Stockmen's Livestock Market, Inc. v. Norwest Bank of Sioux City

• Decision Date: 06 February 1998
• Docket Number: Nos. 97-1396,97-1397,s. 97-1396
• Citation: 135 F.3d 1236
• Parties: STOCKMEN'S LIVESTOCK MARKET, INC., Appellee, v. NORWEST BANK OF SIOUX CITY, NA, Appellant. STOCKMEN'S LIVESTOCK MARKET, INC., Appellant, v. NORWEST BANK OF SIOUX CITY, NA, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1236

135 F.3d 1236

STOCKMEN'S LIVESTOCK MARKET, INC., Appellee, v. NORWEST BANK OF SIOUX CITY, NA, Appellant.

STOCKMEN'S LIVESTOCK MARKET, INC., Appellant, v. NORWEST BANK OF SIOUX CITY, NA, Appellee.

Nos. 97-1396, 97-1397.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 19, 1997.

Decided Feb. 6, 1998.

Thomas Bennin, Minneapolis, MN, argued (Tamara A. Wilka and Gary J. Pasby, Sioux Falls, SD, on the brief), for appellant.

Steven M. Johnson, Sioux Falls, SD, argued, for appellee.

Before BOWMAN, BRIGHT and MURPHY, Circuit Judges.

BRIGHT, Circuit Judge.

Stockmen's Livestock Market ("Stockmen's") filed this action against Norwest Bank of Sioux City, NA ("Norwest"), alleging that Norwest defrauded and deceived Stockmen's by characterizing Norwest's lending and banking relationships with D & R Feedlots, Inc. ("D & R") as "satisfactory," and by breaching its promise to honor one of D & R's nonsufficient funds ("NSF") checks. Stockmen's also claimed that Norwest converted funds "belonging to" Stockmen's when Norwest placed a hold on D & R's checking account. The jury returned a verdict in favor of Stockmen's in the amount of $620,404.04 in compensatory damages and $75,000 in punitive damages. The district court denied Norwest's motion for judgment as a matter of law.

On appeal from the adverse judgment (No. 97-1396), Norwest argues that the evidence fails to support the jury's verdict and that the court erred in giving certain jury instructions. In its cross-appeal (No. 97-1397) Stockmen's argues that the district court erred in failing to award post-verdict, pre-judgment interest on the punitive damages award. We affirm the jury's verdict, in part, with respect to fraud and deceit and reverse with respect to conversion and promissory estoppel. Furthermore, we affirm the award of punitive damages. On the cross-appeal, we reject Stockmen's' claim for any interest on punitive damages before the district court's entry of judgment.

I. BACKGROUND

Gail Sohler operates Stockmen's, a livestock sales barn. Don Foreman operated as a cattle broker doing business as D & R. D & R purchased mainly "fat cattle"--those ready for slaughter--and then re-sold the cattle to slaughterhouses, including Iowa Beef Processors ("Iowa Beef").

D & R had a $2.4 million line of credit at Norwest, which D & R initially obtained to finance cattle buying. By the time the transactions in dispute occurred, D & R had fully extended its line of credit. D & R financed its ongoing business transactions by floating checks. Specifically, D & R purchased livestock by writing a check on the day of purchase (the "fat cattle" sales at Stockmen's were on Wednesdays). Stockmen's would then hold D & R's checks until the following Monday when it deposited checks received from the other feedlots that had also purchased "fat cattle." ¹ During that several day period, D & R would resell the livestock to a slaughterhouse and then deposit the slaughterhouse's check in its bank account.

Between 1988 and February of 1994, D & R had issued a number of NSF checks. By October 20, 1992, the problem had escalated to a level that caused Norwest to notify D & R that Norwest would no longer honor any NSF check from D & R. D & R had exhausted its line of credit in September, 1993, prior to the transactions in question in February, 1994. On January 1, 1994, Norwest downgraded D & R's credit rating from a 4 to a 4EW, an early warning classification. Mike Rickert, a Norwest loan officer in the agriculture department, had managed D & R's account since late 1990.

On February 1, 1994, Gail Sohler, the owner of Stockmen's, learned that D & R's checks to at least one other livestock barn had been returned NSF. Sohler directed his office manager, Gary Stevens, to call the Livestock Board of Trade ² in Kansas City to get an update on D & R. Before Stockmen's obtained a further credit check, Stockmen's sold D & R 476 head of cattle on February 2, 1994, and obtained a check from D & R for the full purchase price, $405,324.52. D & R took immediate possession of the cattle and sent at least 433 head to Iowa Beef for slaughter. Stockmen's deposited the $405,324.52 check in its local bank on February 7. Tr. (vol.I) at 111, 114.

