McCormick v. Texas Commerce Bank Nat. Ass'n

• Decision Date: 07 April 1988
• Docket Number: No. B14-86-00743-CV,B14-86-00743-CV
• Citation: 751 S.W.2d 887
• Parties: L.G. McCORMICK, et al., Appellants, v. TEXAS COMMERCE BANK NATIONAL ASSOCIATION, Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 887

751 S.W.2d 887

L.G. McCORMICK, et al., Appellants, v. TEXAS COMMERCE BANK NATIONAL ASSOCIATION, Appellee.

No. B14-86-00743-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

April 7, 1988.

Rehearing Denied June 23, 1988.

John D. Gilpin, Linda S. Moroney, Houston, for appellants.

D. Mitchell McFarland, Laura Gibson, Anna M. Jobsis, Houston, for appellee.

Before PAUL PRESSLER, MURPHY and ELLIS, JJ.

OPINION

MURPHY, Justice.

L.G. McCormick and Beacon Hill Farms, Inc., appeal from a jury verdict in favor of Texas Commerce Bank ("TCB"). TCB sued appellants and W.L. Marshall (not a party to this appeal), alleging that they conspired to commit fraud by a "check kiting scheme." By passing worthless checks and drafts among three banks located in three different cities, appellants took advantage of the time lapse in the check collection process and thereby obtained false credit. These paper transfers, totalling several million dollars, created an overdraft on the Beacon Hill Farms, Inc.'s corporate account in the amount of $735,574. When the overdraft was discovered in December 1974, McCormick, as the sole owner of the corporation, personally guaranteed payment of the overdraft and any other indebtedness of Beacon Hill Farms, Inc., but he ultimately failed to make such payment. McCormick and Marshall were indicted by a grand jury for conspiracy to commit theft. A jury trial in 1976 resulted in conviction; McCormick was sentenced to ten years in prison and ordered to pay a fine of $5,000. His sentence was subsequently suspended; he was placed on probation for ten years and ordered to make restitution of $367,000 to TCB. The restitution remains unpaid.

Immediately after the 1976 conviction, TCB filed suit, seeking an enforceable civil judgment against McCormick, Beacon Hill Farms, Inc., and Marshall. Marshall admitted liability and signed an agreed judgment in favor of TCB. In March 1986, the civil case against McCormick and Beacon Hill Farms, Inc., went to trial.

In seven points of error, appellants allege that the trial court erred in admitting certain evidence, in failing to allow McCormick to explain the circumstances surrounding his criminal conviction, in impaneling a jury, in failing to dismiss a biased juror, and in permitting cumulative error causing an improper rendition of judgment. We affirm.

Appellants' second, third, and fourth points of error relate to admission of evidence of McCormick's prior conviction for conspiracy to commit theft.

The record shows that when TCB attempted to introduce the criminal court record at trial, appellants objected to its admission arguing that the judgment in the criminal trial was irrelevant, remote in time, and did not constitute a final conviction because the sentence was probated. Counsel for TCB urged admission of the conviction under Rule 803(22) of the Texas Rules of Evidence, specifically stating, "It is a conviction involving the same facts. And the necessary facts to the conviction are the same facts that we have on trial in this case." The judgment of conviction and sentence were introduced and admitted as substantive evidence. Those points of error relating to admission of the conviction for impeachment purposes, point three and a portion of point four, are overruled.

In their second point of error appellants contend that it is reversible error to admit evidence of a prior conviction in a subsequent civil trial arising out of the same facts when the criminal defendant had entered a not guilty plea. We disagree. The Texas Rules of Evidence provide the following exception to the hearsay rule:

(22) Judgment of previous conviction. Evidence of a judgment, entered after a trial or upon a plea of guilty ..., adjudging a person guilty of a felony, to prove any fact essential to sustain the judgment of conviction.

Tex.R.Evid. 803(22).

