Peoples Bank and Trust Co. v. Cermack, 92-CA-00117-SCT
| Citation | 658 So.2d 1352 |
| Decision Date | 01 June 1995 |
| Docket Number | No. 92-CA-00117-SCT,92-CA-00117-SCT |
| Parties | 29 UCC Rep.Serv.2d 416 The PEOPLES BANK AND TRUST COMPANY v. Jerry CERMACK and Container Engineering Corporation. |
| Court | United States State Supreme Court of Mississippi |
W.P. Mitchell, Stephen H. Morris, Mitchell, Voge, Beasley & Corban, Tupelo, for appellant.
Grady F. Tollison, Jr., Tollison Austin & Twiford, Oxford, William F. Randle, Tupelo, for appellee.
Before DAN M. LEE, P.J., and SULLIVAN and BANKS, JJ.
This appeal arises from two separate suits filed in Lee County Circuit Court on September 15, 1989, by Jerry Cermack (hereinafter Cermack) and Container Engineering Corporation (hereinafter Container) against The Peoples Bank and Trust Company (hereinafter Peoples Bank) alleging inter alia, that: (1) Peoples Bank had breached its fiduciary duty it owed to Cermack and Container; (2) Peoples Bank had breached its contract with Cermack and Container; (3) Peoples Bank After the completion of all pre-trial and discovery matters, the consolidated case was tried on November 12-15, 1991, before a jury of twelve. After hearing all of the testimony and viewing the evidence, the jury was instructed as to the law and allowed to begin their deliberations. The jury completed its deliberations and returned a verdict for Cermack for $25,000 as actual damages against Peoples Bank. The jury also returned a verdict for Container in the amount of $300,000 as actual damages and $250,000 as punitive damages against Peoples Bank. Peoples Bank timely filed its motion for a JNOV or in the alternative a New Trial. This motion was denied and accordingly, Peoples Bank filed their notice of appeal to this Court. On appeal, Peoples Bank assigns the following as error:
breached its obligation of good faith under the U.C.C.; (4) Peoples Bank breached the implied covenant of good faith and fair dealing; (5) duress; (6) negligence (alleged in Cermack's complaint alone); (7) intentional infliction of emotional distress (alleged in Cermack's complaint alone); and (8) interference with business (alleged in Container's complaint alone). 1 On October 11, 1991, the lower court consolidated these two complaints
1. THE COURT ERRED IN GIVING PLAINTIFFS' JURY INSTRUCTION NUMBER P-14
2. THE COURT ERRED IN REFUSING TO GIVE DEFENDANT'S JURY INSTRUCTIONS NUMBERS D-2 AND D-4
3. THE COURT ERRED IN GIVING PLAINTIFFS' JURY INSTRUCTIONS NUMBERS P-4 AND P-1
4. THE COURT ERRED IN GIVING PLAINTIFF' JURY INSTRUCTIONS NUMBERS P-3 AND P-1.
5. THE COURT ERRED IN GIVING COURT'S JURY INSTRUCTION NUMBER C-3 AND PLAINTIFF'S JURY INSTRUCTION NUMBER P-1
6. THE COURT ERRED IN GIVING PLAINTIFFS' JURY INSTRUCTION P-5 AND P-8
7. THE COURT ERRED IN OVERRULING DEFENDANT'S OBJECTIONS TO THE TESTIMONY OF MARSHALL JENKINS CONCERNING CERTAIN DAMAGES ALLEGEDLY SUFFERED BY CONTAINER ENGINEERING
8. THE COURT ERRED IN GIVING PLAINTIFFS' JURY INSTRUCTION NUMBER P-1
9. THE VERDICTS OF THE JURY WERE AGAINST THE OVERWHELMING WEIGHT OF THE EVIDENCE AND WERE A RESULT OF BIAS, PASSION AND PREJUDICE ON THE PART OF THE JURY
10. OTHER ERRORS
After carefully reviewing the record, we find merit in a number of Peoples Bank's assignments of error. For the sake of this opinion, the assignments of error will be discussed in the order in which they appear in Peoples Bank's brief.
Container first became a customer of Peoples Bank in 1973 and during the next fifteen years, Peoples Bank loaned money to Container and Cermack. Most prominent among the loans to Container was Peoples Bank's loan made under a state-sponsored Industrial Revenue Note Program that enabled Container to finance the construction of its current facility.
In 1985, Container received an inquiry from Gilson Brothers Company, Inc., as to whether Container could manufacture shipping crates for Gilson. Cermack, short of the necessary operating capital needed to take on this new account, contacted Peoples Bank about getting a loan so that Container In 1987, Container sought additional operating capital from Peoples Bank to help it land a new account. Container was faced with cash flow problems and needed additional capital to take on the new account. Jerry Cermack, Container's president, met with three of the officers from Peoples Bank at his plant and discussed with them his need for additional capital and a restructuring of his existing debt with Peoples Bank.
could take on the account. After discussing the Gilson account and the capital that would be required by Container to undertake it, Peoples Bank declined to give Container a capital loan. However, Peoples Bank extended a $140,000 line of credit on Container's accounts receivable.
