Stone v. First Wyoming Bank N.A., Lusk

• Decision Date: 07 February 1980
• Docket Number: Nos. 77-1638,77-1639,s. 77-1638
• Citation: 625 F.2d 332
• Parties: Helen R. STONE, Trustee for Robert D. Munroe, a Bankrupt; Foy D. Jordan; Richard J. Bird; B. L. Kootz; Frank M. Mantello; Cant-Hook Ranch, a partnership; Lusk Ranch, a partnership; and Cant-Hook Cattle Co., a partnership, Plaintiffs-Appellants and Cross-Appellees, v. FIRST WYOMING BANK N. A., LUSK, First Wyoming Bank N. A., Cheyenne, and the Lincoln Corporation, Defendants-Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 332

625 F.2d 332

Helen R. STONE, Trustee for Robert D. Munroe, a Bankrupt;

Foy D. Jordan; Richard J. Bird; B. L. Kootz; Frank M.

Mantello; Cant-Hook Ranch, a partnership; Lusk Ranch, a partnership; and Cant-Hook Cattle Co., a partnership, Plaintiffs-Appellants and Cross-Appellees, v. FIRST WYOMING BANK N. A., LUSK, First Wyoming Bank N. A.,

Cheyenne, and the Lincoln Corporation,

Defendants-Appellees and Cross-Appellants.

Nos. 77-1638, 77-1639.

United States Court of Appeals, Tenth Circuit.

Argued Nov. 15, 1978.

Rehearing Denied Sept. 3, 1980.

Decided Feb. 7, 1980.

Norman D. Haglund of Kelly, Haglund & Garnsey, Denver, Colo., for plaintiffs-appellants and cross-appellees Foy D. Jordan, Richard J. Bird, B. I. Kootz, Frank M. Mantello, Cant-Hook Ranch, a partnership, Lusk Ranch, a partnership, and Cant-Hook Cattle Co., a partnership.

David J. Carey of Anderson & Carey, Littleton, Colo., for plaintiff-appellant and cross-appellant Helen Stone.

Blair J. Trautwein of Hathaway, Speight & Kunz, Cheyenne, Wyo., for defendants-appellants-appellees and cross-appellants.

Before HOLLOWAY and DOYLE, Circuit Judges, and STANLEY, District Judge. ^*

HOLLOWAY, Circuit Judge.

In this diversity action plaintiffs-appellants seek review of a judgment notwithstanding the verdict entered by the district court on defendants-appellees' motion. The court set aside a jury verdict which was generally in favor of the appellants. The defendant banks cross-appeal the denial of an alternative motion for a new trial.

Appellants are four individuals Richard J. Bird, Foy D. Jordan, B. L. Kootz, and Frank M. Mantello; three partnerships the Cant-Hook Ranch partnership; the Lusk Ranch partnership, and the Cant-Hook Cattle Co. partnership; and Ms. Helen Stone bankruptcy trustee for one Robert D. Munroe whose whereabouts is unknown. Munroe, Bird, and Jordan were partners of the Cant-Hook Ranch partnership which was formed in 1970. Munroe, Kootz, Mantello, and Jordan were partners of the Lusk Ranch partnership which was formed in 1972. Munroe, Jordan, and Bird were partners of the Cant-Hook Cattle Co. partnership which was formed in 1972. These partnerships, operating mainly out of Colorado and Wyoming, were engaged in various phases of the cattle raising industry.

Appellants initially filed this suit as a declaratory judgment action seeking a determination of their legal right to and ownership of approximately $361,664.31, plus interest, held in escrow by the defendant-appellee First Wyoming Bank of Lusk (Lusk Bank) and for a legal accounting of the proper amounts owed by the Cant-Hook Cattle Co. partnership to Lusk Bank on certain promissory notes held by Lusk Bank. The complaint also asked for a determination of legal rights to certain collateral held by Lusk Bank, in particular the stock certificate of appellant Jordan which represented ownership of 5,000 shares of Greyhound Corporation stock. The appellees, Lusk Bank, First Wyoming Bank of Cheyenne (Cheyenne Bank), and Lincoln Corporation, a nominee corporation of Lusk and Cheyenne Banks, responded to the complaint by denying the appellants had any legal right to the escrowed funds and by asserting a counterclaim for $455,526.13 against all of the appellants, jointly and severally, on twenty separate promissory notes held by Lusk Bank. ¹

I THE FACTUAL BACKGROUND

Viewing all the evidence, together with all reasonable inferences therefrom, in the light most favorable to the party receiving the jury verdict, Symons v. Mueller Co., 493 F.2d 972, 976 (10th Cir.), the evidence tended to show the following facts:

During 1974 and 1975 Lusk Bank, in participation with Cheyenne Bank, conducted several banking transactions with Cant-Hook Cattle Co. and several further transactions with Robert D. Munroe. ² These By early 1975 the Lusk Bank held twenty unpaid promissory notes with a total outstanding principal balance of $455,526.13. Seven (7) of these notes, with a total outstanding balance of $102,359.44 named the Cant-Hook Cattle Co. partnership as maker, and were signed by a duly authorized agent, Jack S. Manion. ³ Four (4) additional notes, with a total outstanding balance of $73,851.15, named the Cant-Hook Cattle Co. partnership as maker, and were signed by one Bill Powell, an employee of Robert Munroe. ⁴ Each of these eleven notes reflected that the sole borrower or debtor was Cant-Hook Cattle Co. None of these notes made any reference to any of the other partners or partnerships. XX R. 673. Moreover, each of the notes was listed on Lusk Bank's liability ledger as an obligation of Cant-Hook Cattle Co. without any reference to the other partners or partnerships. III App. 12-12A.

