Petition for Writ of Certiorari — Engstrom v. First National Bank

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No. 9420 23 JUN 1 2 5

Ih The *

Supreme Court of the United States

October Term, 1994

JOHN T. ENGSTROM, ET AL.,

Petitioners,

THE FIRST NATIONAL BANK OF EAGLE LAKE,

Respondent.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

PETITION FOR WRIT OF CERTIORARI

*PauL E. KNISELY

Broapbus A. Spivey

THOMAS P. PREHODITCH

Sprvey, GRIGG, Ketty & KNISELY

48 East Avenue

Austin, Texas 78701

(512) 474-6061

(512) 474-1605 (fax)

Jot K. LONGLEY

Tim LABADIE

LONGLEY & Maxwe t, L.L.P.

P.O. Box 12667, Capitol Station

Austin, Texas 78711

(512) 477-4444

(512) 477-4470 (fax)

Attorneys for Petitioners

*Counsel of Record

COCKLF LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. Whether § 532(3) of the Soldiers’ and Sailors’ Civil

Relief Act, which provides that “[nJo sale, foreclosure, or

seizure of property for nonpayment of any sum due under any

[obligation secured by . . . security in the nature of a mort-

gage upon real or personal property owned by a person in

military service] . . . shall be valid if made . . . during the

period of military service,” prohibits a creditor bank, which

has a lien on farm equipment to secure the debts of a family

farmer who is on active military duty, from arranging an

auction of the debtor’s farm equipment, approving the sales at

the auction, signing the debtor’s name to the check for the

proceeds from the auction, and applying those proceeds

toward the debtor’s and his family’s outstanding farm loans

with the Bank.

2. Whether the Fifth Circuit’s interpretation § 532 of the

Soldiers’ and Saitors’ Civil Relief Act as being inapplicable

to the conduct of Respondent First National Bank of Eagle

Lake in this case is inconsistent with the construction of the

Act mandated by the Supreme Court in Conroy v. Aniskoff,

ecg WEUDs ccuan 182 Oaks Lee CEFF 2).

3. Whether § 536 of the Soldiers’ and Sailors’ Civil Relief

Act extends the protections of § 532 to an active service

member’s family members and their family farming entities

who are affected by the military service.

QUESTIONS PRESENTED -—- Continued

4. Whether in rejecting Petitioners’ claims under the Sol-

diers’ and Sailors’ Civil Relief Act the lower courts improp-

erly_applied and/or disregarded the proper standard of review

of the evidence on a motion for summary judgment.

5. Whether a proper review of the summary judgment evi-

dence in this case shows that there are genuine issues of

material facts with respect to whether the Respondent Bank

was responsible in whole or in part for the seizure, fore-

closure on, and/or sale at auction of Petitioners’ farm equip-

ment while Captain Engstrom was on active military duty in

the Persian Gulf.

ill

LIST OF PARTIES

|. Petitioners are:

a) John T. Engstrom, Individually and as Next

Friend of Andrea Engstrom, a minor;

b) Lyndia Engstrom, Individually and as Next

Friend of Andrea Engstrom, a minor;

c) John T. Engstrom, Melissa Engstrom, and

Cynthia Engstrom, Individually and d/b/a JTE

Farms Joint Venture;

d) Coltair Farms, Inc.

2. Respondent is The First National Bank of Eagle

Lake, Texas.

TABLE OF CONTENTS

Page

CORI SITE: ET TOER a 5.5.50 OA Re4 phi cetswswess i |

BB ENT Ree ere eee ey oe ee iii

pro OB es, pre oe re ee ree iv

TAs Se PAT I hse a i Sew V

STATEMENT OF JURISDICTION ................... 2

or tate). gt 3): : A eae ree Peers 2

SE SPE WEL RAS eb oc a eee ew 4

PRE ios o's 0k Und vee oe en iG he ee ae Pee es 13

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TABLE OF AUTHORITIES

Page

CasEs

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)

Per AE ET rt Ce Tee ne Sen 17, 18, 19

Boone v. Lightner, 319 U.S. 561. (1943). 0... 6 ccc. 15

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ...... Ee, is

Cockerham v. Cockerham, 527 S.W.2d 162 (Tex.

SOR Ad iibd we BRAT h GR ORE PRE ee a 29

Conroy v. Aniskoff, __. U.S. _... 113 S.Ct. 4562

CTS ack odes Oe RR kadE Cas OR CS passim

Detweiler v. Peria, 38 F.2d 591 (D.C. Cir. 1994)....... 15

Engstrom v. First National Bank of Eagle Lake, 47

Pia. BO ee EN SE. Bk deca <a dices CP eee passim

Hanson v. Crown Toyota Motors, Inc., 572 P.2d 380

COR BF as oA hee Sia Ea 15

In re A. H. Robins & Co., 996 F.2d 716 (4th Cir.

POPC R sas vk ds cee wh a rena ke het era a 15

Little v. Liquid Air Corp., 37 F.3d 1069 (Sth Cir.

el ky SER on em REIN roca ede z pee cbnaia aE 17

Pacific Finance Corp. v. Gilkerson, 217 S.W.2d 440

(Tex.App. — Beaumont 1948, no writ)............... 15

Pailet v. Ald, Inc., 194 So.2d 420 (La. App. 1967). .24, 25

Reid v. Margolis, 181 Misc. 222, 44 N.Y.S.2d 518

CUE cess bad bin Fiat wana ia Ca Oa ae 29

Tucson Telco Federal Credit Union vy. Bowser, 9

Anz.Agp. 242,.431 B26 322 IGG oo. is ov occ. 29

United States v. Bomar, 8 F.3d 226 (Sth Cir. > i} Se 13

TABLE OF AUTHORITIES - Continued

Page

STATUTES

y ik Pe tj PST Teer eT ee eT ee 2

Soldiers’ and Sailors’ Civil Relief Act

Pe es BE osc bad beeecaadaankateana i

Se Miailrs TU Oe OS ben vies dean ce bas W404 04 00Rers 14

Fe UR PE SOG nici ives Fie Oe 3

Pe Se ER ee a os v0 Sen bce eceesserescienee 14

SO. UK. AMOR. | TaN cnc s occnenedaavannccscueene 24

Se Ss BR BO Oe. ona ixaas bens tacennsnans passim

Fe ect es, FO oe irs kon oaeeeeass 4, 5, 28, 29

Tex.Bus.&Com-Cone § 17.41, e€ 0G. .......0 Soe ec cceee 5

FROME © DAEs x es 00's ds awk eavessbedee eae 29

No.

In The

Supreme Court of the United States

October Term, 1994

JOHN T. ENGSTROM, ET AL.,

Petitioners,

THE FIRST NATIONAL BANK OF EAGLE LAKE,

Respondent.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

PETITION FOR WRIT OF CERTIORARI

TO THE HONORABLE SUPREME COURT OF THE

UNITED STATES:

COME NOW Petitioners John T. Engstrom and Lyndia

Engstrom, Individually and as next friends of Andrea

Engstrom; John T. Engstrom, Melissa Engstrom, and Cynthia

Engstrom, Individually and d/b/a JTE Farms Joint Venture;

and Coltair Farms, Inc., and request that a writ of certiorari be

issued to review the opinion and judgment of the United

States Court of Appeals for the Fifth Circuit in this cause, and

as grounds for review by writ of certiorari Petitioners would

respectfully show the Supreme Court the following:

STATEMENT OF JURISDICTION

The Supreme Court has jurisdiction of this case under 28

U.S.C. § 1254(1).

This is an appeal from a summary judgment granted by

the district court and affirmed by the court of appeals in an

action brought by Petitioners under the Soldiers’ and Sailors’

Civil Relief Act, 50 U.S.C. Appx. § 501, et seq., with pendent

state claims. The Fifth Circuit rendered its opinion and judg-

ment on March 29, 1995, in Cause No. 93-2719, Engstrom v.

First National Bank of Eagle Lake, 47 F.3d 1459 (Sth Cir.

1995).

STATUTES INVOLVED

The pertinent provisions of the Soldiers’ and Sailors’

Civil Relief Act, 50 U.S.C. §§ 501, et seq. include the follow-

ing:

§ 532. Mortgages, trust deeds, etc.

(1) The provisions of this section shall apply only

to obligations secured by mortgage, trust deed, or

other security in the nature of a mortgage upon real

or personal property owned by a person in military

service at the commencement of the period of the

military service and still so owned by him which

obligations originated prior to such person’s period

of military service.

(2) In any proceeding commenced in any court

during the period of military service to enforce such

obligation arising out of nonpayment of, any sum

thereunder due or out of any other breach of the

terms thereof occurring prior to or during the period

of such service the court may, after hearing, in its

discretion, on its own motion, and shail, on applica-

tion to it by such person in military service or some

other person on his behalf, unless in the opinion of

the court the ability of the defendant to comply with

the terms of the obligation is not materially affected

by reason of his military service —

(a) stay the proceedings as provided in this

Act [50 U.S.C. Appx. §§ 501, et seq.]; or

(b) make such other disposition of the case as

may be equitable to conserve the interests of all

parties.

(3) No sale, foreclosure, or seizure of prop-

erty for nonpayment of any sum due under any

such obligation, or for any other breach of the

terms thereof, whether under a power of sale,

under a judgment entered upon warrant of

attorney to confess judgment therein, or other-

wise, shall be valid if made after the date of

enactment of the Soldiers’ and Sailors’ Civil

Relief Act Amendments of 1942 and during the

period of military service or within three

months thereafter, except pursuant to an agree-

ment as provided in section 107 [50 U.S.C.

Appx. § 517]', unless upon an order previously

granted by the court and a return thereto made

and approved by the court.?

(4) Any person who shall knowingly make or

cause to be made any sale, foreclosure, or sei-

zure of property, defined as invalid by subsec-

tion (3) hereof, shall be guilty of a

misdemeanor and shall be punished by

imprisonment not to exceed one year or by fine

not to exceed $1,000, or both.3

' Section 517 provides that the prohibitions of the Soldiers’ and

Sailors’ Civil Relief Act may be modified or waived by written agreement

executed by the service member during or after the period of military

service. No such written agreement is at issue here.

2 In 1991, shortly after the events in this case, an amendment to

§ 532(3) deleted the words “after the date of enactment of the Soldiers’ and

Sailors’ Civil Relief Act and” following “valid if made.” This minor

technical amendment has no bearing on the issues presented here.

3 Another 1991 amendment substituted the words “shall be fined as

provided in Title 18, United States Code, or imprisoned for not to exceed

§ 536. Extension of benefits to dependents

Dependents of a person in military service shall be

entitled to the benefits accorded to persons in mili-

tary service under the provisions of this article upon

application to a court therefor, unless in the opinion

of the court the ability of such dependents to com-

ply with the terms of the obligation, contract, lease,

or bailment has not been materially impaired by

reason of the military service of the person upon

whom the applicants are dependent.

