Giroir v. MBank Dallas, NA

• Decision Date: 25 November 1987
• Docket Number: Civ. No. LR-C-76-531.
• Citation: 676 F. Supp. 915
• Parties: C.J. GIROIR, Jr. and Stock, Inc., Plaintiffs, v. MBANK DALLAS, N.A., Defendant, Federal Savings & Loan Insurance Corporation, Intervenor.
• Court: U.S. District Court — Eastern District of Arkansas

676 F. Supp. 915

C.J. GIROIR, Jr. and Stock, Inc., Plaintiffs, v. MBANK DALLAS, N.A., Defendant, Federal Savings & Loan Insurance Corporation, Intervenor.

Civ. No. LR-C-76-531.

United States District Court, E.D. Arkansas, W.D.

November 25, 1987.

Bruce W. Claycombe, Jones, Claycombe & King, Dallas, Tex., H. Sam Hilburn, Hilburn, Calhoon, Harper & Pruniski, Ltd., North Little Rock, Ark., for plaintiffs.

Winstead, McGuire, Sechrest & Minick, P.C., Dallas, Tex., Robert L. Robinson, Jr., William T. Marshall, Scotty Shively, Hatfield, Robinson, Hodges, Staley, Marshall, Jordan & Shively, Little Rock, Ark., for Mbank.

Doug Smith, Alan Wooten, Warner & Smith, Forth Smith, Ark., Linda Newman, Graham & Jones, Los Angeles, Cal., for Balder Corp.

Donna Mixon, Peter Lovato, Robert Patterson, Hopkins & Sutter, Chicago, Ill., Peter Heister, James W. Cherry, Eichenbaum, Scott, Miller, Liles & Heister, Little Rock, Ark., for Federal Sav. and Loan Ins. Corp.

MEMORANDUM OPINION

MORRIS SHEPPARD ARNOLD, District Judge.

In January, 1986, plaintiff C.J. Giroir, Jr., obtained from defendant MBank Dallas an irrevocable letter of credit¹ in the amount of $13,209,000. In conjunction with the letter of credit, plaintiff Giroir executed a promissory note to MBank for $13,209,000. As collateral, he pledged 133,000 shares of Worthen Bank stock and some promissory notes payable to him by the Balder Corporation.² Stock, Inc., a corporation of which plaintiff Giroir is the sole stockholder, pledged a certificate of deposit worth $1,864,000³ and 109,000 shares of Worthen Bank stock as additional collateral.⁴

On the same day that the letter of credit was issued, FirstSouth, a savings and loan association, "assumed and agreed to pay and perform" plaintiff Giroir's obligations to MBank under the letter of credit and the promissory note.⁵ As security for FirstSouth's assumption of these obligations, FirstSouth pledged all of its current and future assets, including three Treasury notes worth $6,000,000 and two Federal National Mortgage Association securities worth $6,400,000. FirstSouth's liability under the assumption agreement, however, was limited to $8,500,000 or the fair market value of the collateral it had pledged,⁶ whichever was greater. The assumption agreement states that plaintiff Giroir was to "remain obligated and liable" on the letter of credit and the promissory note. Under the terms of the assumption agreement, to which plaintiff Giroir, FirstSouth, and MBank were all parties, MBank had the right to "sell, exchange, release, substitute, or otherwise deal with all or any part of the property now or hereafter securing" the obligations.⁷

In early December, 1986, the Federal Home Loan Bank Board declared FirstSouth insolvent. The Federal Savings and Loan Insurance Corporation (FSLIC) was appointed as receiver for FirstSouth at that time.

In January, 1985, FirstSouth had issued a commitment letter⁸ to plaintiff Giroir stating that FirstSouth would lend plaintiff $3,894,872 in four installments over four years.⁹ When FSLIC took over as a receiver for FirstSouth, it repudiated the commitment letter to plaintiff Giroir and refused to lend him the money that he had been expecting for December, 1986. As a result, plaintiff Giroir was unable to make payments on his promissory notes to the former stockholders of the First National Bank of Fayetteville. The former stockholders then drew on the letter of credit from MBank and were paid $13,184,554 by MBank in January, 1987.

In late January, 1987, MBank notified FirstSouth, by then in receivership, that the letter of credit had been drawn upon and that MBank therefore intended to call on FirstSouth to repay it under the terms of the assumption agreement. MBank advised FirstSouth that, if the debt was not repaid, it would foreclose on the collateral pledged by FirstSouth, including the Treasury notes and the Federal National Mortgage Association securities. Allegedly acting both in its corporate capacity and as receiver for FirstSouth, FSLIC immediately sued in federal court in Dallas to enjoin MBank from foreclosing on FirstSouth's collateral.

In July, 1987, FSLIC, allegedly acting in its corporate capacity only, bought plaintiff Giroir's promissory note from MBank. MBank then transferred to FSLIC the security interests in the Worthen Bank stock, the Balder Corporation promissory notes, and the certificate of deposit. FSLIC then agreed to the dismissal of its lawsuit against MBank.

