First Heights Bank, FSB v. Gutierrez

• Decision Date: 18 March 1993
• Docket Number: No. 13-91-366-CV,13-91-366-CV
• Citation: 852 S.W.2d 596
• Parties: FIRST HEIGHTS BANK, FSB, Appellant, v. Jorge GUTIERREZ, Receiver for Rio Grande Savings and Loan Association, Appellee.
• Court: Texas Court of Appeals

Page 596

852 S.W.2d 596

FIRST HEIGHTS BANK, FSB, Appellant, v. Jorge GUTIERREZ, Receiver for Rio Grande Savings and Loan Association, Appellee.

No. 13-91-366-CV.

Court of Appeals of Texas Corpus Christi.

March 18, 1993.

Rehearing Overruled May 6, 1993.

Ann S. Duross, Asst. Gen. Counsel, and Colleen B. Bombardier and Maria Beatrice Valdez, F.D.I.C., Washington, DC, amicus curiae.

Ronald A. Piperi, H. Miles Cohn, David C. Holmes, Honigman, Miller, Schwartz & Cohn, Houston, Rene O. Oliveira, Roerig, Oliveira, & Fisher, Brownsville, for appellant.

John B. McFarland, Robert J. Hearon, Jr., Graves, Dougherty, Hearon & Moody, Austin, Reynaldo G. Garza, Jr., Garza & Garza, Brownsville, Michael Diehl, Graves, Dougherty, Hearon & Moody, Austin, for appellee.

Before DORSEY, KENNEDY and FEDERICO G. HINOJOSA, Jr., JJ.

OPINION

DORSEY, Justice.

This case concerns the successors of two failed savings and loan institutions and involves an intricate loan transaction between the failed thrifts. Rio Grande Savings and Loan, the Plaintiff below, contended that a loan made to it by appellant ¹ was fraudulent and illegal, and that the note evidencing it was void, or, in the alternative, that the loan had been repaid. Appellant proclaimed the validity of the loan transaction in a counterclaim and asserted that the entire balance on the note was due and payable. After a jury trial, the trial court upheld the validity of the note in its judgment on the verdict, but held that a substantial portion of the note had been repaid by appellees. The judgment on the verdict also adopted the jury's finding that the loan transaction was fraudulently induced by one of First Heights's co-defendants.

By forty points of error, First Heights appeals. Appellant primarily contends that the D'Oench Duhme ² doctrine applies to bar all claims and defenses asserted by plaintiffs below, that the jury charge was inadequate to support the judgment, and that no evidence existed to support either the findings the jury did make or the judgment. Appellant complains that the trial court had no jurisdiction and that venue was improper. Review of certain procedural and evidentiary rulings is also sought. The judgment of the trial court is modified and, as modified, affirmed.

I. FACTS

In January 1986, Rio Grande, an uninsured savings and loan institution, ³ was declared insolvent. At that time, First Savings Association of Orange, an insured institution, ⁴ was nearing the end of its fiscal year on June 30, 1986, and held certain promissory notes evidencing nine outstanding development loans. These loans were in default and totalled $71 million. In order for Orange to make a profit and show a favorable financial position on its end-of-year audit, these delinquent loans had to be closed out. To accomplish this, the properties had to be sold to new buyers.

Ronald Piperi, Orange's President, approached Fincher Investment Co., the parent of Rio Grande, and asked for a $15 million loan from Rio Grande to assist in the re-purchase of those nine properties. ⁵ While the re-purchase of the properties would serve to partially pay off the $71 million in delinquent notes held by Orange, Orange Service Company, Orange's wholly-owned subsidiary, held an interest in 75% of the profits from eight of the properties and a 50% profits interest in the ninth. Orange Service would obtain profits from the sale if the new buyers made down payments of at least $15 million. Accordingly, Piperi asked Rio Grande to loan the buyers $15.1 million, with Orange loaning almost $861,000, for the necessary down payment. Orange would then loan an additional $71 million to the new buyers to complete the sale, closing out the delinquent loans and substituting the new ones as current assets.

Fincher and Rio Grande told Piperi that it did not have sufficient capital to make a $15 million loan. Piperi responded that Orange would loan the money to Rio Grande, and Rio Grande could then invest it as Piperi directed. Fincher and Rio Grande management decided to enter into the transaction.

On June 26, 1986, Rio Grande wrote a promissory note to Orange in the amount of $20 million. ⁶ To secure the note, Rio Grande pledged 465 first-lien real estate notes held by it, totalling more than $18 million in value.

