RICHARD G. KOPF, District Judge.
The plaintiff, LOL Finance Company ("LOLFC" or "LOL"), claims (1) that the defendants, Paul Johnson & Sons Cattle Co., Inc. ("PJSCC"), Robert P. Johnson ("Johnson"), and Keri J. Maloley ("Maloley"), converted cattle and proceeds from sales of cattle in which LOLFC held a security interest; (2) that sales proceeds were also converted by the defendant, First National Bank of Omaha ("FNBO"); (3) that all of the defendants
PJSCC claims in a third-party complaint that the owners of the cattle, Maverick Feeders, Inc. ("Maverick"), and Shon and Julie Sawyer (collectively, "the Sawyers"), have a contingent liability for feed bills and the cost of defending this action if LOLFC prevails on its claims. See Third-Party Complaint (filing 26). No motion has been filed with respect to these contingent claims.
Maverick and the Sawyers claim (1) that PJSCC breached its contract to custom feed the cattle; (2) that the defendants converted the cattle and sales proceeds; (3) that PJSCC and Johnson committed fraud and deceit; and (4) that the defendants conspired to convert the cattle and proceeds. See Answer to Third-Party Complaint, Counterclaim and Cross-Claim (filing 40) and Amended Counterclaim and Cross-Claim (filing 204).
PJSSC, Johnson, and Maloley have joined in filing a motion for summary judgment (filing 165) concerning all claims alleged against them in LOLFC's amended complaint and in the counterclaim and cross-claims of Maverick and the Sawyers. These defendants argue that LOLFC does not have a perfected security interest in the cattle and proceeds because the collateral description in its security agreement and financing statement is insufficient. PJSSC also claims to have a prior security interest. No argument is made regarding
FNBO has filed three separate motions regarding the claims for conversion and conspiracy alleged in counts 2 and 3 of LOLFC's amended complaint and counts 2 and 4 of Maverick and the Sawyers' cross-claim. See Defendant FNBO's Motion for Summary Judgment on Claims Asserted by Plaintiff LOL Finance Co. (filing 168), Motion for Summary Judgment on Claims Asserted by Third-Party Defendant Maverick Feeders, Inc. (filing 169), and Motion to Dismiss Maverick Feeders, Inc.'s Crossclaim (filing 206).
FNBO's first motion for summary judgment will be granted in part and denied in part. With respect to count 2 of LOLFC's amended complaint, the motion will be granted insofar as it is claimed that FNBO converted funds deposited in PJSCC's checking account by applying the funds to pay down PJSCC's loans. The motion will be denied, however, to the extent it is alleged that FNBO aided and abetted the conversion committed by PJSCC. The motion also will be denied with respect to count 3 of LOLFC's amended complaint (conspiracy claim). Because Maverick and the Sawyers filed an amended pleading with leave of court after FNBO filed the second motion for summary judgment, that motion is technically moot.
FNBO's motions for summary judgment were filed on September 24, 2010. Maverick and the Sawyers filed an opposing brief and index of evidence on September 30, 2010. Their amended counterclaim and cross-claim was filed on November 3, 2010. FNBO's motion to dismiss the amended pleading was filed on November 12, 2010. It reads, in part:
(Filing 206, at 1-2.)
On November 22, 2010, Maverick filed a brief in opposition to the motion to dismiss, stating that it "resists the motion on the grounds and for the reasons set forth in the resistance to the summary judgment motion (Dkt. # 200) and record citations therein, . . . ." (Filing 218, at 1-2.)
As requested by FNBO, the Rule 12(b)(6) motion to dismiss will be treated as a Rule 56 motion for summary judgment. See Fed.R.Civ.P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion."). Because the issues presented by the motion to dismiss are identical to those presented by the previously filed motion for summary judgment, and because Maverick and the Sawyers have fully responded to FNBO's arguments and evidence, I conclude that the motion may be considered under Rule 12(d) without further notice. See Riehm v. Engelking, 538 F.3d 952, 962 n. 5 (8th Cir.2008) (plaintiffs had constructive notice of district court's treatment of defendants' motion to dismiss as motion for summary judgment where plaintiffs introduced and relied on material outside complaint); Madewell v. Downs, 68 F.3d 1030, 1048 (8th Cir.1995) (lack of formal notice that district court will treat Rule 12(b)(6) motion to dismiss as motion for summary judgment is harmless where nonmoving party has submitted evidence in opposition to motion).
PJSCC, Johnson, and Maloley also filed their motion for summary judgment in advance of Maverick's amended pleading, on September 16, 2010. The motion is now moot insofar as it requests that "the Court render summary judgment in favor of each [the defendants], individually, ... on all third party claims of the Third Party Defendants against them, or any of them." (Filing 165, at 1.) On November 29, 2010, PJSCC, Johnson, and Maloley responded to Maverick and the Sawyers' amended counterclaim and cross-claim by filing an "Answer [to] Amended Counterclaim of Maverick et al Against PJSCC And Answer to Cross Claims Against Defendants (#204) And Fed.R. Civ. P. 12b Motion." (Filing 221, at 1.) This filing purportedly includes both an answer and a Rule 12(b)(6) motion to dismiss, but the defendants state in a footnote that "[n]o separate Brief is filed with this Motion and no ruling prior to trial is requested. The Motion is filed as a prelude to trial as a
The purported motion to dismiss is a nullity and will not be considered. Under the Federal Rules of Civil Procedure, a motion to dismiss for failure to state a claim upon which relief can be granted "must be made before pleading if a responsive pleading is allowed." Fed.R.Civ.P. 12(b).
The brief filed by PJSCC, Johnson, and Maloley in support of their motion for summary judgment fails to comply with Nebraska Civil Rule 56.1(a). This local rule provides that a party moving for summary judgment "must include in the brief in support of the summary judgment motion a separate statement of material facts about which the moving party contends there is no genuine issue to be tried and that entitles the moving party to judgment as a matter of law. Failure to submit a statement of facts may be grounds to deny the motion." NECivR 56.1(a)(1) (emphasis in original). "The statement of facts should consist of short numbered paragraphs, each containing pinpoint references to affidavits, pleadings, discovery responses, deposition testimony (by page and line), or other materials that support the material facts stated in the paragraph.... The statement must not contain legal conclusions. Failure to provide citations to the exact locations in the record supporting the factual allegations may be grounds to deny the motion." NECivR 56.1(a)(2) (emphasis in original).
