Court Opinion

ID: 171168
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:28:28+00
Date Added: 2024-06-11T09:42:01.692245
License: Public Domain

FILED
                                                             United States Court of Appeals
                                                                     Tenth Circuit

                     UNITED STATES COURT OF APPEALS                August 28, 2008
                                                                 Elisabeth A. Shumaker
                            FOR THE TENTH CIRCUIT                    Clerk of Court

    WILLIAM D. SCHNACK,

                Plaintiff-Appellant,

    v.                                                  No. 07-4149
                                                (D.C. No. 2:04-CV-1026-DS)
    VALLEY BANK OF NEVADA,                                (D. Utah)
    and its successor Bank of America,

                Defendant-Appellee.

                             ORDER AND JUDGMENT *

Before HARTZ, EBEL, and O’BRIEN, Circuit Judges.

         William Schnack purchased a certificate of deposit (“CD”) from Valley

Bank of Nevada (“Valley Bank”), a predecessor in interest to Bank of America

(“the bank”). When he attempted to redeem his CD some fifteen years later, the

bank refused payment because it found no record of the CD. Dr. Schnack filed

this diversity suit to compel payment, but the district court dismissed the action,

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
finding that the CD had already been redeemed, or, alternatively, that the claim

was foreclosed by the doctrine of laches. Dr. Schnack appeals, and exercising

jurisdiction under 28 U.S.C. § 1291, we affirm.

                                          I

      This case originates from another legal dispute in which Dr. Schnack and

several co-defendants entered into a settlement agreement with Mann Enterprises,

Inc., in 1986. Among other things, the agreement required Dr. Schnack to

“deposit in the Registry of the United States District Court for the District of Utah

. . . $500,000 in cash or equivalent.” Aplt. App., Tab. 3 at 44. Pursuant to this

provision, on April 29, 1986, Dr. Schnack purchased from Valley Bank a

ninety-day CD in the amount of $500,000, proof of which was entered into the

court registry on May 3, 1986. The CD was set to mature on July 28, 1986, but

there is no record of any further activity until May 10, 2001, at which time

Dr. Schnack moved the court to release the money. The court granted the motion,

and on August 29, 2001, Dr. Schnack attempted to redeem his CD from the bank.

The bank denied payment, however, because its earliest accounting records dating

from June 7, 1988, showed no history of the CD. When Dr. Schnack failed to

convince the bank to remit the $500,000, he sued.

      The suit culminated in a two-day bench trial, after which the court

dismissed the case. Based on the evidence, the court found that the CD had been

redeemed sometime before June 7, 1988; that Dr. Schnack likely used the

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proceeds of the CD to deposit $581,536.62 into an escrow account pursuant to

another provision of the Mann settlement agreement; and even if the evidence did

not show the CD had been redeemed, the bank had successfully raised the

affirmative defense of laches because more than fifteen years had passed before

Dr. Schnack sought redemption. This appeal challenges nearly all of the district

court’s findings, but particularly these three.

                                          II

      We review the district court’s findings of fact for clear error and its legal

conclusions de novo. Orient Mineral Co. v. Bank of China, 506 F.3d 980, 1001

(10th Cir. 2007), cert. denied, 128 S. Ct. 2872 (2008). Dr. Schnack first disputes

the court’s conclusion that the CD was redeemed before June 7, 1988. He argues

that there was no evidence affirmatively showing that the CD had been redeemed

prior to that date, and no record of the CD after that date because the bank

searched the records from the wrong branch. He further asserts there was no

evidence the bank followed its usual procedure for redeeming a CD and the

records relied upon by the court were inaccurate. To buttress his position, he

offers an alternative scenario in which he claims the bank gave him the original

CD, which he deposited into the court’s registry.

      We begin with the evidence before the district court, which included the

“Full Trial Reports,” Aplt. App., Tabs 7 & 9, and the “Assignments Trials,” id.,

Tabs 8 & 10, from Valley Bank’s Reno Plaza branch, the location where

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Dr. Schnack purchased his CD. Both reports were from June 7, 1988, and January

1, 1992. The Full Trial Reports listed outstanding CDs, while the Assignments

Trials designated whether a CD was being held as security, which would require

release prior to redemption. Neither report contained any reference to

Dr. Schnack’s CD.