The case before us presents the very circumstance contemplated by the rule. McCormick had been tried and convicted of a felony; his plea of not guilty is irrelevant. Neither can he escape the effect of the rule because his sentence was probated. Evidence of his felony conviction was offered as substantive proof of facts in the civil case which were essential to the judgment in the criminal case. The rule supplanted the Texas common law and need not be reconciled with prior case law. The cases cited by appellants pre-date rule 803(22), do not involve defendants who were adjudicated guilty or who pleaded guilty and are, therefore, inapplicable. Evidence of the conviction was properly admitted. See Britt v. Cambridge Mutual Fire Insurance Co., 717 S.W.2d 476 (Tex.App.--San Antonio 1986, writ ref'd n.r.e.) Appellants' second point of error is overruled.

In related point four, appellant argues that even if evidence of the conviction can be properly admitted as substantive proof under rule 803(22), the findings of the criminal judgment are not conclusive under the doctrine of collateral estoppel but are rebuttable, and, therefore, McCormick should have been allowed to explain mitigating circumstances respecting the prior conviction, specifically, his claim of inadequate representation by counsel. We disagree.

The question whether findings of a criminal judgment are conclusive under the doctrine of collateral estoppel has not been addressed by the Texas courts with respect to the new evidentiary rule 803(22). Prior to the adoption of 803(22), our supreme court held that a collateral attack, an attack on the validity of a judgment in a suit not instituted for that purpose, is an impermissible attempt to avoid the binding effect of a judgment. See Akers v. Simpson, 445 S.W.2d 957, 959 (Tex.1969). The federal courts have also concluded that a prior conviction may work an offensive collateral estoppel in a subsequent civil proceeding if the identical issues for which estoppel is sought were litigated and directly determined in the prior criminal proceeding. Vela v. Alvarez, 507 F.Supp. 887, 889 (S.D.Tex.1981), citing Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 569, 71 S.Ct. 408, 414, 95 L.Ed. 534 (1951). The doctrine is equitable; because of the existence of a higher standard of proof and greater procedural protection in a criminal prosecution, a conviction is conclusive as to an issue arising against the criminal defendant in a subsequent civil action. United States v. Thomas, 709 F.2d 968, 972 (5th Cir.1983), citing In the Matter of Raiford, 695 F.2d 521 (11th Cir.1983).

Federal cases making specific reference to Federal Rule of Evidence 803(22) use the identical prerequisites in giving offensive collateral estoppel effect to criminal judgments. Where (i) the issue at stake was identical to that in the criminal case, (ii) the issue had been actually litigated, and (iii) determination of the issue was a critical and necessary part of the prior judgment, the judgment is established by offensive collateral estoppel and is within the hearsay exception of federal rule of evidence 803(22). United States v. Monkey, 725 F.2d 1007, 1010, (5th Cir.1984). When the requirements are satisfied, a party is estopped from attacking the judgment or any issue necessarily decided by the guilty verdict. Monkey, 725 F.2d at 1010.

Applying the standards of the federal judiciary to Texas Rules of Evidence 803(22), we hold that the trial court did not err in refusing to permit McCormick to explain the circumstances of his criminal conviction. To allow McCormick to present evidence of inadequate representation by counsel would impugn the validity of the judgment; such an explanation would place in the jurors' minds a question as to whether guilt would have been assessed if counsel had conducted a different defense. The pivotal issue in the adjudication of guilt--that McCormick had engaged in a check kiting scheme which resulted in a debt obligation to the bank--had been fully litigated and was essential to the criminal conviction. The trial court correctly excluded appellants' offer of proof contained in a bill of exception. The appropriate forum for attacking the criminal judgment was by appeal. A fully litigated issue should not be retried.

The exclusion is further justified under rule 403, providing that relevant evidence may be excluded if its probative value is substantially outweighed by the danger of confusion of the issues or misleading the jury. Tex.R.Evid. 403. Proof establishing McCormick's liability to the bank included a signed letter agreement. The authenticity of this personal guarantee was not questioned. In this circumstance, evidence that his criminal defense counsel was less than zealous would have little probative value and could tend to distract the jurors from the central issue of conspiracy to commit theft. Appellants' fourth point of error is overruled.

By their first point of error, appellants contend that the trial court erred in admitting references to McCormick's appearance before a grand jury in 1960 when he was merely summoned to testify in an investigation of Marshall and was not indicted or convicted. The reference occurred upon cross examination of McCormick by counsel for TCB:

Q: Mr. Marshall had a problem with the law with regard to the Tuscola Bank,...