STATEMENT OF THE CASE

I. Proceedings in The Courts Below

Petitioners filed this lawsuit in Texas state court in 1991.

On August 26, 1991, Respondent removed this case to the

Southern District of Texas, Houston Division, in Cause No.

H-91-2392. (R. 10:19, 29)4

Petitioners then filed a First Amended Complaint. (R.

7:332) Petitioners’ pleadings allege that in late 1990 and early

1991, while U. S. Navy Captain John T. Engstrom was on

active military duty in the Persian Gulf, Respondent First

National Bank of Eagle Lake (“the Bank”) took action to

foreclose on and sel] at auction the Engstroms’ family farm

equipment, applying ‘the proceeds toward the balance of the

family’s farm loans from the Bark which were secured by the

equipment. Petitioners allege that the sale was invalid and

one year” for the words “shall be guilty of a misdemeanor and shall be

punished by imprisonment not to exceed one year or by fine not to exceed

$1,000.”

4 The notation “R” refers to the Record in this case. It is referenced

by volume and page numbers (separated by a colon). For additional

references, the district court’s docket sheet listing the documents in the

Record appears at the front of Vol. 1 of the Record, which is at present in

the custody of the district clerk.

wrongful, rendering the Bank liable for violations of § 532

and § 536 of the Soldiers’ and Sailors’ Civil Relief Act, 50

U.S.C. Appx. § 501, et seq., as well as the Texas Deceptive

Trade Practices Act, Tex.Bus.&Com.Cope § 17.41, et seq. (R.

7:332) On September 1, 1992, Respondent filed a motion for

summary judgment on two alleged grounds:

(1) that the “undisputed evidence” shows that the

Engstroms’ farm equipment was not seized and sold by the

Bank, but rather was “sold by [neighboring farmer] Jim Clip-

son acting at the direction of John Engstrom,” and therefore

the Soldiers’ and Sailors’ Civil Relief Act did not apply; or

alternatively

(2) that none of the Plaintiffs other than John Engstrom

has standing to sue under the Relief Act because the farm

equipment was owned only by John Engstrom. (R. 7:230, 279,

277)

Petitioners filed a response to the motion for summary

judgment, with attached affidavits by Captain Engstrom and

his wife, Lyndia Engstrom, along with various deposition

excerpts and extensive documentary evidence from the Bank’s

files on the Engstroms’ loans. (R. 4:1311: 4:1242-1306) Peti-

tioners later supplemented the response with additional docu-

mentary evidence. (R. 2:2396-2505)

On September 2, 1993, the district court granted the

motion for summary judgment on the first alleged ground

only. (R. 1:2530) In its accompanying memorandum, the

district court declared that the Bank was not responsible for

the sale of the Engstroms’ equipment and therefore could not

be held liable under the Soldiers’ and Sailors’ Civil Relief

Act. (R. 1:2529)5

> In its order granting partial summary judgment on Petitioners’

claims under the Soldiers’ and Sailors’ Civil Relief Act, the district court

also directed that the pendent claims under Texas law be severed and

remanded to state court. (R. 1:2530) Respondent filed a cross-appeal of the

remand order.

On March 29, 1995, the Fifth Circuit affirmed the sum-

mary judgment and remand order by its opinion and judgment

in Engstrom vy. First National Bank of Eagle Lake, 47 F.3d

1459 (Sth Cir. 1995).

II. Statement Of Facts

Petitioner John T. Engstrom is a Captain in the United

States Navy. In 1989-90, while Captain Engstrom was on

reserve military status, he and his wife Lyndia Engstrom and

their three daughters, Melissa, Cynthia, and Andrea Engstrom

were operating a family rice farm in Colorado County, Texas.

The rice farm was the Engstrom family’s principal source of

income; all of the family members participated in the farm

labor and the running of the business. (R. 6:781, 779,

695-701, 684-690)

During 1989 and 1990, the First National Bank of Eagle

Lake made several loans to John T. Engstrom and to two

family business entities owned by John T. Engstrom and two

of his daughters, Melissa and Cynthia: Coltair Farms, Inc., a

Texas corporation, and JTE Farms Joint Venture.© The loans

were for the purchase of various items of farm equipment and

the financing of the Engstroms’ rice farming business. (R.

6:781)

As of June 30, 1990, the total outstanding balance of the

Engstroms’ various loans from the Bank was $211,187. (R.

6:721) John Engstrom owed $63,396 on a promissory note for

several consolidated loans which were secured by all of the

Engstroms’ farming equipment (including a GMC Suburban

and various tractors, combines, trucks, tools, etc.), as well as

an $18,000 real estate debt; JTE Joint Venture owed almost

6 The Fifth Circuit’s opinion at one point mistakenly identifies Cap-

tain John T. Engstrom as “Tom” Engstrom and mistakenly lists “John T.

Engstrom” as one of the Engstroms’ children. 47 F.2d at 1462. The

Engstroms have no sons. It is Captain Engstrom himself who was doing

business as JTE Farms Joint Venture with his two eldest daughters, Melissa

and Cynthia.

$80,000 on two other loans, one secured by the same farm

equipment as John Engstrom’s loans and the other by the

Engstroms’ 1990 rice crop; and Coltair, Inc. owed $50,181 on

another loan secured by the 1990 rice crop. (R. 6:231-234,

721)

The Bank’s file on the Engstroms’ farm loans shows that

the collateral on the loans collectively had been valued at

$412,599.7 (R. 6:721)

In spite of this initial high value placed on the collateral,

the loan file reveals a continuing concern on the Bank’s part

about repayment of the loans due to the poor crop yields in

1990 and the devaluation of the Engstroms’ collateral as a

result. The file reflects that as of at least June 30, 1990, the

Bank had a contingent plan to “liquidate” the farm equipment

in order to satisfy the debts if they were not paid by the end of

1990. The monthly loan-status reports from the Bank’s file

during the Summer and early Fall of 1990 describe the

Engstroms’ debt situation and the Bank’s planned course of

action. After setting out the various loan balances, these

reports (dated as indicated) state in part as follows:

June 30, 1990 :

“e+ * &

COMMENTS: John understands that he has to

pay out this year.

** *

ACTION PLAN: If debtor does not pay out from

1990 harvest, ask him to move loan or furnish high-

quality collateral or liquidate.

STATUS: Awaiting harvest and sale of crop.”

? The Fifth Circuit’s opinion mistakenly states that the Engstroms’

debts to the Bank amounted to “approximately $412,600.” 47 F.2d at 1461.

The collective debts at that time amounted to $211,187; the Bank had

valued the collateral at $412,599.

The failure by the court of appeals to get a number of the basic

undisputed facts straight contributes to Petitioners’ dismay about the

court’s flawed review of the disputed facts and testimony in evidence.

(R. 6:721) (emphasis added) |

July 31, 1990 |

[same as June 30 summary]

(R. 6:723)

August 31, 1990

“soe Ke

COMMENTS: John understands that he has to

pay out this year.

* * *

ACTION PLAN: If debtor does not pay out from

1990 harvest, ask him to move loan or furnish high-

quality collateral or liquidate.

STATUS: Awaiting harvest and sale of crop. He has

approximately 140A of rice to cut. Plans to start o/a

9/12. Will have no second crop. Expects yields of

31 or 32 bbls. overall. His naval reserve unit has

not been ordered to active duty. He plans to

volunteer for duty during the Christmas holi-

days.”

(R. 6:724) (emphasis added)

September 30, 1990

“ ke *e *

COMMENTS: John understands that he has to

pay out this year.

x * *

ACTION PLAN: Debtor is to come in 10-10-90 and

discuss results of 1990 farming program. If he does

not expect to pay out, ask him to move loan or

furnish high-quality collateral or liquidate.

STATUS: Harvest of first crop is complete. Will

have no second crop. Expects yields of 31 or 32

bbls. overall. He is a naval reservist and expects

to be called shortly for a 3 month tour in the

Middle East.”

(R. 6:725) (emphasis added)

In October 1990, as expected, Captain Engstrom was

reactivated from the Naval reserves and was assigned to

active duty with the United States Navy in the Persian Gulf

during the Desert Shield and Desert Storm operations. (R.

6:780-781, 711-718; 7:252-253)

Prior to his departure for duty, Captain Engstrom met

with the Bank’s executive vice-president, Travis Wegenhoft,

concerning the handling of the Engstroms’ loans while he was

overseas. Wegenhoft agreed to an arrangement whereby one

of the Engstroms’ neighboring farmers, Jim Clipson, would

be authorized to sell some of the Engstroms’ farm equipment,

one item at a time, and to apply any sales proceeds to the

Engstroms’ loan payments. The Bank was to supervise and

control all aspects of Clipson’s conduct, from advertising to

repairing equipment to effectuating sales. Clipson was to

receive a five percent commission for handling the sales. (R.

6:780-781, 713-715)

Captain Engstrom prepared a specific price list for Clip-

son to follow in selling each item of the farm equipment, and

Engstrom discussed the price list with Wegenhoft. (R. 6:714)

Captain Engstrom also set up a special account at the Bank in

which Clipson was to deposit the proceeds of the sales of any

equipment and from which withdrawals could be made for

any necessary repairs on the equipment. (R. 712-13)

Captain Engstrom specifically instructed Wegenhoft

and Clipson not to sell the Engstroms’ farm equipment at

an auction sale. Captain Engstrom and Wegenhoft agreed

that if the Engstroms’ farm debts were not paid off by the

time he returned from active duty, the Engstroms and the

Bank would then decide on a further course of action. (R.

6:713-715; 7:254)

Despite these explicit agreements, the Bank went ahead

and arranged to have the bulk of the Engstroms’ farm equip-

ment sold at an auction while Captain Engstrom was in the

Persian Gulf. The Bank’s loan-status reports after Captain

Engstrom’s departure in October 1990 reveal the Bank’s plan

of action and the extent of the Bank’s awareness of Captain

Engstrom’s situation:

October 30, 1990

“se ke *

COMMENTS: Debtor has been called to active

duty with the Navy in the Persian Gulf. Crop

yields were disastrously low. All income from the

sale of crops has been received. Payment of ASCS

deficiency payment is in doubt. Mainly because of

increased doubt about the deficiency payment. [sic]

The Coltair Farms, Inc. note and note 3 [one of the

two JTE loans] above were charged off after the

above date. Also, an exposure of $30,000 was esti- |

mated for note 4 [the other JTE loan]. |

*x* * *

ACTION PLAN: Have arranged for Jim Clipson,

Jr. to sell all equipment. Rent house is for sale.

Will suggest lowering price closer to values used

here.

STATUS: Have an appraisal of equipment from

local dealer and proceeding to sell equipment.

