Farina v. Mission Inv. Trust

Decision Date23 April 1980
Docket NumberNo. 78-1579,78-1579
Citation615 F.2d 1068
PartiesJoe P. FARINA, Plaintiff-Appellant, v. MISSION INVESTMENT TRUST et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Richard L. Jackson, Dallas, Tex., for plaintiff-appellant.

Royal H. Brin, Jr., Dallas, Tex., for Federal Deposit Ins. Corp.

O. Carl Hamilton, Jr., McAllen, Tex., for Rio Grande Building and Loan Association.

Hughes, Luce, Hennessy, Smith & Castle, H. Robert Powell, William B. Finkelstein, Dallas, Tex., for Midland Mortgage Investors Trust, et al.

Thompson, Knight, Simmons & Bullion, Molly Steele Bishop, Dallas, Tex., for Mission Investment Trust.

Appeal from the United States District Court for the Northern District of Texas.

Before COLEMAN, Chief Judge, REAVLEY and ANDERSON, Circuit Judges.

COLEMAN, Chief Judge.

This action began as a lawsuit in the 162nd Judicial District Court of Dallas County, Texas by Joe P. Farina to set aside a $14 million debt he owed on a complex real estate transaction. It ended with a federal district court dismissing Farina's suit, granting summary judgment to defendants on a counterclaim, and finding that Farina failed to prosecute his claim with diligence.

Farina appeals on the grounds that (1) improper transfer of this case from the state to federal district court deprives the federal district court of essential subject matter jurisdiction, and compels that we reverse the judgment and send it back for remand to the state court, and (2) that the summary judgment against Farina and for defendants was an abuse of the court's discretion.

We affirm the District Court's actions. We find the District Court had subject matter jurisdiction in this case, and that it did not abuse its discretion when it dismissed the plaintiff's suit, entered a summary judgment for defendants, and found the plaintiff did not diligently prosecute his case.

Prior to April 25, 1973, appellant Joe P. Farina (referred to as "Farina") entered into a series of complex mortgage agreements to purchase approximately 592 acres of land for resale. On April 25, 1973, Farina executed a promissory note for $16 million payable to Gulf South Advisors, Ltd. ("Gulf"). Gulf was a consortium, made up of five participants: (1) Mission Investment Trust (Mission); (2) Midland Mortgage Investors Trust (Midland); (3) Rio Grande Building and Loan Association (Rio); (4) International City Bank of New Orleans (ICB); and (5) Standard and Accident Insurance Company. 1 The $16 million was a wraparound loan, covering previous advances, interest, tax due, and those advances and other expenses anticipated over the life of the loan.

The record does not provide much information on Farina's repayment of these creditors in the first year of his loan, but in 1975 the $16 million loan was in default, and Gulf went into bankruptcy. 2 The $16 million loan became part of Gulf's bankruptcy estate. Farina had indicated to his creditors that he might charge them with violation of the usury laws of Texas. 3 The consortium wanted to continue the loan, and wanted to get it out of the bankruptcy estate, but it did not want to face a suit with Farina on the question of usury. Based on these considerations Farina and the consortium came to an agreement. The consortium advanced Farina $14 million to pay off the principal and interest due on the $16 million loan. They added Gary Null as Trustee of the Deed of Trust, and Texas American Bank as the nominee to hold the note for the lender institutions. Prior to making advances to Farina the consortium asked him to sign two releases. The First Release was for purposes of the bankruptcy process, and the second was for the $14 million note.

On the First Release Farina made an appearance before the United States District Court of the Western District of Oklahoma, to get the approval of the renegotiated loan from the judge involved in the bankruptcy process. Judge Luther Bohanon approved the release, finding it to be made for mutual consideration. 4 Farina waived all claims of usury involving the $16 million loan in the First Release. 5 In the Second Release Farina stated that he had consulted counsel and based upon that advice had determined that the $14 million loan was not usurious either. 6 Both releases were signed July 30, 1975.

Farina's repayment of the $14 million loan was no better than his repayment of the $16 million loan. In 1977 he was in default again. He was given 21 days notice that on April 5, 1977, the Trustee would sell the Deed of Trust at the courthouse door in Dallas. Farina filed a suit in the 162nd District Court of Texas on April 5, 1977 (just 31 minutes before the foreclosure sale), asking the court to issue an injunction to prevent the sale, and asking it to void the $14 million debt as being in violation of the Texas usury laws.

