Opposition Brief — Mackie v. Federal Deposit Insurance

Supreme Court brief1992

Ask Donna

What actually matters in this document.

Text

. ae 7.

No. 91-1443 ey 75 (Ye |

LERK |

—— |

| ori: oF TEE

In the Supreme Court of the United States

OCTOBER TERM, 1991

THOMAS S. MACKIE, DBA WARWICK, PETITIONER

FEDERAL DEPOSIT INSURANCE CGRPORATION.

MANAGER OF FSLIC RESOLUTION FUND

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

KENNETH W. STARR 7

Solicitor General

Department of Justice :

Washington, D.C. 20530

(202) 514-2217

—

ALFRED J.T. BYRNE

General Counsel

DOROTHY L. NICHOLS

Associate General Counsel

ANN S. DuRoss

Assistant General Counsel

COLLEEN BOMBARDIER

JOHN P. PARKER

Attorneys

Federal Deposit Insurance Corporation

Washington, D.C. 20429

QUESTION PRESENTED

Whether petitioner had a fair opportunity to present

his case before the court of appeals and the district

court.

TABLE OF CONTENTS

aE kaa cule nenecueacdansvacisCassidooscaceskes

Neen ee eee ssucsconabacacsbiucasienas

TABLE OF AUTHORITIES

Cases:

Celotex v. Catrett, 477 U.S. 317 (1986) ................000000000000

Clark v. Aetna Casualty & Sur. Co., 778 F.2d 242 (5th

oii Ndla a Candies dirdctdindaehusaiicnaenassascmenaxstecdsennecs

Clark v. Dedina, 658 S.W.2d 293 (Tex. Ct. App. 1983) ....

Furman v. United States, 720 F.2d 263 (2d Cir. 1983) ....

Granny Goose Foods, Inc. v. Brotherhood of Teamsters,

Local No. 70, 415 U.S. 423 (1974) ............cccccccsssssesseesees

Greater Southwest Office Park, Ltd. v. Texas Commerce

Bank, 786 S.W.2d 386 (Tex. Ct. App. 1990) 0.0.0.0...

NLRB v. Amalgamated Clothing Workers, Local 990, 430

National Hockey League v. Metropolitan Hockey Club,

Bs ccs cecsxcnechanhckssa\wacenanevacsssancteesvccnce

Pierce v. Underwood, 487 U.S. 522 (1988) ...............s0eeee-

Savers Fed. Sav. & Loan Ass’n v. Reetz, 888 F.2d 1497

chs leas sisakeskuaianeanncynascedbtcasine

Tarrant Sav. Ass’n v. Lucky Homes, Inc., 390 S.W.2d

ae ert cac al dancacenncavesocenice sss

Taylor v. McKeithen, 407 U.S. 191 (1972) ......... cece eee eee

Thomas v. Sams, 734 F.2d 185 (5th Cir. 1984) ..........

United States v. Cal’s Tupelo Blossom U.S. Fancy Pure

Honey, 344 F.2d 288 (6th Cir. 1965) 0.00... eeee eee ee

Yee v. City of Escondido, 112 S. Ct. 1522 (1992) «00.0...

(III)

Page

fe |

ounre =

-~)

or CO

Statutes and rules: Page

Financia] Institutions Reform, Recovery, and Enforce—

ment Act of 1989, Pub. L. No. 101-73, §§ 401-406, 103

igh ag ag ce IE 4

Fed. R. Civ. P. ORME sssentreseiieiaencinies Soins, &

Tex. R. Civ. P. OMMEE sissneninrisenurcdvondshveseraiassadsnséncac si. 3

Miscellaneous:

H.B. No. 169, 72d Leg., Regular Sess., 199] Tex. Gen.

PE sonsicntmronmenenumigtoe ia 7

In the Supreme Court of the Gnited States

OCTOBER TERM, 199]

No. 91-1443

THOMAS S. MACKIE, DBA WARWICK, PETITIONER

FEDERAL DEPOSIT INSURANCE CORPORATION,

MANAGER OF FSLIC RESOLUTION FUND

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE RESONDENT IN OPPOSITION

OPINIONS BELOW

The order of the court of appeals, Pet. App. 3, is

unpublished, but the decision is noted at 948 F.2d 1285

(Table). The opinion of the district court, Pet. App. 12-

18, is unreported. The opinion of the district court on

rehearing, Pet. App. 6-11, is unreported.

