# Opposition Brief — Lively v. Federal Deposit Insurance > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0717%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1992 - **Citation:** 506 U.S. 821 ## Text Gupreme Court, U.S. 7 FiLED 29 882 05 we ci | No. 91-1894 In the Supreme Court of the Cinited : OCTOBER TERM, 1992 TrRuITT V. LIVELY, PETITIONER vU. FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR UNITEDBANK — HOUSTON 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 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 RICHARD J. OSTERMAN, JR. MICHAEL H. KRIMMINGER Counsel Federal Deposit Insurance Corporation Washington, D.C. 20429 QUESTIONS PRESENTED 1. 12 U.S.C. 1821(d)(2)(A) (Supp. IIT 1990) provides that, in its capacity as receiver of an insolvent financial institution, the Federal Deposit Insurance Corporation (FDIC) succeeds to the institution’s “rights, titles, pow- ers, and privileges”; under 12 U.S.C. 1821(d)(2)(B) (Supp. I] 1990), the FDIC may “collect all obligations and money due the institution.” The question presented is whether, pursuant to these provisions, the FDIC suc- ceeed to an institution’s rights under a guaranty. 2. Whether petitioner raised a genuine issue of mate- rial fact in challenging the validity of a foreclosure sale under Texas law. TABLE OF CONTENTS cae ci laddvensuicadbenboxnssbénshnsennsesnsscuniersaacesake SS RR Se DS ee ea caidas su gadehhaveesbensdatansiaiaesaknicesnstic La tik uc Wu b sevickuncekaguebadnadphucentnandtehibensbakehede ts ie aS i ah TABLE OF AUTHORITIES Cases: American Sav. & Loan Ass’n v. Musick, 531 S.W.2d 581 red aa Las diac ada phaaenncenbapeedéesanheabeneoainrensncus Diversified Developers, Inc. v. Texas First Mortgage REIT, 592-S.W.2d 43 (Tex. Civ. App. 1979) ................. Goodman v. Lukens Steel Co., 482 U.S. 656 (1987).. Hausmann v. Texas Sav. & Loan Ass’n, 585 S.W.2d 796 (Tex. Civ. App. 1979), writ refused n.r.e. (Jan. 23, AMA RS a ate nae Sie eal aah nd bbs atnchadethiekigvesbusdavnsninéonets Hutson v. Sadler, 501 S.W.2d 728 (Tex. Civ. App. 1978).. Jasper Fed. Sav. & Loan Ass'n v. Reddell, 730 S.W.2d oo 6S ss sai au schamacbasapncisinabsionansses Nautical Landings Marina, Inc. v. First Nat'l Bank in Port Lavaca, 791 S.W.2d 293 (Tex. Ct. App. 1990), writ a a aaneppasnnaeadononsenese Savers Fed. Sav. & Loan Ass’n v. Reetz, 888 F.2d 1497 er ole aks sacenhudpuneuadnndskersnianandiivewiy University Sav. Ass'n v. Springwoods Shopping Center, es OM RD cic answanncennsandsneceneaseanieeuanse Worcester, In re, 811 F.2d 1224 (9th -Cir. 1987) ......... Statute and regulations: - Financial Institutions Reform, Recovery and Enforce- ment Act of 1989, Pub. L. No. 101-73, § 209(b), 103 Stat. 12 U.S.C. 1821(d)(2) (Supp. IT 1990) ..ccccsccccseseeeeeeeeseeees 12 U.S.C. 1821(d(2A) (Supp. IT 1990)...................0cc000. (IIT) 6 5 mm DO Regulations—Continued: 12 U.S.C. 1821(d)(2)(A)G) (Supp. IT 1990 12 U.S.C. 1821(d)(2)(B) (Supp. If 1990) Tex. Prop. Code § 51.002 (Vernon 1987) \ Jn the Supreme Court of the Cited States OCTOBER TERM, 1992 No. 91-1894 TRUITT V. LIVELY, PETITIONER v. FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR UNITEDBANK -- HOUSTON ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT BRIEF FOR THE RESPONDENT IN OPPOSITION OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1-8) is unreported, but the judgment is noted at 952 F.2d 400 (Table). The opinion of the district court (Pet. App. 13- 18) is reported at 760 F. Supp. 115. JURISDICTION The judgment of the court of appeals was entered on January 9, 1992. A petition for rehearing was denied on February 27, 1992. Pet. App. 9-10. The petition for a writ of certiorari was filed on May 27, 1992. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). (1) to STATEMENT 1. Petitioner was the president of the Gettysburg Corporation. In September 1985, acting on behalf of Get- tysburg, petitioner executed and delivered to United- Bank-Houston a promissory note for $926,926.56 and a deed of trust on real property owned by Gettysburg. Pet. App. 2. Petitioner also executed and delivered a personal guaranty of all debts owed by Gettysburg to United Bank-Houston. Jbid. On April 30, 1987, the Texas Banking Commissioner declared UnitedBank-Houston insolvent and appointed the Federal Deposit Insurance Corporation (FDIC) the federal receiver for the bank. Pet. App. 2. As receiver, the FDIC sueceeded to all of the rights, titles, powers, and privileges of the bank. 12 U.S.C. 1821(d)(2)(A) (Supp. I] 1990). Gettysburg and petitioner subsequently defaulted on the note and the personal guaranty. Pet. App. 2-3. The FDIC proceeded with foreclosure under the deed of trust. It provided notice of the foreclosure sale on September 15, 1987. 