In his suit Farina named as defendants Mission, Midland, ICB, Rio, Exchange Bank and Trust (later called Texas American Bank), and Gary Null. Farina served the petition for ICB to the Federal Deposit Insurance Corporation (FDIC), stating in the petition that he understood that ICB was in receivership, and that the FDIC was its receiver.

The FDIC anticipated Farina's suit. Less than an hour after Farina filed in the 162nd Court the FDIC filed a Petition for Removal in the United States District Court of the Northern District of Texas. FDIC cited 12 U.S.C. 1819(4) 7 as its basis for removal, and for jurisdiction in federal courts. In its sworn Petition for Removal the FDIC stated it was a "successor in interest" to ICB. In its Original Answer, dated April 25, 1977, the FDIC denied under oath that it was a receiver of ICB. 8

Farina's suit was moved immediately to federal district court. Farina made no objection to this removal, or to FDIC's assertion that it was a Party in Farina's suit during active litigation of this case. On November 30 FDIC filed a Motion for Summary Judgment. From April 5, 1977, to March 6, 1978, Farina filed answers to FDIC's motions, and dealt with FDIC as a valid party to the suit. He did not object to FDIC's participation until after final judgment was entered against Farina, almost a year after the suit was originally filed.

Farina was not granted his injunction. Trustee Null sold the property for.$1.8 million April 5, 1977. Texas American Bank then brought a counterclaim against Farina on behalf of the other members of the consortium, for the balance owed on the $14 million loan. The counterclaim was filed May 25, 1977.

From April 25, 1977 to December 9, 1977, all members of the consortium filed original answers to Farina's suit, raising the defense of accord and satisfaction, citing Farina's First and Second Release.

On August 22, 1977 Texas American Bank, in the pursuit of its counterclaim, filed Interrogatories and Requests for Admissions to Farina. The Requests for Admissions, if established, would have proven all elements of the defendants' counterclaim. On August 31, 1977 David Hunt filed a motion to withdraw as Farina's attorney, citing his "inability to establish rapport and cooperation with" Farina. The court granted this motion September 6, but warned Farina that he had 30 days to find another attorney. Failure to meet this deadline, the court warned, would result in dismissal of Farina's case with prejudice. Hunt sent Farina a letter September 15, 1977 enclosing the Judge's order, and advising Farina "It is very important that you secure another counsel prior to October 6, 1977 . . . ".

On October 3, 1977, 42 days after serving the Requests for Admissions and Interrogatories on Farina, Texas American Bank, having received neither a response nor an objection, filed a motion to have the Admissions deemed answered in its favor, in accordance with Rule 36(a) 9 of the Federal Rules of Civil Procedure. It also moved under Rule 56 for a Summary Judgment against Farina's claim and for defendants' counterclaim.

On October 11 Farina asked the Court for an extension of the 30 days given to find a new attorney. The Court extended the deadline to November 11, 1977. Farina failed to get an attorney by November 11, and did not request another extension. In the interim all other defendants filed motions for summary judgment. The Court set December 12, 1977 for a hearing on all motions.

On December 9, 1977, Farina found a new attorney. This was 104 days after Farina's old attorney had asked the Court for permission to withdraw, and 94 days after the Court had given Farina 30 days to find another attorney. Farina asked that the December 12 hearing be postponed, and it was put off until December 21, 1977.

On December 20 and 21st Farina took the first step in prosecution of his suit since he had filed the original petition in state court April 5. He filed a flurry of motions. 10 The most important of the motions were deficient both in form and substance. His Response to Request for Admissions, filed December 20, 1977, contained assertions that he could neither affirm nor deny some Requests, without stating that he had made a reasonable inquiry into the matter in question. 11 He refused to admit or deny admissions concerning matters plainly within his knowledge, and concerning documents within his possession. 12 Farina's Affidavit in Opposition to Motion for Summary Judgment, also filed December 20, attempted to incorporate by reference his original pleadings, containing only broad allegations of fact and law. 13 He made no response to defendants' claims of accord and satisfaction through the releases.

On December 21, 1977, Texas American Bank made a motion to determine the sufficiency of Farina's answers. This motion was argued at the hearing held on the same day, along with previous motions to deem admissions answered, and motions by all defendants for summary judgment against Farina. It was not until after the December 21, hearing, later in that day, that Farina responded to defendants' assertion of accord and...

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