On June 30, 1986, Orange wired a total of approximately $15.4 million to Rio Grande in two separate transfers, the first for $14.5 million and the second for $980,000. After Orange made the first transfer, Rio Grande wired approximately $14.1 million of that money back to Orange the same day, to be deposited into an escrow account with National Title Company. ⁷ $10.3 million of this money was Orange Service's profit participation in the sale of the nine properties to the new buyers. $3.8 million made up the sellers' profits. However, the sellers' profits went directly into the escrow account to guarantee sufficient cash flow to service the debt, in the event the new owners would be unable to make payments to Orange during the first year of ownership.

Orange then made the second transfer for $980,000 to Rio Grande, which was wired back to Orange on the same day and into the same National Title account. This money was National Title Company's fee for effectuating the closings on the property sales.

Orange then tendered an additional $71 million to the buyers of the nine properties in the form of non-recourse loans. This closed out the original development loans in default and enabled Orange to start anew, claiming assets in the form of accounts receivable of $71 million in current loans in good standing. Orange maintained first lien status on the nine properties. These new assets, in addition to Orange's subsidiaries' profits, resulted in Orange's immediately showing a profit on its financial audit at the end of its fiscal year, June 30, 1986.

Rio Grande was given second liens on the same nine properties to secure the $15.1 million non-recourse loans to the purchasers. A total of $86 million was loaned to purchase the properties; the buyers paid no money of their own. However, the appraised value of the properties was well below the $71 million loaned by Orange.

The properties did not generate enough income to pay the loans the buyers received from both Rio Grande and Orange. Neither bank received payments on those loans, and all went into default.

Meanwhile, Rio Grande made no payments on the $20 million note due Orange. Rio Grande maintained that it repaid the loan when that money was sent directly back to accounts at Orange held in the names of two of Orange's subsidiaries. Rio Grande contended that the profits of Orange's subsidiaries were Orange's. It was Orange's position, however, that Rio Grande failed to make the necessary payments on the note and therefore was in default on its full amount.

On May 12, 1987, the Texas Savings & Loan Department placed Rio Grande under receivership and in liquidation on April 28, 1988. Jorge A. Gutierrez, an appellee, was appointed liquidating agent by the Texas Savings & Loan Commissioner and later appointed receiver in 1990. On May 9, 1988, Orange (by then renamed "Champion Savings and Loan") filed suit in Orange County against Rio Grande and Gutierrez seeking payment of the balance due on the $20 million note and judicial foreclosure on the securing collateral, the 465 real estate liens.

Gutierrez filed suit in Cameron County on May 19, 1988, against Orange, Piperi, and former Rio Grande directors at Fincher Investments, among others. He alleged fraudulent inducement and conveyance with regard to the loan transaction, and requested a declaration that the entire loan transaction be rescinded and that the indebtedness under the note be canceled. Gutierrez asked for injunctions and constructive trusts on the collateral involved in the transaction to prevent Orange from foreclosing on or assuming those 465 loans and 9 liens.

Orange moved to transfer venue in Gutierrez's Cameron County case to Orange County, contending that an injunction against Orange's foreclosure suit must be brought in the county in which the foreclosure action is pending, and, in the alternative, that Orange's principal place of business was in Orange County. Orange filed a plea in abatement as well, asserting that all of the claims filed by Rio Grande were compulsory counterclaims which should have been filed in the Orange County case. The trial court denied the motions and retained Gutierrez's case in Cameron County. Gutierrez subsequently filed Plaintiffs' Third Amended Petition, in which he formally rejected and denied Orange's demand for payment on the $20 million note. Orange filed no further pleadings.

On September 23, 1988, the Federal Home Loan Bank Board declared Orange insolvent and closed it. The Federal Savings and Loan Insurance Corporation (FSLIC) was appointed receiver. That day, Heights of Texas, FSB (later First Heights), acquired Orange's assets and assumed both its deposit and secured liabilities. In October, 1988, the FSLIC sought to remove Rio Grande's case against Orange to Federal Court. After the case was removed, First Heights Bank intervened and, having assumed substantially all assets and liabilities of Orange, replaced First Savings Association of Orange and the FSLIC in the federal court action. All federal claims were dismissed and the case was remanded to the court in Cameron County with First Heights and Piperi the primary defendants.

The jury's verdict essentially found:

1. The money loaned to Rio Grande was for the benefit of Orange;

2. Orange was the actual owner of the nine properties;

3. The $15.1 million loaned to the new buyers was in fact a partial payment of the note to Orange;

4. All of the information was contained in the loan files of Orange;

5. Piperi was guilty of fraud;

6. Rio Grande did not receive adequate consideration for the 465 loans it pledged, in that it gave those notes to Orange in exchange for second lien...