Credit Inv. & Loan Co. v. Guaranty Bank & Trust Co.

• Decision Date: 26 August 1968
• Docket Number: No. 21825,21825
• Citation: 166 Colo. 471,444 P.2d 633
• Parties: CREDIT INVESTMENT AND LOAN CO., Inc., a Colorado corporation, Plaintiff in Error, v. GUARANTY BANK AND TRUST COMPANY, a Colorado corporation, and Walter A. Woods, Defendants in Error.
• Court: Colorado Supreme Court

Page 633

444 P.2d 633

166 Colo. 471

CREDIT INVESTMENT AND LOAN CO., Inc., a Colorado

corporation, Plaintiff in Error, v. GUARANTY BANK AND TRUST COMPANY, a Colorado corporation, and Walter A. Woods, Defendants in Error.

No. 21825.

Supreme Court of Colorado, In Department.

Aug. 26, 1968.

Richard H. Bate, Boulder, for plaintiff in error.

Winner, Berge, Martin & Camfield, Quiat, Seeman & Quiat, Denver, for defendants in error.

HODGES, Justice.

This case arose out of a financing arrangement between Credit Investment, the plaintiff below, and Guaranty Bank, one of the defendants. The other defendant in the trial court was Walter A. Woods, President of Guaranty Bank. The parties will be referred to herein as plaintiff and defendants or by name.

The plaintiff's amended complaint contains five claims which will be described later in this opinion. Each claim was answered by the defendants and after trial to the court, findings of fact and conclusions of law were made and judgment was entered against the defendant bank for $27,477.08 plus interest on Claim No. 3 only. Plaintiff claims this judgment was inadequate, and that the trial court erred in dismissing the other claims, except Claim No. 1 which was withdrawn by the plaintiff during the trial. Plaintiff urges reversal of the judgments of dismissal of Claim Nos. 2, 4, and 5 and that the trial court be ordered to modify its judgment by entry of a $72,489 judgment against the defendant bank and to enter a judgment against defendant Woods for the same $72,489 plus a further amount of $37,000. Also, the plaintiff contends that the trial court erred in setting aside the default entered on its ex parte motion and denying its motion for a summary judgment.

Defendant bank claims that the findings and consideration of factors utilized by the court in determining the amount of judgment on Claim No. 3 are erroneous, and that the award of interest on the judgment is contrary to law. In particular, the defendant bank claims that the findings of fact and conclusions of law and its judgment are based on matters not raised by the pleadings, the pretrial order, the contentions of the parties, or the evidence in the case. Also, the defendant bank maintains that the court erred in adopting certain findings and facts from the auditor's report, because the auditor held no hearings, and reported on matters not encompassed within the issues framed and upon which no evidence was presented during the trial. Defendant bank does concede that judgment for not more than $3,207 would have been proper on the plaintiff's third claim and requests that the case be remanded with directions to modify the judgment to this amount or $1,400 as both amounts have support in the record as the balance in a reserve account to which the plaintiff would be entitled. In the alternative, the defendant bank urges a reversal and a remand for a new trial on the third claim. Otherwise, on behalf of both defendants, it is argued that the court properly dismissed Claim Nos. 2, 4 and 5.

Plaintiff maintains the defendant bank has no standing in this court to urge reversal or remand of the judgment against the bank on Claim No. 3 because it neither filed a praecipe for writ of error or filed the record within the time prescribed. Defendant bank counters by stating in its brief that after filing separate designations of record, both counsel filed a stipulation dispensing with counter designation of record, and that they agreed to and did split the cost of the record filed in this court. Also, defendant bank's answer brief cross-assigns error to the judgment for the plaintiff on the third claim and devotes a substantial portion of its brief to this alleged error. The plaintiff thereafter filed a reply brief. Furthermore, this alleged error is fully outlined in the defendant bank's motion for new trial. It therefore appears clearly that in accordance with R.C.P.Colo. 111(f), the defendant's cross-assignment of error may be properly considered on this writ of error.

The facts which gave rise to this case are as follows. The plaintiff engaged in the purchase of promissory notes from companies which contracted for home improvements. Robert C. Yarbrough, the managing agent of the plaintiff, discussed the negotiation to the bank of these non-recourse notes as acquired with David F. Finnegan, then Vice President of the defendant bank but deceased at the time of trial. There was an agreement that the plaintiff would sell and the bank would buy there notes on a recourse basis and a letter was sent by Mr. Finnegan on behalf of the bank to Mr. Yarbrough relating to the terms of purchase of these notes by the bank. This letter in pertinent part is quoted as follows:

'We are setting up the following plan for your firm in accordance with our discussion:

1. Purchase individual contracts on following basis.

2. Rate--6% On unpaid balance of contract.

3. Advance--100% (50% to regular checking account and 50% to reserve account).

4. Maximum terms to be 36 months.

5. Type of contracts--home modernization and other to carry F.H.A. required forms, such as Certificate of Completion, etc.

