US Ex rel. Crow Creek Sioux Tr. v. Tri-Cty. Bank

• Decision Date: 07 July 1976
• Docket Number: No. CIV 73-3019.,CIV 73-3019.
• Citation: 415 F. Supp. 858
• Parties: UNITED STATES of America ex rel. CROW CREEK SIOUX TRIBE v. TRI-COUNTY BANK OF CHAMBERLAIN, SOUTH DAKOTA, a corporation.
• Court: U.S. District Court — District of South Dakota

415 F. Supp. 858

UNITED STATES of America ex rel. CROW CREEK SIOUX TRIBE v. TRI-COUNTY BANK OF CHAMBERLAIN, SOUTH DAKOTA, a corporation.

No. CIV 73-3019.

United States District Court, D. South Dakota.

July 7, 1976.

COPYRIGHT MATERIAL OMITTED

David L. Bergren, Fort Pierre, S. D., for plaintiff.

Robert E. Morgan, Chamberlain, S. D., for defendant.

MEMORANDUM OPINION

BOGUE, District Judge.

Between 1971 and early 1973, Defendant Tri-County Bank of Chamberlain, South Dakota, made some sixteen loans to Plaintiff Crow Creek Sioux Tribe. Crow Creek Sioux Tribe apparently did most of its banking at Tri-County Bank during this period, as evidenced by the existence of several checking accounts held in the name of various tribal programs and businesses.

In return for each of the sixteen loans, a promissory note was executed by the Chairman of the Tribe. The individual notes will be discussed in detail below, but it may be noted at this point that only five of the sixteen notes were expressly authorized by the Crow Creek Sioux Tribal Council (although one of the other eleven notes was merely a renewal of an outstanding note which had been authorized by resolution, and another note was for the stated purpose of advancing an installment on an outstanding note which had also been authorized by resolution. Thus seven of the sixteen notes bear at least colorable tribal approval). There is no evidence to indicate that any of the loan agreements had been approved by the Secretary of the Department of the Interior. cf. 25 U.S.C. § 81.

The sixteen notes in question were either made for expressly stated purposes or secured by specific collateral. Each of the notes bore, inter alia, the following terms:

This note is payable at a definite time subject to any acceleration . . . Upon any default in the payment of interest, this note shall become immediately due and payable at the option of the holder hereof.

Using the purpose or collateral as titles for the respective notes, the notes are as follows (each title is followed by the number, in parentheses, which the bank assigned to the notes—the list includes the Tribal checking account wherein the loans in question were deposited, in instances where evidence was offered of such a deposit):

1. Case loader note (# 9592). This $10,600.00 note was authorized by Tribal Council Resolution CC-72-3-17, which further authorized that the installment payments for the note were to be made from the Tribe's construction company funds.

2. Case loader payment note (# 11042). This note was an advance made for the purpose of paying one of the installments on the case loader note (# 9592). $4,771.04 was advanced in return for the note.

3. Backhoe and front-end loader note (# 8738). Authority for the then Chairman's execution of this $11,750.00 note is found in Tribal Council Resolution CC-8-31-72.

4. Backhoe payment note (# 11041). The evidence does not clearly indicate whether the $5,135.64 loan evidenced by this note was for the purpose of advancing an installment on the backhoe and frontend loader note (# 8738).

5. Water treatment plant note (# 12051). The loan underlying this note was characterized as an advance pending receipt of funds for the tribe's water treatment plant. The amount loaned, $8,000.00, was deposited in a checking account the Tribe maintained for its water treatment program. No council resolution authorized the note.

6. EDA Project note (# 10601). An advance of $31,000.00 was made by the bank pending the Tribe's receipt of EDA funds in return for the then Chairman's execution, without benefit of Council resolution approving this note. The loan was deposited in the Tribe's checking account for water storage facilities.

7. Planning Grant note (# 12175). The $4,000.00 loan received in return for this note was deposited in the Tribe's "Planning Project" checking account. No Council resolution authorized the then Chairman's execution of this note.

8. Council Resolution note (# 7947). As indicated by its otherwise vaguely stated purpose, this $3,127.73 note was authorized by Council Resolution CC-71-1-5. The liability underlying this note was discharged by the subsequent execution of a renewal note listed immediately below.

9. Council Resolution Renewal note (# 10610). This note was simply a renewal of the above note's face amount with interest, and is a promise to pay a renewed face amount of $3,572.48.

