Lyons v. Jefferson Bank & Trust

• Decision Date: 10 June 1992
• Docket Number: Civ. A. No. 91-B-2245.
• Citation: 793 F. Supp. 989
• Parties: David J. LYONS, commissioner of insurance for the State of Iowa and receiver for the Iowa Trust, Plaintiff, v. JEFFERSON BANK & TRUST, Defendant.
• Court: U.S. District Court — District of Colorado

793 F. Supp. 989

David J. LYONS, commissioner of insurance for the State of Iowa and receiver for the Iowa Trust, Plaintiff, v. JEFFERSON BANK & TRUST, Defendant.

Civ. A. No. 91-B-2245.

United States District Court, D. Colorado.

June 10, 1992.

Edwin S. Kahn, Walter W. Garnsey, Jr., Kelly, Haglund, Garnsey & Kahn, Denver, Colo., Anuradha Vaitheswaran, Asst. Atty. Gen., Iowa Securities Bureau, Des Moines, Iowa, for plaintiff.

Philip E. Lowery, Marcella T. Clark, Lowery, Lamb & Lowery, P.C., William C. Waller, Jr., Denis H. Mark, Kevin D. Allen, Vinton, Waller, Slivka & Panasci, Denver, Colo., for defendant.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

Defendant moves for additional findings of fact and a corresponding amendment of the judgment under Fed.R.Civ.P. 52(b). Additionally, defendant moves under Rule 59(a) for a new trial or rehearing of my findings of fact and conclusions of law, 793 F.Supp. 981. The issues are adequately briefed and oral argument will not materially aid their resolution. Because defendant's proposed additional findings of fact are either irrelevant to the ultimate decision or unsupported by the record, its Rule 52(b) motion is denied. Further, I find no factual or legal error in my findings of fact and conclusions of law and, therefore, defendant's Rule 59(a) motion is denied. See, Lyons v. Jefferson Bank & Trust, 793 F.Supp. 981 (D.Colo.1992).

As an initial matter, I note that the legal arguments and theories contained in defendant's post-trial motions were not raised before judgment entered. Similarly, defendant's proposed additional findings of fact go to these new theories and were not raised before judgment. Aside from conclusory statements that the expedited treatment of this case caused incomplete analysis of the factual and legal issues, defendant makes no showing at all why these issues are raised for the first time by way of post-trial motion. Indeed, both parties conceded the need to expedite resolution of this case and defendant never requested a continuance or in any other way objected to the accelerated pace in which this case was resolved. Defendant's motions are obviously filed by new counsel in a blatant attempt to belatedly inject new issues into the case at the district court level, hoping that these issues may be preserved for appeal. Despite this dispositive deficiency in defendant's motions, I will address the merits of the matters presented in the interest of a complete record.

I.

Fed.R.Civ.P. 52(b) provides that, upon motion within ten days of judgment, a trial court may amend its findings of fact or make additional findings and may amend the judgment accordingly. The purpose of this motion is to correct manifest errors of law or fact, or, in some limited situations, to present newly discovered evidence. Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1219 (5th Cir.1986). A party may move under this rule even if the amended or additional findings would effectively reverse the judgment. Id. That is not to say, however, that a motion to amend should be employed to introduce new evidence that was available at the time of trial but was not proffered, to advance new theories, or to secure a rehearing on the merits. Id. "Blessed with the acuity of hindsight, defendant may now realize that it did not make its initial case as compelling as it might have, but it cannot charge the district court with responsibility for that failure through this Rule 52(b) motion." Id. at 1220. See also, 9 Wright & Miller, Federal Practice and Procedure, § 2582 (1971), ("A party who failed to prove his strongest case is not entitled to a second opportunity by moving to amend a finding of fact or conclusion of law").

Except for motions to amend based on newly discovered evidence (here defendant proffers no newly discovered evidence), the trial court is required only to amend its findings or make additional findings based on evidence contained in the record. To do otherwise would defeat the compelling interest in the finality of litigation. Fontenot, 791 F.2d at 1219. Moreover, a Rule 52(b) motion must raise questions of substance. Wright & Miller, supra, § 2582. Thus, a motion to amend should not be granted where the proposed additional findings of fact are not material to the district court's conclusions. Elkins v. McGee, 1987 WL 181520*1, 1987 U.S. Dist. LEXIS 12589*3 (D.Kan. Sept. 9, 1987).

