Westinghouse Credit Corporation v. Green

• Decision Date: 26 October 1967
• Docket Number: No. 8784.,8784.
• Citation: 384 F.2d 298
• Parties: WESTINGHOUSE CREDIT CORPORATION, Appellant, v. James GREEN and Emma Jo Green, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

384 F.2d 298 (1967)

WESTINGHOUSE CREDIT CORPORATION, Appellant, v. James GREEN and Emma Jo Green, Appellees.

No. 8784.

United States Court of Appeals Tenth Circuit.

October 26, 1967.

Richard M. Davis, of Davis, Graham & Stubbs, Denver, Colo. (Robert H. Harry, Thomas S. Nichols and Richard P. Holme, of Davis, Graham & Stubbs, Denver, Colo., with him on the brief), for appellant.

Bernard L. Trott, of Trott, Kunstle, O'Leary & Ratner, Colorado Springs, Colo., for appellees.

Before LEWIS and SETH, Circuit Judges, and BRATTON, District Judge.

BRATTON, District Judge.

This is an appeal by Westinghouse Credit Corporation from a jury verdict in favor of Mr. and Mrs. James Green, who, with others, had signed as guarantors on a loan made by Westinghouse to Mountain States Mining and Milling Company. The Greens' defense was that their guaranty had been induced by the fraudulent representations of Westinghouse agents having apparent authority to make such representations. Westinghouse denied the agents' apparent authority and counterclaimed that Green had defrauded it by withdrawing from Mountain States money he had advanced to the company to qualify it for the Westinghouse loan. Green denied that his actions were fraudulent.

Green had been approached by Donald Coleman, the owner of Coleman Electric Company and an independent finance dealer for Westinghouse, and by H. K. Gilliland, the president of Mountain States Mining and Milling Company. Coleman had been in touch with the industrial financing agent of Westinghouse, who had recommended to Westinghouse that it make a loan to the new company. Westinghouse agreed to loan $165,000.00 to the newly formed corporation, provided that certain paid-in capital requirements were met. Coleman proposed that Green advance the company $85,000.00 interim financing in return for a royalty interest and an interest in the process to be used to recover gold from the Snake River in Wyoming. Of the $85,000.00 interim money, $65,000.00 would be paid to Coleman Electric Company for equipment it furnished to the project, and Coleman proposed to borrow this amount from his company and turn it back to Green immediately. The effect of the proposed transaction would be that the mining company would have an equity ownership in the equipment, and Coleman would owe his company the amount of the repayment to Green. The gold mining claims owned by the company and the new process to be used to recover the gold were represented as very valuable.

A series of meetings were held. At one of them, Paul Lord, a Westinghouse salesman, gave Green a report on the project. The report was bound in a Westinghouse cover, and Coleman and Lord represented that it was the result of an investigation by Westinghouse into the recovery process and the value of the claims. The report was very favorable to the proposed venture's profitability. Both Coleman and Lord owned stock in the venture.

Coleman and Gilliland also asked the Greens to become substituted guarantors on the Westinghouse loan, replacing two guarantors who had refused to put up any money for the project. The Greens agreed to advance the $85,000.00 and to guaranty the note. In accordance with Coleman's initial proposal, $65,000.00 was paid to Coleman Electric Company, and it returned this amount to Green.

The mining company soon became defunct, and it appeared that the mine had been "salted" so as to falsify the reports of its value. The new recovery process was equally valueless. Westinghouse had never investigated either the property or the process, and the representations that it had done so were completely false.

With the loan in default, Westinghouse sought to hold the guarantors liable and filed this diversity action in the court below.

At the close of the evidence, Westinghouse moved for a directed verdict in its favor on its charge of fraud against Green and for a directed verdict against defendants on the issue of apparent authority. The court denied the motions, and this is appealed as error. Westinghouse contends that the evidence fails to show any acts or conduct by it which created apparent authority in Coleman or Lord to make representations to the Greens. Further, it argues, no representations of any kind were made to Mrs....