Anything not sold will go into Bank’s equipment

auction.”

(R. 6:746) (emphasis added)

November 30, 1990

“ke k *

COMMENTS: Debtor has been called to active

duty with the Navy in the Persian Gulf. Crop

yields were disastrously low. All income from the

sale of crops has been received. Payment of ASCS

deficiency payment is in doubt. Charged off

$19,641 on the JV [JTE] and $65,183 on Coltair

Farms, Inc.

* * *

ACTION PLAN: Have arranged for Jim Clipson,

Jr. to sell all equipment. Rent house is for sale.

Will suggest lowering price closer to values used

here.

STATUS: Have an appraisal of equipment from

local dealer and proceeding to sell equipment.

Anything not sold will go into Bank’s equipment

auction in late January.”

(R. 6:745) (emphasis added)

Clipson admitted in his deposition that during the time

Captain Engstrom was in the Persian Gulf, Clipson consulted

repeatedly with Wegenhoft and obtained the Bank’s approval

before selling any of the Engstroms’ equipment: “I took

everything to Travis [Wegenhoft]. I did everything through

[Wegenhoft]. [Wegenhoft] okayed whether anything was

sold or what.” (R. 7:240) (emphasis added)

Wegenhoft admitted in his deposition that he approved

the Engstroms’ equipment sales. (R. 6:765) In fact,

Wegenhoft signed the bills of sale on several items of the

Engstroms’ equipment which were sold in early January 1991.

(R. 6:736-737, 747) The Bank also paid some of the repair

bills on the Engstroms’ equipment. (R. 6:752-761, 739-745,

731-736)

Finally, as the Bank had planned, the Engstroms’ farm

equipment was placed in the Bank’s equipment auction for

liquidation on January 26, 1991. About ten days before the

auction, with the apparent cooperation of Clipson (who also

owed the Bank on a farm loan at the time), the Engstroms’

farm equipment was gathered and taken to a site in Eagle

Lake, Texas, where the Bank had arranged with an auctioneer

to auction off various Bank debtors’ properties. (R.

7:246-248)

The Bank’s senior vice-president, Sam Thomson, admit-

ted that he arranged for the auction, contacted the auctioneer,

and selected the location of the auction, and that both he and

Wegenhoft were present at the auction to see what amounts

the Bank would realize from the sale of the equipment. (R.

4:1653-1660, 6:767) In addition, the Bank paid for advertis-

ing for the auction and charged the cost to the Engstroms’

loan balances. (R. 6:733-34, 760)

Captain Engstrom had no advance notice that his

property was going to be auctioned off. (R. 6:780)

The Engstroms’ farm equipment sold at the auction for

the meager total of $63,952.50; after the Bank deducted a

commission for Clipson, the Engstroms’ netted only

$60,115.35. (R. 6:719, 748) The Bank took the sale pro-

ceeds and applied them toward the balance of two of the

Engstroms’ loans. Travis Wegenhoft signed John

Engstrom’s name to the check directing the payment of the

proceeds to the Bank and indicating the amounts to be

applied to the loan balances. (R. 6:719)

On February |, 1991, Wegenhoft sent a handwritten note

to Lyndia Engstrom which read as follows:

Dear Lyndia,

This morning we received the proceeds from

the sale of your farm equipment sold last Satur-

day, Jan. 26. We ran the funds through your

checking account and applied them to the appro-

priate notes.

Copies of these transactions are enclosed along

with a copy of the list of the equipment sold and

what each item brought.

I know this is hard for you, but you can be proud

of what John is doing. Let me know if I can be of

any assistance.

(R. 6:749) (emphasis added)

The Engstroms’ summary judgment evidence shows that

they lost as much as $186,000 from the market value of their

farm equipment because of the manner of its sale. (R. 7:253)

The Engstroms also sustained severe injury to their credit

reputations. (R. 7:255) The family members all suffered

sleeplessness, nightmares, and emotional distress as a result

of the wrongful foreclosure and sale of their property, and

Lyndia Engstrom suffered such extreme emotional trauma

immediately after the sale that she required hospitalization

and psychological therapy. (R. 7:255)

ARGUMENT

I. The Fifth Circuit Misconstrued The Soldiers’ And

Sailors’ Civil Relief Act

The lower courts’ holding that Respondent First National

Bank of Eagle Lake did not violate § 532 of the Soldiers’ and

Sailors’ Civil Relief Act by its actions in effectuating the

foreclosure and sale of Petitioners’ farm equipment at the

Bank’s auction stands in disregard of the terms of the statute

and the evidence in this case.

The mandate of § 532(3) is specific, direct, and unequiv-

ocal with respect to obligations secured by any type of mort-

gage on real or personal property of persons in military

service: “No sale, foreclosure, or seizure of property for

nonpayment of any sum due under any such obliga-

tion . . . shall be valid . . . if made during the period of

military service.”

Both the district court and the court of appeals concluded as a

matter of law that the Bank did not violate § 532(3). However, the

lower courts seriously misconstrued the law applicable to this case

and inexplicably disregarded much of the evidence and many of

the facts to which the law must be applied.

Curiously, neither the district court in its memorandum

nor the Fifth Circuit in its opinion saw fit even to mention, let

alone discuss or attempt to distinguish, this Court’s recent

decision in Conroy v. Aniskoff, ___ U.S. ___, 113 S.Ct. 1562

(1993), in which the Court gave a clear directive as to the

proper construction of the Soldiers’ and Sailors’ Civil Relief

Act.8

8 The lower courts completely ignored Conroy despite Petitioners’

extensive discussion of Conroy in their briefs to both courts. See, for

example, the Brief of Appellants, pp. 17-19. The Fifth Circuit also sur-

prisingly failed to cite or discuss its own even more recent decision

liberally construing the Relief Act in affirming a criminal conviction under

§ 535 of the Act. United States v. Bomar, 8 F.3d 226, 231 (Sth Cir. 1993).

Again, Petitioners had discussed Bomar at some length in their Brief of

Appellants, at pp. 19-21.

At issue in Conroy was § 525 of the Act, which similarly

protects service members by providing that the “period of

military service shall not be included . . . in computing any

period . . . provided by any law for the redemption of real

property sold or forfeited to enforce any obligation, tax, or

assessment.”

The petitioner in Conroy was an Army officer who owned

a parcel of land in Maine. He had failed to pay real estate

taxes for 1984-1986, resulting in a tax lien which he had 18

months to pay off or else lose title to the property to the city.

Notwithstanding § 525, the lower courts in Conroy upheld the

forfeiture of the officer’s title to the land after his non-

payment of the tax lien during the 18-month redemption

period, reasoning that the officer’s service status had not

impaired his ability to pay.

Reversing the lower courts, the Supreme Court held that

§ 525 rendered the forfeiture invalid. The Court pointed out

that “[t]he statutory command in § 525 is unambiguous,

unequivocal, and unlimited.” Conroy, 113 S.Ct. at 1564.

Observing that the very essence of the Relief Act is that it

“suspends various civil liabilities of persons in military ser-

vice,” id. at 1563-49 the Court held that Congress’s command

9 In the very first section of the Act (other than the title section), 50

U.S.C. Appx. § 510, Congress makes the protective purpose of the Act

explicit:

In order to provide for, strengthen, and expedite the national

defense . . . and to enable the United States the more suc-

cessfully to fulfill the requirements of the national defense,

provision is hereby made to suspend the enforcement of

civil liabilities, in certain cases, of persons in the military

service of the United States in order to enable such persons to

devote their entire energy to the defense needs of the Nation,

and to this end the following provisions are made for the

temporary suspension of legal proceedings and transac-

tions which may prejudice the civil rights of persons in the

armed services... .

(emphasis added)

must be enforced according to its terms regardless of whether

a particular liability sought to be enforced against a service

member happens to impose any particular degree of hard-

ship.!°

This Court has also previously stated, in Boone v. Light-

ner, 319 U.S. 561, 574 (1943), that “[t]he Soldiers’ and

Sailors’ Civil Relief Act is always to be liberally construed to

protect those who have been obliged to drop their own affairs

to take up the burdens of the nation.” (emphasis added)

The same construction applies to § 532(3) of the Relief

Act in the present case. But the Fifth Circuit, having ignored

Conroy, also disregarded its mandate regarding construction

of the Relief Act’s terms. Instead of applying the statute’s

unambiguous and unlimited command literally and broadly,

the Fifth Circuit’s discussion of the Relief Act falls back on

pre-Conroy equivocation, citing old state court decisions for

the propositions that “[a]lthough the act is to be liberally

construed it is not to be used as a sword against persons with

legitimate claims,” and that the Act “is to be administered as

an instrument to accomplish substantial justice which requires

an equitable consideration of the rights of parties to the end

that their respective interests may be properly considered.” 47

F.3d at 1462.

10 See also In re A. H. Robins & Co., 996 F.2d 716, 718 (4th Cir.

1993) (mandatory tolling of limitations periods in § 525 not dependent on

actual effect on service member’s exercise of legal rights); Detweiler v.

Pefia, 38 F.2d 591, 593 (D.C. Cir. 1994) (§ 525 tolling provision’s com-

mand is “unexceptionable”); Hanson v. Crown Toyota Motors, Inc., 572

P.2d 380 (Utah 1977) (plaintiff in Relief Act case held not required to

prove that inability to pay on installment contract for purchase of auto-

mobile was due to military service; defendant who repossessed car while

plaintiff was on active duty was still liable); Pacific Finance Corp. v.

Gilkerson, 217 S.W.2d 440 (Tex.App. — Beaumont 1948, no writ) (wrong-

ful repossession of armed service member’s automobile in violation of

Relief Act entitled service member to recover actual and exemplary dam-

ages).

Section 532(3) does not call for weighing of interests or

contemplation of the parties’ “equitable considerations.” The

statute simply declares outright that “no sale, foreclosure, or

seizure of property for nonpayment ... shall be valid... if

made during the period of military service.”

In light of this categorical statutory mandate, the only

proper issue for consideration is whether the actions of the

Respondent Bank render it responsible in whole or in part for

the sale, foreclosure, and/or seizure of Petitioners’ farm

equipment.

Acknowledging that Captain Engstrom “was undoubtedly

a member of the class protected by the Relief Act,” 47 F.3d at

1463, the Fifth Circuit further recognized that “[t]he Bank

arranged the auction, signed off on some of the bills of sale,

and signed John Engstrom’s name to the checks in order to

apply the auction proceeds to the debt.” /d. Nonetheless, the

court accepted the Bank’s claim of entitlement to summary

judgment on the purported grounds that the Bank did not

itself directly seize the equipment and place it in the auction,

but rather that the Engstroms’ neighbor Jim Clipson did so,

and that the Bank therefore could have no liability under the

Relief Act. /d.

