Mason v. FDIC

• Decision Date: 30 March 1995
• Docket Number: Civ. A. No. H-94-1008.
• Citation: 888 F. Supp. 799
• Parties: William J. MASON, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for First City, Texas—Houston, Defendant.
• Court: U.S. District Court — Southern District of Texas

888 F. Supp. 799

William J. MASON, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for First City, Texas—Houston, Defendant.

Civ. A. No. H-94-1008.

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

March 30, 1995.

COPYRIGHT MATERIAL OMITTED

Donald Kirk Leufven, Alonso & Cersonsky, Bobby Nick Turner, Office of Harris Cty Atty., Houston, TX, for F.D.I.C.

Leonard H. Simon, Todd J. Zucker and Brian K. Hammer, Boyar Simon and Miller, Houston, TX, for William J. Mason.

Donald Kirk Leufven, Alonso & Cersonsky, Houston, TX, for First City, Texas — Houston N.A.

ORDER

HARMON, District Judge.

Pending before the Court is United States Magistrate Judge Frances H. Stacy's Memorandum and Recommendation (Instrument #20) Granting in Part Defendant's Motion to Dismiss (Instrument # 3). Having reviewed the record and considered the memorandum, the Federal Deposit Insurance Corporation's objection, and the applicable law, the Court finds the recommendations to be proper in all respects. Accordingly, the Court

ORDERS that the Magistrate's Memorandum and Recommendation is ADOPTED in toto as the Order of this Court as if herein restated, and further

ORDERS that Defendant's Motion to Dismiss be GRANTED as to Plaintiff's claim for violations of Texas' Deceptive Trade Practices Act and DENIED as to Plaintiff's claims for breach of warranty, tortious interference, and civil conspiracy.

MEMORANDUM AND RECOMMENDATION GRANTING IN PART DEFENDANT'S MOTION TO DISMISS

STACY, United States Magistrate Judge.

Before the Magistrate upon referral from the District Judge is Defendant's Motion to Dismiss (Document No. 3) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. After reviewing the motion, the responses and replies, the allegations set forth in Plaintiff's Original Complaint, and the applicable law, the Magistrate RECOMMENDS, for the reasons set forth below, that Defendant's Motion to Dismiss be GRANTED IN PART and DENIED IN PART.

I. Background

On March 28, 1994, Plaintiff William J. Mason ("Mason") brought suit against the Federal Deposit Insurance Corporation as Receiver for First City, Texas ("FDIC") for breach of warranty, violations of Texas' Deceptive Trade Practices Act, tortious interference and conspiracy. According to Mason, First City, Texas — Houston, N.A. ("First City") wrongfully demanded payment under a letter of credit, causing Mason to lose his interest in Modern World Media, Inc. ("MWM").

On February 9, 1990, Mason and Mark White ("White")¹ purchased Pyle Communications for $3,600,000. This purchase was financed by a line of credit provided by First City in the amount of $2,100,000, a loan from First City to White in the amount of $400,000, and a $1,900,000 Spindletop Savings Association discount.² The $2,100,000 line of credit was secured by (1) the assets of Pyle Communications; (2) guarantees executed by Mason, White, and White's wife; and (3) a letter of credit obtained by Gnat, Robot, Inc. ("GRI") from NCNB.³

On August 9, 1990, Pyle Communications was acquired by MWM, a Texas corporation created and owned by Mason and White.⁴ Pursuant to this acquisition, MWM assumed all obligations of Pyle Communications. Following MWM's acquisition of Pyle Communications, First City entered into an agreement to provide MWM with a $5,100,000 line of credit. This line of credit was secured by (1) the assets of MWM; (2) guarantees executed by Mason, White, White's wife, and White's Children's Trust; (3) a pledge of 100% of the MWM stock owned by Mason, White, and White's Children's Trust; and (4) a letter of credit obtained by GRI and issued by NCNB in the amount of $2,500,000.⁵ In connection with the GRI letter of credit, GRI entered into a stock option agreement with Mason, White, White's wife, and White's Children's Trust. Under that agreement, in the event that First City drew against the GRI letter of credit, GRI would be entitled to all stock in MWM.⁶

Mason's role in MWM's acquisition of Pyle Communications is essential to an understanding of the arguments for dismissal. Mason acted as a 40% shareholder in MWM, as a guarantor of the First City loans, as a pledgor of MWM stock, and as a party to the stock option agreement with GRI. In an event of a default under the First City loans, Mason risked liability on the amounts due and owing on the notes by virtue of the guaranty agreement, risked the loss of his stock in MWM to First City by virtue of the pledge agreement, and risked the loss of his stock in MWM to GRI by virtue of the stock option agreement.

