China Worldbest Grp. Co. v. Empire Bank

• Decision Date: 12 June 2012
• Docket Number: SD 30487.,Nos. SD 30453,s. SD 30453
• Parties: CHINA WORLDBEST GROUP CO., LTD., Plaintiff–Appellant/Respondent, v. EMPIRE BANK, Defendant–Respondent/Cross–Appellant.
• Court: Missouri Court of Appeals

373 S.W.3d 9

CHINA WORLDBEST GROUP CO., LTD., Plaintiff–Appellant/Respondent,
v.
EMPIRE BANK, Defendant–Respondent/Cross–Appellant.

Nos. SD 30453, SD 30487.

Missouri Court of Appeals,
Southern District,
Division Two.

May 21, 2012.
Motion for Rehearing and Transfer
Denied June 12, 2012.

Application for Transfer Denied Aug. 14, 2012.

[373 S.W.3d 10]

Richard L. Rollings, Jr. of Camdenton, MO, for Appellant/Respondent.

Richard L. Schnake of Springfield, MO Division II, for Respondent/Cross–Appellant.

JEFFREY W. BATES, Judge.

China Worldbest Group Co., Ltd. (Worldbest) appeals from the trial court's entry of judgment on a jury verdict, which awarded Worldbest no damages in its action against Empire Bank (Empire) for alleged negligence in the handling of a documentary collection. Worldbest contends: (1) the jury verdict upon which the trial court entered its judgment was inconsistent, in that the verdict found Empire negligent but awarded no damages to Worldbest; and (2) the trial court erred in admitting evidence about the poor quality of the goods delivered pursuant to the contract underlying the documentary collection. Empire has cross-appealed. It contends the trial court erred in denying Empire's motion for judgment notwithstanding the verdict (JNOV) because: (1) Empire owed no legal duty to Worldbest; and (2) Worldbest did not have standing to sue because it had assigned its rights to a third party. We affirm.

[373 S.W.3d 11]

I. Factual and Procedural Background

Tricia Derges (Derges) started Mostly Memories, Inc. (Mostly Memories) in 1993. Mostly Memories created bath, body and candle products for retail sale. Mostly Memories imported some products it sold from China.

In 1999 or 2000, Mostly Memories began importing products made in factories owned by Michael Chao (Chao). Chao operated a company called Rucon International (Rucon). Chao and Rucon were agents of Worldbest, which engaged in the import and export business. Derges submitted orders and discussed the quality of shipments with Chao by email. Derges would wire the purchase price to Chao after the shipping containers arrived. She never paid for product without inspecting it first. When nonconforming product arrived, Derges would email Chao. Chao would either replace the product or instruct Derges not to pay for it.

In 2004, Mostly Memories was given the opportunity to present a special show on the QVC television shopping network. Derges ordered 55,000 spice racks from Chao to present for sale on that show. The spice racks were wooden cabinets with ceramic drawers. Each drawer contained a scented candle. Derges arranged to have Chao manufacture the spice racks and ship them directly to QVC. As part of that process, Chao shipped a sample spice rack to Derges. She was concerned because the scent on the candles was weak. Chao told Derges not to worry because the remainder “would be just fine.” Derges paid a $100,000 down payment on the spice racks.

After the first installment of spice racks were manufactured and shipped, Worldbest sent a documentary collection to Empire. The documentary collection was a group of documents which included a collection instruction, a bill of lading for the shipped spice racks and a sight draft for the purchase price of the spice racks. The collection instruction told Empire to “deliver documents against payment.” When Empire received the packet, the documents were forwarded to Mostly Memories. No payment was made.

When the first shipment of spice racks arrived at QVC, the product failed a quality test known as the drop test. Because QVC sold its products primarily through the mail, it required packaging that would protect the product from possible rough handling during shipping. To make that assessment, a sample in its original packaging would be dropped and then opened and inspected for breakage. The spice racks failed the drop test on three occasions.

Derges arranged to have the remaining shipments sent to the Mostly Memories factory so her employees could repack the spice racks. When the spice racks arrived, Derges discovered that there were additional quality problems. The ceramic drawers were different sizes, and many were stuck in the wooden cabinets. Some of the ceramic drawers had been broken, revealing that the candles were made of inferior wax “with about a quarter inch of really pretty covering so that it would hide the junk wax below.”

