Resolution Trust Corp. v. Starkey

• Decision Date: 09 January 1995
• Docket Number: No. 93-2172,93-2172
• Citation: 41 F.3d 1018
• Parties: RESOLUTION TRUST CORPORATION, As Receiver for Commonwealth Federal Savings Association, Plaintiff-Appellee, v. Jerry L. STARKEY, et al., Defendants, George D. Thomas, Jr., and George D. Thomas, III, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1018

41 F.3d 1018

RESOLUTION TRUST CORPORATION, As Receiver for Commonwealth

Federal Savings Association, Plaintiff-Appellee, v. Jerry L. STARKEY, et al., Defendants, George D. Thomas, Jr., and George D. Thomas, III,

Defendants-Appellants.

No. 93-2172.

United States Court of Appeals, Fifth Circuit.

Jan. 9, 1995.

E.K. Peticolas, Peticolas & Shapleigh, El Paso, TX, for G. Thomas, Jr.

David J. Gallo, San Diego, CA, for G. Thomas, III.

Randi Born, James Haralson Pearson, Houston, TX, for appellee.

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

Before POLITZ, Chief Judge, GOLDBERG and DUHE, Circuit Judges.

GOLDBERG, Circuit Judge:

The Resolution Trust Corporation ("RTC") brought suit against defendants George D. Thomas, Jr. (Thomas Jr.), George Thomas III (Thomas III), and Jerry L. Starkey, to enforce guaranties on two promissory notes. The defendants did not oppose the RTC's motion for summary judgment, and the district court granted summary judgment in favor of the RTC. Defendants Thomas Jr. and Thomas III ¹ (hereinafter referred to collectively as "appellants") appeal from the district court's judgment. The appellants assert that the RTC did not properly serve process on them. In addition, the appellants argue that the RTC failed to demonstrate its ownership of the promissory notes. We reverse with respect to Thomas III and affirm with respect to Thomas Jr.

I

The RTC brought this suit in its capacity as Conservator of Commonwealth Federal Savings Association ("Commonwealth Federal"), a federally chartered savings and loan association with its principal place of business in Houston, Texas. The RTC filed this suit to collect the deficiency balance remaining on two promissory notes the defendants had guarantied.

Some background on the origin and ownership of the notes at issue in this case is required. The defendants borrowed $1,191,168 from Commonwealth Savings Association ("Commonwealth Savings"). To obtain these funds the defendants signed two promissory notes. These notes were secured by real estate owned by the defendants. In addition, the defendants made personal guaranties on these notes.

In the summer of 1988 both notes matured. When the notes went unsatisfied, Commonwealth Savings foreclosed on the properties securing the notes, and sold the properties at auction. The sale of these properties yielded $536,618, leaving a deficiency of $654,550.

On March 8, 1989, pursuant to a resolution by the Federal Home Loan Bank Board ("FHLBB"), Commonwealth Savings was placed into the conservatorship of the Federal Savings and Loan Insurance Corporation ("FSLIC"). On May 23, 1989, the FHLBB created Commonwealth Federal and named the FSLIC conservator for Commonwealth Federal. On that same day, all of the notes and guaranties at issue in this case were assigned to the FSLIC as Conservator for Commonwealth Federal.

On August 9, 1989, the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA") became law. FIRREA created the RTC and provided that the RTC would succeed to the interests of all FSLIC receiverships or conservatorships created from January 1, 1989 through August 9, 1989. The Commonwealth Federal conservatorship fell into this category, and the RTC became conservator of Commonwealth Federal.

Upon becoming conservator of Commonwealth Federal, the RTC sent the defendants letters demanding payment. These letters went unheeded, and on October 3, 1990 the RTC filed suit to recover the deficiency owing on the notes. However, the RTC failed to serve any of the defendants within 120 days of filing its complaint.

On February 4, 1991, the RTC filed a motion to retain the case on the docket. This motion requested that the district court not dismiss the RTC's complaint pursuant to Federal Rule of Civil Procedure 4(j) for failure to serve the parties within the relevant time period. On February 8, 1991, the district court granted the RTC's motion and issued a retention order permitting the RTC "... 30 days from [that] Order to serve one or more of the defendants."

