Appendix — Stewart v. Joslin, 119 S. Ct. 2048 (1999) (No. 98-1604)

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UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-41338

Summary Calendar

D.C. Docket No. 9:96-CV-169

DENNIS JOSLIN, Certified Public Accountant

Plaintiff — Appellee

v.

WALTER YOUNAS STEWART, ET AL

Defendants

WALTER YOUNAS STEWART

Defendant — Appellant

Appeal from the United States District Court for the

Eastern District of Texas, Lufkin.

Before REYNALDO G. GARZA, BARKSDALE, and

DENNIS, Circuit Judges.

JUDGMENT

(Filed Sep. 8, 1998)

This cause came on to be heard on the record on

appeal and was taken under submission on the briefs on

file.

ON CONSIDERATION WHEREOF, it is now here

ordered and adjudged by this Court that the judgment of

the District Court in this cause is affirmed.

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IT IS FURTHER ORDERED that defendant-appellant

pay to plaintiff-appellee the costs on appeal to be taxed

by the Clerk of this Court.

ISSUED AS MANDATE: NOV 3 1998

A true copy

lest

Clerk, U.S. Court of Appeals, Fifth Circuit

By /s/ Illegible

Deputy

New Orleans, Louisiana NOV 3 1998

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UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 97-41338

Summary Calendar

DENNIS JOSLIN, Certified Public Accountant,

Plaintiff-Appellee,

VERSUS

WALTER YOUNAS STEWART, ET. AL.,

Defendants,

WALTER YOUNAS STEWART

Defendant-Appellant.

Appeal from the United States District Court

for the Eastern District of Texas

(9:96-CV-169)

(Filed Sep. 8, 1998)

Before REYNALDO G. GARZA, BARKSDALE, and

DENNIS, Circuit Judges.

PER CURIAM:*

* Pursuant to 5TH Cir. R. 47.5, the Court has determined

that this opinion should not be published and is not precedent

except under the limited circumstances set forth in 5TH Cir. R.

47.5.4.

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Walter Stewart executed four separate promissory

notes totaling $256,000.00 to Sam Houston National Bank

of Huntsville, Texas in 1983, 1984, and 1985. During the

signing of the notes, Stewart also executed four deeds of

trust on four individual tracts of land to secure the notes.

Each of the deeds of trust contained a cross-collateraliza-

tion clause which provided that each deed of trust

secured “all indebtedness” of Walter Stewart to the bank,

whether past, present or future and incurred by any

means.

The first tract of land, conveyed by the deed of trust

on July 13, 1983, pledged a 70.773 acre plot of land which

fronts a county road. The other three parcels of land are

essentially land-locked and cannot be reached except by

use of the first tract of land. There is an easement along a

creek bed, but it is unreliable due to its location and

possible flooding.

Stewart defaulted on the four notes and then filed

voluntary Chapter 12 bankruptcy in the Eastern District

of Texas. The bankruptcy court entered an Order Con-

firming Debtors’ Chapter 12 Plan of Reorganization on

June 16, 1988. Under his Plan, Stewart committed to

repay a total of $102,855.20 out of the $256,000.00 that he

originally borrowed from the Sam Houston National

Bank of Huntsville, Texas under the four notes. The Plan

did not address the cross collateralization clauses.

On April 16, 1993, in accordance with 11 U.S.C. Sec-

tion 1222(b)(9), the bankruptcy court entered an Order |

Modifying Debtors’ Chapter 12 Plan. The bankruptcy

court’s order held that the modifications requested were

“not material.” The order’s effect was to extend the terms

al

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of payment to the secured creditors so that the Stewarts

could continue to make payments on their debts after the

time period contemplated by the Chapter 12 Plan was

terminated. The modified plan indicated that the amount

of the indebtedness secured by the four tracts of land, at

that time, was approximately $92,231.35.

The modification order also provided that the Stew-

arts could prepay any secured claim by paying the

unpaid balance of the note, principal and accrued interest

and shall “thereupon be entitled to and said creditor shall

forthwith issue a release of lien on said property and

otherwise extinguishing any debt secured or formerly

secured thereby.” This language is essentially the same as

the language of the initial plan submitted by the bank-

ruptcy court.

