Federal Deposit Ins. Corp. v. F & A Equipment Leasing

• Decision Date: 24 September 1990
• Docket Number: No. 05-89-00487-CV,05-89-00487-CV
• Citation: 800 S.W.2d 231
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Appellant, v. F & A EQUIPMENT LEASING et al., Appellee.
• Court: Texas Court of Appeals

Page 231

800 S.W.2d 231

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellant, v. F & A EQUIPMENT LEASING et al., Appellee.

No. 05-89-00487-CV.

Court of Appeals of Texas Dallas.

Sept. 24, 1990.

Rehearing Denied Nov. 7, 1990.

Bill W. Bailey, Lancaster, J. Roderick Price, Midland, for appellant.

Howard C. Rubin, Dallas, for appellee.

Before ENOCH, C.J., and WHITHAM and WHITTINGTON, JJ.

OPINION

WHITTINGTON, Justice.

The Federal Deposit Insurance Corporation (FDIC), in its corporate capacity, and successor in interest to First Consolidated Bank--Pleasant Run, N.A. (FCB), appeals a judgment rendered against FCB in favor of F & A Equipment Leasing, Kenneth W. Arterbury, Danny Frazell, ¹ Bobby R. Wilson, and Vernon F. Wilson (the Wilsons). The FDIC became a party to these proceedings only after appeal had been perfected to this Court by FCB and was the result of FCB's being declared insolvent October 20th, 1989, with the FDIC being appointed its receiver. Following the reasoning of this Court in FSLIC v. Stone, 787 S.W.2d 475 (Tex.App.--Dallas 1990, n.w.h.) and FDIC/Manager Fund v. Larsen, 793 S.W.2d 37 (Tex.App.--Dallas 1990, n.w.h.), we hold that F & A's claims are barred as a matter of law. Accordingly, we reverse the trial court's judgment and render judgment in favor of the FDIC on F & A's claims. We also vacate that part of the judgment whereby it denies the note-holders' right to collect on the promissory notes and remand that issue to the trial court for further consideration in light of this opinion.

STATEMENT OF FACTS

This is an appeal from a judgment rendered on a jury verdict. The case was initiated by FCB who sued F & A and the Wilsons for the collection of three promissory notes executed by F & A and later assumed by the Wilsons. The subject promissory notes were collateralized by certain earth moving equipment. Possession of the equipment collateral was delivered by F & A, the original debtors, to the Wilsons when they assumed the subject promissory notes. No additional financing statements were filed. The equipment collateral subsequently "disappeared" after being transferred to the Wilsons.

F & A defended FCB's lawsuit and countersued, alleging that FCB engaged in deceptive trade practices, was negligent, committed fraud, impaired their collateral, and breached a fiduciary duty to F & A. The Wilsons answered FCB's lawsuit but did not appear for trial.

It was alleged at trial that F & A had established a trust relationship with FCB. There was testimony that F & A requested that the credit history of the Wilsons, the people assuming liability on the notes, be investigated thoroughly. Don Beers, former vice president of FCB, advised F & A that the Wilsons were ready to assume the notes but that F & A would remain liable on the debt to FCB. Beers told F & A that the Wilsons "had a little slow pay" but that they paid their bills. F & A contended that FCB was negligent and breached its duty to F & A by not truthfully notifying them concerning the Wilsons' lack of creditworthiness and poor credit history. As stated earlier, after the equipment was transferred to the Wilsons, it disappeared. When FCB could not collect from the Wilsons on the notes, it pursued a judgment against F & A.

The trial court entered judgment on the verdict in favor of F & A and against FCB on December 29, 1988. The judgment was for $212,280, being made up of $75,800 compensatory damages, $75,000 punitive damages for gross negligence or deceptive trade practices, ² $5,055 statutory penalties for usury on promissory note number two, $2,000 statutory penalties for usury on promissory note number three, $1,875 attorneys' fees on usury issues, $36,100 attorneys' fees on other issues, and $16,450 prejudgment interest. The jury found that FCB breached a fiduciary duty to F & A; however, no amount of damages was ascertained. F & A obtained a finding that FCB had breached a contract ³ with F & A and had impaired F & A's right to the collateral. The court, based on the foregoing findings, discharged the subject promissory notes with regard to F & A. The trial court also entered judgment in favor of FCB against the Wilsons ⁴ for $87,522.83 on the subject promissory notes and for attorneys' fees of $24,093.25. FCB filed a motion to modify judgment and a motion for new trial, both of which were denied by the trial court. Appeal was perfected by FCB on March 29, 1988, and appellate briefing was completed on September 11, 1989.