The Fifth Circuit’s concept of the Act’s purview is far too

narrow. Even the conceded actions of the Bank with respect to

the sale of the Engstroms’ farm equipment defy the absolute

statutory prohibition. If anything, the undisputed evidence

revealing the role of the Bank compels the conclusion as a

matter of law that the Bank transgressed § 532(3) by arrang-

ing for and taking the proceeds from the sale of the

Engstroms’ property while Captain Engstrom was on military

duty overseas. The sale which the Bank organized and from

which the Bank directly benefitted was invalid, and the Bank

was thereby unjustly enriched. That is enough for Petitioners

to maintain their cause of action against the Bank under

§ 532(3) and to hold the Bank accountable for the loss caused

by the unlawful sale of Petitioners’ property.

II. The Lower Courts Misapplied The Standard Of

Review Of The Evidence Relating To A Motion For

Summary Judgment

At the very least, the conclusion that the Bank bears

responsibility for the invalid sale of the Engstroms’ equip-

ment is one that can reasonably be inferred from the evidence

of record. Particularly probative are the notations in the

Bank’s loan files about Captain Engstrom’s military status

and about the Bank’s plans to require payment on the loans by

the end of 1990 or else have the Engstroms’ farm equipment

“liquidate[d]” or placed in “the bank’s equipment auc-

tion.” Taken together with the Engstroms’ testimony about

their dealings with the Bank, and the admissions in the depo-

sition testimony of the Bank’s own executive officials, Travis

Wegenhoft and Sam Thomson, about their role in the auction

of the Engstroms’ equipment and the disposition of the pro-

ceeds, sufficient evidence plainly exists to support Peti-

tioners’ claims that the Bank violated § 532(3).

The lower courts, however, held otherwise, viewing the

evidence as conclusively exonerating the Bank of respon-

sibility. Both the district court’s memorandum and the opinion

of the court of appeals give lip service to the proper standard

of review of the evidence pertaining to a motion for summary

judgment under Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, and

their many progeny. See, e.g., Engstrom, 47 F.3d at 1462. But

the lower courts’ ostensible application of the Celo-

tex/Anderson standard to the evidence of record in this case

reflects more a zeal for granting summary judgments than a

fair and proper consideration of the evidence.!!

'! The Fifth Circuit’s increasing affinity for summary judgments, and

its concomitant willingness to downplay or disregard the non-movants’

evidence, is reflected in its recent en banc decision in Little v. Liquid Air

Corp., 37 F.3d 1069, 1075-76 (Sth Cir. 1994) The en banc majority in Little

justified its approach to summary judgments in part by bemoaning “back-

The standards of review of a summary judgment motion

established in Celotex and Anderson were not intended to

grant carte blanche to the lower courts to weigh conflicting

evidence, to decide what evidence to accept or reject, or to

elect whose testimony to believe. In order to temper and

restrain the lower courts’ increasing penchant for easing their

own burdens by too casually granting summary judgments in

reliance on the Celotex/Anderson line of cases, they must be

required to abide by this Court’s cautionary admonitions in

Anderson:

{[I]n ruling on a motion for summary judgment,

the judge must view the evidence through the

prism of the substantive evidentiary burden. This

conclusion is mandated by the nature of this deter-

mination. The question here is whether a jury could

find either that the plaintiff proved his case by the

quality and quantity of evidence required by the

governing law or that he did not. * * *

Our holding that the . . . standard of proof

should be taken into account in ruling on sum-

mary judgment motions does not denigrate the

role of the jury. It by no means authorizes trial

on affidavits. Credibility determinations, the

weighing of the evidence, and the drawing of

legitimate inferences from the facts are jury

functions, not those of a judge, whether he is

ruling on a motion for summary judgment or a

directed verdict. The evidence of the non-movant

is to be believed, and all justifiable inferences are

to be drawn in his favor.

logs in the district courts and the high cost of litigation.” /d. at 1076. Those

factors should have nothing to do with the evaluation of evidence to

determine the existence of genuine, material fact disputes in a given case;

their very invocation suggests that clearing the courts’ dockets is of greater

importance than citizens’ right to have their day in court on legitimate civil

claims.

Id. at 259-60. (italics are the court’s; boldface emphasis

added)

In the present case, the district court and court of appeals

have engaged in the very sort of judicial usurpation of the

jury’s role decried in the above passage from Anderson. The

lower courts’ summary denial of Petitioners’ right to trial by

jury is especially unwarranted in light of Conroy’s recent

explication of the “substantive evidentiary burden” for a

claim by an aggrieved member of the armed services, under

the Soldiers’ and Sailors’ Civil Relief Act.

A. The District Court Disregarded Evidence About

The Bank’s Role In The Sale Of The Engstroms’

Property

The district court concluded as a matter of law that the

Bank did not violate the Relief Act because of Jim Clipson’s

involvement in Captain Engstrom’s arrangement with the

Bank for making loan payments while he was away on mili-

tary duty.

This simplistic conclusion does not reflect a thorough

review of the evidence of record; in fact, the court’s mem-

orandum opinion makes no mention of the affidavits, bank

records, and other controverting evidence filed by the

Engstroms, which demonstrate the Bank’s direct involvement

in the planning and execution of the foreclosure and liquida-

tion of the Engstroms’ property, the proceeds from which

went directly into the Bank’s coffers.

The district court’s decision certainly does not reflect a

proper consideration of the evidence and reasonable infer-

ences from the perspective of the non-movant Petitioners: to

the contrary, the court’s memorandum opinion relies exclu-

sively on short, self-serving excerpts of deposition testimony

by the Bank’s own officers (which were attached to the

Bank’s motion for summary judgment), and disregards an

abundance of controverting evidence showing the Bank’s

active role in the unlawful sale of the Engstroms’ property.

The district court’s initial discussion of the background

facts, although sparse, is generally correct:

John Engstrom was called to active duty in October

1990, and was deployed to the Persian Gulf on

October 23, 1990. Pls’ Original Petition at p. 2.

Prior to his departure, Engstrom made arrangements

with the Bank for a neighbor, James Clipson, to

carry out the orderly sale of Engstrom’s assets as

necessary to meet payments due on outstanding

loans. Id. Plaintiffs contend that John Engstrom

notified the Bank not to sell his equipment at an

auction sale. Despite Engstrom’s request[,] on Janu-

ary 26, 1991, an auction was conducted at which the

plaintiffs’ equipment was allegedly sold for wholly

inadequate consideration.

(See Appendix: District Court Memorandum, p. 2)

After this introductory statement, however, the district

court departs from the undisputed background facts and pur-

ports to resolve contested facts about the events in question:

Although plaintiffs endeavor to show that the Bank

carried out the auction, all plaintiffs have actually

demonstrated is that Bank officers aided “people

aes that were interested in selling some equipment.”

Pls.” Resp. to Reply on Support of Defs.’ Mot. for |

Summ. J. at Ex. A, p. 114; Dep. of Sam Thomson at

p. 114. Sam Thomson, a bank officer, merely

assisted in contacting an auctioneer and also

arranged for an auction site. He explained that “it’s

unfair to characterize it as the bank’s auction.” Pls.’

Resp. to Reply on Support of Defs.’ Mot. for

Summ. J. at Ex. A, p. 88; Dep. of Sam Thomson at

p. 88.12 * * *

12 As shown by the district court’s quotations from specific evidenti-

ary attachments, the court’s conclusions are based on assuming the cred-

ibility and accuracy of isolated snippets of the deposition testimony of Sam

Thomson, one of the Respondent Bank’s own involved officers.

ee a eee |

The sole violation asserted against the Bank under

the Soldiers’ and Sailors’ Civil Relief Act is that

the Bank allegedly seized the plaintiffs’ equipment

and sold it at auction at an unreasonably low price.

The Bank’s summary judgment evidence demon-

Strates that it was Clipson and not the Bank that

placed the equipment in auction. Def.’s mot. for

Summ. J. at Ex. B at pp. 36-37, 54-55; Dep. of

James Clipson at pp. 36-37, 54-55. In an effort to

raise a genuine issue of material fact the plaintiffs

contend that they never gave Clipson the authority

to sell the equipment at an auction sale. Assuming,

arguendo, that Clipson was mistaken about his

authority to sell the plaintiffs’ equipment at an

auction[,] the damage sustained could not be

imputed to the Bank, but rather to Clipson who is

not a party to this proceeding. The Bank did not

violate the statute.

(See Appendix; District Court Memorandum, pp. 2, 4-5)

These few conclusory “findings” constitute the sum total

of the district court's discussion of the evidence of record. As

the opinion states, the court adopts as determinative “the

Bank's summary judgment evidence.” The court casually

dismisses, with virtually no discussion, the Engstroms’ sum-

mary judgment evidence, set out above, showing that the

Bank was directly and integrally involved in the arrangement

with Captain Engstrom and Clipson concerning how the

Engstroms’ debts were to be paid during his absence; that the

Bank, in disregard of the agreed arrangements, directed,

approved, and/or acted in concert with Clipson in the fore-

closure, seizure, and sale of the Engstroms’ farm equipment

at the Bank’s auction on January 26, 1991; and that the Bank

received all of the proceeds of the sale.!3

'3 This abundance of evidence directly controverting the Bank’s

alleged lack of responsibility for the sale of the Engstroms’ equipment was

attached to Petitioners’ response and supplemental response to

A. The Court Of Appeals Disregarded Evidence

About The Bank’s Role In The Sale Of The

Engstroms’ Property

The Fifth Circuit’s discussion of the summary judgment

evidence is, if anything, even more deferential to the movant

Bank and disdainful of the Petitioners’ controverting evidence

than is the district court’s memorandum.

The court of appeals gives three reasons for upholding

the summary judgment: (1) that the Bank “thought that Clip-

son had Engstrom’s permission to sell the equipment,”

Engstrom at 1464; (2) that there was “no summary judgment

evidence inferring [sic] that Clipson was an agent of the

Bank,” id.; and (3) that the Bank’s “acquiescence” in Clip-

son’s sale of the equipment is insufficient to make the Bank

liable under the Relief Act. /d. Petitioners will address these

three points in order.

1. The Fifth Circuit Improperly Resolved Dis-

puted Facts About The Bank’s Knowledge Of

And Involvement In The Sale

The court of appeals acknowledges that John Engstrom

“testified that he told Clipson and Wegenhoft that his property

was not to be sold at auction,” Engstrom at 1463, and that

“[t]he bank arranged the auction, signed off on some of the

bills of sale, and signed John Engstrom’s name to the checks

in order to apply the auction proceeds to the debt.” /d.

