Gray v. F.D.I.C.

• Citation: 841 S.W.2d 72
• Decision Date: 29 October 1992
• Docket Number: No. 01-91-00706-CV,01-91-00706-CV
• Parties: 19 UCC Rep.Serv.2d 665 Virgie M. GRAY, Successor Administrator with Will Annexed of the Estate of Elmer J. Gray, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First Mexia Bank, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 72

841 S.W.2d 72

19 UCC Rep.Serv.2d 665

Virgie M. GRAY, Successor Administrator with Will Annexed of

the Estate of Elmer J. Gray, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First

Mexia Bank, Appellee.

No. 01-91-00706-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Oct. 29, 1992.

Jay N. Gross, Eric J. Toher, Houston, for appellant.

Kerry L. Haliburton, Beverly Willis, Waco, for appellee.

Before OLIVER-PARROTT, C.J., and MIRABAL and PRICE, ^* JJ.

OPINION ON MOTION FOR REHEARING

OLIVER-PARROTT, Chief Justice.

This case is an appeal from a judgment on a guaranty of a promissory note. We reverse and render a take-nothing judgment. We deny appellee's motion for rehearing, withdraw our previous opinion, and substitute the following opinion.

Prior to his death on December 26, 1986, Elmer J. Gray executed a guaranty agreement in October 1985 with First Mexia Bank (First Mexia or the Bank) by which he guaranteed the first $150,000 of any then-existing or future debt owed to First Mexia by "Jesse Jones d/b/a Quality Pipe and Steel."

Thereafter, in August 1986, an earlier note, payable to First Mexia by Jesse Jones d/b/a Quality Pipe and Steel in the original principal sum of $141,086.38, was split into two separate notes, also payable to First Mexia by Jesse Jones d/b/a Quality Pipe and Steel. The two resulting notes were made out for the respective original principal sums of $41,185.22 and $100,482.32. The $100,482.32 note is the note at issue in this case, and was secured by certain tangible collateral. ¹ After the note matured by its terms on February 7, 1987, Jones failed to repay the debt. Accordingly, on June 10, 1987, First Mexia brought suit against him on the note, obtaining a default judgment.

Following the judgment against Jones, First Mexia filed a claim against Elmer Gray's estate (the Estate) on January 2, 1988. That claim was rejected on January 28, 1988, by the individual who originally served the Estate as administrator. First Mexia then brought this suit on April 11, 1988, within the 90-day period provided by TEX.PROB.CODE ANN. § 313 (Vernon 1980) for suits on rejected claims. Meanwhile, on January 21, 1988, First Mexia had repossessed some of the collateral and on that date the president of the Bank sent to Jones a letter giving notice of the repossession and that the collateral would be subject to private sale after 10 days. ² First Mexia did not cause any similar notice to be sent to Mr. Gray's personal representative to communicate those same facts directly to the Estate until November 21, 1990, ³ long after the repossession and long after the Bank sold certain items of the collateral. ⁴

By its second amended petition, the Bank claimed that, in addition to the guaranty agreement, there existed a second basis for holding the Estate liable for the balance on the note. The Bank asserted that Jones and Gray had been engaged in business together as a partnership at the time Jones had executed the note; that they had represented themselves to the Bank as partners; that the loan had been made to the partnership on the basis of those representations; and that along with Jones, Gray was jointly and severally liable for that partnership debt. At trial, the jury found, inter alia, (i) that Jones and Gray had been partners in the purchase of oilfield pipe, (ii) that the debt represented by the note was a partnership debt, and (iii) that the notice to Jones served as notice to Mr. Gray--or, more precisely, since it was posthumous, as notice to the Estate.

Judgment was rendered upon the jury verdict, and granted First Mexia an allowed and approved claim against the Estate for the full $100,482.32 principal amount of the note, plus pre- and postjudgment interest, costs, and attorneys' fees. The Estate perfected this appeal on July 17, 1991. Subsequently, First Mexia was declared insolvent on August 22, 1991, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver for First Mexia. The FDIC was duly substituted as appellee.

