Thomas v. Colorado Trust Deed Funds, Inc.
This text of 366 F.2d 140 (Thomas v. Colorado Trust Deed Funds, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
This case arose in the receivership proceeding of Colorado Trust Deed Funds, Inc. and Mortgage Underwriting Corporation, Colorado Corporations, pending in the United States District Court for the District of Colorado. It was argued along with (No. 8079) Thomas III, et al. v. Colorado Trust Deed Funds, Inc., et al., 10 Cir., 366 F.2d 136. The agreement by which Thomas acquired all the outstanding stock of Mortgage Insurance Company of America from Jayne T. Snyder of Denver, Colorado,1 required him to assume the management of Colorado Trust Deed Funds, Inc. (“Funds”), and another Colorado corporation, Mortgage Market, Inc. (“Markets”), with power to designate corporate officers thereof.2 The record discloses that Markets was to be liquidated. Thomas appointed C. A. McLin as manager of these corporations, and McLin undertook the responsibility for an orderly liquidation of Markets on behalf of Thomas. McLin held himself out as president of that corporation.
When Thomas took over active management of Markets, negotiations were entered into with the receiver of Los Angeles Trust Deed and Mortgage Exchange, Inc., (“L.A.T.D.”) for the recovery of certain assets (notes and trust deeds) held in escrow by the receiver of L.A.T.D. for the account of Markets. Before the recovery of these assets was accomplished, McLin and Thomas induced some of the investors in Markets to accept investment certificates issued by Funds and to assign and transfer their investments from Markets to Funds.3 When McLin obtained a release [142]*142of the notes and deeds of trust from the receiver of L.A.T.D., they were endorsed to Markets as “Trustee.” They were not, however, delivered to Funds or the receiver of Funds or to the former Markets investors who had transferred their investments to Funds. Instead, McLin thereafter disposed of these assets in order to secure loans and certain real properties for Markets.
Alleging that these assets were the property of Funds by virtue of the assignments from the original owners, and that McLin, as Thomas’ agent, wrongfully diverted them from Funds, the receiver of Funds instituted proceedings requesting the United States District Court to direct Thomas and McLin to show cause why they should not transfer to Funds’ receivership estate those assets or pay the equivalent value thereof. After a trial, the court found McLin and Thomas liable for the wrongful diversion of these notes and deeds of trust and, upon ascertaining that such assets were not available for delivery to the receiver, entered judgment against Thomas and McLin for their value. Thomas alone appeals.
For the first time it is contended upon appeal that Markets is an indispensable party to this action and that the judgment of the trial court should be vacated as it purports to affect the rights and properties of Markets. As a general rule, an indispensable party to an action is one who has such an interest in the subject matter of the litigation that a final judgment cannot be entered without affecting that interest or without leaving the controversy in such a condition that its final determination will be inconsistent with equity and good conscience. Turner v. Brookshear, 10 Cir., 271 F.2d 761; Williams v. Pacific Royalty Co., 10 Cir., 247 F.2d 672; F.R.Civ.P. 19(a). The judgment here is for the monetary value of the assets which were assigned to Funds and thereafter diverted. Even though title may have gone to Markets from L.A.T.D., they did not belong to Markets, and Funds was entitled to their possession. Markets was merely a conduit through which the property passed.
It is quite clear that McLin, in control of the operations of Markets, received the assets in question here. It is equally clear that the receiver of Funds was entitled to possession of them4 for administration in the receivership estate. It is also clear that McLin wrongfully disposed of the assets, and his duty to account for their value has been determined. The dispositive question thus presented on this appeal is whether the court’s finding that McLin received and thereafter diverted the assets as the [143]*143agent of Thomas was sustained by substantial evidence. We think it was.
Upon the execution of the original purchase contract, McLin assumed control of Markets through Thomas. Thomas directed McLin to negotiate with the receiver of L.A.T.D. in California and “do whatever could be done to recover the Trust Deeds for the investors of Markets.” McLin’s authority in this matter derived solely from Thomas.5 Thomas, acting through McLin, was in the nature of a trustee for the equitable owners of the assets received from L.A. T.D., and he is not excused from liability because these assets were hypothecated or otherwise disposed of by his agent and not by himself personally. A principal is responsible for the fraudulent acts of an agent whom he has put in position to perpetrate the fraud complained of. Restatement, 2d., Agency, 261; Gleason v. Seaboard Ry., 278 U.S. 349, 49 S.Ct. 161, 73 L.Ed. 415; Amen v. Black, 10 Cir., 234 F.2d 12, remanded for dismissal pursuant to motion, 355 U.S. 600, 78 S.Ct. 530, 2 L.Ed.2d 523; United States v. Fox Lake State Bank, N.D.Ill.E.D., 240 F.Supp. 720; J. C. Millett Co. v. Park & Tilford Distillers Corp., N.D.Cal.S.D., 123 F.Supp. 484;
Affirmed.
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366 F.2d 140, 12 Fed. R. Serv. 2d 320, 1966 U.S. App. LEXIS 5435, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thomas-v-colorado-trust-deed-funds-inc-ca10-1966.