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BERKLINE CORPORATION v. BANK OF MISSISSIPPI

JULY 25, 1984

BERKLINE CORPORATION
v.
BANK OF MISSISSIPPI



Mona Edenfield South Central Credit Manager The Berkline Corporation One Berkline Drive Morristown, Tennessee 37814

Dear Ms. Edenfield:

Furniture City, Inc. has an active line of credit with the Bank of Mississippi in the low six figure range. They have two deposit accounts with us. One account is a savings in the low six figure range and the other is a commercial checking account with average balances in the low five figure range. All deposit accounts and credit experience have been handled in a satisfactory manner. The principals of the corporation have, in past experience with our bank, demonstrated sound business judgement. If you have any questions, please feel free to contact us.

Sincerely, /s/ Steve Smith Steve Smith Loan Officer

 SS:jh

 Berkline also obtained a credit report from the Lyon Furniture Mercantile Agency and another report from Dun and Bradstreet, Inc. Neither report disclosed much and the details of neither are significant here.

 Thereafter Berkline honored credit orders from Furniture City and shipped merchandise to Furniture City having an approximate wholesale value of $10,000. As fate would have it, Furniture City did not pay Berkline nor apparently did it pay anyone else, for on December 18, 1978, Furniture City was named guest of honor in a petition for involuntary bankruptcy filed in the United States Bankruptcy Court for the Western District of Tennessee.

 In due course Berkline received a modest distribution from Furniture City's bankrupt estate, leaving an outstanding and unpaid balance of $6,605.79.

 On November 5, 1981, Berkline commenced this action by filing its declaration in the Circuit Court of DeSoto County, Mississippi. In its pleadings Berkline charged that the July 31, 1978, letter contained material false statements, that the letter had induced Berkline to extend credit to Furniture City, and that Berkline had suffered loss in consequence thereof. In addition to its claim for actual damages, Berkline charged fraudulent misrepresentation on the part of Bank of Mississippi and demanded punitive damages.

 The Bank's answer admitted that, pursuant to the instructions of Furniture City, Berkline had made credit inquiry of the Bank and that the July 31 letter had been furnished in response. The Bank admitted that Steve Smith was a duly authorized officer in the premises and that he did in fact write the letter in question.

 Answering further, the Bank averred that the contents of the letter were true and accurate at the time the letter was written, that it did not intend that Berkline act upon the letter to its detriment, that Berkline in fact relied upon other information obtained from other sources in making its credit decision, along with other defenses not pertinent here.

 At trial, in addition to the facts described above, Berkline's credit manager, Mona Edenfield testified that she called the Bank on December 13, 1978, in attempt to discuss Funiture City's default with the Bank's loan officer, Steve

 Smith. Ms. Edenfield was advised that Mr. Smith had left the Bank in September of 1978. Ms. Edenfield then talked with a Mrs. Hollingsworth at the Bank and gave the following testimony:

 "We questioned her (Mrs. Hollingsworth) concerning the letter we received from the Bank, and at that time she told us there had been no checking and savings account in these amounts that were stated in the letter, and that the Bank was having problems also, and she referred us to the Assistant Vice President and gave us the name of Rick Caldwell. I spoke with him, and he told me at that point that the Bank had an outstanding debt of fifty to sixty thousand dollars, they were having problems, it looked very serious, and, you know, Mr. Smith was not there."

 With its proof essentially in the posture recited above, Berkline rested its case. At that point, Bank of Mississippi moved the Court for entry of an order dismissing the declaration. Grounds for the motion, of course, were the Bank's contention that ...


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