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DUNN v. PHOENIX VILLAGE

February 14, 1963.

Byron G. DUNN, Plaintiff,
v.
PHOENIX VILLAGE, INC., a Corporation, and S. B. Holley, Jewell Morris, Wilson Hatfield, Wendell Johnson, Charles Fite and Richard L. Martin, Defendants.



The opinion of the court was delivered by: MILLER

The findings of fact and conclusions of law are included herein in lieu of the filing of findings of fact and conclusions of law separately stated as authorized by Rule 52(a), Fed.R.Civ.P.

 The plaintiff, Byron G. Dunn, is a citizen of Oklahoma and a resident of the City of Muskogee in said State. The defendant, Phoenix Village, Inc., is a corporation organized and existing under the laws of the State of Arkansas with its principal place of business in the City of Fort Smith, Arkansas. The individual defendants are citizens of the State of Arkansas and reside in the City of Fort Smith.

 The "matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs."

 The court has jurisdiction of the cause of action and the parties.

 On June 18, 1962, plaintiff filed his complaint in which he alleged that on or about April 15, 1960, at the request of the defendants, he undertook to secure for and on behalf of defendants a mortgage loan on certain lands and proposed buildings in the City of Fort Smith, Arkansas, for the purpose of enabling the defendants to secure the financing necessary for the construction of a shopping center; that the individual defendants were acting in their "separate, several and individual capacity for and on behalf of their own interest, and were also acting as the authorized agents of the defendant corporation"; that from April 15, 1960, to on or about October 1, 1961, the plaintiff performed services as requested of him by the defendants, including, but not limited to, "the preparation of financial statements, the securing of a leasing agent, the preparation of loan applications, the securing of adequate interim financing, and the securing of loan commitments for permanent financing"; that as a result of the efforts of the plaintiff, commitments were secured from lending agencies in the sum of $450,000.00 by the defendants, and "as a result of the services of the plaintiff, the defendants were able to and did construct the shopping center"; that the defendants accepted the services of the plaintiff "with the knowledge that they were being rendered on behalf of said defendants with the expectation on the part of the plaintiff of receiving payment therefor, and that under all the circumstances said defendants knew that they were not gratuitous, but were rendered by the plaintiff with the expectation of compensation. That said services were beneficial to all of said defendants."

 He prayed judgment against all of the defendants "for the reasonable value of his services in the amount of $25,000.00 and his costs herein expended."

 On July 5, 1962, the defendants filed their motion for a more definite statement, in which they alleged in paragraph numbered I that the plaintiff should be "required to state the facts supporting his conclusion that he was employed to secure the financing necessary for the construction of a shopping center, by stating whether the alleged contract was in writing or oral and, if in writing, by furnishing a copy thereof, or if oral, by setting forth the essential terms thereof including the name of the proposed borrower of the alleged mortgage loan."

 In paragraph V of the motion the defendants alleged that the plaintiff should be "required to state facts supporting his conclusion that defendants 'accepted the services of plaintiff with the knowledge that they were being rendered on behalf of said defendants with the expectation on the part of the plaintiff of receiving payment therefor and that under all the circumstances said defendants knew that they were not gratuitous but were rendered by plaintiff with the expectation of compensation', by stating whether plaintiff's expectation of compensation was based upon the alleged contract in paragraph II of the complaint or some other unrelated contract and, if the latter, whether it was in writing or oral and, if in writing, by furnishing a copy thereof, or if oral, by setting forth the essential terms thereof."

 On July 9, 1962, the court entered an order upon said motion, by which the plaintiff was ordered to amend paragraph 2 of the complaint "by alleging whether the contract between the plaintiff and defendants was in writing or oral. If in writing, a copy of said contract shall be set forth in the amendment, and if oral, the plaintiff shall allege the essential terms and also the name of the proposed borrower of the mortgage loan."

 The court further directed that the plaintiff "clarify whether his claim is based upon the original contract, and whether the plaintiff and the defendants regarded the contract as in full force and effect when a loan was finally accepted by the defendants."

 In accordance with the order of the court, the plaintiff on July 17, 1962, filed his amended complaint in which he restated in substance the allegations contained in the original complaint and further alleged:

 "* * * That the agreement between the plaintiff and the defendants was an oral agreement made in March, 1960, in the City of Fort Smith, Arkansas, and affirmed at various times subsequent thereto, by the terms of which the plaintiff agreed to devote his efforts to secure financing for the defendant corporation, and specifically to secure a mortgage loan commitment acceptable to the defendants, and the defendants agreed to pay a broker's fee of three (3%) percent, plus expenses, of the amount actually borrowed, or to compensate the plaintiff by permitting him to write life insurance on the lives of the individual defendants, to be owned by the corporation, in the amount of the capitalized structure of the shopping center, and to further permit said plaintiff to place all property insurance on the structure to be built."

