Umbrella Bank, Fsb v. Jamison, CIV. A-06-CA-100LY.
| Decision Date | 26 May 2006 |
| Docket Number | No. CIV. A-06-CA-100LY.,No. A-06-CA-206LY.,CIV. A-06-CA-100LY.,A-06-CA-206LY. |
| Citation | 341 B.R. 835 |
| Parties | UMBRELLA BANK, FSB, Appellant. v. Pamela Kaye JAMISON, James R. Kersh, Marsha G. Milligan, Trustee, and Randolph N. Osherow, Appellees. |
| Court | U.S. District Court — Western District of Texas |
Douglas W. Alexander, Alexander Dubos Jones & Townsend, LLP, Austin, TX, Dana Livingston Cobb, Alexander Dubose Jones & Townsend, Austin, TX, Sabrina L. Streusand, Hughes & Luce, L.L.P., Austin, Brian Turner, Law Office of Brian Turner, Austin, TX, for UmbrellaBank, FSB, Appellant.
John Worthy Alvis, Attorney at Law, Austin, TX, James D. Jameson, Austin, TX, for Pamela Kaye Jamison, Debtor.
ORDER ON MOTION FOR STAY OF JUDGMENT PENDING APPEAL AND REVIEW OF DETERMINATION OF SUPERSEDEAS BON AMOUNT
Before this Court in cause number A-06-CA-100-LY is the appeal of Umbrella Bank, FSB from the bankruptcy court's Amended Judgment in an adversary proceeding styled In re: Pamela Kaye Jamison, Debtor; Umbrella Book, FSB v. Pamela Kaye Jamison, James Kersh and Marsha Milligan, Trustee, Case No. 03-15244-FM, Adversary No. 04-1055-FM, signed November 17, 2005.1 Also pending in the same cause is Umbrella Bank's Motion For Stay Of Judgment Pending Appeal And For Review Of Determination Of Supersedeas Bond Amount filed February 24, 2006 (Clerk's Document No. 4), Appellees Pamela Jamison, her bankruptcy trustee Marsha Milligan, Jamison's former husband James Kersh, and his bankruptcy trustee, Randolph Osherow's response (Clerk's Document No. 8), and Appellant Umbrella Bank's reply (Clerk's Document No. 10). By its motion, Umbrella Bank asks this Court to modify the supersedeas bond amount of $1,672,891.80 set by the bankruptcy court to stay execution of the Amended Judgment on appeal. The amount represents the full amount of damages awarded by the bankruptcy-court judgment and two years of interest.2 See Fed. Bankr.R. 8005; Fed.R.Civ.P. 62(d). Specifically, Umbrella Bank asks this Court to reduce the amount of the supersedeas bond to $167,780.84, an amount it contends is in accordance with the applicable Texas law. See Tex. Civ. Prac. & Rem.Code Ann. § 52.006 (West Supp. 2005) ("Section 52.006").
On March 17, 2006, Umbrella Bank moved for a temporary stay of execution of the Amended Judgment while this Court considered the motion to review the supersedeas (Clerk's Document No. 9). After a hearing, at which all parties were represented by counsel, this Court granted the bank's motion and temporarily set supersedeas at $167,780.84 (Clerk's Order No. 14). Umbrella Bank has deposited $167,780.84, into the registry of this Court.
After considering Umbrella Bank's motion, the response, the reply, the arguments of counsel, the file, and the applicable law, this Court is of the opinion that the motion should be granted and that the amount of supersedeas to stay execution of the Amended Judgment pending appeal should be modified to $167,780.84.
The factual background and history of this case is set forth in the bankruptcy court's findings of fact in its November 7 Memorandum Opinion rendered in the underlying adversary proceeding. At issue are various transactions between Umbrella Bank, a chartered federal savings bank under Illinois law, and Jamison, Kersh and their company, Texas Financial Corporation ("TFC") a wholesale mortgage business. Between 1998 and 2000, Jamison and Kersh, who were married at the time, along with other individuals, were shareholders, directors, and officers why, operated TFC. TFC maintained operating account number 212061601 at the bank. Additionally, the bank extended to TFC a warehouse line of credit. In 1998 the bank extended to Jamison and Kersh home-equity revolving line of credit, count number 285004736, in the original principal amount of $125,000. On April 17, 2000, the bank also extended a home-equity loan, account number 1115005872, to Jamison and Kersh in the amount of $595,000. The property at issue, located in Austin, Travis County, Texas, was the homestead of Jamison and Kersh.
