Title: Charter Thrift and Loan v. Cooke

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Charter Thrift and Loan v. Cooke1988 WY 151766 P.2d 522Case Number: 88-133Decided: 12/13/1988Supreme Court of Wyoming
CHARTER THRIFT AND LOAN, 
A UTAH CORPORATION, APPELLANT (PLAINTIFF),

v.

BREC COOKE, D/B/A 
STAGECOACH ENTERPRISES, APPELLEE (DEFENDANT),

GEORGE E. COOKE 
ASSOCIATES, INC., A WYOMING CORPORATION, AND ROCKY MOUNTAIN EQUITY CORPORATION, 
(DEFENDANTS).

Appeal from the District 
Court, TetonCounty, Robert B. Ranck, 
J.

Peter F. Moyer, 
Jackson, for appellant.

Floyd R. King of 
King & King, Jackson, for 
appellee.

Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY, 
and GOLDEN, JJ.

MACY, 
Justice.

[¶1.]     Appellant Charter 
Thrift and Loan (Charter) sought judgment against appellee Brec Cooke, d/b/a 
Stagecoach Enterprises (Cooke) for amounts owed on a promissory note secured by 
a collateral assignment of a lease and a trust deed with an assignment of rents. 
At the conclusion of a bench trial, the district court directed judgment for 
Cooke.

[¶2.]     We 
affirm.

[¶3.]     Charter presents the 
following issue:

Was a directed verdict 
properly entered by the trial court against the appellant, where a landlord 
assigned its leasehold rights to the appellant as security for a loan, and the 
appellee as tenant refused to pay rent to appellant following default on the 
loan?

[¶4.]     George E. Cooke 
Associates, Inc. (Associates) (a closely held family corporation whose 
stockholders are George Cooke, his wife, Marina, 
and his son, Brec) owned as its sole asset a bar/restaurant in Wilson, Wyoming, known as the Stagecoach Bar. On 
January 10, 1985, Associates leased a portion of the bar to Cooke for a term of 
five years. The lease stated that the leased area (basically the kitchen area) 
was to be used by Cooke for conducting a food service business within the 
bar.

[¶5.]     On January 17, 1985, 
Associates obtained a $40,000 loan from Charter. As part of the loan 
transaction, Associates executed three documents: (a) a collateral assignment of 
a lease giving to Charter all the beneficial interest in the lease between 
Associates and Cooke; (b) a commercial note in the amount of $40,000; and (c) a 
trust deed with an assignment of rents conveying to Charter, in trust, the lease 
between Associates and Cooke.

[¶6.]     On February 19, 1985, 
Charter recorded the trust deed with the Teton County Clerk, attaching the 
collateral assignment of lease as well as the lease itself. Charter conceded 
that no other filing of its security interest in the lease was made in 
Wyoming.

[¶7.]     After the December 4, 
1985, payment, Associates ceased making payments on the loan from Charter, 
having made regular payments since March 19, 1985. On February 5, 1986, 
Associates sold the bar to Stagecoach Enterprises, Inc., a corporation whose 
sole stockholder is Cooke. The lease between Associates and Cooke was then 
verbally cancelled, and a new lease on the kitchen portion of the bar was 
entered into between Stagecoach Enterprises, Inc. and another corporation called 
First Stage, Inc. Cooke and Juline Christofferson owned one-half of the stock in 
First Stage, Inc. By early 1987, Cooke and Christofferson purchased all the 
stock in First Stage, Inc. and cancelled the new lease.

[¶8.]     The record further 
demonstrates that no payments were made on Associates' indebtedness to Charter 
from December 4, 1985, until August 12, 1986. Cooke negotiated with Charter to 
assume Associates' indebtedness, but those negotiations ultimately failed 
because Charter insisted that, as part of the assumption, Cooke give to Charter 
a mortgage on the bar, which he refused to do. From August 1986 through the end 
of October 1986, while negotiating with Charter, Cooke paid a total of $9,000 to 
Charter on Associates' debt.

