Sobranes Recovery Pool I v. Todd & Hughes Const.

• Decision Date: 28 November 2007
• Docket Number: No. 06-10912.,06-10912.
• Citation: 509 F.3d 216
• Parties: SOBRANES RECOVERY POOL I, LLC, a Delaware Limited Liability Company, as successor-in-interest to Federal Deposit Insurance Corporation, as Manager of FSLIC Resolution Fund in its Corporate Capacity, Plaintiff-Appellant, v. TODD & HUGHES CONSTRUCTION CORP.; J. Randall Hughes, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

509 F.3d 216

SOBRANES RECOVERY POOL I, LLC, a Delaware Limited Liability Company, as successor-in-interest to Federal Deposit Insurance Corporation, as Manager of FSLIC Resolution Fund in its Corporate Capacity, Plaintiff-Appellant, v. TODD & HUGHES CONSTRUCTION CORP.; J. Randall Hughes, Defendants-Appellees.

No. 06-10912.

United States Court of Appeals, Fifth Circuit.

November 28, 2007.

David D. Pavcek (argued), David Pavek & Associates, Denver, CO, for Movant-Appellant.

Mark Hamblin How (argued), How, Freds, Rohde, Woods & Duke, Dallas, TX, for Defendants-Appellees.

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

Before HIGGINBOTHAM, SMITH and OWEN, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Sobranes Recovery Pool I, LLC (Sobranes), as private-party assignee of the Federal Deposit Insurance Company (FDIC), sought to execute on a judgment entered against Todd & Hughes Construction Company (THCC) and J. Randall Hughes (collectively, Defendants) in favor of the FDIC under the Federal Debt Collection Procedures Act (FDCPA).¹ The district court held that Sobranes could not invoke the FDCPA. We affirm, although on grounds different from those relied on by the district court.

I

In June 1984, THCC executed an "All Inclusive Deed of Trust Note" (the Note) in favor of Western Savings Association for $10.3 million. The Note matured on June 8, 1985. In June 1985, THCC executed an "Extension of Real Estate Note and Lien," renewing the Note and extending the maturity date to July 31, 1985. When THCC renewed the Note, Hughes Gordon Todd, and Thomas Todd each guaranteed the Note. In July 1985, THCC, Western Savings Association, and BBC Olympic agreed to an "Assumption and Consent Agreement and Modification of Real Estate Note and Lien," under which BBC Olympic assumed without recourse the Note and obligations of THCC. The assumption note was to mature on June 1, 1987.

However, in September 1986, Western Savings Association was placed into receivership and its assets — including the notes and guarantees involved here — were transferred by the Federal Savings and Loan Insurance Corporation (FSLIC) to Western Federal Savings and Loan Association (Western Federal). Then, in August 1988, Western Federal was placed into receivership, and its assets — again including the notes and guarantees involved here — were transferred to Sunbelt Savings, FSB, by the FSLIC. Sunbelt Savings transferred the notes and guarantees back to the FSLIC in December 1988. THCC and the guarantors defaulted on their obligations under the notes and guarantees.

In August 1989, Congress abolished the FSLIC and appointed the FDIC as Manager of the FSLIC Resolution Fund.² The FDIC thus came into possession of the notes and guarantees, and in August 1991, the FDIC brought suit against THCC, T. Todd, G. Todd, and Hughes to recover on the note and guarantees. The FDIC filed an amended complaint in March 1992, adding Todd & Todd Development Company as a defendant and asserting additional claims against T. Todd, G. Todd, and Hughes, in order to recover on another promissory note and guarantee agreements.³ The district court entered judgment in favor of the FDIC in October 1992, and an abstract of judgment was filed in January 1993.

The FDIC did not execute on the judgment itself, but rather assigned the judgment to RecoverEdge, LP. RecoverEdge then assigned the judgment to Lawyers' Recovery & Litigation Services, Inc. On October 28, 2004, Lawyers' Recovery assigned the judgment to Sobranes; the district court received notice of the assignment on January 31, 2005. During the series of assignments, a writ of execution issued in April 2003.

On July 1, 2005, Sobranes, turning to enforcement of the judgment, filed a motion requesting declaratory judgment, appointment of a receiver, or an accounting. Sobranes sought a declaration that assets held by Hughes' wife, Melanie Hughes, pursuant to an agreement "Partitioning Community Property,"⁴ were subject to execution to satisfy the judgment. It also sought to have the successor entities to THCC placed in receivership, and in the alternative requested an accounting of assets held by Hughes, his wife, and the successor entities. Mrs. Hughes and the successor entities were not parties to the FDIC's judgment.

