Petition for Writ of Certiorari — Shanks v. Estes Park Bank

a | Supreme Court, U.S.

FILED

UO eid AUG 22 1988

JOSEPH F. SPANIOL, JR.

a CLERK

CASE NO. A88-38 -

IN THE

SUPREME COURT OF THE UNITED STATES

1988 TERM

DEWEY D. SHANKS, GENEVIEVE M. SHANKS, JOSEPH

C. SHANKS, and CAMILLE S. HARPER,

Petitioners,

Vv.

THE ESTES PARK BANK,

Respondent.

a" ol

ON WRIT OF CERTIORARI

TO THE SUPREME COURT

OF THE STATE OF COLORADO

PETITION FOR WRIT

OF CERTIORARI

and unt

a

JAMES B. DUNLAP

9580 West 14th Avenue

Lakewood, Colorado 80215

PH: (303) 234-9673

ATTORNEY FOR PETITIONERS

I. QUESTIONS PRESENTED FOR REVIEW

1. Whether the Colorado Supreme Court

erred in refusing to grant certiorari and

failing to correct the errors of the Colorado

Court of Appeals.

2. Whether Petitioners were denied

their constitutional rights to equal

protection and due process of law by the

numerous procedural and substantive errors of

the trial court and the appellate courts.

3. Whether Petitioners were denied

their constitutional right to a jury trial.

4. Whether the trial court erred in

ruling, and the appellate courts erred in

failing to correct such ruling, that Section

38-10-117 C.R.S. means that any conveyance

done with an intent to defraud creditors is

void and not voidable.

5. Whether the trial court erred in

ruling, and the appellate courts erred in not

i

correcting such ruling, that the defenses of

waiver and estoppel were not available

against an allegation that a fraudulent

conveyance had been committed.

6. Whether the trial court erred in

refusing to instruct the jury on the issues

of waiver and estoppel as possible defenses

to an allegedly fraudulent conveyance, and in

instructing the jury as it did as to what

constitutes a fraudulent conveyance, and

whether the appellate courts erred in failing

to correct such errors.

7. Whether the trial court erred in

dismissing the Defendants' counterclaims for

lack of evidence, and whether the appellate

courts erred in failing to correct such

error.

8. Whether the trial court erred in

refusing to allow into evidence further

ii

testimony of the Defendants regarding their

Small Business Administration Loan

transactions with Plaintiff, and whether the

appellate courts erred in failing to correct

such error.

9. Whether the Colorado Court of

Appeals erred in failing to address all

issues presented in appeal, and the Colorado

Supreme Court erred in failing to correct

such error.

10. Whether the Colorado Court of

Appeals erred in characterizing this matter

as an equitable action wherein erroneous jury

instructions are not prejudicial, and the

Colorado Supreme Court erred in failing to

correct such error,

ll. Whether the Colorado Court of

Appeals erred in implicitly holding that lack

of consideration is the "sine qua non" of a

iii

fraudulent conveyance, and the Colorado

Supreme Court erred in failing to correct

such error.

II. PARTIES

The petitioners, Dewey D. Shanks,

Genevieve M. Shanks, Joseph C. Shanks and

Camille S. Harper were the defendants in the

trial court, the defendants - appellants in

the Colorado Court of Appeals, and the

petitioners in the Colorado Supreme Court.

The respondent Estes Park Bank was the

plaintiff in the trial court, the plaintiff

-- appellee in the Colorado Court of Appeals,

and the respondent in the Colorado Supreme

Court. In addition in the trial court Dewey

D. Shanks and Genevieve M. Shanks were third-

party plaintiffs and Maurice O. Worley and

Professional Real Estate Consultants, Inc.,

were third-party defendants. The latter two

iv

parties were also appellees in the Colorado

Court of Appeals, but were dismissed

therefrom by stipulation and are no longer

parties.

we edit

iach ELDER i pe et wil wom scien gta eS

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TABLE OF CONTENTS

Section

I. Questions Presented For Review

Els BDOCESOR 2 cs wb eh 4 eh hl

III. Table of Authorities ....

TV. Opinions Below .. see «6

Ve JSUEROGACEROR 2 2 6 0 ts 6 8 8

VI. Constitutional and Statutory

Peovisione . ««e«+seee

VII. Statement of the Case ...

VIII. Argument ..«-se«+s-eere-ee

TX. Conclusion ..«s«e-e«ceee

X. Certificate of Service ....

XI. Appendix ...«4#-e+e«4beeeee

vi

Page

vii

III. TABLE OF AUTHORITIES

Cases Page

Atkinps_vs United States,

S50 Psne sees foe. Of Cl. (1977) . . 34

Barretsville_ Bank_& Trust Co.

vy. Bolton, 182 Tenn. 364, 187

SE ww gg ww 25

Brooks_vs Black, 22 Colo.App. 49,

eens. . | . . . «19, 20

Carey. vs Pipbus, 435 U. S. 247,

eee | | | fl. ll. 21, 22

Federal Ins. Co. vs Pub. Service Co.

194 Colo. 107, 570 P.2d 239 (1977) . 29

Genov3a_v. Champion, 33 B.R. 930

re Ma eeenis A9GS) « «© « « « « 23

Kinpey_v. yoelin Bros. Mercantile Co.

7a eee eee mee. fa? (1924). . . 25

=

Lingsey_v. Normet, 405 U. S. 56, 92

§.Ct. 862 (1972) . e * . + * e s ° e 34

McKelvy.v..Cooper, 165 Colo. 1102,

Pee | |. wl 27

Motz v. Jammaron, 679 P.2d 661

(Colo.App. 1983) ees 6 « « « 28

Myers.v. Hayden, 82 Colo. 98, 257

P. 35 (1927) . . 7 x +. a e e v s o e 23

vii

Park State Bank.v. Mclean, 660

Pan. £2. Aceneenes EOOH) eos 6 6 ss

Roberts_v. City of .New York, 295

o. 8S. 264, 33 8.ce. 669 (1935) ...

Rollie.v. Bethke, 71 N.D. 208,

er es we ae

Sangers_v. Black, 136 Colo. 417,

Dee ee eee ees eo ng kt ee

Seattle Lodge No. 211, ETC. v. .Par-T-Pak

Beverage.Co., 55 Wash.2d 587, 349

aa ane Ceeee) sees 4% « & ee

Shamie_.v. City. of Pontiac, 443 F.Supp.

9, BES eS PO yy | ee

Sbuman.ve Tuxborn, 481 P.2d 741

CGee@ames Beal « « 06 46 4 + © te

Sickman.v. Abernathy, 14 Colo. 174,

Sec er See Gs sh ek et te;

In_Re_ Smythe, 32 B.R. 736

See BOD gf 6g ee ew ee a

Thuringer.v. Trafton, 58 Colo. 250,

ee ee ke ek ak wee

Walton.v. First National Bank,

32 Geld. 265, 22 8. 440 (1869)...

Wright. v. Yust, 118 Colo. 449,

ae cme wee 6OeOe hb 6 a ew ws

viii

20

21

25

33

25

34

28

25

20

22

22

20

Young_v._ Colorado Nat'l] Bank of Denver,

148 Colo. 104, 365 P.2d 701 (1901) .

Constitutions

U. S. Constitution Amendment V ....

U. S. Constitution Amendment VII...

U. S. Constitution Amendment XIV...

Colo. Constitution Article II,

Section 25 o a am a s . oe 7 ° o 7 * .

Statutes

38-10-117 C.R.S. 2 a eS ee 19,

38-10-120 C.R.S. Ve Oe ae a ee ee oe ee”

38-10-121 Cea eo Me - a we es ££ + 6 & @

C.A.R. 1 a * 7 “ e . sd . . ° sd . 7 . s

comeCels 38 : . 7 2 7 . 7 * e 7 . s . .