[¶9.]     On May 18, 1987, George 
E. Cooke and his wife, Marina Cooke, were discharged from their debts in a 
Chapter 7 bankruptcy proceeding in the United States Bankruptcy Court for the 
District of Wyoming. As a result of this bankruptcy, Cooke was the only source 
from which Charter could expect payment on the 
indebtedness.

[¶10.]  By stipulation, the parties agreed that 
the only property encumbered by the trust deed with assignment of rents was the 
rentals payable under the lease between Cooke and Associates and that "[t]he parties to this proceeding all had 
proper notice of said assignment of rents referred to in the Trust Deed, and as 
between those parties the `rental stream' was duly encumbered as security 
for the * * * loan." (Emphasis added.) Cooke also contended that on April 19, 
1985, before he had notice of the assignment of the lease, he made an advance 
payment of rent to Associates in the amount of $17,000.

[¶11.]  We will not set out in detail the claims 
made by Charter in its complaint, because by the time of trial the issues had 
been simplified to such an extent that the only claim being pursued by Charter 
was one premised on the theory that Associates (as landlord) and Cooke (as 
tenant) could not alter the lease to the detriment of 
Charter.

[¶12.]  In a nonjury trial, where the district 
court dismisses the plaintiff's suit at the end of the presentation of the 
plaintiff's evidence, as occurred in this case, this Court is compelled to 
consider the evidence as it would have had the district court directed a jury 
verdict. Caribou Four Corners, Inc. v. Chapple-Hawkes, Inc., 643 P.2d 468 
(Wyo. 1982); Fuller v. Fuller, 606 P.2d 306 
(Wyo. 1980). 
We must view that evidence most favorably to the plaintiff, giving him the 
benefit of all reasonable and legitimate inferences that may be drawn therefrom. 
Willmschen v. Meeker, 750 P.2d 669 (Wyo. 1988); 
Osborn v. Manning, 685 P.2d 1121 (Wyo. 1984). The approved approach to be used 
by a trial judge in considering a motion under W.R.C.P. 41(b)(1)1 is:

When plaintiff's proof 
fails in some aspect, the motion must be granted. When plaintiff's evidence is 
overpowering, the trial judge's work is easy and the motion should be denied. 
When the plaintiff has presented only a prima facie case founded on unimpeached 
evidence, the district judge should not grant the motion, even though he sits in 
the stead of a jury as the trier of facts and may not feel at that juncture of 
the trial that plaintiff has sustained his proof burden.

Kure v. Chevrolet Motor 
Division, 581 P.2d 603, 606 (Wyo. 1978). See also Arbenz v. Bebout, 444 P.2d 317 (Wyo. 
1968).

[¶13.]  Charter's burden in this appeal is to 
demonstrate to this Court that it presented a prima facie case in the district 
court. A prima facie case is made if at least some evidence is presented on 
every essential element of the cause of action. Osborn, 685 P.2d 1121; Caribou 
Four Corners, Inc., 643 P.2d 468. Charter sets out the facts of the case but 
beyond that makes no cogent argument and cites no pertinent authority to support 
the proposition that it made a prima facie case before the district court. 
Charter did not present a coherent theory of its case to the district court, and 
that failing continues before this Court.

[¶14.]  Even though Charter's burden is a 
relatively light one in view of the W.R.C.P. 41(b)(1) dismissal, we must follow 
our wellsettled rule that the judgment of the trial court is presumed to be 
correct and that one appealing therefrom must make an affirmative showing of 
error. Gregory v. Sanders, 635 P.2d 795 (Wyo. 
1981), appeal after remand 652 P.2d 25 (Wyo. 
1982); Spriggs v. Copenhaver, 459 P.2d 203 (Wyo. 1969). This Court cannot be expected to 
make an independent investigation to find some error upon which an appeal could 
possibly rely. Id. Our review of this case is made difficult 
because no findings of fact or conclusions of law as required by W.R.C.P. 
41(b)(1) were made by the district court, either formal or informal. Kure, 581 P.2d 603; 9 C. 
Wright and A. Miller, Federal Practice and Procedure: Civil § 2371 at 220 n. 41 
(1971). Charter has raised no issue in this regard, and we do not view it as one 
appropriate for consideration sua sponte. See White v. Fisher, 689 P.2d 102 
(Wyo. 
1984).

