Filed: Jun. 16, 1998
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 97-3940 _ United States of America, * * Appellee, * * Appeal from the United States v. * District Court for the Southern * District of South Dakota. Joe Leon Mulder, * * Appellant. * _ Submitted: March 10, 1998 Filed: June 16, 1998 _ Before WOLLMAN and LOKEN, Circuit Judges, and BATAILLON,1 District Judge. _ BATAILLON, District Judge. Joe Leon Mulder was convicted of one count of bank fraud in violation of 18 U.S.C. § 1344. The district
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 97-3940 _ United States of America, * * Appellee, * * Appeal from the United States v. * District Court for the Southern * District of South Dakota. Joe Leon Mulder, * * Appellant. * _ Submitted: March 10, 1998 Filed: June 16, 1998 _ Before WOLLMAN and LOKEN, Circuit Judges, and BATAILLON,1 District Judge. _ BATAILLON, District Judge. Joe Leon Mulder was convicted of one count of bank fraud in violation of 18 U.S.C. § 1344. The district ..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 97-3940
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the Southern
* District of South Dakota.
Joe Leon Mulder, *
*
Appellant. *
___________
Submitted: March 10, 1998
Filed: June 16, 1998
___________
Before WOLLMAN and LOKEN, Circuit Judges, and BATAILLON,1 District Judge.
___________
BATAILLON, District Judge.
Joe Leon Mulder was convicted of one count of bank fraud in violation of 18
U.S.C. § 1344. The district court sentenced Mulder to eighteen months in prison, to
be followed by three years of supervised release. Mulder appeals, asserting that the
district court erred in making evidentiary rulings, in denying his motion for new trial
based on newly discovered evidence, and in construing the sentencing guidelines
1
The Honorable Joseph F. Bataillon, United States District Judge for the District
of Nebraska, sitting by designation.
relating to downward departure. Upon review, we reverse and remand the case for a
new trial.
I. BACKGROUND
Joe Leon Mulder resides in Lake Benton, Minnesota. In 1989, Mulder was in
the business of feeding cattle and raising calves. He lived on a rented fifteen-acre farm
site owned by Glenn Krog, who also farms in Lake Benton. Beginning in 1987, Krog
loaned Mulder money to buy calves, and Mulder remained indebted to him.
In May, 1989, Mulder applied for a loan with the Corn Exchange Bank, located
in nearby Elkton, South Dakota. Mulder wanted to purchase fifteen cows and twenty-
one heifers. Marvin Moore, a commercial lending officer, dealt with Mulder during his
relationship with the bank. On May 31, 1989, Moore completed a financial statement
which Mulder signed. Gov't Ex. 10. The financial statement indicated that Mulder did
not own any real estate. Under the liabilities column, the financial statement had an
entry for cattle owing to Mr. Glenn Krog in the amount of $61,990.00. The backside
of the financial statement recorded that Mulder’s liability to Krog was secured by 106
steers valued at $62,752.00.
In addition to financial statements, the bank maintained a loan commentary sheet
on Mulder. Def. Ex. A. The commentary contains entries made by Moore and other
bank employees from May 1989 through March 1995. The commentary sheet makes
no reference to Mulder owning real estate. Three separate entries on the loan
commentary sheet reference Mulder’s debt to Krog.2
2
An entry dated May 1989, states “. . . owes $45,000 to Krog. . . .” The entry
dated October 11, 1989, states “has debt to neighbor of $50,000.00 on cattle." The
entry dated February 6, 1990, states “[o]wes neighbor, Glen Krog, approximately
$58,000 on cattle in yard.” Def. Ex. A.
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To secure its promissory note, the bank entered into a security agreement with
Mulder on May 31, 1989. It secured its interest with fifteen head of Holstein cows and
twenty-one Holstein heifers. Gov't Ex. 11. In October 1989, the bank entered into
another security agreement with Mulder for the purpose of securing all swine and their
young, their products and produce, and all feed produced in the farming operation.
Gov't Ex. 12. On May 7, 1990, the bank entered into a third security agreement with
Mulder which covered inventory, equipment, farm products, accounts, instruments,
documents, chattel paper and other payments, and general intangibles. Gov't Ex. 15.
On August 3, 1990, the bank loaned Mulder $50,000.00 at an annual interest rate
of 12.5 percent for renewal of notes, feed, and the balance of the acreage. Gov't Ex.