7d. at 38. On October 6, 1987, the property was sold at foreclosure for $170,000. /bid. After the proceeds of the sale were applied to reduce the balance due on the note, a deficiency of $794,691.15 re- mained. /bid. 2. In November 1988, the FDIC filed its original pe- tition against petitioner and Gettysburg in Texas state court, seeking to recover the deficiency. Pet. App. 3. In September 1989, the FDIC removed the action to the United States District Court for the Southern District of Texas, as permitted under the then-recently enacted Financial Institutions Reform, Recovery and Enforce- ment Act of 1989, Pub. L. 101-73, § 209(b), 108 Stat. 216. Pet. App. 3. The FDIC subsequently moved for summary judgment in its favor on all claims. 3 The district court granted summary judgment in favor of the FDIC. It held, in relevant part, that the FDIC was the proper party to enforce petitioner’s obligations under the guaranty. It also held that petitioner had not estab- lished any material irregularities in the foreclosure sale. Pet. App. 15-17. 3. The Fifth Circuit affirmed in an unpublished, per curiam opinion. Pet. App. 1-8. ARGUMENT The decision of the court of appeals is correct and does not conflict with any decision of this Court or any other court of appeals. Further review is therefore not war- ranted. 1. Petitioner first claims (Pet. 6-9) that his guaranty ran only to UnitedBank-Houston’s corporate successors or assigns and that the FDIC did not qualify as either. Therefore, he argues, the FDIC could not enforce the guaranty. The court of appeals correctly rejected that argument. Pet. App. 7. The FDIC was the successor to “all rights, titles, powers and privileges” of United-Bank Houston, pur- suant to 12 U.S.C. 1821(d)(2)(A)(i) (Supp. Il 1990). Under 12 U.S.C. 1821(d)(2)(B) (Supp. IT 1990), the FDIC was en- titled to “collect all obligations and money due the insti- tution,” as well as to “preserve and conserve [its] assets and property.” These two provisions plainly empowered the FDIC to enforce petitioner’s guaranty to United Bank-Houston. The guaranty conferred “rights” (12 U.S.C. 1821(d)(2)(A (i) (Supp. IT 1990)) upon United Bank- Houston as against petitioner, to which the FDIC suc- ceeded when it was appointed receiver for the bank. Those rights ineluded the right to “collect * * * money due [UnitedBank-Houston]” (12 U.S.C. 1821(d)(2) (B) (Supp. IL 1990)) from petitioner as a result of his de- faulting on the guaranty of Gettysburg’s debt to the bank. Contrary to petitioner’s contention (Pet. 7), the court of appeals did not create a “new” category of successors who may enforce a guaranty. Instead, the court merely yave effect to statutory provisions that authorize the FDIC to enforce the debts due to the failed institution and thereby maximize the assets of the institution avail- able for payment of creditors. Petitioner nevertheless argues that the guarantor of a debt has no obligation to the successor of the debt-holder if the succession occurs by operation of federal statute rather than by private agreement. Petitioner thus seeks to release personal guarantors of debts to financial institutions from any obligation to make good on their promise when the FDIC is appointed receiver. Petitioner does not explain, how- ever, Why such a windfall should be available to personal guarantors, alone among the obligors of the institution. Petitioner’s position is squarely at odds with the plain purpose of 12 U.S.C. 1821(d)(2) (Supp. IL 1990). 