Western Plains Service Corp. v. Ponderosa Development Corp., 83-2286

• Decision Date: 30 July 1985
• Docket Number: No. 83-2286,83-2286
• 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.
• Court: U.S. Court of Appeals — Tenth Circuit

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.

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 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 find that the evidence presented conclusively favors one party such that reasonable men could not arrive at a contrary verdict. "The philosophy of this doctrine is that there must be a minimum of interference with the jury." Yazzie v. Sullivent, 561 F.2d 183, 188 (10th Cir.1977).

A review of the record leads unequivocally to the conclusion that no evidence of repayment was presented. The jury's verdict to the contrary is simply without foundation. WPSC advanced monies secured by a mortgage to purchase and begin the development of a tract of land that PDC did not own prior to the loan agreement. When repayment appeared unlikely, WPSC commenced a foreclosure action to liquidate its security interest. In granting WPSC judgment notwithstanding the verdict, the court concluded that PDC had not performed the terms of the agreement.

PDC now asks us to recast the action that was tried to characterize the counterclaim for breach of contract as an affirmative defense vitiating repayment of the contract. This we cannot do. That defense was not raised in the trial court, and the jury never considered whether breach was a complete defense. Nevertheless, because the jury returned damages on PDC's counterclaim and WPSC did not appeal the award of these damages, PDC would have us conclude that the jury determined WPSC's breach exonerated PDC from repayment of the loan. In asking us to reverse the court's ruling, PDC theorizes that the jury not only intended the "affirmative defense" to forgive repayment, but it also included the value of the land in its ultimate award of damages.

To support this contention, PDC relies on Western National Bank of Lovell v. Moncur, 624 P.2d 765 (Wyo.1981). Moncur involved a line of credit extended by the plaintiff bank to the defendant to finance his cattle feeding business. When the bank was sold, the new bank owners, nervous about the downturn in the cattle market, sought repayment of the $150,000 line of credit with the understanding that refinancing would be available. Relying on these representations, defendant Moncur reduced his debt incurring substantial personal losses to keep his business in operation. Contrary to the promise to continue financing the business, the lender...