Although the defendants' supporting brief purports to contain a 4-paragraph "statement of uncontroverted facts," this statement generally consists of arguments and legal conclusions, which are not sufficient to establish that summary judgment should be entered for the defendants.
The brief filed by PJSCC, Johnson, and Maloley in opposition to LOLFC's motion for summary judgment fails to comply with Nebraska Civil Rule 56.1(b). This local rule provides that "[t]he party opposing a summary judgment motion should include in its brief a concise response to the moving party's statement of material
LOLFC satisfied the requirements of Nebraska Civil Rule 56.1(a) by setting out in its supporting brief a 124-paragraph statement of material facts that includes pinpoint references to the record. PJSCC, Johnson, and Maloley have not made a concise response to this statement in their opposing brief. Instead, the defendants have responded with their own 22-paragraph statement of material facts (which they failed to provide in support of their cross-motion for summary judgment). While I will give due consideration to any additional facts that are properly referenced in the defendants' statement, see Jenkins v. Winter, 540 F.3d 742, 747 (8th Cir.2008) (holding that district court erred in not considering statement of facts presented in opposition to summary judgment motion), LOLFC's statement of material facts, to the extent it is supported by the record, will be deemed admitted by PJSCC, Johnson, and Maloley because these facts are not controverted by the defendants' response.
By contrast, FNBO has complied with NECivR 56.1(b) by responding to each paragraph of LOLFC's statement of material facts with appropriate references to the record. FNBO has also complied with NECivR 56.1(a) by providing a 24-paragraph statement of material facts in support of its motion for summary judgment. Finally, LOLFC and Maverick have complied with NECivR 56.1(b) in responding to FNBO's statement of material facts.
Based upon my examination of the record and careful review of the statement of material facts as set forth in LOLFC's brief in support of its motion for summary judgment (filing 154, at 3-29), and FNBO's response in its opposing brief (filing 190, at 3-18), and of the statement of material facts as set forth in FNBO's brief in support of its motion for summary judgment (filing 175, at 4-10), and the responses of LOLFC (filing 182, at 2-8) and Maverick and the Sawyers (filing 200, at 2), I find there is no genuine dispute regarding the following facts:
Plaintiff LOL Finance Company ("LOLFC" or "LOL") is a Minnesota corporation
LOLFC provides financing for cattle producers in cooperation with its sister company, Land O'Lakes Purina Feed LLC ("LOLPF"), doing business as 4-Square Cattle Services ("4-Square"). Both LOLFC and LOLPF are subsidiaries of Land O'Lakes, Inc. (McKay Aff. [filing 155-2] ¶ 4; Sauder
Defendant Paul Johnson & Sons Cattle Co., Inc. ("PJSCC"), is a Nebraska corporation with its principal place of business located in Nebraska. (Amended Complaint [filing 19] ¶ 2; PJSCC Answer [filing 25] ¶ 2; FNBO Answer [filing 37] ¶ 2.) PJSCC operates a cattle feedlot near Bertrand, Nebraska, where it feeds cattle for its own account and on a custom basis for others. (Johnson Depo. [filing 156-8] at 7:24-8:8; Johnson Decl. [filing 167-2] ¶ 3.)
Defendant Robert P. Johnson ("Johnson") is a citizen of the State of Nebraska. (Amended Complaint [filing 19] ¶ 4; PJSCC Answer [filing 25] ¶ 4; FNBO Answer [filing 37] ¶ 4.) Johnson is the chief executive officer and president of PJSCC. (Johnson Decl. [filing 167-2] ¶ 2.)
Defendant Keri J. Maloley ("Maloley") is a citizen of the State of Nebraska. (Amended Complaint [filing 19] ¶ 5; PJSCC Answer [filing 25] ¶ 5; FNBO Answer [filing 37] ¶ 5.) Maloley is employed by PJSCC as an office manager and bookkeeper. (Maloley Decl. [filing 167-4] ¶ 2.)
Defendant First National Bank of Omaha ("FNBO") is a national banking association with its principal place of business located in Omaha, Nebraska. (Amended Complaint [filing 19] ¶ 3; FNBO Answer [filing 37] ¶ 3; PJSCC Answer [filing 25] ¶ 3.) At all relevant times, PJSCC was a deposit and loan customer of FNBO. (Kalkowski
Third-Party Defendant Maverick Feeders, Inc. ("Maverick") is a South Dakota corporation with its principal place of business in South Dakota. (Amended Complaint [filing 19] ¶ 11; PJSCC Answer [filing 25] ¶ 11; FNBO Answer [filing 37] ¶ 11.) Maverick is owned by Third-Party Defendants Shon D. Sawyer and Julie K. Sawyer (collectively, "the Sawyers"), who have resided on a farm near Hurley, South Dakota, continuously since approximately 1995. (Sawyer Aff.
In November 2002, Maverick and the Sawyers retained 4-Square to provide them with cattle-consulting services and to assist them in obtaining financing from LOLFC to purchase and raise cattle. To implement their business relationship, Maverick and the Sawyers entered into a Cattle Consulting Agreement with 4-Square on November 20, 2002. (Sawyer Aff. [filing 155-1] ¶ 5; Sauder Aff. [filing 155-16] ¶ 4 and Ex. A [filing 155-17].) Pursuant to the terms of the Cattle Consulting Agreement, 4-Square assisted Maverick and the Sawyers in obtaining financing from LOLFC. (Sawyer Aff. [filing 155-1] ¶ 6; Sauder Aff. [filing 155-16] ¶ 5; McKay Aff. [filing 155-2] ¶ 7.)