On appeal, the Estate asserts several "personal" defenses, contending that enforcement of the debt against the Estate is barred because: (1) there is no evidence, or alternatively, insufficient evidence to support the jury's finding that the debt evidenced by the note was a partnership debt [point of error three]; (2) even if the debt was a partnership debt, then it is still not enforceable against the Estate because as a matter of law the notice First Mexia sent to Jones did not constitute reasonable notification to the Estate of the Bank's repossession and intended disposition of the collateral, which the Bank was required to give under TEX.BUS. & COM.CODE ANN. § 9.504 (Vernon 1991); the trial court erred both in submitting the question of reasonable notification to the jury and in misstating the law in its instructions to the jury in connection with that question; and there was no evidence, or alternatively, insufficient evidence to support the jury's finding that the Bank gave reasonable notification to the Estate [points of error two and three]; (3) First Mexia failed to dispose of the repossessed collateral in a commercially reasonable manner, as also required by section 9.504, and there was no evidence, or alternatively, insufficient evidence, to support the jury's finding to the contrary [point of error four]; and/or (4) as a matter of law, First Mexia's retention of a portion of the collateral for over three years operated to discharge the debt under TEX.BUS. & COM.CODE ANN. § 9.505 (Vernon 1991) [point of error one].

Addressing the merits of the Estate's points of error, the FDIC in reply asserts that there is no bar to enforcement of the $100,482.32 note against the Estate, because: (1) there was factually and legally sufficient evidence to support the jury's finding that the debt evidenced by the note was a partnership debt [reply to point of error three]; (2) the notice First Mexia sent to Jones constituted reasonable notification to the Estate of the Bank's repossession and intended disposition of the collateral because acceptance of notice under section 9.504 fell within the scope of the limited authority to act for Mr. Gray after his death that Jones retained under the provisions of the Texas Uniform Partnership Act, TEX.REV.CIV.STAT.ANN. art. 6132b (Vernon 1970) ("Texas UPA"), such that the notice to Jones was sufficient to preserve the right to collect the note balance from the Estate; therefore, the trial court's submission of the question of reasonable notification to the jury and its instructions to the jury in connection with that question were both correct, and there was factually and legally sufficient evidence to support the jury's finding that reasonable notification of the Bank's repossession and intended disposition of the collateral was given to the Estate [reply to points of error two and three]; (3) there was factually and legally sufficient evidence to support the jury's finding that First Mexia disposed of the repossessed collateral in a commercially reasonable manner [reply to point of error four]; and/or (4) First Mexia's retention of a portion of the collateral for over three years did not operate to discharge the debt under § 9.505 of the Texas Business and Commerce Code [reply to point of error one]. In its supplemental brief, filed after completion of oral argument in the case at bar, among five issues there discussed, the FDIC raised the additional contention that (5) any defects in the notice of sale of the collateral do not prevent enforcement of the $100,482.32 note because (a) the Bank's notice pertained only to the $41,185.22 note (which is not at issue in this case); (b) the sales took place in connection only with the $41,185.22 note and not the $100,482.32 note; and (c) the proceeds were applied only to the $41,185.22 note and not the $100,482.32 note ["Issue No. 5" in the FDIC's supplemental brief].

Finally, the FDIC also asserts, in both its original and supplemental briefs, that, in any event, regardless of the merits of the Estate's points of error, under the federal common law flowing from D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and its partial codification at 12 U.S.C. § 1823(e) (1989), the FDIC takes the note free of the personal defenses that the Estate asserts. Because it is potentially dispositive, we address this latter assertion at the outset.

Federal common law defenses are unavailable to the FDIC on this appeal because they were first raised after perfection of the appeal.

After the Estate had already perfected this appeal, the FDIC was substituted as a party to this action on November 27, 1991, because of its appointment as receiver for First Mexia. Of course, First Mexia did not raise the federal common law defenses in the trial court. It did not do so because it could not have done so. Those defenses are available, if at all, only to the FDIC and similar regulatory authorities, because of their role in protecting the banking system itself. Langley v. FDIC, 484 U.S. 86, 91-93, 108 S.Ct. 396, 399, 98 L.Ed.2d 340 (1987). Later, when the FDIC was appointed receiver, it simply stepped into the shoes of First Mexia. The FDIC gained no rights to challenge the judgment of the trial court except those which First Mexia then possessed. FSLIC v. Kennedy, 732 S.W.2d 1, 3 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.). The subsequent enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Act of August 9, 1989, Pub.L. No. 101-73, 1989 U.S.C.C.A.N. (103 Stat.) 183 (codified at 12 U.S.C. §§ 1811-1833e) did not alter this result. The relevant provision of FIRREA states:

(B) Rights and remedies of Conservator or Receiver--In the event of any appealable judgment, the Corporation as conservator or receiver shall--

(i) have all the rights and remedies available to...