Douglas County Bank & Trust v. United Fin'l

Decision Date17 December 1999
Docket NumberNo. 98-4155,98-4155
Citation207 F.3d 473
Parties(8th Cir. 2000) DOUGLAS COUNTY BANK & TRUST CO., APPELLANT, v. UNITED FINANCIAL INCORPORATED, APPELLEE. Submitted:
CourtU.S. Court of Appeals — Eighth Circuit

Appeal from the United States District Court for the District of Nebraska

[Copyrighted Material Omitted] Before Murphy and Magill, Circuit Judges, and Smith,1 District Judge.

Smith, District Judge

Douglas County Bank & Trust Co. ("DCB&T"), a Nebraska banking corporation, appeals the district court's2 denial of DCB&T's motion for judgment as a matter of law or for a new trial, filed after a jury found for DCB&T on one count of fraudulent misrepresentation. DCB&T asserts that the district court erred in not finding, as a matter of law, that the jury improperly considered evidence in making its determination of damages, and that it should have set aside the jury's damage award. DCB&T alternatively contends, that the district court abused its discretion in failing to grant a new trial on that issue. We affirm.

I.

DCB&T operates a Mortgage Servicing Division as part of its banking business. It purchases, through a confidential bidding process, the right to collect principal and interest on individual mortgage loans that have been collected or pooled together into packages. As compensation for the administration of these loans, DCB&T keeps a portion of the income generated. These packages are sold in the secondary mortgage market to servicing entities, like DCB&T, through written offering circulars detailing the financial characteristics of these pooled mortgages.

United Financial Incorporated ("UFI"), a Colorado corporation, acts as a broker of pooled mortgage packages on behalf of different sellers. UFI creates offering circulars sent to potential customers. The information contained in the circulars is supplied by the seller.

The Government National Mortgage Association ("GNMA") is an agency of the federal government. It has primary responsibility for regulating mortgages based on federally established criteria. As part of its responsibilities, GNMA underwrites mortgage loans meeting certain standards. If loans do not meet these standards, including eligibility for and attainment of a Mortgage Insurance Certificate ("MIC"), such loans are not accepted into the GNMA program. Consequently, the entity that has purchased the right to service the loans is responsible for repayment of their full value if the borrower defaults.

On April 16, 1996, UFI sent a circular to DCB&T, offering for sale a $65,000,000 Florida GNMA mortgage portfolio. UFI was brokering the portfolio for Waters Mortgage Corporation ("WMC"), the seller. DCB&T unsuccessfully bid on this package.

The successful bidder notified UFI on May 24, 1996, that it refused to go forward with the sale due to the results of the bidder's due diligence investigation of the packaged mortgages. The bidder indicated that some of the loans lacked the MIC, an indication of the federal insurability of the loans. The bidder also indicated that some of the loans were delinquent in principal and interest payments. Following receipt of this notice, UFI and WMC decided to repackage the portfolio by eliminating certain loans. They created a new $49,000,000 offering. DCB&T was given the first opportunity to purchase the revised package without going through the bidding process.

On or about June 2, 1996, DCB&T called UFI to discuss the loan package's characteristics. DCB&T recognized the new package offering involved some of the same loans as the April 16, 1996 offering. UFI's representative confirmed that the package was derived from the previous offer and represented that the previous successful bidder could not obtain financing.

On or about June 3, 1996, DCB&T successfully bid on the package and agreed to pay WMC $147,000. On June 7, 1996, DCB&T wired the first payment of $73,500 to WMC. During mid-June, it began its due diligence evaluation of the mortgage package, a process that continued into July. On or about June 20, 1996, DCB&T's investigation revealed that many MICs were missing from the individual loan files. In fact, at least three hundred out of approximately one thousand loans lacked the appropriate MICs. After contacting UFI and WMC, DCB&T received assurances from WMC that the missing MICs existed and would be obtained in the near future. After having been put on notice of the missing MICs, DCB&T wired the second payment of $73,500 to WMC on June 28, 1996.

DCB&T executed an assignment agreement with the seller on or about July 29, 1996, giving it the responsibility for servicing the loans from that day forward. On August 8, 1996, GNMA approved and consented to the assignment agreement. On or about August 15, 1996, DCB&T and WMC requested that GNMA allow them to withdraw certain loans from the transaction since the loans could not be certified within the required period of time.

