Pinemont Bank v. Belk
| Decision Date | 12 January 1984 |
| Docket Number | No. 82-2211,82-2211 |
| Citation | 722 F.2d 232 |
| Parties | PINEMONT BANK, Plaintiff-Appellee, v. Henderson BELK, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Don Fogel, Kevin Risley, Houston, Tex., for defendant-appellant.
Stanley B. Binion, Ann Ryan Robertson, Houston, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before WISDOM, TATE and GARWOOD, Circuit Judges.
Pinemont Bank ("the Bank") brought this diversity suit against Henderson Belk ("Belk") to recover on a guaranty for $300,000 which Belk had allegedly executed on behalf of Prestige Imports, Inc., a corporation which had defaulted on several loans from the Bank. The district court granted judgment for the Bank for $300,000, plus interest and attorneys' fees. Belk appeals, alleging that because several of the district court's findings were clearly erroneous and because the court's interpretation of the law was flawed, we should reverse and render judgment for Belk. Alternatively, Belk contends that he is entitled, at the least, to a jury trial on remand, because the district court abused its discretion by denying Belk's pretrial motion for a jury trial under Fed.R.Civ.P. 39(b). Although we find that Belk is not entitled to have the district court's judgment reversed and rendered in his favor, we nevertheless hold that Belk was erroneously denied a jury trial and therefore reverse and remand for another trial on that ground.
In the early 1970's, the Bank, a Texas state bank, began doing business with Gulf Import Autos, Inc. ("Gulf Import"), a corporation which was in the business of selling new and used cars. Gulf Import was owned by a Mr. and Mrs. Johnson. The Bank extended a working capital loan, several installment loans, and a floor plan loan to Gulf Import.
In 1976, Billy Tyson and William King began negotiating with the Johnsons to buy their stock ownership in Gulf Import. King and Tyson also met with officials from the Bank to determine whether the Bank would be willing to continue to finance Gulf Import after King and Tyson bought it. The Bank indicated that it would only finance Gulf Import or the men individually if they could obtain the backing of someone with the financial ability to guarantee their loans. After Tyson and King informed the Bank that Henderson Belk, a North Carolina resident, would be willing to guarantee their loans, the Bank wrote to Belk and asked him to execute two guaranties. Belk executed and returned the guaranties; a $300,000 guaranty of Gulf Import and a $25,000 guaranty of William King, both dated October 22, 1976.
After the transaction with the Johnsons was completed, Tyson and King assumed the operation of Gulf Import. In November 1976, the United States government filed a federal tax lien against Gulf Import to recover unpaid withholding taxes. To circumvent the lien, the Bank, King, and Tyson formulated a plan whereby the Bank would foreclose on Gulf Import's assets, and King and Tyson, through Prestige Imports, Inc. ("Prestige"), another corporation they wholly owned, would buy the assets of Gulf Import at the foreclosure sale.
On December 2, 1976, the Bank, through its vice president, William Pickens, sent a letter to Belk asking him to execute a new $300,000 guaranty for Prestige. The letter explained the plan to Belk:
Soon thereafter, the Bank received the $300,000 guaranty, purportedly signed by Belk. Although Belk denies that he executed the guaranty, a handwriting expert at trial testified that, in his opinion, Belk had signed the guaranty. In addition, the district court found that "[t]he signature of Henderson Belk on the guaranty agreement dated December 2, 1976 is genuine."
In January 1977, the Bank held the foreclosure sale on Gulf Import's assets. The Bank loaned money to Prestige with which Prestige purchased the assets--Gulf Import's automobiles--at the sale. Later, in April 1977, Tyson purchased King's interest in Prestige.
