Title: O'Donnell v. Western Nat. Bank of Casper

State: wyoming

Issuer: Wyoming Supreme Court

Document:

O'Donnell v. Western Nat. Bank of Casper1985 WY 143705 P.2d 1242Case Number: 83-141Decided: 09/19/1985ROBERT F. O'DONNELL AND LOIS O'DONNELL, APPELLANTS (DEFENDANTS), 

v. 

WESTERN NATIONAL BANK OF CASPER, APPELLEE (PLAINTIFF).
Supreme Court of Wyoming
ROBERT F. O'DONNELL AND 
LOIS O'DONNELL, APPELLANTS (DEFENDANTS), 

v. 

WESTERN NATIONAL BANK OF 
CASPER, 
APPELLEE (PLAINTIFF).

 
 
Appeal from the District 
Court, NatronaCounty, Dan Spangler, 
J.

 
 
John C. Brooks, 
Vlastos, Reeves, Murdock and Brooks, Casper, and Michael O'Donnell, Senior Law 
Student, for 
appellants.

H.B. Harden, 
Jr., Harden & Harden, Casper, for appellee.

Before THOMAS, C.J., 
ROSE, ROONEY and BROWN, JJ., and RAPER,* 
J., Retired.

* CARDINE, J., having recused himself, RAPER, J., Retired, was assigned 
pursuant to order of the court entered June 13, 1983.

THOMAS, Chief 
Justice.

[¶1.]     In resolving this 
appeal, we must address questions of the sufficiency of the evidence to sustain 
a theory of fraud and a theory of undue influence. Both of these theories were 
asserted as affirmative defenses to an action brought to recover the principal, 
interest and attorney's fees on two promissory notes. In addition, they were 
presented as independent grounds for affirmative relief in appropriate 
counterclaims. Another question we must address is when the statute of 
limitations on a claim against a bank for conversion of money in a depositor's 
account starts to run. The district court held that the evidence of fraud and 
undue influence was not sufficient to justify submission of those issues to a 
jury. It also held that the statute of limitations on the claim of conversion 
began to run at the time the depositor was notified of the transfers from the 
depositor's account, and, therefore, that cause of action was barred. We agree 
with these rulings and affirm the judgment of the trial court. 

[¶2.]     The appellants, Robert 
F. O'Donnell and Lois J. O'Donnell, state the issues presented by their appeal 
in this way:

"A. Did the trial court 
err, as a matter of law, in ruling that Defendants' claims of fraud, undue 
influence and conversion were barred by the four year statute of 
limitation?

"B. Did the trial court 
err, as a matter of law, in ruling that insufficient evidence existed to submit 
to the jury that the Plaintiff was guilty of fraud or undue 
influence?"

The appellee, 
the Western National Bank of Casper, agrees with that statement of the 
issues.

[¶3.]     The events which led to 
this litigation began in April of 1977 when the Wyoming National Bank of Casper 
loaned money to a firm known as Enesco of Wyoming, Inc., which was in the 
business of manufacturing an energy-saving wall panel, consisting of finished 
wall board on the inside and exterior, for use in home or office. The loans by 
the bank were secured by Enesco's equipment, tools, furniture and fixtures, 
inventory, accounts receivable, retainages and materials. One loan in the amount 
of $50,000 was renewed in July of 1977. Apparently Enesco's business was not 
successful, and some of the principals began looking for new capital. In the 
process they talked to Barton W. Smith, President of the Western National Bank 
of Casper. He 
suggested that Mr. O'Donnell might be interested in acquiring this business 
because it would fit in with his own insulation business.

[¶4.]     Subsequently, an 
agreement was reached pursuant to which the Western National Bank of Casper 
loaned $61,494.43 to Robert O'Donnell, which was used to pay off the Enesco of 
Wyoming, Inc., notes to the bank, and Enesco's notes then were assigned to Mr. 
O'Donnell. The stated purpose of the transaction was that O'Donnell would take 
over the position of the bank. At apparently about the same time, Mr. O'Donnell 
also received a bill of sale from Enesco of Wyoming, Inc., which described 
substantially the same property covered by the security agreement originally 
given to the bank and subsequently assigned to Mr. 
O'Donnell.