Defendant proposes six new findings of fact. First, defendant contends that it invested $44.8 million in Wymer's scheme between December 13, 1989 and November 18, 1992. However, there is no persuasive or satisfying proof in the record to support this allegation. Defendant relies on its Exhibit A-3, but that exhibit is wholly incredible. Based on the elaborate securities kiting scheme perpetrated by Wymer, it is impossible for me to determine from the record the amounts that defendant actually invested. Further, this finding is immaterial to my judgment imposing a constructive trust. See, infra, discussion of Johnson v. Studholme.

Second, defendant argues that from November 25, 1991 to December 12, 1991 it had no knowledge that Iowa Trust claimed any interest in the funds it received free from Refco Capital Corp. on November 25, 1991. Defendant introduced no evidence on this point at trial. Moreover, it is immaterial to my ultimate determination to impose a constructive trust. Under established Colorado law, a constructive trust may be imposed on an innocent donee who acted in good faith and had no knowledge that the funds it received were actually stolen from another. In re Marriage of Allen, 724 P.2d 651 (Colo.1986).

Third, defendant asserts that many others who were not parties to this lawsuit have claims to the funds at issue. However, defendant introduced no evidence on this point at trial and never moved to have any of these parties joined in the action. Nor did any potential third party move to intervene. Once again, this proposed finding is immaterial to my ultimate conclusion. The funds transferred to defendant were stolen from plaintiff. Equity demands that they be returned to the receiver of the Iowa Trust from whence they came.

Fourth, defendant contends that Iowa Trust learned of the SEC investigation of Wymer on December 6, 1991 and, at that time, Iowa Trust could have requested and received its funds from Wymer. This proposed finding simply misstates the evidence. Although Iowa Trust did learn of the SEC investigation, its funds were already gone. Wymer misappropriated the 1995 Notes on November 25, 1991 and, thus, plaintiff could not have received funds on December 6 that had already been taken.

Fifth, defendant asserts that had it not liquidated its account on December 11, 1991, the funds sought by plaintiff would have been frozen by the order of the California court. Thus, defendant argues, plaintiff would merely have a claim with all other persons defrauded by Wymer. Now defendant misunderstands the evidence. The California court merely froze all accounts managed by Wymer to preserve the status quo. On December 11, 1991, plaintiff's funds were held in a JBT custodial account at Shearson Lehman Brothers. Defendant does not explain how others defrauded by Wymer would have claim to funds held in a JBT account. Further, this proposed finding is immaterial to my ultimate conclusion because the freeze order would merely have changed the venue for litigating plaintiff's claim.

Finally, defendant contends that Wymer and the Iowa Trust had "a very close relationship." While one may quarrel with this vague characterization, this proposed finding is, again, wholly immaterial to my ultimate conclusion. Regardless of Wymer's relationship with the Iowa Trust, he had no authority to misappropriate the trust's treasury notes. Moreover, as a matter of equity, defendant would still have to return the funds to their rightful owner.

Not only are defendant's assertions untimely, but defendant has shown no manifest error of law or fact or that its proposed additional findings of fact are warranted. The Rule 52(b) motion is denied.

II.

Rule 59(a)(2) provides that in any action tried without a jury the trial court may grant a new trial for any of the reasons for which rehearings have heretofore been granted in suits in equity. On such a motion, the court may open the judgment, take additional testimony, amend or make new findings of fact and conclusions of law, and direct entry of a new judgment. "A motion for a new trial in a nonjury case or a petition for rehearing should be based upon manifest error of law or mistake of fact, and a judgment should not be set aside except for substantial reasons." 11 Wright & Miller, Federal Practice & Procedure, § 2804 (1973). Further, "a new trial will not be granted on grounds not called to the court's attention during the trial unless the...