Brown v. Mercantile Bank of Poplar Bluff, s. 17347

• Decision Date: 05 December 1991
• Docket Number: 17381,Nos. 17347,s. 17347
• Citation: 820 S.W.2d 327
• Parties: Thomas C. BROWN and Sofia Brown, Cross-Claim Plaintiffs/Appellants, v. MERCANTILE BANK OF POPLAR BLUFF, Cross-Claim Defendant/Appellant.
• Court: Missouri Court of Appeals

Page 327

820 S.W.2d 327

Thomas C. BROWN and Sofia Brown, Cross-ClaimPlaintiffs/Appellants, v.MERCANTILE BANK OF POPLAR BLUFF, Cross-ClaimDefendant/Appellant.

Nos. 17347, 17381.

Missouri Court of Appeals,

Southern District,

Division Two.

Dec. 5, 1991.

G.H. Terando, Wilhoit, Edmundson, Terando & Hopkins, Poplar Bluff, for cross-claim plaintiffs-appellants.

Elizabeth A. Blaich, Summers, Walsh, Pritchett and Blaich, Poplar Bluff, for cross-claim defendant-appellant.

SCHRUM, Presiding Judge.

Cross-claimantsThomas C. Brown and Sofia Brown sought actual and punitive damages from Mercantile Bank of Poplar Bluff alleging that Mercantile wrongfully withheld from them the principal and interest on an $85,000 certificate of deposit pursuant to a garnishment when Mercantile knew, or should have known, the funds were not subject to garnishment.Following a bench trial, the court awarded the Browns $4,921.86 in actual damages and $4,874 in attorney fees and denied their claim for punitive damages.

In case No. 17347, Mercantile appeals from the award of actual damages and attorney fees.In case No. 17381, the Browns appeal from the denial of their claim for punitive damages.

We conclude that the trial court erred in its determination of the amount of actual damages, erred in awarding attorney fees, and did not err in denying the claim for punitive damages.We modify the award of damages, and, as modified, the judgment is affirmed.

FACTS

On January 3, 1985, Thomas Brown and Sofia Brown purchased an $85,000 twelve-month certificate of deposit from Mercantile.The face of the CD included the following:

Payable to the depositor upon presentation and surrender of this certificate, properly endorsed, on a maturity date.If more than one depositor is named above, and unless specifically indicated therein to the contrary, this certificate and the deposit evidenced hereby, shall belong to said depositors as joint tenants with right of survivorship (and not as tenants in common); provided, however, for all purposes, including endorsement, payment of principal and interest, presentation, transfer, and any notice to or from the depositors, this institution may deem and treat as the absolute owner hereof any one depositor named above, or the survivor or survivors, and each such depositor shall be the agent of each other depositor for all the foregoing purposes.

Named as "Depositors" on the CD were "Thomas C. Brown or Sofia Brown or Jessica Lynn Brown."Thomas C. Brown and

Sofia Brown were--and are--husband and wife.Jessica Lynn, the Browns' daughter, was 15 years old on the date the CD was issued.Thomas and Sofia Brown purchased the CD with proceeds from the sale of a beer distributorship.

Interest on the CD, which was 9% for the initial term, was payable monthly.The CD was automatically renewable for a 12-month term in the absence of the occurrence of one of these conditions: presentation for payment on or within 10 days after a maturity date; receipt by the bank, before a maturity date, of the depositor's written notice of intention to redeem; or written notice to a depositor, not less than 30 days before a maturity date, of the bank's intention to redeem at maturity.

On October 29, 1985, Thomas and Sofia Brown used the Mercantile CD as security for an $85,000 line of credit at Commerce Bank of Poplar Bluff.The Browns endorsed the back of the CD: "Assigned and pledged to Commerce Bank of Poplar Bluff, N.A., under that certain assignment dated 10-19-85."The Browns delivered the CD to Commerce; Mercantile was aware that the Browns had used the CD as collateral for a line of credit at Commerce.

The present dispute had its genesis in prior litigation involving Thomas Brown.On April 30, 1985, in Statler Mfg. Inc. v. Brown, 691 S.W.2d 445, this court reversed a judgment against Statler and in favor of Brown and his business partner Eugene Ferguson and remanded with instructions to the Ripley County Circuit Court to enter judgment for $120,337.40 in favor of Statler against Brown and Ferguson.The judgment in favor of Statler was not against Sofia or Jessica Lynn Brown.