But the court then recites that “Clipson testified that he

thought that he had John Engstrom’s permission to sell the

equipment at auction,” id., and (based on Wegenhoft’s testi-

mony about his alleged “understanding” that Engstrom

instructed Clipson to deliver the equipment to the sale) that

Respondent’s motion for summary judgment. (R. 6:831-839, 682-781,

4:1653-1660; 2:2396-2505)

EELS TT ON eT ame |

the Bank “also thought that Engstrom had given Clipson

permission to sell the equipment at auction.” /d. The court

then reaches the remarkable conclusion that as a matter of law

the Bank is not responsible under the Relief Act because

“(t]he testimony is uncontradicted that Clipson sold the

equipment with, what [the Bank] and Clipson thought was,

Engstrom’s permission.” /d. at 1464. (emphasis added)

This conclusion (1) demonstrates a dexterous disregard

for the court’s own recounting of Captain Engstrom’s explicit

testimony directly refuting what Clipson and the Bank

claimed about his instructions, and (2) rests improperly on

assuming the credibility of the Bank officers’ self-serving

testimony about what the Bank “thought” with respect to

Clipson’s authority to auction off the Engstroms’ equipment

en masse. One could hardly contrive a more egregious exam-

ple of a court’s improper assumption of the jury’s fact-finding

role than the granting of a summary judgment based on

(directly controverted!) testimony about what an interested

party claims to have “understood” or “thought.”

John Engstrom’s affidavit and deposition testimony state

unequivocally that the arrangements and agreements he made

for servicing the loan payments were made with both Clipson

and the Bank. (R. 6:780-781, 713-715) Captain Engstrom’s

affidavit vigorously refutes the contention that he gave either

Clipson or the Bank permission to sell the equipment at

auction; it states that “I also specifically told Mr. Travis

Wegenhoft not to sell the equipment at an auction sale

while I was gone.” (R. 6:780-781) Captain Engstrom’s affi-

davit further points out that he did not know of the transfer of

the equipment from his barn to the auction site, and that he

never even received notice that an auction sale would be held.

(R. 6:780-781)

The notations in the Bank’s own monthly loan-status

reports show that the Bank obviously knew Captain Engstrom

was on active military status overseas when the auction was

arranged and held. (R. 6:745-6) And the entries stating:

“Have arranged for Jim Clipson, Jr. to sell all equipment”;

“Have an appraisal of equipment from local dealer and

proceeding to sell equipment”; and “Anything not sold will

go into Bank’s equipment auction,” clearly implicate the

Bank in the process of arranging and effectuating the sale.

Indeed, the subject-less verb forms “Have” [an appraisal] and

“Have arranged” [for the sales] necessarily refer to the Bank

as the implied subject (or at least one of the subjects) of the

verbs.

The lower courts could not properly conclude from this

evidence that the Bank undisputedly “thought” the auction

sale was effected by Clipson at Captain Engstrom’s direction.

To come to such a conclusion as a matter of law is to stand the

summary judgment standard of review on its head.

The one case relied on by the Fifth Circuit as authority

for its conclusion, Pailet v. Ald, Inc., 194 So.2d 420 (La. App.

1967), see Engstrom, 47 F.3d at 1463 and 1464, does not

provide support for the summary judgment rendered here. In

Pailet, a serviceman/mortgagor’s dry-cleaning equipment was

surrendered to the mortgagee in consideration for forgiveness

of the mortgage during the period of his military service. He

was held not to have a claim against the mortgagee because

his mother was found to have acted as his agent in resolving a

complaint about the equipment by demanding the mortgagee

to remove it in exchange for forgiveness of the debt. Notably,

the fact-finder in Pailet determined the mother’s authority to

make the agreement on behalf of the mortgagor only after a

trial on the contested agency issue and a resolution of the

conflicting testimony on that issue. /d. at 422. In addition, the

record in Pailet showed that the service member/mortgagor

had made no effort to repudiate the agreement after learning

of it, but rather had ratified it by his subsequent conduct. /d.

The court in Pailet held that there was no violation of

§ 531 of the Relief Act!* because the mortgagee had not

'4 Section 531 is similar to § 532; it provides that “[n]o person who

has received . . . under a contract for the purchase or real or personal

initiated the rescission of the contract, but rather had made

the agreement only upon the demand of the mortgagor’s

representative, and because the mortgagor/service member

had not been prejudiced by the agreement made on his behalf,

in which he had later acquiesced. /d. at 423.

Clearly, Pailet is inapposite here for at least two reasons:

(1) the alleged agent’s authority to act for the debtor in

agreeing to the surrender of the property was determined by

the fact-finder only after a full trial of the contested facts; and

(2) the court relied in part on a lack of prejudice to the debtor,

which is not a valid consideration under § 532(3) in the wake

of this Court’s observation in Conroy that “Congress included

a prejudice requirement [in parts of the Relief Act] whenever

it considered appropriate to do so, and that its omission of any

such requirement in [other parts of the statute] was deliber-

ate.” Conroy, 113 S.Ct. at 1565.'5

If whether the Bank “thought” Clipson was given permis-

sion to auction off the Engstroms’ equipment is even a mate-

rial fact affecting the Bank’s liability for its involvement in

the invalid sale, then a remand for trial is necessary in this

property . . . a deposit or installment of the purchase price . . . from a

person . . . who, after the date of payment of such deposit or installment,

has entered military service, shall exercise any right or option under such

contract to rescind or terminate the contract or resume possession of the

property for nonpayment of any installment thereunder due or for any other

breach of the terms thereof . . . except by action in a court of competent

jurisdiction.”

'S Interestingly, as an example of a provision of the Relief Act in

which the statutory protection is conditioned on a showing of prejudice, the

Court in Conroy cited § 532(2), which authorizes a court to stay efforts to

enforce a mortgage obligation “unless in the opinion of the court the ability

of the defendant to comply with the terms of the obligation is not materially

affected by reason of his military service.” Conroy, 113 S.Ct. at 1565.

Section 532(2) is not involved here, since the Bank did not commence a

proceeding in court to enforce the Engstroms’ obligations, but rather acted

extra-judicially to satisfy a portion of their debts via the auction sale of

their farm equipment.

case to permit a jury to resolve the direct conflict in the

evidence about the Bank’s state of knowledge of Clipson’s

authority in that regard.

2. The Fifth Circuit Improperly Resolved Dis-

puted Facts About Whether Clipson Was Act-

ing As An Agent Of The Bank

The evidence of record also establishes — or at the very

least raises a reasonable inference — that Jim Clipson cooper-

ated, coordinated, and worked in concert with the Bank, and/

or as the Bank’s agent, in foreclosing on, taking possession

of, and selling the Engstroms’ equipment at the auction.

As set out in the factual summary earlier, both Clipson —

who was himself indebted to the Bank — and the Bank’s

executive vice-president, Travis Wegenhoft, admitted that

Clipson continually consulted with Wegenhoft and that

Wegenhoft approved all of Clipson’s sales of the Engstroms’

equipment. The notations referred to above in the Bank’s loan

files further indicate that the Bank actively managed the

arrangements with Clipson to handle the sales. The Bank’s

senior vice-president, Sam Thomson, admitted that he, not

Clipson, was the person who made all the arrangements for

the January 1991 auction sale, including selecting the auc-

tioneer. The auction — which involved sales of various farm

debtors’ property — was obviously for the Bank’s benefit, not

for Clipson’s; it was, in the Bank’s own repeated words from

its loan file, “the Bank’s equipment auction.”

Other evidence of record supports the inference that

Clipson was acting for the Bank rather than the Engstroms.

While Clipson was attempting to sell the individual pieces of

equipment (before the auction), a man named L. D. Schilling

offered to buy the Engstroms’ pickup for $3500. Lyndia

Engstrom forwarded the offer to her husband, who told her to

have Clipson refuse it. Despite her instructions to Clipson to

turn down the offer, however, Wegenhoft called her and

informed her that since the Bank had the title to the pickup, it

was going to go ahead and have it sold to Schilling for $3500.

(R. 6:705-706, 750-751)

The totality of the evidence plainly gives rise to the

reasonable inference that Clipson was acting as an agent for,

and/or in concert with, the Bank in selling the equipment at

the auction.

3. The Bank’s Role Was Sufficient To Render It

Liable For Causing An Invalid Sale Under

§ 532(4) Of The Relief Act

The Fifth Circuit has chosen to describe the Bank’s role

in the sale of the Engstroms’ farm equipment as mere “acqui-

escence” to Clipson’s conduct. That is not a fair characteriza-

tion, nor does it in any event exonerate the Bank from

liability for violation of the Relief Act’s explicit prohibition.

The Bank certainly treated the sale of the Engstroms’

property as its own. Wegenhoft not only approved Clipson’s

initial itemized sales, he actually signed the bills of sale on

several of the items sold. Then the Bank’s officers arranged

for and attended the auction, and Wegenhoft even signed John

Engstrom’s name to the check turning over the proceeds of

the auction sale to the Bank. (R. 6:719)

Finally, Wegenhoft had the audacity to write Mrs.

Engstrom a personal note shortly after the auction, saying

how badly he felt about having sold off her family’s property

but reminding her to be “proud of what John is doing” by his

service to the country! (R. 6:749)

The Bank’s actions, by any fair assessment, went well

beyond mere “acquiescence” in a sale by Clipson. But even if

all of this evidence were not sufficient to show that the Bank

itself, by its direct role in the aucticning of the Engstroms’

farm equipment, was sufficiently engaged in the “sale, fore-

closure, or seizure of property for nonpayment of any sum” to

violate § 532(3) alone, the evidence still demonstrates a fact

issue on the Bank’s liability for knowingly “mak[ing} or

caus[ing] to be made any sale, foreclosure, or seizure of

”

property, defined as invalid by subsection (3) hereof....

50 U.S.C. Appx. § 532(4).

The Fifth Circuit dismisses this statutory language by

asserting in a footnote that § 532(4) “is a criminal statue and

[ti:zrefore] is not apropos to this discussion.” Engstrom, at

1464, n. 1. To the contrary, § 532(4) clarifies who may be

held answerable for an invalid sale conducted in violation of

the strict prohibition of § 5°2(3). If one who causes an

unlawful sale to be made may be responsible even to the

extent of criminal sanctions, then surely such a party may also

be civilly liable for the loss brought about by the violation of

the Soldiers’ and Sailors’ Civil Relief Act.

Certainly there is sufficient evidence of the Bank’s

involvement to present a genuine issue of fact for the jury as

to whether the Bank “made or caused to be made” a sale,

foreclosure, or seizure of the Plaintiffs’ farm equipment by

means of arranging for “the bank’s equipment auction.”

Properly viewing the evidence and the reasonable infer-

ences therefrom in the light most favorable to the non-movant

Petitioners, and under the liberal — i.e., the literal — construc-

tion of § 532 of the Soldiers’ and Sailors’ Civil Relief Act in

favor of service members as mandated by this Court’s deci-

sion in Conroy, the summary judgment against Petitioner John

Engstrom should be reversed.

