Sheppard Federal Credit Union v. Palmer
| Decision Date | 23 April 1969 |
| Docket Number | No. 25923.,25923. |
| Citation | 408 F.2d 1369 |
| Parties | SHEPPARD FEDERAL CREDIT UNION, Appellant, v. Michael A. PALMER, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Robert M. Helton, Donald E. Short, Wichita Falls, Tex., for appellant.
Charlye O. Farris, Wichita Falls, Tex., for appellee.
Before GEWIN, PHILLIPS* and GOLDBERG, Circuit Judges.
Rehearing and Rehearing En Banc Denied April 23, 1969.
Subsequent to the oral argument in this case, the court's study of the record disclosed what appeared to be an erroneous allocation of burden of proof. Since the parties had not argued the point, the court requested and received from the parties supplemental briefs addressed to the questions (1) whether the district court had erred in its instruction to the jury on burden of proof and (2) if there was error, whether it was plain error requiring this court's recognition despite the fact that no objection was made to it in the court below. After a careful consideration of the law and the facts, we have concluded that the district court erred and that the error, in the circumstances of this case, was plain error; accordingly, we reverse the judgment of the district court.
The crux of the dispute in the trial of this case was whether the appellant Credit Union's seizure of the appellee Palmer's automobile was legally justifiable. Palmer had borrowed money from the Credit Union to purchase the car and the latter had taken a security interest in it. The security agreement contained the following acceleration clause:
If said mortgagee shall at any time deem said mortgagor, said chattels, said debt or said security unsafe or insecure, then upon the happening of said contingencies or any of them, the whole amount herein secured remaining unpaid, is by said mortgagor admitted to be due and payable, and said mortgagee may at said mortgagee\'s option (notice of which option is hereby expressly waived), foreclose this mortgage by action or otherwise, and said mortgagee is hereby authorized to enter upon the premises where said goods and chattels may be, and remove and sell the same and all equity of redemption of the mortgagor therein . . . .
Although this so-called insecurity clause is drafted in the broadest possible terms, the Texas Uniform Commercial Code makes it clear that the secured party can accelerate "only if he in good faith believes that the prospect of payment or performance is impaired."1 Deeming itself insecure, the Credit Union in this case seized Palmer's automobile which was still under the Credit Union's control at the time of these proceedings. The primary question in the court below was whether the creditor's action stemmed from a reasonable, good-faith belief that its security was about to become impaired.2
In its instructions to the jury the district court stated in part:
Palmer is entitled to damages unless Credit Union proves by a preponderance of the evidence that it had reasonable grounds to believe that on February 9, 1967 the debt involved herein or said security was unsafe or insecure . . . .
The court emphasized this charge by repeating the substance of it in its rather brief instructions. Moreover, the first special issue out of six submitted to the jury was couched in the same terms. The charge clearly placed the burden of proof upon the Credit Union to establish the reasonableness of its conduct. However, the Texas UCC states: "The burden of establishing lack of good faith is on the party against whom the power to accelerate has been exercised."3 The error committed here is patent. Under the Texas law, the creditor is presumed to have acted in good faith. The trial court in this case turned the presumption around when it placed the burden of proof on the creditor.
When the record on appeal discloses that an error has been committed which results in a miscarriage of justice, this court must reverse even though the party prejudiced raised no objection in the court below.4 The determination of whether justice has miscarried is not always easy. The criterion is certainly not whether the court approves or does not disapprove the result of the case. In many instances, such a standard would permit the court to substitute its own policy judgment for that of the state legislature. Indeed, in the present case, as a matter of policy, this court does not disapprove the result in the district court, because "the . . . decision to throw the burden of proof on the debtor is debatable."5 However, we are not at liberty to accept or reject the legislative policy of the state of Texas; we are bound to apply state law as it is, not as we might wish that it were.
Thus, for purposes of the plain error rule, justice is done when a person has received substantially everything to which he is entitled under the applicable law. If the court were convinced that the verdict and award in this case would have been substantially the same under proper instructions on burden of proof, the judgment would have to be affirmed, for the Credit Union would have received substantially everything to which it was entitled under Texas law. However, on the record before us, we cannot say that a correct charge would have made no substantial difference. Burden of proof is always of major importance and, in this case where the evidence was close on the question of good faith, it was crucial.
The evidence introduced during the trial tended to establish some facts favorable and some detrimental to both parties. The Credit Union was a non-governmental corporation chartered under the Bureau of Federal Credit Unions and located on Sheppard Air Force Base in Texas. According to its manager, the Credit Union was "a non-profit organization, that provides low cost loans to its members and also offers them a fair dividend on their savings." The members of the Credit Union were primarily military personnel, including Palmer who was a second lieutenant stationed at the air base.
Palmer was a twenty-four year-old man who had joined the Air Force on May 28, 1966 for two years of service as a registered nurse. On October 11, 1966, some four and a half months after entering the service, he applied to the Credit Union for a loan. At that time his salary was $400 per month. Other than summer and part-time work, he had worked a total period of six months before entering the service. After the approval of his application, he authorized a Class E Allotment in the amount of $110.19 to be paid to the Credit Union once a month.
Palmer submitted his resignation to the Air Force on February 2, 1967, less...
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Brown v. AVEMCO Inv. Corp.
...to acceleration based on a clause authorizing acceleration when the creditor "deemed himself insecure." Sheppard Federal Credit Union v. Palmer, 408 F.2d 1369 (5th Cir. 1969). Acceleration on this basis clearly falls within the specific language of § 1.208. See also McKay v. Farmers and Sto......
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G. A. Thompson & Co., Inc. v. Partridge
...The leading case on the applicability of the plain error rule to an erroneous burden of proof instruction is Sheppard Federal Credit Union v. Palmer, 408 F.2d 1369 (5th Cir. 1969). Sheppard holds that: (b)urden of proof is always of major importance and, in this case where the evidence was ......
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