Wisdom v. First Midwest Bank, of Poplar Bluff

• Decision Date: 09 March 1999
• Docket Number: No. 98-1290,98-1290
• Citation: 167 F.3d 402
• Parties: RICO Bus.Disp.Guide 9648 Robert R. WISDOM; Nancy J. Wisdom, Appellants, v. FIRST MIDWEST BANK, OF POPLAR BLUFF; Jerry F. McLane; Jerry Dorton; Joey McLane, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 402

167 F.3d 402

RICO Bus.Disp.Guide 9648

Robert R. WISDOM; Nancy J. Wisdom, Appellants, v. FIRST MIDWEST BANK, OF POPLAR BLUFF; Jerry F. McLane Jerry Dorton; Joey McLane, Appellees.

No. 98-1290.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 22, 1998.

Decided Jan. 11, 1999.

Rehearing and Rehearing En Banc Denied March 9, 1999.

Irl B. Baris, St. Louis, MO (Jon M. Baris, St. Louis, MO, on the brief), for Appellant.

Robert J. Selsor, St. Louis, MO (Eleanor A. Maynard, St. Louis, MO, on the brief), for Appellee.

Before HANSEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

HANSEN, Circuit Judge.

Robert and Nancy Wisdom (the Wisdoms) brought this Racketeer Influenced and Corrupt Organizations Act (RICO) claim against First Midwest Bank and three of its officers. They also asserted federal law claims for violation of the Truth In Lending Act, mail fraud, wire fraud, extortion, and pendant state law claims of common law fraud and deceit. The district court dismissed the claims for failure to state a claim upon which relief could be granted, from which the Wisdoms now appeal. We affirm in part, vacate in part, and remand to the district court for further proceedings.

I.

In reviewing a motion to dismiss for failure to state a claim, we view the facts in the light most favorable to the claimant, taking the facts as found in the complaint as true. See Duffy v. Landberg, 133 F.3d 1120, 1122 (8th Cir.), cert. denied, --- U.S. ----, 119 S.Ct. 62, 142 L.Ed.2d 49 (1998). In May 1989, the Wisdoms borrowed $283,000 (Loan I) from First Midwest Bank to purchase Robert R. Wisdom Oil Co., Inc., using the proceeds to pay off the company's creditors. The loan was contingent on them also taking another $120,000 loan (Loan II), which they were unaware of until closing, on property foreclosed by a related bank, Carter County Bank. The Wisdoms allege it was too late to back out of Loan I because representatives of the creditors to be paid off were present at the closing.

Defendant Jerry McLane is principal owner and president of First Midwest Bank and principal owner of Carter County Bank. Defendant Joey McLane was also president of First Midwest Bank at some time and dealt with the Wisdoms concerning their loans. Plaintiffs defaulted on Loan I in May 1991, and entered into a settlement agreement for $257,825 with defendant Jerry Dorton, a vice-president of First Midwest Bank. Portions of the payments meant for the Loan I settlement were credited to Loan II between May 1991 and January 1992.

In March 1992, when the Wisdoms sought to pay off the then balance of Loan I of $1,473, Dorton strongly suggested that they leave the loan on the books to make it harder for other creditors to attach the property securing the loan. In July, Dorton mailed a letter to the Wisdoms' attorney, indicating that both notes could be released for $15,000. In August 1992, the bank mailed a notice of default, stating a balance due on Loan I of $51,375, and threatened foreclosure. Plaintiffs paid an additional $28,000 between September and December 1992 and arranged for their associate to assume the then $26,000 balance of Loan I. Because Loan II was still outstanding, defendants refused to release any collateral securing Loan II. Much of the collateral was subsequently stolen and vandalized.

The Wisdoms filed a pro se complaint alleging that the defendants participated in a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c) & (d) (1996), by committing various acts of mail fraud, wire fraud, extortion, and Truth In Lending violations in connection with the collection of the two loans. The Wisdoms also alleged that the defendants violated the Truth In Lending Act, 15 U.S.C. §§ 1601-67f (1996). ¹ The district court read the complaint as alleging implied rights of action under 18 U.S.C. § 1341 (1996) (mail fraud), 18 U.S.C. § 1343 (1996) (wire fraud), and 18 U.S.C. § 1951 (1996) (extortion). Finally, the Wisdoms brought pendant state claims against the defendants based on common law fraud and deceit. The defendants filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted. See Fed.R.Civ.P. 12(b)(6). The Wisdoms filed a traverse to the motion to dismiss, requesting that the court allow them to amend their complaint if it was indeed defective. The district court dismissed the complaint in its entirety, without addressing the Wisdoms' argument that they should be allowed to amend their complaint. This appeal followed.