III. Section 536 Of The Relief Act Protects Captain

Engstrom’s Family Members

Because of the lower courts’ summary disposition of the

case on the basis of the Bank’s alleged non-liability for

violation of § 532 of the Relief Act, the courts did not reach

the other Petitioners’ claims for relief under § 536 of the Act.

The Bank contends that only Captain Engstrom has

standing to assert a claim under the Relief Act because only

he was a party to the consolidated note and security agree-

ment on the farm equipment. But one of the notes executed by

JTE Joint Venture, in which Cynthia and Melissa Engstrom

were joint venturers and thus necessarily joint obligors, was

erential

also secured by the same equipment, and both the Engstroms

and the Bank intended that the proceeds from any itemized

equipment sales be used to pay off all of the Engstroms’

notes, including those of JTE Joint Venture and Coltair, Inc.

The net proceeds of the auction sale of the Engstroms’ equip-

ment ($60,115.35) were in fact applied to both John

Engstrom’s consolidated note ($54,334.42) and to a note

executed by JTE Joint Venture ($5,780.93). (R. 749)

Section 536 expressly extends the same protections

afforded by the Act to the dependents of a person in the armed

services as to the person himself. See, e.g., Reid v. Margolis,

181 Misc. 222, 44 N.Y.S.2d 518 (1943) (Relief Act’s protec-

tions extend to prohibit foreclosure on home of parents of

service member who were dependent on son’s income); Tuc-

son Telco Federal Credit Union v. Bowser, 9 Ariz.App. 242,

451 P.2d 322 (1969).

To refuse to extend the Statutory protection to the

Engstrom family members and their family business entities

would be to ignore che reality that the Engstroms’ rice farm

was the primary source of employment and income for all

members of the family at that time, and that the entire family

enterprise was adversely affected by Captain Engstrom’s acti-

vation for military service.

Further, Lyndia Engstrom was presumptively a commu-

nity property owner of the equipment purchased by John

Engstrom during their marriage. It is the Bank’s burden to

prove that she had no interest in the equipment or that it was

her husband’s separate property. Tex.Fam.Cope § 5.02: Cock-

erham v. Cockerham, 527 S.W.2d 162, 167 (Tex. 1975)

By virtue of § 536, all of the Petitioners, i.e. all of the

Engstrom family and their closely-held family business enti-

ties, are entitled to a reversal of the summary judgment

rendered against them.

CONCLUSION

WHEREFORE, PREMISES CONSIDERED, Petitioners

John T. Engstrom and Lyndia Engstrom, Individually and as

Next Friends of Andrea Engstrom; John T. Engstrom, Melissa

Engstrom, and Cynthia Engstrom, Individually and d/b/a JTE

Farms Joint Venture; and Coltair Farms, Inc., pray that the

Supreme Court grant their Petition for Writ of Certiorari, and

that upon final hearing, the Supreme Court reverse the judg-

ments of the courts below and remand this cause for trial; and

that the Court grant Petitioners such other and further relief,

at law or in equity, to which they may show themselves justly

entitled.

Respectfully submitted,

*PauL E. KNISELY

Broapus A. Spivey

THOMAS P. PreHODITCH

Spivey, GricGc, Ke_ty & KNISELY

48 East Avenue

Austin, Texas 78701

(512) 474-6061

(512) 474-1605 (fax)

Joe K. LONGLEY

Tim LABADIE

LoncLey & Maxwe tt, L.L.P.

P.O. Box 12667, Capitol Station

Austin, Texas 78711

(512) 477-4444

(512) 477-4470 (fax)

Attorneys for Petitioners

*Counsel of Record

Seat Pan onic Sica een du OW et

NL Ne RPE: 9 ing Saad

App. 1

John T. ENGSTROM, and Lyndia Engstrom, Individu-

ally and as next friends for Andrea Engstrom, John T.

Engstrom, Melissa Engstrom and Cynthia Engstrom,

Etc., et al., Plaintiffs-Appellants, Cross-Appellees,

Vv.

The FIRST NATIONAL BANK

OF EAGLE LAKE, Defendant-

Appellee, Cross-Appellant.

No. 93-2719.

United States Court of Appeals,

Fifth Circuit.

March 29, 1995.

Serviceman sued bank under Soldiers’ and Sailors’

Civil Relief Act after his farm equipment, in which bank

had security interest, was sold at auction while he was on

active military duty. The United States District Court for

the Southern District of Texas, Melinda Harmon, J., dis-

missed serviceman’s claims but allowed complaint to be

amended to allege state law claims and remanded state

law claims to state court. On cross-appeals, the Court of

Appeals, Stewart, Circuit Judge, held that: (1) bank’s

acquiescence in auction sale of serviceman’s farra equip-

ment and its organization of auction did not make it

liable under Relief Act because bank thought that neigh-

bor who sold equipment at auction had serviceman’s

permission and there was no evidence that neighbor was

agent of bank; (2) allowing serviceman to amend com-

plaint to add claims under Texas Deceptive Trade Prac-

tices Act was not abuse of discretion; and (3) remand of

state law claims to state court was not abuse of discretion.

Affirmed.

App. 2

Appeals from the United States District Court for the

Southern District of Texas.

Before JONES and STEWART, Circuit Judges, and

DUPLANTIER*, District Judge.

STEWART, Circuit Judge:

John T. Engstrom and his family appeal the judgment

of the district court dismissing their claims under the

Soldiers’ and Sailors’ Civil Relief Act 50 U.S.C.App.

§§ 501-593 against the First National Bank of Eagle Lake

(“First National”). First National has filed a cross-appeal

of the district court’s judgments to allow the original

complaint to be amended and to remand the state law

claims to state court. For the following reasons, the judg-

ments of the district court are affirmed.

BACKGROUND

John T. Engstrom operated a rice farm in Texas. His

farm was financed by the First National Bank of Eagle

County. Engstrom owed approximately $412,600 to First

National. Part of this debt was secured by the equipment

used on the farm. In October 1989, John Engstrom was

called to active military duty and was deployed to the

Middle East. Prior to his departure, Engstrom made

arrangements with First National for a neighbor, James

Clipson, to carry out the orderly sale of Engstrom’s

equipment, as necessary, to meet payments due on the

outstanding loans. Engstrom met with Travis Wegenhoft,

*District Judge of the Eastern District of Louisiana, sitting

by designation.

SG te aca rk ce ESN le My sne Hk Do

App. 3

First National’s vice president, and obtained First

National’s consent to sell the equipment at private sales

and to supply the sales Proceeds to the loan balances.

Some pieces of equipment were sold as a result of private

sales, but on January 26, 1991, most of the equipment was

sold at auction.

The equipment was moved to the auction site by

Clipson. Sam Thompson, a senior vice president with

First National, contacted the auctioneer and arranged a

location for the auction. Equipment belonging to

Engstrom and other farmers in the area was auctioned.

Both Mr. Thompson and Wegenhoft were present at the

auction. Following the auction, Mr. Wegenhoft signed Mr.

Engstrom’s name to the checks for Engstrom’s portion of

the proceeds, and had the proceeds applied to Engstrom’s

outstanding debt.

Tom Engstrom and Lyndia Engstrom, individually

and on behalf of their children Andrea Engstrom, John T.

Engstrom, Melissa Engstrom and Cynthia Engstrom d/b/a

JTE Farms Joint Venture, and Coltair Farms, Inc. (collec-

tively “Engstrom”) filed suit in state court alleging that

First National had violated the strictures of the Soldiers’

and Sailors’ Civil Relief Act (“Relief Act”) which forbid

the sale of the property during a military personnel’s

service period without a court order. He also filed pen-

dent state claims. First National removed the suit to

federal court.

First National filed a motion for summary judgment

contending that it had not violated the Relief Act.

Engstrom also filed a motion to amend his complaint. The

district court granted both motions and then remanded

App. 4

the state law claims to state court. Engstrom appeals the

judgment of the district court dismissing his federal

claims; First National has filed a cross-appeal contending

that the district court erred in allowing Engstrom to

amend his complaint.

STANDARD OF REVIEW

This Court’s reviews a district court’s grant of sum-

mary judgment de novo. Topalian v. Ehrman, 954 F.2d 1125,

1131 (5th Cir.), cert. denied, __ U.S. __, 113 S.Ct. 82, 121

L.Ed.2d 46 (1992). Summary judgment under Fed.R.Civ.P.

56(c) is proper “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to

a judgment as a matter of law.” Celotex Corp. v. Catrett,

477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265

(1986). If the moving party meets the initial burden of

showing that there is no genuine issue of material fact,

the burden shifts to the non-moving party to produce

evidence or designate specific facts showing the existence

of a genuine issue for trial. Id. at 322-24, 106 S.Ct. at

2552-53; Fed.R.Civ.P. 56(e).

A defendant who moves for summary judgment may

rely on the absence of evidence to support an essential

element of the plaintiff’s case. International Ass'n of Machi-

nists & Aerospace Workers, Lodge No. 2504 v. Intercontinen-

tal Mfg. Co., 812 F.2d 219, 222 (5th Cir.1987). There must

be evidence giving rise to reasonable inferences that sup-

port the non-moving party’s position. St. Amant v. Benoit,

806 F.2d 1294, 1297 (5th Cir.1987).

COMER Sh, ee tp Al ae te ta

Nees Bee ee.

+ lil

App. 5

DISCUSSION

Engstrom contends that the district court erred in

dismissing his claims under the Soldiers’ and Sailors’

Civil Relief Act 50 U.S.C.App. §§ 501-593. (“Relief Act”).

The purpose of the Relief Act is to Suspend enforcement

their entire energy to the defense needs of the Nation. 50

U.S.C.App. § 510. The Relief Act applies to servicemen

and reservists who are ordered to report for military

service. See 50 U.S.C.App. §§ 511 & 516. The provision of

the Relief Act are to be liberally construed. Koons v.

Nelson, 11” Colo. 574, 160 P.2d 367, 372 (1945). Although

the act is to be liberally construed it is not to be used as a

sword against persons with legitimate claims. Slove v.

Strohm, 94 Ill. App.2d 129, 236 N.E.2d 326, 328 (1968). The

Relief Act is to be administered as an instrument to

accomplish substantial justice which requires an equita-

ble consideration of the rights of parties to the end that

their respective interests may be properly conserved. New

York Life Ins. Co. v, Litke, 181 Misc. 32, 45 N.Y.S.2d 576, 582

(1943)

Amongst the Relief Act’s many provisions is a prohi-

bition against the sale or foreclosure of a serviceman’s

mortgaged property in 50 U.S.C.App. § 532. The pertinent

Provisions of 50 U.S.C.App. § 532 are as follows:

(3) No sale, foreclosure, or seizure of property for

nonpayment of any sum due under any such oblig-

ation, or for any other breach of the terms there-

of... shall be valid if made during the period of

military service or within three months thereaf-

ter. . . . [emphasis ours].

