Walter E. Heller & Co. v. Barnes

• Decision Date: 22 February 1967
• Docket Number: No. 5783,5783
• Citation: Walter E. Heller & Co. v. Barnes, 412 S.W.2d 747 (Tex. Ct. App. 1967)
• Parties: WALTER E. HELLER & COMPANY, Appellant-Appellee, v. James C. BARNES, Sr., et al., Appellees-Appellants. . El Paso
• Court: Texas Civil Court of Appeals

Page 747

412 S.W.2d 747

WALTER E. HELLER & COMPANY, Appellant-Appellee, v.James C. BARNES, Sr., et al., Appellees-Appellants.

No. 5783.

Court of Civil Appeals of Texas El Paso.

Feb. 22, 1967.

Rehearing Denied March 22, 1967.

Strasburger, Price, Kelton, Miller & Martin, Royal H. Brin, Jr., Dallas, for appellant and appellee.

Stubbeman, McRae, Sealy & Laughlin, W. B. Browder, Jr., and Milton L. Bankston, Midland, for Barnes and others.

Allan Poage, El Paso, Wm. J. Rochelle, Jr., and John L. King, Dallas, for intervenor.

G. H. Nelson, Lubbock, for McSpadden.

Walker F. Means, Pecos, for appellees and appellants.

OPINION

CLAYTON, Justice.

This may be characterized as a 'Billie Sol Estes' case.The facts in brief essence are these:

Estes would arrange with a manufacturer of anhydrous ammonia tanks and related equipment, such as, in this case, Superior Manufacturing Company, hereafter referred to as 'Superior', to sell it certain tanks which he claimed he then owned, and further, that he would secure 'purchasers' who would buy tanks from the manufacturer.Estes promised the manufacturer that the purchases would be arranged under a price which would allow the manufacturer a profit equal to its normal profit had it indeed manufactured the tanks.Estes (or his agents) would agree with the purchasers that if they entered into his proposed transaction he would pay the down payment, if required by the manufacturer, and pay them a cash 'bonus' amounting to approximately ten per cent of the purchase price of the tanks, and further, would lease the tanks from the purchaser on the basis of rentals that would amount to the installments on the unpaid portion of the purchase price of the tanks due the manufacturer.Estes would then secure from the purchasers the lease agreements, chattel mortgages or conditional sales contracts and installment notes on the tanks to be 'purchased', together with balance sheets and credit ratings and financial statements of the purchasers, and would execute his lease of the tanks and make the 'bonus' payments.The necessary papers were then turned over to the manufacturer, who, through its agents, would pass the required papers over to finance companies, or individuals, such as Walter E. Heller & Company, in this case, who would discount the paper and pay the manufacturer.The latter would receive the 'mark up' or profit, and pass the balance along to Estes, from which he would make his rental payments, the 'bonus', etc., and continue the cycle, although the tanks, in large measure, were never manufactured.Elaborate arrangements were made to avoid detection, such as dummy number plates to be attached to tanks in existence that would conform to numbers contained in the purchase documents, in the event of possible inspection.

When these Estes schemes became disclosed, this suit was filed by plaintiffs, included in what may be known as the 'Barnes Group': i.e ., J. C. Barnes, Sr., J. C. Barnes, Jr., Russell J. Ramsland and W. F. Wynn, one of the many groups or associations of purchasers, against Billie Sol Estes, individually and d/b/a Billie Sol Estes Enterprises or Billie Sol Estes Enterprises, Inc., Superior Manufacturing Company, Barbara Jean Orr, Executrix of the Estate of Harold E. Orr, deceased, Coleman D. McSpadden, who, with Orr, was a former officer of Superior, and Walter E. Heller & Company, one of the finance groups.Other original partiesdefendant were severed and were disposed of in other suits.This cause of action was for damages and for the cancellation of certain obligations executed by the Barnes Group and held by, among others, Heller & Company.During the proceedings in the trial on its merits, the Barnes Group tendered and paid into the registry of the court, the sum of $81,299 .52, as representing the 'bonus' payments it had received from Estes for signing some or all of the instruments it sought to cancel.Harry Moore, Jr., Trustee of the bankrupt estate of Billie Sol Estes, intervened in the trial to recover for the estate the tendered amount on the contention that these bonus payments were made from Estes' general bank account and could not be traced to the money that came from Heller through Superior to Estes or to any other specific source, and therefore should be returned to the bankrupt estate for the benefit of all of Estes' creditors, including the plaintiffs and defendants in this case.