17. The bank secured the note by a security agreement dated May 7, 1990. On August
31, 1990, the bank loaned Mulder $12,000.00 for the purchase of seventeen heifers and
for feed. Gov't Ex. 13. The bank secured this loan by security agreements dated May
31, 1989, October 11, 1989, and May 7, 1990.
On February 6, 1991, Moore completed another financial statement on Mulder
which Mulder signed. Gov't Ex. 18. The financial statement lists farm real estate with
a value of $93,500.00. Schedule A lists two owned properties -- a ten-acre property
known as Thompson farm valued at $17,000,00 and a fifteen-acre property known as
Hollywood Acres valued at $76,500.00. The liabilities section of the financial
statement references no debt owing to Krog.
The bank generated a computerized commercial review spreadsheet on Mulder
dated May 16, 1991. Def. Ex. B. Under current assets, the spreadsheet contains a zero
value for the homestead, a land value of $16,000.00, and an improvements value of
$77,500.00. On June 21, 1991, the bank extended Mulder a line of credit in the amount
of $165,000.00. Gov't Ex. 20. The bank determined that the existing collateral for the
line of credit remained adequate. The bank secured its line of credit by the security
agreement signed by Mulder on May 7, 1990.
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Mulder signed another financial statement for the bank on December 3, 1991.
The financial statement listed two fixed real estate properties -- a fifteen-acre home
farm site valued at $80,000.00 and a ten-acre site valued at $50,000.00. The financial
statement did not identify a liability to Krog. Gov't Ex. 21. On February 26, 1992, the
bank loaned Mulder $60,000.00. Gov't Ex. 22. The bank secured its promissory note
by a real estate mortgage dated February 23, 1992, and a security agreement dated May
7, 1990. Mulder gave the bank a mortgage on the fifteen-acre building site owned by
Krog. Gov't Ex. 5. Moore testified that the bank did not verify ownership of the
mortgaged property prior to making the loan to Mulder. Tr. 91:7-8.
On July 31, 1992, Moore wrote Jerry Remund, a certified appraiser, requesting
an appraisal on the dairy acreage. Def. Ex. D. Remund prepared an appraisal report
as of August 15, 1992, and appraised the acreage at an appraised value of $41,000.00.
Def. Ex. E. The appraised value was lower than any value recorded on Mulder’s
financial statements. The appraisal contained no title search and did not identify the
property owner of record.
Mulder provided the bank with a signed financial statement dated August 14,
1992, prepared by an outside source. Gov't Ex. 23. The financial statement listed two
long-term farm assets -- a fifteen acre farmstead home valued at $100,000.00 and a ten-
acre Thompson’s dairy farm valued at $83,000.00. The financial statement identified
no liability owing to Krog.
On November 13, 1992, Mulder signed a promissory note prepared by the bank
in the amount of $145,000.00 for the renewal of outstanding notes. Gov't Ex. 24. The
bank secured the note by a security agreement dated May 7, 1990, and a dairy
assignment dated November 13, 1992. In February 1993, Mulder presented the bank
with a signed financial statement prepared by an outside source. Gov't Ex. 25. The
balance sheet listed long-term farm assets of buildings and improvements totaling
$210,500.00.
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The bank prepared another promissory note in the amount of $10,000.00 for
Mulder on March 24, 1993, which was not signed by Mulder. Gov't Ex. 26. The bank
secured the promissory note by a security agreement dated May 7, 1990, and an
assignment of a certificate of deposit. On June 21, 1993, Moore prepared a financial
statement on Mulder which he signed. Gov't Ex. 27. This financial statement listed
two long-term or fixed assets -- a ten-acre dairy site valued at $100,000.00 and a
fifteen-acre building site valued at $110,500.00.
On June 21, 1993, the bank prepared a promissory noted in the amount of
$141,850.17 secured by security agreements dated May 7, 1990, and November 13,
1990. The promissory note was not signed by Mulder. Gov't Ex. 28. On October 12,
1993, the bank prepared two promissory notes in the amounts of $137,000.00 and
$10,000.00. Gov't Exs. 29 & 30. These promissory notes were also not signed by
Mulder.
Glenn Krog testified that in June 1993, he discovered that the bank had taken
a mortgage on his acreage. Tr. 55:7-11. In June 1993, his attorney notified the bank
by letter that it had taken a mortgage on Krog’s property. Tr. 56:2-4. In December
1993, Moore received documents from Krog evidencing Mulder’s indebtedness to
Krog. Gov't Exs. 7-8.