App. 6

This provision applies to obligations incurred before or

during military service. 50 U.S.C.App. § 532(2). A service-

man can give a written release to allow for the sale or

foreclosure of his property. See 50 U.S.C.App. §§ 517 &

532(3). The Relief Act also allows agents authorized

under state law to dispose of the serviceman’s property.

See Pailet v. Ald, Inc., 194 So.2d 420 (La.Ct.App.1967).

Engstrom argues that First National sold his farm

equipment in violation of the Relief Act. As a reservist

called to active duty, Engstrom was undoubtedly a mem-

ber of the class protected by the Relief Act. His obligation

was incurred before he was called up to active service

and thus he meets the qualifying provision of 50

U.S.C.App. § 532(2). The only question remaining is

whether the bank violated the act by selling the equip-

ment.

The summary judgment evidence submitted by the

Bank and Engstrom is as follows: In the Fall of 1990,

before John Engstrom was called up to military service,

the bank had written in its loan reports that Engstrom’s

loans had to be moved or be liquidated. In his deposition,

John Engstrom testified that before he left he arranged

with Clipson and Wegenhoft to sell some of his equip-

ment at private sale to pay some of the debt. He also

testified that he told Clipson and Wegenhoft that his

property was not to be sold at auction.

Clipson testified, in deposition, that he was the per-

son who gathered Engstrom’s equipment together and

sold it at the auction. He also testified that John Engstrom

had given him permission to sell the equipment when

Engstrom had temporarily returned from the service one

oe eee

App. 7

weekend. Clipson also stated that he obtained the per-

mission of the bank to sell the property. In his deposition,

Wegenhoft testified that he had not directed the equip-

ment to be sold. He stated that it was his understanding

that Engstrom had given his permission to Clipson to sell

the equipment at auction.

In the bank’s loan reports is this November 30, 1992

statement about the status of the loan:

ACTION PLAN: Have arranged for Jim Clip-

son, Jr. to sell all equipment. Rent house is for

sale. Will suggest lowering price close to values

used here.

STATUS: Have an appraisal of equipment from

local dealer and proceeding to sell equipment.

Anything not sold will go into bank’s equip-

ment auction in late January.

The bank arranged the auction, signed off on some of the

bills of sale, and signed John Engstrom’s name to the

checks in order to apply the auction proceeds to the debt.

The summary judgment evidence submitted to the

district court demonstrates that it was Clipson, not First

National, that placed Engstrom’s equipment in auction.

Clipson gathered the equipment together, took it to the

auction, and sold it. Clipson testified that he thought that

he had Engstrom’s permission to sell the equipment at

auction:

Q Was it Travis [Wegenhoft] that asked you to

go ahead and bring the equipment [to auc-

tion].

A_ No, John [Engstrom] asked me to do it.

App. 8

First National also thought that Engstrom had given Clip-

son permission to sell the equipment at auction:

Q So, the bank didn’t sell it at the auction sale.

A No.

Q Who did?

John Engstrom instructed Jim Clipson to

deliver it to the sale. Well, that’s my under-

standing; but from here it sounded like John

Engstrom’s folks were to deliver it.

The testimony is uncontradicted that Clipson sold the

equipment with, what First National and Clipson thought

was, Engstrom’s permission.

Although Engstrom produced evidence that First

National acquiesced in the sale of the equipment and that

it organized the auction, First National is not liable under

the Relief Act for selling the equipment for several rea-

sons. First, as we have stated above, First National

thought that Clipson had Engstrom’s permission to sell

the equipment. See Pailet, 194 So.2d at 423 (holding that

duly authorized representatives may sell a serviceman’s

property). Second, Engstrom submitted no summary

judgment evidence inferring that Clipson was an agent of

the bank, which could impute Clipson’s action to the

bank, when the equipment was sold. Third, we have

found no authority indicating that First National’s acqui-

escence to Clipson’s sale of the equipment or that First

National’s organization of the auction where the equip-

ment was sold makes it liable under the Relief Act.!

1 Engstrom argues that First National is liable under 50

U.S.C.App. § 532(4) of the Relief Act for “mak[ing or caus[ing]”

App. 9

In his brief, Engstrom strenuously argues that Clip-

son did not have permission to sell his equipment. He

points to his own deposition and affidavits in which he

unequivocally denies giving Clipson permission to sell

the equipment. However, for summary judgment pur-

poses, assuming arguendo that Clipson did not have the

authority to sell the equipment at auction, such lack of

authority would only give Engstrom a potential action

against Clipson who is not a party to the lawsuit. As

noted by the District Court, Engstrom’s proof fails to

establish liability of First National under the Relief Act.

CROSS-APPEAL

First National contends that the district court erred in

allowing Engstrom to amend his complaint. The amend-

ments added claims under the Texas Deceptive Trade

Practices Act, the Texas Uniform Commercial Code, and a

claim for negligence. First National argues that because

the additional causes of action were dependent on the

allegations that the bank sold Engstrom’s equipment, it

was futile for the district court to allow the amendments.

The Federal Rules of Civil Procedure provide that,

after an answer has been filed, “a party may amend the

party’s pleading only by leave of court” and that “leave

to amend shall be freely given when justice so requires.”

Fed.R.Civ.P. 15(a). In the absence of . . . undue prejudice

to the opposing party by virtue of allowance of the

amendment, futility of amendment, etc. - the leave

a sale to be made. This section of the Relief Act is a criminal

Statute and is not apropos to this discussion.

App. 10

sought should, as the rules require, be “freely given.”

Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9

L.Ed.2d 222 (1962). This Court review a district court’s

denial of leave to amend a complaint for abuse of discre-

tion. Avatar Exploration Inc. v. Chevron, U.S.A., Inc., 933

F.2d 314, 320 (5th Cir.1991).

In the amendments, Engstrom states that First

National could be liable under the Texas Deceptive Trade

Practices Act. This Act defines an unconscionable act as

any act which takes advantage of the lack of knowledge,

ability, experience, or capacity of a person to a grossly

unfair degree. Tex.Bus. & Com. § 17.45. Engstrom states

that even if it was true that First National did not sell his

equipment in auction, First National still knew before the

sale that (1) the equipment was going to be sold and (2)

the sale was contrary to his wishes and instructions.

In brief, Engstrom argues that First National could

have committed a unconscionable act in taking advantage

of his lack of knowledge, ability, experience, or capacity

when it did not prevent the sale even though it had every

right and opportunity to do so. The district court consid-

ered these claims under the factors enunciated in Foman

and allowed the amendments. After thoroughly examin-

ing the record and the applicable law, we find no abuse of

the district court’s discretion in granting the motion to

amend. We therefore find this contention to be without

merit.

First National also contends that the district court

erred in remanding the remaining state law claims to

App. 11

state court.? The general rule is that state claims should

be dismissed once the basis for federal jurisdiction has

been dismissed. Parker & Parsley Petroleum v. Dresser

Industries Inc., 972 F.2d 580, 585 (5th Cir.1992). The factors

to be addressed in determining whether to retain jurisdic-

tion once the federal claims have been disposed of are

judicial economy, convenience, fairness, federalism, and

comity. See, e.g., Newport Ltd. v. Sears, Roebuck & Co., 941

F.2d 302, 307 (5th Cir.1991), cert. denied, 502 U.S. 1096, 112

S.Ct. 1175, 117 L.Ed.2d 420 (1992); Parker & Parsley Petro-

leum v. Dresser Industries Inc., 972 F.2d 580, 585 (5th

Cir.1992).

Although this case has been pending for three years

and the parties were in the midst of trial preparation, the

amount of judicial resources that were invested into this

case, as noted by the district court, has been remarkably

small. Since there has been no substantial commitment of

judicial resources and the remaining claims can be rou-

tinely resolved, the district court did not abuse its discre-

tion by remanding the remaining state claims to state

court. See Parker & Parsley, 972 F.2d at 587.

2 We note that we have jurisdiction over the district court’s

decision to remand this case. In a case where the district court

has the discretion over whether to remand a case, such as the

instant case, we have the power to review the district court's

decision on appeal. Hook v. Morrison Milling Co., 38 F.3d 776, 780

(Sth Cir.1994),.

App. 12

CONCLUSION

Because there is clear evidence that First National

Bank of Eagle Lake did not seize and sell Engstrom’s

property, the judgment of the district court dismissing

Engstrom’s Soldiers’ and Sailors’ Relief Act claims is

AFFIRMED. The judgment of the district court granting

Engstrom’s motion to amend complaint is AFFIRMED.

The judgment of the district court remanding this case to

state court is also AFFIRMED.

App. 13

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

JOHN P. ENGSTROM,

ET AL,

)

NS cnn ACTION

= ) NO.

FIRST NATIONAL BANK ) H-91-2392

OF EAGLE LAKE

Defendant. )

ORDER

In accordance with the memorandum of even date it

is ORDERED that the Defendant’s Motion for Summary

Judgment (Instrument No. 32) is hereby GRANTED as to

plaintiffs’ claim brought under Soldiers’ and Saiiors’ Civil

Relief Act of 1940. It is further

ORDERED that the remainder of this case is hereby

REMANDED to the 25th Judicial District Court of Colo-

rado County, Texas, Cause No. 17,448.

SIGNED at Houston, Texas, this 31st day of August,

1993.

/s/ Melinda Harmon

MELINDA HARMON

UNITED STATES

DISTRICT JUDGE

App. 14

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

JOHN P. ENGSTROM,

ET AL,

)

Plaintiffs, ) CiviL ACTION

bai ) NO.

FIRST NATIONAL BANK ) H-91-2392

OF EAGLE LAKE

)

Defendant.

MEMORANDUM

(Entered Sept. 2, 1993)

Plaintiffs’ bring this action for violations of the Sol-

diers’ and Sailors’ Civil Relief Act of 1940, 50 U.S.C. App.

§§ 501-593 (1981 & Supp. 1992), and the Texas Deceptive

Trade Practices - Consumer Protection Act. Tex. Bus. &

Com. Code Ann. §§ 17.41-17.63.! Plaintiffs allege that

while John Engstrom was on active duty in the United

States Navy during the Persian Gulf war the defendant

repossessed and sold the equipment used in the plain-

tiffs’ farming operations. Pending before the Court is the

Motion for Summary Judgment (Instrument No. 32) filed

by the defendant First National Bank of Eagle Lake (the

“Bank”). Having considered the motion the response, the

reply, and the applicable law the Court is of the opinion

that the motion should be granted.

1 This action was removed from the 25th Judicial District

Court of Colorado County, Texas, on the basis of tederal ques-

tion jurisdiction.