[¶5.]     These events occurred 
during a period of turmoil in Mr. O'Donnell's life. One of his sons had been 
seriously injured and burned in a motorcycle crash not long before. A family 
friend, whom he described as almost like a sister to him, passed away in 
Denver, and he 
went there to attend the funeral. During that time, he apparently suffered some 
minor stroke which temporarily impaired his vision and caused serious concerns 
about his health. Barton W. Smith testified that because of these events he 
wondered whether Mr. O'Donnell should attempt to take over the Enesco business 
at that time, and posed that question to Mr. O'Donnell.

[¶6.]     Mr. O'Donnell proceeded 
as indicated, however, and shortly thereafter one of the individuals who had 
been interested in Enesco of Wyoming, Inc., suggested that Mr. O'Donnell owed 
him $24,000 because of a debt from that corporation to him. At the same time he 
claimed that he was the owner of the secured property. At Smith's suggestion, 
O'Donnell proceeded with an action to establish his title to the property and 
equipment, and he was initially represented without charge by the same attorney 
who represented the bank. When O'Donnell's deposition was taken, however, that 
attorney learned of the bill of sale to O'Donnell, and he concluded that 
possibly there was a difference of interest between O'Donnell and the bank. He 
then suggested that O'Donnell obtain independent counsel, which O'Donnell did, 
and ultimately a judgment was entered based upon a compromise and settlement 
which established O'Donnell's title to the equipment covered by the security 
agreement and financing statement which had been assigned to him by the 
bank.

[¶7.]     Subsequently, O'Donnell 
concluded that the bank had not dealt in good faith with him, and he advised the 
bank, of which he had been a long-time customer, that he would make no further 
payments on the bank's notes arising out of this transaction. When he failed to 
make the payments, the bank instituted suit to recover the principal amount of 
the notes, the interest and attorney's fees. O'Donnell defended that action and 
asserted as affirmative defenses fraud in the inducement with respect to the 
transaction and undue influence on the part of Barton W. Smith. He also asserted 
counterclaims for fraud, for undue influence, and for conversion. This last 
claim arose out of an additional loan of $25,000 which was made to him by the 
Western National Bank of Casper for his own account. Of that amount, 
however, $2,567.03 was deposited to one Enesco account, and $1,025.48 was 
deposited to another Enesco account. Apparently these amounts were intended to 
be used to pay off pre-existing debts of Enesco. The "advice of charge" notices 
for those two amounts were included in O'Donnell's bank statement for the month 
of August, 1977. Western National Bank of Casper answered denying the counterclaims, and 
the case ultimately went to trial before a jury.

[¶8.]     At the close of all the 
evidence, the court granted the bank's motion for judgment on its complaint and 
judgment against the defendants on their counterclaim. The court held that there 
had been shown no defense to the amounts due on the promissory notes, finding 
that the evidence was insufficient to sustain either the theory of fraud or 
undue influence. The district court further held that the affirmative claims of 
fraud, undue influence and conversion all were barred by an applicable four-year 
statute of limitations. The O'Donnells have taken their appeal from the judgment 
which was entered based upon the findings of the court at the close of all the 
evidence.

[¶9.]     We address the issues 
presented inversely because the parties are in accord that the statute of 
limitations would not foreclose defenses interposed by a party to a claim. They 
agree that the correct rule is found in Hawkeye-Security Insurance Company v. 
Apodaca, Wyo., 524 P.2d 874 (1974). Because of the rule 
of that case, the decision of the district court not to submit the defenses of 
fraud and undue influence to the jury depends upon the insufficiency of the 
evidence to support those theories.

[¶10.]  The Wyoming National Bank of Casper points to precedent in Wyoming requiring in 
order to establish fraud a false representation of a material fact which is 
relied upon to the detriment of the person claiming fraud. Furthermore, the 
person claiming fraud must establish these elements in a clear and convincing 
manner. Hagar v. Mobley, Wyo., 638 P.2d 127 (1981); Johnson v. Soulis, Wyo., 542 P.2d 867 (1975); White v. Ogburn, Wyo., 528 P.2d 1167 (1974); Davis v. Schiess, Wyo., 417 P.2d 19 
(1966).