6. Payments to be collected and account serviced by Yarbrough. Payments remitted daily--Twice or three times weekly.

7. When customer is three payments delinquent, balance due may be charged to reserve account.

8. Reserve account to be maintained at no less than 50% of the total outstanding notes.

9. Notes endorsed 'With Recourse."

The parties involved relied upon this letter and upon Other verbal statements to each other, with the result that 118 commercial transactions were entered into between the plaintiff and the bank as alleged in the amended complaint. These transactions involve promissory notes endorsed to the bank 'with recourse' totaling $114,152 of which the bank retained $57,076 in a 'reserve account', and paid the balance to the plaintiff as contemplated by paragraph 3 of the letter.

Sometime in January 1957, officers at the bank, contemplating that they would purchase from plaintiff during any one month only up to $20,000 in notes, became 'alarmed' about the total amount of notes being purchased during that month. They began interrogations of the makers of the notes and investigations of the various documents as stated in paragraph 5 of the letter. Suffice it to say, because of discovery of what was later alleged as fraud in defense of the various claims filed against the bank, the bank refused on February 8, 1957 to purchase additional notes. On March 25, 1957, the bank took over collection and complete control of all of the notes and proceeded to receive payments directly from the makers after that date.

The plaintiff having purchased additional notes without recourse prior to February 8, 1957 and after that date, then sought other banking institutions to whom they could sell such notes on a similar basis. Subsequent inquiry of Defendant Woods by one banking institution led to the allegations against Woods as contained in Claim No. 5. The amended complaint contains five separate claims briefly summarized as follows:

Claim No. 1--For loss of profits in the amount of $1,694.70 due to refusal on February 8, 1957 of the bank to accept additional completed contracts under the bank's continuing offer. This claim was withdrawn by the plaintiff during the trial.

Claim No. 2--For expenditures in the amount of $9,066.75 in acquiring commercial paper and for loss of profit in the amount of $6,346.75 on the acquired paper, both allegedly due to the bank's revocation without prior notice of its agreement to purchase promissory notes from plaintiff.

Claim No. 3--For the amount of $57,076 held by the bank in a reserve account for plaintiff on March 25, 1957, the date of the bank's alleged breach and disaffirmance of the contract between the parties which it is claimed gave plaintiff the right to treat the contract at an end and thus entitled plaintiff to the full amount in the reserve account.

The first three claims were against the bank Only. Claims 4 and 5 were against Woods only.

Claim No. 4--For the combined amounts of claims Nos. 2 and 3 for the alleged wilful and malicious inducement by Woods which caused the bank to breach the contract with the plaintiff.

Claim No. 5--For the amount of $37,000 representing loss of plaintiff's capital investment and total destruction of its business due to alleged wilful and malicious inducement of other banks not to have business dealings with plaintiff and due to alleged false misrepresentations by Woods to other bankers that the plaintiff was improperly conducting its finance business.

The trial court granted defendant's motion for summary judgment on August 25, 1958. To this judgment, the plaintiff brought a writ of error and this court, in Credit Investment and Loan Co., Inc. v. Guaranty Bank and Trust Company and Walter A. Woods, 143 Colo. 393, 353 P.2d 1098, reversed this judgment and remanded the cause with directions to the trial court to vacate its judgment and to enter a rule upon defendants to answer or otherwise plead to the amended complaint.

Upon remand, such rule was entered on August 29, 1960, granting twenty days within which to answer or otherwise plead. On November 16, 1960, default was entered upon plaintiff's oral motion and written affidavit against both defendants for failure to answer or otherwise plead. Answer was finally filed on December 4, 1961 and on January 24, 1962, the trial court set aside the default and denied plaintiff's motions for default judgment or summary judgment. The plaintiff complains here that such motions should have been granted and assigns error thereto, and that the trial court abused its discretion in setting aside the default.

At the conclusion of plaintiff's case, the trial court granted Defendant Woods' motion for dismissal, thereby disposing of Claim Nos. 4 and 5, and entered judgment for Woods, on the basis of insufficient evidence...