On November 22, 2002, LOLFC provided Maverick and the Sawyers with a revolving line of credit in the principal amount of $2 million to purchase and raise cattle. (Sawyer Aff. [filing 155-1] ¶ 7; McKay Aff. [filing 155-2] ¶ 8 and Ex. A [filing 155-3].) To secure the revolving line of credit, Maverick and the Sawyers also entered into a Commercial Security Agreement with LOLFC on November 22, 2002. (Sawyer Aff. [filing 155-1] ¶ 8; McKay Aff. [filing 155-2] ¶ 9 and Ex. B [filing 155-4].) The Commercial Security Agreement describes the collateral as follows:
(Commercial Security Agreement (McKay Aff. Ex. B) [filing 155-4] at 1.)
LOLFC filed a financing statement in both Minnesota and South Dakota, on February 27 and 28, 2003, respectively. (McKay Aff. [filing 155-2] ¶ 10 and Ex. C [filing 155-5].) The financing statements describe the collateral as follows:
The revolving line of credit was renewed and extended on multiple occasions from 2002 through 2009. (Sawyer Aff. [filing 155-1] ¶ 9; McKay Aff. [filing 155-2] ¶ 15; Sauder Aff. [filing 155-16] ¶ 6.)
Since approximately 2004, Maverick has on several occasions delivered cattle to PJSCC's feedlot to be fed and raised to market weight. (Johnson Depo. [filing 156-8] at 18:14-17, 22:24-23:10; Johnson Decl. [filing 174-17] ¶ 4; Sawyer Depo. [filing 174-12] at 84:22-24.) Maverick consented to PJSCC's selling of these cattle at market. (Sawyer Aff. [filing 174-14] ¶ 14; Johnson Depo. [filing 156-8] at 18:14-17, 22:24-23:10.)
On February 22, 2006, PJSCC filed a financing statement with the Nebraska Secretary of State identifying itself as the "creditor" and Maverick as the "debtor." The collateral is described as "all livestock." (Depo. Ex. 1 (Miesen
On June 30, 2006, PJSCC or FNBO filed a financing statement with the South Dakota Secretary of State identifying FNBO as the "creditor" and Maverick as the "debtor." The collateral is described as all of Maverick's "assets now or hereafter in the care of [PJSCC]." (Depo. Ex. 2 (Miesen Aff. Ex. O) [filing 156-16].) FNBO terminated the June 30, 2006, financing statement on January 29, 2007. (Miesen Aff. Exs. O, P [filings 156-16, 156-17]; Kalkowski Depo. [filing 156-12] at 41:14-19.)
On January 26, 2007, FNBO filed a financing statement with the South Dakota Secretary of State identifying itself as the "creditor" and Maverick as the "debtor." The collateral is described as "[a]ll of [Maverick's] assets now or hereafter in the care or possession of [PJSCC]...." (Depo. Ex. 4 (Miesen Aff. Ex. R) [filing 156-19].)
During 2007, PJSCC agreed to provide financing to Maverick to purchase and raise certain cattle. PJSCC obtained the funds to finance the cattle under its "customer finance" credit line with FNBO. (Kalkowski Depo. [filing 156-12] at 54:17-56:3.)
On November 12, 2007, PJSCC and Maverick entered into a contract identified as a "LOC Master Promissory Note and Security Agreement/Margin." Under the terms of the security agreement, Maverick granted PJSCC a security interest in "[a]ll of [Maverick's] livestock, including cattle, on [PJSCC's] feedlot...." (Depo. Ex. 3 (Miesen Aff. Ex. Q) [filing 156-18].) On the same day it was signed, PJSCC assigned all of its rights under the Security Agreement to FNBO. (Depo. Ex. 3 [filing 156-18]; Johnson Depo. [filing 156-8] at 31:18-32:15; Kalkowski Depo. [filing 156-12] at 43:12-18.)
The cattle financed by PJSCC/FNBO did not perform well. PJSCC claims that Maverick incurred losses on the cattle ranging from approximately $600,000.00 to $960,000.00. (Johnson Depo. [filing 156-8] at 266:3-10; Kalkowski Depo. [filing 156-12] at 54:17-56:16.)
From November 7, 2008, through January 19, 2009, Maverick and the Sawyers purchased 3,504 head of cattle from Tri-County Livestock Exchange, Inc. ("Tri-County"), in Motley, Minnesota. (Sawyer
To facilitate the purchases, Tri-County sent copies of the invoices (referred to as "Buyer Recaps") to 4-Square. (Sawyer Aff. [filing 155-1] ¶ 12; Sauder Aff. [filing 155-16] ¶ 9 and Ex. B [filing 155-18]; McKay Aff. [filing 155-2] ¶ 19.) Upon receipt of the Buyer Recaps, 4-Square prepared Cattle Receipt and Evaluation Agreements for each Buyer Recap. The Cattle Receipt and Evaluation Agreements confirmed the placement of the cattle into the 4-Square consulting program. (Sauder Aff. [filing 155-16] ¶ 10 and Ex. C [filing 155-19].)
4-Square forwarded the Buyer Recaps to LOLFC with written requests to fund the purchases under the revolving line of credit. (Sauder Aff. [filing 155-16] ¶ 11 and Ex. D [filing 155-20]; McKay Aff. [filing 155-2] ¶ 19.) Upon receipt of the funding requests, LOLFC wired funds advanced under the revolving line of credit to purchase the cattle to Tri-County's bank, First Integrity Bank in Staples, Minnesota. (Sawyer Aff. [filing 155-1] ¶ 12; McKay Aff. [filing 155-2] ¶ 19; Sauder Aff. [filing 155-16] ¶ 11.)
On January 8, 2009, Maverick and the Sawyers entered into a supplemental Commercial Security Agreement with LOLFC. This agreement contains the same collateral description as before. (McKay Aff. [filing 155-2] ¶ 20 and Ex. F [filing 155-8].) On that same day, Maverick and the Sawyers entered into a supplemental Cattle Consulting Agreement with 4-Square. (Sawyer Aff. [filing 155-1] ¶ 11; Sauder Aff. [filing 155-16] ¶ 12 and Ex. E [filing 155-21].)