II.

We review the dismissal of a complaint for failure to state a claim upon which relief could be granted de novo, affirming the district court if there is no provable set of facts that would entitle the plaintiff to the requested relief. See WMX Tech., Inc. v. Gasconade County, Mo., 105 F.3d 1195, 1198 (8th Cir.1997). In so doing, we construe the complaint liberally, taking all factual allegations as true. Id. It is well settled that "we may affirm the district court's judgment on any basis supported by the record." Stevens v. Redwing, 146 F.3d 538, 543 (8th Cir.1998) (internal quotations and citations omitted).

A. RICO Claim

Section 1962(c) of the RICO Act makes it "unlawful for any person employed by or associated with any enterprise engaged in ... interstate ... commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." Subsection (d) criminalizes a conspiracy to violate one of the other subsections of § 1962. Section 1964(c) allows a private party, who has been injured in his property from a RICO violation, to sue for damages. To state a RICO claim, the Wisdoms must show "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted).

The pattern element "requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5); see also H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237-38, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). However, a mere allegation of two or more acts is insufficient to state a RICO claim; the predicate acts must be related and must "amount to or pose a threat of continued criminal activity." See United HealthCare Corp. v. American Trade Ins. Co., Ltd., 88 F.3d 563, 571 (8th Cir.1996) (quoting H.J. Inc., 492 U.S. at 239, 109 S.Ct. 2893). The relationship prong of the pattern element is satisfied if the predicate acts " 'have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.' " Handeen v. Lemaire, 112 F.3d 1339, 1353 (8th Cir.1997) (quoting H.J. Inc., 492 U.S. at 240, 109 S.Ct. 2893). The second prong, continuity, can be either closed-ended or open-ended. Closed-ended continuity involves "a series of related predicates extending over a substantial period of time;" open-ended continuity involves acts which, by their nature, threaten repetition into the future. See H.J. Inc., 492 U.S. at 241-42, 109 S.Ct. 2893. Multiple predicates within a single scheme are encompassed within the RICO statute as long as the relationship and continuity elements are met. See id. at 237, 109 S.Ct. 2893; Terry A. Lambert Plumbing, Inc. v. Western Sec. Bank, 934 F.2d 976, 981 (8th Cir.1991).

In defining "racketeering activity," § 1961(1) lists the predicate acts that will support a RICO claim. The Wisdoms' pro se complaint alleges that the defendants' racketeering activity included numerous instances of mail fraud, wire fraud, extortion, and violations of Truth In Lending. Acts indictable under the mail fraud, wire fraud, and extortion statutes are among the enumerated predicate acts. However, Truth In Lending violations are not on the list. See 18 U.S.C. § 1961(1). The Wisdoms wish to replead the acts surrounding First Midwest Bank's requirement that they accept the second loan, originally pled as a violation of Truth In Lending, as a violation of the Bank Holding Company Act, 12 U.S.C. § 1972 (1996). We address this argument later, but note for now that a violation of that statute similarly is not a predicate act for purposes of establishing a RICO claim. See 18 U.S.C. § 1961(1). Thus, we look only to the alleged predicate acts of mail fraud, wire fraud, and extortion to determine whether the pattern requirement has been met.

When pled as RICO predicate acts, mail and wire fraud require a showing of: (1) a plan or scheme to defraud, (2) intent to defraud, (3) reasonable foreseeability that the mail or wires will be used, and (4) actual use of the mail or wires to further the scheme. See Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 & n. 6 (8th Cir.1995) (noting that a RICO claim does not require proof of misrepresentation of fact). Extortion is defined as "obtaining ... property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." 18 U.S.C. § 1951(b)(2).

The Wisdoms allege that the defendants committed mail fraud in relation to the settlement agreement reached in May 1991. The Wisdoms do not dispute that they were delinquent on the loan or that the amount of the settlement correlated to the unpaid balance of the loan. They only claim that the conditions of the settlement were unfair. The bank had a right to attempt to collect on the delinquent loan, including entering into the settlement agreement. We agree with the district court that the settlement was nothing more than hardball financing; it did not rise to the level of fraud. See, e.g., Lambert Plumbing, 934 F.2d at 981 (finding that a bank's acts of protecting itself in light of a problem loan are not indicative of racketeering activity).

Though mail fraud can be a predicate act, mailings are...