Dennis Joslin then purchased the four notes and

deeds of trust from the FDIC, the successor in interest to

the Sam Houston National Bank of Huntsville, Texas.

Joslin filed suit for judicial foreclosure under the deeds of

trust. Both parties filed motions for summary judgment.

Stewart asserted that res judicata should apply

because the modification order showed that the cross-

collateralization issue was litigated and was specifically

addressed.

Joslin, on the other hand, contended that the mod-

ification order could not have set aside the cross-collat-

eralization provision without resulting in an impermis-

sible “material modification.” Joslin further argued that

the issue of cross-collateralization was not only not liti-

gated, but was not even mentioned in any of the bank-

ruptcy documents.

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The United States District Court for the Eastern Dis-

trict of Texas granted Joslin’s motion for summary judg-

ment. Judge John Hannah entered a partial summary

judgement in favor of Joslin on September 19, 1996, and

on September 24, 1997 entered final summary judgment

granting the relief requested by Joslin, namely the fore-

closure of the deed of trust liens on the property owned

by STEWART, as well as an award of attorney’s fees and

costs of court.

The district court agreed with Joslin that the mod-

ification order entered April 19, 1993 was not res judicata

as to the cross-collateralization issue. The court noted

that the issue of cross-collateralization clauses was not

the subject of any of the bankruptcy proceedings. More-

over, the court found that if the modification order was

intended to terminate the cross-collateralization rights of

the note holder, this would be an impermissible material

modification of the Plan. The court also stated that if it

was the intention of Plaintiffs to eliminate the cross-

collateralization terms of the deeds of trust, this should

have been expressly stated within the documents. Fur-

thermore, the fact that it was not mentioned must be

construed against the Debtors who were the drafters of

the documents.

On October 22, 1997 Stewart perfected his appeal to

this court.

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Discussion

I. Summary Judgment

The Fifth Circuit reviews a grant of summary judg-

ment de novo, applying the same standard applied by the

district court. Lubbock County Hosp. Dist. v. National Union

Fire Ins. Co. of Pittsburgh, Pennsylvania, 143 F.3d 239, 241

(5th Cir. 1998). In reviewing a motion for summary judg-

ment, we view the evidence in the light most favorable to

the non-moving party. Bloom v. Bexar County, Texas, 130

F.3d 722, 724 (5th Cir. 1997). Summary judgment is proper

if the evidence when so viewed demonstrates that there is

no genuine issue as to any material fact and that the

moving party is entitled to a judgment as a mater [sic] of

law. Fep. R. Civ. P. 56(c); see Bloom, 130 F.3d at 724. The

party seeking summary judgment carries the burden of

showing that there is lack of evidence supporting the

non-moving party’s case. Celotex Corp. v. Catrett, 477 U.S.

317, 322, 106 S.Ct. 2548, 2552 91 L.Ed.2d 265 (1986).

After reviewing the district court’s granting of sum-

mary judgment de novo, this court affirms its decision in

granting Joslin’s motion and its denial of STEWART’s

motion.

il. Res judicata

Res judicata is utilized when claims have already

been judicially acted upon or decided. Bradley v. Arm-

strong Rubber Co., 130 F.3d 168, 179 (5th Cir. 1997). In

order for res judicata to apply, four requirements must be

satisfied. Gulf Island-IV, Inc., v. Blue Streak-Gulf Is Ops, 24

F.3d 743, 746 (5th Cir. 1994), cert. denied, 513 U.S. 1155

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(1995). First, the parties in the instant action must be the

same as or in privity with the parties in the prior action.

Russell v. Sunamerica Securities, Inc., 962 F.3d 1169, 1172-73

(Sth Cir. 1992). Second, “the court that rendered the prior |

judgment must have been a court of competent jurisdic-

tion.” Gulf Island-IV, Inc., 24 F.3d at 746. Third, there must /

be a final judgment on the merits. Bradley v. Armstrong

Rubber Co., 130 F.3d 168, 179 (5th Cir. 1997). Fourth, the

same cause of action must be involved in both suits. Id.