In early August, 1987, FSLIC notified plaintiff Giroir of its intention to foreclose on the collateral. On August 18, 1987, plaintiff Giroir applied ex parte to this court for a temporary restraining order to enjoin the transfer from MBank to FSLIC of any of plaintiff Giroir's collateral. The order was issued, and although the collateral had already been transferred to FSLIC, the foreclosure action was apparently postponed. Two days later, this court held a full hearing and vacated the temporary restraining order and denied a preliminary injunction.

In September, 1987, plaintiff Giroir filed an amended complaint, alleging that because FSLIC had the power to buy his promissory note from MBank only in its capacity as receiver for FirstSouth, the purchase of that promissory note was a discharge by FirstSouth of his indebtedness to MBank. As a consequence, plaintiff Giroir alleges, instead of transferring his collateral to FSLIC, MBank should have returned the collateral to him.

Plaintiff Giroir sues MBank for breach of contract, conversion, and breach of fiduciary duty and asks for compensatory damages of $9,000,000 and punitive damages of $20,000,000.

FSLIC moved to intervene as a defendant. The court has granted that motion.

Before the amended complaint was filed, MBank had moved to dismiss. The only contention contained in that motion that is still in issue¹⁰ is that venue is improper because of the choice-of-forum clauses in the letter of credit application and agreement and the security agreements. After the amended complaint was filed, MBank again moved to dismiss, contending in addition that the amended complaint failed to state a claim, especially one for punitive damages, and asking, in the event the case is not dismissed, that the court transfer it to the federal district court in Dallas.

The motions to dismiss will be denied, and the case will be transferred to the federal district court for the Northern District of Texas, Dallas Division.

I.

MBank's arguments as to the first amended complaint's alleged failure to state a claim are factual arguments, supplemented by references to documents outside the amended complaint, and thus are better suited for a summary judgment motion. They cannot, of course, be considered on a motion to dismiss.

Count 1 of plaintiff Giroir's complaint clearly alleges the elements of a claim for breach of contract, i.e., the existence of a valid and enforceable contract between the parties, the obligation of the defendant under the contract, a violation by the defendant, and the resultant damages to the plaintiff. See, e.g., Koenning v. Manco Corp., 521 S.W.2d 691, 699-700 (Tex.Civ.App.1975); Rabalaias v. Barnett, 284 Ark. 527, 528-29, 683 S.W.2d 919 (1985).

Count 2 of plaintiff Giroir's complaint clearly alleges the elements of a claim for conversion, i.e., ownership of property by the plaintiff and the exercise of dominion over the property by the defendant in violation of the plaintiff's rights. See, e.g., Staats v. Miller, 240 S.W.2d 342, 344 (Tex.Civ.App.1951), rev'd on other grounds, 243 S.W.2d 686 (Tex.1951); Auston v. Loyd, 533 F.Supp. 737, 740 (W.D. Ark.1982), aff'd, 691 F.2d 503 (8th Cir. 1982).

Count 3 of plaintiff Giroir's complaint clearly alleges the elements of a claim for breach of fiduciary duty, i.e., the existence of a fiduciary relationship between the parties, a breach of the defendant's duty to the plaintiff within that relationship, and the resultant damages to the plaintiff. See, e.g., Watson v. Limited Partners of WCKT, Ltd., 570 S.W.2d 179, 182 (Tex.Civ.App.1978); Raines v. Toney, 228 Ark. 1170, 1179-80, 313 S.W.2d 802 (1958).

As for punitive damages, both tort counts allege that MBank's conduct was willful, intentional, and in conscious disregard of plaintiff Giroir's rights. This is sufficient to state a claim for punitive damages. See, e.g., InterFirst Bank Dallas, N.A. v. Risser, 739 S.W.2d 882, 907 n. 29 (Tex.Ct.App.1987); Johnson v. Brace, 472 F.Supp. 1056, 1060 (E.D.Ark.1979).

The complaint plainly states a claim. The next question to be addressed, then, is whether the choice-of-forum clauses in plaintiff Giroir's letter of credit application and agreement and the security agreements require dismissal of this case.

II.

The letter of credit application and agreement executed by plaintiff Giroir and accepted by MBank contains the following language: "This Agreement is made and is performable in Dallas County, Texas, and the undersigned plaintiff Giroir waives the right to sue or be sued hereon elsewhere." The security agreements executed by plaintiff Giroir and Stock, Inc., contain this language: "This Agreement shall be construed in accordance with the ... applicable laws of the State of Texas and any proceeding hereunder shall be in Dallas County, Texas." The assumption agreement executed by plaintiff Giroir, FirstSouth, and MBank provides: "This Agreement shall be governed by and construed in accordance with the laws of the State of Texas and shall be performable in Dallas, Texas." MBank contends that these provisions prevent plaintiff Giroir from bringing his lawsuit in Arkansas.¹¹

In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 2, 92 S.Ct. 1907, 1909, 32 L.Ed.2d 513 (1972), the Supreme Court examined a choice-of-forum clause in a towing contract that specified that "any dispute arising" was to be "treated before" a London court. The Court found that "absent some compelling and countervailing reason," id. at 12, ...