Other Authorities

37 Am Jur 2d, Fraud. Conveyances

Section 106 . > . . a o . -_ a + 6 .

ix

28

21

33

24

19

IV. OPINIONS BELOW

1. Order of Colorado Supreme Court

denying certiorari April 25, 1988, not

published, Appendix p. A-l.

2. Opinion of Colorado Court of

Appeals, October 8, 1987, not published,

Appendix p. A-4.

3. Order and Judgment of District

Court, June 10, 1983, Nunc Pro Tunc June 3,

1983, not published, Appendix p. A-6.

V. JURISDICTION

The decision sought to be reviewed was

dated and entered on April 25, 1988. No

rehearing was sought in the Colorado Supreme

Court because the Colorado Rules of Appellate

Procedure do not provide for rehearing of a

decision by that court denying certiorari.

This Court entered its order on July 15,

1988, extending the time for filing this

petition for writ of certiorari to and

including August 22, 1988.

Jurisdiction is conferred on this Court

to review the judgment in question by writ of

certiorari by 28 U.S.C. Section 1257(3).

VI. CONSTITUTIONAL AND STATUTORY PROVISIONS

United States Constitution

Fifth Amendment:

No person shall be held to answer fora

capital, or otherwise infamous crime, unless

on a presentment or indictment of a Grand

Jury, except in cases arising in the land or

naval forces, or in the Militia, when in

actual service in time of War or public

danger; nor shall any person be subject for

the same offence to be twice put in jeopardy

of life or limb; nor shall be compelled in

any criminal case to be a witness against

himself, nor be deprived of life liberty, or

property, without due process of law; nor

shall private property be taken for public

use, without just compensation.

Seventh Amendment:

In suits at common law, where the value

in controversy shall exceed twenty dollars,

the right of trial by jury shall be

preserved, and no fact tried by a jury, shall

be otherwise reexamined in any Court of the

United States, than according to the rules of

the common law.

Fourteenth Amendment, Section 1:

All persons born or naturalized in the

United States, and subject to the

jurisdiction thereof, are citizens of the

United States and the State wherein they

reside. No State shall make or enforce any

law which shall abridge the privileges or

immunities of citizens of the United States;

nor shall any State deprive any person of

life, liberty, or property, without due

process of law; nor deny to any person within

its jurisdiction the equal protection of the

3

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laws.

Colorado Constitution

Article II, Section 25

Due process Of law. No person shall be

deprived of life, liberty or property,

without due process of law.

Colorado Bevissd_ Statutes

38-10-1117. Conveyances to defraud

creditors void. Every conveyance or

assignment in writing or otherwise of any

estate or interest in lands, goods, or things

in action or of any rents and profits issuing

thereupon, and every charge upon lands, goods,

or things in action or upon the rents and

profits thereof made with the intent to

hinder, delay, or defraud creditors or other

persons of their lawful suits, damages,

forfeitures, debts, or demands, and every

bond or other evidence of debt given, suits

commenced, or decree or judgment suffered

oe es.

with the like intent as against the person so

hindered, delayed, or defrauded shall be

void.

38-10-120. Intent, question of fact -

want of consideration. The question of

fraudulent intent, in al cases arising under

the provisions of this article, shall be

deemed a question of fact and not of law; nor

shall any conveyance or charge be adjudged

fraudulent against creditors or purchasers

solely on the ground that it was not founded

on a valuable consideration.

38-10-121. Purchaser with notice of

fraud. The provisions of this article shall

not be construed in any manner to affect or

impair the title of a purchaser for a valuable

consideration, unless it appears that such

purchaser had previous notice of the

fraudulent intent of his immediate grantor or

of the fraud rendering void the title of such

grantor.

Colorado _Bules.of Procedure

Colorado Appellate Rule 1 (a)(1):

(a) Matters Reviewable. An appeal to

the appellate court may be taken from:

(1) A final judgment of any district,

superior, probate, or juvenile court in all

actions or special proceedings whether

governed by these rules or by the statutes;

Colorado Rule of Civil Procedure 38:

(a) Where Jury Right Exists. Upon

demand, in actions for the recovery of

specific real or personal property, with or

without damages or for money claimed as due

On contract, or as damages for breach of

contract, or for injuries to person or

property, an issue of fact must be tried by a

jury. However, after demand a jury trial may

be waived by stipulation of the parties.

(b) Demand. Any party may demand a

trial by jury of any issue triable by a jury

by serving upon the other parties a demand

therefor in writing at any time after the

commencement of the action and not later than

ten days after the service of the last

pleading directed to such issue. Such demand

may be endorsed upon a pleading of the party.

(c) Same: Specification of Issues. In

his demand a party may specify the issues

which he wishes so tried; otherwise he shall

be deemed to have demanded trial by jury for

all the issues sotriable. If he has

demanded trial by jury for only some of the

issues, any other party within ten days

after service of the demand or such lesser

time as the court may order, may serve a

demand for trial by jury of any other or all

of the issues of fact in the action.

(d) Waiver. The failure of a party to

serve a demand as required by this Rule and

to file it as required by Rule 5 (d)

constitutes a waiver by him of trial by jury.

A demand for trial by jury made as herein

provided may not be withdrawn without the

consent of the parties.

VII. STATEMENT OF THE CASE

The Petitioners Dewey D. Shanks and

Genevieve M. Shanks had had a banking

relationship with the Respondent Estes Park

Bank from 1952 up to the initiation of this

litigation. They had entered into various

personal and business loan transactions with

the Estes Park Bank over the years and had

relied upon business and financial advice

from the Bank's President, George Hix. In

1977 Mr. and Mrs. Shanks obtained an SBA loan

from the Bank for $75,000.00 for their

business, E-2 Lift, Ltd., a corporation they

had formed for the sale of conversion kits

that changed ordinary pick-ups to small dump

trucks. During the application stage for

this loan they informed the Bank's Mr. Hix

that their personal residence would not be

avaiable as collateral, but, at the time of

loan closing the requirement appeared that

they indeed had to pledge it. To do so

they had to obtain permission from their

adult children, Joseph C. Shanks and Camille

S. Harper, the other Petitioners herein.

Because of this last-minute requirement,

because the Estes Park Bank required the

Shanks to use some of the SBA loan proceeds

to pay off other loans instead of using them

only for operating capital, and because at

one point the Bank's Mr. Hix entered the

Shanks' home, looked around and exclaimed

"My, I could live here," causing Mrs. Shanks

to go into the bathroom and throw up (Trial

Transcript Vol. V, p. 279 11. 3-25, p. 357 l.

20, p. 358 1. 9) the Shanks determined to pay

off this SBA loan early. They did so in the

spring of 1978, six and one-third years

before it was due.

In July 1978 the Shanks entered into a

new loan transaction with the Bank. They

executed a note for $100,000.00 and the only

collateral required by the Bank was four

commercial lots in the town of Estes Park,

Colorado. This loan was for the purchase of

such lots plus the payoff of some unsecured

amounts due, and came due in January, 1979.

The Shanks did not pay this note then and in

March, 1979 the Bank commenced foreclosure

proceedings against the four lots. On May

14, 1979, however, the parties restructured

the loan. The Shanks paid the Bank

$12,000.00, the Bank extended this

10

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$100,000.00 to a new maturity date of May 14,

1980, and an additional note was executed by

the Shanks to the Bank for $10,435.54 secured

by a second deed of trust against the same

four commercial lots. At the time of these

May 14, 1979, transactions the Bank was aware

that earlier that year, on February 9, 1979,

Mr. and Mrs. Shanks had conveyed their

residence to their children, Joseph C. Shanks

and Camille S. Harper, reserving a life

estate therein. Mr. Hix admitted that he was

aware of such transfer within two weeks of

its occurrence (Trial Transcript Vol. IV, p.