During early 2009, Maverick and the Sawyers agreed to deliver some of the cattle they purchased from Tri-County to PJSCC's feedlot to be raised to market weight. (Sawyer Aff. [filing 155-1] ¶ 14.)
Unbeknownst to Maverick and the Sawyers, PJSCC intended after selling the cattle in 2009 to apply the sale proceeds toward payment of the prior debt. (Johnson Depo. [filing 156-8] at 68:18-69:10, 76:18-77:5, 78:13-16; Kalkowski Depo. [filing
Chris Kalkowski and FNBO's attorney, Richard (Rick) Myers, participated in a conference call with Johnson on March 31, 2009. They discussed whether PJSCC could exercise a right of setoff against 2,142 head of cattle that Maverick had in the feedyard, and whether FNBO would provide financing for the cattle. (Depo. Ex. 53 (Miesen Aff. Ex. W) [filing 156-24] at 3; Kalkowski Depo. [filing 156-12] at 67:9-69:9; Johnson Supp. Depo. [filing 156-9] at 7:19-22, 9:12-25.) It was determined they would need to (a) confirm that Maverick owned the cattle; (b) conduct a lien search to confirm no other creditors had a lien against the cattle; (c) check Maverick's corporate status; and (d) check with Maverick's South Dakota bank, Campbell County Bank, to confirm it was not claiming a lien against the cattle. (Depo. Ex. 53 [filing 156-24] at 3); (Kalkowski Depo. [filing 156-12] at 68:25-69:16, 70:14-22, 71:8-74:19.)
FNBO had a lien search conducted in South Dakota, which revealed LOLFC's February 28, 2003 financing statement. (Kalkowski Depo. [filing 156-12] at 69:13-20, 112:2-18.) FNBO believed that LOLFC's security interest only applied to cattle located at a feedlot operated by 4-Square Cattle Services; it assumed the reference in the financing statement to "cattle consulting services" meant cattle feedlot services. (Kalkowski Depo. [filing 156-12] at 116:1-4, 12-14.) Neither FNBO nor PJSCC ever asked LOLFC or 4-Square for a copy of the Commercial Security Agreement or a copy of the Cattle Consulting Agreement or took any other measures to try to determine whether Maverick and the Sawyers' cattle and proceeds were subject to LOLFC's security interest. (Johnson Depo. [filing 156-8] at 74:9-75:10; Maloley Depo. [filing 156-10] at 79:1-25; Kalkowski Depo. [filing 156-12] at 118:20-120:11, 156:5-19, 161:8-11.)
During March and April 2009, Maverick and the Sawyers transferred 3,431 head of cattle (the "Maverick Cattle") to PJSCC's feedlot.
In late May or early June 2009, LOLFC learned that the Maverick Cattle had been
On June 4, 2009, LOLFC's Senior Loan Officer, Ronald C. McKay, called Johnson and informed him that LOLFC had a security interest in the Maverick Cattle and that 4-Square was helping Maverick and the Sawyers and LOLFC monitor and manage the cattle. (McKay Aff. [filing 155-2] ¶ 24; Johnson Depo. [filing 156-8] at 54:4-56:3.)
On June 5, 2009, after learning that FNBO was PJSCC's lender and had filed a financing statement with the South Dakota Secretary of State identifying Maverick as a debtor and cattle as collateral, LOLFC sent FNBO a proposed Subordination Agreement. (McKay Aff. [filing 155-2] ¶ 25 and Ex. H [filing 155-10]; Kalkowski Depo. [filing 156-12] at 141:8-143:10.)
Also on June 5, 2009, 4-Square's Financial Analyst, Michelle H. Sauder, contacted PJSCC's bookkeeper, Keri J. Maloley, and informed her that the Maverick Cattle were owned by Maverick and the Sawyers and financed by LOLFC. Sauder told Maloley that 4-Square would be monitoring and inspecting the Maverick Cattle for Maverick and the Sawyers and LOLFC. (Sauder Aff. [filing 155-16] ¶ 15 and Ex. H [filing 155-24]; Maloley Depo. [filing 156-10] at 55:7-56:21.)
Sauder also informed Maloley that 4-Square would be sending PJSCC ear tags bearing the 4-Square logo to be placed on the Maverick Cattle to identify them as 4-Square cattle. (Sauder Aff. [filing 155-16] ¶ 15; Maloley Depo. [filing 156-10] at 56:22-25.) That same day, Sauder ordered 4,000 ear tags from 4-Square's ear-tag supplier, Lextron Southeast. Lextron Southeast shipped the ear tags directly to PJSCC's feedlot. The ear tags arrived at PJSCC's feedlot on June 9, 2009. Maloley signed the receipt for the ear tags. (Sauder Aff. [filing 155-16] ¶ 16 and Exs. I, J [filings 155-11, 155-12]; Maloley Depo. [filing 156-10] at 57:1-58:5.) FNBO was aware that 4-Square sent the ear tags to PJSCC. (Kalkowski Depo. [filing 156-12] at 162:1-11, 305:5-11.) Johnson, Maloley and Kalkowski all understood that 4-Square sent the ear tags to PJSCC to identify the Maverick Cattle as 4-Square cattle. (Maloley Depo. [filing 156-10] at 59:22-25; Kalkowski Depo. [filing 156-12] at 163: 6-164:3; Johnson Depo. [filing 156-8] at 59:18-60:12.)
On June 16, 2009, McKay sent a letter to both PJSCC and FNBO notifying them that LOLFC had a "first lien" on the Maverick Cattle; that "the cattle are being managed for Maverick by Joe Varner of Tri-County Livestock"; and that "[t]he cattle are being monitored for LOL Finance Co. by 4-Square Cattle Services." (McKay Aff. [filing 155-2] ¶ 26 and Exs. I, J [filings 155-11, 155-12]; Johnson Depo. [filing 156-8] at 56:6-57:20; Kalkowski Depo. [filing 156-12] at 153:3-155:22.)