Mrs. Hughes and the successor companies argued, inter alia, that even though a writ of execution issued in April 2003, it came too late as Texas law required the writ to issue within ten years from entry of judgment to prevent it from going dormant, and that Sobranes could not invoke the FDCPA to evade the state time-bar. Sobranes countered that execution of the judgment in the hands of the FDIC would face no limitations period under the FDCPA, and as the FDIC's assignee, it should have the same benefit. The district court referred the requests to a magistrate judge.

The magistrate recommended denying Sobranes' motion, concluding that the judgment is not a "debt" under the FDCPA because the underlying notes and guarantees were between private parties; that under Federal Rule of Civil Procedure 69(a), state law governed the time limits on execution, and execution was time-barred under Texas law because no writ of execution issued within ten years of the entry of judgment and there were no grounds for revival.

The district court agreed with the recommended denial of relief, but on different grounds. The court explained that "Sobranes has not identified (and the court has not located) any instance where a private party such as Sobranes, as assignee or otherwise, has been held to be entitled to recover judgment on a debt, or otherwise to assert rights or benefits under the FDCPA." Rather, the court concluded that the case law indicated that the United States was the "proper party to invoke the benefits of the FDCPA." The court thus "adopt[ed] the magistrate judge's recommendation to deny Sobranes' motion . . . on the limited ground that Sobranes has failed to demonstrate that it is a proper party to invoke FDCPA and that it therefore cannot rely on the FDCPA to establish that the judgment is not dormant under Texas law." Sobranes appeals.

II

Before turning to the merits, we address three preliminary issues.

A

Although neither party questions our jurisdiction, we have an independent duty to consider it, and given the unusual procedural history of this case, we pause on the issue.⁵ 28 U.S.C. § 1291 gives this court jurisdiction to review "final decisions" of the district courts. "A final decision generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment."⁶

Sobranes' brief and reply brief are in great — if not complete — tension over whether the district court's order is a final decision. In its statement of jurisdiction, Sobranes writes, "The parties in the underlying post-judgment proceeding agreed, and the trial court agreed, that `the judgment is dormant if Texas law applies, and it is not dormant if the FDCPA controls.'" Thus, Sobranes explains, because the judgment is dormant under Texas law, the district court's ruling that the FDCPA is inapplicable is dispositive. In its reply brief, Sobranes comes about face, arguing that the issue of dormancy was never decided below, the issue of dormancy is not before this court, and this court should remand on the issue. But if this be so, then this court is without jurisdiction because the district court never reached the dispositive issue remaining in the case. Rather, the district court only made an antecedent ruling on the applicable law, and the applicability of the FDCPA is not "effectively unreviewable on appeal from a final judgment."⁷

A close reading of the district court's ruling, the magistrate's recommendation and report, and the parties' filings persuade us that the district court did rule that the judgment is dormant under Texas law.

In recommending that Sobranes' motion be denied, the magistrate specifically considered whether the judgment is dormant, concluding that it is. Thus, the magistrate's decision squarely placed the issue before the district court — and Sobranes' objections to the magistrate's decision explicitly made the argument that the judgment is not dormant because of the FDCPA.

Before analyzing the applicability of the FDCPA, the district court framed the issue before it as "Sobranes' objection to the magistrate judge's conclusion that the judgment is dormant," and noted that "the parties also agree that the judgment is dormant if Texas law applies." The district court adopted the magistrate's recommendation, concluding that "[Sobranes] therefore cannot rely on the FDCPA to establish that the judgment is not dormant under Texas law." The district court specifically limited its departure from the magistrate's recommendation to the FDCPA analysis, leaving untouched the magistrate's analysis of the dormancy issue. It is not surprising that the district court did not include a detailed analysis of whether the judgment is dormant under Texas law as the parties conceded that it is, a concession Sobranes again makes in its statement of jurisdiction in its opening brief.

As the district court in substance held that Sobranes is time-barred from executing on the judgment, its order is a final decision, and we have jurisdiction.

B

The central question is whether Sobranes is entitled to invoke the FDCPA. As this is a question of statutory interpretation, our review is de novo.⁸

C

Sobranes argues that resolving the issue of whether the judgment is a debt within the meaning of the FDCPA would not properly dispose of this appeal because the district court did not address it. It is an elementary proposition, and the supporting cases too numerous to cite, that this court may "affirm the district court's judgment on any grounds supported by the record"⁹ — which we elect to do.

III

Congress passed the FDCPA "to create a...