Dennis v. Bradbury

• Decision Date: 22 December 1964
• Docket Number: Civ. A. No. 6480.
• Parties: Frank DENNIS, Plaintiff, v. T. O. BRADBURY and N. B. Burt, Defendants.
• Court: U.S. District Court — District of Colorado

236 F. Supp. 683

Frank DENNIS, Plaintiff, v. T. O. BRADBURY and N. B. Burt, Defendants.

Civ. A. No. 6480.

United States District Court D. Colorado.

December 22, 1964.

Yegge, Hall & Shulenburg, Robert B. Yegge, Denver, Colo., and Looney, Watts, Looney & Nichols, Oklahoma City, Okl., for plaintiff.

Emory L. O'Connell, and Robert J. Enochs, Fred M. Winner, Denver, Colo., and Cecil R. Ditsch, Littleton, Colo., for defendants.

DOYLE, Judge.

This was a trial to the Court. The within opinion will serve to set forth the important facts and conclusions so that formal findings are deemed unnecessary.

The action as filed originally sought statutory treble damages for alleged usury growing out of a real estate development in which the plaintiff Dennis and his then associates sought and obtained financial assistance from the defendants Bradbury and Burt. At the trial the plaintiff dropped the treble damage claim and now limits his demand to one of quantum meruit for excessive interest paid.

The cause has been before this Court on numerous occasions but has not come to trial on its merits until a relatively recent date.

As a result of a jurisdictional ruling there was an interlocutory appeal. See Bradbury v. Dennis, (10 Cir.) 310 F.2d 73. It was there held that an assignment to plaintiff from an insolvent corporation was not "improper or collusive" within Title 28 U.S.C. § 1359.

More recently, this Court considered the question whether the transaction in question is to be regarded as a loan or as a vendor-vendee transaction, or a contract of joint venture. The predominant character of the agreement was held to be that of a loan or financing agreement.

At the pre-trial conference it was determined that defendants were entitled to introduce parol evidence in an effort on their part to show that in truth the transaction was one of joint venture or partnership involving profits rather than interest. Trial was thereupon had on September 30, 1964; briefs have been filed and the matter is now submitted on the merits.

The main question continues to be whether the sums paid to defendants are to be regarded on the one hand as interest, or on the other hand as profits of a joint venture. Now, however, we are not limited to the agreements, but can consider them in the light of the evidence.

Defendants have, however, raised other questions which require some comment. The important of these may be described as follows:

1. Whether there is under Colorado law a common law remedy or whether the treble damage remedy provided by statute excludes any other remedy.

2. Does the one-year statute of limitations applicable to usury treble damage actions bar this action.

3. Whether the plaintiff is a proper party to maintain the action.

A summary of the important provisions of the contracts must precede an analysis of the evidence in order that the evidence will assume perspective.

The basic contract, Exhibit 1, was entered into on March 2, 1957. The contracting parties were the defendants (first parties) and the plaintiff, together with his then associate, John R. Mallon.

It provided that Bradbury and Burt would immediately make available the sum of $78,000.00 together with a further sum of $22,000.00. These funds were to be used for the acquisition in fee by defendants of a certain described tract of real estate which was under the agreement to be conveyed to defendants by the "present owners" (Dennis and Mallon). The sums were also to be used to develop the tract.

Paragraph 2, the crucial paragraph of the agreement, goes on to provide that second parties, (plaintiff), shall be entitled to receive conveyances back of individual lots upon the payment by them of $2200.00 for each lot to be applied to the principal of the fund advanced, plus the payment of an additional $500.00 "bonus" or a total of $2700.00 per lot. Other provisions of this paragraph give plaintiffs the right to sell certain lots without paying the principal sum but requiring that they pay the $500.00 bonus in each instance. The text of this provision is set forth below:

