614 F.2d 1056 (5th Cir. 1980), 78-2249, South Central Livestock Dealers, Inc. v. Security State Bank of Hedley, Tex.

Docket Nº:78-2249.
Citation:614 F.2d 1056
Party Name:SOUTH CENTRAL LIVESTOCK DEALERS, INC., et al., Plaintiffs, John Dahl Construction Company, Inc., Plaintiff-Intervenor-Appellee Cross- Appellant, v. SECURITY STATE BANK OF HEDLEY, TEXAS, Defendant-Appellant Cross-Appellee.
Case Date:April 04, 1980
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1056

614 F.2d 1056 (5th Cir. 1980)

SOUTH CENTRAL LIVESTOCK DEALERS, INC., et al., Plaintiffs,

John Dahl Construction Company, Inc.,

Plaintiff-Intervenor-Appellee Cross- Appellant,

v.

SECURITY STATE BANK OF HEDLEY, TEXAS, Defendant-Appellant

Cross-Appellee.

No. 78-2249.

United States Court of Appeals, Fifth Circuit

April 4, 1980

Rehearing Denied May 1, 1980.

Page 1057

[Copyrighted Material Omitted]

Page 1058

R. A. Wilson, Amarillo, Tex., Curtis L. Frisbie, Jr., Dallas, Tex., for defendant-appellant cross-appellee.

Gibson, Ochsner & Adkins, John Huffaker, Amarillo, Tex., for John Dahl Const.

Appeals from the United States District Court for the Northern District of Texas.

Before WISDOM, POLITZ and SAM D. JOHNSON, Circuit Judges.

SAM D. JOHNSON, Circuit Judge.

John Dahl Construction Co., Inc., (Dahl) intervened in a suit brought by South Central Livestock Dealers, Inc., et al., (the Original Plaintiffs) against Security State Bank of Hedley, Texas, (the Bank) for the Bank's wrongful offset of money held in trust by Donley County Feedlot, Inc., (the Feedlot) in an account at the Bank. The district court rendered summary judgment for the Bank, but this Court reversed and remanded. After remand, the Original Plaintiffs settled with the Bank, but Dahl proceeded to trial. The jury awarded Dahl all its claimed actual damages plus $25,000 in exemplary damages. Modifying only the prejudgment interest awarded by the district court, we affirm the district court judgment for Dahl.

I. The Facts

The Feedlot was in the business of fattening for slaughter cattle that belonged to its customers and selling the cattle to meat packers. It was a "custom feedlot," that is, it segregated each customer's cattle in separate pens. The Feedlot would fatten the cattle for between 120 and 190 days, depending on the initial size and sex of the animals. During this period, the Feedlot kept track of the amount of feed that each customer's cattle consumed and the veterinary bills incurred by each customer's cattle. At the end of the feeding period, the Feedlot would sell the fattened cattle to a packing house. It would then remit to the customer whose cattle it had sold the proceeds of that sale less any feed and veterinary bills that customer had incurred, but not paid.

The Feedlot banked at Security State Bank of Hedley, Texas. Initially, the Feedlot had only one account at the Bank. Later, when the Feedlot began to have difficulty keeping its funds and those of its cattle customers separate, the Feedlot and the Bank agreed that the Feedlot needed another account. The Feedlot opened another account, known as the cattle account, to go along with its original, or regular, account. The Feedlot used the cattle account as a custodial account for the sale proceeds from its customers' cattle. The Feedlot used the regular account for its own operating expenses and salaries. When the Feedlot sold cattle for a customer, it would deposit the proceeds in its cattle account. It would then write a check from the cattle account to the regular account to cover the feed and veterinary bills associated with the cattle it had sold. Finally, the Feedlot would write a check on the cattle account to the customer for the net proceeds of the cattle sale. At one point, the Bank severely criticized the Feedlot for overdrawing the cattle account because that account contained other people's money.

The Feedlot also had a number of outstanding loans from the Bank. In July of 1974 the Bank took some drastic measures to protect itself against a possible default by the Feedlot on its loans. On July 12th the Bank offset the entire balance of the Feedlot's regular account, $15,528, against the indebtedness the Feedlot owed the Bank. The Bank also dishonored $29,000 in checks drawn against the cattle account. The Bank took this action without notifying the Feedlot. Three days later, on Monday, the Bank persuaded the Feedlot's vice president to renew a $172,000 note secured by the Feedlot accounts receivable. Then the Bank offset the entire $86,247 balance of the cattle account. This action gave rise to the instant suit. The Feedlot did not learn of the Bank's offsets until Thursday, July 18th. The Bank later sequestered the Feedlot and obtained constructive possession of it. By early August, the Feedlot filed for bankruptcy.

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The Original Plaintiffs, who were customers of the Feedlot, sued the Bank claiming wrongful offset of the cattle account and tortious interference with the contractual relations between the Feedlot and its customers. The district court gave the Bank a directed verdict on the grounds that it had the right to offset funds in the cattle account.

The Original Plaintiffs and Dahl successfully appealed. In South Central Livestock Dealers, Inc. v. Security State Bank of Hedley...

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