Whitmore v. First City Nat. Bank of Oxford

• Decision Date: 26 January 1979
• Parties: Robert L. WHITMORE et al. v. FIRST CITY NATIONAL BANK OF OXFORD, etc., et al. 77-281.
• Court: Alabama Supreme Court

Page 517

369 So.2d 517

Robert L. WHITMORE et al. v. FIRST CITY NATIONAL BANK OF OXFORD, etc., et al.

77-281.

Supreme Court of Alabama.

Jan. 26, 1979.

Rehearing Denied April 6, 1979.

Thomas E. Davis and Gary F. Burns of Burns, Shumaker & Davis, Gadsden, for appellants.

Jack W. Torbert and Howard B. Warren, Gadsden, for appellee, First City National Bank of Oxford.

BEATTY, Justice.

This is an appeal by Robert L. Whitmore and other plaintiffs from a judgment in their favor entered on four separate jury verdicts. We affirm.

The controversy arose out of a many-faceted multi-party construction project. It began with a tract of real estate owned by Tombo Corporation, one of whose principal stockholders was Tom Stinson. Tombo Corporation sold this tract of land to Alder Acres, Inc., a corporation (which later was dissolved and became Fitts and Rogers, Inc.). Alder Acres executed a mortgage on the property in favor of First City National Bank of Gadsden (which became First Alabama Bank). Tom Stinson was employed as a loan officer by that bank at the time this mortgage was executed, but at the time of the transaction in question he had become president of the First City National Bank of Oxford, Oxford, Alabama.

Sometime in April, 1975 Fred Fitts, a Gadsden developer and co-owner of Fitts and Rogers, Inc., approached Stinson concerning his project to construct a health spa. The spa was to be built on the tract of land described above and which Fitts and Rogers subsequently had sold to Regency Health Club, Inc. Fitts was also president of Regency.

On April 30, 1975 the First City National Bank of Oxford agreed to make a loan of $175,000.00 to Regency and its president for construction of the spa. The loan agreement between the bank and Regency provided, however, that the bank would not be obligated to advance more than $120,000.00 unless the bank were able to obtain the participation of some other financial institution for the balance of the loan amount. The loan was closed that day, with $100,000.00 being advanced to Regency. Of that sum $39,777.55 went to satisfy the earlier mortgage indebtedness on the property which was owned by First Alabama Bank. The further sum of $46,069.76 of the proceeds was used by Fitts to purchase a certificate of deposit which was assigned to the bank as security for pre-existing debts of Fitts and Rogers, Inc. Another $7,603.63 of the proceeds was used to pay off a bank loan on Fitts' automobile, and $922.75 of the proceeds was paid to the closing attorney. An additional $8,000.00 was advanced at a later date.

Sometime later Diversified Development Company, Inc. became interested in the construction of the spa. The evidence tends to show that Robert Whitmore, Vice-President of Diversified, contacted Fitts regarding Diversified's participation in building it, and Fitts asked for an estimate of costs, which Diversified originally estimated at $180,000.00. In June or July, 1975, Whitmore inquired of Stinson about the bank's loan to Fitts for the spa project. According to Stinson, he advised Whitmore to confer with Fitts regarding the details of the loan. Whitmore and Diversified's president, Julius Pate, however, maintained that Stinson represented to them that Fitts had a loan of $175,000.00 and that Diversified was financially safe in proceeding with the spa project. In any case, Fitts authorized Diversified to begin construction and it began on July 1, 1975.

On September 12, 1975 Pate and Whitmore visited the Oxford bank to obtain a first installment on the Regency loan. Ultimately they did receive a check in the amount of $23,864.00 payable to Regency and Diversified, but only after they had executed a promissory note for the amount of that check. They were also supplied with a like note for Fitts' signature. After Fitts executed his note to the bank in that amount, Whitmore and Pate were allowed to cancel their note in the same amount. At that time Stinson informed Pate and Whitmore that the bank would lend no more money for the spa project. Their later effort on or about October 1 to obtain additional bank funds was unsuccessful. When Pate and Whitmore communicated with Fitts about this, according to them Fitts stated to them:

He's (Stinson) going to have to get you the money. I paid him under the table to set this deal up for me and he's going to have to cooperate with us. I'll call him and we'll get your money.

Fitts denied making these statements.

At least one other meeting in Oxford was attended by all of these parties concerning the procurement of additional funds, and later they met in Gadsden seeking the participation of the First Alabama Bank. When these were not forthcoming, the construction project was halted. Pate, Whitmore and Diversified brought this action against First City National Bank of Oxford, Stinson, Fitts and The Regency Health Club, Inc. alleging breach of contract, conspiracy and fraud.