[¶15.]  In an effort to demonstrate its prima 
facie case, Charter cites Slane v. Polar Oil Company, 48 Wyo. 28, 41 P.2d 490 
(1935), and 51C C.J.S., Landlord and Tenant § 42c (1968), for the proposition 
that recordation of the collateral assignment of the lease with the Teton County 
Clerk was the proper method for perfecting its rights under the assignment. 
Whether or not this is correct as a matter of law is largely irrelevant because 
the parties agreed, and it became the rule of this case, that all parties had 
notice of the assignment and agreed that the rents were encumbered as security 
for the loan. Presuming, as we must, that the district court's judgment is 
correct, Charter's case did not fail on the basis that the assignment was not 
properly recorded.

[¶16.]  Charter also cites Bornel, Inc. v. City 
Products Corporation, 432 P.2d 489 (Wyo. 1967), for the proposition that the terms 
of the particular documents are of primary concern in determining the effect of 
the collateral lease assignment. Charter fails to recite any specific language 
from the documents that gives it an interest in the rents from Cooke, and it 
concludes that Associates had the right to collect those rents only so long as 
it was not in default on the loan. Again, we do not necessarily disagree but 
note that this argument goes only to a theory that Charter had some kind of 
mortgage it could have foreclosed upon. At the time of trial, Charter did not 
seek foreclosure on the trust deed or on any other mortgage interest it may have 
had.

[¶17.]  For the proposition that a landlord and 
tenant may modify or augment a leasehold in the ordinary course of business but 
that in so doing they may not adversely affect or prejudice the right of an 
assignee, Charter cites Pheister v. Ogden Smelting & Refining Mills, Inc., 
364 P.2d 1078 (Wyo. 1961), and 51C C.J.S., supra at §§ 42 and 51. These 
authorities pertain almost exclusively to actions founded on a mortgage theory 
and, to a large extent, to mortgages of leases made by the lessee rather than 
the lessor. As Charter clearly did not proceed on a mortgage theory in the 
district court, these authorities do not and cannot serve as justification in 
demonstrating that the district court committed error when it directed judgment 
for Cooke.

[¶18.]  Finally, Charter relies upon Wood v. 
Stevenson, 30 Wyo. 171, 217 P. 953 (1923), which is a case 
dealing only with mortgage law. Charter asserts that it is analogous to the 
circumstances of this case but does not develop that analogy, and we do not 
perceive its applicability.

[¶19.]  In conclusion, we hold that Charter 
failed to carry its burden of showing that it presented a prima facie case that 
prevented the district court from entering judgment for Cooke at the close of 
Charter's case.

[¶20.]  AFFIRMED.

URBIGKIT, J., filed a dissenting 
opinion.

FOOTNOTES

1 W.R.C.P. 41(b)(1) 
provides in pertinent part:

After the plaintiff, in 
an action tried by the court without a jury, has completed the presentation of 
his evidence, the defendant, without waiving his right to offer evidence in the 
event the motion is not granted, may move for a dismissal on the ground that 
upon the facts and the law the plaintiff has shown no right to relief. The court 
as trier of the facts may then determine them and render judgment against the 
plaintiff or may decline to render any judgment until the close of all the 
evidence. If the court renders judgment on the merits against the plaintiff, the 
court shall make findings as provided in Rule 52(a).

URBIGKIT, Justice, 
dissenting

[¶21.]  I dissent. I differ from the majority's 
interpretation of the evidence and law which is clouded by the fact that Charter 
Thrift and Loan's (Charter) attorney could have been more zealous in his 
representation both at trial and on appeal. I refuse to lose sight of the forest 
for the trees. In a directed verdict1 analysis under W.R.C.P. 41(b)(1), 
the entire evidence must be viewed most favorably to the plaintiff with the 
benefit of all reasonable inferences going to the plaintiff. Willmschen v. 
Meeker, 750 P.2d 669 (Wyo. 1988); Fuller v. 
Fuller, 606 P.2d 306 (Wyo. 1980); Shook v. 
Bell, 599 P.2d 1320 (Wyo. 1979). While the 
majority cites the correct rule, the spirit and substance of this principle is 
abrogated by the majority's application to this fact situation. Clearly, a prima 
facie case of assignment and impairment by an original lending transaction 
participant was shown. Unquestionably, the impairment was for the participant's 
subsequent advantage which totally eliminated the security interest to which he 
agreed.

