Schlesinger v. Woodcock

• Decision Date: 07 December 2001
• Docket Number: No. 00-268.,00-268.
• Citation: 35 P.3d 1232,2001 WY 120
• Parties: Mary Beth SCHLESINGER, Appellant (Defendant), v. Betty Jane WOODCOCK, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

35 P.3d 1232

2001 WY 120

Mary Beth SCHLESINGER, Appellant (Defendant), v. Betty Jane WOODCOCK, Appellee (Plaintiff).

No. 00-268.

Supreme Court of Wyoming.

December 7, 2001.

Representing Appellant: Stephen R. Winship of Winship & Winship, P.C., Casper, WY.

Representing Appellee: Kenneth R. Marken, Casper, WY.

Before LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] Appellant Mary Beth Schlesinger and her company, Custom Syndicated Research, Incorporated (CSR), obtained numerous loans from private individuals; some were documented with promissory notes, and some were not. All the notes and the verbal negotiations described the same terms. Appellee Betty Jane Woodcock, one of the lenders with both documented and undocumented loans, sought to collect claiming the parties' course of dealing established the loan terms for the undocumented loans. After default, Ms. Schlesinger obtained Ms. Woodcock's signature on a modified loan agreement with much more favorable terms for the borrower. The trial court granted summary judgment on the documented loans and held the modified loan agreement void for lack of consideration. After a bench trial, the trial court entered judgment for Ms. Woodcock on the remaining loans finding the oral contract loans included the same terms as the written promissory notes. Ms. Schlesinger appealed the judgment as it pertained to the undocumented loans. We affirm.

ISSUES

[¶ 2] Ms. Schlesinger presents these issues:

1. After undocumented loans were made, whether a written agreement that established the interest rates and due dates of said loans and provided the lender with a reinvestment option was supported by any consideration.

2. After determining that a written agreement was void, did the District Court err in relying upon that agreement to support its judgment that specified the terms for the underlying oral agreements[?]

3. When the only witness to support the Plaintiff's theory regarding the parties' "course of conduct" was not credible, did the Court err in granting judgment in favor of Plaintiff[?]

4. Whether the District Court erred when it awarded Plaintiff her attorney's fees incurred in relation to her unsuccessful attempt to establish her allegations of fraud and conspiracy.

Ms. Woodcock rephrases the issues in the following manner:

1. Did the trial court correctly hold Appellant Mary Beth Schlesinger liable to... Appellee Betty Jane Woodcock for the principal, interest, late penalty fees and collection costs, including attorney's fees, for five unpaid loans which Appellee made to Appellant and her company?

A. Did the trial court commit reversible error in determining that an antecedent document entitled "Loan Agreement" was unenforceable for lack of consideration, and thus, did not relieve the Appellant Defendant of her liability for the five unpaid loans?

B. Did the trial court commit reversible error in finding the five unpaid loans to be enforceable by Appellee-Plaintiff against Appellant-Defendant, even in the absence of supporting promissory notes?

C. Did the trial court abuse its discretion in awarding Appellee-Plaintiff her reasonable attorney's fees and costs of collection?

FACTS

[¶ 3] In 1997, CSR began experiencing financial difficulties and needed funds to make its payroll. Ms. Schlesinger, the sole shareholder and president, approached her friend, Ted Dixon, a financial planner and investment advisor, seeking his assistance in obtaining the necessary funds. Mr. Dixon agreed to help and approached three of his clients, as well as his parents, with the possibility of them providing loans to CSR as investments.

[¶ 4] From the outset, Mr. Dixon made it clear to Ms. Schlesinger that, in order to justify advising his clients to take money out of their current investments, the terms of any loans would necessarily require a high rate of return and strong collateralization. He specifically informed Ms. Schlesinger, based on his experience with similar situations, the interest rate would have to be twenty-five percent and the loans short term. In those initial discussions, Mr. Dixon also informed Ms. Schlesinger that, on behalf of his clients, he would require her personal liability for repayment of the loans in addition to CSR. He explained this requirement was necessary to provide his clients maximum security. A total of fourteen loans were entered into between Mr. Dixon's clients, Ms. Schlesinger, and CSR between April 1997 and April 1998. All the loans from Mr. Dixon's clients to CSR and Ms. Schlesinger documented by promissory notes contained terms providing twenty-five percent interest, joint and several liability of Ms. Schlesinger and CSR, and attorney's fees. Some of the loans were documented in promissory notes, and others were not. One such loan made by Ms. Woodcock, a person in her seventies, on January 12, 1998, was documented by a receipt which included the notation "Loan to CSR Inc. Standard Terms." At no time did Ms. Schlesinger question or object to the terms as described by Mr. Dixon or as set out in the documentation. The following is a complete list of the undisputed loans from Ms. Woodcock:

