McAdoo v. Union Nat. Bank of Little Rock, Arkansas

• Citation: 535 F.2d 1050
• Decision Date: 21 May 1976
• Docket Number: No. 75-1700,75-1700
• Parties: L. M. McADOO et al., Appellants, v. UNION NATIONAL BANK OF LITTLE ROCK, ARKANSAS, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 1050

535 F.2d 1050

L. M. McADOO et al., Appellants, v. UNION NATIONAL BANK OF LITTLE ROCK, ARKANSAS, Appellee.

No. 75-1700.

United States Court of Appeals Eighth Circuit.

Submitted April 15, 1976.

Decided May 21, 1976.

Edward R. Smith, Lubbock, Tex., for appellants; Dean Carlton, Dallas, Tex., on brief.

Lucius Bunton, Odessa, Tex., for appellee; Griffin Smith, Little Rock, Ark., on brief.

Before GIBSON, Chief Judge, ROSS and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

L. M. McAdoo and Vanita M. Byars, Executrix of the Estate of Clarence C. Byars, deceased, plaintiffs below, joined by Great Oil Basin Securities Corporation, a nominal defendant, appeal from a judgment of the United States District Court for the Eastern District of Arkansas ¹ rendered in February, 1975 in favor of one of the defendants, Union National Bank of Little Rock, Arkansas.

In 1970 McAdoo and the late Clarence C. Byars were minority stockholders in Great Oil Basin, a Texas corporation with its principal place of business in Odessa, Ector County, Texas. They commenced this suit in federal court in the Northern District of Texas as a stockholders' derivative action against the corporation, as nominal defendant, and against a number of actual defendants, including Ivan A. Ezrine and Maurice F. Olen. Basically, plaintiffs alleged securities fraud, conspiracy, and a plundering of the company by Ezrine, Olen, and others. Subject matter jurisdiction, which is established, was based on the Securities and Exchange Act of 1934, 15 U.S.C. § 78a et seq.

Union National Bank of Little Rock, Arkansas, hereinafter called the Bank, was brought into the case as a defendant while the litigation was pending in federal court in Texas. After a number of proceedings had been had in the Texas court, the case was transferred to the Eastern District of Arkansas in January, 1972 pursuant to 28 U.S.C. § 1404(a).

As far as the Bank was concerned, plaintiffs sought a declaratory judgment invalidating a promissory note in favor of the Bank executed on behalf of Great Oil Basin on August 26, 1969 and payable on or before August 26, 1970. The note evidenced a loan of $500,000.00 made to the corporation by the Bank; the note bore interest at the rate of 9% per annum from date until paid, and was secured by a deed of trust covering a shopping center in Odessa, Texas, which was the principal asset of the borrower. The note and deed of trust were signed by Ezrine as ostensible president of the corporation and by the corporation's secretary, Joan Wellner. The borrowing of the money and the execution of the loan papers were purportedly authorized by a resolution of the Board of Directors of Great Oil Basin.

Great Oil Basin was not a regular customer of the Bank and its principal place of business was located hundreds of miles from Little Rock. In the summer of 1969 money was extremely tight, and the Bank was not in a financial position to make a $500,000.00 loan to Great Oil Basin without compensating funds. After negotiations that went on over a period of months prior to the making of the loan, the parties agreed that the borrower would furnish the Bank with a certificate of deposit (CD) in the amount of $300,000.00, maturing in one year, and it was agreed that this certificate would bear interest at the rate of 6.25% per annum to be paid by the Bank.

The borrower obtained the CD from a broker in Philadelphia, Pennsylvania, and paid the broker a fee of $9750.00 for use of the certificate. Presumably, the CD was issued in the name of the brokerage company or its principal or principals; while it was ultimately delivered to the Bank and increased the cash funds or reserves of the Bank by $300,000.00, it was not held by the Bank as collateral security.

Great Oil Basin defaulted on the note when it fell due, which was shortly after this suit had been commenced in Texas. However, during the pendency of the case very substantial payments have been made on the note and have been duly credited to the borrower. Those payments were without prejudice to the legal position assumed by plaintiffs and Great Oil Basin in this action.

The position of plaintiffs in the district court was that Ezrine had no authority to bind Great Oil Basin with respect to the loan, and that the loan was usurious as a matter of Arkansas law in that when the net value of the CD to the Bank is taken into consideration, the effective interest called for by the obligation was in excess of 10% per annum which is the maximum legal rate of interest that may be charged in Arkansas in view of Article 19, § 13 of the Arkansas Constitution of 1874; see also Ark.Stat.Ann. §§ 68-608 and 68-609. ²

The Bank denied that plaintiffs were entitled to the relief sought, but the Bank sought no affirmative relief for itself until several months after the judgment of the district court was rendered.