Walter E. Heller & Company, the only defendant in the suit to contest the same, denied the allegations of plaintiffs that it had entered into a fraudulent conspiracy in the transactions in question, and filed a cross-action against the Barnes Group, seeking judgment for the unpaid balance of the notes signed by the latter, thus becoming a cross-plaintiff.

Trial was to a jury, to which was submitted twenty-six special issues, which issues, and the jury's answers thereto, are as follows:

No. 1.That Walter E. Heller & Company acted in bad faith in taking the Barnes Group instruments involved in this suit.(The court defined 'bad faith' as follows: 'You are instructed that the term 'bad faith', as used in this charge, means that the persons or company making or taking the instrument must have knowledge of substantial facts and circumstances as to create in his or its mind a suspicion that there was something wrong with the subject matter or title of the persons or person for whom he makes it or from whom he or it takes it, the instrument itself, or to the money represented by such instrument, combined with an intentional disregard of and refusal on the part of the marker or taker of the instrument to learn the facts from the means of knowledge which he or it knows or is at hand, and the circumstances must be such as to constitute dishonesty and not merely negligence.')

No. 2.That the Barnes Group acted in bad faith in signing and executing the instruments.

No. 3.That Heller & Company participated in a conspiracy with Estes or Superior to conceal the non-existence of the anhydrous ammonia tanks from the Barnes Group at the time of the execution of the instruments.

No. 4.That Estes, Orr and Superior did not conspire to conceal the non-existence of the tanks and equipment from Heller at the time of its purchase of the instruments .

No. 5.That Robert K. Graham did not participate in the conspiracy mentioned in No. 4 above.(Robert K. Graham was an officer in Leasing, Inc., and General Leasing of Ft. Wayne, Inc., Indiana corporations, the name of one or the other of such corporations and that of Graham appearing in most, if not all of the lease contracts which were assigned to Heller and others.Graham had represented himself as an 'agent' of Heller, and was described in the testimony as being in liaison with Estes and Superior.)

No. 6.That Estes represented that the tanks and equipment described in the instruments were in existence at the time the instruments were obtained from the Barnes Group.

No. 6A.That such representation was false.

No. 7.That the Barnes Group believed and relied upon such representation.

No. 8.That the Barnes Group would not have signed such instruments had such representation not been made.

No. 9.That Robert K. Graham represented that the tanks and equipment described in the instruments were in existence at the time the instruments were obtained from the Barnes Group.

No. 9A.That such representation was false.

No. 10.That the Barnes Group believed and relied upon such representation.

No. 11.That the Barnes Group would not have signed the instruments had such representation not been made.

No. 12.That the Barnes Group represented to Heller & Company that the tanks and equipment had been furnished and delivered by the supplier and accepted by the Barnes Group.

No. 13.That at the time of such representation the Barnes Group knew that the tanks and equipment had not been furnished and delivered by the supplier and accepted by the Barns Group.

No. 14.That the Barnes Group intended such representation to be relied upon by some financial or lending institutions such as Heller & Company.

No. 15.That Heller & Company did not believe or rely upon such representations.

No. 16.This issue is conditioned upon an affirmative answer to Special IssueNo. 15, and was not answered since the answer to Special IssueNo. 15 was in the negative.

No. 17.That Robert K. Graham was an agent of Heller & Company at the time and on the occasion when the instruments were obtained from the Barnes Group.(The court gave a definition of 'agent' and 'apparent' or 'ostensible' agent.)

No. 18.That the endorsements on the back of the notes involved in this suit were not changed or altered as to the number of parties to the instruments after endorsement by Superior.

No. 19.The notes and chattel mortgages involved in this suit provided for interest exceeding ten per cent per annum.(The court gave a definition of 'interest'.)

No. 20.That $72,000.00 would be a reasonable attorneys' fee for the legal services incurred by Heller & Company in this cause.

No. 21.The jury answered 'None' to the issue of what sum of money, if paid in cash now, would fairly and reasonably compensate the Barnes Group for their damages proximately caused by the acts and conduct of Heller & Company complained of by the Barnes Group, such as is indicated in Issues 1 and 3.(The court gave an instruction that the burden was upon the plaintiff to establish that it had sustained damages proximately caused by the complained-of acts and conduct of Heller & Company.)

No. 22.Let unanswered since it was

No. 22.Left unanswered since it was Issues 6, 6A, 7, 8, 9, 9A, 10 and 11, and some amount of money in answer to Special Issue 21, since no amount of money was found in answer to Special Issue 21.This issue was relative to 'malice' as defined in the issue.

No. 23.This issue was also left unanswered since it was conditioned upon affirmative answer to Special IssueNo. 3,...