Opinion
James G. Johnston, V. G. Seavy, Jr., Denver, for plaintiff in error.
Holme, Roberts & Owen, Denald K. Bain, Denver, for defendant in error.
ENOCH, Judge.
This case was transferred from the Supreme Court pursuant to statute.
This is an action on a promissory note. The parties appear in reverse order of their appearance in the trial court. The First National Bank of Hays, Kansas, (Bank) brought this action against H. M. Popp Truck Line, Inc., (Company) and Glenn Popp, individually. Service was not obtained on Glenn Popp and though he was called as a witness, he is not a party to the action. Trial to the court ended in a judgment for the Bank against the Company for $25,297, the balance due on the note.
Glenn Popp was president of the Company, a family-owned corporation. His sister, Dorothy Burns, was the secretary and treasurer. Together they owned all of the stock except one share. The remaining share was owned by William Burns, husband of Dorothy Burns, who served as vice president. These three stockholders were also the sole directors of the Company.
The Company was in the business of hauling petroleum products in large tank trucks. It was the business practice of the Company for the individuals Glenn Popp and William Burns to borrow money in their own names, use the money to purchase a truck in their personal names and then lease the truck to the Company. The Company paid lease rental to the individual who in turn paid off the personal note. This general practice was known by the Bank.
The Bank had done business with the Company and the individuals in the past. It had in its file a Company borrowing resolution signed by Dorothy Burns as secretary-treasurer, authorizing Glenn Popp to borrow money for the business of the Company.
In December 1966, Glenn Popp wrote a letter to the Bank on the stationery of another company, asking to borrow personally $25,000 to be used to pay off a $9,000 personal loan which he had at the Bank, with the balance to be used to buy another truck. The Bank prepared a financing statement in the name of the Company with a promissory note attached for the amount requested with the Company's name inserted as the borrower along with Glenn Popp, individually. This document was mailed to Glenn Popp who signed it as president of the Company and individually. He also had his sister, Dorothy Burns, sign as the secretary-treasurer of the Company. Dorothy did not read the document, but the record indicates she knew generally what it was and after signing did discuss it with her husband, William Burns. Neither made any inquiry of Glenn Popp or the Bank concerning the transaction, nor the application of the funds. The money was used, as represented, to pay off the $9,000 personal account of Glenn Popp and to purchase a truck. However, the truck apparently was for the use of another trucking company in which Glenn Popp had an interest. The record does not indicate whether the $9,000 personal debt was related to a prior business transaction on behalf of the Company or strictly a personal nonbusiness account.
Glenn Popp, personally, made 7 monthly payments on the note. This action was started by the Bank when no additional payments were received.
The Company alleges that it was error to hold the Company liable on the note for the reasons that Glenn Popp borrowed the money for his personal use, that the Bank knew that the proceeds of the loan were to be used by him personally and that the Company received nothing from the loan. We do not agree.
The authenticity of the note is not denied. It was properly executed by the officers of the Company who owned all but one share of the stock. As pointed out, the one share was owned by William Burns, who knew about the transaction and raised no objection. It thus appears that if Glenn Popp did not have actual authority under these circumstances to borrow the money, there was certainly acquiescence on the part of all stockholders and directors and the Company cannot deny liability on the note. See, Colorado Federal Savings & Loan Assn. v. Beery, 141 Colo. 45, 347 P.2d 146.
The Company argues that Glenn Popp borrowed the money for personal use and since the Bank knew this, the Company cannot be held liable. This argument overlooks the other facts that it was the business practice of all three parties who owned the Company to borrow money as individuals and personally to buy equipment which was then leased to the Company. The Bank knew of this business practice and had made loans previously on this basis. The record indicates that the loan in question was obtained under conditions quite similar to the prior business practices of the Company and its officers. The Company is now estopped to deny its liability. See, Texas Co. v. Commercial Savings Bank, 79 Colo. 600, 248 P. 558.
The Company further contends that it should not be liable because it received nothing from the loan, or to put it another way, having received none of the proceeds or benefits, there was no consideration. The Company and Glenn Popp, personally, were co-makers of the note. Where one of the co-makers of a note receives the consideration or benefits of the note, the defense of no consideration is not available to the other co-maker. Luby v. Jefferson County Bank, Colo.App., 476 P.2d 292. See, Bloom v. Pioneer State Bank, 75 Colo. 28, 223 P. 750. Though Glenn Popp received the proceeds of the loan, the trial court properly held the Company liable, as the co-maker, for the balance of the indebtedness.
Judgment affirmed.
SILVERSTEIN, C.J., and DUFFORD, J., concur.