The element at issue in this case is whether there has

been a final judgment on the merits. The district court

was correct in its conclusion that the modification order

did not render a final judgment in regard to the cross-

collateralization clauses. The issue of the cross-collateral-

ization clauses was not the subject of any of the bank-

ruptcy proceedings. The district court noted that the Plan

submitted by the Stewarts to the bankruptcy court for its

approval provided “[iJn this particular Plan all Deed of

Trust lienholders will be allowed to maintain their respec-

tive liens on the property described on the Schedules in

the Chapter 12 Plan, to the full extent of the Plan Secured

Values.” Clearly this language supports Joslin’s conten-

tion and the court’s decision that the bankruptcy court

did not intend to terminate the cross-collateralization

rights of the note holder.

In addition, this court agrees with the district court’s

finding that the elimination of the cross-collateralization

clauses under the modification order would constitute an

impermissible material modification of Stewart’s Chapter

12 Plan. Under the Bankruptcy Code, a Modification

Order is prohibited from creating “a change in the rights

of a [secured creditor] from what such rights were under

eM ne nee MENS eRe

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the Plan before modification.” 11 U.S.C. §1223(c) (1998).

Furthermore, the Modification Order itself states that

“the modifications ... are not material.” Moreover, as the-

district court noted, if the plaintiffs intended to eliminate

the cross-collateralization terms of the deeds of trust, this

should have been expressed within the documents. The

fact that it is not mentioned must be construed against

against [sic] the Debtors who were the drafters of the

documents. In re Fawcett, 758 F.2d 588, 591 (11th Cir.

1985); In re Duplechain, 111 B.R. 576 (W.D. Louisiana

1990).

Accordingly, this court affirms the district court’s

decision that the modification order is not res judicata to

the cross-collateralization issue. In addition, Appellant's

remaining contentions are not viable and are without

merit because the modification order did not eliminate

the cross-collateralization clauses. Therefore, this court

affirms the district court’s decision in all respects.

AFFIRMED.

November 5, 1998

Re: 9:96-cv-00169

Notice sent to:

James Haralson Pearson

Jeffrey W Wheelock

John Fredrick Berry

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IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-41338

DENNIS JOSLIN, Certified Public Accountant

Plaintiff - Appellee

v.

WALTER YOUNAS STEWART, ET AL

Defendants

WALTER YOUNAS STEWART

Defendant — Appellant

Appeal from the United States District Court for the

Eastern District of Texas, Lufkin

ON PETITION FOR REHEARING

(Filed Oct. 26, 1998)

Before REYNALDO G GARZA, BARKSDALE, and

DENNIS, Circuit Judges.

PER CURIAM:

IT Is ORDERED that the petition for rehearing filed

in the above case is denied.

ENTERED FOR THE COURT:

/s/ Illegible

United State Circuit Judge

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

LUFKIN DIVISION

DENNIS JOSLIN, § CIVIL ACTION

Plaintiff, § NO. 9-96CV169

V.

WALTER YOUNAS STEWART

and KIM STEWART,

Defendants.

MMMM MM

FINAL JUDGMENT

(Filed Sep. 24, 1997)

On the date set forth below, at a regular term of this

Court, and in its regular order on the docket, came on to

be heard the Motion For Summary Judgment (the

“Motion”) filed by Plaintiff Dennis Joslin against Defen-

dants Walter Younas Stewart and Kim Stewart. The

Court, after considering the Motion, the supporting affi-

davit and exhibits, the pleadings and discovery filed in

this case, and the argument of counsel, is of the opinion

that the Motion should be granted. It is therefore:

ORDERED that the Motion For Summary Judgment

of Dennis Joslin is GRANTED; it is further

ORDERED that Dennis Joslin have and recover

$7,500.00, from Walter Younas Stewart, representing the

reasonable and necessary attorneys’ fees incurred to date

in this action; it is further

ORDERED that Dennis Joslin have and recover of

and from Walter Younas Stewart $10,000.00, representing

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reasonable and necessary attorneys’ fees to defend an

appeal to the Fifth Circuit Court of Appeals, but such

sum is remitted if no appeal is taken to the Court of

Appeals; $5,000.00 to prepare or respond to an applica-

tion to the U.S. Supreme Court for Writ of Certiorari, but

such sum is remitted if neither party files an application

to the United States Supreme Court for writ of certiorari,

it is further;