86, 11. 17-20) and that shortly after that

time he told Mr. Shanks "I don't have any

desire to have your home." (Trial Transcript

Vol. IV, p. 88, 11. 10-11)

Subsequent to the May 14, 1979,

transactions, the Shanks made plans for

development of the lots. In early 1980 Mr.

ll

mies

Shanks formed a partnership with a Dr.

Bohnsack and a Mr. Wheeler to do so, and they

drew plans, began cost calculations and began

working with propective tenants and

contractors.

In May 1980 the two notes came due at

the Bank but the lots had not been developed

so they could not be paid then. The partners

discussed the possible development and their

ideas with the Bank. In August 1980 the

Bank's Mr. Hix told Mr. Wheeler "...he would

do nothing if Mr. Shanks would profit in any

manner at all. He was not interested in

cooperating onthe land if he felt Mr. Shanks

would benefit by it." (Trial Transscript

VOL. EVe Be Bae bs 29 —- Ps 222, 1. 3)

On August 27, 1980, the Bank commenced

foreclosure against the four lots. It

obtained an appraisal dated September 4,

1980, valuing the Shanks‘ five lots

12

altogether at $2.50 per square foot for a

total of $75,175.00, or approximately

$15,000.00 per lot. (The Shanks owned a

fifth adjacent lot that was not pledged to

the Bank). At the foreclosure sale the Bank

relied on this appraisal and bid $60,000.00

for the four lots, creating a deficiency

claim on the notes against the Shanks of

$73,323.01. No other bids were received and

after expiration of the statutory redemption

period the Bank took title to the lots.

The same appraiser, Maurice Wooley of

Professional Real Estate Consultants, Inc.,

who provided this September 4, 1980,

appraisal at $2.50 per square foot for the

Bank, had appraised the same five lots

together at $4.00 per square foot, or a total

of $122,000.00 on May 4, 1979, and had also

appraised the fifth lot by itself at

$32,500.00 on April 30, 1979.

RZ

Because of the claimed deficiency the

Bank initiated the instant litigation, filing

its complaint in December 1980. (The

complaint is at Appendix p. A-1ll). In its

first claim for relief it sought a money

judgment for the claimed deficiency. In its

second claim for relief it sought to set

aside the February 9, 1979, transfer by the

Shanks of the remainder interest in their

home to their children as a fraudulent

conveyance.

In their Answer, Counterclaims, Jury

Demand and Third Party Complaint, Appendix p.

A-16) the Shanks generally denied the Bank's

allegations and pleaded jnter alia, duress,

waiver and estoppel, and knowledge by the

Bank that its bid was far below the actual

value of the property. The Shanks also

pleaded two counterclaims against the Bank.

In the First they alleged the Bank breached

14

the SBA loan agreement between their

controlled corporation, E-Z Lift, Ltd., and

the Bank by improperly requiring use of some

of such loan proceeds to repay other loans,

causing damage to their business and credit,

and further failing to show one such other

loan as paid, causing damages. In the

Second, they alleged they had taken out loans

from the Bank in reliance on its financial

representations and business advice and that

the bank had induced them to take out such

loans in order to eventually foreclose on the

real property collateral, which was the

commercial lots, that the Bank deliberately

and negligently furnished information to

third parties that prevented development of

such lots, and that as a result of the Bank's

interference with their business and breach

of its fiduciary duty they suffered damages.

Their jury demand was timely and unqualified.

Trial was to a jury of six. At the

conclusion of Shank's case the Bank moved for

dismissal of both counterclaims and for a

directed verdict on its first claim for

relief. The Trial Court denied the motion

for directed verdict (Trial Transcript Vol.

Ve, pe 389, 11. 4-9), but granted the motion

to dismiss both of Shanks‘ counterclaims,

finding there was no evidence of damages on

the first (Trial Transcript Vol. VI, p. 397,

ll. 8-14), and no evidence to support the

second (Id., pp. 397-98).

Jury instructions were considered (Trial

Transcript Vol. I, pp. 28-47; Vol. VI, pp.

399-401) and given to the jury. The

Defendants tendered an instruction on their

waiver and estoppel defense but it was

refused by the Trial Court, which ruled that

such defenses do not apply to a fraudulent

16

conveyance (Trial Transcript Vol. VI, pp.

399-400). The jury returned three verdicts:

(1) that the Shanks transferred their home

with an intent to hinder, delay or defraud

the bank (Appendix p. A-8), (2) for the

Third-Party Defendants and against the Shanks

(Appendix p. A-10), and (3) a verdict for the

Bank and against the Shanks for $96,440.85

(Appendix p. A-9). The Trial Court ordered

judgment to enter accordingly. (Appendix p.

A-6).

Defendants then appealed to the Colorado

Court of Appeals. The issues perfected on

appeal are set forth at (Appendix p. A-22).

In their briefs therein the Shanks pointed out

the trial court's errors in statutory

interpretation and in depriving them of a

jury decision on their counterclaims, and

their denial of due process of law. The

Colorado Court of Appeals rendered its

17

ant oe

opinion on October 8, 1987, (Appendix p. A-4)

affirming the trial court's decision without

addressing many of the issues raised, and

denied rehearing.

Application was made to the Colorado

Supreme Court for review by way of Petition

for Writ of Certiorari. Again therein errors

of the lower courts in statutory

interpretation were pointed out along with

the effective deprivation of a jury trial,

and the Court of Appeals' errors in relying

on inapposite cases, failing to perform its

duty to decide, and failing to follow

applicable law as established by the higher

court. The Petition for Writ of Certiorari

to the Colorado Supreme Court was denied

without opinion on April 25, 1988 (Appendix

pe. A-l).

Petitioners now seek review in this

Court.

18

VIII - ARGUMENT

A. THE LOWER COURTS INCORRECTLY

CONSTRUED SECTION 38-10-1117 C.R.S. IN HOLDING

THAT FRAUDULENT CONVEYANCES ARE VOID, IN

CONFLICT WITH ESTABLISHED LAW THAT THEY ARE

VOIDABLE, THUS DENYING PETITIONERS DUE

PROCESS.

In the trial of this matter the

construction of Section 38-10-117 C.R.S. was

in issue. The trial court read the statute

literally and ruled that since the term

"void" was used therein, a fraudulent

conveyance does not effectively transfer

anything, and nothing that occurs thereafter

could be considered to allow the transfer to

stand. (Trial Transcript Vol. VI, p. 399 11

2-9). This interpretation is contrary to the

general rule that where "void" is used in

such statutes it is construed to mean

"voidable" (37 Am. Jur. 2d Fraud. Conveyances

Section 106). This is also the law of

Colorado by statute and decision. In

Brooks_v. Black, 22 Colo.App. 49, 123 P. 131

19

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(1912) a husband-to-wife conveyance was.

determined to be fraudulent. However, the

wife's later conveyance of the same property

was upheld as passing good title. Such |

conclusion could not have been reached if the

husband-to-wife transfer had been literally

"void." Section 38-10-121 C.R.S. also clearly

states such rule, that a bona fide purchaser

can take good title regardless of the effect

of 38-10-117 if it does not have notice of

the fraudulent intent. The ruling of Brooks

is still the law, cited for such purpose in

In_Be Smythe, 32 B.R. 736 (D. Colo 1983),

citing for the same purpose Wright.v..Yust,

118 Colo. 449, 195 P.2d 951 (1948).

The Court of Appeals herein ignored

this statute and case law and did not address

this statutory interpretation issue in any

way. The case of Park State Bank. vy. Mclean,

660 P.2d 13 (Colo.App. 1982) it cited for

20

support addresses no elements of a fraudulent

conveyance nor this question. Such error by

the lower courts was a gross and obvious

disregard of the applicable established case

and statutory law. No rationale was

provided; the ruling was completely

arbitrary. Under such circumstances such

mistaken unjustified deprivation of property

violated the Due Process Clause of the Fifth

and Fourteenth Amendments. Cagrey..v. Pipbus,

435 U. S. 247, 98 S.Ct. 1042 (1978). See,

Roberts_v. City_of New York, 295 U. S. 264,

55 S.Ct. 689 (1935). And such error violated

the due process provision of the Colorado

Constitution, Article II, Section 25.