[¶11.]  In this regard, the O'Donnells point to 
knowledge on the part of Barton Smith that Tech Plus, a partnership composed of 
principals in Esesco of Wyoming, Inc., claimed ownership of the equipment of 
Esesco of Wyoming, Inc. They also assert that Smith told Mr. O'Donnell that he 
would receive the assets of Enesco of Wyoming, Inc., by taking the position of 
the bank and that Smith failed to tell Mr. O'Donnell of the possibility of a 
lawsuit over a debt to Tech Plus. The evidence was equivocal with respect to any 
knowledge on the part of Barton W. Smith about the claim by Tech Plus of 
ownership of the equipment. The debt to Tech Plus was shown on a financial 
statement which was in Mr. O'Donnell's hands before he accepted the assignment 
from the bank and accepted a bill of sale from Enesco of Wyoming, Inc. He did 
establish his ownership of the assets in litigation with Enesco of Wyoming, Inc. 
and the principals of Tech Plus. Under the circumstances, we agree with the 
district court that the evidence of any false representation which was relied 
upon by O'Donnell to his detriment is far from clear and convincing, and the 
district court properly refused to submit the issue of fraud to the 
jury.

[¶12.]  With respect to the claim of undue 
influence, the O'Donnells' position suffers from similar failings. In Johnson v. Soulis, supra, 542 P.2d  at 
874, we adopted the following definition of undue influence from A.L.R. 
Restatement, Contracts § 497 (1932):

"Where one party is under 
the domination of another, or by virtue of the relation between them is 
justified in assuming that the other party will not act in a manner inconsistent 
with his welfare, a transaction induced by unfair persuasion of the latter, is 
induced by undue influence and is voidable."

In this regard, 
the O'Donnells claim unusual susceptibility of Mr. O'Donnell to persuasion at 
the time of the transaction because of the tragic events that had occurred 
within the time preceding the transaction. They also point to opportunity on the 
part of Barton W. Smith to exercise undue influence and suggest that the 
evidence shows a disposition to exercise undue influence. Finally, they claim 
that there was an unnatural nature in this transaction. In this jurisdiction, 
concepts of undue influence have most frequently been articulated in cases 
involving will contests. In those cases we have held that undue influence must 
be such as destroys free agency and substitutes the will of another for that of 
the testator. We have required a dominant confidential relationship and clear 
proof that undue influence in fact was exercised. Matter of Estate of Brosius, Wyo., 683 P.2d 663 (1984); In re Estate of 
Carey, Wyo., 504 P.2d 793 (1972); In 
re Estate of Wilson, Wyo., 399 P.2d 1008 (1965); In re Estate of Draper, Wyo., 374 P.2d 425 (1962); In re Estate of Nelson, 
72 Wyo. 444, 266 P.2d 238 (1954); In re 
Estate of Anderson, 71 Wyo. 238, 255 P.2d 983 (1953). Other cases involving 
rescission of deeds and contracts reflect similar principles. See Anderson v. Rocky Mountain Federal Savings 
and Loan Association, Wyo., 651 P.2d 269 (1982); Perry v. Vaught, Wyo., 624 P.2d 776 
(1981); Skinner v. Skinner, Wyo., 601 P.2d 543 (1979); Brug v. Case, Wyo., 
600 P.2d 710 (1979); Johnson v. 
Soulis, supra; Zullig v. Zullig, 
Wyo., 502 P.2d 198 (1972); McIver v. 
Faulk, Wyo., 397 P.2d 270 (1964). An evaluation of the evidence relied upon 
by the O'Donnells demonstrates that it would not meet any of these tests. The 
claim that Smith's advice to O'Donnell that it would be an awfully good deal for 
him to take the position of the bank and receive the assets of Enesco in 
connection with O'Donnell's susceptibility to this advice because of his 
problems and his testimony that he depended upon the financial advice of Smith 
do not overcome O'Donnell's own testimony that he investigated the transaction 
and made an independent judgment with respect to whether or not he should go 
ahead. Again we agree with the district court that there was insufficient 
evidence of undue influence to go to the jury.

[¶13.]  While we are in accord with the 
conclusion of the district court that the claims of undue influence and fraud 
insofar as affirmative relief was sought were barred by the applicable statute 
of limitations, § 1-3-105, W.S. 1977, we need not deal specifically with that 
issue in view of our disposition of the evidentiary issue. We do agree, however, 
that when the bank statements were sent to Mr. O'Donnell in 1977, he knew or 
should have known of the claimed conversion of moneys from his account by the 
bank which deposited them in the accounts of Enesco of Wyoming, Inc. Since no 
claim was brought within four years based upon that alleged conversion, the 
district court properly concluded that the claim was barred by the four-year 
statute of limitations set forth in § 1-3-105, W.S. 1977. This justified the 
conclusion of the district court not to submit the claim of conversion to the 
jury.

[¶14.]  The judgment of the district court is 
affirmed.