      The bank also introduced Valley Bank’s Central Information File (CIF)

from September 6, 1988. See id., Tab 12. The CIF was a comprehensive report,

listing all customer accounts, and although it listed Dr. Schnack’s demand deposit

and loan accounts, it did not reference his CD.

      Carol Theisen, a former operations officer and current assistant

vice-president of the bank, testified that the absence of an entry on these reports

indicated that the CD had been redeemed. See id., Tab 13 at 121. She explained

that when a customer purchased a CD, the customer would receive a receipt while

the issuing branch would retain the original CD under lock. Outstanding CDs

were then recorded on the Full Trial Reports, which were generated weekly and

audited monthly for accuracy. Ms. Theisen stated that it would be “highly

unlikely” for a locked CD to be missing from the issuing branch and omitted from

the Full Trial Reports, but remain outstanding. Id. at 107. Though she

acknowledged that a matured CD could be held in a suspense account, she

explained that Valley Bank’s policy was to alert customers when a CD had

matured, inform them that it was no longer earning interest, and inquire whether

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they wished to renew the CD. She added that before a CD escheated, the bank

took additional efforts to contact the customer. On this note, Jerad Henry

testified that he examined the bank’s escheatment records but found nothing to

indicate that the CD had been turned over to the state.

      Also before the court were all 1099 IRS tax statements issued by the bank

to Dr. Schnack for interest earned from 1991 through 2003. Here again, none of

the statements were generated by Dr. Schnack’s CD. Anna Canas, the custodian

of the statements, testified that the absence of any 1099s for the CD indicated that

it had been inactive and earned no interest from 1991 to 2003.

      Based on this evidence, the district court concluded that the CD had been

redeemed prior to June 7, 1988, the date of the bank’s earliest retained records.

We perceive no error in the court’s conclusion. The bank’s reports dating back to

June 7, 1988, showed no trace of the CD; Ms. Theisen testified that the absence

of any entries in any of the bank’s regularly kept business records indicated that

the CD had been redeemed; and she believed, albeit without personal knowledge,

that the bank reports were “100-percent accurate,” id. at 116. This evidence

strongly suggests that the CD had been redeemed sometime before June 7, 1988.

Although Dr. Schnack insists the bank’s reports do not affirmatively show the CD

has been redeemed, the reports are not intended to show that a CD has been

redeemed. Rather, as Ms. Theisen testified, the reports list only open CDs,

which, by negative implication, indicates that a CD not on the reports had already

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been redeemed. See id. at 121. This was a reasonable inference to draw from the

evidence.

      Dr. Schnack asserts a host of challenges to this conclusion, but he offers no

evidence to support his contentions. He charges that the bank’s reports were

inaccurate, even though the evidence indicated that the bank took measures to

ensure the accuracy of its records. Ms. Theisen testified that two bank employees

audited the reports monthly by reconciling the Full Trial Reports with the actual

CDs maintained by each branch to ensure that the CDs on the reports matched

those retained by the branch. Although she did not specifically know whether

audits were conducted in 1986 or 1987 before she began working at the Reno

Plaza branch, she knew that audits had been “ongoing” and that “[e]very branch

had audits.” Id. at 110. Dr. Schnack’s insistence that “banks can, and do, make

mistakes,” Aplt. Br. at 21, attempts to ignore the mechanisms the bank

implemented to avoid mistakes and ensure the accuracy of its records, see Aplt.

App., Tab 14 at 142.

      Dr. Schnack’s hypothesis that his CD may be discovered at another branch

is similarly unavailing. Ms. Theisen testified that the CD could not have been

held at any branch other than Reno Plaza because that is where the CD was

purchased. Id., Tab 13 at 114. Paula Cobb corroborated that testimony, stating

that CDs issued by a particular branch remain with that branch until redemption

because each branch maintains its own inventory of CDs. Yet even if the CD had

                                        -6-
been retained at another branch, it presumably would have appeared on the CIF;

the fact that it did not demonstrates that this contention is purely speculative.