Peoples Bank agreed to restructure Container's existing debt and loan Container an additional $25,000 to fund its acquisition of the new account if Container agreed to reduce its operating expenses by $35,000 per year. 2 On March 19, 1987, Peoples Bank sent Cermack a letter setting forth the terms of the proposed loan agreement. In turn, Cermack sent Peoples Bank a letter on March 20, 1987, proposing how Container would comply with the Bank's condition precedent found in paragraph "A" of the March 19, 1987, loan agreement. Peoples Bank refused to accept Cermack's March 20, 1987, proposal for reducing Container's operating expense, and on March 23, 1987, Cermack submitted a proposal for cutting operating costs that was acceptable to Peoples Bank. On May 4, 1987, after both sides agreed to the conditions set forth in the loan agreement, Cermack signed the agreement.
In addition to the requirement in the loan agreement that Container cut its operating costs by $35,000 per year (II.A.), the loan agreement also provided that:
D. Container Engineering, Inc. will not incur additional indebtness [sic] without the prior consent of The Peoples Bank & Trust Company.
The two promissory notes signed in conjunction with the loan agreement provided:
DEFAULT AND ACCELERATION: The Borrower shall be in Default upon the occurrence of any one or more of any of the following events: ... (5) Borrower fails to keep any promise under any agreements intended to secure the repayment of this Promissory Note; (emphasis added).
On March 31, 1988, Container purchased two new Navistar International trucks at an approximate cost of $165,000 without seeking approval from Peoples Bank. Cermack first gave Peoples Bank notice of its purchase of the two trucks when it submitted its quarterly financial statement to Peoples Bank on or about April 26, 1988. Peoples Bank received the quarterly statement but did not notice the journal entry that indicated that Cermack had incurred new debt and purchased the new trucks. Peoples Bank learned that Cermack had bought the trucks during July of 1988. At this point, Peoples Bank decided to wait and see what effect the purchase of the new trucks would have on Cermack's cash flow situation during the second quarter. Upon receiving and reviewing the second quarter report, Peoples Bank determined that the truck purchases worsened Cermack's cash flow problems. In August of 1988, armed with the fact that Cermack had breached his loan agreement with Peoples Bank, and that this breach had worsened Container's precarious cash flow situation, Peoples Bank decided to accelerate Cermack's outstanding debts.
On September 7, 1988, Peoples Bank gave notice to Cermack that he had violated Section II, Paragraph D of the March 19, 1987, loan agreement (Cermack incurred new indebtedness without first gaining Peoples Banks approval) and that Peoples Bank intended to accelerate the two loans evidenced by the promissory notes dated April 28, 1987. Therefore, Cermack would have to satisfy its Initially the September 7, 1988, letter required that Cermack satisfy his existing debt by October 8, 1988. However, after a September 15, 1988, meeting between Cermack and Peoples Bank, the bank agreed to extend the call of the loans for an additional thirty days. In a subsequent letter dated November 2, 1988, Peoples Bank granted Cermack a ninety-day extension to find new financing. Peoples Bank never took any affirmative steps to foreclose against Cermack. In fact, at the time Cermack "sold" his property, he was still operating under an extension of time that Peoples Bank had granted him to find new financing.
$176,543.54 indebtedness to Peoples Bank. Peoples Bank also cancelled Cermack's revolving line of credit. The revolving loan on the accounts receivables was self-liquidating and would not require that Container acquire additional financing to satisfy this debt. 3
Cermack and his accountant attempted to obtain financing for his debts from the Small Business Administration and other banks. However, neither the Small Business Administration nor any of the banks Cermack approached would lend Cermack the needed money. In April of 1989, Cermack "sold" his building and land to David Megginson and Gayle Kinsey under a lease/buyback deal for approximately $300,000.00. Cermack paid off the $176,543.54 debt to Peoples Bank and used the remaining funds to finance the operation of his business.
On appeal, this Court does not review jury instructions in isolation; rather, they are read as a whole to determine if the jury was properly instructed. Burton By Bradford v. Barnett, 615 So.2d 580, 583 (Miss.1993); Payne v. Rain Forest Nurseries, Inc., 540 So.2d 35, 40 (Miss.1989); Byrd v. F-S Prestress, Inc., 464 So.2d 63, 66 (Miss.1985). Accordingly, defects in specific instructions do not require reversal "where all instructions taken as a whole fairly--although not perfectly--announce the applicable primary rules of law." Burton, 615 So.2d at 583. However, if those instructions do not fairly or adequately instruct the jury, this Court can and will reverse. Id.
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