Grand Valley Water Users' Ass'n v. Zumbrunn

Decision Date14 April 1921
Docket Number5578.
Citation272 F. 943
PartiesGRAND VALLEY WATER USERS' ASS'N v. ZUMBRUNN.
CourtU.S. Court of Appeals — Eighth Circuit

W. H Gabbert, of Denver, Colo. (Guy V. Sternberg and S. G McMullin, both of Grand Junction, Colo., on the brief), for plaintiff in error.

Frank McLaughlin, of Denver, Colo. (W. F. Zumbrunn, of Kansas City Mo., and Frank Exline, of Denver, Colo., on the brief), for defendant in error.

Before SANBORN, CARLAND, and STONE, Circuit Judges.

SANBORN Circuit Judge.

The plaintiff below, Mrs. Zumbrunn, is the wife of Mr. W. F Zumbrunn, who was her agent, and who, with her consent, loaned her money on the promissory notes for $6,500 of the defendant below, the Grand Valley Water Users' Association, a corporation of the state of Colorado, organized to co-operate with the government of the United States in the construction, maintenance, and operation of the Grand Valley project, an irrigating canal under construction by the United States Reclamation Service. Mr. Zumbrunn conducted the negotiations which resulted in Mrs. Zumbrunn's loan, so that his knowledge was hers.

The association pleaded three defenses: (1) That the notes were given by it with Zumbrunn's knowledge, without any consideration moving to it, for the accommodation of Charles C. Ladd, for the purpose of lending the Association's name to Ladd to enable him to obtain credit; (2) that the notes were void, because one of the defendant's articles of incorporation provided that its 'indebtedness, other than that incurred for construction or purchasing the canal, shall not exceed two-thirds of its capital stock,' that its issued and outstanding capital stock, when it gave the notes, was 22,000 shares, of the par value of $1 each, and its indebtedness not incurred for construction or purchasing the canal was $15,000, and that Zumbrunn knew those facts; and (3) that Ladd had made a contract with the defendant to act as its colonization agent to sell lands to and locate settlers on the lands in its irrigation district, that Ladd wanted $6,500 to conduct at Kansas City, Mo., this business of selling these lands, that he went to Grand Junction, Colo., and with the aid of Zumbrunn persuaded the defendant to give the notes in suit to enable Ladd to get this $6,500, and to agree to retain the moneys it should receive from the sales of land by Ladd to pay the notes as they became due, that Zumbrunn agreed that the notes should be paid in that and in no other way, that Ladd entered upon the performance of his contract, and the defendant, with the consent of the plaintiff, paid him the commissions he earned thereunder.

The plaintiff, by her reply, denied all the averments of new matter in this answer. A jury was waived. The court tried the case, and made special findings of the facts: (1) That the notes were made by the defendant in consideration of the amounts thereof, which were received by it from the plaintiff for its own benefit, that it borrowed these amounts from the plaintiff to perform its contract with Ladd, and that, when those amounts were paid over to Ladd, that was done by its direction, to enable it to perform its contract with Ladd, and the defendant was not an accommodation maker or indorser of the notes; (2) that all the sums named in the notes as principals were paid by the plaintiff to the defendant and distributed on its orders, and that it was estopped from maintaining its plea that the execution of the notes was beyond the powers of the corporation; and (3) that the evidence entirely failed to establish that there was any agreement between the plaintiff and the defendant that the notes should be paid out of the moneys received from the sales of land by Ladd, and in no other way; and it rendered judgment against the defendant for $8,352.10, the amount of the notes and interest.

The first defense set up in the answer was that the defendant did not receive any consideration for the notes, but made them with the knowledge of Zumbrunn for the accommodation of Ladd. In this court this is the argument in support of this defense: (a) The defendant had no power to do business outside of the state of Colorado, because section 847, Rev. Stat. Colorado 1908, provides that, 'when any company shall be created under the laws of this state for the purpose of carrying on part of its business beyond the limits thereof, such certificate (the certificate for incorporation) shall state that fact'; the certificate for the incorporation of the defendant did not state any such fact; section 861 of the Revised Statutes of Colorado 1908, provided that it might be lawful for such a corporation, existing for the purpose, among others, of carrying on part of its business in another state to accept any law of such state, and to exercise any powers, privileges, and franchises conferred by such laws; the contract between the defendant and Ladd was beyond the powers of the defendant, because it contained agreements that the defendant would employ Ladd as its agent in Missouri, Kansas, Iowa, and Nebraska to procure purchasers of and settlers upon the lands in its irrigation district in Colorado, and that it would advance and lend to him $6,500, as well as agreements that Ladd would perform his duties as such agent in those states. (b) The defendant received no consideration for its notes, and was an accommodation maker, although the plaintiff by its direction furnished the $6,500, and at its request paid it over to Ladd, and the making of the notes was therefore beyond its powers, and they were therefore void.

