Federal Deposit Ins. Corp. v. Registry Hotel Corp.
| Decision Date | 24 February 1986 |
| Docket Number | Civ. A. No. CA 3-85-1085-G. |
| Citation | 639 F. Supp. 812 |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver, Plaintiff, v. REGISTRY HOTEL CORPORATION and Registry Dallas Associates, Defendants. |
| Court | U.S. District Court — Northern District of Texas |
T. Ray Guy & Janie L. Frank, Jenkens & Gilchrist, Dallas, Tex., for plaintiff.
E. Russell Nunnally & Alan B. Rich, Johnson & Swanson, Dallas, Tex., for defendants.
This case is before the court on the motion for summary judgment of defendants Registry Hotel Corporation and Registry Dallas Associates ("Registry"). After considering the arguments of counsel and the supporting affidavits, the court concludes that the motion should be denied.
On December 10, 1985, the court denied Registry's motion for summary judgment, holding that Tex.Bus. & Com.Code § 9.318(b) (Vernon Supp.1986) governed the transaction at issue and that material issues of fact existed as to whether the assigned contract was terminated "in good faith and in accordance with reasonable commercial standards." After plaintiff, Federal Deposit Insurance Corporation ("FDIC"), apparently satisfied itself through pretrial discovery that Registry had acted in good faith and in accordance with reasonable commercial standards, it requested the opportunity to brief another issue in response to Registry's motion. The court granted the request and now addresses the newly-raised issue.
Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R. Civ.P. 56(c). See, e.g., Galindo v. Precision American Corp., 754 F.2d 1212, 1216 (5th Cir.1985); Albertson v. T.J. Stevenson & Company, Inc., 749 F.2d 223, 228 (5th Cir.1984).
In considering a motion for summary judgment, the court must inspect the entire record and draw all reasonable inferences in favor of the party opposing the motion. In re Municipal Bond Reporting Antitrust Litigation, 672 F.2d 436, 440 (5th Cir.1982).
The movant has the burden of showing that no genuine issue of material fact exists, but the nonmovant must respond to an otherwise sufficient motion:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
Fed.R.Civ.P. 56(e). See, e.g., United States v. An Article of Drug Consisting of 4,680 Pails, Each Pail Containing Sixty Packets, 725 F.2d 976, 984-85 (5th Cir.1984); Smith v. Flagship International, 609 F.Supp. 58, 62 (N.D.Tex.1985).
FDIC, as receiver of Indian Springs State Bank of Kansas City, Kansas ("the Bank"), filed this case to recover loans extended to Frownfelter Construction Company ("FCC"). The following facts are undisputed:
1. The Bank made a series of loans to FCC in the total principal amount of $102,217.92. Repayment was due in May and June 1983.
2. On February 24, 1982, FCC and Registry executed a $170,000 construction contract.
3. In consideration for the loans, Stanley Frownfelter ("Frownfelter"), owner and president of FCC, signed a security agreement giving the Bank a security interest in the Registry contract.
4. On April 16, 1982, Registry accepted the assignment by executing the following acknowledgment:
This assignment is acknowledged and accepted this 16th day of April, 1982, and assignee will be named as co-payee on any disbursement of above named contract.
J.R. Thoele, vice-president and secretary-treasurer of the Registry Hotel Corporation, signed the acknowledgment and acceptance.
5. Prior to November of 1982, Registry terminated the contract for failure of FCC to obtain the necessary bonds.
6. In November of 1982, Registry contracted with Uni-Lock Pavestone ("Pavestone"), FCC's former subcontractor, to perform the work FCC was to perform.
7. In January of 1983, Pavestone subcontracted with Frownfelter's company Pave-Lock Systems to provide labor for the installation of paving stones.
8. FCC defaulted on the loans, and FDIC sued Registry for the $102,217.92 deficiency.
An effective assignment requires notice to the account debtor (1) that the amount due or to become due has been assigned and (2) that payment is to be made to the assignee. Tex.Bus. & Com. Code Ann. § 9.318(c) (Vernon Supp.1986). See Olshan Lumber Company v. Bullard, 395 S.W.2d 670, 672 (Tex.Civ.App. — Houston 1965, no writ). The court concludes that the assignment of the Registry-FCC contract was effective.
If an account debtor fails to comply with a valid assignment and improperly pays the assignor, the account debtor may be liable to the assignee for the amount of the improper payment. Estate of Haas v. Metro-Goldwyn-Mayer, Inc., 617 F.2d 1136, 1139 (5th Cir.1980); Citizens National Bank of Orlando v. Vitt, 367 F.2d 541, 547 (5th Cir.1966); Manes Constructions Company, Inc. v. Wallboard Coatings Company, Inc., 497 S.W.2d 334, 337 (Tex. Civ.App. — Houston 14th Dist. 1973, no writ); East Texas Bank & Trust Company v. Mid-South Contractors, Inc., 451 S.W.2d 782, 784 (Tex.Civ.App. — Tyler 1970, no writ).
FDIC contends that Registry failed to pay the Bank in accordance with the assignment. It therefore seeks to recover from Registry the outstanding amount of Frownfelter's debt.
Registry argues that it is not liable to FDIC as a matter of law because, as a result of FCC's breach of a material bonding condition, it terminated FCC's contract thus making no payments to FCC from the date of the assignment until the present date. Thus, it concludes, termination relieved it of any obligation it may have had to FDIC.
Tex.Bus. & Com.Code Ann. § 9.318(b) (Vernon Supp.1986) provides for modification or substitution of an assigned contract:
So far as the right to payment or a part thereof under an assigned contract has not been fully earned by performance, and notwithstanding notification of the assignment, any modification of or substitution for the contract made in good faith and in accordance with reasonable commercial standards is effective against an assignee unless the account debtor has otherwise agreed but the assignee acquires corresponding rights under the modified or substituted contract.
Pretermitting its "good faith" argument for purposes of the present motion, FDIC contends that it acquired "corresponding rights under the modified or substituted contract," and that Registry waived any defense it might have had to the original contract by entering into the new agreement. The court need not address the latter contention because its conclusion as to the former argument is dispositive.
FDIC contends that "determining whether the particular contractual gyrations between Registry, Frownfelter, and Pavestone constitute the type of arrangement that qualifies as a substituted or modified contract with concommitant corresponding rights for the assignee is necessarily a factual issue" (Letter Brief of February 11, 1986 at 2). To substantiate its proposition, FDIC relies on the following portion of a law review article written by the assistant reporter and later reporter of Article Nine of...
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