At the trial the court submitted the case to the jury on a count of contract between Diversified and Regency, and conspiracy and fraud against all defendants. The jury returned four separate verdicts. It found in favor of Diversified on its contract count and awarded $125,000.00 against Regency Health Club. It awarded $16,000.00 to Diversified against all defendants. Another verdict awarded $20,000.00 to Pate against Fitts and Regency. It also awarded Whitmore $20,000.00 against Fitts and Regency. In the aggregate the jury's verdict was $181,000.00. Thus each of the plaintiffs obtained a jury verdict, either on the theory of contract or upon the theories of fraud and conspiracy. The plaintiffs moved for a new trial, and when that was denied them this appeal ensued.

Basically, there are four issues presented for review: Whether the trial court erred in:

(1) excluding evidence of an August 20, 1974 payment from Fred Fitts to Tom Stinson and their alleged conversation regarding "under the table" payments;

(2) excluding evidence of the certificate of incorporation of Tombo Corporation and a deed from Tombo Corporation to Alder Acres;

(3) preparing the verdict forms submitted for the jury's use, and

(4) in refusing to allow the plaintiffs to amend their complaint and the pretrial order.

With regard to the first item, we have concluded that the trial court did not err in excluding evidence of the August, 1974 payment from Fitts to Stinson and the alleged statement of Fitts, by way of either direct or cross-examination. In reaching this conclusion we have not overlooked the nature of a conspiracy or the kind of evidence which may prove its existence. The conduct of the alleged conspirators during the progress of the conspiracy and its end result in themselves usually establish the ultimate fact of the conspiracy itself. It is for this reason that our court has approved the introduction of evidence before and after the date of the combination. Barber v. Stephenson, 260 Ala. 151, 69 So.2d 251 (1953); O'Dell v. State, 270 Ala. 236, 117 So.2d 164 (1959). The proof, however, must tend to establish the ultimate fact, I. e., the conspiracy itself. Barber, supra. It is in that aspect that this evidence was inadmissible. When Fitts paid Stinson on August 20, 1974, neither the Regency Health Club, nor Pate nor Whitmore was even contemplated by Fitts or Stinson, for aught appearing. Fitts did not come forward with the proposal to build the spa until the following April. Stinson's connection with the property, as principal stockholder of Tombo Corporation, had long since been removed when the construction idea was advanced. It does not appear that the mere payment to Stinson was an act unlawful in itself, and therefore,

where unlawful means are not used . . . the object or purpose of the combination must be to cause damage to the plaintiff. . . . (W)hat is required is that the combiners should have acted In order that . . . the plaintiff should suffer damage. If they did not act in order that the plaintiff should suffer damage they are not liable, . . . . (Snyder v. Faget, 295 Ala. 197, 203, 326 So.2d 113 (1976) quoting with approval from Winfield on Torts, Conspiracy 557, (8th ed. 1967)).

The reference to an "under the table" payment by Fitts to Stinson referred to that 1974 payment from Fitts to Stinson and thus was offered to prove a conspiracy to damage the plaintiffs. Under the circumstances it furnished no reasonable inference of a purpose to injure these plaintiffs at the time it was made. Indeed, the plaintiffs' argument seems to be that this payment represents a plan by Fitts and Stinson to have Diversified contract with Fitts to construct the spa, and then to have the venture fail with a resulting loss to Diversified (not to mention any loss to Fitts by reason of its failure). Without describing the evidence in detail, we have observed that the record contains evidence of extensive real estate transactions conducted by Fitts and Rogers prior to and at the time of the payment in question. Fitts testified, in fact, that this was a payment to Stinson for putting an earlier project together in which Stinson had made money for him. There was also evidence of many other debts owed by Fitts and Rogers to banks, other than to Stinson's employer, at the time of the payment in question. None of this evidence would help to qualify the earlier payment to Stinson as relevant evidence tending to prove a conspiracy between Fitts and Stinson at that time to harm Diversified, Pate or Whitmore. Its exclusion by the trial court, therefore, was proper. Phoenix Insurance Co. of New York v. Leonard, 270 Ala. 427, 119 So.2d 217 (1960).

What we have stated with reference to the 1974 transaction between Stinson and Fitts applies equally as well to the exclusion from evidence of the Tombo Corporation charter and the warranty deed from Tombo to Alder Acres, Inc. Our examination of the...