 On July 25, 1962, subsequent to the filing of the amended complaint, the defendant corporation filed its separate answer in which it denied entering into any agreement, express or implied, with plaintiff in March, 1960, or at any other time "and specifically denies that it agreed to pay a broker's fee of 3%, plus expenses, of the amount actually borrowed or any other fee or expenses, or to compensate plaintiff by permitting him to write life insurance to be owned by this defendant or any other corporation, firm or individual, on the lives of the individual defendants in this action, in the amount of the capitalized structure of said shopping center or any other amount, or to permit plaintiff to place any other insurance on any other structure; but, on the contrary, alleges that this defendant, through its officers, agents and employees did, at or about the time alleged by plaintiff, commence negotiations with the Great Southern Life Insurance Company, a corporation organized under the laws of the State of Texas and authorized to do business in the State of Arkansas, for a loan for the construction of a shopping center and that plaintiff, representing himself to be an officer of and agent for said insurance company, did represent exclusively the interests of said insurance company throughout such negotiations with this defendant and time and time again assured this defendant there was not, nor would there be, any charge or other obligation on the part of this defendant to plaintiff individually."

 The corporate defendant admitted that the individual defendants were acting as the authorized agents for it but denied all other allegations pertaining thereto; that the plaintiff did prepare a loan application but that the application prepared by plaintiff "was directed to his principal, said Great Southern Life Insurance Company, while he was acting within the scope of his authority as agent for said company and not as the result of any separate agreement with, or as agent for, this defendant."

 The defendant admitted that it received a loan commitment in the sum of $450,000.00 from Great Southern Life Insurance Company which it at first accepted but later rejected, and upon rejection of the loan commitment, "it forfeited and paid to said insurance company the sum of $4,500.00 as liquidated damages, and that previous thereto plaintiff had repeatedly stated to this defendant through its officers, agents and employees that in the event of such rejection, such forfeiture would be the only charge against this defendant."

 That at all times while the negotiations were in progress, "plaintiff did not intend or expect to charge this defendant for any services by him rendered or to be rendered, his only intention and expectation being to create a favorable climate for the prospective sale to this defendant of an insurance-funded stock redemption plan and, further, that plaintiff reiterated time and time again that there was not nor would there be any obligation on the part of this defendant to purchase any such plan."

 On July 25, 1962, the individual defendants filed their motion to dismiss the original and amended complaint on the ground that a claim was not stated against them or any of them.

 On July 26, 1962, the motion of the individual defendants was denied on the ground that the original complaint and the amended complaint raised a question of whether the defendants in the negotiation of the contract were acting as agents of Phoenix Village, Inc., or whether they were acting in a dual capacity, and whether there was a meeting of the minds of the plaintiff and the defendants "that the individuals assumed a responsibility to the plaintiff along with their alleged principal, Phoenix Village, Inc."

 Following the overruling of the motion to dismiss, the individual defendants on August 3, 1962, filed their joint answer, in which they in effect denied all the allegations contained in the original and amended complaint as hereinbefore referred to.

 On August 7, 1962, plaintiff filed a motion for production of documents which the defendants promptly furnished to the satisfaction of plaintiff, and an order was entered on October 30, 1962, overruling said motion.

 Upon the issues joined the cause proceeded to trial to the court on January 10, 1963. Upon the completion of the presentation of evidence by the plaintiff, all the defendants moved for a dismissal of the complaint and the amendment thereto. The court reserved action on said motion. Then the individual defendants moved for dismissal of the original and amended complaint, and the court sustained said motion and dismissed the original and amended complaint against the individual defendants.

 The original complaint and the amended complaint having been dismissed as against the individual defendants, the claim of plaintiff against the defendant corporation, Phoenix Village, Inc., was submitted and taken under advisement subject to the submission of briefs by the attorneys for the parties in support of their respective contentions, which briefs have been received and considered along with all the evidence and the exhibits.

 It will be noted that the plaintiff in his original complaint sought a recovery for the reasonable value of his service in the amount of $25,000.00 and his costs herein expended. By his amended complaint he alleged that the agreement between himself and the defendants was oral, and that "the defendants agreed to pay a broker's fee of three (3%) percent, plus expenses, of the amount actually borrowed, or to compensate the plaintiff by permitting him to write life insurance on the lives of the individual defendants, to be owned by the corporation, in the amount of the capitalized structure of the shopping center, and to further permit said plaintiff to place all property insurance on the structure to be built."

 The corporate defendant in its answer alleged that "plaintiff did not intend or expect to charge this defendant for any services by him rendered or to be rendered, his only intention and expectation being to create a favorable climate for the prospective sale to this defendant of an insurance-funded stock redemption plan and, further, that plaintiff reiterated time and time again that there was not nor would there be any obligation on the part of this defendant to purchase any such plan."

 The evidence introduced by both parties leaves much to be desired. However, there is no indication or contention that more definite evidence could be produced. Therefore, the court, in the consideration of the issues, has attempted to consider all of the testimony and to arrive at a reasonable solution of the controversy between the parties. In so approaching the case, the court realizes that it should not assume any facts that are not established by the evidence, but must consider the evidence in totality in order to determine what the intention of the parties was and whether plaintiff is entitled to recover any amount and, if so, how much and on what basis.