"Second parties shall be entitled to receive conveyances of individual lots in said Southwood Addition subject to the same liens and encumbrances aforesaid, and also subject to all liens or encumbrances suffered to attach thereto by Second Parties upon payment to First Parties of the sum of $2,200.00 to be credited against the fund of One Hundred Thousand Dollars ($100,000.00) made available by First Parties, as aforesaid, and upon the payment of an additional $500.00 bonus, or a total of $2,700.00 per lot conveyed to Second Parties. Provided, however, that Lots 2, 3, and 4, in Block 2, and Lots 2, 3, 4, 5, 7, 8, and 9 in Block 5 of said addition shall be conveyed by First Parties to Second Parties upon payment of the sum of $500.00 only for each lot, said $500.00 for said lots to be bonus to First Parties. Second Parties agree to pay First Parties sufficient sums, as aforesaid, to cover the conveyance to Second Parties of not less than four (4) lots on or before April 1, 1957, and to pay sufficient sums for and to receive title to not less than Four (4) lots, as aforesaid, in each calendar month thereafter. Provided, however, that if at any time the aforesaid fund of One Hundred Thousand Dollars ($100,000.00) made available by First Parties shall be completely restored to First Parties from the payments of $2,200.00 per lot, as aforesaid, or otherwise, then Second Parties shall be entitled to receive conveyances of further lots upon the payment of $500.00 per lot bonus only."

The agreement further provides that there shall be additional amounts advanced upon a revolving fund basis. It also sets up a method for disposition of the funds by appointment of the Colorado Title Service Company as an escrow agent.

An addendum added the same day sets up indebtedness limits declaring that the total amount outstanding after December 1, 1957, shall not exceed $90,000.00, and after January 1, 1958, shall not exceed $70,000.00; after March 1, 1958, shall not exceed $50,000.00. This addendum also provides for termination of the contract giving to the defendants an option to terminate under specified conditions and provided for continuation of the payments of bonuses for each lot sold. A further provision of the addendum is that the plaintiff Dennis and that his Associate, Mallon, personally guarantee all of the indebtedness.

A further and supplemental agreement was executed March 31, 1958. This recites that the second parties (plaintiff and Mallon) failed to make the payments demanded by the original agreements. It acknowledges the right of defendants to foreclose but declares that they desire to work out a settlement of the agreement without waiving any right to foreclose. This supplemental agreement proceeds to give to defendants the right to collect all proceeds from lots sold and to pay costs and expenses in connection with the development, finally assigning to the plaintiff Dennis and Mallon all moneys left over from the sale after the defendants have been reimbursed under the terms of the original agreement of the addendum.

In the Court's interlocutory decision of April 27, 1964, the above-described contracts were construed and it was concluded that the transaction as reflected by the agreements was a loan. There, it was said:

"Where, as here, money is made `available' and sometimes described as `advanced' in varying amounts and at different times, interest is charged; there is an overall plan of financing; various provisions protect and safeguard the amount of security; an individual and absolute obligation to repay, apart from the security, is imposed the conclusion is inescapable that the transaction is a financing arrangement, that is to say a loan."

It was further stated:

"In the present case there was no effort, studied or otherwise, to disguise the loan aspect of this transaction. It appears to be a loan and it is in substance a loan. It was, indeed, conceded by counsel for the defendants on oral argument that the transaction in question was at least in part a loan, plus to be sure something else. We find that the agreement of March 2, 1957 did embody a loan-mortgage agreement, and that it did not embody a bona fide sale coupled with an agreement to repurchase. We expressly make no finding with respect to the amounts which are deemed to be interest on that loan. Our finding that the agreement of March 2, 1957 embodied a loan-mortgage transaction does not preclude a subsequent finding that the parties were at least to a limited extent, joint adventurers.

"It is sufficient for present purposes to conclude that the predominant character of this transaction is a financing arrangement or loan and that is our conclusion."

At the trial evidence as to the intent of the parties was received, it having been held at the pre-trial conference that some of the terms were sufficiently ambiguous to justify reception of parol testimony.

From this testimony it would appear that plaintiff and his associates purchased the tract in question with a view to developing it. It consisted of approximately eighty acres located in Arapahoe County, Colorado. A plat had been filed and had been submitted to the Federal Housing Administration and the Veterans Administration prior to dealings with the defendants here. Dennis had been furnishing the money and in the first part of 1957 was having difficulty financing the venture. T. W. Anderson, a real estate broker and developer, had as agent of Robert and Ruth Lee, sold the tract to Dennis, et al. so the latter went to Anderson and asked him for financial help. Anderson stated that he was not in position to make a loan of this magnitude, that is, of $100,000.00 but he agreed to put Dennis and Mallon in touch with the defendants Bradbury and Burt. So, in February, 1957, a conference was held in the office of Anderson at which Bradbury, Burt, their lawyer, and Mallon...