Marcoux v. Van Wyk
| Decision Date | 18 April 1978 |
| Docket Number | Nos. 77-1146 and 77-1271,s. 77-1146 and 77-1271 |
| Citation | 572 F.2d 651 |
| Parties | 23 UCC Rep.Serv. 977 Roy "Pat" MARCOUX, Jim Thompson, Sr., Don M. Burtenshaw and Ben D. Jernberg, a partnership, d/b/a B & J Cattle Company of Terreton, Idaho, Roy J. Henkel, Emmett Livestock Commission Company, Inc., Appellees, v. Dale VAN WYK, Appellant. Roy "Pat" MARCOUX, Jim Thompson, Sr., Don M. Burtenshaw and Ben D. Jernberg, a partnership, d/b/a B & J Cattle Company of Terreton, Idaho, Roy J. Henkel, Emmett Livestock Commission Company, Inc., Appellees, v. FIRST NATIONAL BANK OF ELDORA and the Federal Deposit Insurance Corporation, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Thomas G. McCuskey (argued), Neiman, Neiman, Stone & Spellman, John H. Neiman, and Thomas M. Zurek, Des Moines, Iowa, on brief, for appellant, Dale Van Wyk.
John F. Veldey (argued), Cartwright, Druker & Ryden, Marshalltown, Iowa, on brief, for appellants, First National Bank of Eldora and Federal Deposit Insurance Corp.
David A. Domina (argued), Deutsch, Jewell, Otte, Gatz, Collins & Domina, Norfolk, Neb., James H. Ottman, Shook, Hardy & Bacon, Kansas City, Mo., and G. A. Cady, Hobson, Cady & Drew, Hampton, Iowa, on brief, for appellees.
Before LAY and ROSS, Circuit Judges, and LARSON, * Senior District judge.
These appeals involve five consolidated diversity cases, arising out of the sale of livestock by appellees, plaintiffs below, to Mid-States Livestock, Inc., an Iowa corporation, in exchange for sight drafts drawn on Mid-States. The drafts were never paid. Plaintiffs sued Mid-States; Dale Van Wyk, its treasurer and a chief stockholder; the First National Bank of Eldora, Iowa (the Bank) and its directors; Roger Jensen, the Bank's president; and the Federal Deposit Insurance Corporation (FDIC), the receiver of the Bank, on various theories of fraud and negligence. The district court directed a verdict for the Bank's directors at the close of plaintiffs' case; the remaining issues were submitted to the jury and a verdict for the plaintiffs was returned. Van Wyk, the Bank and the FDIC moved for judgments notwithstanding the verdict and for new trials, which the trial court denied. Marcoux v. Mid-States Livestock, Inc., 429 F.Supp. 155 (N.D. Iowa 1977). All three parties appeal from those rulings. 1
The major issue on this appeal is the denial of the Bank's and the FDIC's motions for judgment n. o. v. The facts related to that issue are carefully and thoroughly discussed in the district court's order on the post-trial motions, supra, and will be reviewed only briefly here.
Plaintiffs are cattle dealers who delivered cattle to Mid-States at various times during September 1973, accepting sight drafts totalling about $530,000 drawn on Mid-States in return. The drafts were forwarded by plaintiffs' bankers to the First National Bank of Eldora for collection. The Bank held the drafts unpaid, on Mid-States' instructions, beyond its midnight deadline. See Iowa Code § 554.4104(1)(h) (1975). All of the drafts relevant here were received by the Bank between September 20 and September 28, but none were returned to plaintiffs' banks until October 3. On that same date, Mid-States collapsed; it had been speculating heavily since August in the commodities market and had diverted large amounts of its working capital to cover margin calls. By September 20, 1973, it was insolvent and subsequent attempts to save the company failed. A day after Mid-States collapsed, the First National Bank was declared insolvent because it had made numerous unsecured extensions of credit to Mid-States. The FDIC was appointed liquidator and receiver.
