Dean v. FDIC ( 2000 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-30674
_____________________
BARBARA CROWTHERS DEAN,
Plaintiff-Appellant,
v.
GENERAL FINANCIAL SERVICES, INC. and/or; FEDERAL
DEPOSIT INSURANCE CORPORATION, Successor of the
Federal Savings and Loan Insurance Corporation,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
Docket No. 97-CV-3708-B
_________________________________________________________________
January 5, 2000
Before KING, Chief Judge, and WIENER and BARKSDALE, Circuit
Judges.
PER CURIAM:*
Plaintiff-Appellant Barbara Crowthers Dean (“Dean”) appeals
from the district court’s entry of summary judgment in favor of
Defendants-Appellees (“Appellees”) General Financial Services
(“GFS”) and the Federal Deposit Insurance Corporation (“FDIC”) as
the successor of the Federal Savings and Loan Insurance
Corporation (“FSLIC”).
I. FACTUAL AND PROCEDURAL BACKGROUND
*
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this opinion should not be published and is not precedent except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.
The facts giving rise to this case stretch back to 1983.
That year, Dean signed a note and mortgage with Colonial Mortgage
and Loan Corporation (“Colonial”). Colonial subsequently
assigned the note and mortgage to New Orleans Federal Savings and
Loan Corporation (“NOF”). NOF went into receivership in June
1986 with the FSLIC as receiver. Dean, apparently, failed to
make the installment payments on the loan and the FSLIC filed
suit for non-payment in Louisiana state court on November 6,
1987. Dean claims she was never served with notice of the suit,
despite the fact that return of service was filed with the court.
A preliminary default judgment was entered by the court on
December 16, 1987 and that judgment was confirmed by the court on
January 15, 1988. Despite her previous non-payment, Dean made
payments to the FSLIC between 1988 and May 1990. The FDIC
subsequently succeeded the interests of the FSLIC, and on June 5,
1995 assigned the judgment to GFS. GFS immediately set about
trying to collect the judgment. GFS sent a letter to Dean on
June 15, 1995, informing her that they had purchased her note
from the FDIC.
After a series of communications with Dean’s attorney, GFS
apparently decided that the dispute could not be solved amicably
and began foreclosure proceedings. Dean then filed this suit in
Louisiana state court to annul the 1988 judgment, alleging that
she had never been served with notice of the original suit and
that the judgment had been obtained through fraud or ill
practice. The case was subsequently removed to federal court.
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Dean amended her complaint in July 1998 seeking a declaratory
judgment that any attempts to collect on the 1988 judgment would
be barred because the prescriptive period in which to enforce the
judgment had run in January 1998.
While Dean’s action was pending in federal court, GFS filed
suit in Louisiana state court to revive the 1988 judgement. The
state trial court ruled that GFS could not revive the judgment
because the ten-year prescriptive period on the collection of
judgments had run. GFS subsequently appealed this decision to
the Louisiana Fourth Circuit Court of Appeal.
In a series of rulings, at issue here, the district court
granted summary judgment to Appellees on all of Dean’s claims.
First, the district court granted summary judgment to the
Appellees with respect to Dean’s action to annul the 1988
judgment. The court found that Dean had failed to present any
evidence showing that she was not properly served with notice of
the original suit. The court also held that the evidence
indicated that Dean was aware of the judgment, at the latest, by
July 31, 1995. Under Louisiana law, a party who believes that a
default judgment has been entered against her by fraud or ill
practice has one year to file suit from when she knew of, or
should have know of, the fraud or ill practice. Because Dean
discovered the existence of the judgment in July 1995 but did not
file her suit until November 19, 1996, the court ruled that her
claim had prescribed.
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In a separate decision the court granted summary judgment to
GFS on Dean’s declaratory judgment action. Dean argued that she
never acknowledged the judgment or renounced prescription and,
therefore, the prescriptive period had run and GFS could not
maintain any collection action. GFS argued, however, that
because Dean had made payments to the FSLIC between 1988 and May
1990, she had acknowledged the judgment and therefore the
prescriptive period ran anew from the date of her last payment to
the FSLIC. The district court determined that Dean had renounced
prescription by continuing to make payments to the FSLIC after
the 1988 judgment and granted summary judgment to GFS.
Because we agree with the district court’s result in regards
to Dean’s attempt to annul the 1988 judgment, we AFFIRM the
district court’s entry of summary judgment in favor of the FDIC
and GFS on that issue. However, with respect to the issue of
prescription, we are Erie bound by the intervening decision of
the Louisiana Court of Appeals, which ruled (subsequent to the
district court’s decision) that the 1988 judgment had prescribed.