 The defendant corporation was organized February 16, 1959, and became the owner of real estate situated in Fort Smith, upon which it desired to erect a shopping center.

 In the spring of 1960 the plaintiff was engaged in the mortgage loan brokerage and insurance business and during that time was employed by a group of physicians in Fort Smith to aid them in obtaining finances to construct a medical center in the city. Mr. Jewel Morris, a stockholder and the Vice President of the defendant corporation, learned of such activity on the part of the plaintiff and requested a conference with plaintiff. In accordance with such request the plaintiff met Messrs. Morris and Paul J. Bercher, Jr., who at the time was a stockholder, in Fort Smith, Arkansas, for a general conference. Accompanying the plaintiff was Mr. R. S. Sams, who at that time, but not presently so engaged, was an agent of the Great Southern Life Insurance Company. The discussion was along general lines, but Messrs. Morris and Bercher advised plaintiff that the defendant corporation desired to construct a shopping center and was interested in obtaining a loan from some institution with which to finance the construction. The plaintiff was requested to make suggestions, which he did, and Messrs. Morris and Bercher specifically inquired of him what he would expect as remuneration for his services in aiding the corporation if the corporation should desire to proceed. They were assured at the time by the plaintiff that he would not expect any commission or compensation from them or the corporation for his work in aiding them in obtaining a loan, but that he would obtain his compensation in another manner. When asked to explain what he meant by that statement, he stated that he was not a broker and would "get his pay" from Great Southern Life Insurance Company. He also stated that he hoped to write insurance for the corporation and the individual stockholders, and that his commission as an insurance agent would be all that he would expect. At that time, but not at the time of the trial, he was a life insurance agent of the Great Southern Life Insurance Company. It was also ascertained by Messrs. Morris and Bercher at that time that the plaintiff was obtaining his compensation for the work he was doing for the group of physicians by writing insurance for them.

 The plaintiff was introduced by Sams as a Vice President of the Great Southern Life Insurance Company, and Messrs. Morris and Bercher left the conference believing that the plaintiff was in fact a Vice President of the insurance company. He carried a business card, 3 1/2 X 2 inches in size, which apparently was handed to either Mr. Morris or Mr. Bercher. However, they did not read the card but assumed that he was a Vice President of the insurance company and had appeared in such capacity. The other officers and stockholders of defendant entertained the same opinion until months later.

 The card, enlarged to twice its size, is as follows:

 (Illustration omitted)

 The next contact that the plaintiff had with any of the officials of the defendant corporation was on May 3, 1960, at which time he called on the defendant, Richard L. Martin, who was one of the directors of the defendant corporation. The next day, May 4, 1960, a special meeting of the Board of Directors of the defendant corporation was held. The minutes of the meeting reflect that Mr. Martin reported "on progress made toward securing a loan for construction of the shopping center. He stated that Byron Dunn, Agent for Great Southern Life Insurance Company of Houston, Texas, had conveyed the unofficial information that the company would commit itself to a loan in the amount of $350,000.00 at 6 1/2 percent interest without a national or stockholder endorsement of the Consumer Market, Inc., lease to the shopping center and that he (Dunn) was of the opinion that he personally could obtain an additional $250,000.00 commitment from an unnamed source who would enter into a mutually acceptable arrangement with Great Southern for the security on their respective loans."

 Upon this report being made to the directors, they adopted a resolution providing:

 "* * * That the president or vice-president is hereby authorized to borrow not in excess of $600,000.00 from the Great Southern Life Insurance Company and/or any other lending institution for such period and on such terms as may be agreed upon by the officer effecting such loan, provided, that such loan shall not exceed an interest rate equal to 6 1/2% per annum of the amount borrowed and, provided further, that such lending institution shall not require personal endorsements in excess of the proportion each stockholder's share of stock in Phoenix Village, Inc. bears to the total outstanding shares of stock in the corporation, and

 * * *

 "* * * That the president or vice-president is authorized to execute, in behalf of this corporation, such application for loan or loan agreement or other papers or documents as may be necessary or advisable in order to effect such loan or loans."

 Following the meeting of the Board and on the same day, Mr. Martin wrote plaintiff as follows:

 "You are authorized to negotiate with any lending institution of your choosing for a mortgage loan on certain land belonging to the corporation in the vicinity of Towson and Phoenix Avenues in Fort Smith, Arkansas. It is understood that any final arrangements made by virtue of such authority will be subject to approval of the board of directors of Phoenix Village, Inc. and that no liability will be incurred by the corporation until such approval is given and application made.

 "The undersigned is a director of and attorney for Phoenix Village, Inc."

 The letter was written at plaintiff's request to insure him a finder's fee from whichever of his unnamed sources he might secure the $250,000.00 over and above the $350,000.00 his company (Great Southern) would probably lend.

 Following the receipt of that letter the plaintiff proceeded to acquire certain information which he thought necessary to include in an application for a mortgage loan, and on July 11, 1960, he personally prepared in his own handwriting an application of the defendant corporation to Great Southern Life Insurance Company for a first mortgage loan on city real estate. The application appears as plaintiff's Exhibit No. 2 and is for a loan of ...


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