On October 20, 1989, while the appeal was awaiting submission to this Court, FCB was declared insolvent and the FDIC was appointed receiver. The FDIC, in its corporate capacity, subsequently purchased selected assets from the receiver, including the promissory notes at issue in this matter. The FDIC thereby became the true party in interest in this appeal. 12 U.S.C. § 1823 (1989). The FDIC was substituted as plaintiff and granted leave to file a supplemental brief, which was filed April 17, 1990. F & A also filed a supplemental brief on May 1, 1990.

POINTS OF ERROR

In FCB's original appellate brief, eight points of error were briefed. They are: (1) there was no evidence that FCB impaired F & A's rights to the collateral; (2) the trial court erred (a) in ruling that FCB impaired F & A's rights to the collateral because the promissory notes contained express waivers of impairment; (b) in overruling F & A's motion for new trial because the evidence is factually insufficient that FCB impaired F & A's rights to the collateral; (c) in failing to submit jury questions on whether F & A was a "consumer" with regard to the services performed by FCB in connection with the transfer of the collateral to the Wilsons; (d) in awarding judgment to F & A and discharging the promissory notes based upon the defense of impairment of collateral for the reason that such defense is available only to sureties; (e) in awarding judgment to F & A for attorneys' fees based upon the jury's finding of gross negligence on the part of FCB; (f) in awarding judgment to F & A for actual damages which included loss of the collateral and in denying recovery to FCB on the promissory notes as a result of impairment of collateral; and lastly (g) in denying recovery to FCB on its cause of action against F & A because of the discharge of the subject promissory notes as a result of collateral impairment.

By supplemental brief, the FDIC, as the true party in interest, advanced four additional points of error, designated points nine, ten, eleven and twelve. They are: (9) substitution of the FDIC as the true party in interest renders all evidence of matters extraneous to banking records to have been improperly admitted as a matter of law; (10) F & A is not entitled to judgment against the FDIC for fraud, deceptive trade practices and usury, or to awards of punitive damages and attorneys' fees as a matter of federal law; (11) the FDIC is entitled to raise for the first time on appeal all rights and remedies available to it in the trial court even though entry of judgment preceded the receivership by the FDIC and (12) the defenses of gross negligence, breach of fiduciary duty, and impairment of collateral cannot be sustained against the FDIC and the notes should not have been discharged. We sustain the FDIC's points of error nine, ten, eleven, and twelve and reverse and render judgment in favor of the FDIC on F & A's claims. The FDIC's claim seeking collection of the subject promissory notes against F & A is vacated and remanded for new trial.

POINTS OF ERROR NINE, TEN, AND ELEVEN

In points of error nine, ten, and eleven, set forth in their supplemental brief, the FDIC contends that: (9) substitution of the FDIC as the true party in interest renders all evidence of matters extraneous to banking records to have been improperly admitted as a matter of federal law; (10) F & A is not entitled to judgment against the FDIC for fraud, deceptive trade practices, usury, or to awards of punitive damages and attorneys' fees as a matter of federal law; and (11) the FDIC is entitled to raise for the first time on appeal all rights and remedies available to it even though entry of judgment preceded the receivership. These three points of error are addressed together by the FDIC in its brief.

ERRONEOUS ADMISSION OF EVIDENCE

The FDIC contends in point of error nine that the appointment of FDIC as receiver caused all evidence of matters extraneous to banking records introduced by F & A at trial to have been improperly admitted because of controlling federal law protective of failed federally insured institutions and the assets of the agencies that insure its deposits. Therefore, the FDIC argues, F & A's claims fail as a matter of federal law under D'Oench, Dhume & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and Langley v. FDIC, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987).

F & A's claims arose from alleged prereceivership conduct of FCB. The claims generally involved deceptive trade acts or practices, negligence, fraud, breach of fiduciary duty, impairment of collateral, gross negligence, and attorneys' fees. At trial, evidence extraneous to the banking records of FCB was admitted on the issue of these claims and defenses. Now, on appeal, the issue is whether facts giving rise to F & A's claims, even though established at trial, will nonetheless fail on appeal as a matter of law under the federal common law exclusionary principles set forth in D'Oench and Langley. This issue has already been adversely decided against F & A and in favor of the FDIC in Stone. See Stone, 787 S.W.2d at 481-82. We therefore hold that the appointment of the FDIC as receiver, while the judgment is on appeal, causes all evidence introduced at trial of matters extraneous to banking records to have been erroneously admitted as a matter of federal law. See Stone, 787 S.W.2d at 484. We sustain the FDIC's ninth point of error.

F & A'S AFFIRMATIVE CLAIMS

FDIC's point of...