ORDERED that Dennis Joslin have and recover of

and from Walter Younas Stewart post-judgment interest

on attorneys’ fees as allowed by law at the legal rate of

5.60% percent per annum, from the date this judgment is

entered until the judgment is paid in full; it is further

ORDERED that Dennis Joslin shall have judicial fore-

closure of a lien on the following described property:

62.026 acres of land out of and a part of the

JOHN BEATY SURVEY A-7 in Houston County,

Texas, out of a tract called 164.7 acres and

described as the 4th tract in a deed from Hazel

Younas to Walter Stewart dated Feb. 13, 1979

recorded in Vol. 623 page 170 of the Houston

County Deed Records, this 62.026 acre tract

being more particularly described by metes and

bounds as follows:

BEGINNING on an iron post set for the SW

corner of this tract and the NW corner of a

158.121 acre tract (formerly called 149.3 acres)

and being N 00 deg 04 min 33.574 sec E 2797.258

feet and N 00 deg 27 min E 539.6 feet from the

most SW corner of the Walter Stewart original

tract, also being N 00 deg 27 min E 539.6 feet

from the SE corner of the Walter Stewart tract

called 100 acres;

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THENCE N 00 deg 27 min E 1315.0 feet to

iron post set for corner in the West line of the

said 164.7 acre tract, same being the SW corner

of a 62.135 acre tract;

THENCE S 89 deg 29 min 55.011 sec E

2040.532 feet to iron post set for corner in the

East line of the said 164.7 acre tract, same being

the SE corner of the said 62.135 acre tract;

THENCE South 1315.0 feet to iron post

found for corner, same being the NE corner of a

158.121 acre tract;

THENCE N 89 deg 30 min W 2059.86 feet to

the place of beginning and containing 62.026

acres of land, more or less.

and

An easement in common with Grantors for

access, ingress and egress upon, over and across

the following strip of land:

A strip of land 30 ft. in width for the purpose of

ingress and egress to and from the above 62.026

acre tract, being 15 feet on each side of the

following described centerline:

BEGINNING in the NB line of the above 62.026

acre tract, 15 fee [sic] West of its NE corner;

THENCE North parallel with the E B line of a

62.135 acre tract (described in Deed of Trust

recorded in Vol. 804 page 648 Official Records of

Houston County, Texas) at 1324' cross N B L of

said 62.135 acre tract and the SB line of a 62.244

acre tract (described in Deed of Trust recorded

in Vol. 773 page 348 of the Official Records of

Houston County, Texas) at approximately 2524

ft. a point near the NE corner of said 62.244 acre

tract and Hurricane Bayou;

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THENCE in the northeasterly direction along

the SE side of said Bayou, across a 70.733 acre

tract owned by Walter Stewart, along a passable

route, to intersect the S or SW margin of the

Halls Bluff Road.

The lien is set forth in a certain Deed of Trust

recorded in Volume 819, Page 113 under the Official

Public Records of Real Property of Houston County,

Texas. The Deed of Trust described above was extended

and carried forward by an Extension of Lien recorded in

Volume 856, Page 484 of the Official Public Records of

Real Property of Houston County, Texas; it is further

ORDERED that Dennis Joslin shall have judicial fore-

closure of a lien on the following described property:

SECOND TRACT: 70.733 acres out of and a

part of the JOHN BEATTY SURVEY, A-7 and the

ELIJAH GOSSETT SURVEY, A-34 in Houston

County, Texas and also being out of and a party

of a called 369 acre tract in the BEATTY SURVEY

and out of and a part of a called 176.5 acre tract

in the GOSSETT SURVEY, also being out of and

a part of the same land conveyed to Walter

Stewart in a Deed recorded in Vol. 616, Page 215

of the Houston County Deed Records, which

70.733 acres more particularly described by

metes and bounds as follows:

