Bank One, Texas, N.A. v. Taylor

Decision Date18 August 1992
Docket NumberNo. 90-2654,90-2654
Citation970 F.2d 16
Parties, 20 UCC Rep.Serv.2d 732 BANK ONE, TEXAS, N.A. and Federal Deposit Insurance Corporation as Receiver for Mbank Houston, N.A., Plaintiffs-Third Party Defendants-Appellants, v. Suzan E. TAYLOR d/b/a Exploration Services, Defendant-Third Party Plaintiff-Appellee, v. WORTH OPERATING, INC., et al., Third Party Defendants.
CourtU.S. Court of Appeals — Fifth Circuit

Robert D. Daniel, Hirsch & Westheimer, Houston, Tex., for F.D.I.C., etc. and Bank One, Texas.

Fulbright & Jaworski, Houston, Tex., for Bank One, Texas.

Hayden Burns, J. Burke McCormick, Butler & Binion, Houston, Tex., for Suzan Taylor, etc.

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

Before REYNALDO G. GARZA and GARWOOD, Circuit Judges, and MAHON, District Judge. *

MAHON, District Judge:

This appeal arises out of a lawsuit commenced by MBank Greens Parkway, N.A., predecessor of MBank Houston, N.A., (MBank) to recover on three unpaid promissory notes executed by Ms. Suzan Taylor d/b/a Exploration Services (Taylor). A jury trial resulted in a verdict of $9.6 million in favor of Taylor based upon her assertion of various lender liability claims against MBank. For the reasons stated below, we conclude that the punitive damage award is unsustainable, but find there is sufficient evidence to support the remainder of the jury's verdict.


The dispute which brought about the present litigation arose in 1984. Taylor at the time was the sole owner of a company called Exploration Services, a business which provided geological and geophysical consulting services for oil and gas companies. In October 1984, Taylor entered into an agreement with C.I. Oil, Inc. (CI) in which she acquired an interest in a petroleum drilling prospect in Louisiana known as the Comite Prospect. In accordance with their agreement, Taylor deposited $300,000 into two money market checking accounts Though Taylor had originally instructed MBank to pay the deposited funds to CI, she changed those instructions when it appeared that CI could not or would not transfer all of the interest to her in accordance with their agreement. On November 20, 1984, Taylor wrote MBank instructing it to disburse $220,000 of these funds to CI and $80,000 to Sequoia Resources "in accordance with the ... [a]greement by and between Exploration Services and C.I. Oil, Inc. and only upon written authorization of Suzan E. Taylor." The following day, CI and Sequoia agreed to this disbursement arrangement.

                at MBank to pay CI for an interest in the prospect.   The agreement provided that once CI turned over Taylor's interest in the prospect and furnished Taylor the well log showing the well had been drilled to the specified depth, Taylor would authorize MBank to release the $300,000 to CI.   CI had no agreement with MBank nor was it a signatory on either account

On December 17, 1984, CI produced the well log described in the agreement and made written demand upon MBank for the $220,000, informing the bank that CI would hold MBank liable for any disbursement of those funds in a "manner contrary to the distribution instructions of Taylor's letter of November 20." Because Taylor and CI continued to dispute the amount of lease interest to be conveyed under their agreement, Taylor refused to provide MBank written authorization for the release of the $220,000 to CI. MBank therefore immediately froze the accounts and demanded that Taylor settle her dispute with CI. Despite Taylor's repeated requests for MBank to release her funds, MBank continued the freeze on Taylor's accounts for almost four months, insisting that CI and Taylor resolve their differences. During this period, Taylor lost the opportunity to participate in both the Comite Prospect and another prospect called Santa Paula.

When Taylor made another written demand for the funds on March 7, 1985, MBank filed a state court interpleader action against Taylor and CI. Taylor and CI eventually reached a settlement and gave consistent instructions to MBank as to the disposition of the account balances on April 12, 1985. MBank, however, refused to dismiss the state interpleader action or permit Taylor to have access to the funds until she signed a release absolving MBank from all liability. On April 16, 1985, MBank, Taylor and CI reached a final settlement of the interpleader action in which MBank agreed to absorb its attorney's fees in return for Taylor's agreement to release MBank from any liability. The interpleader action was later dismissed on May 8, 1985, on MBank's motion for nonsuit. The next day Taylor received a letter from MBank demanding that all four of her outstanding loans be paid in full within five days 1 even though the two secured loans were not past due. Six days later, MBank repossessed Taylor's Jaguar automobile and commenced admiralty proceedings in federal court to repossess Taylor's yacht which was later seized and sold at public auction.

