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Radiance Capital Receivables Eighteen, LLC v. Concannon

United States District Court, W.D. Missouri, Central Division

December 29, 2017

RADIANCE CAPITAL RECEIVABLES EIGHTEEN, LLC, Plaintiff,
v.
MATTHEW JEROME CONCANNON, Defendant.

          ORDER

          NANETTE K. LAUGHREY UNITED STATES DISTRICT JUDGE.

         Following a bench trial held on September 26, 2017, the Court entered a final Order and Judgment in favor of Plaintiff Radiant Capital on its breach of guaranty claim and request for costs of collection. Docs. 80 and 81 (dated October 10, 2017). Before the Court are Defendant Concannon's Motion to Amend Findings and Judgment under Fed. R. Civ. p. 52(b) and 59(e), Doc. 84, and Plaintiff Radiance Capital's Petition for Award of Attorneys' Fees and Costs, Doc. 83. The Motion to Amend is denied and the Petition for Award is granted.

         In this lawsuit, Radiance sought payment from Concannon as the guarantor on Providence Farms' promissory notes payable to Premier Bank. The debt was past due and Concannon refused to pay pursuant to the guaranty. Radiance sued as the successor in interest to Premier Bank, for breach of Guaranty or in the alternative, under quantum meruit.

         To recover on a breach of guaranty in Missouri, a creditor must show that: (1) the defendant executed the guaranty; (2) the defendant unconditionally delivered the guaranty to the creditor; (3) the creditor, in reliance on the guaranty, thereafter extended credit to the debtor; and (4) there is currently due and owing some sum of money from the debtor to the creditor that the guaranty purports to cover. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 382 (Mo. 1993) (en banc). Radiance, as successor in interest to Premier Bank, was also required to show that it had a valid assignment of the Providence Farms debt and the Guaranty that it sought to enforce against Concannon. Concannon asserted the defense of fraud in the factum, on the basis that José Lindner made misrepresentations in connection with the Guaranty.

         The Court granted Radiance summary judgment with respect to three elements of its breach of Guaranty claim-reliance by Premier Bank, ownership of the Guaranty and debt by Radiance, and the amount due and owing on the debt. The remaining elements were tried to the Court. The key disputes at trial were: (1) Whether Concannon executed the Guaranty, (2) Whether the Guaranty was delivered to Premier Bank on Concannon's behalf by José Lindner, and (3) Concannon's fraud in the factum defense that would make the Guaranty void even if signed and delivered. The Court concluded that Radiance had proven its claim for breach of guaranty and that Concannon's fraud defense failed.

         I. Concannon's motion to amend under Rules 52(b) and 59(e).

         Concannon raises three grounds for relief. He states that the Court overlooked law concerning the duty to ascertain the scope of an actual agent's authority; misapplied the law governing the creation of an actual agency; and overlooked evidence presented at trial establishing that José Lindner was Concannon's fiduciary. Doc. 84, p. 1. He asks the Court to make amended or additional findings of fact; to hold that Radiance failed to carry its burden to prove Concannon delivered the disputed guaranty and that Concannon carried his burden to prove the defense of fraud in the factum; and to enter judgment in his favor. Id., pp. 1-2.

         The purpose of a motion under Rule 52(b) or Rule 59(e) is to correct manifest errors of law or fact made at trial, or to present newly discovered evidence. Pro Edge, L.P. v. Gue, 377 F.Supp.2d 694, 698 (N.D. Iowa 2005) (and citations therein); and Dale and Selby Superette & Deli v. U.S. Dep't of Ag., 838 F.Supp. 1346, 1348 (D. Minn. 1993) (and citations therein). Such a motion is “not intended to routinely give litigants a second bite at the apple, but to afford an opportunity for relief in extraordinary circumstances.” Dale and Selby, 838 F.Supp. at 1348.

         Concannon does not seek to present newly discovered evidence and, as discussed below, he has failed to demonstrate any manifest error of law or fact. Therefore, the motion to amend is denied.

         A. Duty to ascertain the scope of authority, or make reasonable inquiry.

         Concannon first argues that the Court overlooked law concerning the duty to ascertain the scope of an agent's actual authority, or to make reasonable inquiry. He argues that the duty applies to all forms of agency including actual agency, not only “apparent agency” as “[this] Court suggest[ed]” in its Order. Doc. 85, p. 5 of 18 (Section I). He asks the Court to find that, even if José Lindner had actual authority, Premier Bank had a duty to ascertain the scope of that authority and negligently failed to inquire. He argues that if Premier Bank had made reasonable inquiry, then the bank “would have learned that Concannon did not intend to deliver the Disputed Guaranty, and this entire fiasco would have been avoided.” Doc. 85, p. 7 of 18.

         Concannon cites a line of Missouri cases in which courts held that an entity such as a bank has a common law duty to inquire into the scope of an agent's authority, when the entity has notice that the person is acting as an agent. Id., pp. 6-7 (and citations therein). But Concannon overlooks that actual and apparent authority are defenses to failure to inquire. The most recent authority cited by Concannon is the Missouri Supreme Court's decision in Dalton & Marberry, P.C. v. Nations Bank, N.A., 982 S.W.2d 231 (Mo. 1998) (en banc). There, an accountant embezzled funds from her employer's, Dalton & Marberry's, payroll account. The employee obtained valid signatures on Dalton & Marberry checks, made payable to the NationsBank, then took the checks to the bank and obtained blank cashier's checks or money orders. The bank never inquired whether the employee was authorized to obtain the blank cashier's checks or money orders. Dalton & Marberry sought to recover the amount of the embezzled funds from the bank, pursuant to the common law duty of inquiry recognized decades earlier in Martin v. First National Bank in St. Louis, 219 S.W.2d 312 (Mo. 1949). Id. at 232.

         The Dalton court held that Martin was “still good law” and that “[a] payee bank is liable if it fails to inquire as to the authority of an agent of the drawer-depositor who wrongfully diverts the proceeds of a check made payable to the order of the bank itself.” Id. at 233-34. “However, ” the court held, “the claim is subject to the defense of actual and apparent authority.” Id. at 233. “In Missouri, a payee bank may avoid liability by proving that the agent has actual or apparent authority from the drawer-depositor.” Id. at 235. Put a slightly different way, proof of actual authority would obviate the need to examine whether a bank made reasonable inquiry. This Court has located no authority disturbing the Missouri Supreme Court's holding in Dalton.

         This Court concluded in the Order of 10/10/2017 that the Guaranty was delivered to Premier Bank and that Lindner had actual authority to do so. Doc. 80, p. 18. The Court also acknowledged Concannon's argument that Radiance had failed to carry its burden to show that Premier Bank made a reasonable inquiry into the scope of Lindner's authority when he delivered the Guaranty, and that Radiance had therefore fatally failed to demonstrate that Lindner had apparent authority. Id., p. 19. But, the Court held, Concannon's argument would not be addressed “[b]ecause Lindner had actual authority[.]” Id., pp. 19-20. The Court's conclusion is entirely consistent with the Missouri Supreme Court's holding in Dalton that actual authority is a defense to a claim of failure to make reasonable inquiry, and this Court is bound to follow Missouri law as announced by Missouri's Supreme Court. No purpose would be served by addressing Concannon's argument concerning the duty of reasonable inquiry and apparent authority.

         Concannon has failed to demonstrate manifest error of law or fact, and ...


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