Delta Pride Catfish, Inc. v. Marine Midland Bus. Loans, Inc., LR-C-89-889.

• Decision Date: 19 June 1991
• Docket Number: No. LR-C-89-889.,LR-C-89-889.
• Citation: 767 F. Supp. 951
• Parties: DELTA PRIDE CATFISH, INC., Individually, and on Behalf of All Others Similarly Situated, Plaintiff, v. MARINE MIDLAND BUSINESS LOANS, INC., and Atkinson & Company Truck Brokers, Inc. and Walter M. Dickinson, as Trustee in Bankruptcy for Atkinson & Company Truck Brokers, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

767 F. Supp. 951

DELTA PRIDE CATFISH, INC., Individually, and on Behalf of All Others Similarly Situated, Plaintiff, v. MARINE MIDLAND BUSINESS LOANS, INC., and Atkinson & Company Truck Brokers, Inc. and Walter M. Dickinson, as Trustee in Bankruptcy for Atkinson & Company Truck Brokers, Inc., Defendants.

No. LR-C-89-889.

United States District Court, E.D. Arkansas, W.D.

June 19, 1991.

COPYRIGHT MATERIAL OMITTED

Richard C. Bradley, III, James R. Mozingo, Stennett, Wilkinson & Ward, Jackson, Miss., and Anthony J. Sherman, Sherman & James, Little Rock, Ark., for plaintiff Delta Pride Catfish, Inc.

Frederick S. Wetzel, III, Wetzel & Pruniski, Little Rock, Ark., for Atkinson & Co. Truck Brokers, Inc. and Walter M. Dickinson.

John E. Tull, III and David F. Menz, William & Anderson, Little Rock, Ark., for defendants.

MEMORANDUM OPINION

SUSAN WEBBER WRIGHT, District Judge.

In this case a truck hauler alleges a scheme by a truck broker and its lender to divert monies collected from shippers to pay off the truck broker's business loan rather than remitting those funds to the haulers. Plaintiff Delta Pride Catfish, Inc. (Delta Pride) sued Marine Midland Business Loans, Inc. (Marine Midland), alleging that Marine Midland seized $31,500 belonging to Delta Pride in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68, as well as state laws prohibiting breach of trust, fraud, and conversion.¹ Delta Pride also joined Atkinson & Company Truck Brokers, Inc. (ATB) and Walter M. Dickinson, trustee in bankruptcy for ATB, as defendants on the counts of breach of trust, fraud, and conversion.

Marine Midland moves to dismiss or, alternatively, for summary judgment. Since the parties have put before the Court matters outside the pleadings by submitting supporting and opposing affidavits and depositions, as well as numerous exhibits, the Court will treat this motion as a motion for summary judgment. Court v. Hall County, Neb., 725 F.2d 1170, 1172 (8th Cir.1984). The Court has carefully considered the testimony, exhibits, and briefs of the parties and for reasons set forth below grants summary judgment in favor of Marine Midland on all claims.

I. FACTS

A. Marine Midland and ATB

Prior to filing bankruptcy in August 1988, ATB operated as a truck brokerage company which arranged for transportation of freight by truck from a shipper to a designated recipient. ATB would solicit or receive inquiries from various parties who wished to ship or receive freight and would, thereafter, arrange for an individual or firm having a truck or trucks for hire to pick up the freight and deliver it to its final destination.

On January 7, 1982, ATB's predecessor, Atkinson & Company Truck Brokering, Inc., executed an accounts receivable contract with Commercial Credit Business Loans, Inc. (Commercial Credit). The contract provided that ATB would borrow money from Commercial Credit based on a percentage of the shippers' billings which were outstanding at a given time, in exchange for an assignment of and security interest in ATB's present and future accounts.

As collateral security for all present and future obligations of Customer to Commercial Credit, Customer will and does hereby assign and pledge to Commercial Credit, and gives Commercial Credit a security interest in, all of its Accounts ... which it now owns or shall hereafter acquire or create.... On receipt of the assignments of Accounts, Commercial Credit will credit Customer with an amount up to Eighty-five Per Cent (85%) of the collateral value thereof, as determined by Commercial Credit, and also will credit Customer with the remainder of the face amount of Accounts on receipt of such payment by Commercial Credit.... Commercial Credit will loan Customer, on request, such amounts so credited or a part thereof as requested.

Defendant's Motion to Dismiss or, Alternatively, Motion for Summary Judgment hereinafter Defendant's Motion, Exhibit 6. ATB agreed "to execute assignments daily so as to vest in Commercial Credit full title to and a security interest in Accounts, and Commercial Credit thereupon shall be entitled to and have all of the ownership, title, rights, securities and guaranties of Customer in respect thereto." Id. The contract also required ATB to forward daily to Commercial Credit all payments from shippers on the accounts receivable.