JURISDICTION

The judgment of the court of appeals was entered on

November 5, 1991. A petition for rehearing was denied

on December 10, 1991. Pet. App. 2. The petition for a

writ of certiorari was filed on March 9, 1992. The

Jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

STATEMENT

1. On April 30, 1985, petitioner executed a promis-

sory note (note), guaranty agreement, loan agree-

ment, and a deed of trust in connection with a loan

made by Killeen Savings and Loan Association (Kill-

een Savings) in the principal amount of-$1,388,926.

The loan agreement provided for a note to be executed

with an interest rate equal to the lesser of (a) the

maximum allowed rate or (b) “The greater of” two

percent above the published prime rate charged by

RepublicBank of Dallas, or 10.5% per annum. The

note, which was subsequently executed, deleted the

“sreater of” language contained in the loan agree-

ment. The loan agreement stated, however, that “[i]n

the event of a conflict between any of the provisions of

the Note, Deed of Trust or this Agreement, the

provisions of this Agreement shall control.” Pet. App.

16-17.

On January 1, 1986, petitioner defaulted on the note.

Six months later, on June 27, Killeen Savings filed

suit in Texas state court against petitioner seeking

to recover the amounts due on the note and alleging

fraud and breach of fiduciary duty. On December 12,

1986, Killeen Savings appointed a substitute trustee

to» act under and by virtue of the deed of trust. Three

days later, Killeen Savings gave notice of the foreclo-

sure sale of the property securing the note. On Jan-

uary 6, 1987, the substitute trustee sold the property

pursuant to the deed of trust’s terms at a public sale

for $1,312,500. Petitioner filed a counterclaim, alleg-

ing that Killeen Savings had failed to bid the proper-

ty’s full market value at the foreclosure sale.

Petitioner sought to offset the amount of his counter-

claims against the amount that he owed on the note.!

On August 17, 1987, the Texas state court entered

sanctions in the amount of $500 against petitioner,

and further ordered him to comply with Killeen

Savings’ discovery requests. On September 14, 1987,

after petitioner failed to comply with that order, the

Texas state court imposed discovery sanctions pur-

suant to Texas R. Civ. P. 215(8), prohibiting peti-

tioner “from seeking further discovery of any nature

from [Killeen Savings] in furtherance or support of

[petitioner’s] Original Counterclaim.” Pet. App. 21-

22.2 The order imposing sanctions did not bar peti-

tioner from conducting discovery related to Killeen

Savings’ claims on the note.

Killeen Savings’ claims on the note were tried

before a jury in December 1988. On December 14, the

jury returned its verdict in favor of Killeen Savings.

2. On December 27, 1988, the Federal Home Loan

Bank Board declared Killeen Savings insolvent and

appointed the Federal Savings and Loan Insurance

Corporation as receiver (FSLIC/Receiver). The

FSLIC/Receiver sold its rights under the note to

FSLIC in its corporate capacity, but retained the lia-

bility, if any, for petitioner’s counterclaims. On Jan-

uary 24, 1989, the FSLIC/ Receiver intervened in this

case and removed it to the United States District

! Specifically, petitioner alleged violations of the Texas

Deceptive Trade Practices-Consumer Protection Act, wrongful

foreclosure, failure to conduct foreclosure in a commercially

reasonable manner, unjust enrichment, and intentional inflic-

tion of emotional distress. He also asserted a usury claim and

sought a declaratory judgment.

* In addition, the Texas state court ordered petitioner to

pay Killeen Savings $500, representing its expenses incurred in

obtaining the sanctions.

Court for the Northern District of Texas. On October

12, 1989, the Federal Deposit Insurance Corporation

(FDIC) substituted itself for the FSLIC.*

On January 10, 1990, the FDIC, as receiver for

Killeen Savings and in its corporate capacity as man:

ager of the FSLIC Resolution Fund, moved for the

entry of judgment against petitioner. On January 30,

petitioner filed a motion for judgment notwithstand-

ing the verdict and, in the alternative, for a new trial

in district court. On August 22, the district court

granted in part the FDIC’s motion to dismiss peti-

tioner’s counterclaims. The court ruled, however,

that the FDIC had failed conclusively to establish the

appropriate interest rate to be applied. The court

therefore denied the FDIC’s motion for the entry of

judgment and reopened discovery on the limited issue

of the appropriate rate of interest on the note. Pet.