4/11/97 $20,000 Executed note Paid 4/17/97 $50,000 Executed note Paid 11/24/97 $25,000 No note Unpaid 12/15/97 $15,000 Executed note Unpaid 1/12/98 $25,000 Receipt Unpaid 3/18/98 $15,000 No note Unpaid 4/16/98 $ 9,000 No note Unpaid

[¶ 5] During 1998, Mr. Dixon began experiencing serious personal problems which impaired his ability to conduct his business. Ms. Schlesinger had difficulty obtaining responses to inquiries and documentation for loans she was receiving through Mr. Dixon. The record reflects that several loans Mr. Dixon arranged between Ms. Woodcock and Ms. Schlesinger in late 1997 and 1998 were not accompanied by written promissory notes. However, Ms. Schlesinger provided no evidence of any discussion prior to the loans relating to a change of the standard terms, and Ms. Woodcock relied upon those terms in making the loans. Mr. Dixon admitted that it was his fault promissory notes were not found to memorialize all the loans but he "couldn't imagine approving a loan without those terms." No negotiations ever occurred between Ms. Schlesinger and Ms. Woodcock directly, and Ms. Woodcock relied upon Mr. Dixon to make good investments on her behalf.

[¶ 6] Ms. Schlesinger testified that Mr. Dixon set forth the loan terms on a "take it or leave it" basis and she agreed to them, including joint and several liability. She had no explanation or evidence to suggest what the terms of the undocumented loans would have been if the "standard terms" were not applied. At about the same time frame as the last undocumented Woodcock loans were made in March and April of 1998, a loan was made by another of Mr. Dixon's clients which was documented by a promissory note with the same standard terms—twenty-five percent interest, joint and several liability, and attorney's fees.

[¶ 7] Approximately five months after Ms. Woodcock made the last loan to Ms. Schlesinger and CSR, Ms. Schlesinger's father presented a modified loan agreement to Ms. Woodcock and informed her that, because several of her loans were not documented by promissory notes, this modified loan agreement would provide her greater security. The modified loan agreement purported to supersede all prior agreements relating to the loans, reduced the interest rate to ten percent, and, in effect, eliminated the joint and several liability. By its own terms, the modified loan agreement supported Ms. Woodcock's contention that all the previous loans were subject to the same "standard terms." The section discussing the computation of interest due, drafted by Ms. Schlesinger's representatives, referred to the verbal terms negotiated by Mr. Dixon including the twenty-five percent interest rate.

[¶ 8] The modified loan agreement lowered the interest rate, eliminated the protection of joint and several liability, and extended the term of the loans. It provided no additional protection of Ms. Woodcock's legal right to repayment of the previous loans. Ms. Woodcock signed the loan agreement without Mr. Dixon's knowledge. A few weeks subsequent to the agreement being signed, CSR filed for bankruptcy.

[¶ 9] Ms. Woodcock filed suit in an effort to collect on the loans and also made allegations of fraud and conspiracy. Both parties sought summary judgment on the modified loan agreement. The trial court granted Ms. Woodcock's summary judgment motion concluding the modified loan agreement lacked consideration and was void.

[¶ 10] In addition, the trial court granted Ms. Woodcock summary judgment on the December 15, 1997, promissory note executed by Ms. Schlesinger and on certain of the standard loan terms applicable to the remaining loans including the twenty-five percent interest rate and the thirty-five-day repayment deadline calculated from the date of the loans. The trial court also granted Ms. Schlesinger summary judgment on the fraud and civil conspiracy claims.

[¶ 11] Following a trial to the court on the remaining issues, the court found a course of dealing existed between the parties which proved each of the oral contracts for loans included: joint and several liability; twenty-five percent interest per annum on any unpaid balance; short term due dates; late charges of one percent on the principal; and the obligation of the borrowers, including Ms. Schlesinger, to pay all reasonable attorney's fees and costs of collection. Judgment was awarded for $89,000 in principal, $52,995.89 in interest through June 2, 2000, $890 in late fees, $11,140 in attorney's fees and costs of collection, and $996.20 in court costs. Ms. Schlesinger appealed both the summary judgment order and the final judgment.

STANDARD OF REVIEW

A. Summary Judgment

[¶ 12] It is well recognized that summary judgment is proper only when there are no genuine issues of material fact and the prevailing party is entitled to...