Following an audit in early 2000, the hank's auditors expressed concern about TFC's warehouse line of credit, specifically TFC's inability to timely sell its loans in the secondary market. TFC was often past due or in an overdraft position regarding its accounts with Umbrella Bank. Among the several claims in the underlying adversary proceeding was Jamison and Kersh's claim that the bank conditioned the extension of the home-equity loan on using a portion of the proceeds to repay their earlier-created home-equity line of credit and to pay certain sums owed by TFC to the bank. The final HUD-1 Settlement Statement pertaining to the home-equity loan reflects a payment to the bank of $346,014.74 and a payment of $217,080.92 disbursed to Jamison and Kersh. According to the closing records, the title company wired the $346,014.74 payment to the bank pursuant to the written directions of Umbrella Bank loan officer Ralph Rosynek, who was overseeing the home-equity loan. Of the $346,014.74 paid to the bank, $226,089.74 was applied the bank to repay Jamison and Kersh's home-equity revolving line of credit loan. As of the time of the bankruptcy-court hearing, the bank was unable to account for the application of the remaining $119,925.00. The bank contends that $68,000 of the funds were applied, at the request of Kersh, to TFC's overdrafts.
On June 27, 2001, Umbrella Bank determined that Jamison and Kersh's home-equity loan was in default, sent them a notice of acceleration, and demanded that they promptly pay $595,668.87. Up to this point, payments on the home-equity loan had been made by or on behalf of Jamison Kersh in the total amount of $95,227.20. On December 14, 2001, counsel for Jamison and Kersh sent the bank a letter informing it that the home-equity loan was unlawful, the lien against the homestead invalid, and the bank had violated Texas usury laws.
In April 2002, Umbrella Bank filed an application for judicial foreclosure of the home-equity deed-of-trust lien securing the home-equity loan signed by Jamison and Kersh in state district court in Travis County, Texas. Later in April, and before being served with the application for foreclosure, Jamison and Kersh filed a separate action in state district court, claiming that the bank's lien against their homestead was invalid, that the bank should be required to forfeit the principal and interest paid to it by Jamison and Kersh, that the loan charged an usurious interest rate, and they are entitled to recover from Umbrella Bank state statutory usury penalties, and attorney's fees. By an agreed order, the state court consolidated Jamison and Kersh's action with Umbrella Bank's foreclosure action. Following consolidation, Jamison and Kersh each filed voluntary petitions in bankruptcy pursuant to Title 11 United States Code, chapter 7. The filing of the bankruptcy petitions resulted in a stay of the state-court action. See 11 U.S.C. § 362(a)(1). In February 2004, the bankruptcy court lifted the stay and allowed the state-court action to proceed. Milligan, however, removed the state-court action to the bankruptcy court. See 28 U.S.C. §§ 157, 1334, 1452; Fed. Bankr.R. 7001, 9027 (). The property securing the home-equity loan was sold pursuant to a separate order of the bankruptcy court, and Milligan retains the proceeds of that sale pending further order of the bankruptcy court. The parties stipulated to amounts of attorney's fees, costs, and expenses each had incurred, and that such amounts were reasonable and necessary.
The bankruptcy court tried the adversary proceeding in November 2005, and ordered the following: (1) the $595,000 home-equity loan violates the Texas Constitution, therefore, it is invalid, unlawful, and unenforceable and Umbrella Bank must forfeit all principal and interest owed or paid by Jamison and Kersh under the loan;3 (2) Umbrella Bank must repay to Jamison and Kersh all interest paid, $95,227.20; (3) Umbrella Bank violated Texas usury laws by charging and receiving interest in excess of the lawful rate, and as a penalty, must pay Jamison and Kersh $605,568.12;4 (4) Umbrella Bank also violated Texas law by charging Jamison and Kersh in excess of double the maximum amount of lawful interest and, as an additional penalty, must pay them $779,078.67;5 (5) Umbrella Bank must pay Jamison and Kersh's reasonable attorney's fees in specified amounts;6 and (6) Umbrella Bank must pay Jamison and Kersh $1,625 for costs and expenses.
On December 19, Umbrella Bank moved in the bankruptcy court for a stay of the Amended Judgment pending appeal and that supersedeas be set at $167,780.84 under Texas law. The bank contends that in determining the amount of the bond, the bankruptcy court must consider Federal Rule of Civil Procedure 62(f) and Fifth Circuit authority, which leads to the conclusion that a federal court must look to state law to determine the amount of supersedeas required to stay execution of the judgment on appeal. See Fed.R.Civ.P. 62(f); Castillo v. Montelepre, Inc., 999 F.2d 931, 942 (5th Cir. 1993).
The bankruptcy court held a hearing on the motion, and after taking the matter under advisement, concluded that the amount of supersedeas should be set under Federal Rule of Civil Procedure 62(d) and ordered that to stay execution of the Amended Judgment pending appeal, Umbrella Bank must post supersedeas in the amount of $1,672,891.80. Umbrella Bank now asks this Court to reduce the supersedeas amount to $167,780.84, which it contends is the amount it would have bee' required to post to stay execution of the same judgment had the cause proceeded in Texas state court.7 See Fed. R. Bankr.P. 8005 ().
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