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FALCONI v. FDIC

July 29, 1957

Domenick FALCONI, Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant



The opinion of the court was delivered by: WILLSON

In this civil action tried to a jury, the verdict was for the plaintiff. Plaintiff sued to recover the sum of.$ 19,265.70 with interest. The verdict was in the even sum of $ 21,000, on which judgment was entered. During the course of the trial, at the close of plaintiff's evidence, defendant moved for a directed verdict and again at the close of all the evidence. The decision on both motions was reserved. After judgment was entered, defendant then filed and has pending the usual motions for a new trial and for judgment n.o.v.

Plaintiff is Domenick Falconi, a resident of Washington County in this district. The defendant Federal Deposit Insurance Corporation is organized and existing under an Act of Congress. 12 U.S.C.A. §§ 1811-1831. The First National Bank of Cecil, Pennsylvania had been a national bank organized and existing under the laws of the United States. On Monday, September 25, 1950, before the bank opened for business, John F. Wagner, for many years its executive vice-president and cashier, ended his life in front of the bank's vault by shooting himself. Following Wagner's suicide, the directors of the bank met, determined that the bank was insolvent, and called upon the Federal Deposit Insurance Corporation for aid.

 The Federal Deposit Insurance Corporation, in accordance with the purposes for which it was incorporated, entered into an agreement with the insolvent Cecil Bank and the First National Bank of McDonald, Pennsylvania, a nearby town, wherein the McDonald Bank assumed all of the deposit liabilities of the Cecil Bank and the Federal Deposit Insurance Corporation agreed to provide the MeDonald Bank with the necessary funds to make it whole. The Federal Deposit Insurance Corporation made an initial advance to the McDonald Bank in the sum of $ 800,000; however, in the course of the liquidation of the affairs of the Cecil Bank, Federal Deposit Insurance Corporation was required to advance more than $ 1,700,000 to make good the Cecil Bank's deposit liabilities. The defendant found the affairs of the Cecil Bank in a great state of confusion. Important papers were found in packing boxes and deposit tickets and documents were found under desk blotters. Many irregular instruments were found on the premises, including checks drawn on other banks and signed with various names as purported drawers, but otherwise blank, and promissory notes purportedly signed by various makers but otherwise in blank.

 During the liquidation of the Cecil Bank, many customers submitted proof that they had made deposits which were not reflected on the books of the bank and these and the many other irregularities which were disclosed subsequent to the McDonald Bank taking over were traced to the activities of John F. Wagner.

 Plaintiff's claim is based upon a transaction involving two checks which plaintiff says Wagner used for the benefit of the bank on September 19, 1950. These were checks signed in blank by plaintiff and left with Wagner. Both checks were drawn on the First National Bank, Canonsburg, Pennsylvania. One check was dated September 19, 1950. This was made to the order of Joe Minehart in the sum of $ 9,265.70. The other check was dated September 21, 1950, and made payable to the First National Bank of Cecil in the sum of $ 10,000. The issue in the case is simply whether the transaction involving these checks and three other checks mentioned by Wagner to the plaintiff in their conversation of September 19, are part and parcel of a conceded check kite; or whether, as contended by plaintiff, John F. Wagner, the executive officer of the bank, without authority from the plaintiff, drew these checks on plaintiff's account and for the benefit of the bank.

 A significant feature of this case and which the record shows, is that there is really very little of a factual controversy. What was done by the plaintiff and Wagner is not disputed to any great extent. However, the legal effect of their acts is the subject of controversy.

 Another peculiar feature of the case is that both litigants stress the fact that the Cecil Bank was a one-man organization, operated by Wagner in a loose and careless manner and that Wagner was most accommodating to his friends and customers of the bank. There were but two other employees besides Wagner. Plaintiff conceded that prior to the dates in issue here, he had for a period of at least twenty-three months prior to Wagner's death, participated in a check kite involving over a million dollars and involving many, many transactions. Plaintiff's case is based on the proposition that he trusted Wagner as his friend and financial advisor, but that Wagner in the end used plaintiff's account for the benefit of the bank.

 Plaintiff was a farmer, residing in Canonsburg, a town some eight miles from Cecil. In addition to farming, plaintiff was a livestock dealer, real estate dealer and beer distributor. During the period discussed here, plaintiff's principal banking connection was with the Cecil Bank, in which he carried six or seven accounts aggregating in deposits some $ 60,000 to $ 70,000. Plaintiff also had an account in the First National Bank of Canonsburg, but this was a relatively small account with a balance of from $ 1,000 to $ 1,500. On many occasions, plaintiff left with Wagner at the Cecil Bank, checks drawn on plaintiff's account in the Canonsburg Bank, which checks were signed by the plaintiff but otherwise blank. Plaintiff's testimony was that the practice grew up because he was involved in cattle deals and other transactions which required use of bank credit at various times and that Wagner accommodated him in that manner by creating credit at the Cecil Bank with the checks drawn on plaintiff's account at the Canonsburg Bank. Plaintiff readily conceded that he filled in a great many of the check forms on the Cecil Bank by writing in his own name as payee, filling in the date and also writing in a name other than his own as the purported maker of the check. On many occasions he made out checks using names of relatives or other persons, without telling these people what he had done. Among the names which the plaintiff wrote in as the purported makers of these checks were: Lentie Rosconi, A. P. Richere, P. T. Santissi, Pietro Quardiere, Pietro Rosconi and Rosconi Pietro. Twenty-nine of these so-called 'manufactured' checks were admitted in evidence upon stipulation of plaintiff's counsel that in each instance the name of the purported maker of the check was actually written in by the plaintiff. Wagner also made out similar checks, filling in a date and an amount and also writing in various names as the purported makers.