While the Maverick Cattle were at its feedlot, PJSCC provided 4-Square with monthly reports so that 4-Square could monitor the performance of the Maverick Cattle. (Sauder Aff. [filing 155-16] ¶ 19 and Exs. R-T [filings 155-34, 155-35, 155-36]; Maloley Depo. [filing 156-10] at 60:1-67:1; Johnson Depo. [filing 156-8] at 65:13-66:5; Kalkowski Depo. [filing 156-12] at 164:22-165:1, 305:16-19.)
Johnson decided to artificially inflate Maverick and the Sawyers' feed bills with fictitious "feed adjustments." (Depo. Exs. 6-11 (Miesen Aff. Ex. B [filing 156-3]).) PJSCC added total "feed adjustments" to Maverick and the Sawyers' bills for the Maverick Cattle in the amount of $307,167.66. (Depo. Exs. 6-11 (Miesen Aff. Ex. B [filing 156-3]); Johnson Depo. [filing 156-8] at 222:2-13.) Johnson admitted during his deposition that the purported "feed adjustments" were simply "arbitrary numbers" that he made up to extract extra amounts from Maverick and the Sawyers, in part to pay the prior debt. (Johnson Depo. [filing 156-8] at 222:9-224:5, 195:10-25, 204:7-205:10, 206:20-207:1.)
Maloley, who prepared the feed bills, confirmed Johnson's testimony.
During the summer of 2009, Kalkowski and Myers participated in conference calls with Johnson "to troubleshoot as to how to recover the [Maverick] debt." (Kalkowski Depo. [filing 156-12] at 241:23-243:9; Supp. Johnson Depo. [filing 156-9] at 30:1-10.) Kalkowski testified, however, that he left it up to Johnson to decide what to do with respect to the Maverick debt. (Kalkowski Depo. [filing 156-12] at 242:21-25.)
In September 2009, PJSCC began selling the Maverick Cattle to meat-packing companies. (Sawyer Aff. [filing 155-1] ¶ 16; Depo. Exs. 6-11 (Miesen Aff. Ex. B [filing 156-3]).) PJSCC did not turn any of the proceeds from the sale of the Maverick Cattle over to Maverick and the Sawyers or LOLFC. (Johnson Depo. [filing 156-8] at 268:4-10; Sawyer Aff. [filing 155-1] ¶ 16; McKay Aff. [filing 155-2] ¶ 30.) The proceeds from the sale of the Maverick Cattle were deposited into PJSCC's business checking account with FNBO. (Maloley Depo. [filing 156-10] at 108:19-109:25, 110:1-2; Kalkowski Depo. [filing 156-12] at 196:15-18.)
At the close of each banking day, funds in PJSCC's business checking account were automatically swept into a special clearing account identified as the "central account." (Kalkowski Depo. [filing 156-12] at 214:1-215:9; Supp. Kalkowski Depo. [filing
Pursuant to a faxed request from Maloley, Kalkowski reversed a payment to PJSCC's operating line of credit and instead applied the funds from the central account to PJSCC's "customer finance" credit line for "payment on [a] receivable from Maverick." (Kalkowski Depo. [filing 156-12] at 226:1-231:14; Depo. Ex. 52 (Miesen Aff. Ex. V) [filing 156-23] at 2.)
In early October 2009, McKay spoke with Johnson on the telephone. During this conversation, Johnson stated, for the first time, that he was planning to use the proceeds from the sale of the Maverick Cattle to pay the prior debt. Johnson further claimed that PJSCC's banker, Kalkowski, was making him use the proceeds to pay the prior debt. (McKay Aff. [filing 155-2] ¶ 30.) McKay objected to Johnson using any of the proceeds to pay the prior debt and reminded Johnson that LOLFC held a perfected security interest in the Maverick Cattle and proceeds. (McKay Aff. [filing 155-2] ¶ 30.) After speaking with Johnson, McKay contacted Kalkowski. McKay relayed to Kalkowski the substance of his telephone conversation with Johnson. Kalkowski denied that FNBO was forcing Johnson to use the proceeds to pay the prior debt. (McKay Aff. [filing 155-2] ¶¶ 31 and 34 and Ex. L [filing 155-14] at 3.)
Several weeks passed and neither Maverick nor LOLFC received any proceeds from the sale of the Maverick Cattle. McKay called Johnson on the telephone on Friday, October 16, 2009, to inquire about the proceeds. During this conversation, Johnson acknowledged that he could not use the proceeds from the sale of the Maverick Cattle to pay the prior debt and promised to forward the proceeds, after deducting PJSCC's fees for feeding and caring for the Maverick Cattle, to LOLFC the following week.
On November 3, 2009, LOLFC commenced this action and filed a motion for a temporary restraining order to freeze the proceeds from the sale of the Maverick Cattle. (See filings 1, 8.) On November 5, 2009, with the consent of all of the parties, the court issued a temporary restraining order requiring, among other things, that proceeds from the sale of the remaining Maverick Cattle be deposited into an approved escrow account at FNBO's sister bank, First National Bank of Columbus, pending the disposition of this case on the merits. (See filing 18.)