Therefore, we REVERSE the district court’s judgment dismissing
Dean’s declaratory judgment action.
II. DISCUSSION
Dean advances two issues on appeal. Dean argues that the
district court improperly granted the Appellees summary judgment
on her attempt to annul the 1988 judgment and she also contends
that the district court improperly granted GFS summary judgment
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on her declaratory judgment action. We discuss each of these
issues in turn.
We review the district court’s grant of summary judgment de
novo, applying the same standards as the court below. See
Matagorda County v. Law, 19 F.3d 215, 217 (5th Cir. 1994).
Summary judgment is proper when there is no genuine issue of
material fact and the moving party is entitled to judgment as a
matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317 (1986). A dispute regarding a material fact is
“genuine” if the evidence is such that a reasonable jury could
find in favor of the nonmoving party. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
1. Annulment of the 1988 Judgment
Dean argues that the 1988 judgment should be annulled for
two reasons. First, she claims that she was never properly
served with notice of the underlying lawsuit. Second, Dean
claims that the judgment was obtained through fraud or ill
practices.
a. Annulment for Failure to Properly Serve Notice
Dean argues that because she was not properly served with
original notice of the suit that culminated in the 1988 default
judgment, the judgment should be annulled. The FDIC produced a
return of service form that indicated that Dean had been
personally served on November 21, 1987. The form was signed
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“David Gathers per Saulny.” The FDIC also submitted an affidavit
from Deputy Gathers in which he attested to personally serving
Dean on November 21, 1987.
We begin by noting that a sheriff’s return of service is
entitled great weight and is presumed to be correct. See La.
Code Civ. Proc. Ann. art. 1292 (West 1984). Return of service is
prima facie evidence that service was effectuated. See Blue,
Williams & Buckley v. Brian Investments, Ltd., 706 So.2d 999,
1003 (La. Ct. App. 1997). If a return of service form is
produced, the party attacking service must prove by “clear and
convincing” evidence that they were not served with process. Id.
at 1004. Dean’s assertion that she was not actually served,
standing alone, fails to sufficiently rebut the presumption of
service. See Roper v. Dailey, 393 So.2d 85, 88 (La. 1980). Even
though Deputy Gathers did not personally sign the return of
service, his affidavit is viewed as an allowable amendment to the
return. See Petruit v. Leblanc, 216 So.2d 863 (La. Ct. App.
1968).
Dean has failed to overcome the presumption of service
established by the return of service form and Deputy Gather’s
affidavit. Dean offers only her own uncorroborated assertion
that she was not served and the affidavit of her son stating that
Dean never mentioned to him that she was being sued. Dean offers
no reasons why she could not have been served as the return of
service indicated. Moreover, her son’s affidavit that she never
mentioned the suit to him has no bearing on whether Dean was
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actually served. Dean has wholly failed to offer any evidence
creating a genuine issue of fact as to whether she was served.
b. Annulment for Fraud or Ill Practice
A final judgment may be annulled if it was obtained through
fraud or ill practice. See La. Code Civ. Proc. Ann. art. 2004
(West 1990). A suit to annul a judgment obtained by fraud or ill
practice must be brought within one year from when the fraud or
ill practice is, or should have been, discovered. See id.;
Gennuso v. State, 339 So.2d 335 (La. 1976); Kambitsis v.
Schwegmann Giant Supermarkets, 665 So.2d 500, 502 (La. Ct. App.
1995).
Dean claims that she did not receive a copy of the judgment
until December 1995. While this may be true, we agree with the
district court that, before she actually received a copy of the
judgment, Dean should have been on notice that it had been
entered. Once Dean had sufficient information to incite
curiosity, excite attention, or put a reasonably minded person on
guard, she had, or should have had, the “constructive knowledge
necessary to start the running of prescription.” LeCompte v.
Stat-Dep’t of Health and Human Resources- S. Louisiana Med. Ctr.,
723 So.2d 474, 476 (La. Ct. App. 1998).
On July 31, 1995, Dean’s attorney wrote to GFS inquiring as
to the details of the 1988 judgment. We agree with the district
court that this letter indicates that Dean had knowledge of the
1988 judgment by July 31, 1995, at the very latest. Knowledge of
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the judgment should have been sufficient to put Dean on notice
that the judgment may have been obtained through fraud or ill
practice. This indicates sufficient knowledge to begin the
running of the prescriptive period. Because Dean did not file
this action until over a year after having discovered the
existence of the judgment, her claim is prescribed and the
district court correctly granted summary judgment to FDIC and
GFS.
2. Dean’s Declaratory Judgment Action
In her amended complaint Dean argued that the court should
enter a declaratory judgment holding that the prescriptive period
for enforcement of the 1988 judgment had run. The district
court, however, determined that because Dean had continued to
make payments to the FSLIC between 1988 and May 1990, she had
renounced prescription.
There is a ten-year prescriptive period for the collection
of money judgments. See La. Civ. Code Ann. art. 3501 (West
1994). Dean argues that any effort by GFS to collect the 1988
judgment is prescribed because it did not file suit by January
11, 1998--ten-years after the entry of the default judgment. GFS
contends that because Dean continued to make payments to the
FSLIC between 1988 and May 1990, she acknowledged the judgment
and therefore the prescriptive period runs anew from her last
payment. Dean counters that the payments to the FSLIC were not
8
an acknowledgment of the judgment but were merely payments on the
underlying mortgage.
GFS points to Lima v. Schmidt, 595 So.2d 624 (La. 1992), and
La. Civ. Code Ann. art. 3464 (West 1994), to support its
proposition that the 1988 judgment has not prescribed.
Prescriptive statutes are “strictly construed against
prescription and in favor of the obligation sought to be
extinguished.” Lima, 595 So.2d at 629; see also Sotomayor v.
Lewis, 673 So.2d 1201, 1205 (La. Ct. App. 1996) (noting that
“prescription should be strictly construed against the
extinguishment of a claim.”). However, when a petition, on its
face, shows that the prescriptive period has run, “the burden is
on the [creditor] to show why the claim has not prescribed.”
Lima, 595 So.2d at 628 (citations omitted). The Louisiana Civil
Code provides that prescription is interrupted when one
acknowledges “the right of the person against whom he had
commenced to prescribe.” La. Civ. Code Ann. art. 3464 (West
1994). “If prescription is interrupted, the time that has run is
not counted. Prescription commences to run anew from the last
day of interruption.” La. Civ. Code Ann. art. 3466 (West 1994).
The Louisiana Supreme Court has held that a “clear and
direct” acknowledgment is not necessary to halt prescription but
that a “simple acknowledgment...requiring no particular form” is
sufficient. Lima, 595 So.2d at 632. A party may acknowledge the
rights of another without any particular formality. See Flowers
v. United States Fidelity & Guaranty Co., 381 So.2d 378, 380 (La.
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1979). Acknowledgment of a right may be “oral or written, formal
or informal, express or tacit.” La. Civ. Code Ann. art 3464,
comment (e) (West 1994); see also Lima, 595 So.2d. at 634;
Chapital v. Guaranty Savings & Homestead Ass’n., 681 So.2d 1307,
1310 (La. Ct. App. 1996). Tacit acknowledgment “occurs when a
debtor performs acts of reparation or indemnity, makes an
unconditional offer or payment, or lulls the creditor into
believing he will not contest liability.” Lima, 595 So.2d at
634. Tacit acknowledgment “may be inferred from specific facts
and circumstances.” Id. at 632; see also Settoon Marine, Inc. v.
Great Lakes Dredge & Dock Co., 657 So.2d 537, 539 (La. Ct. App.
1995).
We find GFS’s argument, that the prescriptive period on the
1988 judgment has not run because Dean tacitly acknowledged the
judgment, to be persuasive. Nonetheless, we are Erie bound by
the recent decision of the Louisiana Fourth Circuit Court of
Appeal affirming the state trial court’s decision that the
prescriptive period on the 1988 judgment had run. See General
Financial Services, Inc. v. Dean, No. 99-CA-1798 (La.Ct.App.
1999). The Louisiana appellate court, citing Cassiere v. Cuban
Coffee Mills, 74 So.2d 193 (La. 1954), ruled that acknowledgment
of a judgment does not halt the running of prescription and that
a revival of judgment action, brought within the prescriptive
period, is “the exclusive method by which the running of
prescription on a money judgment may be prevented.” The court
found that GFS had not filed a revival action within ten years of
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the original judgment and therefore the 1988 judgment had
prescribed. As a court bound by the principles of Erie R.R. Co.
v. Tompkins, 304 U.S. 64 (1938), and its progeny, we must accept
the decision of the Louisiana appellate court.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the
district court in favor of the FDIC and GFS dismissing Dean’s
action to have the 1988 judgment declared a nullity but REVERSE
the court’s judgment dismissing Dean’s declaratory judgment
action. Each party shall bear its own costs.
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