Bank Of Saipan v. Cng Financial Corp

380 F.3d 836 (5th Cir. 2004)

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Nature of the Case

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Facts

Two con-artists, Montgomery and Berkich, arrived in Saipan pretending to be important and wealthy businessmen. They wanted to buy P. They colluded with P's president Tomas Aldan and offered to buy P. Even before the sale was finalized, they took over P and began making improper and undocumented loans to various individuals without the knowledge of P's shareholders or Board of Directors. The scam was discovered before the sale was finalized but not before considerable sums of money had been looted. Meanwhile, in Texas, Wilson, another sophisticated con-man with a previous felony conviction, presented himself to D as an important and wealthy businessman and expressed his intent to purchase two of D's failing subsidiaries, Finity and Fi-Scrip. A mutual con-artist friend arranged a meeting with the cons as P to obtain a loan. They loaned P $5 million of the Bank's money, $4.5 million of which was paid to D in the purchase of Finity and Fi-Scrip. Wilson claimed ownership of 48,000 outstanding credit card accounts. The accounts were nonexistent, but nonetheless were to be used as collateral for his loan from P. Wilson actually informed Montgomery and Berkich that these accounts did not exist, but they loaned him the $5 million anyway. D was, allegedly, aware of Wilson's lies regarding the phony credit card accounts but decided to proceed with the deal provided Wilson could obtain the necessary financing. P alleges that D knew or should have known that Wilson could not obtain financing legitimately. D also allegedly raised its asking price for its subsidiary companies after it learned of Wilson's fraud, presumably to take advantage of the known fraud in whatever way it could. Wilson paid $4.5 million D, and D financed the remaining amount to satisfy its $19.7 million asking price in the form of promissory notes taken from Wilson. Wilson defaulted on the promissory notes and the Bank loan, and D took back its interest in the subsidiary companies (but retained the $4.5 million pilfered from the bank). This suit arose in federal district court when Fi-Scrip, Finity, and others sued P for release of the Bank's UCC-1 filing on some of Finity and Fi-Scrip's computer equipment. P responded with counterclaims against D and others for the losses it suffered from the Wilson loan. At issue were the remaining claims by the P against D for misrepresentation, aiding and abetting fraud, unjust enrichment, money had and received, and joint enterprise. After the conclusion of P's evidence, D moved for an entry of judgment as a matter of law pursuant to Rule 50. The motion was granted. There was no misrepresentation by D to P; D did not owe a special duty to P that would require disclosing information about Wilson; 3) there was no joint venture between D and Wilson that would make D liable for Wilson's conduct; 4) there was no evidence that D committed fraud or duress, or took any undue advantage of the situation; 5) there was no evidence that D knew or should have known that Wilson was defrauding P; 6) any representations that may have been made by D had no influence whatsoever on whether P would lend the money to Wilson; 7) P lacked clean hands; and 8) D relied upon the P loan by changing its position and transferring interest in Fi-Scrip and Finity to Wilson. P filed a timely appeal.