Johnson testified that the proceeds from the sale of the Maverick Cattle that would be due to Maverick and the Sawyers, in the absence of any other claim, would be calculated as the total sales proceeds less PJSCC's fees, plus interest charged on those fees. (Johnson Depo. [filing 156-8] at 118:5-12.) The amount of sales proceeds, PJSCC's fees, and interest charged on those fees are all reflected on the face of closeout statements for the Maverick Cattle. (Depo. Exs. 6-11 (Miesen Aff. Ex. B) [filing 156-3].) The amounts shown are:
Lot Sales Proceeds Fees Interest 1996 $ 779,405.30 $ 372,740.19 $ 6,893.14 1997 $ 428,890.51 $ 224,566.92 $ 4,706.67 1999 $ 706,010.86 $ 342,646.21 $ 6,407.00 2000 $ 504,289.85 $ 247,795.18 $ 6,294.58 2005 $ 521,445.63 $ 283,175.91 $ 6,109.61 2006 $ 788,716.80 $ 410,930.96 $ 9,240.34 Total $3,728,758.95 $1,881,855.37 $39,651.34
(Depo. Exs. 6-11 (Miesen Aff. Ex. B) [filing 156-3].) Based upon these figures, the net proceeds due to Maverick and the Sawyers can be calculated as follows:
Total Sales Proceeds $3,728,758.95 Total Fees ($1,881,855.37) Total Interest ($ 39,651.34) Net Proceeds $1,807,252.24
The "Total Fees" referenced above include the fictitious "feed adjustments" PJSCC added to Maverick and the Sawyers' closeout statements. The amount of fictitious "feed adjustments" are:
Lot "Feed Adjustment" 1996 $ 56,746.64 1997 $ 37,473.32 1999 $ 58,535.72 2000 $ 38,384.52 2005 $ 47,099.52 2006 $ 68,927.94 Total $307,167.66
(Depo. Exs. 6-11 (Miesen Aff. Ex. B) [filing 156-3].) During her deposition, PJSCC's bookkeeper, Maloley, admitted that the proceeds reflected on two of the closeout statements were understated and that Maverick and the Sawyers were entitled to the following credits:
Lot Mistake Actual Difference 1999 $1,197.31 $12,479.55 $11,282.24 2006 $ 299.33 $ 1,039.96 $ 740.63 Total $12,022.87
(Maloley Depo. [filing 156-10] at 183:21-184:13, 188:1-189:25; Depo. Exs. 6-11 (Miesen Aff. Ex. B) [filing 156-3].) Adding back the fictitious "feed adjustments" and the credits conceded by Maloley results in total proceeds due to Maverick and the Sawyers as follows:
Net Proceeds $1,807,252.24 "Feed Adjustments" $ 307,167.66 Credits for Mistakes $ 12,022.87 Total $2,126,442.77
Proceeds in the principal amount of $630,290.28 have been deposited into the approved escrow account. (Miesen Aff. [filing 156-1] ¶ 4 and Ex. A [filing 156-2].) Defendants retained the remaining net proceeds in the amount of $1,496,152.49 ($2,126,442.77-$630,290.28). (Johnson Depo. [filing 156-8] at 268:4-10.) PJSCC concedes that at least $426,494.00 of the proceeds deposited into the approved escrow account belongs to Maverick and the Sawyers. (Johnson Depo. [filing 156-8] at 269:13-271:3.)
As of September 1, 2010, the following amounts were due to LOLFC under the revolving line of credit:
Principal $2,075,772.83 Interest $ 156,805.03 Total $2,232,577.86
(McKay Aff. [filing 155-2] ¶ 36 and Ex. M [filing 155-15].)
The business checking account into which PJSCC deposited the proceeds from the sale of Maverick Cattle was a deposit account in which FNBO held a security interest perfected by control. (Kalkowski Aff. [filing 174-1] ¶¶ 10, 18, 20-23) Neither LOL nor Maverick had control or ownership of this account. (Kalkowski Aff. [filing 174-1] ¶¶ 20, 21.) PJSCC drew funds from the account to pay costs and expenses incurred in operating its feedyard. (Maloley Depo. [filing 174-19] at 111:23-112:6; Johnson Depo. [filing 174-13] at 134:2-11.) PJSCC deposited proceeds derived from the sale of other cattle, including cattle owned by PJSCC, into this account. (Kalkowski Aff. [filing 174-1] ¶ 18.) LOL, Maverick, PJSCC, and FNBO never entered into a written agreement with regard to the disposition and use of the funds deposited by PJSCC into its demand deposit accounts held at FNBO. (Kalkowski Aff. [filing 174-1] ¶ 23.)
PJSCC was a borrower from FNBO on three separate promissory notes. One promissory note dated September 25, 2008 was for a principal amount of $350,000. A second note dated September 25, 2008 was for a principal amount of $3,000,000. A third note dated December 16, 2008 was for a principal amount of $6,000,000. All three of these promissory notes contained the following provision granting FNBO a right of setoff in all of PJSCC's accounts at FNBO:
(Kalkowski Aff. Exs. A, B, C [filings 174-2, 174-3, 174-4].)
As security for the sums advanced under the promissory notes identified above, PJSCC provided FNBO a security interest in all of PJSCC's accounts, including its deposit accounts held at FNBO. The security agreement provided, in part, as follows:
(Kalkowski Aff. Ex. D [filing 174-5].)
PJSCC's deposit accounts at FNBO are governed by a deposit account agreement, which during the relevant time period provided, in part, as follows:
(Kalkowski Aff. Ex. E [filing 174-6].)
As part of its banking relationship with PJSCC, FNBO provided treasury services to PJSCC. The treasury services provided by FNBO are set forth in the Terms and Conditions for Treasury Services ("Treasury Services Agreement"). (Kalkowski Aff. Ex. F [filing 174-7].) The terms of the Treasury Services Agreement called for a "sweep arrangement" in PJSCC's accounts held at FNBO. This arrangement required FNBO at the close of each banking day to determine whether the collected balance in PJSCC's deposit accounts held at FNBO were at their "target balance." If there were excess funds within PJSCC's deposit accounts held at FNBO at the close of a banking day, then FNBO was required to apply those funds to PJSCC's outstanding loan balance. If the funds within PJSCC's deposit accounts held at FNBO at the close of a banking day were below the "target balance," then FNBO was required to advance funds sufficient to meet the target balance from PJSCC's line of credit. (Kalkowski Aff. Ex. F [filing 174-7] § 31.)
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). In ruling on a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party, giving that party the benefit of all inferences that may be reasonably drawn from the evidence. See Dancy v. Hyster Co., 127 F.3d 649, 652-53 (8th Cir.1997). It is not the court's function to weigh evidence in the summary judgment record to determine the truth of any factual issue; the court merely determines whether there is evidence creating a genuine issue for trial. See Bell v. Conopco, Inc., 186 F.3d 1099, 1101 (8th Cir.1999).
The moving party bears the burden of showing there are no genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). However, "a party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.'" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)) (internal marks omitted).
