477--478, 68 P.2d 458, 462 (1937), this court set out the criteria for actionable fraud as follows:

'* * * (1) A false representation of a material existing fact, or a representation as to a material existing fact made with a reckless disregard of its truth or falsity; or a concealment of a material existing fact, that in equity and good conscience should be disclosed. (2) Knowledge on the part of the one making the representation that it is false; or utter indifference to its truth or falsity; or knowledge that he is concealing a material fact that in equity and good conscience he should disclose. (3) Ignorance on the part of the one to whom representations are made or from whom such fact is concealed, or the falsity of the representation or of the existence of the fact concealed. (4) The representation or concealment made or practiced with the intention that it shall be acted upon. (5) Action on the representation or concealment resulting in damage. * * *.'

The representations by Brown, in connection with his negotiations with Donald Bemel as well as with Bemel Associates in Rochester, have all of the elements to charge him with fraud. The trial court, however, held that the execution of the note resulted in a waiver which relieved Brown of any prior conduct. We do not agree with that conclusion for the only pertinent evidence in this regard is that the note was given to Donald Bemel for his company merely as evidence of the sum due. The actions of Brown were not negated by this acknowledgment that he owed the money obtained solely on reliance on his fraudulent conduct. It follows that the trial court erred when it dismissed the fraud claim against Brown.

Turning next to the question of the dismissal of Inglis, we conclude that the trial court did not err.

There was no evidence that Brown was ever the actual agent of Inglis. There is no testimony by the Bemels or Brown that there was any direct contact on the loan by Bemel Associates with Inglis. There were no representations made by Inglis at any time. Nevertheless, plaintiffs in error attempt to invoke the doctrine of estoppel in urging that the court erred in decreeing Inglis free from liability. It is contended that the doctrine contained in Chamberlain v. Poe, 127 Colo. 215, 256 P.2d 229, should be applied. In that case we stated:

'* * * when one by his...