2. Petitioner also argues (Pet. 9-12) that the court of appeals erred in concluding that the foreclosure sale was proper under Texas law. In an effort to cast this argu- ment as one appropriate for this Court’s review, petition- er asserts that the court of appeals’ interpretation of Texas law conflicts with the Ninth Circuit’s interpreta- tion of California law in Jn re Worcester, 811 F.2d 1224 (1987). Pet. 10. This effort is obviously unavailing; the two decisions apply the laws of different States to differ- ent sets of facts. Petitioner thus fails to establish a fed- eral issue warranting further review. In any event, the courts below correctly determined that petitioner’s state-law challenge to the foreclosure sale did not raise a triable fact. Under Texas law, a foreclosure sale cannot be set aside unless the party challenging the sale can prove D both that the property was sold for a grossly inadequate price and that there was a material irregularity in the sale procedure. See, e.g., Savers Fed. Sav. & Loan Ass’n v. Reetz, 888 F.2d 1497, 1503 (5th Cir. 1989); American Sav. & Loan Ass’n v. Musick, 531 S.W.2d 581, 587 (Tex. 1975); Nautical Landings Marina, Inc. v. First Nat’l Bank in Port Lavaca, 791 S.W.2d 293, 298 (Tex. Ct. App. 1990), writ denied (Dec. 19, 1990). Petitioner did not make either showing. First, petitioner failed to show that the property was sold for a grossly inadequate price. The district court found that the price for which the property sold was “not deficient,” observing that the property was sold for “over 85% of the appraised value.” Pet. App. 15. The court of appeals summarily affirmed on this issue. Jd. at 7. Although petitioner disputes this finding, he provides no reason why this Court should depart from its practice of declining to review factual findings concurred in by both courts below. See, e.g., Goodman v. Lukens Steel Co., 482 U.S. 656, 665 (1987). Under Texas law, petitioner’s failure to establish that the sale price was grossly inad- equate, standing alone, defeated his challenge to the sale. Moreover, none of the aspects of the sale cited by peti- tioner had a material effect on the sale. Petitioner first asserts that an error in the notice of foreclosure sale “could have caused a chilling [effect on] the bidding.” Pet. 10. Petitioner did not, however, present any evi- dence that the error—which consisted of the listing on the notice of a lot that was not subject to UnitedBank- Houston’s lien—actually affected the sale. In the ab- sence of evidence of actual prejudice, petitioner’s mere speculation of a “chilling” effect was inadequate as a matter of law to set aside the sale. See Diversified De- velopers, Inc. v. Texas First Mortgage REIT, 592 S.W.2d 43,44 (Tex. Civ. App. 1979). a eceieidait iil 6 Petitioner next asserts that the FDIC did not provide 21 days’ notice of the sale, as required by law. Pet. 11. That assertion is incorrect. Notice of the scheduled foreclosure sale was mailed to petitioner Gettysburg on September 15, 1987; the sale occurred on October 6, 1987. Pet. App. A38. Counting the day of the sale, as is per- mitted under Texas law, 21 days elapsed. Hausmann v. Tevas Sav. & Loan Ass’n, 585 S.W.2d 796, 801 (Tex. Civ. App. 1979), writ refused n.r.e. (Jan 23, 1980); Hutson v. Sadler, 501 S.W.2d 728 (Tex. Civ. App. 1973). linally, petitioner observes that the deed of trust con- tained a scrivener’s error setting the time of sale as be- tween 10:00 P.M. and 4:00 P.M., rather than between 10:00 A.M. and 4:00 P.M. Pet. 11. The time of the sale was accurately reported, however, in the notice of sale, as required by Texas Prop. Code § 51.002 (Vernon 1987), and the sale was actually held at 2:30 P.M. on October 6, 1987. FDIC C.A. Br. 31-82. In the absence of evidence of actual prejudice, errors of this sort do not suffice under Texas law to set aside a foreclosure sale. See Nautical Landings Marina, 791 S.W.2d at 299; Jasper Fed. Sav. & Loan Ass’n v. Reddell, 730 S.W.2d 672, 674-675 (Tex. 1987); University Sav. Ass’n v. Springwoods Shopping Center, 644 S.W.2d 705, 706 (Tex. 1982). a CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General ALFRED J.T. BYRNE General Counsel DOROTHY L. NICHOLS Associate General Counsel ANN S. Du.Ross Assistant General Counsel RICHARD J. OSTERMAN, JR MICHAEL H. KRIMMINGER Counsel Federal Deposit Insurance Corporation JULY 1992 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0717%3A2. Public record. Not legal advice.