App. 19-20.

The FDIC later moved for summary judgment,

which the district court granted. The court rejected

petitioner’s claim that there was no evidence showing

the amount of interest due on the note. Pet. App. 16.

The court found that the documents in the record

showed that the interest rate was to be calculated

according to the terms of the loan agreement, rather

than the terms of the note. /bid.4 Thereafter, the

% The Federal Deposit Insurance Corporation (FDIC) later

assumed FSLIC’s role as receiver for Killeen Savings pursuant

to the Financial Institutions Reform, Recovery, and Enforce-

ment Act of 1989 (FIRREA), Pub. L. No. 101-73, §§ 401-406,

103 Stat. 354-363. Accordingly, the FDIC is the respondent in

this action, and all further references in this brief will be to the

FDIC.

4 The district court also found that petitioner had failed to

raise a genuine issue of material fact regarding several mat-

ters: (1) whether, at the time of foreclosure, Killeen Savings

district court denied petitioner’s motion for recon-

sideration and for a new trial. Jd. at 9. The district

court also awarded the FDIC attorneys’ fees, finding

the request reasonable. /d. at 10.

3. The court of appeals summarily affirmed without

opinion. Pet. App. 3.

ARGUMENT

1. Petitioner contends that by summarily disposing

of his appeal without issuing an opinion the court of

appeals did not adequately consider his arguments.

Pet. 10-11. Appellate courts, however, have “wide lati-

tude in their decisions of whether or how to write

opinions.” Taylor v. McKeithen, 407 U.S. 191, 194 n.4

(1972). Requiring appellate courts to write a full opin-

ion in every case would squander scarce judicial

resources. In light of the large number of cases that

come before the courts of appeals, it is not surprising

that the circuits have adopted local rules that autho-

rize the use of unpublished summary dispositions.

Yet, “(t]he fact that a disposition is by informal sum-

mary order rather than by formal published opinion in

no way indicates that less than adequate considera-

tion has been given to the claims raised in the appeal.”

Furman v. United States, 720 F.2d 263, 265 (2d Cir.

1983). See also NLRB v. Amalgamated Clothing

Workers, Local 990, 430 F.2d 966, 971 (5th Cir. 1970);

United States v. Cal’s Tupelo Blossom U.S. Fancy

believed the property to be worth more than the amount owing

on the note; (2) whether, at the time of foreclosure, Killeen

Savings carried the property on its books at a value greater

than the amount owed; (3) whether other circumstances

showed the property to be worth more than the amount owed;

(4) what was the fair market value of the property at the time

of foreclosure; and (5) whether there were irregularities at the

foreclosure sale, rendering it void. Pet. App. 15 n.1.

Pure Honey, 344 F.2d 288, 289 (6th Cir. 1965) (“it is

not the policy or practice of this court, in reviewing

cases on appeal where a District Court has rendered a

comprehensive opinion with which we find ourselves

in full agreement, to rewrite such an opinion”). Here,

petitioner was afforded a trial by jury in state court,

review by a district court, and full briefing and argu-

ment in the court of appeals. Petitioner has received

his day in court.

2. Petitioner’s next contention—that he did not

receive a fair trial—consists of three claims: (1)

Killeen Savings did not realize the full market value

of the property at the foreclosure sale, Pet. 12-19; (2)

the Texas state court erred in imposing sanctions

against him which prevented him from conducting

discovery on his counterclaims, Pet. 20; and (3) the

evidence presented by the FDIC to the district court

did not establish the amount of the deficiency, Pet. 20-

21, 25-29. Each claim lacks merit.

a. Petitioner’s first contention—that he was enti-

tled to rely on the fair market value of the property to

contest the amount Killeen Savings received at the

foreclosure sale—ignores well-settled case law that

evidence of the value of real property securing an

indebtedness, which has been properly sold at public

sale, does not raise an issue of fact as to the proper

amount of offset to the indebtedness. Under applicable

Texas law,® only the amount received at the sale is to

* Effective April 1, 1991, the Texas legislature amended

Chapter 51 of the Texas Property Code. The amendment al-

lows a debtor to challenge the amount of a deficiency remain-

ing after a foreclosure sale by introducing evidence of the fair

market value of the foreclosed property. The new law,

however, is prospective only. The Act states that an “action to

recover a deficiency resulting from a foreclosure sale that is

conducted before [the Act’s effective date] is governed by the

be credited on the debt absent irregularities in the

foreclosure sale contributing to the allegedly inade-

quate price. Savers Fed. Sav. & Loan Ass’n v. Reetz,

888 F.2d 1497, 1503 (5th Cir. 1989) (Texas law is well

settled that inadequacy of foreclosure sale price can-

not alone invalidate an otherwise valid foreclosure):

Tarrant Sav. Ass’n v. Lucky Homes, Inc., 390 S.W.2d

473 (Tex. 1965); Greater Southwest Office Park, Ltd.

v. Texas Commerce Bank, 786 S.W.2d 386, 390 (Tex.