 The manner of the operation of the kite by plaintiff and Wagner was substantially as follows: Checks on the Canonsburg Bank were used at the Cecil Bank. To cover these checks when they had cleared through banking channels and had reached the Canonsburg Bank, checks on the Cecil Bank were deposited at the Canonsburg Bank. The Cecil Bank's correspondent in Pittsburgh was the Farmers National Bank, to which the Cecil Bank remitted regularly. It took about five days for the checks to clear and reach the Canonsburg Bank. The Canonsburg Bank cleared through the Union National Bank at Pittsburgh. The latter bank in turn sent checks it received from the Canonsburg Bank to the Pittsburgh Branch of the Federal Reserve Bank, which in turn sent checks drawn on the Cecil Bank which had been deposited at the Canonsburg Bank, to the Cecil Bank in its regular remittance letters for payment. Usually, before the day a check was calculated to reach the Canonsburg Bank, plaintiff or Wagner would deposit in the Canonsburg Bank a manufactured check drawn on the Cecil Bank. Again it would take a few days for this covering check to reach the Cecil Bank on which it was drawn, but when it did reach the Cecil Bank, Wagner would cover it with another of plaintiff's signed checks drawn on the Canonsburg Bank. Plaintiff testified that checks cleared in a volume of over $ 100,000 in some seven or eight weeks in the described method. He testified that the withdrawals from his Canonsburg account were in approximately the same amounts as were the checks, the body of which were filled in by Wagner, although the checks themselves were actually signed by him. What has been said here is a brief summary of the evidence in the case as to the kiting transactions prior to September 19, 1950. As to the kite prior to that date, there was simply no dispute between plaintiff and the defendant.

 In the early stages of this litigation, the defendant sought summary judgment in its favor, based on plaintiff's testimony taken on deposition, showing the same check kite which plaintiff acknowledged that he participated in with Wagner. However, the motion was denied, because of plaintiff's factual allegation that the transaction involving the two checks at issue here took place after the kite had terminated and was separate and apart from the prior course of action. As mentioned, at the close of plaintiff's evidence and also at the close of all of the evidence, decision was reserved on defendant's motion for a directed verdict. It is now my conviction that upon all of the evidence there was no jury issue, and decision having been reserved on the motions for a directed verdict, judgment n.o.v. must now be entered. It is my view that there are no controverted issues of fact in this case upon which reasonable men could differ. Nevertheless, the jury did find for the plaintiff. Under the circumstances, it is necessary that the court correct the error.

 It is my view that upon the facts and inferences to be drawn therefrom, supported by the overwhelming weight of the evidence, the case is so strongly in favor of the defendant that the jury should not have reached a contrary conclusion. The underlying principle is familiar. Moore says, Vol. 5, page 2314:

 '* * * a verdict will normally be directed where both the facts and the inferences to be drawn therefrom, as supported by the overwhelming weight of the evidence, point so strongly in favor of one party or the other that the court feels reasonable men could not possibly come to a contrary conclusion.'

 He continues, page 2315:

 'In other words, where the evidence is such that without weighing the credibility of the witnesses, there can be but one reasonable conclusion as to the verdict, the court should determine the proceeding by nonsuit, directed verdict or judgment n.o.v.'

 Federal law is applicable in this case, 12 U.S.C.A. § 1819, Fourth, which provides that '* * * All suits of a civil nature * * * to which the Corporation shall be a party shall be deemed to arise under the laws of the United States: * * *.'

 Consideration has been given to the familiar and cardinal rules in determining whether judgment n.o.v. should be entered. The rule is well established that a motion for judgment n.o.v. presents only a question of law as to whether, when all the evidence is considered together with all reasonable inferences in favor of plaintiff, there is a total failure or lack of evidence to prove any necessary element of plaintiff's case. Willits v. Yellow Cab Co., 7 Cir., 214 F.2d 612, at page 615.

 On review of the evidence in this case it is my view that there is a complete absence of probative facts to support the jury verdict. Therefore, there was no room in this case for a jury to exercise its sole and exclusive function to evaluate the credibility of witnesses and from the entire evidence select that which it believed or which it relied upon. Gunning v. Cooley, 281 U.S. 90, 50 S. Ct. 231, 74 L. Ed. 720; Hobart v. O'Brien, 1 Cir., 243 F.2d 735.

 We now reach a point in this discussion wherein the factual issues are disputed, plaintiff contending, of course, that a jury issue was presented and defendant contending to the contrary.

 Defendant says that there are three questions involved in its motion.

 (1) Has the plaintiff established that Cecil Bank was unjustly enriched at the expense of the plaintiff?

 (2) Has the plaintiff established that he was dealing with the Cecil Bank in the matters here involved rather than with John F. Wagner individually?

 (3) Has the plaintiff established that John F. Wagner's unlawful acts in the matters here involved were within his real or apparent ...


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