B. LACK OF CONSIDERATION BY ITSELF

DOES NOT MAKE A CONVEYANCE FRAUDULENT, AND

THE AUTHORITY RELIED UPON BY THE COURT OF

APPEALS IS NOT DISPOSITIVE. THE JURY SHOULD

HAVE BEEN INSTRUCTED ON ALL ELEMENTS OF A

FRAUDULENT CONVEYANCE. THESE ERRORS DENIED

| PETITIONERS DUE PROCESS AND THEIR RIGHT TO A

\ JURY TRIAL.

ee eb lig Se hi ah . .

In its opinion, the Court of Appeals

21

concluded "the trial court did not err in

holding that the conveyance was without

consideration and in granting the relief

sought by the plaintiff and in setting aside

the transaction." It appears the affirmation

of the trial court judgment was based on the

fact the children did not give consideration

in exchange for the remainder interest, as if

lack of consideration by itself makes any

transfer fraudulent. Such is clearly not the

law, as set forth in Section 38-10-120

C.R.S., resulting in another arbitary

decision denying due process. Carey_vyv.

Pipbuss_supra.

Further, whether a transfer is

fraudulent also requires a determination

whether the transferor is insolvent when it

is made or becomes insolvent because it is

made. Thuringer_ ve Trafton, 58 Colo. 250,

144 P. 866 (1944), Walton. v. First National

Bank, 13 Colo. 265, 22 P. 440 (1889),

Myexrs.v. Hayden, 82 Colo. 98, 257 P. 35

(1927), Genova_vy. Champion, 33 B.R. 930

(Bkrtcy.D.Colo. 1983). In the instant case

no such determination was made. And, there

was sufficient evidence by which the jury

could have determined the Shanks were

solvent. Their financial statement of May

14, 1979, (Defendant's Trial Exhibit C,

Record Vol. II, P. 28-29) showed a positive

net worth of $218,783.46 excluding their

residence. The valuation for their

commercial real estate was supported by the

April 30, 1979, appraisal they had obtained

from Worley (Defendants' Exhibit 54, Vol. II,

p. 42), valuing one lot at $32,500.00, so it

was reasonable for them to conclude that the

four adjacent similar lots pledged to the

Bank were worth $130,000.00, adequately

securing an indebtedness of $110,435.54.

23

Further, in 1978 they had paid off the SBA

loan of $75,000.00 six and one-third years

early, which is not the indication of an

insolvent debtor. The Bank attacked the

financial statement but at best, a conflict

in evidence was created. The function of the

jury is to resolve such conflicts and it

should have been instructed regarding the

solvency element. It was not, which

effectively deprived Petitioners of their

right to a jury trial under the Seventh

Amendment and C.R.C.P. 38.

C. THE DEFENSES OF WAIVER AND ESTOPPEL

ARE AVAILABLE AGAINST AN ALLEGEDLY FRAUDULENT

CONVEYANCE, AND DENYING THEM FURTHER DENIED

DUE PROCESS AND THE RIGHT TO A JURY DECISION.

The trial court ruled that waiver and

estoppel were not allowable defenses (Trial

Transcript Vol. VI, p. 399, 11. 9-13),

contrary to Colorado and other law that

clearly holds that when a creditor acquiesces

in a sale that could have been deemed

24

fraudulent, or ratifies such a transaction,

or changes its position after having

knowledge of the transfer, that it is barred

from later setting aside the transaction.

Kinpsy_Vve Yoclin.Bros. Mercantile .Ca., 76

Colo. 136, 230 P. 127 (1924), Sickman_v.

Abernathy, 14 Colo. 174, 23 P. 447 (1889),

Seattle Lodge Nos 211 ETC vs Par-T-Pak

Beverage .Co., 55 Wash.2d 587, 349 P.2d 229

(1960), Barretsville_Bank_.& Trust Co. ve

Bolton, 182 Tenn. 364, 187 S.W. 2d 306 (1945)

(Bank president had constructive notice of

transfer by recorded deed and actual notice

10 days later, found to have acquiesced in

transfer and waived right), and Bollieuv.

Betbke, 71 N.D. 208, 299 N.W. 303 (1941).

In the instant case the Bank's

President Hix told Mr. Shanks, within days

after the allegedly fraudulent February 9,

1979, transfer, "I don't have any desire to

TA a RIG owe

have your house." (Trial Transcript Vol. IV,

p. 88, 1. 10-11). Mr. Hix was a banker of

many years of experience (Trial Transcript

Vol. III, pe. 23, 1. 22-~p. 24, 1. 9) and by

his own testimony had done real estate

appraisals for the bank. (Trial Transcript

Vol. IV, pe 77, le 22-—-p. 78, 1. 2). From

this the jury could reasonably conclude that

he knew what he was doing when he made such

statement and was giving up any right he may

have had to go after the residence. Further,

with knowledge of the transfer, three months

later, on May 14, 1979, the Bank accepted

$12,000.00 from the Shanks, extended the

$100,000.00 note for a year, and wrote a new

note for $10,435.54. From this evidence a

Knowing waiver could reasonably be concluded

to have occurred, and the jury should have

been instructed on this issue. The

Petitioners were not allowed to have their

26

peers determine this issue, however, since

the court took it away from the jury.

D. THIS MATTER WAS A JURY CASE

ABUL INITIO INVOLVING BOTH LEGAL AND EQUITABLE

RELIEF, AND COMPLETE AND PROPER JURY

INSTRUCTIONS WERE REQUIRED. THE FAILURE TO

DO SO FURTHER DENIED DUE PROCESS AND THE

RIGHT TO A JURY TRIAL.

The Court of Appeals relied on

| McKelyyuve.Cooper, 165 Colo. 1102, 437 P.2d

346 (1968) in characterizing the instant case

as an equitable action and in

concluding that erroneous jury instructions

4 are not prejudicial. McKelvy.v. Cooper was a

quiet title action tried to a court sitting

with an admittedly advisory jury. To the

contrary, the instant case was tried to a

jury on all issues without objection by any

of the parties or the trial court after an

unqualified jury demand was made by

Defendants in their initial pleading. The

jury was not serving in an "advisory"

capacity. Authority is well established that

27

"the trial of a non-jury action to a jury

with the consent of both parties and the

judge, is a jury trial in its regular sense."

Youpg_Vs Colorado Nat'l Bank.of Denver, 148

Colo. 104, 365 P.2d 701 (1961), Shuman_y.

Tuxborn, 481 P.2d 741 (Colo.App. 1971), which

was the case here. McKelyy is inapposite.

Further, the trial court was never

requested to determine whether the nature of

the case was legal or equitable because it

was never an issue raised by the parties or

the court. If the trial court had decided

the nature of this case, it would have had to

determine that the basic thrust was legal,

(See Motz.ve Jammaron, 676 P.2d 661

(Colo.App. 1973), since legal remedies

predominated.