"Tortious conversion is any distinct act of dominion wrongfully asserted over another's property in denial of or inconsistent with that person's rights." Zimmerman v. FirsTier Bank, N.A., 255 Neb. 410, 585 N.W.2d 445, 451 (1998). "The plaintiff must establish a right to immediate possession of the property at the time of the alleged conversion." Id. "In other words, `the essence of conversion is not acquisition by the wrongdoer, but the act of depriving the owner wrongfully of the property.'" Id., at 452 (quoting Terra Western Corp. v. Berry and Co., 207 Neb. 28, 295 N.W.2d 693, 696 (1980)). "[I]n an action for damages alleged to have been sustained by reason of the conversion of personal property, the plaintiff must recover, if at all, upon the strength of his own title and not upon the weakness of the title of the defendant." Allen v. Dealer Assistance,
There is no genuine dispute that Maverick and the Sawyers owned the 3,431 head of cattle that were delivered to PJSCC for custom feeding in 2009. FNBO contends there is uncertainty whether these were the cattle that were purchased from Tri-County with financing provided by LOLFC,
Under the Uniform Commercial Code, a security interest attaches to collateral, and is enforceable against the debtor and third parties with respect to the collateral, when three conditions have been met: (1) the debtor has signed a security agreement which contains a description of the collateral in question, including after-acquired collateral; (2) value has been given; and (3) the debtor has rights in the collateral. See Neb. UCC § 9-203(1); In re Damrow Cattle Co., Inc., 300 B.R. 479, 486 (Bkrtcy. D.Neb.2003). The defendants deny that the first condition was satisfied, and contend that the description of the collateral was insufficient.
The purpose of a collateral description in a security agreement is "evidentiary." Neb. UCC § 9-108 Official Comment 2. The test of sufficiency of a description under Section 9-108 "is that the description do the job assigned to it: Make possible the identification of the collateral described." Id. Revised Article 9 does not require an "exact and detailed" description. Id. A description of collateral "is sufficient, whether or not it is specific, if it reasonably identifies what is described." Neb. UCC. § 9-108(a). Examples of reasonable identification include descriptions of collateral by specific listing, category, a type of collateral defined in the Uniform Commercial Code, quantity, "computational or allocational formula or procedure," or "any other method, if the identity of the collateral is objectively determinable." Neb. UCC § 9-108(b).
In LOLFC's security agreement, the collateral is described as including "[a]ll of the cattle whether now owned or hereafter acquired by [Maverick and the Sawyers] and placed by [them] with 4-Square Cattle Management Services under a Cattle Consulting Agreement ... [and] all proceeds relating to any of the foregoing...." This description clearly is sufficient.
The defendants argue that the Maverick Cattle were not placed with 4-Square because they were placed with PJSCC. They contend "placed with" is a term of art in the cattle feeding industry which connotes a physical placement of cattle in a feedyard. However, 4-Square is not involved in the business of feeding cattle. It is undisputed that 4-Square's business simply is to provide consulting services to cattle producers. Consistent with the description of collateral in LOLFC's security agreement, the supplemental Cattle Consulting Agreement that was entered into on January 8, 2009, specified that it applied to "[a]ll Cattle placed with [4-Square] by [Maverick and the Sawyers] for participation in the Program not to exceed 5500 head at any one time." (Sauder Aff. Ex. E [filing 155-21] at 1 (emphasis supplied).) It was also specified that 4-Square's fees "shall be payable upon execution of this Agreement and placement of the Cattle in the Program." (Sauder Aff. Ex. E [filing 155-21] at 2, 7 (emphasis supplied).) I find no ambiguity in the collateral description, which reasonably identifies the Maverick Cattle.
Generally, "a financing statement must be filed to perfect all security interests and agricultural liens." Neb. UCC § 9-310(a). A financing statement is sufficient if it provides the names of the debtor and the secured party and "indicates the collateral covered by the financing statement." Neb. UCC § 9-502(a). "A financing statement sufficiently indicates the collateral that it covers if the financing statement provides ... a description of the collateral pursuant to section 9-108." Neb. UCC § 9-504. Because the financing statements filed by LOLFC describe the collateral using language identical to the collateral description in the security agreement, the financing statements are likewise sufficient. There is no dispute that the financing statements were filed in the proper locations. Consequently, I find as a matter of law that LOLFC has a perfected security interest in the Maverick Cattle and proceeds from the sale of such cattle.
PJSCC argues that it "held a superior lien over that asserted by LOL with respect to the cattle that are the subject of this lawsuit. Each party had lien statements on file with the Nebraska Secretary of State's office. [PJSCC's] lien was filed on 2/22/06 and on 6/30/06.
In the first place, PJSCC does not have a valid security interest. As previously discussed, a written security agreement is required to create an enforceable security interest. See Neb. UCC § 9-203(b)(3). The defendants have been unable to identify any security agreement
The general rule is that "while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection... of a security interest in collateral." Neb. UCC § 9-301(1). Maverick is a South Dakota corporation, and its principal place of business also is located in South Dakota. The Sawyers have lived on their ranch near Hurley, South Dakota, continuously since approximately 1995. Consequently, at all pertinent times, the debtors were located in South Dakota. See Neb. UCC § 9-307(b)(1) and (2). Because the debtors were and are located in South Dakota, the law of South Dakota governs perfection of security interests in the Maverick Cattle. There is no dispute that LOLFC was the first to file in South Dakota.
PJSCC argues that Nebraska law applies under Neb. UCC § 9-301(2), which provides that while collateral is located in a jurisdiction, "the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral." As indicated by its plain language, Section 9-301(2) only applies to possessory security interests. PJSCC did not attempt to perfect its security interest in the Maverick Cattle by taking possession of the cattle. Instead, it attempted to perfect its security interest by filing a financing statement. Section 9-301(2) therefore is inapplicable.
PJSCC also claims that Nebraska law governs the parties' security interests under Neb. UCC § 9-302, which provides: "While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products." The only potential agricultural lien available to PJSCC would have been an agister's lien under Neb.Rev.Stat. § 54-201(2).