BEGINNING on a point in the center of County

Road and the center of Hurricane Bayou for the

North corner of this tract, same being in the

North line of said 369 acre tract;

THENCE with the meanders of said County

Road as follows: S 30 deg 38’ E 379.92 feet; S 52

deg 47' E 150.92 feet; S 76 deg 48’ 36.219" E

537.16 feet; S 52 deg 00’ E 211.61 feet; S 15 deg

eames

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14' E 283.79 feet and S 32 deg 38' E 160.76 feet to

corner of same, set Iron Rod for reference corner

in South West fence line if said County Road;

THENCES [sic] 4 deg 25' W 887.47 feet to Iron

Post set for corner, same being the North East

corner of a 123.703 acre tract;

THENCE N 89 deg 43' 37.21" W 1993.13 feet to

Iron Post set for corner;

THENCE North 1010.86 feet to corner and cen-

ter of Hurricane Bayou, set Iron Rod for refer-

ence corner, South 15 feet;

THENCE with the meanders of said Hurricane

Bayou as follows: N 5 deg 07' 58.48" E 334.64

feet; N 85 deg 06' E 110.23 feet; S 44 deg 35' E

200.13 feet; N 8 deg 04’ E 195.21 feet; N 84 deg

51' E 141.07; N 4 deg 49’ E 86.94 feet; N 89 deg

31' E 172.24 feet; N 36 deg 33' W 259.18 feet; N

77 deg 51' E 137.79 feet; N 15 deg 28' E 129.59

feet and N 70 deg 49' E 269.03 feet to the place of

beginning and containing 70.733 acres of land

more or less, as surveyed on February 11, 1980

by C R Hodges, Registered Public Surveyor No.

1645, Texas.

The lien is set for in a certain Deed of Trust recorded

in Volume 223, Page 21 of the Deed of Trust Records of

Houston County, Texas. The Deed of Trust described

above was extended and carried forward by an Extension

of Real Estate Note and Lien recorded in Volume 856,

Page 480 of the Official Public Records of Real Property of

Houston County, Texas; it is further

ORDERED that Dennis Joslin shall have judicial fore-

closure of a lien on the following described property:

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Field Notes for 62.244 Acres

JOHN BEATY SURVEY, A-7

Houston County, Texas

62.244 acre out of and a part of the John Beaty

Survey A-7, in Houston County, Texas and being

out of and a part of the called 164.7 acre tract

conveyed to Walter Stewart in a deed recorded

in the Houston County Deed Records, which

62.244 acres more particularly described by

metes and bounds as follows:

BEGINNING on an iron rod set at fence

corner post for corner, same being the South

East corner of an 18 acre tract and the North

East corner of a 99.739 acre tract owned by

Walter Stewart and being in the West line of the

said called 64.7 acre tract;

THENCE N 00° 27' E 183.0 feet to corner in

the center of Hurricane Bayou, set iron rod for

reference corner S 00° 27' W 15.0 feet;

THENCE with the center of said Bayou as

follows: N 76° 27' E 150.0 feet, N 45° 15' E93.0

feet, N 21° 10' W 215.0 feet, N 59° 40’ E 150.0 |

feet, N 89° 25' E 80.0 feet, S 47° 15' E 106.0 feet, S

34° 05' W 220.0 feet, S 73° 10’ E 133.0 feet, N 55°

45' E 178.0 feet, S 63° 00' E 77.0 feet, S32° 35' W

204.0 feet, S 21° 20' E 85.0 feet, N 61° 35’ E 82.0

feet, N 37° 30' E 343.0 feet, S 47° 00’ E 114.0 feet,

S 22° 40' W 240.0 feet, S 14° 35' W 133.0 feet, S

82° 40' E 106.0 feet, N 60° 30' E 217.0 feet, S 62°

32' E 70.0 feet, S 19° 35’ W 160.0 feet, N 69° 55' E

153.0 feet, N 56° 15' E 169.0 feet, N 49° 53' E

356.0 feet, S 77° 53' E 153.0 feet, S 5° 30' W 77.0

feet, S 74° 10' W 167.0 feet, S 31° 20' E 198.0 feet,

N 23° 35' E 152.0 feet and S 85° 21' 00.346" E

224.271 feet to corner in same, found iron pipe

SLOT RE ey ern

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for reference corner South, 15.0 feet, same being

the North East corner of said called 164.7 acre

tract;