Commercial Credit properly perfected its security interest in all of ATB's present and future accounts receivable and proceeds therefrom by filing the necessary financing statements with the Circuit Clerk of Arkansas County and with the Arkansas Secretary of State. Defendant's Motion, Exhibits 7 and 8. Amendments to these financing statements were later filed changing the debtor's name to Atkinson & Company Truck Brokers, Inc.

On January 9, 1986, Commercial Credit assigned its rights under the accounts receivable contract to Marine Midland. Marine Midland filed a financing statement with the Circuit Clerk of Arkansas County and the Arkansas Secretary of State on January 10, 1986 and January 14, 1986 respectively, covering all property specified in the original Commercial Credit financing statement. Plaintiff's Exhibit 27 shows that Marine Midland's loans to ATB on the accounts receivable also were secured by the personal guaranty of ATB's president and majority shareholder, Larry Atkinson.

ATB would contact shippers and arrange for truckers to pick up and deliver individual shipments for the shippers. ATB charged the trucker a commission based upon the gross freight costs of the shipment, and sometimes advanced up to fifty percent of the cost of the shipment to the trucker for fuel, food, and other expenses. In the normal course of business, following delivery of a shipment, the trucker would provide ATB with the receipted bill of lading either in person or by mail. ATB then issued the trucker a check drawn on ATB's general checking account for the net amount owed him after deducting ATB's commission and any advances. The trucker was paid before ATB collected from the shipper.

The parties disagree over how soon a trucker was paid after delivery of the bill of lading. Delta Pride claims that when ATB invoiced the shipper, ATB's computer immediately cut a check to the trucker, but that ATB generally held the check for seven days. Glover Aff. ¶ 9. However, a statement appearing in Exhibit 52, which Delta Pride submitted in support of its response to the summary judgment motion, somewhat belies this assertion. Exhibit 52 is a copy of a form letter dated April 8, 1988 and sent by Marine Midland to a certain trucking company requesting information about the trucking company's account with ATB. The response contains the following remark from the trucking company:

Until recently we would turn in the tickets of commodities hauled during the preceeding sic week on a Monday and pickup sic our checks on Tuesday and this is the way it should be. Now we take the tickets in on Monday and get our settlement checks on the following Monday. This throws our paying of our own bills off two weeks. They do need to get back to the old way of doing business.

Marine Midland contends that a trucker who personally delivered the bill of lading to ATB was issued a check the same day and that when ATB received the bill of lading in the mail, a check was issued the same day of receipt, but turnaround time from receipt to payment of the trucker was five to ten days. L. Atkinson Aff. ¶ 4(d).

Both parties agree that in the normal course of business ATB would pay the trucker before ATB received payment from the shipper. See, e.g., Plaintiff's Exhibit 37 at 1000310 (1987 Marine Midland memorandum analyzing various elements of risk in ATB's operations which states that "since truckers are completely paid by the time the invoice is generated and receivables are turning in 22 days, ATB's tight cash flow would naturally occur"). Otherwise, the dispute over how long after receipt of the bill of lading the trucker was paid is immaterial.

Upon receipt of the bill of lading, ATB invoiced the shipper for the gross freight charge and requested that the payment be made directly to ATB. The usual turnaround time for payment from the shipper was two to three weeks. See L. Atkinson Aff. ¶ 4(e); J. Atkinson Aff. ¶ 4(e); Plaintiff's Exhibit 37. At the same time, ATB also would send a copy of the invoice and bill of lading to Marine Midland, who immediately provided financing on the account receivable. ATB obtained daily funding from Marine Midland for up to eighty-five percent of its accounts receivable. All monies received from Marine Midland were placed in ATB's general checking account. When ATB received payment from the shipper on the invoice, ATB endorsed the check and forwarded it the same day to Marine Midland by express mail.

In October 1987 Marine Midland became concerned about the financial condition of ATB,² particularly ATB's tight cash flow, the increase in ATB's accounts receivable over ninety days past due, mounting losses in ATB's wholly owned subsidiary, Atkinson Trucking Company, and ATB's increased borrowings to meet note payments on equipment owned by Larry Atkinson and used by the subsidiary. See Plaintiff's Exhibits 37-45. In a November 1987 loan status report, Marine Midland indicated that

ATB's problem stems mainly from their subsidiary which has operated at a loss since it opened in 1985. While client's operations remain profitable, tangible net worth has dropped due to the continued increase in advances to subsidiary, with same totalling 204M $204,000 and 528M $528,000 as of 12/86 and 9/87 respectively.

Plaintiff's Exhibit 42.

On December 2, 1987 Marine Midland informed ATB by letter that it was terminating its accounts receivable contract effective April 1, 1988. In its termination notice, Marine Midland also demanded that payment in full be made on or before April 1, 1988, and notified ATB that its security...