On February 3, Stevens called the Livestock Board of Trade to inquire about D & R's credit status. Joyce Knorr, a business information officer for the Livestock Board of Trade, testified that after Stevens' inquiry, she called Rickert at Norwest. Knorr further testified that Rickert informed her, according to Knorr's notes of the conversation, that D & R's checking account fluctuates from zero to a high six-figure amount and that Norwest considered the checking account "satisfactory." Tr. (vol.II) at 286-87. With respect to D & R's line of credit, Knorr testified that Rickert informed her that D & R had a "revolving line of credit to a low seven figure, there was [sic] outstanding funds on the account" and the account was "satisfactory." Id. at 287. Knorr testified that she immediately relayed this information to Stockmen's.

Rickert in his trial testimony denied telling Knorr that funds were available on D & R's line of credit. Rickert testified he told Knorr the account was "satisfactory" because he believed the credit was fully secured. During this conversation, Rickert did not indicate that D & R had "maxed out" its line of credit or that D & R had written several NSF checks.

On the same day, February 3, Norwest mailed a notice of security interest, signed by loan officer Rickert, to the slaughterhouses doing business with D & R, which included Iowa Beef. The notice of security interest required the slaughterhouses to make all further checks from D & R's sale of cattle payable jointly to D & R and Norwest.

On February 9, Foreman purchased 251 head of cattle from Stockmen's, paid for them with a check in the amount of $215,079.52 and took delivery. On February 11, Stockmen's received notice from Norwest that D & R did not have sufficient funds to cover the $405,324.52 check. At 11:20 a.m. that day, Stevens (office manager for Stockmen's) called Rickert at Norwest regarding the $405,324.52 NSF check. Stevens testified that Rickert told him that there had been a cash flow problem and that the check would be good if Stevens resubmitted the check. Rickert testified he told Stevens that D & R previously had cash flow problems and to rerun the check, but denied telling Stevens the check would be good. Rickert and Stevens did not discuss D & R's $215,079.52 check for the February 9 livestock purchase.

Sometime after noon on February 11, Rickert conducted a drive-by inspection of D & R's feedlot, and counted 300 cattle rather than the 1800 counted at the January collateral inspection. At 4:20 p.m. that afternoon, Norwest placed a legal hold on D & R's account. The legal hold allowed Norwest to exert complete control over the account.

On February 12, Rickert and his supervisor, Don Vaudt, met with Foreman. Rickert and Vaudt evaluated the available records in an attempt to determine the status of D & R's finances, and examined D & R's bank statements for the previous six months in an attempt to determine what happened to the 1500 missing head of cattle. Norwest asserts that it first learned at this meeting that livestock barns were waiting six to eight days before presenting D & R's checks. At trial, Foreman testified that Rickert and Norwest had known since sometime in 1993 that the sales barns routinely held D & R's checks.

On February 14, Stockmen's deposited D & R's check for $215,079.52 (for the February 9 livestock purchase), along with the returned $405,324.52 check. Norwest terminated D & R's line of credit on February 17. Norwest returned D & R's checks to Stockmen's in the amounts of $405,324.52 and $215,079.52 marked "account closed."

Stockmen's originally brought suit in South Dakota state court against Norwest. Norwest timely removed the case to federal district court. After five days of trial, a jury found for Stockmen's on each of the four theories of recovery: conversion, promissory estoppel, common law fraud, and statutory deceit, and awarded Stockmen's $620,404.04 in compensatory damages and $75,000 in punitive damages. The district court denied Norwest's motion for judgment as a matter of law, as well as the motion by Stockmen's for pre-judgment, post-verdict interest on the punitive damages award. Both parties timely appealed.

II. DISCUSSION

The standard of review of the denial of a motion for judgment as a matter of law is de novo. Lamb Engineering & Const. Co. v. Nebraska Public Power Dist., 103 F.3d 1422, 1430 (8th Cir.1997). In the present case, the district court reviewed Norwest's motion for judgment as a matter of law under South Dakota law, which corresponds with South Dakota's standard for reviewing a motion for directed verdict. Specifically, the district court stated that it reviews motions for judgment as a matter of law by:

view[ing] the evidence in a light that is most favorable to the non-moving party and giv[ing] that party the benefit of all reasonable inferences that fairly can be drawn from the evidence. When viewed in this light, if there is any substantial evidence to sustain the cause of action or defense, it must be submitted to the finder of fact.

Weiszhaar Farms, Inc. v. Tobin, 522 N.W.2d 484, 492 (S.D.1994) (internal citations omitted). This court has articulated a similar standard for reviewing a sufficiency of the evidence challenge. That standard requires that a jury verdict be affirmed "unless, viewing the evidence in the light most favorable to the prevailing party, we conclude that a reasonable jury could have not found for that party." Chicago Title Ins. Co. v. Resolution Trust Corp., 53 F.3d 899, 904 (8th Cir.1995) (citation omitted).

A. Conversion

To recover on its claim for conversion, Stockmen's had the burden of proving (1) that Stockmen's had an ownership interest or...