Pollock v. F.D.I.C.

• Decision Date: 04 April 1994
• Docket Number: No. 92-9010,92-9010
• Citation: Pollock v. F.D.I.C., 17 F.3d 798 (5th Cir. 1994)
• Parties: Merlyn J. POLLOCK, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver for First City Texas Dallas, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 798

17 F.3d 798

Merlyn J. POLLOCK, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver for First City Texas Dallas, Defendant-Appellee.

No. 92-9010.

United States Court of Appeals Fifth Circuit.

April 4, 1994.

Rehearing Denied May 6, 1994.

David Jude Gallo, Fedynyshyn & Gallo, San Diego, CA, for plaintiff-appellant.

Manuel A. Palau, F.D.I.C., Washington, DC, Neil J. Orleans, James W. Morris, Goins, Underkofler, Crawford & Langdon, Dallas, TX, for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, JOLLY, and BARKSDALE, Circuit Judges.

GOLDBERG, Circuit Judge:

The parties in this case have separately orchestrated a series of mortgage transactions and have fashioned clashing interpretations of a common work. Both Merlyn Pollock ("Pollock") and the Federal Deposit Insurance Corporation ("FDIC") have attempted to present a melodious symphony to the court. Despite utilizing the same notation, the same sheet music, the same instruments documenting their transaction, the parties produce contrapuntal arrangements whose dominant tones fail to generate harmonious melodies. Although successful in individually creating euphonious arrangements, sung together, their mellifluous tunes degenerate into more cacophony than symphony.

Because both sides to this dispute harmonize the instruments of the agreement in a reasonable fashion, we find that the relevant documents are essentially ambiguous. We therefore reverse and remand the case to allow the district court to determine the most melodic interpretation of the parties' intentions.

I. Background

We sound the opening notes of our composition by laying out the facts which form the background rhythms over which we can then lay out the conflicting melodies. Merlyn Pollock entered into an agreement in August of 1986 to purchase from First City Bank--Valley View ("First City") the Kreck Foods meat processing plant and property ("meat plant"). Pollock executed a promissory note ("Original Pollock Note") in favor of First City to finance the acquisition of the meat plant. The note, in the principal amount of $1,879,242, was secured by a deed of trust ("Original Deed of Trust").

The Original Deed of Trust pledged the meat plant as collateral for First City under the Original Pollock Note. Importantly, the Original Note was a non-recourse loan. Thus, upon default by Pollock, the meat plant itself was the only asset available as security for First City. Pollock was to have no personal liability under the loan.

In September of 1986, two weeks after signing the original loan documents, Pollock executed a security agreement ("Security Agreement") in favor of First City, pledging a Certificate of Deposit in the principal amount of $89,179.71 to secure all existing and future indebtedness that Pollock had with First City. The Security Agreement provided that the Certificate of Deposit would remain as security on all Pollock's indebtedness until First City executed a written termination statement and returned the collateral to Pollock.

In March of 1987, Pollock and First City entered into an agreement to restructure Pollock's meat plant debt pursuant to which Pollock executed a second promissory note ("Renewal Note") in the principal amount of $1,975,000 in favor of First City. As Pollock had made no payments under the Original Note, the entire amount of that debt was rolled into the Renewal Note. As part of the renewal and extension of the Original Note, Pollock executed a second deed of trust ("Renewal Deed of Trust") in favor of First City to secure his continuing indebtedness.

The Renewal Note contained, similar to the Original Note, a non-recourse provision that stated, "If this Note is not paid at maturity, ... Holder's sole remedy shall be to foreclose its security interest and lien upon the Property described in the Deed of Trust, and Maker shall have no personal liability to Holder for the Indebtedness herein described." The accompanying Renewal Deed of Trust then described "Mortgaged Property" to include "any and all security and collateral of any nature whatsoever, now or hereafter given for the repayment of the Indebtedness or the performance and discharge of the Obligations." ¹

When Pollock failed to make the first payment under the Renewal Note, the Note was accelerated and the meat plant property was posted for foreclosure. After the property was sold and the proceeds applied to the indebtedness due under the Renewal Note, First City applied Pollock's Certificate of Deposit against the remaining deficiency.

On January 25, 1991, Pollock filed a civil action in Texas state court, seeking recovery against First City, Texas--Dallas, successor in interest by merger with First City Bank, Valley View, ² for the proceeds of the Certificate of Deposit. Cross motions for summary judgment were filed, arguing that the Certificate of Deposit either did or did not collateralize the Renewal Note and therefore could or could not be applied against the deficiency incurred under that note.

The state district court entered a judgment in favor of First City as a matter of law. The court held that the loan documents evinced the parties' intention to utilize the Certificate of Deposit as security on Pollock's meat plant loan. The Bank, according to the state court, had therefore acted properly in using the proceeds from the Certificate of Deposit as an offset against the deficiency on the loan.

Pollock perfected an appeal to the state appellate court on January 15, 1992. Oral argument was scheduled for November 4, 1992. On October 30, the Texas Banking Commission appointed the Federal Deposit Insurance Corporation as receiver for First City, and, on November 3, the FDIC intervened in this suit. That same day, the FDIC removed the action to the United States District Court pursuant to 12 U.S.C. Sec. 1819(b)(2)(B). The federal district court adopted the judgment of the state court and transferred the case to our court for review.

II. Analysis

For the central movement of this dispute, Pollock suggests two distinct thematics, one jurisdictional, the other substantive. His jurisdictional argument submits that the federal district court acted improperly in adopting and transferring the case to this court and that this case was improperly removed from the state court in the first place. On the substantive side, Pollock contends that the state court erred in granting summary judgment in favor of First City because the Renewal Note and Deed of Trust did not allow recourse to the Certificate of Deposit. In the alternative, Pollock asserts that the documents are ambiguous as to the collateralization of the Certificate of Deposit. We begin by addressing the procedural and jurisdictional issues and subsequently confront the substantive questions raised against the judgment.

A. Federal Court Jurisdiction

Pollock complains that we cannot have jurisdiction over his case because the adoption and transfer order issued by the district court does not constitute a "final decision." As such there was no adjudication on the merits by the federal district court, and therefore, he claims there can be no order that could properly be appealed to this court. His arguments have no merit in light of our recent en banc decision in In re Meyerland, 960 F.2d 512 (5th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 967, 122 L.Ed.2d 123 (1993).

The district court in the instant case precisely followed the instructions laid out in Meyerland and by subsequent rulings interpreting that decision. In Meyerland, we held that the district court should "take the state judgment as it finds it, prepare the record as required for appeal, and forward the case to a federal appellate court for review." 960 F.2d at 520. This is precisely the course of action taken by the district court here. Meyerland continues:

A case removed from state court simply comes into the federal system in the same condition in which it left the state system. Granny Goose Foods, Inc. v. Brotherhood of Teamsters, Etc., 415 U.S. 423, 435-36, 94 S.Ct. 1113, 1122-23, 39 L.Ed.2d 435 (1974). For instance, if the notice of appeal was adequate in the state court system, it should be deemed adequate when it enters the federal courts, regardless of whether the state technical requirements for notice of appeal differ from the federal.

Id. Meyerland 's reasoning upholding the adoption and transfer procedure has been routinely reaffirmed since the announcement of that decision. See In re 5300 Memorial Investors, Ltd., 973 F.2d 1160 (5th Cir.1992); McMillan v. MBank Fort Worth, N.A, 4 F.3d 362 (5th Cir.1993); NCNB Texas National Bank v. Johnson, 11 F.3d 1260, 1264 (5th Cir.1994). Under the scheme set out in these cases, the lower court in this case acted properly and Pollock's argument as to this point is simply without merit.

Pollock additionally challenges the removal to federal court by arguing that 12 U.S.C. Sec. 1819(b)(2)(B) does not grant subject matter jurisdiction to the federal courts under the facts of this case. ³ That section makes clear that, except in very limited circumstances, all civil cases to which the FDIC is a party are deemed to arise under federal law. ⁴ Pollock concedes the general rule of removal but asserts that this case falls within the exception expressed in 12 U.S.C. Sec. 1819(b)(2)(D). Under that provision, an action shall not be deemed to arise under the laws of the United States if it is an action:

(i) to which the Corporation, in the Corporation's capacity as receiver of a State insured depository institution by the exclusive appointment by State authorities, is a party other than as a plaintiff;

(ii) which involves only the preclosing rights against the State insured depository institution, or obligations owing to, depositors, creditors, or stockholders by the State insured depository institution; and

(iii) in which only...