926 F.2d 462 (5th Cir. 1991), 90-2650, Federal Deposit Ins. Corp. v. Lanier

Docket Nº:90-2650
Citation:926 F.2d 462
Party Name:FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellee, v. Joseph P. LANIER, et al., Defendants, and Bill D. Whittington and Thomas J. O'Grady, Defendants-Appellants.
Case Date:March 18, 1991
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 462

926 F.2d 462 (5th Cir. 1991)





Joseph P. LANIER, et al., Defendants,


Bill D. Whittington and Thomas J. O'Grady, Defendants-Appellants.

No. 90-2650

United States Court of Appeals, Fifth Circuit

March 18, 1991

Rehearing Denied April 11, 1991.

Page 463

Jack D. Hicks, Robert T. Cain, Jr., Zeleskey, Cornelius, Hallmark, Lufkin, Tex., for Whittington and O'Grady.

Preston C. Goodwin, Spring, Tex., for plaintiff-appellee.

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

Before JOHNSON, SMITH, and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Defendants guaranteed notes made by D-1 Enterprises, Inc., and its three subsidiaries. The Federal Deposit Insurance Corporation (FDIC), acting in its corporate capacity for the failed bank that had extended the loan, obtained a deficiency judgment against two of the guarantors. Because the bank gave proper notice of its intent to sell the inventory, we affirm the judgment in favor of the FDIC.


Defensive Security Southwest, Inc. (Defensive Security), Defensive Fire Control, Inc. (Defensive Fire), and Unisec, U.S.A., Inc. (Unisec), were distributors and installers of fire alarm and security systems. In 1982, Defensive Security executed a promissory note for $350,000 payable to Commercial State Bank and gave the bank a security agreement covering its accounts receivable and inventory. In addition, Bill Whittington, Joseph Lanier, James Devlin, and Thomas O'Grady contemporaneously gave the bank a continuing guaranty. Defensive Security soon executed another promissory note for $200,000, which was cross-collateralized with the prior note.

Subsequently, with the bank's approval, the shareholders of Defensive Security, Defensive Fire, and Unisec reorganized their companies under a single holding company named D-1 Enterprises, Inc. (D-1), with the three former corporations becoming wholly-owned subsidiaries of D-1. This new corporation then received a revolving line of credit from the bank, evidenced by a promissory note for $1,000,000 (the D-1 note). As collateral, the bank received a security interest in the accounts receivable and inventory of D-1, Defensive Security, and Defensive Fire, and a pledge of stock in D-1. In addition, O'Grady, Whittington, Devlin, and Thomas W. Crafton executed a new, continuing guaranty; Lanier did not guarantee this note.

At this time, D-1 arranged to pay off the $200,000 note and the remainder owing on the $350,000 note. Any remaining principal

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amounts on these notes were incorporated as part of the revolving credit, and at the end of 1982 the outstanding principal balance on the D-1 note was $907,669.74.

The revolving line of credit was renewed several times, the last time being on February 4, 1984. This final note is the subject of the instant suit. The bank decided to foreclose its security interest by calling the D-1 note. D-1 and its subsidiaries then filed chapter 11 bankruptcy petitions.

The bank obtained an order from the bankruptcy court authorizing it to foreclose its security interest against the collateral. The bank then sent notice to the parties, stating that it intended to sell the collateral at either a public or private sale ten days after the letter was sent. Four months later, the inventory was sold for $100,000 at a private sale.

The bank brought a deficiency judgment in state court against the guarantors. The FDIC, in its corporate capacity as purchaser and liquidator of the bank's assets, later intervened and removed the case to federal court. The FDIC filed a motion for summary judgment, seeking recovery against all defendants as guarantors. Lanier and Whittington opposed the motion, stating that the bank did not dispose of the collateral in accordance with Texas law. Lanier filed a motion for summary judgment, asserting that the only notes that he had guaranteed had been paid and discharged.

The district court entered an interlocutory order granting Lanier's motion and granted the FDIC's motion against Whittington, Devlin, and O'Grady as to liability only. Following a bench trial to determine damages, the court granted the FDIC final judgment against the three guarantors for $347,686.51, plus costs, attorneys' fees, and post-judgment interest.

Whittington and O'Grady now appeal. The FDIC has not appealed the judgment denying it relief against Lanier. Whittington and O'Grady challenge only...

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