City National Bank of Fort Smith, Arkansas v. Vanderboom, Civ. A. No. 2103-2107.

• Decision Date: 27 September 1968
• Docket Number: Civ. A. No. 2103-2107.
• Citation: 290 F. Supp. 592
• Parties: The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. Ilo VANDERBOOM, Platte, South Dakota, Defendant. The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. DeHAAN LIVESTOCK AND GRAIN FARMS, INC., a South Dakota Corporation (Andrew DeHaan, Platte, South Dakota, Registered Agent), Andy D. DeHaan, Kenneth J. DeHaan (Both Platte, South Dakota) and Lyle R. DeHaan, Geddis, South Dakota, Defendants. The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. H. T. RINGLING, Platte, South Dakota, Defendant. The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. James NACHTIGAL, Academy, South Dakota, Defendant. The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. Robert CARTER, Platte, South Dakota, Defendant.
• Court: U.S. District Court — Western District of Arkansas

290 F. Supp. 592

The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. Ilo VANDERBOOM, Platte, South Dakota, Defendant.

The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. DeHAAN LIVESTOCK AND GRAIN FARMS, INC., a South Dakota Corporation (Andrew DeHaan, Platte, South Dakota, Registered Agent), Andy D. DeHaan, Kenneth J. DeHaan (Both Platte, South Dakota) and Lyle R. DeHaan, Geddis, South Dakota, Defendants.

The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. H. T. RINGLING, Platte, South Dakota, Defendant.

The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. James NACHTIGAL, Academy, South Dakota, Defendant.

The CITY NATIONAL BANK OF FORT SMITH, ARKANSAS, a national banking association, Plaintiff, v. Robert CARTER, Platte, South Dakota, Defendant.

Civ. A. Nos. 2103-2107.

United States District Court W. D. Arkansas, Fort Smith Division.

September 27, 1968.

Thomas Harper, of Harper, Young, Durden & Smith, Fort Smith, Ark., for plaintiff.

William M. Stocks, of Bethell, Stocks, Callaway & King, Fort Smith, Ark., for defendants.

OPINION

JOHN E. MILLER, Senior District Judge.

A motion for summary judgment was filed by the plaintiff in each of these cases on August 5, 1968. Prior to the filing of the motion, the plaintiff had filed a motion for summary judgment in each of the cases on April 8, 1968. The court considered the earlier motion, and submitted to counsel a letter opinion, and an order was entered overruling the motion on May 15, 1968. (Counsel for plaintiff have requested that the earlier motion be again considered in connection with the present motion of August 5, 1968.)

The complaint in each of the following cases was filed November 11, 1967.

In Civil Action 2103 the plaintiff is seeking judgment for $20,555.64 with interest from May 30, 1967.

In Civil Action 2104 the plaintiff is seeking judgment for $70,000 with interest from June 1, 1967.

In Civil Action 2105 the plaintiff is seeking judgment for $44,444.44 with interest from May 30, 1967.

In Civil Action 2106 the plaintiff is seeking judgment for $45,833.34 with interest from May 30, 1967.

In Civil Action 2107 the plaintiff is seeking judgment for $32,222.22 with interest from May 30, 1967.

Subsequent to the commencement of Civil Actions 2103-2107 the plaintiff on November 16, 1967, filed a complaint (Civil Action 2108) against these same defendants and others to enjoin and restrain said parties from proceeding with Case No. 67-871 filed by them in the Circuit Court, Second Judicial Circuit, County of Minnehaha, State of South Dakota, against the plaintiff. The court, after a full hearing in Civil 2108, issued a preliminary injunction enjoining the parties from prosecuting said suit in the state court of South Dakota. Later the plaintiffs in the South Dakota case dismissed their complaint, and on March 13, 1968, the defendants in the instant case filed their separate answers and counterclaims, in which they each admitted the execution of the notes, the receipt of the money from plaintiff, the payments made thereon by them, and extensions granted by plaintiff, but denied that they were liable for the reasons set forth in their counterclaims. In the counterclaim, the defendants alleged:

"The defendant and counter-claimant states that for sometime prior to, at the time of, and subsequent to the execution of the note, one James S. Hall, was a vice president and agent of the plaintiff and that Hall, in conjunction with others, worked out a scheme or method of fraudulent misrepresentations whereby this defendant and counter-claimant and others would use personal funds and funds obtained from the plaintiff for the ultimate purchase of all of the stock in an Arkansas corporation called American Home Builders, Inc., which was represented by Hall and others to this defendant and counter-claimant and others to be a well-managed, solvent corporation, when in fact at the time of these misrepresentations and at the time of the execution of the note in question and subsequent thereto American Home Builders was in fact insolvent. At all times herein mentioned, Hall owned approximately one-third of the stock in American Home Builders and fraudulently induced this defendant and counter-claimant and others to obtain the loan by the execution of the note in question, all in violation of 12 U.S.C.A., Section 375 A, and 18 U.S.C.A., Section 220, and the rules and regulations thereunder pertaining to national banks, while an officer and agent of the plaintiff, and further the plaintiff at all times herein mentioned did not follow normal banking practices and knew or should have known that by advancing the money under the note in question, it was participating in the scheme whereby this defendant and others would purchase an insolvent corporation with the proceeds of the note and other personal money, all to the detriment of this defendant and counter-claimant, and to the financial benefit and gain of its officer and agent and itself, all in violation of the U. S. Code sections hereinabove referred to and further in violation of the common law."

