Resolution Trust Corp. v. Northpark Joint Venture

• Decision Date: 24 April 1992
• Docket Number: No. 91-1501,91-1501
• Citation: 958 F.2d 1313
• Parties: RESOLUTION TRUST CORPORATION, as receiver for First Savings and Loan Association of Waco and First Savings and Loan Association of Temple, and as conservator of First Savings and Loan, F.A., Temple, Texas, Plaintiffs-Appellees, v. NORTHPARK JOINT VENTURE, et al., Defendants, and Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson, Barry Howard, Robert L. Schiff, Charles H. Perry, Herbert G. Schiff and Telstar Partnership, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1313

958 F.2d 1313

22 Fed.R.Serv.3d 1031

RESOLUTION TRUST CORPORATION, as receiver for First Savings and Loan Association of Waco and First Savings and Loan Association of Temple, and as conservator of First Savings and Loan, F.A., Temple, Texas, Plaintiffs-Appellees, v. NORTHPARK JOINT VENTURE, et al., Defendants and Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson Barry Howard, Robert L. Schiff, Charles H. Perry Herbert G. Schiff and Telstar Partnership, Defendants-Appellants.

No. 91-1501.

United States Court of Appeals Fifth Circuit.

April 24, 1992.

Rehearing Denied May 21, 1992.

Robert D. Lybrand, Deborah A. Wilson, Dallas, Tex., for Dannis and Crosson.

Carla Marie Calabrese, Haynes & Boone, Dallas, Tex., Dennis Sheehan, Terry S. Boone, Haynes & Boone, Ft. Worth, Tex., for plaintiffs-appellees.

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

Before KING, JOHNSON and DAVIS, Circuit Judges.

JOHNSON, Circuit Judge:

This action originated in state court as a suit to recover the balance of a debt. The state court granted partial summary judgment against the defendants, concluding that the defendants were responsible for the unsatisfied indebtedness. After the case was removed to federal district court, the federal court declined to reconsider the state court ruling and entered a judgment against the defendants. Unable to conclude that the district court committed reversible error, this Court affirms.

I. FACTS AND PROCEDURAL HISTORY

In April 1985 Northpark Joint Venture ("Northpark"), a joint venture formed under Texas law, entered into a loan agreement with Texas State Mortgages, Inc. ("TSM"). TSM advanced Northpark $9.15 million, which Northpark in a promissory note agreed to repay with interest. To secure repayment of the loan, Northpark executed a deed of trust granting TSM a lien upon certain real property located in Mississippi. In addition, the individuals who formed Northpark--Steven S. Schiff, Charles G. Dannis, Stephen T. Crosson, Barry Howard, Robert L. Schiff, Charles H. Perry, Herbert G. Schiff and Telstar Partnership--executed absolute and unconditional personal guaranties to repay up to $3,202,500 of the $9.15 million indebtedness. ¹

Two years later, Northpark defaulted on its obligation under the promissory note. Unable to collect repayment, TSM assigned its rights in the loan transaction to First Savings and Loan Association of Waco ("First Waco") and First Savings and Loan Association of Temple ("First Temple"). Pursuant to the terms of the loan agreement, First Waco and First Temple made a formal demand that Northpark and its individual guarantors cure the default. The default remained uncured, and First Waco and First Temple sold the Mississippi property in a public foreclosure sale for $3,202,500. The proceeds of the foreclosure sale were applied to the unpaid principal, leaving an unsatisfied indebtedness of $3,253,464.96 in principal and $1,200,683.11 in accrued interest.

Following foreclosure, First Waco and First Temple filed suit in Texas state court against Northpark and its individual guarantors to recover the amount of the unsatisfied indebtedness. The individual guarantors filed a counterclaim seeking a declaratory judgment that they were not liable under the note or their guaranties. Both sides then filed motions for summary judgment. In September 1989 the court granted partial summary judgment against the individual guarantors, concluding that the guarantors must bear personal liability for $32,202,500 of the unsatisfied indebtedness. ²

While the action was still pending in state court, Northpark declared bankruptcy and was dismissed from the lawsuit. ³ Moreover, First Waco and First Temple became insolvent. The Resolution Trust Corporation ("RTC") was appointed to serve as the receiver of both First Waco and First Temple. ⁴ In August 1990 the RTC intervened in the state court action and removed the case to federal court. The individual defendants filed a motion for reconsideration of the partial summary judgment. The federal district court denied the motion for reconsideration, ruling that the guarantors indeed were liable for $3,202,500 of the unsatisfied indebtedness, plus interest and "reasonable" attorneys' fees.

On May 16, 1991, the individual defendants filed a notice of appeal. Four days later, the federal district court entered a "Final Judgment" denying all relief that the defendants had sought in their counterclaim and granting the RTC a specific award of $93,463.60 in attorneys' fees.

II. DISCUSSION

The defendants argue that the district court erred in declining to reconsider the partial summary judgment that the state court had entered. After removal of an action to federal district court, "[a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court." 28 U.S.C. § 1450 (1988). A prior state court order in essence is federalized when the action is removed to federal court, although the order "remains subject to reconsideration just as it had been prior to removal." Nissho-Iwai American Corp. v. Kline, 845 F.2d 1300, 1303 (5th Cir.1988).

Federal procedure governs the enforcement of a prior state court order in a case removed to federal court. Id. Thus, where the prior state court order is a summary judgment, the federal court must ensure that the order is consistent with the requirements of Rule 56(c) of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 56(c) (permitting summary judgment where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."). If the federal court declines to reconsider the state court summary judgment, then the federal court certifies that the order is indeed consistent with Rule 56(c). The standard of review is the same as if the federal court itself had entered the order: this Court will review the record de novo, resolving all reasonable doubts and drawing all reasonable inferences in favor of the party opposing the summary judgment. FDIC v. Hamilton, 939 F.2d 1225, 1227 (5th Cir.1991).

Before we reach the merits of the summary judgment in this case, we must consider two preliminary questions: (1) whether this Court has acquired the requisite appellate jurisdiction and (2) whether Mississippi or Texas law governs the relative rights of the parties.

A. Appellate Jurisdiction

A timely notice of appeal is a mandatory prerequisite to the exercise of appellate jurisdiction. United States v. Robinson, 361 U.S. 220, 224, 80 S.Ct. 282, 285, 4 L.Ed.2d 259 (1960). Rule 4(a)(1) of the Federal Rules of Appellate Procedure requires an appellant to file its notice of appeal "within 30 days after the date of entry of the judgment or order appealed from." Fed.R.App.P. 4(a)(1) (emphasis added). The defendants in this case filed their notice of appeal four days before the district court entered its final judgment. Consequently, under Rule 4(a)(1), their notice of appeal was premature.

A premature notice of appeal is not necessarily ineffective. In some circumstances, Rule 4(a)(2) of the Federal Rules of Appellate Procedure will permit an appellate court to exercise its jurisdiction despite a premature notice. Rule 4(a)(2) provides that a notice of appeal "filed after the announcement of a decision or order but before the entry of the judgment or order shall be treated as filed after such entry and on the day thereof." Fed.R.App.P. 4(a)(2). This rule recognizes that, unlike a tardy notice of appeal, certain premature notices do not prejudice opposing parties and therefore "should not be allowed to extinguish an otherwise proper appeal." FirsTier Mortgage Co. v. Investors Mortgage Ins. Co., --- U.S. ----, 111 S.Ct. 648, 651, 112 L.Ed.2d 743 (1991).

In FirsTier Mortgage Co. v. Investors Mortgage Insurance Co., the United States Supreme Court attempted to determine the extent to which Rule 4(a)(2) salvages a premature notice of appeal. The plaintiff in FirsTier Mortgage filed a suit alleging that the defendant breached several insurance contracts. The district court granted summary judgment in favor of the defendant, but declined to impose final judgment until the defendant submitted proposed findings of fact and conclusions of law. Before the district court could issue its final judgment, the plaintiff filed a notice of appeal from the summary judgment ruling. The Supreme Court concluded that the notice of appeal, although premature, was effective to invoke the jurisdiction of the federal appellate courts. 111 S.Ct. at 653. According to the Court, a premature notice of appeal relates forward to final judgment and serves as an effective notice from the final judgment whenever it follows "a decision that would be appealable if immediately followed by the entry of judgment." Id. (emphasis in original).

Like the notice of appeal in FirsTier Mortgage, the notice of appeal in the instant case is an effective notice. The defendants in this case appeal the district court order refusing to reconsider the summary judgment in favor of the plaintiffs. At the time that the state court first entered the summary judgment, this decision was a partial judgment that determined the liability of the individual guarantors, but did not purport to determine the liability of defendant Northpark. Thus, at that time, the summary judgment would not have been appealable, even if the state court had entered judgment. However, by the time that the federal district court entertained the motion to reconsider the summary judgment, Northpark was bankrupt and had been dismissed from the action. Since Northpark was no longer a party, the order refusing to reconsider the summary judgment adjudicated the rights...