In December 1993, Mulder presented Moore with a financial balance sheet
prepared by an outside source. Gov't Ex. 31. The financial statement listed two long-
term farm assets, a dairy valued at $100,000.00 and a home place valued at
$110,500.00. The balance sheet, dated December 3, 1993, was not signed by Mulder.
As of December 1993, Mulder owed the bank $204,736.00 on two promissory notes.
Tr. 107:23. Moore testified that the bank ultimately wrote off $132,000.00 in bad loans
to Mulder. Tr. 108:10-11.
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The indictment charges that from on or about February 6, 1991, and ending on
or about December 3, 1993, Mulder knowingly devised a scheme and artifice to
defraud the Corn Exchange Bank of Elkton, South Dakota, to obtain moneys, funds,
credits, and assets owned by means of false and fraudulent representations. The case
was tried to a jury which found the defendant guilty of one count of bank fraud in
violation of 18 U.S.C. § 1344.
II. DISCUSSION
On appeal, Mulder makes several challenges to his conviction and sentence.
Through his counsel, Mulder contends that (1) the district court erred in excluding a
financial statement of Mulder’s dated October 18, 1991, (2) the district court erred in
denying his motion for new trial, (3) the district court failed to depart downward
pursuant to U.S.C.G. § 5K2.0, and (4) the district court erred in excluding testimony
of a defense witness. We consider these arguments in turn.
Mulder first challenges the district court’s exclusion of Def. Ex. C, a financial
statement on Mulder dated October 18, 1991. Defense counsel first introduced Exhibit
C during the cross-examination of Marvin Moore, a Vice President and commercial
lender at Corn Exchange Bank. The document titled “Financial Statement and Loan
Application” was prepared by Russell Bank on October 18, 1991, and signed by
Mulder. The financial statement listed two properties under the category “Fixed
Assets” -- a fifteen-acre building site valued at $80,000.00 and a ten-acre building site
valued at $50,000.00 for a total fixed asset value of $130,000.00. Below “Fixed
Assets” is a category “Rented Land” that records two properties -- a fifteen-acre
building site and a ten-acre building site.
On cross-examination of Marvin Moore, Mulder’s counsel established that
Exhibit C had been supplied to the bank by the Russell Bank and that the financial
statement was contained in the bank's lending file on Joe Mulder. Tr. 123:16-23. The
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government objected to its admission, and the Court took the exhibit under advisement.
Tr. 124:4-15. Following the jury instruction conference, the district court heard
arguments on the admissibility of Defense Exhibit C. Tr. 156:10-25; 157:1-25; 158:1-
20. Defense counsel argued that the exhibit was both relevant and crucial to Mulder’s
good faith defense because Exhibit C supported Mulder’s contention that he advised
the bank that he rented the fifteen-acre building site. Tr. 156:13-19, 23-25; 157:1-4.
The government objected to Exhibit C because it was not one of the financial
statements relied on by the bank and was not relevant to the charges in the case. Tr.
158:7-11. The district court determined that Exhibit C was “internally inconsistent,”
Tr. 158:13-15, was clearly erroneous in listing the ten-acre building site as rented, and
was highlighted to divert the jury’s attention away from the valuations contained in the
financial statement. Tr. 158:15-19. Based on these findings, the district court excluded
Exhibit C.
On appeal, the defendant argues that the district court abused its discretion in
excluding Exhibit C. The defendant contends that Exhibit C is documentary evidence
probative of Mulder’s contention that he was renting the farmstead, probative of his
credibility and his good faith defense. Mulder also claims that Exhibit C affects the
outcome of the action, because a prima facie element of the government’s case was
Mulder’s representations relating to ownership of the fifteen-acre building site.
Relevant testimony is assumed admissible, Fed. R. Evid. 402, unless its
probative value is “substantially outweighed” by the possibility of unfair prejudice. Fed.
R. Evid. 403. Once a party has demonstrated the relevance and probative value of the
evidence, the role of the district court is simply to determine whether admission of the
exhibit would create an “undue tendency to suggest decision on an improper basis.”
Notes of Advisory Committee, Fed. R. Evid. 403. A district court may exclude
relevant evidence if the probative value of the evidence is substantially outweighed by
the danger of unfair prejudice. Fed. R. Evid. 403. A court of appeals gives broad
deference to a district court’s determinations under Rules 401-403 of the Federal Rules
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of Evidence. United States v. Holmes, 822 F.2d 802, 806 (8th Cir. 1987). An appeals
court does not reweigh the evidence, but determines only whether the district court
abused its discretion in excluding the evidence.