For purposes of the pending motions, FNBO does not purport to rely upon the terminated June 30, 2006 financing statement, nor upon the financing statement it filed in South Dakota on January 26, 2007. In other words, FNBO does not claim a security interest in the Maverick Cattle. FNBO instead claims a security interest in PJSCC's business checking account,
Under Revised Article 9 of the Uniform Commercial Code, FNBO's security interest in PJSCC's business checking account takes priority over LOLFC's security interest in proceeds from sales of the Maverick Cattle that were deposited into that account. See Neb. UCC § 9-327(3) ("[A] security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party."). Because the undisputed facts demonstrate that FNBO has a perfected security interest in PJSCC's business checking account,
However, it is a long-standing rule of law in Nebraska that "[a] person who aids in the conversion of property is responsible to the owner for its value." Sprague v. Allied Mills, 129 Neb. 394, 261
Although there is no evidence to show that Johnson or Maloley personally benefitted from PJSCC's conversion of LOLFC's collateral, they also may be held personally liable for aiding and abetting PJSCC in the conversion. "A corporation's officer or agent is personally liable if the officer or agent causes a conversion of another's property, and it is no defense that such officer or agent converted the property while acting for the corporation." Hecker v. Ravenna Bank, 237 Neb. 810, 468 N.W.2d 88, 95 (1991). "In accordance with the rule that an agent is liable for injury resulting from his misfeasance or malfeasance, an agent may be held liable in damages to third persons for conversion, unless he acts solely for his principal, by his direction, and without any knowledge, actual or constructive, of the wrongful conversion being committed by the principal." Standard Grain Co. v. State Bank of Omaha, 106 Neb. 73, 182 N.W. 507, 510 (1921). See also State Securities Co. v. Svoboda, 172 Neb. 526, 110 N.W.2d 109, 112 (1961) ("[O]ne who aids and assists in the wrongful taking of chattels is liable though he acted as agent of another."); Talich v. Marvel, 115 Neb. 255, 212 N.W. 540, 542 (1927) ("All are principals in conversion, and every person who knowingly aids and abets another in the conversion of the property of a third person is liable to such third person for the value of the property so converted.").
Johnson, who is PJSSC's CEO, testified that he made the determination in June 2009, in accordance with instructions from his attorney, that all proceeds from the sale of the Maverick Cattle would be retained until the prior debt was paid. (Johnson Depo. [filing 156-8] at 224:19-225:15.) Johnson also testified that he made the decision to inflate the feed bills for the Maverick Cattle with arbitrary "feed adjustments." (Johnson Depo. [filing 156-8] at 222:2-224:5.) Johnson knew that LOLFC was claiming a security interest. Based on these and other undisputed facts, I find as a matter of law that Johnson aided and abetted PJSCC in the tortious conversion of LOLFC's collateral.
The evidence does not conclusively establish that Maloley knowingly assisted her employer in committing conversion. LOLFC's motion for summary judgment therefore will be denied with respect to its claim against Maloley.
"A civil conspiracy is a combination of two or more persons acting in concert to accomplish an unlawful or oppressive object, or a lawful object by unlawful or oppressive means." Ashby v. State, 279 Neb. 509, 779 N.W.2d 343, 357 (2010) (citing Lamar Co. v. City of Fremont, 278 Neb. 485, 771 N.W.2d 894 (2009); Four R Cattle Co. v. Mullins, 253 Neb. 133, 570 N.W.2d 813 (1997)). "The gist of a civil conspiracy action is not the conspiracy charged, but the damages the plaintiff claims to have suffered due to the wrongful acts of the defendants." Eicher v. Mid America Financial Inv. Corp., 270 Neb. 370, 702 N.W.2d 792, 805 (2005) (citing Wiekhorst Bros. Excav. & Equip. v. Ludewig, 247 Neb. 547, 529 N.W.2d 33 (1995)).
"A party does not have to prove a civil conspiracy by direct evidence of the acts
"Furthermore, a civil conspiracy is only actionable if the alleged conspirators actually committed some underlying misconduct." Id. (citing Eicher v. Mid America Fin. Invest. Corp., 275 Neb. 462, 748 N.W.2d 1 (2008)). "And a conspiracy is not a separate and independent tort in itself; rather, it depends upon the existence of an underlying tort." Id. "So without such underlying tort, there can be no cause of action for a conspiracy to commit the tort." Id. (citing Hatcher v. Bellevue Vol. Fire Dept., 262 Neb. 23, 628 N.W.2d 685 (2001)).
I find there are genuine issues of material fact whether the defendants engaged in a civil conspiracy. I also point out that in order to establish that Johnson and Maloley conspired with PJSCC, it will be necessary to prove that they were "acting outside the scope of their authority or other than in the normal course of their corporate duties." Eicher, 748 N.W.2d at 15 (citing Dixon v. Reconciliation, Inc., 206 Neb. 45, 291 N.W.2d 230 (1980)).
I find there is no genuine dispute regarding the amount of damages sustained by LOLFC as a result of the wrongful conversion of its collateral by PJSCC and Johnson. Such damages total $2,126,442.77.
In addition, LOLFC is entitled to prejudgment interest on the foregoing sum at the rate of 12 percent per annum. See Neb.Rev.Stat. §§ 45-103.02(2), 45-104.
Finally, FNBO argues that Maverick and the Sawyers' claim for consequential damages is too speculative. I conclude this is a matter that will need to be resolved at trial.
To summarize, PJSCC and Johnson are jointly and severally liable to LOLFC for the conversion of its collateral. There is no merit to the argument that LOLFC's security interest is invalid because the collateral is described as cattle "placed with" 4-Square. There are genuine issues of material fact whether FNBO and Maloley aided and abetted the conversion, and also whether the parties engaged in a civil conspiracy. As a matter of law, however, FNBO is not liable to LOLFC or Maverick and the Sawyers for transferring funds out of PJSCC's business checking account to pay down PJSCC's loans. There is no genuine dispute concerning the amount of damages sustained by LOLFC, and it is entitled to prejudgment interest. There also is no genuine dispute that funds deposited in an escrow account pursuant to the court's temporary restraining order should be paid to LOLFC in partial satisfaction of its damages.
The claims remaining for trial include: (1) LOLFC's claim against Maloley and
Accordingly,
IT IS ORDERED: