PRATHER, JUSTICE, FOR THE COURT:
Sellers of livestock filed suit against Central Bank of Mississippi alleging Central Bank had improperly set off trust funds properly belonging to the sellers. From a decision in the Chancery Court of Rankin County awarding sellers actual and punitive damages plus attorneys' fees, Central Bank of Mississippi appeals, assigning as error:
(1) The trial court erred in finding that Central Bank improperly set off funds from the account of Central Mississippi Livestock Exchange and in awarding actual damages of $57,916.
(2) The trial court erred in failing to reduce
appellee's award of actual damages by the amount of surety bond payments made to appellees and by recoupments received by certain appellees prior to filing suit.
(3) The trial court erred in finding that the facts of the case and the law warrant the assessment of punitive damages and reasonable attorneys' fees against the appellant.
(4) The chancery court erred in awarding excessive punitive damages against appellant.
In March, 1983, Central Mississippi Livestock Exchange (CMLE), a Mississippi corporation, was an ongoing business in Bay Springs, Jasper County, Mississippi. CMLE had been conducting Wednesday livestock sales since October, 1980. The president, manager, and primary stockholder of CMLE was Wesley Hendry, who was also the primary stockholder of the Wesley Hendry Land & Cattle Co., Inc. The two corporations were distinct and separate.
Also during March 1983, Central Bank of Mississippi (CBM) was a Mississippi banking corporation with its principal place of business in Brandon, Rankin County, Mississippi. CBM later became the Brandon branch of the First United Bank.
CMLE maintained two checking accounts with CBM - a" general "account and a" custodial "account. CMLE, being subject to the Packers and Stockyards Act, 1921, *fn1 was required to maintain a custodial account pursuant to 9 C.F.R. 201.42 (1987), which describes payments for livestock as" trust funds. "Also maintained at CBM was a separate checking account for the Wesley Hendry Land and Cattle Company (Cattle Co.).
During CMLE's business operations, through prior arrangement with the bank, it was permissible for CMLE to deposit sale proceeds into its general account, but pay sellers from the custodial account. Funds were regularly transferred by CBM from the general account to the custodial account to cover the custodial account checks. The requirements of the Federal Packers and Stockyards Act was the basis for this arrangement.
Also during CMLE's business operations, CMLE was required to pay cattle sellers on sale day, but CMLE allowed buyers 72 hours to remit payment. As a result, CMLE's custodial account was often in overdraft. However, by oral agreement with the bank, CBM honored CMLE's checks until
funds were deposited into the general account and transferred to the custodial account. CBM, therefore, knew that under the federal act the payments for livestock were trust funds and were contained in the general account awaiting their transfer to the custodial account.
On March 9, 1983, CMLE conducted sales in which the appellees were sellers. (Hereinafter" Sellers "). *fn2 Each seller was issued a check drawn on CMLE's custodial account on sale day. In addition, the proceeds of the sales, $125,747, were deposited into CMLE's custodial account. The Sellers' checks, totaling $57,916, were later dishonored.
CMLE's $125,747 deposit was composed of checks, instead of cash. At the time of the deposit, CMLE's general account reflected the bookkeeping entry of the $125,747 deposit. Only after the deposited checks were honored by the banks on which they were drawn would the transfer be made to the custodial account.
While the bank was waiting for the funds to be paid on the $125,747 deposit, it posted its own cashier's check against CMLE's general account, without authority of Wesley Hendry, and credited that sum to the Wesley Hendry Land and Cattle Company account to cover an overdraft there. Later the bank dishonored the checks written to the Sellers on the custodial account as" Drawn Against Uncollected Funds. "The money collected for livestock payments was then retained by the Bank for repayment of the funds it had paid in overdraft for the Cattle Company's account.
The end result was that the money paid by livestock buyers for the Sellers' cattle was kept by the bank instead of remitted to the Sellers. The Bank asserts that their additional payment of an approximately $125,000 overdraft in the custodial account should offset any liability to these plaintiffs.
Shortly afterward, CMLE was launched into involuntary bankruptcy. Eventually, the Sellers received approximately 37% of the face amount of their dishonored checks from CMLE's bonding company. The Sellers subsequently brought this suit.
In the complaint, the Sellers alleged that CBM wrongfully used the trust funds in CMLE's general account to offset a debt owed the bank by Wesley Hendry Land & Cattle Company. The case was transferred from Circuit Court to the Chancery Court of Rankin County. The chancellor held that CBM had improperly transferred the ...