Keegan v. First Bank of Sioux Falls
| Citation | 470 N.W.2d 621 |
| Decision Date | 29 May 1991 |
| Docket Number | No. 17111,17111 |
| Court | Supreme Court of South Dakota |
| Parties | Julie KEEGAN, Appellee, v. FIRST BANK OF SIOUX FALLS, Individually and as Executor of the Estate of C.L. Anderson, Deceased, and Robert J. McDowell, Respondents and Appellees, v. Gunnar MERTZ, Petitioner and Appellant, v. BOYCE, MURPHY, McDOWELL & GREENFIELD, Respondents and Appellees. |
David R. Gienapp of Arneson, Issenhuth and Gienapp, Madison, for appellees.
Michael D. Klampe of Klampe & Nordstrom, Rochester, Minn., Richard A. Johnson of Pruitt, Matthews & Muilenburg, Sioux Falls, for petitioner and appellant.
Gunnar Mertz (Mertz) takes this intermediate appeal from a trial court order suppressing certain evidence pertaining to damages in his claim against lawyer Robert J. McDowell (McDowell) and the law firm of Boyce, Murphy, McDowell and Greenfield (the law firm). We conclude that the trial court's ruling was premature and reverse its order.
Julie Keegan (Keegan) brought suit in 1984 against Mertz, McDowell and the estate of C.L. Anderson (Anderson). The claim arose from transactions surrounding a bank in Wibaux, Montana. Mertz cross-claimed against McDowell and brought in the law firm in which McDowell was a member (Boyce, Murphy, McDowell and Greenfield) by third party complaint. Mertz's claims against McDowell and the law firm alleged legal malpractice in connection with Wibaux bank transactions, and also in connection with transactions surrounding another bank in Lovell, Wyoming.
Keegan's claims involving the Wibaux bank have been settled and she is no longer a party to the suit. The remaining claims pertinent to this appeal are those of Mertz against McDowell and the law firm.
The claimed malpractice relevant to this appeal is that McDowell, representing Mertz, failed to assist him in preparing the necessary documents required by the Comptroller of the Currency (Comptroller) under the federal Change in Bank Control Act, See 12 U.S.C. Sec. 1817 (1984), resulting in the assessment of a $595,000 civil penalty for willful failure to comply with the act in regard to the Lovell bank.
On April 11, 1990, a pretrial motion hearing was held. McDowell and the law firm moved to prohibit the introduction of evidence of the assessment as claimed damages. The trial court granted the motion.
Prior to 1980, McDowell, Anderson and Keegan held ownership interests in banks in Wisconsin and in Wibaux, Montana. McDowell and Anderson also had interest in a Lovell, Wyoming, bank. McDowell and Mertz, a businessman, had been acquainted since 1979. In 1981, at McDowell's suggestion, Mertz purchased Keegan's interest in the Wibaux bank. Mertz also purchased an interest in the Lovell bank; after the purchase, Mertz, McDowell and Anderson were the sole owners, with Mertz owning a 28% share.
Under the Change in Bank Control Act a national bank must obtain prior approval of a change of ownership from the office of the Comptroller and if one individual acquires more than 25% of the stock, an application must be filed. Although Mertz tried to file the required application concerning the Lovell bank himself, he never obtained approval of the acquisition of his ownership interest from the Comptroller. The Lovell bank was declared insolvent by the Comptroller in June 1983 and that agency conducted an investigation into Mertz's involvement in the Wibaux and Lovell banks. As a result, the Comptroller issued a notice of assessment in the sum of $595,000 against Mertz on April 2, 1984.
In July 1984 the Comptroller and Mertz entered into a settlement agreement concerning both the Wibaux and Lovell banks. Mertz was allowed to keep his ownership interest in the Wibaux bank, but was not allowed to serve as an officer, director or employee. He was also prohibited from acting in any capacity in any other bank. In return, the Comptroller agreed to forego the assessment of any civil penalties in connection with the Wibaux bank, but specifically reserved the right to take action concerning the assessment in connection with the Lovell bank "[i]f at any time, he deems it appropriate to do so...."
The Comptroller has taken no action to collect the assessment by demand, negotiation, action or otherwise. Neither party has contacted the Comptroller to ascertain his intentions regarding collection of the assessment, apparently because neither wants to "wake the sleeping giant."
At the time of hearing on the motion, the only evidence on the record regarding the assessment was the affidavit of Mary Curtin (Curtin), an attorney from Minneapolis, who Mertz retained as an expert. Curtin specializes in bank acquisitions and in litigation involving the Comptroller. She was formerly employed by the Federal Reserve System.
In her affidavit Curtin stated:
1. That the Comptroller has the power to assess civil penalties under the Change in Bank Control Act.
2. That there is no statute of limitations concerning the collection of assessments, and the defense of laches does not apply.
3. That the Comptroller may bring an action in federal court to collect the assessment at any time.
4. That the assessment is a final assessment and is not dischargeable in bankruptcy.
5. That the Change in Bank Control Act was amended in 1989 and, among other things, eliminated the right to a trial de novo in federal court and substituted an administrative hearing subject only to limited court review.
6. That from her experience in other cases, the Comptroller's position is that the change in the law applies to conduct occurring prior to 1989.
7. That if the Comptroller should bring action to collect the assessment, Mertz would have no credible defense.
8. That if or when the Comptroller takes legal action to collect the assessment, Mertz will incur substantial attorney fees.
There is reference in the briefs to Curtin's deposition; that deposition is not a part of the record transmitted to this court.
The trial court concluded that the claim regarding the assessment as an element of damages was too speculative to be considered by a jury, and ordered that no evidence about the assessment be offered at trial.
Did the trial court err in entering a pretrial order prohibiting the offer of evidence of the Comptroller's assessment as...
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