Gilbert v. United Nat. Bank, No. 16173

• Court: Supreme Court of South Dakota
• Writing for the Court: SABERS
• Citation: 436 N.W.2d 23
• Parties: Frank GILBERT, d/b/a B & G Cattle on His Own Behalf and as Assignee of Corsica Livestock Marketing, Inc., Plaintiff and Appellant, v. UNITED NATIONAL BANK, Defendant and Appellee, and Corsica Livestock Sales, Inc.; Ronald D. Wentland; George Etter; Elwood Nelson; General Service Corporation; Larry Refold; Ernest Marks; Stan Olson; Robert D. Joslyn, Sr.; General Management Corporation; First National Bank of Beresford, South Dakota; the Mitchell-Huron Production Credit Association; Hurley State Bank; Robert Verschoor; Donald Ensz; John Roth; Bernie Van Veuren; Robert Frederickson; Patrick Kirby and Mari Frederichs; Barnie Blauweit; Guy Varud and Varud Advertising, Defendants.
• Docket Number: No. 16173
• Decision Date: 08 February 1989

Page 23

436 N.W.2d 23 Frank GILBERT, d/b/a B & G Cattle on His Own Behalf and as
Assignee of Corsica Livestock Marketing, Inc.,
Plaintiff and Appellant,
v.
UNITED NATIONAL BANK, Defendant and Appellee,
and
Corsica Livestock Sales, Inc.; Ronald D. Wentland; George
Etter; Elwood Nelson; General Service Corporation; Larry
Refold; Ernest Marks; Stan Olson; Robert D. Joslyn, Sr.;
General Management Corporation; First National Bank of
Beresford, South Dakota; the Mitchell-Huron Production
Credit Association; Hurley State Bank; Robert Verschoor;
Donald Ensz; John Roth; Bernie Van Veuren; Robert
Frederickson; Patrick Kirby and Mari Frederichs; Barnie
Blauweit; Guy Varud and Varud Advertising, Defendants. No. 16173. Supreme Court of South Dakota. Argued Nov. 28, 1988.
Decided Feb. 8, 1989.

Rick Johnson of Johnson, Eklund & Davis Gregory, for plaintiff and appellant.

Lawrence L. Piersol of Davenport, Evans, Hurwitz & Smith Sioux Falls, for defendant and appellee United Nat. Bank; Timothy M. Gebhart of Davenport, Evans, Hurwitz & Smith, Sioux Falls, on the brief.

SABERS, Justice.

Frank Gilbert (Gilbert), individually, and as assignee of other's claims, appeals from summary judgment in favor of United National Bank (UNB). For the reasons stated herein, we affirm.

Facts

The following facts are developed from substantial deposition testimony:

In 1974, Gilbert, a long time cattle buyer, began purchasing cattle for Corsica Livestock Marketing, Inc. (CLM). Under the arrangement, Gilbert would purchase cattle with his own funds for delivery to CLM. In April 1979, Gilbert received several checks as payment for cattle he previously purchased and delivered to CLM. Four of these checks, totalling $311,630.21, were written on the General Services Corporation (GSC) account at the Sumitomo Bank in California (Sumitomo). ¹ Previously, Gilbert was paid by checks drawn on CLM accounts in several South Dakota banks. He was told by CLM officials that the GSC account was a new checking arrangement. The checks written on the GSC account were subsequently dishonored. Apparently, the Sumitomo GSC account was depleted before Gilbert's checks arrived for collection. CLM's subsequent insolvency resulted in the closing of the livestock auction and proceedings in bankruptcy.

UNB's involvement in this action arose from activities which occurred earlier in March 1979. George Etter (Etter) and Don Ensz (Ensz), who were connected with CLM, met with UNB officials for the purpose of establishing two checking accounts at UNB. One account was established in the name of GSC. The other account was established in the names of GSC-CLM. A third person connected with CLM, Elwood Nelson (Nelson), was also involved in opening these accounts at UNB.

Corporate resolutions of authorization were prepared after the accounts were opened. The corporate resolution for the GSC account was signed by Nelson and authorized Nelson and Etter to draw on the account. The resolution for the GSC-CLM account was signed by Dale Dockendorf (Dockendorf), the President of CLM, and Etter. Dockendorf, Nelson, and Etter were authorized to draw on this account.

On March 20, 1979, Etter and Ensz sought to deposit a money order in the amount of $659,567.23 in the GSC account at UNB. The money order was drawn on a CLM account at Farmers State Bank in Parkston, South Dakota. It was not deposited because UNB refused Etter's and Ensz' request to wire transfer $500,000 to

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Sumitomo as the money order involved uncollected funds. Etter and Ensz requested that the money be transferred to Sumitomo as quickly as possible and UNB officials suggested that the money be wired from the Parkston bank to speed up the transaction. UNB received financial statements at this time from GSC and General Management Corporation (GMC), which was connected to GSC. These statements raised serious questions with UNB concerning the authenticity and veracity of the two corporations. Etter, Ensz, and Nelson also raised UNB's suspicions because of their attempts to pressure UNB to transfer the $500,000 to Sumitomo as quickly as possible.

On March 21, the Parkston bank wired $542,237.44 for deposit in the GSC-CLM account at UNB. Etter then called UNB to have $500,000 wired to Sumitomo. UNB wired the money to Sumitomo and made the decision to close the GSC and GSC-CLM accounts because of its suspicions. UNB closed the accounts and issued a cashier's check to GSC-CLM for the money remaining in the accounts. This check was received by Nelson.

During the following month, CLM delivered the Sumitomo checks to Gilbert, which were dishonored. Two years later, in 1981, Gilbert brought an action against CLM to recover the amount of these checks. He also alleged fraud against several individuals for the dissipation of CLM bank account funds. In 1982, Gilbert filed an amended complaint which included an action against UNB based on implied trust and negligence.

A. CLM's claims against UNB.

Following Gilbert's amended complaint against UNB, CLM cross-claimed against UNB in 1982. CLM's cross-claim asserted two claims against UNB: 1) implied trust, and 2) failure to disclose fraudulent activity. CLM failed to serve the cross-claim on UNB and failed to take any action on it.

Sometime prior to February 1, 1986, Gilbert agreed with CLM to dismiss his action against CLM in exchange for an assignment of CLM's cross-claim against UNB. On February 1, Gilbert moved to amend his complaint to include the claims asserted by CLM in its cross-claim. On February 26, UNB moved for summary judgment or dismissal of CLM's cross-claim. UNB alleged in its motion that CLM failed to state a claim against UNB, failed to prosecute the cross-claim, and failed to serve them upon UNB. Following a hearing on UNB's motion, the trial court, on April 2, 1986, dismissed CLM's cross-claims for failure to prosecute pursuant to SDCL 15-6-41(b) and one year inactivity under SDCL 15-11-11 and also because the cross-claims were never served upon UNB. No appeal was taken therefrom by CLM or by Gilbert, as the assignee of CLM's claims against UNB.

B. CLM's claims against UNB as asserted by Gilbert as

assignee.

On June 6, 1986, Gilbert filed a second amended complaint against UNB. In addition to restating Gilbert's two individual claims, this complaint alleged the two CLM claims assigned to Gilbert, which had been dismissed....