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Midwestern Cattle Marketing, LLC v. Legend Bank, N.A.

United States District Court, N.D. Texas, Fort Worth Division

May 16, 2018

LEGEND BANK, N.A., Defendant.



         Came on for consideration the motion of defendant, Legend Bank, N.A., for summary judgment. The court, having considered the motion, the response of plaintiff, Midwestern Cattle Marketing, LLC, the reply, the record, the summary judgment evidence, [1] and applicable authorities, finds that the motion should be denied in part and granted in part.


         Plaintiff's Claims

         The operative pleading is plaintiff's first amended complaint filed March 19, 2018. Doc.[2] 23. In it, plaintiff alleges:

         At all relevant times plaintiff was a cattle broker, matching cattle producers with cattle buyers. Doc. 23 ¶ H. In July 2 011, plaintiff's president, Jason O'Connell ("Jason") met Tony Lyon ("Tony") at a sale barn. Shortly thereafter, plaintiff entered into a business arrangement with Tony, and his parents, Owen ("Owen") and Monna ("Monna") Lyon, through their business, Lyon Farms, Id. ¶ 12• Lyon Farms used a bank account at defendant known as the Owen and Monna D Lyon Cattle Account (the "Legend account"). Owen and Monna were the only signatories on the Legend account. Id. ¶ 13. Owen worked for a pipeline company and Monna was a retired teacher's assistant. They were elderly and retired. Id. ¶ 14.

         For over three years, plaintiff purchased cattle from and sold cattle to Lyon Farms. These transactions were completed using checks from plaintiff's account at Points West Bank in Sidney, Nebraska (the "Points West account"), and the Legend account. Id. ¶ 16. Early in 2014, plaintiff provided to the Lyons a checkbook and a signature stamp on the Points West account so that they could sign checks on its behalf after receiving authorization. Tony also provided plaintiff with blank checks from the Legend account signed by Monna, with the amount to be filled in upon Tony's instructions. Id. ¶ 17.

         Starting in late 2014, Tony represented to plaintiff that he had met a big money cattle buyer named John George with George Cattle Company. Id. ¶ 18- Unbeknownst to plaintiff, John George and George Cattle Company did not exist, but was used as a front for a check-kiting scheme. Id. ¶ 20. Typically, Tony would write a check on plaintiff's Points West account purportedly for funds to be used by Tony for cattle he said he was purchasing for George Cattle Company, Owen would deposit that check to the Legend account and Tony would provide plaintiff a handwritten invoice by fax that provided information about the cattle purportedly being purchased; Tony would request plaintiff to prepare an invoice for George Cattle Company, which plaintiff would do and send by fax to Tony; Tony would inform plaintiff that he had delivered the cattle to George Cattle Company and that George Cattle Company had paid Lyon Farms for the cattle; Tony would then inform plaintiff that it was authorized to fill out one of the checks pre-signed by Monna on the Legend account, and plaintiff would fill out the amount specified by Tony on a pre-signed check, and deposit it into the Points West account. Id. ¶ 19.

         The arrangement between plaintiff and Tony was that plaintiff would never take possession of the cattle directly. Id. ¶ 21. Instead, possession of the cattle purportedly remained with Tony until the cattle were transferred to the fictitious buyer, George Cattle Company. Id.

         In late-2014 and early-2015, the activity in the Legend account increased, the dollar amounts of the transactions increased substantially, and overdrafts on the account became frequent. Id. ¶ 28. Most of the overdrafts were created by checks drawn on the Legend account payable to plaintiff. Id. ¶ 32. Defendant, through Brennan Williams ("Brennan"), the president of its Decatur branch, knew beginning in early 2015 of irregular activity in the Legend account. Id. ¶ 31-32. The amount of the overdrafts grew from about $152, 000 in February 2015 to over $4.4 million in June 2015. Id. ¶ 35. Brennan approved each of the overdrafts. Id. ¶ 37.

         During that time period, Brennan and his father, Brent, received $118, 506, initially by a check written on the Points West account, that was later replaced by a check drawn on the Legend account, from an alleged sale of cattle by them to the Lyons, Id. ¶¶ 42-4 8; and defendant made sure its loans to the Lyons were repaid before the collapse of the check-kiting scheme. Id. ¶¶ 49-52, 60-65. The scheme collapsed in late-June 2015 when Brennan, with the concurrence of Owen, returned for insufficient funds a check payable to plaintiff, drawn on the Legend account, for $5, 020, 230.11. Id. ¶ 64.

         On July 6, 2015, plaintiff obtained a prejudgment writ of garnishment against defendant as garnishee for the indebtedness of the Lyons to plaintiff in the amount of $5, 020, 230.11. Id. ¶ 96. On August 3, 2015, $81, 381.05 was deposited to the Legend account on behalf of the Lyons. Defendant transferred $72, 500 from the Legend account to pay down the remaining balance on a line of credit despite the pending writ garnishment. Id. at 98.

         Plaintiff asserts causes of action for fraudulent transfer (Count One), money had and received (Count Two), unjust enrichment (Count Three), common law fraud (Count Four), aiding and abetting (Count Five), conspiracy (Counts Six and Seven), violation of the garnishment statute (Count Eight), negligent misrepresentation (Count Nine), violations of the Uniform Commercial Code (Count Ten), and negligence, negligence per se, and gross negligence (Count Eleven). Plaintiff also seeks exemplary damages and attorney's fees.


         Grounds of the Motion

         Defendant seeks judgment as to each of the claims asserted by plaintiff, as discussed hereinafter.


         Applicable Summary Judgment Principles

         Rule 56(a) of the Federal Rules of Civil Procedure provides that the court shall grant summary judgment on a claim or defense if 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(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The movant bears the initial burden of pointing out to the court that there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986). The movant can discharge this burden by pointing out the absence of evidence supporting one or more essential elements of the nonmoving party's claim, "since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323. Once the movant has carried its burden under Rule 5 6(a), the nonmoving party must identify evidence in the record that creates a genuine dispute as to each of the challenged elements of its case. Id. at 324; see also, Fed.R.Civ.P. 56(c) ("A party asserting that a fact ... is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record . . . ."). If the evidence identified could not lead a rational trier of fact to find in favor of the ...

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