The theory of recovery against the Bank was that it acted negligently in holding the unpaid drafts well beyond its midnight deadline. See Iowa Code § 554.4202(1)(2) (1975). When a bank handles an item carelessly, it is liable for the damages caused by its negligence in the amount of the item reduced by the amount that could not have been collected in any event. Iowa Code § 554.4103(5). In other words, the plaintiffs' measure of damages is the amount they could have collected had the Bank returned the unpaid drafts seasonably; conversely, if the amounts due were uncollectible in any event, the Bank's negligence caused no damage. Appellants argue that the jury verdict awarding plaintiffs the full amount of their drafts must be set aside both because the evidence does not support a finding of negligence and because plaintiffs failed to show that any portion of the drafts was collectible.
On a motion for judgment n. o. v., the court must give the party securing the jury verdict the benefit of all reasonable inferences to be drawn from the evidence. Griggs v. Firestone Tire & Rubber Co., 513 F.2d 851, 857 (8th Cir. 1975). A party is not entitled, however, to the benefit of unreasonable inferences or those "at war with the undisputed facts." Schneider v. Chrysler Motors Corp., 401 F.2d 549, 555 (8th Cir. 1968). Moreover, the verdict must be supported by substantial evidence; a mere scintilla is not enough. Simpson v. Skelly Oil Co., 371 F.2d 563, 568 (8th Cir. 1967). An appellate court follows the same standards as the trial court in testing the propriety of a judgment n. o. v. Schneider v. Chrysler Motors Corp., supra.
After a careful review of the record in this case, we agree with the district court on the issue of negligence for the reasons stated in the court's memorandum on post-trial motions. 429 F.Supp. at 159-69. There was sufficient evidence from which the jury could infer that the Bank failed to use ordinary care in handling the drafts.
But the interrelated issues of causation and damages concededly present a much more difficult problem. Appellants draw a number of conclusions from the record which indicate that the amounts due were as a matter of law uncollectible. The trial court agreed with most of these conclusions, as do we, and we will recite them only briefly here before discussing the grounds upon which the trial court denied the judgments n. o. v.
The undisputed facts drawn from the record reveal that Mid-States was insolvent from and after September 20, 1973. Plaintiffs were unsecured creditors of Mid-States. They delivered unqualified control of their cattle to Mid-States, solely in reliance on Mid-States' credit, on the dates the drafts were drawn. The cattle were sold to a buyer in the ordinary course of business before the drafts arrived at the Bank. Even with timely notice of nonpayment, plaintiffs could not have recovered by stopping delivery of the cattle or replevying them. See 429 F.Supp. at 162.
Plaintiffs as unsecured creditors would therefore have had to try to collect the amount of their drafts through liens on other Mid-States assets. All of these assets were subject to prior valid liens. Mid-States' real estate was pledged to Central National Bank; its non-real assets were subject to a security interest of the Bankers Trust Company; its checking accounts were subject to the rights of set-off of the First National Bank of Eldora and Bankers Trust. 429 F.Supp. at 162-63. Since even after liquidation, Bankers Trust's claims remained unsatisfied, it is clear that as a matter of law, plaintiffs could not have collected the amounts due by asserting junior liens on Mid-States' assets. 2
Although no legal actions could have secured payment of the money due, plaintiffs nevertheless argue that other evidence supports an inference of collectibility. The trial court accepted this position, which is essentially based on the fact that Mid-States continued doing business from September 20, by hindsight established as the date of its insolvency, until October 3. Bankers Trust, which held the security interest on Mid-States' non-real assets, did not become aware of the company's financial difficulties until September 30, at which time it began monitoring the business. Thus, the trial court found there was a possibility that plaintiffs may have collected by making oral demands on Mid-States between September 20 and September 30, before the company's financial problems were fully realized. The court also noted there was a possibility that Mid-States' principal shareholder, Van Wyk, would have paid the debts personally. The court concluded that this was substantial evidence...
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