      As for Dr. Schnack’s contention that he received the original CD from

Valley Bank and deposited it in the district court’s registry, that, too, is against

the evidence. Ms. Theisen testified that customers were given only a receipt,

while the original CD was “locked up” at the issuing branch. Id. at 103. She

explained that the “colored piece of paper” with “colored printing on it” received

by Dr. Schnack was his receipt, clearly imprinted with the words, “nonnegotiable

receipt.” Id. Consistent with this testimony, Ms. Cobb stated that the copy given

to customers expressly stated that it was a non-negotiable receipt, while the

original CD retained by the bank contained no similar language. Instead, the

original was encoded with its account and CD numbers, which were used to

balance the general ledger. This testimony makes it apparent that the “hard paper

stock multi[-]colored document” Dr. Schnack claims was the original CD,

Aplt. Br. at 10, actually was his receipt.

      None of Dr. Schnack’s remaining contentions provide any basis for

reversal. First, there was no evidence that the bank followed its usual redemption

policy because the bank did not keep, nor was it required to keep, records dating

back more than seven years, and Dr. Schnack offered no evidence of his own to

suggest that the bank deviated from its policy. Second, he is correct that there

would have been no 1099s generated from 1991 through 2003 because the CD

                                             -7-
matured in 1986, but if the CD had rolled over, as he claimed, any interest earned

by the renewed CD during that time frame would have generated a 1099; the fact

that there were no statements related to his CD during that time supports the

court’s conclusion that the CD was redeemed before June 7, 1988. Third,

although the CD could have been held by the bank in a suspense account, there

was no evidence it actually was. Fourth, none of the bank’s records referenced

the CD, but again, because the bank was not required to retain records from as far

back as 1986, it could not affirmatively show when the CD issued, matured, or

was redeemed. And finally, there would have been no need for the bank to

contact Dr. Schnack when the CD matured if he redeemed it upon maturation.

      Turning to the next point of contention, Dr. Schnack claims there was no

evidence supporting the court’s finding that he used the proceeds of the CD to

deposit $581,536.62 into an escrow account. The CD was purchased on April 29,

1986, it matured on July 28, 1986, and the escrow deposit was made on

September 15, 1987. By June 7, 1988, there was no record that the CD remained

outstanding. Given this timeline, it is entirely plausible that the CD was

redeemed and the proceeds applied to the escrow deposit. Because Dr. Schnack’s

unsupported testimony to the contrary leaves us without a “definite and firm

conviction that a mistake has been committed,” Anderson v. City of Bessemer,

470 U.S. 564, 573 (1985) (quotation omitted), the court’s ruling will stand.

                                         -8-
      Lastly, Dr. Schnack argues that laches cannot bar his suit because the

statute of limitations had not yet run on his CD. Laches is an equitable defense

“primarily left to the discretion of the trial court.” Jicarilla Apache Tribe v.

Andrus, 687 F.2d 1324, 1338 (10th Cir. 1982) (quotation omitted). To invoke the

defense, a “defendant must demonstrate that there has been an unreasonable delay

in asserting the claim and that the defendant was materially prejudiced by the

delay.” United States v. Rodriguez-Aguirre, 264 F.3d 1195, 1208 (10th Cir. 2001)

(emphasis and quotation omitted).

      The bank satisfies both criteria. Dr. Schnack waited fifteen years before

attempting to redeem the CD and another three years before bringing this action.

This eighteen-year delay surely prejudiced the bank, because the bank justifiably

destroyed its account records after seven years and cannot now adequately defend

itself. Dr. Schnack argues the statute of limitations had not yet run on his claim

and therefore laches may not be invoked to shorten the statutory period, but

“[w]hether a claim is barred by laches must be determined by the facts and

circumstances in each case and according to right and justice,” id. In this case,

Dr. Schnack failed to “exercise reasonable diligence in protecting his rights.”

Jicarilla Apache Tribe, 687 F.2d at 1338. He believed his CD would renew, but

he received no 1099s relating to the CD from 1991 through 2003 and offered no

evidence indicating that the CD remains outstanding. He claimed the CD could

not be redeemed until the Mann settlement agreement was satisfied, but for

                                          -9-
fifteen years he never even checked on the CD’s status. It is untenable and

unreasonable to leave a $500,000, ninety-day CD unchecked for fifteen years, and

then charge the bank with liability after it justifiably destroyed its records. Under

these circumstances, the district court acted within its discretion in applying

laches as an alternative basis for dismissing the claim.

      The judgment of the district court is AFFIRMED.

                                                     Entered for the Court

                                                     Terrence L. O’Brien
                                                     Circuit Judge

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