This argument has received thoughtful consideration, but for several reasons it has failed to convince that there was any error in the trial and decision of this issue of accommodation maker or not in the court below. In the first place there was no averment or plea in the answer that the defendant's contract with Ladd was beyond the powers of the corporation and void, nor does the record of the trial indicate that any such claim was presented or ruled by the trial court, while the defendant in its answer expressly alleged that the Ladd contract was made, and it is too late now to predicate error in the trial of this case upon the failure of the trial court to sustain the first defense because the Ladd contract was beyond the powers of the defendant and void when no such claim appears to have been made or ruled at the trial.

In the second place, if the concession were made that the defendant had no corporate power to do business outside of Colorado that the Ladd contract was void for that reason, that the defendant knew these facts and the facts that the defendant intended to use and was using the money the plaintiff loaned to it in consideration of its notes to enable the defendant to perform its part of that contract, nevertheless those facts would not, as against the defendant, avoid the notes or defeat her action upon them. Under the statutes of Colorado, and the defendant's articles of incorporation, it was granted the general power to borrow money, to incur and promise to pay indebtedness, and to perform any other necessary or appropriate acts, to acquire in any manner whatsoever, to maintain and to operate any irrigation works. The defendant, therefore, had the general power to borrow the $6,500 of the plaintiff and to make its notes to repay it. The plaintiff had no right and it owed the defendant no duty to supervise, control, or direct the disposition by the defendant of the money she loaned to it, and for which the defendant gave her its written promises to pay. Therefore it is no defense to those notes that the plaintiff knew that the defendant intended to use and was using that money foolishly, or to its detriment, or to perform its part...

To continue reading

Request your trial
12 cases
  • United States Fidelity & Guaranty Co. v. Wilson
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • May 7, 1930
    ...& Steel Co. (C. C. A. 6) 285 F. 707. See, also, Standard Sanitary Mfg. Co. v. Arrott (C. C. A. 3) 135 F. 750; Grand Valley Water Users' Ass'n v. Zumbrunn (C. C. A. 8) 272 F. 943. In our judgment the facts pleaded, greatly reinforced by the evidence adduced, laid a sufficient foundation for ......
  • State Line & Sullivan R. Co. v. Phillips
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 14, 1938
    ...S.Ct. 83, 77 L.Ed. 548; Cohansey Glass Co. v. First National Bank of Philadelphia, 3 Cir., 251 F. 177, 180; Grand Valley Water User's Association v. Zumbrunn, 8 Cir., 272 F. 943, 947; Yazoo & Mississippi Valley R. Co. v. Mullins, 249 U.S. 531, 533, 39 S.Ct. 368, 63 L.Ed. 754; Reavis v. Fian......
  • Titanium Actynite Industries v. McLennan, 5989.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • January 7, 1960
    ...prejudicial, as the testimony was merely cumulative of other evidence and added nothing new to plaintiffs' case. Grand Valley Water Users' Ass'n v. Zumbrunn, 8 Cir., 272 F. 943; In re Livingston's Estate, 102 Colo. 148, 77 P.2d 649; Inyo Marble Co. v. Loundagin, 120 Cal.App. 298, 7 P.2d Com......
  • Nowell v. Equitable Trust Co.
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • September 19, 1924
    ... ... 587, 594 ... Grand Valley Water Users' Association v. Zumbrunn, 272 ... ...
  • Request a trial to view additional results
1 books & journal articles
  • The law of Ponzi payouts.
    • United States
    • Michigan Law Review Vol. 111 No. 1, October 2012
    • October 1, 2012
    ...repugnant to the policy of the law, and was within the prohibition of the statute."). (77.) Grand Valley Water Users' Ass'n v. Zumbrunn, 272 F. 943, 947 (8th Cir. 1921) ("One who has received the benefits of the complete performance by the plaintiff of a contract ... cannot successfully def......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT