Resolution Trust Corp. v. Smith (Two Cases)
| Decision Date | 11 May 1995 |
| Docket Number | 94-20405,94-20221 and 94-20387,Nos. 94-20087,94-20339,s. 94-20087 |
| Citation | 53 F.3d 72 |
| Parties | RESOLUTION TRUST CORPORATION as Conservator for Heritage Federal Savings Bank, Plaintiff-Appellee, v. Dalton SMITH, et al., Defendants-Appellants. RESOLUTION TRUST CORPORATION as Conservator for Heritage Federal Savings Bank, Plaintiff-Appellee, v. Dalton SMITH, and Patricia Smith, Defendants-Appellants. In re Richard FUQUA, Petitioner. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Maurice Bresenhan, Jr., Campbell, Zukowski, Bresenhan & Woods, Houston, TX, for Dalton Smith, et al. in Nos. 94-20087, 94-20405.
Walter Clay Cooke, Brown, McCarroll & Oaks Hartline, Houston, TX, P. Matthew Sutko, Washington, DC, for Resolution Trust Corp.
Maurice Bresenhan, Jr., Campbell, Zukowski, Bresenhan & Woods, Houston, TX, for Dalton and Patricia Smith in Nos. 94-20221, 94-20339.
Larry D. Knippa, Houston, TX, for Richard Fuqua.
Appeals from the United States District Court for the Southern District of Texas and Petition for Writ of Mandamus.
Before KING, EMILIO M. GARZA and DeMOSS, Circuit Judges.
These consolidated appeals stem from the efforts of the Resolution Trust Corporation, acting in its capacity as conservator of Heritage Bank, to collect a judgment from Dalton and Patricia Smith. Shortly after the Resolution Trust Corporation registered the judgment and noticed the Smiths' depositions in aid of judgment, the Smiths pledged stock which constituted a substantial portion of their assets to their attorney, Richard Fuqua, to secure past and future legal services. The Resolution Trust Corporation then asked the district court to use the Texas Turnover Statute to void the transfer of the stock to Fuqua as a fraudulent transfer and to command the turnover of the stock. After a series of hearings and orders (several of which are part of this consolidated appeal), Fuqua surrendered the stock certificate to the court. The Smiths appeal, arguing that the district court's proceedings and rulings violated their due process rights and did not comport with the law interpreting the Texas Turnover Statute. Similarly, Fuqua requests that we issue a writ of mandamus compelling the district court to return the stock certificate to him. Although we reject the Smiths' contentions, we find that the district court erred in adjudicating Fuqua's rights to the stock in the turnover proceeding, and accordingly, we reverse the district court's order that declared Fuqua's security interest void.
In February of 1991, the Resolution Trust Corporation, in its capacity as conservator for Heritage Federal Savings Bank, obtained a judgment of $1,292,524.07 plus interest and attorney's fees against Dalton and Patricia Smith in the Eastern District of Virginia (the "Virginia judgment"). The judgment was affirmed by the Fourth Circuit in December of that same year. A little less than two years later, on September 10, 1993, the RTC filed a registration of the judgment in the Southern District of Texas, and the RTC began collection proceedings. 1 In early October of 1993, the RTC noticed both of the Smiths's depositions in aid of judgment to take place on November 8, 1993.
Meanwhile, according to Fuqua, in late October of 1993, Dalton Smith sought Fuqua's representation in relation to a possible bankruptcy. Fuqua testified that he informed Smith that he was unwilling to represent Smith unless he was "collateralized to be assured of payment." Accordingly, on November 4, 1993, four days before the scheduled depositions, Smith entered into a stock pledge agreement with Fuqua, granting Fuqua a security interest in all of the Smiths' stock in Park Club, Inc. in exchange for past and future legal services. That same day, Fuqua perfected his security interest in the stock when Smith delivered the certificate for the stock to Fuqua.
The next day, November 5, 1993, the Smiths responded to the RTC's deposition notice with a motion for a protective order. The Smiths did not appear for the November 8 depositions. Also on November 5, 1993, the RTC requested a writ of execution, and in their letter requesting the writ, the RTC informed the clerk that the judgment could be satisfied in full through the levy and execution of the Park Club stock certificates. The clerk for the district court issued the writ that same day.
On November 16, 1993, the writ was served on Smith by the United States Marshal. Smith, however, did not turn over the stock certificate; rather, Smith informed the Marshal that he did not have the stock certificate. Three days later, the RTC filed an "Emergency Motion for Turnover," requesting that the district court order Smith to turn over "all stock certificates" for Park Club and other corporations.
The district court held a hearing on the RTC's turnover motion on December 10, 1993. At that hearing, the Smiths' counsel informed the district court and the RTC that:
Mr. Smith, as a result of obligations he owes to another attorney, ... has pledged ... the Park Club stock to that attorney for substantial attorney's fees that he has incurred in connection with other representation.
It is my understanding that there is a perfected security interest under the UCC and possession of the stock certificates themselves in the hands of the other attorney.
Upon this revelation, the district court determined that "the thing to do is to set another hearing, get the lawyer in here, get some testimony and find out whether it was a fraudulent transfer or not, and based upon that and some other factors make a decision." The district court scheduled the hearing for January 14, 1994.
At that hearing, the district court heard the testimony of Smith and Fuqua, and on January 21, 1994, the district court granted the RTC's turnover request as to some assets, but the court did not rule on the Park Club stock. The Smiths objected to the district court's order; nevertheless, on January 24, the district court reaffirmed its ruling. The next day, the Smiths turned over most of the items in the order, but because the Smiths did not turn over all of the items included in the order, on January 26, the RTC initiated contempt proceedings against the Smiths. On January 31, 1994, the Smiths appealed the district court's January 21 and 24 orders.
On February 10, 1994, Patricia Smith was deposed in aid of judgment, but, asserting her spousal and self-incrimination privileges she refused to answer most of the questions propounded by the RTC.
On March 15, 1994, the district court entered a memorandum opinion and an order on the Park Club stock. In its opinion, the district court, inter alia, rejected the Smiths' claim that "the Court has no jurisdiction to void the fraudulent transfer to Fuqua and order the turnover of the Park Club, Inc. stock." Instead, the district court noted that a court may order the turnover of property subject to the debtor's possession and control and that Thus, the district court concluded that "Smith's pledge of the Park Club, Inc. stock to Michael [sic] Fuqua is void" and ordered that "the Park Club, Inc. stock be turned over to the Receiver." Additionally, the district court awarded the RTC attorney's fees.
On the same day that its memorandum opinion was entered, the district court also denied Patricia Smith's assertions of privilege and ordered her to answer the RTC's questions. Additionally, the district court ordered the Smiths to show cause why they should not be held in contempt for their failure to comply with the January 21 and 24 turnover orders. Eight days later, on March 23, 1994, the Smiths appealed the district court's March 15 order commanding the turnover of the Park Club stock and the district court's March 16 order compelling Patricia Smith to answer the RTC's questions at deposition.
On April 15, 1994, the district court amended its March 15 order, once again noting that the "pledge of Park Club, Inc. stock to Richard Fuqua by Dalton Smith is void" and commanding the turnover of the Park Club stock. Additionally, the district court reaffirmed its award of attorney's fees to the RTC. One week later, the Smiths appealed the April 15 amended order.
By April 26, the Park Club stock still had not been turned over, and after a hearing, the district court ordered Fuqua to show cause why he should not be required to turn over the Park Club stock. A hearing on the show cause order was held on May 6, 1994, and Fuqua was ordered to turn over the Park Club stock. Fuqua complied with the district court's order, and ten days later, the district court entered another order directing the United States Marshal to execute and sell the Park Club stock on June 7, 1994. The Smiths also appealed that order, and Fuqua sought a writ of mandamus seeking the return of the Park Club stock. Subsequently, we granted a stay of the sale of the stock, and we consolidated the various appeals and the mandamus request.
Initially, the Smiths contend that their January 31, 1994 appeal of the district court's January 21 and January 24 orders divested the district court of jurisdiction over matters involving the turnover of assets. These appeals, the Smiths contend, left this court with "the exclusive jurisdiction to decide whether the RTC was entitled to any turnover relief regarding the assets discussed at the January 14, 1994 summary hearing and whether the breadth and scope of the command to turnover all 'other corporate documents' was enforceable." We disagree.
As the Smiths contend, we have noted that "notice of appeal typically divests the district court of jurisdiction." Alberti v. Klevenhagen, 46 F.3d 1347, 1358 (5th Cir.1995); accord Farmhand, Inc. v. Anel Eng'g Indus., 693 F.2d 1140, 1145 (5th Cir.1982). This does not describe the...
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