FDIC v. Benson

• Decision Date: 03 March 1994
• Docket Number: Civ. A. No. H-93-640.
• Citation: 867 F. Supp. 512
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Fred J. BENSON, John J. Koldus, III, Daniel C. Pfannstiel, Robert A. Lacey, Robert W. Siegert, Jr., H.K. Odom, Dale Sawyer, Chris Sawyer, the Unknown Heirs of Joe Sawyer, Louise J. King as Independent Executrix of the Estate of Luther G. Jones, Alvin B. Wooten, James C. Smith, Britton L. Rice, Gary D. Guest, Chalon Jones, Morris F. Hamilton, Jr., Jack W. Lester, Nathan R. Hines, M. Patrick Siegert, Bill Youngkin, and Donna R. Davis, Defendants.
• Court: U.S. District Court — Southern District of Texas

867 F. Supp. 512

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Fred J. BENSON, John J. Koldus, III, Daniel C. Pfannstiel, Robert A. Lacey, Robert W. Siegert, Jr., H.K. Odom, Dale Sawyer, Chris Sawyer, the Unknown Heirs of Joe Sawyer, Louise J. King as Independent Executrix of the Estate of Luther G. Jones, Alvin B. Wooten, James C. Smith, Britton L. Rice, Gary D. Guest, Chalon Jones, Morris F. Hamilton, Jr., Jack W. Lester, Nathan R. Hines, M. Patrick Siegert, Bill Youngkin, and Donna R. Davis, Defendants.

Civ. A. No. H-93-640.

United States District Court, S.D. Texas, Houston Division.

March 3, 1994.

COPYRIGHT MATERIAL OMITTED

Bobby Nick Turner, F.D.I.C., Dallas, TX, for F.D.I.C.

Eugene B. Wilshire, Jr., Wilshire Scott Halbach & Dyer, Houston, TX, for Fred J. Benson, John J. Koldus, Daniel C. Pfannstiel, Robert A. Lacey, Robert W. Siegert, Jr., Dale Sawyer, Chris Sawyer, The Unknown Heirs of Joe Sawyer, Louise J. King, Alvin B. Wooten, James C. Smith, Britton L. Rice, Gary D. Guest, Chalon Jones, Morris F. Hamilton, Jr., Nathan R. Hines, M. Patrick Siegert, Donna R. Davis, M.K. Odom, Jr., Jack W. Lester, Jr. Bill Youngkin, pro se.

Maureen Powers, Asst. Atty. Gen., Finance Div., Austin, TX, for Dan Morales.

ORDER

HARMON, District Judge.

Pending before the Court in the above referenced action against twenty-two former directors and officers of the University National Bank of College Station, Texas ("UNB"), a federally insured national bank that failed, and against the heirs¹ of two deceased directors for damages arising out of alleged negligence, gross negligence, negligence per se, and breach of duties of obedience, care, and loyalty are the following motions:

(1) A motion to dismiss, or, alternatively for partial summary judgment from Director Defendants Fred J. Benson, John Koldus III, Louise King, Nathan R. Hines, Jack W. Lester, H.K. Odom, Daniel Pfannstiel, Alvin Price, Britton Rice, Patrick Siegert, Robert W. Siegert, Jr., James Connor Smith, Joe Stanley Stephen, and Alvin Wooten (instrument # 29);

(2) Supplemental motion of Defendant Britton Rice for summary judgment (# 43), which incorporates # 29;

(3) Motion of Defendant Bill Youngkin to dismiss, or, alternatively, for summary judgment (# 44), which also incorporates # 29;

(4) Motion to dismiss, or, alternatively, motion for partial summary judgment, or, alternatively, for more definite statement from Defendants Gary D. Guest, Donna R. Davis, M.L. Cashion, Morris F. Hamilton, Robert A. Lacey, and Oliver Bishop (# 48), also incorporating # 29; and

(5) Rule 12 motion of the Sawyer Defendants or, alternatively, motion for summary judgment (# 50), incorporating limitations challenge of # 29.

The Court initially addresses the motions to dismiss for failure to state a claim, or, alternatively, for partial summary judgment on the grounds that all claims based on events prior to March 8, 1988 are barred by Texas' two-year statute of limitations. Tex. Civ.Prac. & Rem.Code Ann. § 16.003 (Vernon 1986); FDIC v. Nathan, 804 F.Supp. 888, 892 (S.D.Tex.1992). The last two motions contain some of the same challenges.

