McAninch v. Traders National Bank

779 F.2d 466, 1985 U.S. App. LEXIS 25552
CourtCourt of Appeals for the Eighth Circuit
DecidedDecember 13, 1985
DocketNos. 85-1215, 85-1216
StatusPublished
Cited by5 cases

This text of 779 F.2d 466 (McAninch v. Traders National Bank) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McAninch v. Traders National Bank, 779 F.2d 466, 1985 U.S. App. LEXIS 25552 (8th Cir. 1985).

Opinion

HENLEY, Senior Circuit Judge.

These consolidated appeals arise from two malicious prosecution actions. Between September 2, 1975 and January 20, 1976, appellants purchased cattle at the Milan Livestock Auction. In July, 1976 Traders National Bank (Traders) filed conversion actions against appellants, alleging that appellants had purchased the cattle subject to the bank’s security interest. The conversion actions terminated in appellants’ favor. Thereafter, appellants filed a malicious prosecution action against Traders and an action against Traders’ counsel, the law firm of Gage & Tucker and four of its members (Gage & Tucker), Traders’ holding company, General Bancshares, and Thomas J. Guilfoil. In case No. 85-1215, appellants appeal from a judgment of the district court1 entered upon a jury verdict in favor of Traders. In case No. 85-1216, appellants appeal from an order granting summary judgment in favor of Gage & Tucker, General Bancshares, and Guilfoil. We affirm.2

[468]*468The relevant facts can be summarized as follows. In September and December of 1975 Traders, with the participation of the Bank of St. Louis (BOSL),3 made two loans totalling $1,900,000.00 to Ray Olson of Milan, Missouri. Ray Olson and his wife owned more than 95 per cent of the stock in the Milan Livestock Auction. The loans were secured by agreements pledging “all livestock now owned or hereafter acquired by Debtor.” On January 12, 1976 Ernest Harms, a loan officer at Traders, went to Milan to inspect the cattle securing the loan. After Harms could not locate any cattle, he informed officials at Traders and BOSL. Charles Oliver, president of Traders, contacted Gage & Tucker to take whatever steps were necessary to protect the bank’s security interest. On January 14, 1976 John Kraemer and Peter Granat of Gage & Tucker began work on the case. Within a few days, officials from Traders and BOSL went to Milan to investigate. Later Granat discussed the matter with BOSL’s counsel, Thomas J. Guilfoil, and on January 22, 1976 Granat requested a state court injunction to prevent Olson and the livestock auction from disposing of assets pending the outcome of a suit on the promissory note. On February 6, 1976 the state court issued an injunction and attachment order.

On March 23, 1976 William Turner, the Gage & Tucker partner who was supervising the case, asked George Coughlin, a Gage & Tucker associate, to research the question whether Traders’ security interest could be “traced” to the cattle purchasers. In a memorandum dated April 7, 1976, Coughlin concluded that “[bjased on the facts presently known and applying the [applicable] legal standards, it would appear that Traders National Bank duly perfected a security interest in the 4,460 head of cattle sold by Olson through the Milan Livestock Auction. This security interest continued in the cattle after their sale to third party purchasers and thereafter.” In the memo, Coughlin assumed that the eat-tie had been purchased and sold on a short term basis and had not been pastured or acquired for fattening or grazing. Based on Gage & Tucker’s extensive investigation which revealed, among other things, that Olson owned an 812 acre ranch and 26,260 pounds of corn and leased 2,000 acres of land on which he grew hay, Coughlin concluded that Olson was a farmer.

Coughlin’s legal analysis was based on §§ 9-109 and 9-307 of the Uniform Commercial Code (UCC), R.S.Mo. §§ 400.9-109 and 400.9-307. According to the memo, Traders’ security interest in the cattle was dependent upon whether the cattle were “farm products” or “inventory” as defined in the UCC. Good faith buyers of inventory take free of a security interest but buyers of farm products do not. Section 9-109 defines farm products as “crops or livestock or supplies used or produced in farming operations ... and are in possession of a debtor engaged in raising, fattening or other farm operation.” Coughlin’s theory of recovery against the purchasers of the cattle was that the cattle were farm products because they were livestock in possession of a farmer. Under Coughlin’s theory, the fact that the cattle were not used or produced in farming operations was irrelevant.

Coughlin’s memo was given to Jack Min-ton, president of BOSL, a director of Traders, and an officer and director of General Bancshares, to Oliver, and to Guilfoil. After some discussion between Turner and Guilfoil concerning the parties to a suit and the fee arrangements and after obtaining authorization to file suit from Oliver, who believed that Guilfoil and Minton concurred in the decision, in July 1976 Gage & Tucker filed a state and two federal conversion actions against the cattle purchasers. During discovery, Gage & Tucker encountered unexpected evidentiary problems, including changed testimony regarding Olson’s status as a farmer. Gage & Tucker advised Traders that because of the problems a favorable judgment on the conversion suits [469]*469was unlikely and advised Traders to dismiss the suits without prejudice. In November, 1977 the state action was dismissed without prejudice. In December, 1977 the federal district court entered summary judgment with prejudice against Traders.

In 1978 appellants filed a malicious prosecution action against Traders in federal district court. In 1982 appellants filed a malicious prosecution action against Gage & Tucker, General Bancshares, and Guil-foil. In March, 1983 the cases were consolidated for trial. Both sides moved for summary judgment, alleging that the material facts were undisputed. Prior to trial, the district court orally granted motions for summary judgment in favor of Gage & Tucker, General Bancshares, and Guilfoil, finding that as a matter of law appellees had probable cause to file the conversion actions. The district court denied Traders’ motion for summary judgment. In addition, on appellees’ motions, the district court dismissed Albia Sales, Inc. as a plaintiff, finding that Albia lacked capacity to sue. The remaining plaintiffs went to trial against Traders. The jury returned a verdict in favor of Traders.

In this diversity case, it is undisputed that Missouri law applies. At the outset we note that “Missouri law does not favor suits in malicious prosecution[,]” Zahorsky v. Griffin, 690 S.W.2d 144, 151 (Mo.App.1985), and that “[t]he role of the jury in a malicious prosecution action is more limited than in the usual civil proceeding.” McGuire v. Wilcher, 689 S.W.2d 719, 721-22 (Mo.App.1985); see also Hernon v. Revere Copper and Brass Co., 494 F.2d 705, 707 (8th Cir.) (“the general rule is that suits for malicious prosecution are viewed with disfavor and are to be carefully guarded against”), cert. denied, 419 U.S. 867, 95 S.Ct. 124, 42 L.Ed.2d 105 (1974).

Under Missouri law, “[t]o maintain a cause of action in malicious prosecution, a plaintiff has the burden of proving that the defendant instituted the original judicial proceeding without probable cause and with malice, the proceeding terminated in the plaintiff’s favor, and the plaintiff was damaged.” Zahorsky v. Griffin, 690 S.W.2d at 147.

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779 F.2d 466, 1985 U.S. App. LEXIS 25552, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mcaninch-v-traders-national-bank-ca8-1985.