The case was tried to the court and a jury. Plaintiffs' case consisted of a number of depositions, including those of Ezrine and Olen, which were read to the jury, and a number of documentary exhibits. At the conclusion of plaintiffs' case, counsel for the Bank moved for a directed verdict or for the entry of a judgment in favor of the Bank. That motion was denied. The Bank then offered certain depositions and documents and called as witnesses David L. Jameson who was Assistant Cashier of the Bank when the loan was made and Don Couch who was President of the Bank at that time. Neither Mr. Jameson nor Mr. Couch was connected within the Bank at the time of the trial.

At the conclusion of all of the evidence, plaintiffs moved for a directed verdict or for entry of judgment in their favor, and the Bank renewed its motion made at the close of plaintiffs' case.

The motions were denied. The issues of usury and authority were submitted to the jury on special interrogatories and instructions in connection therewith as authorized by Fed.R.Civ.P. 49(a). The jury found that the loan was not usurious, and also found that Ezrine had real or apparent authority to bind Great Oil Basin in connection with the loan.

The district court accepted the findings of the jury. On February 27, 1975 the district court made certain findings of fact and entered judgment favorable to the Bank.

Plaintiffs moved for judgment notwithstanding the jury's answers to the interrogatories, or, alternatively, for a new trial. That motion was filed in early March, 1975 and seems to have been taken under advisement by the district court; it was ruled upon in late July, 1975.

While that motion was pending, the Bank filed a "Countermotion to Modify Judgment," in which motion it prayed that the judgment be expanded so as to call for a judicial foreclosure of the Bank's lien on the shopping center. Plaintiffs promptly filed an "Opposition" to the countermotion and a brief in support of the opposition.

On July 28, 1975 the district court filed a memorandum opinion discussing the questions of usury and authority and denied plaintiffs' post-trial motion. This appeal followed. ³ The record does not indicate that the district court has ever ruled formally on the Bank's "Countermotion" and the plaintiffs" "Opposition" thereto. ⁴

For reversal, plaintiffs contend: (1) that the evidence established as a matter of law that the Bank's loan was usurious by reason of the alleged collateral benefit that the Bank gained from the certificate of deposit, and that the district court erred in submitting the question of usury to the jury; (2) that the burden was on the Bank to show by a preponderance of the evidence that Ezrine had real or apparent authority to bind Great Oil Basin in connection with the loan; that on that issue the Bank did not make a submissible case, and that the district court erred in submitting the issue of authority to the jury; and (3) that the findings, conclusions and judgment of the district court impermissibly went beyond the pleadings in the case and were inconsistent with the position of the Bank that it was seeking no affirmative relief in the action.

In passing upon the first two contentions we are required to view the evidence in the light most favorable to the Bank, to give the Bank the benefit of all inferences favorable to it which reasonably may be drawn from the evidence, and to uphold the district court and the findings of the jury unless the evidence was so one-sided that reasonable men could not differ as to how the respective issues should be resolved. Linn v. Garcia, 531 F.2d 855 (8th Cir. 1976); Griggs v. Firestone Tire & Rubber Co., 513 F.2d 851 (8th Cir. 1975); Schneider v. Chrysler Motors Corp., 401 F.2d 549 (8th Cir. 1968); Hanson v. Ford Motor Co., 278 F.2d 586 (8th Cir. 1960). See also 9 Wright & Miller, Federal Practice & Procedure § 2524.

I. Authority.

The plaintiffs contend that Ezrine had no authority to bind Great Oil Basin because he was never elected to the presidency of the corporation or to its Board of Directors or to any other office or position and that he was simply an interloper. It is also contended that the corporate Board of Directors never in fact authorized the transaction under consideration.

The record contains a copy of a resolution purportedly adopted by the Board of Directors on August 11, 1969 which authorized the taking out of the loan and the execution of the note, deed of trust and other loan papers by the president and secretary of the company. That resolution was regular on its face. It was certified by Ms. Wellner, and there seems to be no question that she was the secretary of Great Oil Basin.

Whether Ezrine was in fact the president of the corporation or not, there was evidence from which the jury could find that he was in full and active charge of the affairs of the corporation, that he held himself out as president, that the Bank's representative, Mr. Jameson, made the usual inquiries as to the authority of Ezrine and was reliably assured that Ezrine had ample authority in...