App. 15

John Engstrom was called to active duty in October

1990, and was deployed to the Persian Gulf on October

23, 1990. Pls.’ Original Petition at p-2. Prior to his depar-

ture, Engstrom made arrangements with the Bank for a

neighbor, James Clipson, to c ‘Ty out the orderly sale of

Engstrom’s assets as necessary to meet payments due on

outstanding loans. Id. Plaintiffs contend that John

Engstrom notified the Bank not to sell his equipment at

an auction sale. Despite Engstrom’s request on January

26, 1991, an auction was conducted at which the plain-

tiffs’ equipment was allegedly sold for wholly inadequate

consideration.

Although plaintiffs endeavor to show that the Bank

carried out the auction, all plaintiffs have actually dem-

onstrated is that Bank officers aided “people that where

interested in selling some equipment.” Pls.’ Resp. to

Reply on Support of Defs.’ Mot. for Summ. J. at Ex. A, p.

114; Dep. of Sam Thomson at p- 114. Sam Thomson, a

Bank officer, merely assisted in contacting an auctioneer

and also arranged for an auction site. He explained that

“it’s unfair to characterize it as the bank’s auction.” Pls.’

Resp. to Reply on Support of Defs.’ Mot. for Summ. J. at

Ex. A, p. 88; Dep. of Sam Thomson at p. 88.

Rule 56(c) provides that “[summary] judgment shall

be rendered forthwith if the pleading, depositions,

answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.”

Fed.R.Civ.P. 56(c). A party seeking summary judgment

bears the initial burden of informing the district court of

the basis for its motion, and identifying those portions of

App. 16

the pleading, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any,

which it believes demonstrate the absence of a genuine

issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,

325 (1986). The moving party has the burden of showing

that there is no genuine issue of material fact and that the

moving party is entitled to judgment as a matter of law.

Williams v. Adams, 836 F.2d 958, 960 (5th Cir. 1988). The

burden is not on the movant to produce evidence show-

ing the absence of a genuine issue of material fact. See

International Ass’n of Machinists & Aerospace Workers, Lodge

No. 2504 v. Intercontinental Mfg. Co., 812 F.2d 219, 222 (5th

Cir. 1987). A defendant who moves for summary judg-

ment may rely on the absence of evidence to support an

essential element of the plaintiff’s case Id.

Once the movant carries this burden, the burden

shifts to the nonmovant to show that summary judgment

should not be granted. See Celotex, 477 U.S. at 324-25. A

party opposing a properly supported motion for sum-

mary judgment may not rest upon mere allegations or

denials of his pleading, but must set forth specific facts

showing the existence of a genuine issue for trial. Ander-

son v. Liberty Lobby, Inc., 477 U.S. 242, 256-57 (1986).

Assertions unsupported by facts are insufficient to

oppose a motion for summary judgment. Williams v.

Weber Management Serv., 839 F.2d 1039, 1041 (5th Cir.

1987). There must be evidence giving rise to reasonable

inferences that support the nonmoving party’s position.

St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987).

Bare or mere allegations are insufficient. Lodge Hall Music,

Inc. v. Waco Wrangler Club, Inc., 831 F.2d 77, 79 (5th Cir.

1987).

App. 17

In considering a motion for summary judgment, the

district court must view the evidence through the prism

of the substantive evidentiary burden. Anderson, 477 U.S.

at 254. The evidence of the nonmovant is to be believed,

and all justifiable inferences are to be drawn in his favor.

Id. at 254. The inferences to be drawn from the underly-

ing facts must be viewed in the light most favorable to

the party opposing the motion. Matsushita Electric Ind. Co.

v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary

judgment is inappropriate if the evidence before the

court, viewed as a whole, could lead to different factual

findings and conclusions. Honore v. Douglas, 833 F.2d 565,

567 (5th Cir. 1987).

The sole violation asserted against the Bank under

the Soldiers’ and Sailors’ Civil Relief Act is that the Bank

allegedly seized the plaintiffs’ equipment and sold it at

auction at an unreasonably low price. The bank’s sum-

mary judgment evidence demonstrates that it was Clip-

son and not the Bank that placed the equipment in

auction.” Def.’s Mot. for Summ. J. at Ex. B. at Pp. 36-37,

54-55; Dep. of James Clipson at pp. 36-37, 54-55. In an

effort to raise a genuine issue of material fact the plain-

tiffs contend that they never gave Clipson the authority

to sell the equipment at an auction sale. Assuming,

arguendo, that Clipson was mistaken about his authority

to sell the plaintiffs’ equipment at an auction the damage

* The Bank did not violate the Soldiers’ and Sailors’ Civil

Relief Act by consenting to Engstrom’s arrangement with Clip-

son to sell plaintiffs’ equipment. See generally Pailet v. Ald, Inc.,

194 So.2d 420, 423 (La.Ct.App. 1967) (debtor’s agent’s voluntary

return of equipment to creditor did not violate the Act).

App. 18

sustained could not be imputed to the Bank, but rather to

Clipson who is not a party to this proceeding. The Bank

did not violate the statute.

The Court must now decide whether to retain juris-

diction over plaintiffs’ pendent state claims. “When the

single federal-law claim is eliminated at an ‘early stage’

of the litigation, the district court has ‘a powerful reason

to choose not to continue to exercise jurisdiction’.” Parker

& Parsley Petroleum v. Dresser Industries, 972 F.2d 580, 585

(5th Cir. 1992) (citing Carnegie-Mellon Univ. v. Cohill, 484

U.S. 343, 351 (1988)).

In Carnegie-Mellon, the Supreme Court stated that “in

the usual case in which all federal-law claims are elimi-

nated before trial, the balance of factors to be considered

under the pendent jurisdiction doctrine —- judicial econ-

omy, convenience, fairness, and comity - will point

toward declining to exercise jurisdiction over the remain-

ing state-law claims.” Carnegie-Mellon Univ. v. Cohill, 484

U.S. at 350 n. 7. Since there has been no substantial

commitment of judicial resources and the remaining

claims are routinely resolved, Parker & Parsley, 972 F.2d at

587 (citing Shaffer v. Board of School Directors, 730 F.2d 910,

912 (3rd Cir. 1984)), remand of plaintiffs’ state law claims

is proper. Parker & Parsley, 972 F.2d at 587.

Accordingly, defendants motion for summary judgment

as to plaintiffs’ federal claims will be granted an [sic] plain-

tiffs’ pendent state claims will be remanded to the 25th

Judicial District Court of Colorado County, Texas.

App. 19

SIGNED at Houston, Texas, this

1993.

31st day of August,

/s/ Melinda Harmon

MELINDA HARMON

UNITED STATES

DISTRICT JUDGE

App. 20

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

JOHN T. ENGSTROM, ET AL., _ ) |

Plaintiff,

vs. ) CIVIL ACTION NO.

THE FIRST NATIONAL BANK? H-91-2392

OF EAGLE LAKE, :

Defendant. )

ORDER

(Entered Jan. 11, 1994)

Pending before the Court is the Defendant’s Motion

to Stay Remand (Instrument No. 93) in which the Defen-

dant seeks a stay of the Court’s Order dated September 2,

1993 (Instrument No. 90). The Court’s Order granted

summary judgment for the Defendant on the federal

question in the case and remanded the remaining issues

in the case to the state court from which the case had

been removed. The Defendant takes issue with the

Court’s rationale for remand and seeks to distinguish its

case from the precedents offered by the Court.

The issue of retaining jurisdiction over Defendant's

state law claims related to the federal question that origi-

nally made the case subject to federal question jurisdic-

tion is squarely within the trial court’s discretion. 42

U.S.C. § 1441(c) (“ . . . the entire case may be removed

and the district court may determine all issues therein, or,

in its discretion, may remand all matters in which State

law predominates.”); Carnegie-Mellon University v. Cohill,

} ' 7

App. 21

108 S.Ct. 614, 619-23 (1988) (holding that “pendant juris-

diction is a doctrine of discretion, not of plaintiff’s right”

and that a district court faced with a case involving single

federal-law claim and a number of state-law claims “had

to consider throughout the litigation whether to exercise

its jurisdictior over the case. When the single federal-law

claim was eliminated at an early stage of the litigation

the District Court had a powerful reason to chose [sic] not

to exercise jurisdiction.”); 14A C. WRIGHT, A. MILLER &

E. COOPER, FEDERAL PRACTICE & PROCEDURE:

JURISDICTION § 3739 (1985 & Supp. 1993).

The Court in Carnegie-Mellon concluded

that a district court has discretion to remand to

state court a removed case involving pendant

claims upon a proper determination that retain-

ing jurisdiction over the case would be inap-

propriate. The discretion to remand enables

district courts to deal with cases involving pen-

dant claims in the manner that best serves the

principles of economy, convenience, fairness

and comity which underlie the pendant jurisdic-

tion doctrine.

Carnegie-Mellon, 108 S.Ct. at 623 (citations omitted).

It has always been true that when a case is in

federal court, either originally or by removal,

the court has discretion whether to hear or to

dismiss any state claims that are pendant to the

federal claim that is the basis for jurisdiction.

Ordinarily it is to exercise that discretion by

dismissing the pendant claims if the federal

claim has been dismissed before trial. The Car-

negie-Mellon case goes beyond the prior law by

recognizing in a removed case a discretion to

remand the pendant state claims to state court

App. 22

rather than to increase the expense and time

involved by dismissing and requiring the plain-

tiff to start over in state court.

14A C. WRIGHT, A. MILLER & E. COOPER, FEDERAL

PRACTICE & PROCEDURE: JURISDICTION § 3739 (1985

& Supp. 1993) (footnotes omitted). “[O}nce a federal dis-

trict court considers the proper factors and decides to

remand, the action should go forward in state court with-

out the further delay of appeal, and without regard to

whether the federal district court was correct or incor-

rect.” Robertson v. Ball, 534 F.2d 63, 66 n.5 (5th Cir. 1976);

14A C. WRIGHT, A. MILLER & E. COOPER, FEDERAL

PRACTICE & PROCEDURE: JURISDICTION § 3740 (1985

& Supp. 1993).

Finding that the decision to remand was within the

Court’s discretion, and finding that the Court properly

considered the Carnegie-Mellon factors when it decided to

remand, the Court declines the Defendant’s suggestion to

revisit the issue. The Court notes that the parties have

already sought appellate review of the summary judg-

ment and that denying the stay will allow the appeal to

be decided expeditiously. Having considered the argu-

ments of counsel and the applicable law, the Court

ORDERS that Defendant’s Motion to Stay Remand is

DENIED.

SIGNED at Houston, Texas, this 10th day of January,

1994.

/s/ Melinda Harmon

MELINDA HARMON

UNITED STATES

DISTRICT JUDGE

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