E. WHEN THERE IS SOME COMPETENT

EVIDENCE TO SUPPORT ANY THEORY OF RELIEF,

THE JURY IS TO BE INSTRUCTED THEREON AND THE

FAILURE TO DO DO IS A FURTHER DEPRIVATION OF

DUE PROCESS AND A JURY DECISION.

28

It is fundamental that when a trial

court decides whether to take an issue away

from the jury, all inferences must be drawn

in favor of the nonmoving party. When there

is some competent evidence to support any

theory the jury is to be instructed thereon.

Peger3aliI pss CQ. Vs Pubs, Service Co., 194

Colo. 107, 570 P.2d 239 (1977). In the

instant case the Shanks advanced two

counterclaims but the trial court dismissed

both even though all counterclaims were

Supported by at least some competent

evidence. The interference with business

claim was supported by the testimony of two

non-party witnesses, Mr. Wheeler and Dr.

Bohnsack. Mr. Wheeler testified that they

formed a partnership with Mr. Shanks to

develop the real estate of the Shanks

pledged to the Bank, began pre-construction

work (Trial Transcript Vol. IV, pp. 214-216,

29

|

221), and that in August, 1980, they met with

the Rank's President Hix to present their

plans. Mr. Hix responded that "*...he would

do nothing if Mr. Shanks would profit in any

manner at all. He was not interested in

cooperating on the land if he felt Mr. Shanks

would benefit by it." (]g. p. 221, 1. 25 --

p. 222, 1. 3), and Mr. Hix described Mr.

Shanks as a “disreputable operator." (]g. p.

222, 1. 16). Mr. Wheeler further testified

that "...as a result of this conversation the

deal primarily fell apart." (Jd, p. 22, 11.

19-20). Dr. Bohnsack testified that Mr. Hix

".,.-insisted that Mr. Shanks was not to

profit in any way...” (Jg., p. 238, 11. 7-8)

and that Mr. Hix said thet Mr. Shanks was

".»not to be involved in this ina

profitable manner." (Id., 11. 1-2). The

trial court determined that this testimony

amounted to no evidence to support the

30

interference claim or rather, in taking the

issue away from the jury, the trial court

determined that it would be impossible for

any reasonable person to find evidence of

interference in these remarks. There was

also evidence of damages from this

interference since Mr. Worley testified that

one developed lot would have been worth

$32,500 (Jg., p. 196, 11. 13-21 and

Defendants’ Exhibit 54, Vol. II, p. 35), but

the Bank purchased the four lots involved for

only $15,000.00 each when it foreclosed (]g.,

p. 54, 11. 17-19), therefore showing damages

of $17,500 per lot or $70,000.00 total.

The Court of Appeals did not correct

the plain error committed by the trial court

by its dismissal of the counterclaims nor

even address such issue. The Shanks were

therefore denied their right to trial by

jury and due process.

31

ee

~~

Sinaia \\ Lie ataa ai

F. THE COURT OF APPEALS FAILURE TO

CORRECT THE TRIAL COURT'S IMPROPER REFUSAL TO

ADMIT CERTAIN EVIDENCE WAS A FURTHER DENIAL

OF DUE PROCESS.

The trial court refused to admit

evidence of the Bank's breach of the SBA loan

agreement raised by the Shanks in their

counterclaim, ruling that such cause of

action belonged to E-Z Lift, Ltd., their

corporation (Trial Transcript Vol. V, p. 271,

11. 14-23). This demonstrated the trial

court's failure to perceive that the Shanks

personally guaranteed the loan (Defendants'

Exhibit F, Paragraph (1) (c), Vol. II, p. 34)

and if the corporation failed to repay it

they would be required to do so. The Bank

knew the SBA loan could benefit them

personally, and treated them and the

corporation as one in combining the corporate

and personal debt to put it over its lending

limit (Trial Transcript Vol. V, p. 263, ll.

14-23). The Shanks were therefore third-

party beneficiaries of the loan agreement and

could sue for its breach. Sanders.v. Black,

136 Colo. 417, 318 P.2d 1100 (1957).

“Therefore evidence of damages caused the

Shanks by breach of the SBA agreement was

relevant and should have been admitted under

Rule 402, Colo. Rules of Evidence. The Trial

Court's refusal to admit such evidence was

not based on a discretionary determination of

relevance, but on the failure to preceive

that the Shanks were real parties in interest

that could be personally damaged, which issue

was not corrected or even reviewed by the

Court of Appeals.

G. THE FAILURE OF THE COURT OF APPEALS

TO ADDRESS AND DECIDE ALL ISSUES RAISED ON

APPEAL WAS A DENIAL OF EQUAL PROTECTION AND

OF DUE PROCESS.

Under Colorado Appellate Rule l a party

is entitled to appeal the judgment of a

district court to the Court of Appeals. The

Due Process Clause of the Fourteenth

33

Amendment does not require a State to provide

appellate review but if a State does so it

must be provided to all litigants equally.

Otherwise the Equal Protection Clause is

violated. Dindsey.v..Normet, 405 U. S. 56,

92 S.Ct. 862 (1972). To arbitrarily decide

some issues and ignore others would deny

equal protection to the litigant raising

those issues that were ignored. If judges

fail to hear ang decide a case, due process

is denied. Atkins.v. United States, 556 F.2d

1028 {Ct. of Cl., 1977), cert. denied, 434 U.

S. 1009, and if an adverse decision is

rendered there must be reasons given

therefore by the State to meet due process

requirements. Shamie.vs.City.of Pontiac, 443

F.Supp 679 (E.D. Mich. 1977). The Court of

Appeals decision herein is glaringly

deficient in all of these respects. It fails

to directly address any of the issues

34

appealed, which are set forth at Appendix p

) A-22.It merely states that the trial court

did not err in setting aside the conveyance.

If the Shanks had brought their counterclaims

in a completely independent action where they

were dismissed and an appeal taken, the Court

of Appeals decision thereon would apparently

' have been a blank piece of paper, for that is

: the effect of their non-opinion herein on

such issue. The issue in the Bank's favor

was reviewed but not the issues in the

Shanks' favor. This is a denial of equal

protection and due process.

IX. CONCLUSION

The errors in this case build one upon

another and their cumulative impact is to

work a clear injustice. The failure by the

trial court to properly interpret the

fraudulent conveyance statute deprived the

Shanks of their right to have the jury

23

ca cis ene Dee Se eee eS

determine their waiver defenses. The

dismissal of their counterclaims was clearly

contrary to all of the evidence in their

favor, which again deprived them of a jury

decision. The Court of Appeals relied on

cases that were not remotely applicable and

failed to review the substance of the issues

appealed. The result in legal terms, if

these errors are not corrected, will bea

deprivation of property without due process

of law and a denial of the equal protection

of the law. The result in societal terms, if

these errors are not corrected, will bea

growing disrepect for the judicial system.

An attorney will have to add a disclaimer to

any advice he or she may give, i.e. "This is

what will happen -- if the court decides to

follow the law this day." When results lose

any degree of predictability the fundamental

fairness upon which our systemof laws is

36

supposedly based is gone.

For these reasons the Petitioners pray

that this Court grant certiorari so that this

matter may be reviewed on the merits.

Respectfully submitted,

fete. ©. Carhage:

s B. Dunlap

Attorney for Petitioners

9580 West 14th Avenue

Lakewood, Colorado 80215

PH: (303) 234-9673

37

X. CERTIFICATE OF SERVICE

The undersigned counsel of record for

Petitioners herein and member of the Bar of

this Court hereby certifies that three true

and complete copies of this Petition for Writ

of Certiorari have been served upon the

Respondent herein by depositing same in the

United States mail, proper first-class

postage prepaid, addressed to Respondents’

; r&

counsel as follows this ly— day of August,

1988:

Charles S. Bloom

WOOD, HERZOG, OSBORN & BLOOM, P.C.

No. 1 Old Town Square

P. O. Box 2003

Ft. Collins, Colorado 80522

James B. Dunlap

XI. APPENDIX

Order of Court (Colorado

Supreme Court denying certiorari).

Order (Colorado Court of Appeals,

denying rehearing) . . .« « « « « «

Opinion (Colorado Court of Appeals)

Order and Judgment (Trial Court) .

Special VecGgict . « « «© © e@ © «@ »

VOREGECE «+ % 6 & @ © a 6 8 ew Oe

Verdict For Third-Party Defendants

COMBLGANG «ce cece eueeunt

Answer, Counterclaims, Jury Demand

and Third Party Complaint...

Issues Presented For Review ...

39

Page

SUPREME COURT, STATE OF COLORADO

Case No. 87SC468

Certiorari to the Colorado Court of Appeals

83CA1136

Larimer County District Court 80CV 1453

ORDER OF COURT

anh

DEWEY D. SHANKS, GENEVIEVE M. SHANKS, JOSEPH

C. SHANKS, and CAMILLE S. HARPER,

Petitioners,

V.

THE ESTES PARK BANK,

Respondents.

Upon consideration of the Petition for

Writ of Certiorari to the Colorado Court of

Appeals, and after review of the record, the

briefs, and the opinion of said Court of

Appeals,

IT IS THIS DAY ORDERED that said

Petition for Writ of Certiorari shall be, and

the same hereby is DENIED.

BY THE COURT, EN BANC, APRIL 25, 1988.

Gary Sonke, Clerk

Colorado Court of Appeals

James B. Dunlap

9580 West 14th Avenue

Lakewood, CO 80215

Wood, Herzog, Osborn & Bloom, P.C.

Charles S. Bloom

No. 1 Old Town Square

P.O. Box 2003

Fort Collins, CO 80522

Honorable Arnaud Newton

Larimer County District Court

Larimer County Courthouse

P.O. Box 2066

Fort Collins, CO 80522

A-2

THE COURT OF APPEALS OF THE STATE OF COLORADO

Case Number 83CA1136

THE ESTES PARK BANK

a Colorado corporation,

Plaintiff-Appellee,

Ve ORDER

DEWEY D. SHANKS,

GENEVIEVE M. SHANKS,

JOSEPH C. SHANKS, and

CAMILLE S. HARPER,

Defendants-Appellants,

and

DEWEY D. SHANKS

and GENEVIEVE M. SHANKS

Third-Party

i ee

Plaintiffs-Appellants.

Upon consideration of the Petition for

Rehearing filed by the Appellants herein,

said Petition is hereby DENIED. It is

ordered that issuance of the Mandate hereby

be, and the same hereby is, stayed to and

oo, Sae>

including 12-21-87, provided that if Petition

of Writ of Certiorari is timely filed with

the Supreme Court of the State of Colorado,

the stay shall remain in effect until

disposition of the within cause by the

Supreme Court.

Sternberg, J.

Smith, J.

DATED: 11-19-87

Kelly, J.

A-3.1

COLORADO COURT OF APPEALS

No. 83CA1136

THE ESTES PARK BANK,

a Colorado corporation,

Plaintiff-Appellee,

NOT

Ve SELECTED

FOR

DEWEY D. SHANKS, PUBLICATION

GENEVIEVE M. SHANKS,

Defendants-Appellants,

and

DEWEY D. SHANKS

and GENEVIEVE WM. SHANKS,

Third-Party Plaintiffs-

i eee

Appellents.

Appeal from the District Court of

Larimer County

Honorable Arnaud Newton, Judge

DIVISION II JUDGMENT

Opinion by JUDGE STERNBERG AFFIRMED

Smith and Kelly, JJ. concur

Opinion

Wood, Herzog, Osborn & Bloom, P.C. filed

Charles S. Bloom and

Ft. Collins, Colorado Judgment entered

A-4

Attorneys for Plaintiff-Appellee

10-8-87.

James B. Dunlap

Lakewood, Colorado

Attorney for Defendants-Appellants

and Third-Party Plaintiffs-Appeilants

This is an appeal of a judgment of the

trial court holding void a conveyance of a

residence from parents to their children

reserving to the parents a life estate. The

trial court did not err in holding that the

conveyance was without consideration and in

granting the relief sought by the plaintiff

and in setting aside the transaction. See

Park State Bank v. McLean, 660 P.2d 13 (Colo.

App. 1982). We also conclude that even if,

as defendants allege, certain jury

instructions were erroneous, the error was

not prejudicial in this, and equitable

action. See McKelyvy_v. Cooper, 165 Colo.

102, 437 P.2d 346 (1968).

The judgment is affirmed.

JUDGE SMITH and JUDGE KELLY concur.

A-5

DISTRICT COURT, COUNTY OF LARIMER, STATE OF

COLORADO

Case No. 80 CV 1453

ry ry abanh -_'

ORDER AND JUDGMENT

-_" ‘ ee oo | 5 ry r sent ee | — ‘ |

THE ESTES PARK BANK, a Colorado corporation,

Plaintiff,

vs.

DEWEY D. SHANKS, GENEVIEVE M. SHANKS, JOSEPH

C. SHANKS and CAMILLE S. HARPER,

Defendants.

— _— ooh ol ry ond —_" ; ant

THIS CAUSE, having come on for trial to

a jury on the issue of whether the Defendants

Dewey D. Shanks and Genevieve M. Shanks

conveyed certain property to Joseph C. Shanks

and Camille S. Harper, with an intent to

hinder, delay or defraud creditors; and

All of the parties being represented in

Court by counsel; and the property in

question being Lot 7, Block 6, Lone Pine

A-6

Acres First Addition, which is also known as

1760 High Pine Drive, Estes Park, Larimer

County, Colorado and

On June 3, 1983, the jury having

answered a Special Verdict that such

conveyance was accomplished with the intent

to hinder, delay or defraud the Estes Park

Bank as a creditor; and

The parties having agreed prior to the

start of the trial that the matter was to be

submitted to the jury, with the Court to

enter an appropriate Order and Judgment based

on the verdict of the jury.

NOW, THEREFORE, IT IS ORDERED, ADJUDGED

AND DECREED that the conveyance of February

9, 1979, of Lot 7, Block 6, Lone Pine Acres

First Addition, also known as 1760 High Pine

Drive, Estes Park, Larimer County, Colorado,

as recorded in the books and records of

Larimer County at Book 1928, Page 697, is

hereby declared to have been void and such

+

7

conveyance is hereby set aside and held for

naught.

Dated this 10th day of June, 1983, Nunc

Pro Tuns June 3, 1983.

Arnaud Newton, Judge

A-7.1

IN THE DISTRICT COURT IN AND FOR THE

COUNTY OF LARIMER, STATE OF COLORADO

Civil Action No. 80CV1453

THE ESTES PARK BANK,

Plaintiff,

vs. SPECIAL

VERDICT

DEWEY SHANKS, GENEVIEVE

SHANKS, JOSEPH SHANKS

and CAMILLE HARPER,

Defendants.

me ee ee ee ee ee eee ee”

QUESTION: Did the Defendants Dewey

Shanks and Genevieve Shanks transfer their

marital home to the Defendants Joseph Shanks

and Camille Harper with an intent to hinder,

delay or defraud The Estes Park Bank as a

creditor? (Yes or No)

ANSWER: YES

[Signatures of jurors typed below]

Ruth F. Martin Robert E. Drechsel [sp?]

Arlene Stewart Given P. Lightsey

Elaine B. Scott Melvin J. Veedluigu [sp?]

A-8

IN THE DISTRICT COURT IN AND FOR THE

COUNTY OF LARIMER, STATE OF COLORADO

ESTES PARK BANK,

Plaintiff,

VS.

VERDICT

DEWEY SHANKS, GENEVIEVE

SHANKS, JOSEPH SHANKS

and CAMILLE HARPER,

me ee ee ee ee ee ee ee ee ee

Defendants.

We, the jury, find for the Plaintiff, The

Estes Park Bank, and award damages of

$96,440.85 against the Defendants, Dewey

Shanks and Genevieve Shanks.

[Signatures of jurors typed below]

Ruth F. Martin Robert E. Drechsel [sp?]

Arlene Stewart Given P. Lightsey

Elaine B. Scott Melvin J. Veedluigu [sp?]

DISTRICT COURT, COUNTY OF LARIMER, STATE OF

COLORADO

Case No. 80 CV 1453

VERDICT FOR THIRD-PARTY DEFENDANTS

ant. _ and.

THE ESTES PARK BANK, a Colorado banking

corporation,

Plaintiff,

vs.

DEWEY D. SHANKS, et al.,

Defendants.

DEWEY D. SHANKS, et al.,

Third-Party Plaintiffs,

vs.

MAURICE C. WORLEY, et al.,

Third-Party Defendants.

We, the jury, find for the Third-Party

Defendant, Maurice Worley and Professional

Real Estate Consultants, Inc., and against

the Third-Party Plaintiff, Dewey and

A-10

Genevieve Shanks.

[Signatures of jurors typed below]

Ruth F. Martin Robert E. Drechsel [sp?]

Arlene Stewart Given P. Lightsey

Elaine B. Scott Melvin J. Veedluigu [sp?]

A-10.1

IN THE DISTRICT COURT

IN AND FOR THE COUNTY OF LARIMER

STATE OF COLORADO

Division I

Civil Action No.: 80CV1453

THE ESTES PARK BANK, a )

)

Colorado banking corporation) COMPLAINT

)

Plaintiff, ) (On Promissory

) Notes and to

vs. ) Set Aside

) Fraudulent

DEWEY D. SHANKS, GENEVIEVE ) Conveyances

) and for

M. SHANKS, JOSEPH C. SHANKS ) Exemplary

) Damages)

and CAMILLE S. HARPER, )

)

Defendants. )

EIRST_CLAIN

Plaintiff by and through its attorney

complains against the Defendant, Dewey D.

Shanks and Genevieve M. Shanks, and states:

1. Plaintiff is a banking corporation

Oorgainized and existing under and by virtue

of the laws of the State of Colorado, with

its principal office and place of business in

A-11

Estes Park, Larimer County, Colorado.

2. On July 28, 1978 and May 14, 1979,

Defendants, Dewey D. Shanks and Genevieve M.

Shanks, executed and delivered to Plaintiff

their promissory notes hereinafter described

and attached hereto as Exhibits "A" and "B"

respectively:

a) One in the principal amount of

$100,000.00 with interest at the rate of 12%

per annum, secured by a Deed of Trust on

certain vacant land of said Defendants in

Larimer County, which note was originally

payable January 24, 1979, but extended to May

14, 1980 by agreement of the parties.

b) One in the principal amount of

$10,439.54 with interest at the rate of 12%

per annum, payable on or before May 14, 1980,

secured by a second lien Deed of Trust on the

same vacant land of Defendants Dewey and

Genevieve Shanks.

3. Said Defendants were in default on

A-12

the notes and Plaintiff duly foreclosed on

and purchased the securing property at Public

Trustee's Sale on October 15, 1980 with a bid

of $60,000.00.

4. After deduction of costs of sale,

the proceeds were applied to the sums due on

the notes leaving a deficiency balance of

$73,323.01 owing to Plaintiff by Defendants

Dewey and Genevieve Shanks, which deficiency

said Defendants have failed and refused to

pay though demand was made.

5. By terms of the said notes, said

Defendants are liable for Plaintiff's

attorney fees and costs incurred in this

action not to exceed 15% of the debt owing

and interest on the deficiency from October

15, 1980 to date of judgment at the rate of

12% per annum.

WHEREFORE, Plaintiff demands judgment in

its favor and against Defendants, Dewey D.

Shanks and Genevieve M. Shanks, and each of

them, in the amount of $73,323.01 on the

deficiency, plus reasonable attorney fees and

costs of this action, interest on the

deficiency at 12% per annum to date of

judgment, interest thereafter as provided by

law, and for such other and further relief as

the Court deems just and proper.

SECOND CLAIM

For its Second Claim, Plaintiff

complains against the Defendants and states:

6. Plaintiff incorporates all of the

allegations of its First Claim by this

reference.

7. Said notes evidence obligations of

Defendants Dewey and Genevieve Shanks to

repay loans originally made to them by

Plaintiff prior to February 9, 1979.

8. At the time credit was extended and

said loans were made by Plaintiff to said

Defendants, said Defendants owned and

occupied as their place of residence certain

A-14

real property in Larimer County, Colorado,

more particularly described as:

LOT 7, BLOCK 6, LONE PINE ACRES

FIRST ADDITION in the Town of Estes Park,

County of Larimer, State of Colorado.

9. On February 9, 1979, said Defendants

Dewey and Genevieve Shanks executed a

Warranty Deed purporting to convey said

property to Defendants Joseph C. Shanks and

Camille S. Harper, which Deed was recorded

February 9, 1979, in Book 1928 at Page 697 in

the Larimer County records.

10. Defendants Joseph C. Shanks and

Camille S. Harper, the grantees named in said

Deed, are children of Defendants Dewey and

Genevieve Shanks.

ll. Defendants Dewey and Genevieve

Shanks received no consideration of monetary

value in exchange for the conveyance of said

property by them.

12. Subsequent to February 9, 1979,

A-15

Defendants Dewey and Genevieve Shanks have

continued to occupy said property as their

place of residence and, on information and

belief, have continued to pay the taxes

assessed against said property from and after

the purported conveyance.

13. As a result of the conveyance

heretofore described, Defendants Dewey and

Genevieve Shanks were rendered insolvent.

14. Said conveyance was made by

Defendant Dewey and Genevieve Shanks with the

intent to hinder, delay and defraud Plaintiff

in its collection of the indebtedness due

from said Defendants, to Plaintiff's damage

in the amount of the deficiency heretofore

described.

15. The purported conveyance described

herein is, therefore, void as against

Plaintiff and should be set aside.

16. Plaintiff's damage were attended by

Circumstances of fraud or a wanton or

A-15.1

reckless disregard of the Plaintiff's rights

and feelings and exemplary damages of

$70,000.00 should be assessed against

Defendants Genevieve and Dewey Shanks and

awarded to Plaintiff.

WHEREFORE, Plaintiff prays for judgment

as follows:

A. For a determination by the Court

that Defendants Joseph C. Shanks and Camille

S. Harper have no rightful interest or

ownership rights in the above described

property and an Order setting said conveyance

aside and rendering it void and of no effect.

B. For judgment in favor of Plaintiff

and against Defendants Dewey D. Shanks and

Genevieve M. Shanks for the damages suffered

by Plaintiff of $73,323.01, plus exemplary

damages of $70,000.00, reasonable attorney

fees and costs of this action, interest as

provided by law, and for such other and

further relief as the Court deems just and

A-15.2

proper.

DATED this 5th day of December, 1980.

WOOD, HERZOG, OSBORN & BLOOM, P.C.

[Signed]

C. William Herzog, No. 2020

Attorney for Plaintiff

217 West Olive, P.O. Box 2003

Fort Collins, Colorado 80522

484-2928

Address of Plaintiff:

P.O. Box 2270

Estes Park, Colorado 80517

A-15.3

IN THE DISTRICT COURT

IN AND FOR THE COUNTY OF LARIMER

STATE OF COLORADO

Civil Action No.: 80CV1453

and CAMILLE S. HARPER,

Defendants.