On April 5, 1968, the plaintiff filed its reply to the counterclaims, in which it alleged:

"1. The defendant's purported counterclaim appears to be set out in Paragraph 7 thereof, and the plaintiff denies each and every allegation made and attempted to be made in said paragraph, and denies that defendant is entitled to the relief prayed against plaintiff therein.

"2. Further answering, plaintiff alleges that by defendant's admission of making payments on the note described in the complaint, defendant waived his right to assert his alleged counterclaim, and is now estopped from doing so.

"3. Further answering, plaintiff alleges it is a holder in due course of the note described in the complaint, and as such holds same free from the claim sought to be asserted by defendant in the counterclaim.

"4. Further answering, plaintiff states that said counterclaim fails to state a claim upon which relief can be granted.

"WHEREFORE, without waiving the foregoing motion, plaintiff prays that the counterclaim herein be dismissed and that plaintiff have the relief first prayed in its complaint against the defendant."

Following the filing of the reply to the counterclaim, the defendants decided to obtain other counsel and employed their present counsel, who filed motions for extensions of time to familiarize himself with the issues, which extensions were granted. Then began the filing of a series of interrogatories which will later be considered along with all other documents in support of the motion for summary judgment.

On August 13, 1968, the defendants, after obtaining leave of court, filed an amended counterclaim, which supplements and enlarges the allegations contained in the original counterclaim. On August 20, 1968, plaintiff filed its reply to the amended counterclaim.

In the motion for summary judgment now before the court in Civil Actions 2103-2107, the plaintiff alleged:

"I.

"The complaints, answers, counterclaims and replies thereto in each of said causes of action, and the affidavits, depositions and certificates and exhibits thereto, all of which are attached hereto, show that there is no genuine issue as to any material fact, either as to the complaints or as to the counter-claims in each of said causes, and that plaintiff, as a matter of law, is entitled to declaratory judgments as prayed in the complaints against the defendants in each of Causes Nos. 2103, 2104, 2105, 2106, 2107 and 2108, and to judgments dismissing the counterclaims in each and all of said causes.

"II.

"In support of this motion, plaintiff attaches hereto the following documents as Exhibits identified as set out below, each of which is made a part hereof:

Exhibit 1—Affidavit of Austin Gatlin. Exhibit 2—Affidavit of Sam Sexton Jr. Exhibit 3—Copy of discovery deposition taken by defendants of Austin Gatlin. Exhibit 4—Copy of discovery deposition taken by defendants of Sam Sexton, Jr. Exhibit 5—Copy of discovery deposition taken by defendants of James S. Hall. Exhibits 6 to 12—Copies of interrogatories served upon and verified answers thereto served by each of the defendants in each of the above causes. Exhibit 13—Copy of interrogatories served upon and verified answers thereto served by plaintiff's president, Edward H Smoot. Exhibit 14—Copy of verified complaint filed and served by these defendants herein as plaintiffs in Cause No. FS-68-C-27 in this court on July 19, 1968.

"III.

"Incorporated herein by reference are other pleadings filed herein by defendants with motions for leave to file same:

Exhibit 15 (by reference)—Third-Party Complaint.

Exhibits 16 to 20 (by reference)— Amended Counterclaims in causes 2103, 2104, 2105, 2106, and 2107.

"WHEREFORE, plaintiff prays for summary judgment granting the relief above described in each of said causes, and that the court fix a time and place for hearing same, not sooner than ten days after service hereof."

In the response of defendants to the motion, each of them alleged:

"1. The plaintiff is not entitled to a declaratory judgment upon the complaint filed against each of the defendants, and the plaintiff is not entitled to a summary judgment against the defendants-counterclaimants on their respective counterclaims filed in Civil Actions Nos. 2103, 2104, 2105, 2106, and 2107.

"2. Genuine issues of material facts exist between the counterclaimants and the plaintiff and as a matter of law, the plaintiff is not entitled to a summary judgment against any one of the counterclaimants in the referenced causes.

"3. In support of each defendant and counterclaimant's opposition to the motion for summary judgment, the defendants and counterclaimants attach hereto the following documents and exhibits identified as set

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