Howerton v. Designer Homes by Georges, Inc.

• Citation: 950 F.2d 281
• Decision Date: 10 January 1992
• Docket Number: No. 91-2174,91-2174
• Parties: Guy B. HOWERTON and Linda M. Howerton, Plaintiffs-Appellees, v. DESIGNER HOMES BY GEORGES, INC., Defendant, The Resolution Trust Corporation, Etc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 281

950 F.2d 281

21 Fed.R.Serv.3d 590

Guy B. HOWERTON and Linda M. Howerton, Plaintiffs-Appellees, v. DESIGNER HOMES BY GEORGES, INC., Defendant The Resolution Trust Corporation, Etc., Defendant-Appellant.

No. 91-2174

Summary Calendar.

United States Court of Appeals,

Fifth Circuit.

Jan. 10, 1992.

Rehearing Denied Feb. 19, 1992.

Scott Douglass Cunningham, Brill, Sinex & Stephenson, Dallas, Tex., for defendant-appellant.

Anthony D. Sheppard, Houston, Tex., for plaintiffs-appellees.

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

Before POLITZ, KING, and EMILIO M. GARZA, Circuit Judges.

POLITZ, Circuit Judge:

The Resolution Trust Corporation appeals a judgment reducing a lien to zero and ordering it to satisfy outstanding materialmen and mechanics liens on land owned by Guy B. and Linda M. Howerton. For the reasons assigned, we affirm.

Background

The Howertons owned a subdivision lot free of encumbrances in 1987 when they contracted with Designer Homes by Georges, Inc. for the construction of a home. They then executed a Mechanic's Lien Contract and a Mechanic's Lien Note in the amount of $173,000 payable to Designer Homes, secured by the subdivision lot. Designer Homes transferred the note and lien to CSA Service Corporation, which transferred and assigned the note and lien to Cornerstone Savings Association, which was ultimately taken over by the Federal Savings and Loan Insurance Corporation and then the RTC. The Howertons and the RTC are the parties in the present dispute.

The Mechanic's Lien Note declares that: "This note incorporates and is subject to the mechanic's lien contract." The Mechanic's Lien Contract provides that "[t]his contract shall bind, inure to the benefit of, and be exercised by successors in interest of all parties[,]" and that any holder of the contract "is subject to all claims and defenses which the debtor could assert against the seller [contractor-builder]...." It also provides that the contractor will construct the Howerton residence "in a good and workmanlike manner, according to the plans and specifications agreed upon." If construction is not completed, then the consideration subject to the lien is to be diminished according to the amount necessary to complete construction as agreed. The contractor was further obliged to "pay all costs of construction, including labor, materials, and subcontractors," and to remove any liens from the property.

It is undisputed that the proposed home was never completed and that Designer Homes breached its contractual duties. The district court accepted the evidence that the unfinished structure is fatally flawed from the foundation up and does not conform to controlling plans and specifications. The proper materials were not used; inferior materials were substituted. The experts tendered by the Howertons testified that the construction is so poor that the foundation, roof, and frame could all collapse under the strain of additional weight if completion is attempted. The cost of repairing the many defects is estimated at between $150,000 and $200,000. During the course of construction the president of Designer Homes demanded, and the Howertons paid, over $20,000. In return, the contractor left $10,032.19 in outstanding subcontractor liens and a structure found by the district court to be totally worthless. The estimated cost of removal is $8,000.

After the Howertons complained of the visible defects in the structure Cornerstone accelerated the note and threatened to foreclose. In response the Howertons filed suit in state court, seeking tort and breach of contract damages and an injunction prohibiting foreclosure. The suit was removed to federal court after the FSLIC placed the defendant bank in receivership and intervened in the state proceeding. After the RTC replaced the FSLIC the Howertons amended their pleadings and named the RTC "in every capacity" as a defendant. The district court entered judgment against the RTC in every capacity. The judgment reduces the lien on the property to zero and orders the RTC to remove the $10,032.19 in mechanic and materialmen liens filed against the land. The RTC timely appeals.

Analysis

We review findings of fact under the clearly erroneous standard, Fed.R.Civ.P. 52, and give plenary review to conclusions of law. FDIC v. Lake Country National Bank, 873 F.2d 79 (5th Cir.1989).

The RTC alleges that because it was never before the court in a corporate capacity the court erred in entering judgment against it "in every capacity." The RTC succeeded the FSLIC as conservator or receiver. 12 U.S.C. § 1441a(b)(6). The RTC, in its corporate capacity, is not liable for claims against the RTC in its capacity as conservator or receiver. See Beighley v. FDIC, 868 F.2d 776 (5th Cir.1989); FDIC v. Roldan Fonseca, 795 F.2d 1102 (1st Cir.1986); and Trigo v. FDIC, 847 F.2d 1499 (11th Cir.1988) (discussing FDIC in its corporate, receiver, and conservator capacities). Accordingly, the RTC argues that the district...