Flanagan v. Germania, F.A.

• Decision Date: 12 May 1989
• Docket Number: No. 88-1979,88-1979
• Citation: 872 F.2d 231
• Parties: Donald F. FLANAGAN, Appellee, v. GERMANIA, F.A., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 231

872 F.2d 231

Donald F. FLANAGAN, Appellee, v. GERMANIA, F.A., Appellant.

No. 88-1979.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 15, 1988.

Decided April 5, 1989.

Rehearing and Rehearing En Banc Denied May 12, 1989.

John L. Davidson, St. Louis, Mo., for appellant.

Robert Herman, St. Louis, Mo., for appellee.

Before ARNOLD, Circuit Judge, BRIGHT, Senior Circuit Judge, and JOHN R. GIBSON, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Germania, F.A., a federal savings association, appeals from an adverse judgment for actual and punitive damages on a tortious interference with contract claim brought by Donald F. Flanagan. Flanagan purchased twenty-eight suntanning beds from Silver Sales, Inc., making a down payment of $29,810. Germania, which had extended credit to Silver Sales' sister corporation, the Plaza Import Sales Company, was alleged to have engaged in loan collection practices that prevented Silver Sales from performing its obligation to deliver the tanning beds. On appeal Germania argues that the district court ¹ erred in failing to direct a verdict or enter a judgment notwithstanding the verdict, because Flanagan failed to establish all the elements of a tortious interference claim. Germania also argues that Flanagan failed to prove he was entitled to punitive damages, that the state of Missouri does not recognize a tortious interference with contract claim against lenders attempting to recover commercial loans, and that in any event federal law preempts the right of Missouri to offer such a right of action against a federal savings association. We affirm.

Flanagan ordered the twenty-eight tanning beds from Silver Sales in May of 1985, using a personal check for $29,810 as a down payment. Silver Sales, however, was experiencing severe financial problems. Flanagan's check was cashed, but no beds were delivered and the money was never returned. Meanwhile Plaza Imports, Silver Sales' sister corporation which owed Germania $550,000, defaulted on its loans. The parties later negotiated a workout agreement that left Germania as the sole stockholder of Silver Sales. Germania appointed new directors and officers to run Silver Sales, all of whom refused Flanagan's demand for delivery of the beds. Flanagan filed suit, obtaining a consent judgment for the amount of the down payment, but the judgment was never collected. Flanagan then brought this action, alleging that Germania had tortiously interfered with the contract between himself and Silver Sales in an effort to collect its own debts.

At trial Germania argued that it had not interfered with the contract, since Silver Sales was financially incapable of meeting its obligations, and that its actions were justified as those of a lender trying to protect its economic position. Germania produced evidence that Plaza Imports' principal asset was a large account receivable from Silver Sales, for tanning beds supplied by Plaza. Additionally, Germania argued that it had a security interest in all tanning beds acquired by Plaza Imports, and that Plaza could not transfer any beds to Silver Sales without written permission, which was never given, and that Silver Sales did receive tanning beds from Plaza while the security agreement was in effect. Relying on this information, Germania's counsel had advised Germania that these circumstances made its behavior proper.

Flanagan, however, produced evidence showing that Germania gave false and fraudulent information to its attorney, and therefore could not have reasonably relied on that attorney's advice. Flanagan showed that John Schlecht, a Germania officer, produced a list of Silver Sales' accounts payable, but did not list either Plaza Imports or Germania as creditors. Schlecht also wrote a memorandum to his superiors boasting that Germania would receive "excess value" and "windfall profits" by collecting Silver Sales' assets. The jury returned a verdict for Flanagan, awarding $29,810 in actual damages and $50,000 in punitive damages.

On appeal Germania argues that this verdict is not supported by the evidence since Silver Sales was insolvent and could not have performed Flanagan's contract, and because Germania believed its actions were justified on the basis of counsel's advice that Mo.Rev.Stat. Sec. 400.9-502(1) allowed such protections of economic self-interest. Similarly, it claims that the punitive damages award was not supported by the evidence. It further argues that Missouri does not recognize tortious interference actions in these circumstances, but instead limits recovery to statutorily defined remedies. Finally, it claims that federal law preempts this common law remedy against a federal savings association.

I.

We first examine Germania's claim that the state of Missouri does not recognize a tortious interference with contract claim against a lending institution attempting to obtain payment. Flanagan alleged in his complaint that Germania violated Mo.Rev.Stat. Sec. 428.020, a provision allowing remedies when conveyances are made to defraud creditors. This claim was dropped during trial. Germania argues that the Missouri legislature intended for this statute to provide the exclusive remedy in cases such as these, and that the common law tortious interference claim is therefore improper. The district court interpreted Missouri law to allow a tortious interference claim, however, and that determination is entitled to deference. See G.A. Imports, Inc. v. Subaru Mid-America, Inc., 799 F.2d 1200, 1205 (8th Cir.1986); Pyle v. Dow Chem. Co., 728 F.2d 1129, 1130 (8th Cir.1984). Germania can point to no Missouri case law to support its position, and we therefore conclude that the district court's interpretation was not erroneous.

Germania's contention that federal law preempts a Missouri tortious interference claim against a federal savings association is likewise without merit. In general, state laws may be preempted in one of two ways: they can actually conflict with an express or implied federal declaration, or they can be in a field so pervasively controlled that no room is left for state rulemaking. See Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152-53, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982); see also Deford v. Soo Line R.R. Co., 867 F.2d 1080, 1083-84 (8th Cir.1989). Germania relies on regulations promulgated by the Federal Home Loan Bank Board, which has Congressional authority to control the operations of all federal savings associations. ² These regulations, however, have no direct bearing on the issues before us. See 12 C.F.R. Part 545 (1988). Part 545 deals with a number of issues, including what loans can be made by federal associations, but says nothing about the collection practices of those institutions. Nothing suggests that Germania was forced to choose whether to follow federal or state law, a traditional test of whether state and federal laws are in actual conflict. Cf. de la Cuesta, 458 U.S. at 153, 102 S.Ct. at 3022. ³

Additionally, Germania can point to no case law that suggests federal law has completely preempted this banking field. Germania cites Community Title Co. v. Roosevelt Fed. Sav. & Loan Ass'n, 670 S.W.2d 895 (Mo.Ct.App.1984), but this case stands only for the proposition that Missouri courts will not issue injunctive relief when state regulatory control of a federal association would result. The question of money damages being awarded against such an institution on a state claim was specifically distinguished. See Community Title, 670 S.W.2d at 902-04. Similarly, de la Cuesta does not help Germania, since that case dealt with a direct and actual conflict between state law and federal regulations concerning the validity of due on sale clauses inserted in mortgage agreements. Here, the common law serves only to supplement complementary federal regulation. Moreover, it seems improbable that Congress would have wished all federal associations to be totally free of state control:

Although they are instruments of the federal government, the associations are privately owned...