The RTC effected service upon Starkey on March 9, 1991. Thomas Jr. was not served until March 19, 1991, and Thomas III was not served until April 9, 1991. Thomas III raised the defense of insufficient service of process in his answer, but Thomas Jr. did not. By order dated July 3, 1991, the district court denied Thomas III's motion to dismiss. On September 1, 1992, the RTC filed a motion for summary judgment. Thomas III filed no response to the summary judgment motion. Thomas Jr. did not respond to the RTC's summary judgment motion either, but instead moved for leave to file a motion to dismiss. The district court dismissed the appellants' motions, and granted summary judgment in favor of the RTC on January 8, 1993.

II

Thomas Jr. appeals from the district court's denial of his motion for leave to file a motion to dismiss. Thomas III appeals the district court's denial of his motion to dismiss. Each appellant's issue is addressed in turn.

A. Propriety of Service of Process upon Thomas Jr.

Thomas Jr. failed to raise the insufficiency of process in his answer. Accordingly, he has waived any objection to service. Fed.R.Civ.P. 12(h)(1)(B). Thomas Jr. argues that the mandatory language of Rule 4(j) (i.e., "an action shall be dismissed" if service is not made within a specified time period) exempts defects in service from the waiver provisions of Rule 12. The law is clear, however, that objections to service are waived if not raised in the answer or pre-answer motion. Kersh v. Derozier, 851 F.2d 1509, 1511-12 (5th Cir.1988). Accordingly, the district court properly denied Thomas Jr.'s motion for leave to file a motion to dismiss.

B. Propriety of Service of Process upon Thomas III

Thomas III's argument deserves greater reflection since he did raise his objection to service in a timely manner. Thomas III filed a motion to dismiss based on, inter alia, the deficiency of service. The district court denied Thomas III's motion to dismiss without comment. We hold that in doing so, the district court erred.

Thomas III argues that the district court erred in granting the RTC extensions, both after the original 120 days expired and after the expiration of the 30-day extension. Conversely, the RTC argues that the district court has discretion to freely grant extensions upon a showing of good cause. The question before us is whether good cause existed for the RTC's delayed service of process as to Thomas III. The district court's finding of good cause is reviewed under an abuse of discretion standard. McDonald v. United States, 898 F.2d 466, 468 (5th Cir.1990).

The RTC's motion to retain the case on the docket consisted of a few lines of text alleging that it was diligently attempting to serve the defendants, that numerous attempts at service had been unsuccessful, and that more time was needed. We need not decide whether the district court abused its discretion in granting the RTC's motion to retain the case on the docket. This is so because the RTC was wholly unjustified in not serving Thomas III within the 30-day extension granted by the district court. Assuming, arguendo, that the RTC showed good cause for failing to serve Thomas III within the 120 following the filing of their suit, the record is bereft of any evidence of good cause for the RTC's failure to serve process within the 30 day extension granted by the district court.

In its response to Thomas III's motion to dismiss, the RTC claims to have made diligent efforts at serving Thomas III, but was unable to do so because it had an incorrect address for Thomas III, and because Thomas III's common name prevented him from being located. It must be assumed that these allegations refer to the difficulties the RTC encountered in finding Thomas III during the 120 days following the filing of the complaint, since they are the same reasons the RTC provided in its motion to retain the case on the docket. Next, the RTC alleged that it was unable to serve Thomas III within the 30-day extension granted by the district court because a postal forwarding order for Thomas III had expired. Apart from this frustrated attempt to mail service to Thomas III, the RTC does not enumerate any other attempt to serve or find Thomas III. After the 30-day extension had expired, the RTC discovered, through some unknown source, that Thomas III was an attorney, and obtained his address from the State Bar. Thereafter, the RTC was able to effect service upon Thomas III at that address.

We conclude that the RTC failed to demonstrate good cause existed for its failure to serve Thomas III within the 30 day extension granted by the district court. The RTC made no showing to support its claim that good cause existed for failing to serve Thomas III. The RTC claims that at all times, it diligently sought to serve Thomas III, yet the RTC did not discover that the address it had for Thomas III was invalid until after 120 days had lapsed. Also, there is evidence that Thomas III could have been located if reasonable efforts had been expended. Thomas III was a practicing attorney in the Dallas...