Wildwood Manor, Inc. v. Gary Nat. Bank

• Decision Date: 09 February 1970
• Docket Number: No. 868A138,No. 1,868A138,1
• Parties: WILDWOOD MANOR, INC., an Indiana corporation, Appellant, v. GARY NATIONAL BANK, a National Banking Association, Appellee
• Court: Indiana Appellate Court

Page 128

255 N.E.2d 128

146 Ind.App. 296

WILDWOOD MANOR, INC., an Indiana corporation, Appellant, v. GARY NATIONAL BANK, a National Banking Association, Appellee.

No. 868A138.

Appellate Court of Indiana, Division No. 1.

Feb. 9, 1970.

Fred G. Donnersberger, Wilson, Benne, Feingold & Donnersberger, Hammond, for appellant.

Fred M. Cuppy, Gerald K. Hrebec, Thomas, Thomas, Burke & Richardson, Gary, for appellee.

LOWDERMILK, Chief Justice.

This action was brought by appellant, plaintiff below, against appellee, defendant below, for money damages growing out of a breach of an oral contract between the parties pertaining to an accounts receivable financing program on a notification basis.

The action was based, and the issues were formed, on appellant's amended complaint in two paragraphs, appellee's answer thereto in five paragraphs, the first being under Supreme Court Rule 1--3, and the remainder being affirmative; appellant's reply to the four affirmative paragraphs of answer; appellee's cross complaint in nine paragraphs and appellant's answer thereto in nine paragraphs, the first eight being under Supreme Court Rule 1--3, and the ninth being affirmative.

Appellee's cross complaint was for balances due on promissory notes on the accounts receivable financing program on a notification basis as agreed by and between the parties.

Briefly, appellant contends that appellee's breach of contract proximately caused and allowed dissipation of appellant's funds in the approximate amount of $92,000, and appellee, by its cross complaint, contends that appellant, through its agents, facilitated the dissipation of appellant's moneys by one of its own officers in such a manner that it left the appellee holding approximately $64,000 of unsecured notes of appellant.

This cause was tried by jury, which after many days of trial, volumes of evidence and approximately 500 exhibits, returned its verdict on Paragraph I of appellant's amended complaint for the appellant in the sum of $3,500 and for appellant and against appellee on appellee's cross complaint, and for appellee on appellant's pleading Paragraph II.

The assignment of errors does not include the jury's verdict on pleading Paragraph II of appellant's amended complaint and there is nothing before the court thereon.

The period of time covered by the issues of this litigation commenced in November, 1964, and ran to February 20, 1967. At the outset, the appellant, which owned a nursing home in the City of Gary, had arranged with one Tomye Calloway to manage the nursing home and to secure financing for the operation, went to the appellee bank, and it was there agreed that, pursuant to the consent of the County Department of Public Welfare of Lake County, Indiana, that all county warrants issued by its authority for services rendered to its recipients in appellant's nursing home were to be forwarded to the bank and the bank agreed, in return, to lend appellant up to but not more than 80% of the amount of the assignment. This was contingent upon the execution of a collateral promissory note. Said County Department of Public Welfare, upon acknowledgement of the assignment, was to mail directly to appellee the drafts in payment of the indebtedness acknowledged by the assignment. The bank was then to apply the money, first to the payment of the notes, then take back the interest due on the note and distribute the balance of said moneys into appellant's corporate checking account. This arrangement was agreed upon so that the bank would have its loans fully secured by the welfare warrants.

Appellant alleged further that the bank received drafts in payment of the specific notes during the month subsequent to the month in which the assignments and notes were executed and instead of paying the notes with the funds assigned to said notes, appellee bank distributed the funds into the corporate checking account of appellant and by doing so facilitated the dissipation of appellant's moneys by one of appellant's officers, directors and employees.

Appellant further claims that notes which had originally been secured were renewed subsequent to the time the money payment of the original note had been tendered to appellee bank in payment of the note and further, maintained that the conduct was contrary to the terms of the oral agreement entered into by and between the parties.

Appellee contends that appellant sustained no damages under any breach of the contract and that all moneys received by appellee from said Welfare Department were placed directly into the corporate checking account of appellant, thereby giving full credit to appellant for all sums coming into the bank from appellant's debtor, the Welfare Department.

