Resolution Trust Corp. v. Holmes

• Decision Date: 09 March 1994
• Docket Number: No. H-92-0753.,H-92-0753.
• Citation: 846 F. Supp. 1310
• Parties: RESOLUTION TRUST CORPORATION, Plaintiff, v. Harry HOLMES, Jr., Thomas J. Holmes, Sr., Thomas J. Holmes, Jr., and John A. Hutchison, III, Defendants.
• Court: U.S. District Court — Southern District of Texas

846 F. Supp. 1310

RESOLUTION TRUST CORPORATION, Plaintiff, v. Harry HOLMES, Jr., Thomas J. Holmes, Sr., Thomas J. Holmes, Jr., and John A. Hutchison, III, Defendants.

No. H-92-0753.

United States District Court, S.D. Texas, Houston Division.

March 9, 1994.

Lisa H. Pennington, Baker & Hostetler, Cynthia J. Thomson, Thomson & Solomon, Houston, TX, for plaintiff.

John L. McConn, Jr., McConn & Hardy, Houston, TX, Stephen E. McConnico, Scott, Douglass & Luton, Austin, TX, for Harry Holmes, Jr. and Thomas J. Holmes, Jr.

Ted Hirtz, Houston, TX, for Thomas J. Holmes, Sr.

Robin C. Gibbs, Gibbs & Ratliff, Houston, TX, for John A. Hutchison, III.

MEMORANDUM AND ORDER

LAKE, District Judge.

Pending before the court is the Amended Motion for New Trial of plaintiff, the Resolution Trust Corporation (RTC). (Docket Entry No. 236) RTC moves for a new trial pursuant to Fed.R.Civ.P. 59 based upon what it advances as newly discovered evidence and newly discovered law. RTC also argues that the court misinterpreted the facts and law when it concluded that all of RTC's claims were barred by the Texas two-year statute of limitations. Defendants, Harry Holmes, Jr., Thomas J. Holmes, Sr., and Thomas J. Holmes, Jr., respond that RTC's motion should be denied because (1) it was not served upon them within the time mandated by Rule 59, (2) RTC's allegedly newly discovered evidence and law do not meet the standard required by Rule 59, and (3) RTC's factual and legal arguments are meritless.

I. Background

Although the factual and legal background of this case is detailed in the court's November 22, 1993, Memorandum and Order (hereinafter referred to as M & O II, reported at 839 F.Supp. 449), an abbreviated presentation of the facts is necessary to understand the court's resolution of RTC's motion. Defendants are former directors of the now failed Spring Branch Savings & Loan Association (Spring Branch). On December 30, 1985, Spring Branch, acting through its board of directors, entered into a Consent Agreement with the Federal Savings and Loan Insurance Corporation (FSLIC), acting under the direction of the Federal Home Loan Bank Board (FHLBB). On February 13, 1986, the board entered into an Agreed Order placing Spring Branch under voluntary supervisory control of the Texas Savings and Loan Department (TSLD). The Agreed Order designated L.W. Grant, III, a TSLD appointee, as the on-site supervisor of Spring Branch. He was succeeded by James Scurlock on November 3, 1986. On March 8, 1989, the FHLBB appointed FSLIC as receiver.¹ On August 9, 1989, pursuant to passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA),² RTC succeeded to that position³ and later transferred the assets of Spring Branch to itself in its corporate capacity.

On March 6, 1992, RTC, acting in its corporate capacity, initiated this action alleging that defendants were negligent, grossly negligent, and breached their fiduciary duties of care and loyalty as directors or officers of Spring Branch. In an August 7, 1992, Memorandum and Order (M & O I, 1992 WL 533256; Docket Entry No. 43), the court held that the Texas two-year statute of limitations applied to all of RTC's causes of action against the defendants and that the Texas business judgment rule barred a simple negligence claim by RTC against a corporate director.

The parties agreed that all of RTC's claims arose more than two years before March 8, 1989, when FSLIC was appointed receiver of Spring Branch. They disagreed, however, about whether the board of directors was adversely dominated, and, if so, whether the statute of limitations was tolled long enough for the claims to have survived until RTC brought suit. In M & O II the court held that the Texas statute of limitations barred all of the claims RTC asserted against defendants — including those based on negligence⁴ — when RTC acquired them. Specifically, the court held that the state-appointed supervisors of Spring Branch possessed the statutory authority to bring suit against its directors. The court also held that RTC failed to meet its summary judgment burden to produce evidence negating the defendants' showing that the board of directors, even if adversely dominated, did not deter the state supervisors from exercising their extensive authority over Spring Branch. Accordingly, the court granted summary judgment in favor of defendants and entered a final judgment dismissing the action.

II. Characterizing RTC's Motion

In Lavespere v. Niagara Mach. & Tool Works, Inc.⁵ the Fifth Circuit addressed the differences between a motion to alter or amend a summary judgment under Rule 59(e) and a motion for relief from a summary judgment under Rule 60(b).

When a party files a motion for reconsideration of a summary judgment and submits in support of that motion evidentiary materials that she failed to file on time, the extent of the court's discretion to reopen the case and to consider the materials depends, in the first instance, on the particular Federal Rule of Civil Procedure under which the motion arises.... A motion for reconsideration ... will be treated as either a motion "to alter or amend" under Rule 59(e) or a motion for "relief from judgment" under Rule 60(b). Under which Rule the motion falls turns on the time at which the motion is served.

Lavespere, 910 F.2d at 173. A party must serve a Rule 59 motion "not later than 10 days after entry of the judgment."⁶ In Harcon Barge Co., Inc. v. D & G Boat Rentals, Inc.⁷ the Fifth Circuit held that motions challenging the merits of a judgment that are not served by the tenth day following entry of the judgment must be treated as Rule 60(b) motions. While the ten day deadlines of Rule 59 are "jurisdictional and cannot be extended in the discretion of the district court,"⁸ a party may move for relief from a judgment under Rule 60 "within a reasonable time" — ordinarily not exceeding one year from the time the judgment was entered. Fed.R.Civ.P. 60(b).

The final judgment in this action was entered on November 29, 1993. (Docket Entry No. 230) The deadline for timely service of a motion under Rule 59 was therefore Monday, December 13, 1993.⁹ Because Rule 59 unambiguously requires that the motion be served not later than 10 days after judgment, courts have required strict compliance with Rule 5's procedure for effecting service of pleadings and papers other than the initial complaint.¹⁰ Defendants have submitted uncontradicted affidavits from their attorneys stating that service was first accomplished by personal service or by Federal Express on December 14, 1994 — the eleventh countable day following the entry of judgment on November 29, 1994. The court therefore agrees with defendants that RTC's motion is untimely as a Rule 59 motion and may only be considered as a Rule 60(b) motion. Nevertheless, the court is mindful that strict application of Rule 59's service deadline appears harsh in this case because RTC's choice to utilize private delivery services was reasonably calculated to effect service more promptly than could be achieved through use of ordinary first class mail. The court will therefore also analyze RTC's motion under the Rule 59 standard.

III. Is RTC Entitled to Relief Under Either Rule?

A. Standards of Review

In Lavespere the Fifth Circuit held that when deciding whether to exercise its discretion to reopen a case under Rule 59 to allow a party to introduce evidence not timely submitted, a court must balance the competing needs "to bring litigation to an end and ... to render just decisions on the basis of all the facts." 910 F.2d at 174. To do so,

the court should consider, among other things, the reasons for the moving party's default, the importance of the omitted evidence to the moving party's case, whether the evidence was available to the non-movant before she responded to the summary judgment motion, and the likelihood that the nonmoving party will suffer unfair prejudice if the case is reopened.

Id.

Rule 60(b), while permitting greater time to move for relief, limits the avenues that provide access to such relief. A district court has discretion to provide relief from a final judgment under Rule 60(b) only if the judgment was entered in error as a result of "mistake, inadvertence, surprise, excusable neglect, newly discovered evidence or fraud; because the judgment is void or no longer deserving of prospective application; or for any other reason justifying relief." Hill v. McDermott, Inc., 827 F.2d 1040, 1042 (5th Cir.1987), cert. denied, 484 U.S. 1075, 108 S.Ct. 1052, 98 L.Ed.2d 1014 (1988). The burden of establishing at least one of these "exacting substantive requirements" is on the movant, and determination of whether that showing has been made is within the discretion of the court. Lavespere, 910 F.2d at 173-74.

B. RTC's Grounds for Relief

RTC advances three grounds for reconsideration of the court's judgment: (1) the recent decision by the Texas Supreme Court in Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937 (Tex.1993), clarifies the criteria to be used in determining whether the otherwise generally applicable Texas statutes of limitations had run against a state agency such as the TSLD; (2) the court's interpretation of the Texas Savings and Loan Act is flawed because it renders portions of the Act unconstitutional and for other reasons previously advanced by RTC; and (3) evidence discovered too late to be submitted before the court's ruling shows that (a) the board of Spring Branch was in fact adversely dominated and (b) the defendant board members were either negligent or grossly negligent and failed to perform their fiduciary duties in such a manner that the business judgment rule should not shield them from liability.

1. Did the statute of limitations run against RTC's claims while they were possessed by TSLD?

The State of Texas and some of its instrumentalities are exempt from otherwise generally...