Id. (citing United States v. Derring,
592 F.2d 1003, 1007 (8th Cir. 1979)).
We conclude that the district court abused its discretion in excluding Exhibit C.
We agree that Exhibit C, which was in the bank’s possession and contained in the
defendant’s lending file, was relevant to the requisite element of intent to defraud.
Exhibit C was also probative of the defendant’s good faith defense. Good faith
constitutes a complete affirmative defense to a charge of fraudulent intent. Willis v.
United States, 87 F.3d 1004, 1008 (8th Cir. 1996). Moreover, Exhibit C was not
unfairly prejudicial to the government. During its case in chief, the government offered
three financial statements prepared by outside sources. Gov't Exs. 23, 25 and 31.
Although Exhibit C can be construed as internally inconsistent, Mulder should have
been allowed an opportunity to explain the inconsistencies to the jury. Because
Mulder’s intent to defraud was a material issue at trial, we conclude that the district
court’s exclusion of Exhibit C constituted reversible error, and we remand for a new
trial.
Inasmuch as this case requires a retrial, we consider the defendant’s other
evidentiary claim that the district court erred in excluding evidence concerning the
routine practices of Marvin Moore in handling financial statements. “We review the
evidentiary rulings of a district court only for abuses of discretion, and will reverse only
when an improper evidentiary ruling affects the substantial rights of the defendant or
when we believe that the error has had more than a slight influence on the verdict.”
United States v. Ballew, 40 F.3d 936, 941 (8th Cir. 1994) (citations omitted).
The defendant contends that pursuant to Rule 406 of the Federal Rules of
Evidence, Mr. Dagel’s testimony was admissible as bearing on Marvin Moore’s routine
practice in handling financial statements and for purposes of impeachment.
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Following an offer of proof, the district judge excluded the testimony. After carefully
reviewing the testimony of Marvin Moore, we conclude that the District Court did not
abuse its discretion when it excluded the evidence. The issue at trial was whether
Mulder intentionally defrauded the bank by knowingly making false representations for
the purpose of obtaining loan monies. The proffered testimony of Rex Dagel on the
routine practice of Marvin Moore in handling financial statements at the bank was not
relevant to this issue. United States v. Elliott, 89 F.3d 1360, 1369 (8th Cir. 1996), cert
denied, ____ U.S. ____,
117 S. Ct. 963 (1997).
Dagel’s testimony may have been admissible for purposes of impeachment.
However, no evidence was elicited from Marvin Moore concerning either his routine
practice, or his conduct in preparing the loan documents for the defendant. The issue
of Moore’s routine practice was not squarely presented to the trial court. Hence, the
proffered testimony of Rex Dagel related to a peripheral matter on which the admission
of extrinsic evidence is subject to the sound discretion of the trial court. United States
v. Johnson, 968 F.2d 765, 766 (8th Cir. 1992). Because Rule 608(b) of the Federal
Rules of Evidence admonishes against the introduction of extrinsic evidence, we
conclude that the district court did not abuse its discretion when it excluded the
proffered testimony of Mr. Dagel.
In light of our disposition above, we need not address the defendant’s remaining
assignment of errors .
III. CONCLUSION
We reverse and remand this case for a new trial with the questioned evidence,
if offered, to be admitted or excluded in accordance with this opinion.
WOLLMAN, Circuit Judge, concurring and dissenting.
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I concur in that portion of the court’s opinion which holds that the district court
did not err in excluding testimony concerning Moore’s practices in handling financial
statements.
I respectfully disagree with the court’s holding that the district court abused its
discretion in excluding Exhibit C. If this case presented a close question on the
sufficiency of the evidence, I might well agree that Mulder suffered prejudice as a
result of the district court’s ruling. When viewed in the light of the overall strength of
the government’s case, however, Exhibit C’s probative value would have been so slight
that its exclusion does not undermine my confidence in the verdict. As the government
points out, Exhibit C was prepared by a bank in Russell, Minnesota, and not by Moore.
Moreover, five of the six financial statements submitted by Mulder to Corn Exchange
Bank were dated after October 18, 1991, the date shown on Exhibit C.
At best, then, Exhibit C would have constituted a straw floating on the massive
sea of evidence against Mulder. Thus, the district court’s error in excluding the exhibit,
if error at all, was harmless.
I would affirm the conviction.
A true copy.
ATTEST:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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