Appellee, by further answer, alleges that it had never been notified of any misallocation or misapplied funds to the corporate checking account, instead of being applied to various notes due appellee, until about February of 1967. Appellee maintains a waiver of any breach of the alleged contract by appellant.

Appellee further alleges that a man named George Walker and Tomye D. Calloway, a woman, were agents of the appellant, acting for and on behalf of appellant, pursuant to authority conferred by the corporation on them and that appellee relied on these agents' authority, including the authority to renew corporate notes for the appellant. Appellee further alleged that appellant accepted benefits derived out of the execution of said notes by said agents and the appellant recognized the contracts which Walker and Calloway made as agents, and that the same was binding upon appellant because appellant had clothed Calloway and Walker with the proper appearance of agency.

Appellee further alleged that on or about February 20, 1967, of the various loans executed by appellant, that four different loans had been renewed with appellant's knowledge, pursuant to the authority contained in the certified copies of resolutions of the Board of Directors of appellant.

Appellant denied these affirmative allegations of appellee and stated further that the placing of the money directly into the corporate checking account of appellant was a misappropriation of specifically pledged money which, under the terms of the contract, was to be applied directly to retire the individual notes and that by the conspiratorial conduct of the appellee's agent and Tomye D. Calloway, appellant's agent, the placing of the money in the corporate account rather than paying the individual notes was the element that facilitated the conversion of the corporate funds to the benefit of said Tomye D. Calloway and the appellee bank.

In reply to the affirmative allegations of appellee the appellant alleged that the appellee never relied upon the actual authority conferred upon appellant's agent, but did conspire with Tomye D. Calloway to exceed any authority which she may have had. And as a part of the conspiracy Tomye D. Calloway was to convert proceeds of various notes and to convert the proceeds tendered by appellant's debtor to appellee so that they might be used for the personal benefit of said Tomye D. Calloway and the bank. It is alleged these funds were originally tendered by appellant's debtor for application to the retirement of the note to which it was pledged.

Appellee duly filed a motion for new trial, which was sustained by the court on May 23, 1968, at which time the court made the following record:

'Comes now the parties hereto in court by their respective counsels and arguments are now heard on motions of both sides for new trial; at the conclusion of which the court overrules the defendant's motion for judgment notwithstanding the verdict and grants the defendant's motion for a new trial as to Paragraph I of plaintiff's complaint and as to defendant's cross complaint and grants the plaintiff's motion for a new trial as to Paragraph II of its complaint.'

Thereafter, appellant filed a motion requesting the court to reduce to writing the reasons for granting the new trial.

This is the proper procedure established for this kind of proceeding, as set forth in Harmon v. Arthur (1963), 134 Ind.App. 526, 189 N.E.2d 719, Judge Ryan of this court stated that:

'We have heretofore established the requirement that in sustaining a motion for a new trial the trial court must state in writing its specific reasons for granting such new trial. Rife v. Karns (1962), 133 Ind.App. 226, 181 N.E.2d 239; Newsom v. Pennsylvania Railroad Co et al. (1962) 133 Ind.App. 582, 181 N.E.2d 240, * * *.'

The court complied with the request and on May 28, 1968, entered the following order on the motion for new trial:

'(1) That the verdict against the defendant on its cross complaint was not sustained by sufficient evidence, but rather the evidence as to said cross complaint is overwhelmingly in favor of the defendant, there being no affirmative answers addressed to said cross complaint and the evidence being clear that said notes sued on and said cross complaint have not been paid, the court exercises its prerogative as the thirteenth juror in sustaining said motion for a new trial.

'(2) The court erred in refusing to grant defendant's motion for a directed verdict at the close of plaintiff's case with respect to the notes sued on in its cross complaint.

'(3) With respect to defendant's motion for a new trial as to paragraph one of plaintiff's complaint, the court is of the opinion that there was insufficient evidence to sustain said verdict, and further that the court erred in giving plaintiff's instruction number five to the jury.

'(4) The court is further of the opinion that plaintiff's motion for a new trial as to paragraph two of plaintiff's complaint should be granted for the reson that the verdict of the jury was tainted with an improper consideration of the issues formed by the cross complaint, and the improper instruction given with respect to paragraph one of plaintiff's complaint, and that therefore a...