THE ESTES PARK BANK, a )

)

Colorado banking corporation) ANSWER,

) COUNTER-

Plaintiff, ) CLAIMS,

) JURY

vs. ) DEMAND

) AND

DEWEY D. SHANKS, GENEVIEVE ) THIRD

) PARTY

M. SHANKS, JOSEPH C. SHANKS ) COMPLAINT

)

)

)

)

COMES NOW the Defendants, by Herbert A,

Shatz, their attorney, and as and for an

Answer to the Complaint, respectfully states

as follcw.s:

1. Denies each and every allegations

set forth in paragraph 3, except admits the

foreclosure.

2. Denies each and every allegation set

forth in paragraphs 4, 5, 6, 7, 8, 9, ll, 12,

A-16

13, 14, 15, and 16.

AFEIBMATIVE DEFENSES

1. That the Complaint does not set

forth grounds upon which relief can be

granted.

2. Duress.

3. Waiver and estoppel.

4. Knowledge of the fact of conveyance

to defendants Joseph C. Shanks and Camille S.

Harper, and that no contrary information was

furnished to plaintiff.

5. That the real property described in

the Complaint was bid in at a price below the

actual value of the said property, and that

the Plaintiff knew the actual value of said

property, and that same was in excess of the

bid price and/or the true value.

6. All matters set forth in the

Counterclaims hereinafter pleaded.

COMES_NOW, Defendants Dewey _D. Shanks

angd_ Genevieve Ms Shanks. and.as_and_ifor_a

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4 105

a fee wees >

First Counterclaim, alleges:

1. That the defendants herein are

owners and control E-Z Lift, Ltd., and on or

about May 26, 1977, the plaintiff was a

guaranteed lender from the United States

Small Business Administration, and loaned to

E-Z Lift Ltd. the sum of. $75,000.00, which

was guaranteed by the United States Small

Business Administration in the amount of 90%,

and these defendants personally. Loan No.

CP-862,195-10-09 Den.

2. That pursuant to the terms of such

loan and authority of the Small Business

Administration, $15,000.00 was to be applied

for working capital and $60,000.00 for

metabesr

3. That at the time of the said loan,

these defendants had a personal and

outstanding loan at plaintiff's bank in the

sum of $6,000.00.

4. That in breach of the Small Business

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Administration agreement between plaintiff

and these defendants, the plaintiff

improperly and in violation of said

agreement, caused a withdrawal of the said

$6,000.00 plus other unauthorized sums from

the proceeds of said loan guaranteed by the

Small Business Administration, on June l,

1977.

5. That the taking of such monies by

the plaintiff was deliberate and malicious,

and without authority, or right.

6. That as a result of same, these

defendants sustained direct and consequential

damage to their business and credit in the

sum of $50,000.00.

7. That in addition to the withdrawal

to itself of said $6,000.00, plus other

unauthorized sums, the plaintiff continued to

maintain the said $6,000.00 was unpaid, and

did so until September 1, 1977. That until

such time, and despite the improper

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withdrawal, the defendants credit for such

period indicated an outstanding delinquency.

8. That these defendants in addition

seek exemplary damages in the sum of

$50,000.00, in that plaintiff consciously and

maliciously and deliberately in violation of

the said agreement and banking regulations,

made payment as aforesaid; and these

defendants seek exemplary damages in the sum

of $50,000.00.

WHEREFORE, on the First Counterclaim,

these defendants pray for judgment in the sum

of $50,000.00, plus $50,000.00 in exemplary

damages, and for such other and further

relief as to the Court may be just and

proper, with costs, interest, attorney fees,

and disbursements.

Second_Counterclsin_by Dewey _D.

Sbapks_s09_Genevisve Ms Shanks:

9. That over a long period of time, the

said defendants have dealt with the

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plaintiff, in making loans, having checking

accounts, and in receiving business and

financial advice.

10. That on February 17, 1978, the

plaintiff advised these defendants that their

loans and credit were substanded, allegedly

according to bank examination.

ll. That thereafter, and in July, 1978

and in May, 1979, the plaintiff bank made the

loans to the defendants that are the subject

matter of the Complaint.

12. That the defendants were advised by

the plaintiff that the said loans were

substantially in excess of the needed

collateral.

13. That the value of the lots taken

and security were in fact worth in excess of

$150,000.00, and that the plaintiff was

advised by the defendants that the lots being

used as security were purchased for

development purposes.

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14. That the loans made by the

plaintiffs, and in inducing defendants to

make such loans, were made on the financial

representations and business advice of the

plaintiff to these defendants.

15. That the plaintiff in inducing

these defendants to make said loans were

adopting a course of action to eventually

permit the plaintiff to foreclose the loans,

and the plaintiff knew that without the

plaintiff's cooperation as a bank in

assisting these defendants with guidance,

advice, knowledge, and financing, the .

defendants could not repay the loans.

16. That thereafter these defendants

made every effort to pay off the loans, by

arranging development of the projects as to

the property being foreclosed by the

plaintiffs, and in seeking additional and

other financing, but the plaintiff

negligently and deliberately furnished

A-21.1

information to third parties that prevented

development of the lots, and lead to the

foreclosure of same at a price substantially

below market value.

17. That the actions by the plaintiff

constituted a breach of plaintiff's fiduciary

and other relationships with these

defendants, and also constituted an

interference with the defendants’ business

and credits.

18. That as a result of same, these

defendants have sustained damages, loss of

credit and reputation, among other things, in

the sum of $500,000.00.

19. That these defendants in addition

seek exemplary damages in the sum of

$500,000.00 in that plaintiff's action was of

a character and nature, and in breach of

fiduciary and other obligations, that

exemplary damages should be awarded.

WHEREFORE, on the Second Counterclaim,

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these defendants pray for judgment in the sum

of $500,000.00, plus $500,000.00 in exemplary

damages, and for such other and further

relief as to the Court may be just and

proper, with costs, interest, attorney fees,

and disbursements.

[Signed]

Herbert A. Shatz 2880

Attorney for Defendants

201 Guaranty Bank Bldg.

Denver, Colorado 80202

825-7247

Address of Defendants:

Dewey D. Shanks and Genevieve

M. Shanks, Box 1499, Estes

Park, Colorado 80517

Joseph C. Shanks, 1206 Court

Place, Colby, Kansas 66701

Camille S. Harper

5151 Greenberry Drive,

Sacramento, California 95841

DEFENDANTS REQUEST TRIAL BY JURY _OF SIX

A-21 .3

i

ae NTT ee,

issues_Presented for Review

1. Whether the Trial Court erred in its

ruling that Section 38-10-117 C.R.S. means

that any conveyance done with an intent to

defraud creditors is void and not voidable.

2. Whether the Trial Court erred in

ruling that the Defenses of waiver and

estoppel were not available against an

allegation that a fraudulent conveyance had

been committed.

3. Whether the Trial Court erred in

refusing to instruct the jury on the issues

of waiver and estoppel as possible defenses

of Defendants, and in instructing the jury as

it did as to what constitutes a fraudulent

conveyance.

4. Whether the Trial Court erred in

dismissing the Defendants’ counterclaims for

lack of evidence.

5. Whether the Trial Court erred in

refusing to allow into evidence further

A-22

aa

testimony of the Defendants regarding their

Small Business Administration Loan

transactions with Plaintiff.

6. Whether the bankruptcy proceedings

by Dewey and Genevieve Shanks in the interim

between the trial of this matter and the

eventual decision by this Court of Appeals

bars any further action by the Plaintiff

bank.

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