Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-01024/USCOURTS-ca10-89-01024-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 

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Fi LED 

U~ ,acd ,;cares C.,oun ·)f Appeals .. ~"--r~ -·-.-•;t 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

1oJUL l l 1990 

AOB.BRT L HOECKER 

Clerk 

COLONIAL NATIONAL BANK, a national 

banking association, 

Plaintiff, 

v. 

SECURITIES MANAGEMENT & RESEARCH, 

a Texas corporation; and AMERICAN 

NAT I ONAL INCOME FUND, INC., a Texas 

c orporation, 

Defendants-Appellees, 

and 

CHARMAINE FORMAN; MARILYN BELL; and 

M & W ENTERPRISES, 

Defendants, 

THE LAW FIRM OF HALL & EVANS 

a nd CLINTON P. SWIFT, 

Appella n ts . 

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) No. 89-1024 

) (D.C. No. 87-M-439) 

) ( D. _Colo. ) 

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ORDER AND JUDGMENT* 

Befo re ANDERSON, BARRETT, and BALDOCK, Circuit Judges. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res · judicata, or collateral estoppel. 10th Cir. R. 

36. 3 . 

Appellate Case: 89-1024 Document: 010110038274 Date Filed: 07/11/1990 Page: 1 
After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. Accordingly, appellants' request for 

oral argument is denied, and the case is ordered submitted without 

oral argument. 

Hall & Evans and Clinton P. Swift, counsel for plaintiff 

Colonial National Bank (CNB), appeal from a sanction order issued 

by the district court requiring them to pay defendants' attorneys' 

fees in the amount of $51,900.33. We review the order for an 

abuse of discretion. Adamson v. Bowen, 855 F.2d 668, 673 (10th 

Cir. 1988). 

The district court's memorandum opinion indicates that the 

sanction was imposed on counsel for drafting a complaint that was 

factually misleading and legally unwarranted. For the reasons 

related briefly below, we cannot agree with either 

characterization of CNB's pleading. 

The primary factual matter prompting the district court's 

concern involved the omission of any allegation disclosing CNB's 

settlement agreement with Willard Forman, which substituted a new 

note for the obligation secured by the stock certificate upon 

which CNB's cause of action rested. Since the settlement 

agreement also expressly acknowledged CNB's continuing legal 

status as holder of the certificate and its right to pursue an 

action for recovery thereon, the existence of the settlement 

agreement did not affect the rights and obligations of the parties 

and, therefore, was not material to the present action. Omission 

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Appellate Case: 89-1024 Document: 010110038274 Date Filed: 07/11/1990 Page: 2 
of the matter from the complaint 

circumstances, be cause for sanction. 

could not, under the 

With respect to the legal sufficiency of CNB's complaint, the 

district court identified the weakness of CNB's position under the 

principles governing the rights of bona fide purchasers against 

adverse claimants under Colo. Rev. Stat. § 4-8-302. However, CNB 

sought recovery on the certificate against the issuer (and its 

transfer agent) as a purchaser for value without notice of defect 

under Colo. Rev. Stat. § 4-8-202 and § 4-8-208. Without 

expressing an opinion on the ultimate merits of such a claim, 

which in light of the unappealed prejudicial dismissal of CNB's 

action has been rendered moot, we do note that this facially valid 

claim is not subject to the defect identified by the district 

court in connection with section 4-8-302. See generally§ 4-8-202 

Official Comment; § 4-8-301 Official Comment l; § 4-8-307 Official 

Comment 1. 

The order of the United States District Court for the 

District of Colorado, insofar as it directs plaintiff's counsel to 

pay defendants' attorneys' fees, is REVERSED. 

ENTERED FOR THE COURT 

PER CURIAM 

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Appellate Case: 89-1024 Document: 010110038274 Date Filed: 07/11/1990 Page: 3