[¶22.]  The backdrop of the parties' 
relationships to one another cannot be so casually disregarded as occurs in the 
majority. Although the majority portrays Brec Cooke as an innocuous participant 
in this arrangement, he was much more deeply involved with the underlying 
financial structure of George E. Cooke Associates (Associates) as owning five 
percent of the closely held family corporation. Moreover, Brec Cooke was aware 
that Associates was heavily encumbered with the lease being the only real 
security for the Charter loan which made possible the expansion of the bar 
property. Overall, an issue that permeates this entire financial transaction is 
that there were no difficulties in collecting on the note until the father, 
George Cooke, who worked for Charter,2 was fired. That job termination 
precipitated first time collection difficulties and engendered wrongful 
termination counterclaim interests in the present suit. With the parties' 
interrelationships put in proper focus, the law that was applied must be 
considered.

[¶23.]  Clearly, the majority as well as the 
district court, confused the assignment and mortgage aspects of this case. The 
majority states:

Charter also cites 
Bornel, Inc. v. City Products Corporation, 432 P.2d 489 (Wyo. 1967), for the 
proposition that the terms of the particular documents are of primary concern in 
determining the effect of the collateral lease assignment. Charter fails to 
recite any specific language from the documents that gives it an interest in the 
rents from Cooke, and it concludes that Associates had the right to collect 
those rents only so long as it was not in default on the loan. Again, we do not necessarily disagree but note that 
this argument goes only to a theory that Charter had some kind of mortgage it 
could have foreclosed upon. At the time of trial, Charter did not seek 
foreclosure on the trust deed or on any other mortgage interest it may have had. 
[Emphasis added.]

The fallacy is 
the limiting of this exchange to a mortgage situation. This arrangement can be 
an assignment of conditional rights. Restatement (Second) of Contracts § 320 
(1981).3 See In Re Allied Products Co., 134 F.2d 725 (6th Cir.), cert. denied sub nom. Barnett v. Maryland Casualty Company, 
320 U.S. 740, 64 S. Ct. 40, 88 L. Ed. 438 (1943); Rockmore v. Lehman, 129 F.2d 892 
(2d Cir. 1942), cert. denied 317 U.S. 700, 63 S. Ct. 525, 87 L. Ed. 559 
(1943); In Re New York, N H & H R Co., 25 F. Supp. 874 (D.Conn. 1938); and 
Bonanza Motors, Inc. v. Webb, 104 Idaho 234, 657 P.2d 1102 (1983). The record 
discloses that during Charter's case in chief, this assignment theory was 
advanced twice, and all parties stipulated that the "rental stream" was 
encumbered as security for the loan to Charter. This stipulation is further 
relevant concerning the sale by the assignor of the premises. There is sound law 
that once notice is given of the assignment to the obligor, Brec Cooke, the 
assignor cannot defeat the assignee's rights nor specifically cancel the 
assignment without the assignee's consent.

Notice of an assignment 
puts the obligor on guard. The obligor is liable to the assignee if the funds 
assigned are subsequently paid to the assignor in violation of the assignment. 
E.g., Chapman v. Tyler Bank & Trust Co., 396 S.W.2d 143 (Tex.Civ.App. 1965); 
see generally 4 A. Corbin, supra, [Corbin on Contracts], § 890 [1951]. Once a 
valid assignment has been made, the assignor cannot cancel or modify the 
assignment by unilateral action without the assent of the assignee; nor may he 
defeat the rights of the assignee. E.g., Wymer v. Wymer, 16 B.R. 497 (Bkrtcy. 
9th Cir. 1980); Shore v. Shore, 71 Cal. App. 3d 290, 139 Cal. Rptr. 349 (1977). 
After notice of the assignment has been given to the obligor, the assignor has 
no remaining power of release. 4 A. Corbin, supra, at 577.