On July 18, 1977, the Bank sent Belk a letter which summarized earlier transactions between the Bank, Prestige, and King and Tyson. The letter concluded by explaining that the Bank had decided to grant Prestige a line of credit for $425,000 consisting of a $100,000 line of credit (unsecured loan) and a $325,000 line to be used to carry a new and used car floor plan line based upon the cost of the automobiles purchased. Enclosed with the letter was a guaranty for $425,000 for Belk to sign and return to the Bank. Belk never executed the guaranty, but the Bank continued to make loans to Prestige. Those loans were evidenced by four notes. The first, dated August 28, 1979, was for $350,000; the second, dated September 11, 1979, was for $85,000; the third, dated July 24, 1980, was for $64,331.42; and the fourth, dated April 24, 1979, was for $17,248.26.
During the course of its relationship with Prestige, the Bank sent several letters to Belk informing him of the financial status of Prestige. Belk never responded to these letters. In a letter of February 1, 1980, James Thomas, the Bank's president, informed Belk that the Bank could not continue to fund Prestige or Tyson until it had evidence of Belk's seriousness to fund the guaranty he had executed. The letter asked Belk to increase the guaranty to $350,000 and to secure the guaranty with marketable securities with a market value of 130 percent of the guaranty, or to at least secure the current guaranty of $300,000 with marketable securities at the 130 percent rate. When Belk did not respond, the Bank sent him a letter dated March 12, 1980, demanding that he secure the $300,000 guaranty with marketable securities. Belk never secured the guaranty.
On June 5, 1980, with Prestige having fallen substantially behind in its repayment on the notes, the Bank made a formal demand of Prestige for a payment in full of all principal and accrued interest due to the Bank under the four notes. On the same date, Thomas wrote to inform Belk that the Bank had demanded that Prestige pay the amount due under the notes, which exceeded the limit of Belk's guaranty of $300,000. The letter then made a formal demand that, within thirty days, Belk pay the $300,000 he had guaranteed. Belk never paid the $300,000, and the Bank filed this suit to recover the $300,000 allegedly owed it under the guaranty, plus interest and attorneys' fees.
Having denied Belk's motion for a jury trial made one week before trial, the district court gave judgment for the Bank in a bench trial. Belk contends on appeal that the district court abused its discretion in denying the motion for jury trial, and that its findings of fact were clearly erroneous and its interpretation of Texas law was in error. We first address the jury trial issue.
The Seventh Amendment to the United States Constitution preserves the right to trial by jury in "Suits at common law." Plainly, this was a case in which Belk would have been entitled to a jury trial, if a jury had been properly demanded, and the parties do not suggest otherwise. Rule 38(b), Fed.R.Civ.P., however, requires that a party make a demand for a jury A party's failure to comply with Rule 38 constitutes a waiver by him of his right to trial by jury. Fed.R.Civ.P. 38(d).
The strictures of Rule 38 are, though, tempered by Fed.R.Civ.P. 39(b), which allows a court, within its discretion, to grant a late motion for a jury trial:
Belk alleges that the district court erred in denying him a jury trial under both Rules 38(b) and 39(b). To determine the merits of this claim, we must scrutinize the relevant pretrial developments.
The record clearly reflects that neither the Bank's original nor its amended complaint contained a formal jury demand, and that neither Belk nor the Bank complied with Rule 38(b) by filing a separate jury demand within ten days after the last pleading was served. Belk does not contend otherwise. However, on the cover sheet to the Bank's amended complaint (filed prior to any answer or motion filed by Belk other than a motion to dismiss for want of personal jurisdiction), the Bank's counsel inadvertently checked the box indicating that a jury demand had been made. 1 This cover sheet (or a copy thereof), containing the erroneous statement that a jury had been demanded, was attached to the amended complaint and served on Belk.
Belk argues that the Bank's service of the cover sheet indicating that a jury had been demanded was sufficient to comply with the requirement of Rule 38(b) that a party desiring a jury trial serve a jury demand on the opposing party within ten days after service of the last pleading. If, indeed, the Bank's service of the mismarked cover sheet on Belk had been sufficient to...
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