THENCE South, 1230.84 feet to iron post set

for corner, in the East line of the said called

164.7 acre tract;

THENCE N 89° 29' 49.937" W 2039.133 feet

to iron post set for corner, same being in the

West line of said called 164.7 acre tract

THENCE N 00° 27' E 1163.826 feet to the

place of beginning and containing 62.244 acres

of land more or less

Field Notes Prepared April 1984.

The lien is set forth in a certain Deed of Trust

recorded in Volume 773, Page 348 of the Official Public

Records of Real Property of Houston County, Texas. The

Deed of Trust described above was extended and carried

forward by an Extension of Lien recorded in Volume 856,

Page 482 of the Official Public Records of Real Property of

Houston County, Texas; it is further

ORDERED that Dennis Joslin shall have judicial fore-

closure of a lien on the following described property:

BEING 62.135 acres of land out of the JOHN

BEATY LEAGUE A07 in Houston County, Texas,

being out of and a part of a tract called 164.7

acres and described as the 4th tract in a deed

from Hazel Younas to Walter Stewart dated Feb.

13, 1979 recorded in Vol. 623 page 170 of the

Houston County Deed Records, and described

by metes and bounds as follows:

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BEGINNING on an iron post set for the North-

west corner of this tract and the Southwest cor-

ner of a 62.244 acre tract (also being part of the

164.7 acre tract) and being in the West line of the

164.7 acre tract) and being in the West line of the

164.7 acre tract and also being S 00 deg 27 min

W 1346.826 feet from the NW corner of said

called 164.7 acre tract;

THENCE S 89 deg 29 min 49.937 sec E 2039.133

feet to iron post set for corner in the East line of

the said called 164.7 acre tract, same being the

SE corner of the said 62.244 acre tract;

THENCE South 1324.0 feet to iron post set for

corner in the East line of the said called 164.7

acre tract;

THENCE N 89 deg 29 min 55.011 sec W 2049.532

feet to iron post set for corner in the West line of

said tract called 164.7 acres;

THENCE N 00 deg 27 min E 1324.0 feet to the

place of beginning and containing 62.135 acres

of land, more or less.

TOGETHER WITH:

An easement in common with Grantors for

access, ingress and egress upon, over and across

the following strip of land:

Beginning at the northeast corner of the

aforesaid 62.135 acre tract, being the southeast

corner of a 64.244 acre tract described in deed of

trust dated Apr. 2, 1984 recorded in Vol. 773

page 348 of the Official Records of Houston

County, Texas, from Walter Younas Stewart to

Morris I. Waller, Trustee;

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THENCE North along the east line of said

64.244 acre tract to point near its NE corner and

Hurricane Bayou;

THENCE in a northeasterly direction along the

SE side of said Bayou, across a 70.733 acre tract

owned by Walter Stewart, along a passable

route, to intersect with the S or SW margin of

the Halls Bluff Road.

The lien is set forth in a certain Deed of Trust

recorded in Volume 804, Page 648 of the Official Public

Records of Real Property of Houston County, Texas. The

Deed of Trust described above was extended and carried

forward by an Extension of Lien recorded in Volume 856,

Page 478 of the Official Public Records of Real Property of

Houston County, Texas; it is further

ORDERED that an order of sale shall issue to any

sheriff or constable in the State of Texas, or to any like

officer of the United States of America, to seize and sell

the above-described properties the same as under execu-

tion in satisfaction of this judgment. The sheriff or other

officer executing the order of sale shall place the pur-

chaser of the above-described properties in possession

within 30 days after the date of sale. The order of sale

shall have the same force and effect as that of a writ of

possession between the parties in this action and any

person claiming under the defendants by any right

acquired pending this action; it is further

ORDERED that Dennis Joslin shall be entitled to all

writs, execution and processes allowed by law in order to

recover and collect all sums awarded to it pursuant to

this judgment.

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SIGNED this 22nd day of September, 1997.

/s/ John Hannah, Jr.

JUDGE PRESIDING

APPROVED:

PEARSON & PEARSON, P.C.

THOMAS A DICKINSON

State Bar No. 05836400

James H. Pearson

State Bar No. 15691200

1200 Smith Street

Suite 3525

Houston, Texas 77002

(713) 739-8600

(713) 739-8341 Fax

Attorney for Dennis Joslin

September 24, 1997

Re: 9:96-cv-00169

Notice sent to: James Haralson Pearson

Jeffrey W. Wheelock

John Fredrick Berry

en Net eet tee ey i.

ee ee ee ee ee ee

a

A-21

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

LUFKIN DIVISION

DENNIS JOSLIN §

V § CIVIL ACTION NO.

§ 9:96CV169

WALTER YOUNAS STEWART §

and KIM STEWART §

MEMORANDUM AND ORDER OF

SUMMARY JUDGMENT

(Filed Sep. 16, 1996)

Before the Court is Plaintiff's Motion for Summary

Judgment which seeks judicial foreclosure of four tracts

of real property as well as Defendants’ Motion for Partial

Summary Judgment. For the reasons stated below, it is

the opinion of the Court that Plaintiff’s Motion for Sum-

mary Judgment is well taken in some respects and should

be GRANTED IN PART and that Defendants’ Motion for

Partial Summary Judgment is not well taken and should

be DENIED.

BACKGROUND

Defendant Walter Stewart executed four Separate

promissory notes totaling $256,000.00 to Sam Houston

National Bank of Huntsville, Texas in 1983, 1984, and

1985. At the same time that Defendant signed these notes,

he also executed a deed of trust on four individual tracts

of land to secure the notes. Each of these deeds of trust

contained a cross-collateralization clause which provided

that each deed of trust secured “all indebtedness” of

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Walter Stewart to the bank, whether past, present or

future and incurred by any means. Kim Steward [sic] did

not execute any of the notes or deeds. Plaintiff, Dennis

Joslin is current owner and holder of the notes in ques-

tion.

The first tract of land, conveyed by deed of trust on

July 13, 1983, pledged a 70.773 acre plot of land which

fronts a county road. The other three parcels of land are

essentially land-locked and cannot be reached except by

use of the 70.773 acre tract. There is an easement along a

creek bed, but it is unreliable due to its location and

possible flooding.

The Stewarts filed voluntary Chapter 12 bankruptcy

in the Eastern District of Texas under cause number

L-87-01295. The bankruptcy court entered an Order Con-

firming Debtors’ Chapter 12 Plan of Reorganization on

June 16, 1988. On April 16, 1993, in accordance with 11

U.S.C. Section 1222(b)(9), the bankruptcy court entered

an Order Modifying Debtors’ Chapter 12 Plan. This order

contains the holding that the court found the modifica-

tions requested were “not material.” This order basically

extended the terms of payment to the secured creditors so

that the Stewarts could continue to make payments on

their debts after the time period contemplated by the

Chapter 12 Plan was terminated. The modified plan indi-

cated that the amount of indebtedness secured by the

four tracts of land, at that time was approximately

$92,231.35. The modification listed several other loans,

not the subject of the case now under consideration.

The modification order also provided that the Stew-

arts could prepay any secured claim by paying the

A-23

unpaid balance of the note, principal and accrued interest

and shall “thereupon be entitled to and said creditor shall

forthwith issue a release of lien on said property and

otherwise extinguishing any debt secured or formerly

secured thereby.” This language is essentially the same as

the language of the initial plan submitted to the bank-

ruptcy court by the Plaintiffs.'

The defendants assert that this modification order

shows that the cross collateralization issue was litigated

and was specifically addressed and that therefore, “it is

obvious that res judicata should apply.”

Plaintiff, on the other hand, argues that the modifica-

tion order could not have set aside the cross-collateraliza-

tion provisions without affecting an impermissible

“material modification.” Plaintiff further argues that the

issue of cross-collateralization was not only not litigated,

it was not even mentioned in any of the bankruptcy

documents.

SUMMARY JUDGMENT

Summary judgment is appropriate when the movant

is able to demonstrate that the pleadings, affidavits and

other evidence available to the court establish that there

are no genuine issues of material fact, and that the mov-

ing party is entitled to summary judgment as a matter of

law. Fed. R. Civ. P. 56(c); see generally 10 & 10A Wright,

Miller & Kane, Federal Practice and Procedure | 2711-2742.

1 “Debtors’ Chapter 23 Plan” at page 3.

A-24

When determining whether to grant summary judg-

ment, the court is merely determining whether a factual

dispute exists, and may not resolve those disputes by

weighing the evidence or engaging in credibility deter-

minations. Anderson, 477 U.S. at 249-250. The evidence of

the non-movant is to be believed, and all inferences are to

be drawn in the non-movant’s favor. Eastman Kodak Co. v.

Image Technical Services, Inc., __ U.S. __, ___, 112 S. Ct.

2072, 2077 (1992). That it may appear to the court that the

non-movant is unlikely to prevail at trial or that the

movant’s statement of facts appears more plausible is not

a valid reason to grant summary judgment. Jones v. West-

ern Geophysical Co. of America, 669 F.2d 280, 283 (5th Cir.

1982); Schweitzer v. University of Texas Health Center, 688 F.

Supp. 278, 288 (E.D. Tex. 1988). Nonetheless, the sum-

mary judgment device is not “a disfavored procedural

short-cut, but rather an integral part of the Federal Rules

as a whole, which are designed ‘to serve the just, speedy

and inexpensive determination of every action.’ ” Celotex,

477 U.S. at 327.

DISCUSSION

After review of the documents submitted by the par-

ties that relate to the bankruptcy proceedings, the Court

is of the opinion that the issue of the cross-collateraliza-

tion clauses was not the subject of any of the bankruptcy

proceedings. The plan submitted by the Stewarts to the

bankruptcy court for its approval provided “In this par-

ticular Plan, all Deed of Trust lienholders will be allowed

to maintain their respective liens on the property

described on the Schedules in the Chapter 12 Plan, to the

full extent of the Plan Secured Values.”

A-25

The Court agrees with Plaintiff, that if the modifica-

tion order was intended to do away with the cross-

collaterization rights of the note holder, this would be an

impermissible material modification of the plan. If it was

the intention of Plaintiffs to eliminate the cross-collateral-

ization terms of the deeds of trust, this should have been

set out within the documents. The fact that it is not

mentioned must be construed against the Debtors who

were the drafters of the documents. In re Fawcett, 758 F.2d

588, 591 (11th Cir. 1985); In re Duplechain, 111 B.R. 576

(W.D. Louisiana 1990).

Accordingly, the Court finds that the modification

order entered April 19, 1993 is not res judicata as to the

cross-collaterization issue.

However, the evidence submitted by the parties is

contradictory as to the indebtedness actually owed by

Defendants on the four notes in question and any other

indebtedness which may be secured by the subject deeds

in trust. Therefore, the Court is not convinced that Plain-

tiff has met his burden of showing that he is entitled to a

judicial foreclosure as a matter of law. Accordingly,

IT IS ORDERED that the Plaintiff's Motion for Sum-

mary Judgment is granted to the extent that the Court

holds that the cross-collaterization issue is not subject to

res judicata under the bankruptcy court’s modification

order.

IT IS ORDERED that the Plaintiff’s Motion for Sum-

mary Judgment as to his entitlement to judicial fore-

closure is DENIED at this time.

A-26

IT Is FURTHER ORDERED that Defendants’ Motion

for Partial Summary Judgment is hereby DENIED.

SIGNED this 11th day of September, 1996.

/s/ John Hannah, Jr.

JOHN HANNAH, JR.

UNITED STATES DISTRICT COURT

September 17, 1996

Re: 9:96-cv-00169

Notice sent to:

James Haralson Pearson

Jeffrey W Wheelock

John Fredrick Berry