The opinion of the court was delivered by: ZIEGLER
The instant case was submitted to the jury on special interrogatories. The jury found that defendants had converted the proceeds from the sale of five shipments of frozen beef and awarded damages to GBS Meat Industry Pty. Limited (GBS) in the sum of $ 28,464, and Moree Meat Industries Pty. Limited (Moree Meat) in the sum of $ 125,781, with interest.
Presently before the court is the motion of A. J. Armstrong Co., Inc., (Armstrong) for judgment notwithstanding the verdict or, in the alternative, for a new trial pursuant to Rules 50(b) and 59 of the Federal Rules of Civil Procedure.
The motion must be denied for the following reasons: (1) the theory now advanced by Armstrong, namely, the district court erred in instructing the jury that Armstrong was liable for conversion if it had actual knowledge the meat was shipped to Kress-Dobkin on consignment, was not raised within the mandatory 10-day period prescribed by Rules 50 and 59; (2) Armstrong has waived the right to assert this theory because it failed to object to the court's instruction as required by Rule 51; (3) assuming Armstrong had preserved its objection, the instruction was a correct statement of the law; (4) there is sufficient evidence to sustain the jury's finding that Armstrong had actual knowledge of the consignment; and (5) the jury's verdict on the question of knowledge is not against the weight of the evidence.
The following facts viewed in a light most favorable to plaintiffs were produced at trial.
Plaintiffs, GBS and Moree Meat, are Australian corporations. GBS is engaged in the business of providing merchandising services to meat packers. (T.139). Moree Meat is engaged in the wholesaling, retailing, and exporting of meat. (T.12). Plaintiffs owned and were in possession of five loads of frozen boneless beef. (GBS owned one and Moree Meat owned four.) Between January 17, 1974, and April 5, 1974, plaintiffs shipped the five loads of beef from Australia to Pennsylvania. While the goods were in transit, GBS and Moree Meat entered into oral consignment agreements with Kress-Dobkin, whereby Kress-Dobkin agreed to act as consignee of all five loads and to sell the beef in accordance with plaintiffs' instructions. In return, plaintiffs agreed to pay Kress-Dobkin a commission on the sales.
Upon receipt of the consigned goods, Kress-Dobkin sold the meat in accordance with the instructions of plaintiffs. Thereafter, Kress-Dobkin and K & D, at the direction of Dobkin, assigned the receivables to Armstrong and converted the proceeds from the sales by remitting the invoice amounts to Armstrong.
A. J. Armstrong Co., Inc., is a financing company. Its International Division finances small and medium size enterprises throughout the United States, specifically those involved in either import or export operations. (T. 613). Armstrong began financing the predecessor of Kress-Dobkin in 1968. (T.198). On March 19, 1973, Kress-Dobkin executed a security agreement in favor of Armstrong. On May 24, 1973, K & D executed a similar agreement. (T.615). Armstrong filed financing statements pursuant to those agreements in accordance with the provisions of the Uniform Commercial Code. (T.619). In each instance, the collateral covered by the security agreements and financing statements included: "All now existing and hereafter acquired accounts, notes and other forms of obligations and all existing and hereinafter acquired inventory and all proceeds of all of the foregoing." (T.620).
The five shipments involved in this case were covered by the security agreements. Thus, when Kress-Dobkin sold the meat, it assigned the receivables to Armstrong. (T.497-513).
At trial, Armstrong contended, and the district court instructed the jury, that under Section 2-326 of the Uniform Commercial Code,
Armstrong was entitled to the proceeds from the sale of the beef unless Armstrong had actual knowledge that the goods were transferred to Kress-Dobkin on consignment. (T.420, 426, 708).
The evidence concerning Armstrong's knowledge of the consignments between Kress-Dobkin and plaintiffs was circumstantial. Taken as a whole, however, we are satisfied that the jury could find, as it did, that Armstrong knew the goods were on consignment.
Armstrong financed all of Kress-Dobkin's international meat transactions. (T.288). The line of credit ranged from $ 1,200,000 to $ 1,600,000. Interest on these loans was 6 percent above prime or as much as 20 percent by late 1973. (T.653). Due to the size of the loads and the precarious nature of Kress-Dobkin's business, Armstrong was very interested in monitoring Kress-Dobkin's financial status. (T.667). Thus, in 1974, the year in which these transactions took place, officers of Armstrong, including Messrs. Hines and Galluzzo, contacted the Kress-Dobkin operation almost daily. (T. 202, 208, 209). Schedules of assignments of accounts receivables passed between Kress-Dobkin and Armstrong each day. (T.222). Employees of Armstrong performed periodic full scale audits of Kress-Dobkin's books and records, which often consumed several days. (T.210, 214). These inspections included examinations of Kress-Dobkin's accounts payable. (T.668). This is significant, since the monies owing on the five loads of meat involved in this case would have appeared on the accounts payable if Kress-Dobkin had purchased the meat from plaintiffs instead of taking them on consignment. (T.669, 670).
This pervasive control of Kress-Dobkin's operations, coupled with the serious financial status of K & D and Dobkin in the spring of 1974, supports the reasonable inference that Armstrong knew the goods were consigned to Kress-Dobkin. This inference is also supported by testimony that Armstrong paid the custom charges on the five loads of beef (T.665), and further that Moree Meat had previously consigned two loads of beef to Kress-Dobkin and received payment by Armstrong to Moree's account at an Australian bank. (T.237).
Armstrong filed a timely motion for judgment notwithstanding the verdict, or a new trial contending, inter alia, there is insufficient evidence to sustain the jury's finding of knowledge or, in the motion for new trial, the weight of the evidence negated such a finding.
In its brief filed on June 28, 1979, over two months after the entry of judgment, Armstrong asserts for the first time that the district court erred in instructing the jury that Armstrong could be found liable for conversion if it knew that the meat shipped by plaintiffs was held by Kress-Dobkin ...