Duryea v. Third Northwestern Nat. Bank of Minneapolis

• Decision Date: 09 October 1979
• Docket Number: No. 78-1740,78-1740
• Citation: 606 F.2d 823
• Parties: Willis M. DURYEA, Jr., Appellant, v. The THIRD NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS, a national banking association; Bruce Winslow, John Doe and Mary Roe, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 823

606 F.2d 823

Willis M. DURYEA, Jr., Appellant, v. The THIRD NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS, a national banking association; Bruce Winslow, John Doe and Mary Roe, Appellees.

No. 78-1740.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 20, 1979.

Decided Oct. 9, 1979.

Before ROSS, STEPHENSON and HENLEY, Circuit Judges.

STEPHENSON, Circuit Judge.

This is an appeal from the findings and judgment of the district court ¹ in favor of the defendant-counterclaimant bank in the amount of its loan, plus attorney fees and costs, against plaintiff-appellant. The two primary issues on appeal are whether defendant bank violated the Bank Holding Company Act of 1970 in making the loans to plaintiff, and whether the trial court's award of attorney fees and costs was proper. We affirm.

Originally defendant-appellee herein, Third Northwestern National Bank of Minneapolis (Bank), brought suit in the Minnesota state courts to collect a $30,000 obligation evidenced by promissory notes signed by Willis M. Duryea, Jr., plaintiff-appellant herein. Thereafter Duryea commenced this federal court action against the Bank, claiming the loans in question violated the Bank Holding Company Act Amendments of 1970, 12 U.S.C. § 1971, et seq.; the Sherman Act, 15 U.S.C. § 1; Minnesota antitrust law, Minn.Stat.Ann. § 325.8013 (Supp.1979); Minnesota common law fraud and unjust enrichment; violation of the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa; the Securities Exchange Act of 1934, 15 U.S.C §§ 78a-78hh; and Minnesota Blue Sky Law, Minn.Stat.Ann. Ch. 80 (1968) (current version Minn.Stat.Ann. Ch. 80A (Supp.1979)). Duryea also named as defendants the Bank's past president, Bruce C. Winslow (Winslow), Robert L. Krause (Krause), Krause Investment Corporation (KIC), and Variable Investment Corporation (VIC). Appellee Bank counterclaimed on its loan for $30,000 plus interest and costs of collection, including attorney fees. ²

The magistrate found for the Bank on its counterclaim and against Duryea on all of his claims, and awarded the Bank full recovery of the loan ($30,000), a stipulated amount of interest, and $22,097.21 as costs of collection, which included attorney fees.

The record discloses that appellant Duryea was approached by Krause, ³ a long-standing friend, accountant and financial adviser of his, concerning a condominium development in Desert Hot Springs, California, in which Krause was involved. Krause proposed to Duryea that Duryea borrow money from the Bank, where Winslow, a friend of Krause, was president; then the money that Duryea had borrowed from the Bank would be invested in the condominium project of Krause. Krause's corporation, KIC, would pay the cost of the loan and all interest involved. The reason for this roundabout method of obtaining funds was that the Bank at that time did not want to extend credit directly to the project. Krause, Winslow and Duryea were all aware of what was being done with the money.

Duryea never met or talked with any official of the Bank. Krause prepared and furnished the Bank with Duryea's financial statement. Krause prepared the note and secured Duryea's signature on the note. It was Duryea's belief that he was entering into negotiations with the Bank to borrow money for the purpose of helping Krause finance development of the project which KIC was constructing. When Duryea signed the note, it was his intention to lend the proceeds to Krause for use on the project.

In connection with the loan, Duryea intended, at some unspecified future date, to purchase one of the condominiums from KIC. Although not reduced to writing, it was understood that Duryea would receive some preference and consideration from KIC when it came time to offer the condominiums for sale.

Initially, on November 18, 1971, $20,000 was loaned by the Bank to Duryea, and the money order was taken by Krause to Duryea, who endorsed it over to KIC. At the same time, Krause gave Duryea a note from KIC for $20,000. The notes were due in 90 days and renewed every 90 days thereafter. Approximately a year later an additional $10,000 was borrowed from the Bank by Duryea after discussions with Krause. The money was furnished to KIC and subsequently the note from Duryea to the Bank and the note from KIC to Duryea were increased to $30,000 to reflect the increased loan. As before, Krause handled all note renewals and paid all interest on Duryea's notes to the Bank. Eventually, KIC went into bankruptcy, the note to Duryea became worthless, and the Bank demanded payment from Duryea on his $30,000 note plus interest and costs including attorney fees.

Duryea limits his appeal to the court's finding that there was no violation of the Bank Holding Company Act (BHCA) by the Bank and the amount of attorney fees awarded the Bank.

The BHCA, 12 U.S.C. § 1972 (Supp.1978), provides in pertinent part:

A bank shall not in any manner extend credit * * * on the condition or requirement

(3) that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan * * *.

The intent of the BHCA Amendments of 1970, which include the above, is "to provide specific statutory assurance that the use of the economic power of a bank will not lead to a lessening of competition or unfair competitive practices." The purpose is to "prohibit anti-competitive practices which require bank customers to accept or provide some other service or product or refrain from dealing with other parties in order to obtain the bank product or service they desire." 1970 U.S.Code Cong. & Admin.News, pp. 5519, 5535. The amendments prohibit certain types of tying arrangements within the banking industry but are not intended to interfere with the conduct of appropriate traditional banking practices. Clark v. United Bank of Denver Nat'l Ass'n, 480 F.2d 235, 238 (10th Cir.), Cert. denied, 414 U.S. 1004, 94 S.Ct. 360, 38 L.Ed.2d 240 (1973). The intent and purpose of the amendments are very similar to those of the antitrust laws in that both seek to guard against unfair competition. Swerdloff v. Miami Nat'l Bank, 584 F.2d 54 (5th Cir. 1978).

The trial court found with reference to the alleged violation of the BHCA Amendments that "Duryea was not coerced, required, or encouraged by the Bank to loan money to Krause or KIC;" further that "Duryea provided no service to the Bank in connection with its loans to him," and concluded, "(t)he Bank has not violated the Bank Holding Company Act of 1970 (12 U.S.C. § 1972)."

Duryea contends that the court's findings are clearly erroneous and therefore its conclusion that there was no violation of the BHCA was in error. We disagree.

Initially we note that the record discloses that Duryea...