First Defendants argue generally that the claims against them are barred by the Texas business judgment rule,² which is a substantive rule of law requiring pleading and proof to avoid its reach, as well as being a defense to negligence actions. Specifically they maintain that Count One, breach of the duty of obedience by ultra vires acts, fails to plead any ultra vires acts and alleges no actionable participation in any of the stated banking transgressions by the former directors and members of the loan committee in approving, ratifying, or permitting loans that allegedly violated federal laws and regulations for banking institutions. They urge that the FDIC has failed to allege actual knowledge by the directors at the time they approved the loans that the loans did not comply with the laws or regulations or participation in these alleged illegal acts or that such actions exceeded their authority. They maintain that while their conduct in approving and ratifying loans may have been negligent, it was not ultra vires, i.e., beyond their corporate power, and that their conduct is therefore protected by the business judgment rule. The directors and members of the loan committee clearly had the authority to ratify or approve loans submitted to them by officers and employees of the bank, almost all after the loans had been consummated and funded, and their failure to monitor the latters' preparation of loans does not subject them to personal liability. Furthermore, the fact that an act is illegal does not make it ultra vires. Nor are they grossly negligent for "abdicating" their duties, insist Defendants, because as the amended complaint charges, they acted: they permitted without questioning certain corporate transactions and actively approved the loans. Joy v. North, 692 F.2d 880 (2d Cir.1982), cert. denied, 460 U.S. 1051, 103 S.Ct. 1498, 75 L.Ed.2d 930 (1983); Brown, 812 F.Supp. at 726. Defendants insist that even if the complaint had alleged an ultra vires act, no claim was stated because the FDIC has failed to plead any negligence by the directors that led to violation of a statute and damage that was proximately caused by that negligence.

Defendants contend that the remaining counts also fail to state a claim. Count Two's claim of breach of the fiduciary duty of loyalty fails to state a claim because there are no charges that any former director was adversely "interested" as to UNB. Counts Three and Four, alleging negligent and grossly negligent breach of a director's duty of care, fail to state claims because voting to approve extensions of credit in the ordinary course of board meetings is protected by the business judgment rule and as a matter of law does not constitute gross negligence. They insist there are no facts alleged to support gross negligence. Count Five for negligence per se fails to state a claim again because such a claim is still a negligence action precluded by the business judgment rule and because the directors, unlike UNB, did not lend money, were not regulated, and lacked the legal capacity to violate the lending laws.

Second, Defendants contend that the claims were time-barred before Plaintiff the Federal Deposit Insurance Corporation ("the FDIC") took over the insolvent bank³ and therefore the FDIC, as an assignee of UNB, cannot assert them. They insist that Texas law does not recognize the adverse domination doctrine, which tolls the statute of limitations where there is domination of a corporation by wrongdoers. Furthermore, given that the purpose of the adverse domination doctrine is protection of the shareholders of a corporation from the hidden acts of fraudulent management, they argue that there was no adversity here after January 1, 1986 because the board of directors of the single shareholder, University Bancorporation, Inc. ("Bancorp"), which acquired one hundred percent of the common stock of UNB, effective as of January 1, 1985, was virtually identical to UNB's board of directors and therefore the shareholder had full knowledge of the alleged wrongdoing after the acquisition.

Defendants further assert that because one hundred percent of the common stock of UNB was sold at a fair price on December 31, 1984, all claims against officers and directors for alleged nonfeasance and malfeasance that occurred before the sale are barred by the "Bangor Punta Doctrine," which precludes claims by a corporation or its successors in interest against the officers and directors for acts that occurred prior to a fair value sale of all of the corporation's common stock. Bangor Punta Operations, Inc. v. Bangor & Aroostook Railroad Co., 417 U.S. 703, 94 S.Ct. 2578, 41 L.Ed.2d 418 (1974). Texas has adopted this doctrine. Advanced Business Communications, Inc. v. Myers, 695 S.W.2d 601, 605-06 (Tex.App. — Dallas 1985, no writ). The rationale of the doctrine is that permitting new shareholders to receive the benefits of claims against management for prior acts would permit a windfall to the purchasers because the price they would have paid for the shares of stock would have already been deflated because of the wrongdoing. Id., 417 U.S. at 711-13, 94 S.Ct. at 2583-84. The presumption is that the new owners paid a decreased value for the shares of stock because their value was reduced by the wrongful acts. Id.

STANDARDS OF REVIEW

In reviewing the sufficiency of a complaint in response to a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), before any evidence has been submitted, the district court's task is limited. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support its claims. Id. The district court should consider all allegations in favor of the plaintiff and accept as true all wellpleaded facts in the complaint. Griffith v. Johnston, 899 F.2d 1427, 1432-33 (5th Cir. 1990), cert. denied, 498 U.S. 1040, 111 S.Ct. 712, 112 L.Ed.2d 701 (1991); Lawal v. British Airways, PLC, 812 F.Supp. 713, 716 (S.D.Tex.1992). Dismissal is not appropriate "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

The movant seeking a federal summary judgment initially must inform the court of the basis for its motion and point out those portions of the pleadings, depositions, answers to interrogatories, and admissions on file that demonstrate the absence of a genuine issue of material fact and show that it is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The movant need not negate the opposing p...