transactions involved loans for substantial sums, evidenced by numerous promissory notes payable to Lusk Bank. By the spring of 1975 Munroe had abandoned his business dealings and disappeared from sight after giving quit-claim deeds of his interest in real property, apparently owned by the Lusk Ranch and the Cant-Hook Ranch partnerships, to the Lincoln Corporation, the nominee corporation of the appellee banks. II App. 179-186. Munroe was subsequently placed in involuntary bankruptcy in absentia, and Ms. Helen Stone was appointed as trustee by the bankruptcy court in the District of Colorado.

The remaining nine (9) notes, with a total outstanding principal of $279,315.54, were in Robert D. Munroe's name as maker. ⁵ Two of these notes totalling $7,500.00 were also in the name of Munroe's wife and were signed personally by both Munroe and his wife. ⁶ Seven of these "Munroe" notes were signed in the name of Robert Munroe by Bill Powell. Aside from each of these notes indicating that Munroe was the sole borrower and debtor, each of the notes was listed on Lusk Bank's liability ledger as the sole obligation of Munroe. III App. 30-30A. None of the notes indicated any execution or guarantee by the other partners or partnerships.

In June 1974 Munroe filed with the Wyoming Secretary of State articles of incorporation for an entity called the Torrington Land & Cattle Management Co. (TLC). III App. 223. Munroe, his wife, and an employee of Munroe were the incorporators, the initial directors and the officers of TLC. ⁷ Prior to and after the incorporation of TLC, Munroe attempted to convince the partners of the three partnerships to consolidate their assets in this Subchapter S corporation to utilize the tax advantages of the corporate structure. II App. 97-100a. Between August and September of 1974, some In October 1974 Bird, Jordan, Kootz, and Mantello discovered that Munroe had placed a large deed of trust against the Cant-Hook Ranch property to secure a personal debt owed to the Conair Air Credit Union and that proceedings had been commenced to foreclose that deed of trust. During this time Jordan, Kootz, and Bird also discovered that Munroe had misrepresented to them the nature of TLC's assets, particularly as to the assets placed in the corporation by Munroe. ⁸ In November 1974 Bird, Jordan, and Kootz, acting through their attorney, Walter Garnsey, rescinded the assignments of their partnership interests to TLC. ⁹ Bird and Jordan, as partners in the Cant-Hook Cattle Co. partnership, also formally cancelled various powers of attorney which Munroe had held from them to conduct the business activities of that particular partnership.

of the individual partners (Bird, Jordan and Kootz) assigned their partnership interests to TLC in return for the TLC stock or TLC promissory notes guaranteed by Munroe.

By letter dated January 15, 1975, Lusk Bank formally demanded that TLC, the partnerships and their partners pay the outstanding principal and interest owed on all of the eleven Cant-Hook Cattle Co. notes previously described. On that same day Lusk Bank also made a formal written demand on Mr. and Mrs. Munroe, but only for the balance owed on the nine Munroe notes previously described. As late as March 21, 1975, Lusk Bank continued to treat the twenty promissory notes as two separate lines of credit by sending TLC, the partnerships, and their partners an audit request for confirmation of the balances due on only the eleven Cant-Hook Cattle Co. notes. III App. 16. A similar request regarding the nine Munroe notes was sent to Munroe and his wife. III R. 34. Subsequently Lusk Bank asserted liability against all of the partnerships and their partners on all twenty unpaid notes, claiming that the various notes represented one line of credit for which all of the partnerships and thus all of the partners were jointly and severally liable.

After Munroe's disappearance in the spring of 1975, his several partners attempted to wind up the affairs of the three partnerships in an orderly manner by selling the remaining assets of the partnerships. Because Lusk and Cheyenne Banks, through the Lincoln Corporation, held Munroe's quit-claim deeds to assets owned by the Lusk Ranch partnership and the Cant-Hook Ranch partnership, their cooperation was necessary to effectuate a proper sale. To secure the banks' cooperation appellants agreed that the proceeds of such sales would be temporarily entrusted to Lusk Bank pending a legal determination of liability on the unpaid promissory notes. Under this arrangement, the assets of the Cant-Hook Ranch partnership were sold, resulting in the transfer of $194,765.60 in proceeds to Lusk Bank in the fall of 1975. The assets of the Lusk Ranch partnership brought $166,898.71, which was similarly transferred to Lusk Bank. The Cant-Hook Cattle Co. partnership had no remaining assets.

At the conclusion of the trial, the jury returned a verdict generally in favor of the appellants and against the appellees, finding specifically that Lusk Bank owed the Lusk Ranch partnership the sum of $166,898.71 plus interest, and further owed the Cant-Hook Ranch partnership the sum of $194,765.60 plus interest. The jury also found that the Cant-Hook Cattle Co. partnership owed the Lusk Bank the sum of...