Pursuant to government policy, GNMA refused to withdraw the uncertified loans from its acceptance of transfer. DCB&T negotiated with GNMA to reach a settlement whereby GNMA would accept the suspect mortgage loans in return for DCB&T's payment of $1.4 million and the promise not to bid on GNMA packages for three years. To compound matters for DCB&T, it discovered that WMC was out of business and insolvent. DCB&T filed suit against UFI to recover the $1.4 million paid to GNMA and the $147,000 paid to the seller.

The claims presented to the jury consisted of the following: (1) material misrepresentation for statements printed in UFI's offering circular; (2) fraudulent concealment for failing to disclose to DCB&T certain relevant information UFI held regarding the mortgage loans in the package; and (3) fraudulent misrepresentation for knowingly making a false statement to an employee of DCB&T in connection with the sale. The jury found in favor of DCB&T only on the latter claim, involving the misrepresentation as to the first bidder's reason for not completing the transaction, and awarded damages in the amount of $75,000.

DCB&T filed a post-trial motion for judgment as a matter of law as to the amount of damages awarded.3 Alternatively, DCB&T requested a new trial on the issue of damages because the verdict and the damage award are contrary to law. The district court denied the motions and allowed the jury verdict to stand on all counts. DCB&T appealed.

II.

DCB&T argues that the district court erred when it denied its motion for judgment as a matter of law or, in the alternative, for a new trial. We review the district court's denial of a motion for judgment as a matter of law de novo using the same standards as the district court. Keenan v. Computer Associates International, 13 F.3d 1266, 1268 (8 th Cir. 1994). A motion for judgment as a matter of law presents a legal question to the district court and this court on appeal: "[W]hether there is sufficient evidence to support the jury's verdict." Id. (quoting White v. Pence, 961 F.2d 776, 779 (8th Cir. 1992)). We view the "evidence in the light most favorable to the prevailing party and must not engage in a weighing or evaluation of the evidence or consider questions of credibility." Id.

A more deferential standard applies when we review a district court's denial of a motion for a new trial under Fed. R. Civ. Pro. 59(a). A "[district] court's decision will not be reversed by a court of appeals in the absence of a clear abuse of discretion." Lowe v. E.I. DuPont de Nemours & Co., 802 F.2d 310 (8 th Cir. 1986); see also 10 Charles Alan Wright & Arthur R. Miller, & Kane, Federal Practice and Procedure, § 2818 (2d. Ed. 1987) (stating that a trial court has broad discretion in granting a new trial and that the appellate court will defer a great deal to its exercise of this discretion).

III. JUDGMENT AS A MATTER OF LAW

DCB&T contends that the district court should have found, as a matter of law, that the jury exceeded its authority and misapplied the law to the evidence before it. DCB&T argues that it was entitled to a greater award of damages than what the jury determined.

DCB&T asserts that it was entitled to recover the entire amount ($1,547,000) of alleged damages as a matter of law since the jury disregarded both the court's damage instruction and the evidence of damages offered by the plaintiff at trial. DCB&T failed to move for judgment as a matter of law before the case was submitted to the jury as required under Fed. R. Civ. Pro. 50(a) and (b); only after the jury reached its disappointing verdict did DCB&T file its motion. However, the district court found that the situation in this case - an award of damages smaller than anticipated by DCB&T - would be unpredictable until after the jury reached its decision. Therefore, the district court considered the motion.

A motion for judgment as a matter of law under Fed. R. Civ. Pro. 50 requires that the moving party make the motion prior to the time the case goes to the jury. We recognize several exceptions which may allow the merits of the motion to be heard, if the moving party fails to present a timely motion. The first exception allows a movant to challenge a jury verdict without moving for a judgment as a matter of law at the close of evidence if their earlier Rule 50(a) motion 1) was raised prior to the close of all of the evidence; and 2) the court indicated that the movant need not renew its motion under Rule 50(b) in order to preserve its right to challenge the verdict. Pulla v. Amoco Oil Co., 72 F.3d 648, 655 (8 th Cir. 1995). The second exception excuses the movant from complying with Rule 50 if no new evidence is presented after the original motion and that a tacit understanding exists that the movant need not renew its motion at the close of all the evidence. K&S Partnership v. Continental Bank, 127 F.R.D. 664, 666-667 (D. Neb. 1989), aff'd in part, rev'd in part, 952 F.2d 971 (8 th Cir. 1991). The third exception...

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