In March of 1991, GRI, sensing that MWM was experiencing financial difficulties, attempted to withdraw its letter of credit. On March 21, 1991, GRI gave First City notice of its intent to withdraw the letter of credit and demanded return of the letter of credit. In conjunction with this notice, GRI filed a lawsuit, seeking to enjoin First City from demanding payment under the letter of credit. Gnat Robot Corp. v. Modern World Media, Inc. and First City, Texas — Houston, N.A., Cause No. 011776 ("GRI lawsuit").⁷ On July 15, 1991, NCNB gave notice to First City that it would not renew the letter of credit beyond its expiration date of August 13, 1991. On July 17, 1991, upon that notice, First City presented the letter of credit to NCNB for payment, arguing that the non-renewal of the letter of credit constituted an event of default under the loan agreements. NCNB paid the letter of credit proceeds, $2,500,000, to First City upon presentment.

On September 3, 1991, the GRI lawsuit went to trial. Following a jury verdict, judgment was entered in favor of GRI in the amount of $2,500,000. The judgment held Mason, the Whites, MWM, and First City jointly and severally liable for the $2,500,000. The judgment also provided that GRI was to receive, pursuant to the stock option agreement, all MWM stock.

Prior to a final judgment being entered in the GRI lawsuit, MWM filed for bankruptcy. The decision to file for bankruptcy was made at an MWM board of directors meeting held on September 16, 1991. Mason did not attend that meeting and alleges that the Whites and First City conspired to prevent him from receiving notice of the meeting.

In the bankruptcy proceeding, MWM was acquired by WCM Media Texas, Inc. in exchange for assuming MWM's liabilities of approximately $4,650,000. To further the acquisition, First City provided financing to WCM in the amount of $700,000. First City also waived its contested contingent and noncontingent claims against MWM totalling approximately $5,000,000 in exchange for a $650,000 unsecured claim against MWM, which could be redeemed by WCM for $1 if the $700,000 loan was repaid within 42 months.

In this action, Mason has brought suit against the FDIC as receiver for First City, arguing that acts by First City constitute breach of warranty, violations of Texas' Deceptive Trade Practices Act, tortious interference with a contract, and conspiracy. With regard to the breach of warranty claim, Mason alleges that First City drew upon the letter of credit before the $2,500,000 provided by the letter of credit was due. With regard to the DTPA claim, Mason alleges that First City's premature and wrongful presentment of the letter of credit constituted false, misleading and deceptive acts. With regard to the tortious interference claim, Mason alleges that First City's premature and wrongful presentment of the letter of credit resulted in interference with the stock option agreement entered into by GRI, Mason and the Whites. Finally, Mason contends that First City conspired with White to place MWM in bankruptcy and thereby deprive Mason of his stock in MWM.

II. Arguments for Dismissal

On May 31, 1994, the FDIC filed a Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The FDIC argues that dismissal is warranted because the claims Mason has brought are all claims belonging to MWM, not to Mason individually. Accordingly, the FDIC contends that Mason is without standing to maintain this action. In response to the Motion to Dismiss, Mason argues that each of the claims he has brought may be maintained in his individual capacity because First City owed him a direct duty as a pledgor of stock, as a guarantor of the loans, and as a party to the stock option agreement.

III. Standard of Dismissal under Rule 12(b)(6)

Rule 12(b)(6) allows for dismissal if a plaintiff fails "to state a claim upon which relief may be granted." Such dismissals, however, are rare, Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir.1986), and only granted where "it appears beyond 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).

In determining whether a dismissal is warranted pursuant to Rule 12(b)(6), the Court accepts as true all allegations contained in the plaintiff's complaint. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982); Gargiul v. Tompkins, 704 F.2d 661, 663 (2nd Cir.1983), vacated on other grounds, 465 U.S. 1016, 104 S.Ct. 1263, 79 L.Ed.2d 670 (1984). In addition, all reasonable inferences are to be drawn in favor of the plaintiff's claims. Id. "To qualify for dismissal under Rule 12(b)(6), a complaint must on its face show a bar to relief." Clark, 794 F.2d at 970.

IV. Standing

In a case brought in federal court on state law claims, issues of standing are determined by reference to state law. Federal Deposit Ins. Corp. v. Howse, 802 F.Supp. 1554, 1561 (S.D.Tex.1992). State law, in this instance, is Texas law, under which "a corporate stockholder cannot recover damages personally for a wrong done solely to the corporation, even though he may be injured by that wrong." Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex.1990).⁸ While this is the general rule regarding corporate stockholder standing, an...