The Statler judgment was a precursor to garnishment proceedings in Ripley County, a separate lawsuit brought by Statler in Butler County, and the cross-claim now before us, which was filed as a part of Statler's Butler County lawsuit.A chronological narration of litigation-related events follows.¹

In November 1985, in Ripley County, Statler summoned Mercantile as a garnishee in aid of execution on the judgment.In its initial response, Mercantile stated it was "unable to determine what interest, if any, Thomas C. Brown has in said Certificate of Deposit and, therefore, requests the Court for an order defining its liabilities therein."

On December 6, the court granted a request from Statler for an order requiring immediate delivery of the CD.On December 16, Mercantile filed a "supplemental answer of garnishee" in which it stated that the CD was not in its possession; that it was a time certificate not payable until January 3, 1986; that prior to the garnishment, on October 29, 1985, $45,000 of the CD had been assigned to Commerce; and that "the face of said Certificate of Deposit shows the ownership to be in the names of Thomas C. Brown or Sofia Brown or Jessica Lynn Brown and under the statutes this is joint ownership and not all of the owners being judgment debtors, the jointly owned asset may not be levied upon for the individual debts of the joint tenants (emphasis in original)."Mercantile then asked the court to quash the garnishment.

On December 18, the court revised its order of delivery to permit Mercantile, in lieu of delivering the CD, to pay the sheriff $48,000.²On the same date, Statler filed a motion for contempt against Mercantile.On December 19, apparently following a hearing, the court continued proceedings on several motions, including Statler's motion for contempt, "in order to allow service of indispensable parties."³

Also on December 19, 1985, Statler filed a petition in the Butler County Circuit Court naming as defendants Thomas and Sofia Brown, Eugene and Patricia Ferguson, Commerce, and Mercantile.In Count I of its petition, directed solely against the Browns, Statler alleged Thomas Brown fraudulently conveyed certain real property to Sofia Brown with intent to hinder collection of the Statler judgment against him.Count II, virtually identical to Count I, was directed solely against the Fergusons.In Count III, directed against Mercantile, Statler sought actual and punitive damages arising from Mercantile's alleged refusal to pay to the sheriff the $48,000 ordered by the court.In Count IV, directed solely against Commerce, Statler alleged the assignment of the CD to Commerce was made by the Browns with intent to hinder collection of the judgment against Thomas Brown and sought to set aside the assignment of the CD to Commerce.

In a January 3, 1986, letter, the attorney ⁴ for Mercantile advised the president of Commerce that the CD had not been renewed and that, "[p]ursuant to garnishment and an order of delivery," the proceeds of the CD, including interest, would be paid into the Ripley County Circuit Court.The letter advised that Mercantile's check in the amount of $85,649.73 would be payable to nine payees: Statler Manufacturing, its three co-plaintiffs, and the law firm representing them; the three Browns; and Commerce.The letter also stated, "You are further advised that the above action has been taken without presentment of the certificate for payment.However, the certificate has been purged from the Bank's system and will not be paid except as stated above."⁵Copies of the letter were sent to Thomas and Sofia Brown, Thomas Brown's attorney, ⁶ and attorneys for Statler and Commerce.

Despite its announced intentions, Mercantile did not follow through on its plan to send a nine-party check to the Ripley County Circuit Court.Instead, it renewed the CD at an annual interest rate of 5.75% and began issuing monthly interest checks payable to all three Browns.However, Mercantile delivered the checks to the Ripley County circuit clerk for "safekeeping."The docket sheet of the garnishment proceedings indicates the first such check was received by the court on January 23, 1986.

In a January 7, 1986 letter, Commerce advised Thomas and Sofia Brown that it would make no more advances on the loan secured by the CD, and the bank requested the Browns provide substitute collateral because of "[r]ecent developments concerning a judgement against Mr. Tom Brown and the action of Mercantile Bank of Poplar Bluff in not renewing your certificate of deposit...."

In a January 17, 1986, letter to Mercantile's attorney, the attorney for Thomas Brown, objecting to Mercantile's sending interest checks to the circuit clerk, stated:

The Bank is aware of the fact that Sofia Brown is Thomas C. Brown's wife and that Jessica L. Brown is their child.Thus, the Bank is aware of the fact that this is property held by the entireties as to an undivided interest and by a third party as to the remaining undivided interest.The wife and child have no judgment against them and their interest in the CD should not have been put at risk.The law in this state is clear that property held by the entireties is not available for execution or satisfaction of a judgment against only one of the spouses.

Despite the objection, Mercantile continued to send the interest checks, payable to all three Browns, to the Ripley County circuit clerk until mid-1987, at which time Mercantile began to retain possession of the checks, still payable to the Browns.At the trial of the cross-claim, Mercantile vice-president William B. Gresham, acknowledging that Mercantile's handling of the check was not pursuant to a court order, stated, "[W]e thought we were doing what was necessary to protect the Bank and other parties in interest at the time."

In June 1987,...