Derges informed Chao of the problems with the spice racks. Chao admitted that he knew some of the spice racks in the first shipment did not meet the quality specifications. Chao assured Derges that 90 percent of the spice racks conformed to the specifications. Meanwhile, employees of Mostly Memories continued unpacking the spice racks to repack them for shipment to QVC; Derges discovered that “way over ten percent” of the spice racks were damaged or of inferior quality.

[373 S.W.3d 12]

Derges told Chao she wanted to cancel the contract. Chao apologized and urged her to accept the additional shipments. Chao told Derges not to pay for the spice racks, but to repair them and pay after the repairs had been completed. Chao said he would take full responsibility.

Derges continued the efforts to salvage the spice racks. Worldbest continued to send documentary collections in connection with the shipments, and Empire continued to forward the bills of lading to Derges without requiring payment on the drafts for the purchase price. Ultimately, the salvage of the project was not successful, resulting in losses well over the purchase price.

In December 2004, Worldbest filed a petition against Empire. Relying on Article 4 of the Uniform Commercial Code (UCC), the petition alleged that Empire accepted Worldbest's documents for collection and was negligent in its subsequent handling of the documentary collection. The petition further alleged that Empire was liable for the face value of the drafts based on its action of failing to collect the drafts before delivering the bills of lading to Mostly Memories. Worldbest sought $442,900 in damages, plus interest.

In Empire's answer, it denied that it agreed to act as a collecting bank. Empire also alleged that Worldbest waived the requirements of the collection instructions through its course of dealing with Mostly Memories by allowing Mostly Memories to inspect goods before accepting them. Finally, Empire alleged that Worldbest suffered no damages as a consequence of any alleged breach because it delivered nonconforming goods.

A three-day jury trial was conducted in December 2009. The trial court admitted the six documentary collection packets that involved the spice rack transactions. Worldbest also presented the testimony of banking expert Walter Baker, III (Baker). Baker explained the process of documentary collections like those used in the transaction between Worldbest and Mostly Memories. He testified that in a “document against payment transaction[,]” the bank releases the shipping documents when it receives payment.

Derges testified on Empire's behalf. Worldbest was permitted to make a continuing objection that Derges' testimony about “any problems with the product are not relevant to any liability that Empire Bank has for failing to comply with the collection instructions in this case[.]” The court overruled the objection and received Derges' testimony on this subject, which we summarized above.

The jury unanimously found in favor of Worldbest, but awarded no damages. After the verdict was read, the jury was removed from the courtroom. Worldbest's counsel objected that the verdict was inconsistent because the finding was for the plaintiff, but no damages were assessed. Other than making that observation, Worldbest's counsel did not request any relief. Empire's counsel argued that the evidence supported a finding by the jurors that Worldbest did not actually sustain any damages. The court decided to accept and file the verdict. Worldbest's counsel declined the opportunity to make any further record on this issue. Thereafter, the trial court entered judgment on the jury's verdict. After the denial of Worldbest's motion for new trial and Empire's motion for JNOV, both parties appealed.

II. Discussion and Decision Worldbest's Appeal

In Worldbest's first point, it contends the trial court erred in accepting the jury's verdict. Worldbest argues that the verdict was inconsistent because the jurors

[373 S.W.3d 13]

found that Empire was negligent, but awarded no damages. Empire responds that any inconsistency in the verdict was waived because Worldbest did not request appropriate relief at trial. We agree with Empire.

To preserve for appellate review a claim that the jury's verdict was inconsistent, the party must object before the jury is discharged. Harrell v. Mercy Health Services Corp., 229 S.W.3d 614, 617 (Mo.App.2007). When a party believes the verdict is inconsistent, the “proper method of seeking relief [is] to request the trial court to return the jury for further deliberation.” Id. at 618. If the objecting party does not request that the jury be returned for further deliberation, the claim of error is waived. O'Brien v. Mobil Oil Corp., 749 S.W.2d 457, 458 (Mo.App.1988). This is true even if...