Western Plains Service Corp. v. Ponderosa Development Corp., No. 83-2286

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: Before McKAY and MOORE; JOHN P. MOORE
• Citation: 769 F.2d 654
• Parties: WESTERN PLAINS SERVICE CORPORATION, A South Dakota Corporation, Plaintiff-Appellee, v. PONDEROSA DEVELOPMENT CORPORATION, A Wyoming Corporation, and Francis H. McVay, Defendants-Appellants.
• Docket Number: No. 83-2286
• Decision Date: 30 July 1985

Page 654

769 F.2d 654 WESTERN PLAINS SERVICE CORPORATION, A South Dakota
Corporation, Plaintiff-Appellee,
v.
PONDEROSA DEVELOPMENT CORPORATION, A Wyoming Corporation,
and Francis H. McVay, Defendants-Appellants. No. 83-2286. United States Court of Appeals,
Tenth Circuit. July 30, 1985.

Page 655

Nick G. Kalokathis, Lathrop & Uchner, P.C., Cheyenne, Wyo. (G. Verne Goodsell, Wilson, Olson, Goodsell & Nash, P.C., Rapid City, S.D., with him on the brief), for plaintiff-appellee.

Jack R. Gage (Thomas E. Campbell, with him on the brief), Hanes, Gage & Burke, P.C., Cheyenne, Wyo., for defendants-appellants.

Before McKAY and MOORE, Circuit Judges, and BROWN, ^* District Judge.

JOHN P. MOORE, Circuit Judge.

This is a diversity action brought by Western Plains Service Corporation (WPSC), appellee, to foreclose on a mortgage securing a promissory note executed by Ponderosa Development Corporation and Frank McVay (PDC collectively), appellants. PDC asserted a variety of counterclaims; ¹ consequently, the case was submitted to a jury. Following a verdict finding generally for PDC, the trial court granted WPSC's motion for judgment notwithstanding the verdict. PDC filed a motion for new trial which was denied. This appeal followed. The basic issue presented is whether the jury's finding that PDC breached the loan agreement underlying the note is a complete defense against the foreclosure action. We conclude that it is not, but we find that the trial court erred in measuring interest damages awarded WPSC.

Although a range of evidence was introduced at trial, the essential facts are not in dispute. WPSC, a savings and loan service corporation, originated, packaged, serviced, and sold loans with participations from other banks or associations. Frank McVay, president of PDC, a Wyoming corporation, which developed parcels of land for residential tract housing, approached WPSC for a construction loan to finance the development of a subdivision in Mills, Wyoming. WPSC agreed to lend $500,000 to PDC for a one-year term. Under the terms of the loan, monthly disbursements were to be made to PDC by WPSC, but PDC was expected to make regular monthly payments on the debt and to complete the development project. According to the agreement, Delbert Bjordahl, chief officer for WPSC, wrote monthly checks from the loan proceeds to pay the interest and fees. Disbursals of principal were made upon WPSC's receipt of invoices or disbursal requests from the borrower. Interest accrued against the outstanding balance paid to the borrower.

Draw requests were honored until December 1979, when Bjordahl began to feel insecure about the feasibility of completing the project. ² Although approximately $400,000 of the $500,000 had been disbursed, no further sums were advanced after the January 1980 disbursement. Subsequently, WPSC granted an extension of the one-year loan for which McVay paid $1,250. WPSC began foreclosure proceedings in federal district court when payment was not received in accordance with the extension.

The jury returned special interrogatories finding that PDC had not failed to repay

Page 656

WPSC according to the terms of the agreement; that WPSC had breached the loan agreement; and that defendants should be awarded damages of $250,000 for losses proximately caused by the breach. WPSC moved for judgment notwithstanding the verdict on the grounds that no evidence of repayment was submitted during trial and that the issue of repayment was not contested by defendants.

In its ruling, the court found that PDC was loaned money that it never repaid; that the loan was secured by WPSC's mortgage which constituted a first lien on the property; and that WPSC was entitled to foreclose on the property to satisfy the debt. Hence, the court ordered WPSC recover $727,969.17, representing the principal sum of $500,000.00, plus interest until August 1983, reduced by offsetting damages awarded by the jury to PDC.

On appeal, PDC complains that the trial court's granting of judgment notwithstanding the verdict on the issue of WPSC's note and mortgage is error because the jury found that breach of contract was a complete defense. PDC also argues that the recovery of interest until August 1, 1983, awards WPSC the full benefit of its bargain despite its breach. Error was also assigned to the trial court's refusal to grant PDC's motion for a new trial.

Our review of the grant or denial of judgment notwithstanding the verdict mirrors that standard applied by the trial court. We must view all of the evidence and inferences therefrom in the light most favorable to the party against whom the motion is made. Symons v. Mueller Co., 493 F.2d 972, 976 (10th Cir.1974). Because of the finality of the determination, this standard is a rigorous one. 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2531 (1971). "[S]ince the grant of such a motion deprives the non-moving party of the determination of the facts by a jury, judgment notwithstanding the verdict should be cautiously and sparingly granted." Joyce v. Atlantic Richfield Co., 651 F.2d 676, 680 (10th Cir.1981). We, too, must...