MBank then initiated the present litigation in state court to recover the indebtedness on the two unsecured loans and recover the deficiency on the note secured by the Jaguar automobile. Taylor filed a counterclaim against MBank contending that the release executed by Taylor in settlement of MBank's interpleader action was procured by fraud and economic duress and was invalid for want of consideration. In addition, Taylor claimed that because MBank had tortiously frozen her accounts, she lost the opportunity to participate in the Comite and Santa Paula prospects causing her to suffer damages in excess of $28 million. Taylor also asserted that MBank wrongfully accelerated the car and yacht loans and had conspired with her former business partner, Worth Energy Corporation, to her detriment.

The trial of this case lasted seven weeks and produced over 5000 pages of transcript Based upon the jury's answers to the special issues, the district judge entered final judgment against MBank. In the judgment, the court deducted from the jury award the past due principal and accrued interest on two unsecured notes Taylor concededly owed. In addition, the court entered a take-nothing judgment on MBank's claim for the deficiency on the third note secured by Taylor's Jaguar and denied MBank's claim for attorney's fees and expenses in connection with the two unsecured loans. The trial court later denied MBank's motion for judgment notwithstanding the verdict, and final judgment was entered in the amount of $9,639,841.65. 2

                and several volumes of exhibits.   At the conclusion, the jury found MBank liable for engaging in false, misleading and deceptive practices in violation of the Texas Deceptive Trade Practices--Consumer Protection Act (DTPA), Tex.Bus. & Com.Code Ann. §§ 17.41-17.826 (Vernon 1987).   The jury also found MBank had tortiously interfered with Taylor's business dealings, conspired to harm Taylor's business, and failed to act in good faith in connection with the "Comite" accounts as well as the car and yacht loans.   The jury found that, while there was no evidence of fraud in the execution of the settlement agreement, MBank did coerce Taylor through economic duress to sign the release and failed to give valid consideration for the release agreement

MBank thereafter filed post-judgment motions for new trial and to modify, correct, or reform the judgment. Before the state trial court could rule on MBank's motions, MBank was declared insolvent, and the Federal Deposit Insurance Corporation (FDIC) was appointed its receiver. The FDIC, as receiver of MBank, filed a plea in intervention in the state court action and adopted MBank's then current pleadings, including its motion for new trial and motion to modify, correct, or reform the judgment. Following its intervention, the FDIC removed the action to federal district court. The FDIC and Bank One, Texas, N.A., (Bank One), successor-in-interest to MBank, then filed memorandum briefs in support of MBank's previously filed motions for new trial and to alter or amend the judgment. The district court denied the motions, and the FDIC and Bank One appealed the judgment to this court. In this appeal, FDIC, as receiver of MBank, is the proper party to defend against Taylor's counterclaims, while Bank One, successor-in-interest to MBank, is the party entitled to pursue collection on the notes on which MBank originally brought suit.


In the present appeal, the FDIC broadly contends there was insufficient evidence presented at trial to support the jury's findings that Taylor executed the settlement agreement under duress, that the settlement agreement lacked valid consideration, and that MBank committed deceptive practices in freezing Taylor's accounts. We consider the various insufficiency points cited by appellants as an appeal from the trial court's denial of MBank's motion for judgment notwithstanding the verdict and apply the same standards as that of the district court. Melear v. Spears, 862 F.2d 1177, 1182 (5th Cir.1989); Granberry v. O'Barr, 866 F.2d 112, 113 (5th Cir.1988). 3 We are guided in this task by the overriding "principle that 'it is the function of the jury as the traditional finder of fact, and not the Court, to weigh conflicting evidence....' " Treadaway v. Societe Anonyme Louis-Dreyfus, 894 F.2d 161, 164 (5th Cir.1990) (quoting Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir.1969)

                (en banc)).  "Weighing conflicting evidence and the inferences to be drawn from that evidence, and determining the relative credibility of the witnesses, are the province of the jury, and its decision must be accepted if the record contains any competent and substantial evidence tending fairly to support the verdict."  Gibraltar Sav. v. LDBrinkman Corp., 860 F.2d 1275, 1297 (5th Cir.1988) (citing Dartez v. Fibreboard Corp., 765 F.2d 456 (5th Cir.1985), cert. denied, 490 U.S. 1091, 109 S.Ct. 2432, 104 L.Ed.2d

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