Bonanza Motors, 
Inc., 657 P.2d  at 1104. See also J. Calamari and J. Perillo, The Law of 
Contracts § 18-17 (3d ed. 1987) and Restatement (Second) of Contracts, supra at 
§ 338(1). Cf., Frankford Trust Co. v. Stainless Steel Services, Inc., 327 
Pa. Super. 
159, 475 A.2d 147, 149-50 (1984), where lessee, obligor, had a meritorious 
defense against lessor's assignee when lessee had not been notified of the 
assignment. The timing of the notice to Brec Cooke may be uncertain, but the 
fact that notice was received cannot be denied and is evidenced by the 
stipulation. Further, it is likewise undeniable that Charter never consented to 
the sale. Consequently, when the facts are viewed most favorably to the 
plaintiff (Charter), a prima facie case of assignment of conditional rights was 
made out which at the very least should have survived a W.R.C.P. 41(b)(1) 
motion.

[¶24.]  I also disagree with the majority in its 
passing reference to the $17,000 where interjected to be contended advance 
prepayment of rent to defeat collateral security of a lender in rent receipts. 
Again, when the evidence is viewed most favorably to the plaintiff (Charter), 
the characterization does not necessarily follow, and specifically, the evidence 
in this record does not bear out that description. No specific amount of money 
was solicited for the prepayment, and Brec Cooke had no recall if there even was 
a verbal agreement involving the prepayment of rent. Additionally, Brec Cooke 
had no idea how the prepayment would be credited to the rent obligation, and he 
had generously helped his father and mother individually out of fiscal 
difficulties previously. Thus, with all reasonable and proper inferences 
afforded Charter, this initial record provides a prima facie case showing a 
significant impairment of Charter's rights under the 
assignment.

[¶25.]  Appropriately considering the 
relationships of the parties with evidence of assignment established to be 
followed by the manipulative impairment of the rights of the holder of the 
collateral, I would find at least a prima facie case presented by Charter so 
that it was an abuse of discretion by the district court to grant the dismissal. 
See Shook, 599 P.2d  at 1322 and Arbenz v. Bebout, 444 P.2d 317 (Wyo. 1968). In reality, 
these parties were playing fast and loose with the concept of a corporation's 
liability veil, resulting in a complete evisceration of the security that was 
lawfully assigned to Charter. Such a practice which significantly impairs an 
assignee's rights is neither desirable nor just in our law and modern times, and 
I cannot condone this conduct. The case was not factually developed in any 
regard sufficient to justify the preclusive judgment granted to the borrowers and their 
successors.

[¶26.]  I would reverse and remand for a trial on 
the merits.

FOOTNOTES

1 Actually, as the case 
was tried without a jury, this should be a motion to dismiss because there would 
be no verdict. See Willmschen v. Meeker, 750 P.2d 669, 672 n. 3 (Wyo. 1988). However, the 
directed verdict analysis becomes important in determining how this court will 
view the evidence. Fuller v. Fuller, 606 P.2d 306 (Wyo. 
1980).

2 Initially, the 
counterclaim was that Charter had wrongfully terminated George Cooke. However, 
the answer was later amended to reflect that George Cooke really worked for 
Citizens Bankshares, Inc., the parent corporation of the plaintiff, which became 
tied into this case through the alleged commingled operation of the two 
companies to effectively result in one corporate 
structure.

3 Restatement (Second) of 
Contracts, supra at § 320 provides:

The fact that a right is 
created by an option contract or is conditional on the performance of a return 
promise or is otherwise conditional does not prevent its assignment before the 
condition occurs.

This financial 
transaction in the present case almost parallels Restatement (Second) of 
Contracts, supra at § 320, comment b. illustration 4:

A has a contract with B 
under which certain payments are to be made to A by B under a fixed schedule and 
other payments are to be made if B's earnings exceed stated amounts. As security 
for a loan to A by C, A assigns to C A's rights to payments by B, A to retain 
any payments falling due before default by A under the loan agreement. The 
assignment is effective according to its terms.