10. Dacotah Standard note (# 12052). The Tribe maintained a checking account for the operation of an enterprise known as Dacotah Standard, and this $5,500.00 loan was deposited in the Dacotah Standard account. No Council resolution authorizes this note.

11. Insurance premium note (# 11036). $11,503.80 was loaned by the bank in return for this note. The loan was obtained for the general purpose of covering insurance premiums. The testimony of Mr. Henry Schelle, President of defendant bank, indicates that the purpose of this loan was related to the development of a commercial complex operated by the Tribe. While no council resolution authorized this note, Mr. Schelle testified that he relied on the articles of incorporation used to form the Commercial Complex organizational structure in making this loan. The Articles of Incorporation for the Complex were not offered into evidence at the trial of this case, and thus the Court is unable to make a finding on the question of whether this loan had received tribal authorization.

12. Motel note (# 12050). An advance of $7,500.00 pending the Tribe's receipt of funds for its then proposed motel was made in return for this note. The advance was deposited in a tribal checking account entitled "Recreation and Commercial Complex." No council resolution to support the loan was offered into evidence.

13. The earnest money note (# 9858). This note evidences a $3,000.00 loan made so that the Tribe could put down earnest money on a mines land contract it was apparently negotiating at the time. This loan lacks the authorization which would be provided by a council resolution.

14. Tractor note (# 8036). Council Resolution CC-71-2-13 authorized a loan for "refinancing of a new . . . tractor," and the then Tribal Chairman obtained a $4,850.00 loan, evidenced by this note, pursuant to that resolution.

15. First Court Fund note (# 10611). A $6,000.00 advance pending the Tribe's receipt of funds for its court fund. Its execution was authorized by Council resolution CC-73-11-18.

16. Second Court Fund note (# 12049). This was another advance of $8,000.00, which was deposited in a checking account maintained by the Tribe for its court fund. The advance was made pending receipt of moneys for the Tribe's court fund. The then Chairman's execution of this note is not supported by a council resolution.

Since the liability underlying the note listed as number eight above was discharged by the execution of the note listed as number nine, the remainder of this opinion will deal primarily with only the remaining fifteen notes.

During the period in question (1971-1973), the Tribe also maintained numerous checking accounts at the defendant bank, twenty-eight of which are relevant to this action. Each of the Tribe's various business and governmental undertakings was at least in part accounted for in the Tribe's records by the maintenance of a separate checking account for the particular undertaking involved. All but one of the checking accounts involved in this action were opened by signing a signature card which bore the title of the account and the account number, and which also contained the following terms:

Items received for deposit or collection are accepted on the following terms and conditions. This bank acts only as depositor's collecting agent and assumes no responsibility beyond its exercise of due care. All items are credited subject to final payment and to receipt of proceeds of final payment in cash or solvent credits by this Bank at his own office. This Bank may forward items to correspondents and shall not be liable for default or negligence of correspondents selected with due care nor for losses in transit, and each correspondent shall not be liable except for its own negligence. Items and their proceeds may be handled by any Federal Reserve Bank in accordance with applicable Federal Reserve rules, and by this bank or any correspondent in accordance with any common bank usage, with any practice or procedure that a Federal Reserve bank may use or permit another bank to use, or with any other lawful means. The Bank may charge back, at any time prior to midnight on its business day next following the day of receipt, any item drawn on this Bank which is ascertained to be drawn against insufficient funds or otherwise not good or payable. An item received after this Bank's regular afternoon closing hour shall be deemed received the next business day.

I hearby agree to the by-laws, rules and regulations of the above-mentioned bank, governing deposits made in its checking department now and/or hereafter adopted by said bank. It is agreed that all stop payment orders be made in writing in accordance with the rules of the bank. The bank is authorized to charge this account a service charge in accordance with its rules. The bank is authorized to mail by ordinary mail the statement and cancelled checks to address last known to bank.

The only account which was opened with a different signature-card agreement was the Crow Creek Tribal Construction Company account, which was a joint account with terms and conditions reflecting the rights and liabilities involved in a joint account. The evidence adduced at the trial of this action does not include any reference to the terms of any agreement regarding the Tribe's numerous checking accounts other than the ones contained on the signature cards, with the exception of the Tribe's Neighborhood Youth Corps Account (XXX-XXX-X), which apparently bore an additional agreement not offered into evidence. This...