Ct. App. 1990). In any event, there is no evidence to

suggest that the sale price was unreasonable. Peti-

tioner failed to raise a genuine issue of material fact

regarding the amount due on the note.

b. Petitioner’s next claim is that the Texas trial

court erred in entering sanctions against him and

that the district court erred in failing to vacate those

sanctions, thereby preventing him from conducting

discovery on his counterclaims. That argument also

lacks merit. Petitioner failed to raise this claim in

district court and therefore has waived his claim. See

Clark v. Aetna Casualty & Sur. Co., 778 F.2d 242, 249

(5th Cir. 1985) (collecting cases). In addition, upon

removal a federal district court takes a state court

action as if everything done in state court had in fact

law as it existed on the date of the sale, and the prior law is

continued in effect for that purpose.” Tex. H.B. No. 169 § 2

(emphasis added). The new law became effective three years

after the foreclosure sale at issue here and therefore does not

apply to this case. H.B. No. 169, 72d Leg., Regular Sess., 1991

Tex. Gen. Laws 39.

* Although petitioner had objected in state court to the

denial of complete discovery, petitioner never moved to vacate

or modify the state court’s sanctions order. The first indication

in the record that petitioner informed the district court about

is payment of fees in state court came after the district court

had entered summary judgment against petitioner.

been done in federal court. Granny Goose Foods, Inc.

v. Brotherhood of Teamsters, Local No. 70, 415 US.

423, 436 (1974). Thus, the sanctions order can be

treated as having been entered by the district court

under Fed. R. Civ. P. 37(b)(2). District courts have

broad latitude in ordering sanctions under that Rule,

and their decisions should be reviewed only for an

abuse of discretion. National Hockey League v.

Metropolitan Hockey Club, 427 U.S. 639, 642 (1976).

ce. Tne FDIC presented sufficient proof of each

element to enforce payment of a promissory note

under Texas law.? Because the FDIC established the

amount of interest due and since petitioner presented

no contrary evidence, the district court properly

granted summary judgment for the FDIC. See Celo-

tex v. Catrett, 477 U.S. 317 (1986). Petitioner also has

not shown that the district court abused its discre-

tion in limiting the scope of discovery, after granting

a new trial, on the issue of the appropriate interest

rate.

3. Petitioner also contends that the district court

erred in its calculation of the amount of attorneys’

fees due to the FDIC. Pet. 21-24. Petitioner has not

presented that claim to this Court as a question for

the Court to resolve, however, and the Court thus

should not reach out to address it. See Yee v. City of

Escondido, 112 S. Ct. 1522, 1532-1534 (1992). In any

event, petitioner’s fact-bound claim does not warrant

further review. The granting or computation of at-

torneys’ fees is committed to the sound discretion of

the district court; such an award is reviewed only for

7 Those elements are (1) the maker of the note signed an

instrument with a promise to pay; (2) the plaintiff is the legal

owner of the instrument; and (3) a sum certain is due and ow-

ing on the instrument. Clark v. Dedina, 658 S.W.2d 293, 295

(Tex. Ct. App. 1983).

errors of law and such gross miscalculations indicat-

ing that the court has abused its discretion. See, e.g.,

Thomas v. Sams, 734 F.2d 185, 193 (5th Cir. 1984). Cf.

Pierce v. Underwood, 487 U.S. 552, 562 (1988). Here,

the FDIC submitted detailed affidavits showing that

it had incurred reasonable and necessary attorneys’

fees. As the district court noted, the FDIC’s request

for fees as well as the FDIC’s retention of new coun-

sel was reasonable “given both the change of forum

and the substitution of the federal government for

Killeen [Savings].” Pet. App. 10. In sum, the district

court properly exercised its discretion in awarding

attorneys’ fees to the FDIC.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR