Polo Club Office v. Vickers ( 1996 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 95-40175
No. 95-40514
_______________
POLO CLUB OFFICE PARK,
Plaintiff-Counter Defendant-Appellee,
VERSUS
HARRISON VICKERS,
Defendant-Third Party Plaintiff-
Counter-Claimant-Appellee-Appellant,
VERSUS
JIM ARNOLD CORPORATION, JIM ARNOLD, and EARL E. ENNIS,
Third Party Defendants-Appellants.
_________________________
Appeal from the United States District Court
for the Eastern District of Texas
_________________________
September 4, 1996
Before KING, SMITH, and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
In this consolidated appeal, Harrison Vickers challenges the
judgment that Polo Club Office Park (“Polo Club”) recover from him
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
the principal balance due on a note. Third-party defendants Jim
Arnold Corporation (“JACOR”), Jim Arnold, and Earl Ennis (collec-
tively “third-party defendants”) appeal summary judgment in favor
of Vickers on the issue of indemnity. We affirm in both appeals.
I.
In 1984, Vickers borrowed $125,000 on behalf of JACOR from the
Century National Bank (“CNB”). He executed a note evidencing
JACOR’s indebtedness (the “1984 Note”) and signed a personal
guarantee. According to the third-party defendants, Vickers
pledged, as collateral, 10,000 shares of JACOR stock that he had
fraudulently created.
On April 26, 1986, Vickers resigned as president of JACOR and
notified CNB of his resignation. In 1988, he once again became
involved with JACOR, this time at the behest of Mary Nell Arnold,
Arnold’s daughter. CNB was threatening legal action, and Arnold
refused to speak with them. At the time, the only viable asset
owned by JACOR was a cause of action against the Al Monsoori Group.
In 1988, CNB and Vickers reconfigured the 1984 Note into a
real estate lien note (the “Note”) in Vickers’s name. The Note
references the “New York Prime” rate but not a particular bank or
index. Vickers also executed a loan agreement (the “Loan Agree-
ment”) with CNB on the same day.
In October 1988, Arnold sold JACOR to Ennis. Subsequently,
Vickers asserted claims to JACOR’s assets. The parties settled
2
their dispute by entering into a mutual release, which was modified
and superseded by a June 15, 1989, mutual release (the “Release
Agreement”). It provided that the third-party defendants would
indemnify Vickers for the CNB debt and that Vickers would release
the third-party defendants from any claims related to the ownership
or operation of JACOR.
On March 29, 1991, JACOR brought suit against Vickers in state
court (“State Suit No. 1"), claiming that Vickers had created
fraudulent stock certificates, committed bank fraud, and tortiously
interfered with JACOR’s business relationship with Guanaco Oil.
Vickers sought leave to join Arnold and Ennis as necessary parties
and file counterclaims against the third-party defendants, alleging
that they breached the Release Agreement.
In the interim, CNB failed and was taken over by the FDIC. On
February 10, 1992, Polo Club purchased the Note as one of a package
of loans it acquired from the FDIC. Polo Club brought suit against
Vickers on the Note in state court (“State Suit No. 2"). Vickers
filed a third-party claim against JACOR, alleging that the Note was
to be paid from the Al Monsoori proceeds. JACOR filed a counter-
claim against Vickers.
In late 1992, JACOR won a verdict of approximately $4 million
in the Al Monsoori lawsuit, and Ennis made arrangements to settle
the judgment. Polo Club received written notification on
September 22, 1992, that it should take action to collect the Note
from the proceeds of the suit. Polo Club took no action, and the
3
third-party defendants disbursed the funds without paying Polo
Club.
In January 1993, after a six-week trial in State Suit No. 1,
the court entered a directed verdict on approximately fifty claims
made by JACOR. The jury found zero liability and zero damages on
claims against Vickers. The jury also found that Vickers never
owned any stock or equity interest in JACOR and that Vickers did
not perform under the Release Agreement.
On September 1, 1993, Polo Club non-suited Vickers in State
Court Suit No. 2. Three weeks later, it filed the instant action
in federal court. Vickers impleaded the third-party defendants,
claiming that they owed him indemnity pursuant to the Release
Agreement. The district court granted summary judgment for Vickers
against the third-party defendants. Polo Club’s claims against
Vickers were tried to the court, which entered judgment for Polo
Club. Vickers and the third-party defendants appealed.1
II.
We begin with three threshold inquiries. The first is whether
the district court erred in finding complete diversity among the
parties. The second is whether we have jurisdiction in No. 95-
40175, which was filed after the entry of summary judgment. The
third is whether we have jurisdiction in No. 95-40514, which was
1
The third-party defendants filed an appeal after the entry of summary
judgment and again after the conclusion of the bench trial.
4
filed after the bench trial.
A.
Our review of the record satisfies us that the district court
did not err in determining that there was complete diversity.
Vickers relies on Ryan’s testimony that he was a “partner with Polo
Club in one or two situations.” That testimony simply demonstrates
that Ryan at times was a partner with Polo Club. Such a proposi-
tion is altogether different from the notion that Ryan is a partner
in Polo Club.
Nothing else in the record supports a finding that Ryan was a
partner therein. Moreover, nothing supports a conclusion that Ryan
had a right to control or manage Polo Club. See FDIC v. Claycomb,
945 F.2d 853, 858 (5th Cir. 1991), cert. denied, 112 S. Ct. 2301(1992) (finding that one characteristic of a partnership is a
mutual right of control or management of the enterprise).
B.
We have jurisdiction in No. 95-40175. Any prematurity was
cured by operation of Fed. R. App. P. 4(a)(2), whereby a notice of
appeal filed after the court announces a decision (here, the order
granting summary judgment) but before entry of judgment is treated
as filed as of the eventual entry of judgment. When the district
court ultimately entered final judgment (which embodied the results
5
of the bench trial and the summary judgment), the entry of judgment
validated the notice of appeal.
C.
We reject the third-party defendants’ argument that the appeal
in No. 95-40514 is premature. A partial entry of judgment under
rule 54(b) was not necessary after the bench trial, because Guy E.
Matthews, Matthews and Associates, Louis Dugas, Jr., William L.
Romans II, John Cuttright, Century National Bank (“CNB”), and the
FDIC were never properly joined as parties.
The third-party defendants, without leave of court, filed a
cross-claim against these parties. Cross-claims may be filed only
against parties to the suit, however. FED. R. CIV. P. 13(h). The
rule allows joinder of new parties, but only in accordance with the
provisions of FED. R. CIV. P. 19 or 20. The third-party defendants
failed to demonstrate before the district court, or on appeal, that
the additional parties met the requirements of rule 19 or 20.
Because the additional parties were never properly joined, the
court was not required to make the determination required by
rule 54(b).
III.
Vickers asserts that Polo Club should have been denied
recovery, based on his personal defenses to the Note or the
doctrine of laches. In the alternative, he argues that the amount
6
of the note should be reduced according to the terms of the Loan
Agreement.
A.
We reject Vickers’s personal defenses.2 The district court
did not err in finding that Polo Club owned the Note. There is
ample evidence in the record to support the finding.
The Loan Agreement also fails to provide Vickers with a
defense. Even assuming that the Note and the Loan Agreement must
be read together, Vickers misreads the two documents. The Loan
Agreement does not provide that CNB (and thus its successor Polo
Club) may satisfy the loan only through the proceeds of the Al
Monsoori lawsuit. Rather, it requires Vickers to use those
proceeds to pay the loan before using the proceeds for any other
purpose.3 The Loan Agreement obligates Vickers, not the note
holder.
2
The federal holder-in-due-course doctrine does not apply to non-
negotiable promissory notes. Resolution Trust Corp. v. Montross, 944 F.2d 227,
228-29 (5th Cir. 1991) (en banc), reinstating in part Sunbelt Sav. v. Montross,
923 F.2d 353 (5th Cir. 1991). The Note does not contain a promise to pay a “sum
certain,” as it does not reference a readily ascertainable interest rate.
3
The relevant provision of the Loan Agreement states:
Debtor [Vickers] further agrees that, in the event the Jim Arnold
Corporation recovers judgment and collects money thereon from a lawsuit
now pending in The United States District court [sic] for the Southern
District of Texas, Numbered H85-4884 . . . that such money collected shall
be paid to Century National Bank and shall be applied to the principal of
the new note without changing the terms of payment as set out in the new
note.
7
B.
Vickers’s laches defense is also without merit, as he has
failed to establish the essential elements. He points to nothing
in the record to demonstrate that Polo Club’s delay was unreason-
able. See In re Casco Chem. Co., 335 F.2d 645, 651 (5th Cir.
1964); City of Fort Worth v. Johnson, 388 S.W.2d 400, 403 (Tex.
1964). Given that Polo Club asserted its rights within the
relevant limitations period, Vickers must allege extraordinary
circumstances that render it inequitable to enforce Polo Club’s
rights. See Barfield v. Howard M. Smith Co., 426 S.W.2d 834, 840
(Tex. 1968). Moreover, Vickers has failed to prove that he has
changed his position, to his detriment, because of the delay. See
Johnson, 388 S.W.2d at 403. Absent such proof, the finding that
Vickers was prejudiced is insufficient to support laches.
C.
We also reject Vickers’s counterclaim against Polo Club. Our
review of the record demonstrates that any finding other than one
that treats the settlement with the Al Monsoori group as a “win”
would be clearly erroneous. We therefore decline to remand this
issue for further fact findings.
IV.
We now turn to the third-party defendants’ claim that the
8
district court erred in granting summary judgment for Vickers on
the issue of indemnification. The third-party defendants argue
first that the court erred in denying their motion to dismiss. In
that motion, they asserted that Vickers’s claims were barred by res
judicata and the doctrine of abstention. In the alternative, they
argue that summary judgment was improper because there were genuine
issues of material fact regarding res judicata, abstention, fraud,
and breach of the indemnity agreement. Because of the overlap
between the issues raised in the motion to dismiss and the
opposition to summary judgment, we discuss each substantive claim
independently.
A.
The third-party defendants failed to prove that the district
court abused its discretion by refusing to abstain. The third-
party defendants have failed to articulate a single reason why the
district court abused its discretion in refusing to abstain.
Except in the exceptional case, federal and state court proceedings
on the same claim are tolerated. Carpenter v. Wichita Falls Indep.
Sch. Dist., 44 F.2d 362, 371 (5th Cir. 1995). This case is far
short of “exceptional.” See Colorado River Water Conservation
Dist. v. United States, 424 U.S. 800, 814 (1976) (stating that
abstention is proper (1) “in cases presenting a federal constitu-
tional issue which might be mooted or presented in a different
9
posture by a state court determination of pertinent state law” and
(2) “where there have been presented difficult questions of state
law bearing on policy problems of substantial public import whose
importance transcends the result in the case at bar”).
B.
The district court did not err in rejecting the defense of res
judicata.4 The third-party defendants failed to present a genuine
issue of material fact on identity of the parties.5 The extent of
the evidence that Ennis and Arnold were parties to State Suit No. 1
was Vickers’s motion for leave to add Arnold and Ennis to the
lawsuit.
There is no evidence that the state court granted Vickers
4
Throughout their brief, the third-party defendants refer to this argument
as “res judicata or collateral estoppel.” The only case citations are to cases
that refer to res judicata. In addition, the third-party defendants fail to make
any cogent argument concerning collateral estoppel. Accordingly, the third-party
defendants have waived any collateral estoppel argument. See FED. R. APP. P.
28(a)(6) (requiring that appellant's brief "contain the contentions of the
appellant on the issues presented, and the reasons therefor, with citations to
the authorities, statutes, and parts of the record relied on"); Cavallini v.
State Farm Mut. Auto Ins. Co., 44 F.3d 256, 260 n.9 (5th Cir. 1995) (holding that
"failure to provide any legal or factual analysis of an issue results in
waiver"); United States v. Maldonado, 42 F.3d 906, 910 n.7 (5th Cir. 1995)
(reasoning that failure to do more than vaguely refer to issue constitutes
waiver); Zuccarello v. Exxon Corp., 756 F.2d 402, 407 (5th Cir. 1985) (noting
that court will not consider issue that was not briefed under standards of
rule 28).
5
In Texas, res judicata “prevents the relitigation of a claim or cause of
action that has been finally adjudicated, as well as related matters that, with
the use of due diligence, should have been litigated in the prior suit.” Jones
v. Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1338 (5th Cir. 1996). To invoke
the doctrine, the proponent must prove: (1) there was identity of parties or
privity between them, (2) the judgment was rendered by a court of competent
jurisdiction, (3) there was a final judgment on the merits, and (4) the prior
claim involved the same claim or cause of action. Id.10
leave to add them as necessary parties. There is no way to infer
from a request to amend that the court granted such a request. It
was incumbent on the third-party defendants to produce competent
summary judgment evidence on this point, and they failed to do so.
Without such evidence, the third-party defendants did not raise a
genuine issue of material fact.
C.
The district court did not err in finding that the third-party
defendants were bound by the indemnity agreement. The “interpreta-
tion of an unambiguous contract is [a] legal question . . . and a
court may decide the issue on a motion for summary judgment.”
Hanssen v. Quantas Airways Ltd., 904 F.2d 267, 269 n.3 (5th Cir.
1990). The third-party defendants do not argue that the release
agreement is ambiguous.
The district court concluded that “the terms of the indemnity
agreement are not contingent on mutual performance." The language
in the Release Agreement “only makes Vickers’ release contingent on
performance. It does not make the indemnity for corporate debt
contingent.” Nothing persuades us that the district court erred in
this regard.
D.
The third-party defendants’ fraud claim is also without merit.
11
The court granted summary judgment for Vickers on the Release
Agreement. In their response to summary judgment and on appeal,
the third-party defendants assert that there is evidence that
Vickers fraudulently obtained the Note in 1988. Assuming that to
be true, Vickers’s fraudulent conduct toward CNB is irrelevant to
the validity of the Release Agreement negotiated by Vickers and the
third-party defendants. Moreover, the appellants have never tried
to explain how it would be relevant.6
For the foregoing reasons, we AFFIRM.
6
See supra note 4.
12