DeVoll v. Johnston ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 01-50865
__________________________
In the Matter of: MARION A. JOHNSTON; PHYLLIS D. JOHNSTON
Debtors.
NORRIS J. DEVOLL,
Appellant,
versus
MARION A. JOHNSTON; PHYLLIS D. JOHNSTON,
Appellees.
__________________________________________________
Appeal from the United States District Court
for the Western District of Texas,
(No. 00-CV-894)
________________________________________________
March 18, 2002
Before POLITZ, STEWART and CLEMENT, Circuit Judges.
PER CURIAM:*
Appellant Norris J. DeVoll claims a perfected judgment lien on
the Tarrant County property of appellees Marion and Phyllis
Johnston by virtue of an abstract of judgment filed pursuant to
Texas Property Code §§ 52.001-.007. The underlying judgment, which
*
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that this opinion should not be published and is not precedent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.
was rendered in Illinois but made enforceable in Texas pursuant to
the Uniform Enforcement of Foreign Judgments Act (UEFJA), Tex. Civ.
Prac. & Rem. Code §§ 35.001-.008, provides for post-judgment
interest of $9.75 per diem.1 The abstract recites the terms of the
judgment, including the $9.75 per diem rate, but also provides for
“interest at the rate of 10% per annum from January 26, 1990 until
paid.” Both the bankruptcy court and the district court found that
the abstract’s inclusion of an additional rate of interest not
specified in the judgment rendered the abstract noncompliant with
Texas Property Code § 52.003(a). Accordingly, the courts ruled the
abstract was ineffective to create a lien and thus that DeVoll was
merely an unsecured creditor. For the reasons that follow, we
affirm.
I. EFFECTIVENESS OF THE ABSTRACT
A. Standard of Review
We review the district court’s decision under the same
standard the district court applied in reviewing the bankruptcy
court’s decision: findings of fact are analyzed for clear error
and conclusions of law are considered de novo. McGee v. O’Connor
1
The bankruptcy court concluded that the $9.75 per diem is
a post-judgment interest rate, and the district court affirmed.
Because the Johnstons have not questioned this ruling, we assume
that the district court’s ruling is correct for purposes of this
appeal. Accordingly, given that the issue whether the judgment
provides for post-judgment interest is not before us, DeVoll’s
argument that the district court materially misstated the
language of the abstract with respect to the $9.75 per diem post-
judgment interest rate is completely irrelevant for purposes of
this appeal.
2
(In re O’Connor), 153 F.3d 258, 260 (5th Cir. 1998).
B. Substantial Compliance?
Texas law provides that a properly recorded and indexed
abstract of a non-dormant judgment establishes a lien on the
judgment debtor’s real property in the county where the abstract is
recorded and indexed. Tex. Prop. Code. § 52.001. According to
Texas Property Code § 52.003(a), a valid abstract of judgment must
“show” a number of things, including “the rate of interest
specified in the judgment.” Tex. Prop. Code § 52.003(a). The
judgment creditor bears the responsibility of insuring that the
clerk of court abstracts the judgment properly. Citicorp Real
Estate, Inc. v. Banque Arabe Internationale D’Investissement, 747
S.W.2d 926, 929 (Tex. App. 1988); Texas Am. Bank/Fort Worth, N.A.
v. Southern Union Exploration Co., 714 S.W.2d 105, 107 (Tex. App.
1986).
It is well-established that there must be substantial
compliance with the statutory requirements of § 52.003(a) for a
judgment lien to attach. Citicorp, 747 S.W.2d at 929. The
substantial compliance standard excuses minor deficiencies in an
element of an abstract. See id. at 930; e.g., Houston Inv. Bankers
Corp. v. First City Bank, 640 S.W.2d 660, 662 (Tex. App. 1982)
(abbreviating the name of the creditor from “First City Bank of
Highland Village” to “First City Bank HV” does not render an
abstract noncompliant). But it will not excuse the complete
omission of an element or the inclusion of an additional term.
3
Texas courts have routinely found substantial compliance lacking
where an abstract completely omits one or more mandatory statutory
elements. See, e.g., Citicorp, 747 S.W.2d at 930 (abstract omitted
the debtor’s address and citation information); Reynolds v.
Kessler, 669 S.W.2d 801, 804-05 (Tex. App. 1984) (abstract failed
to state the date of the judgment as well as the rate of interest
specified in the judgment). Moreover, of significance to this
case, they have refused to find substantial compliance where a term
that is not part of the underlying judgment is included in the
abstract. In Midland County v. Tolivar’s Estate, 155 S.W.2d 921,
922 (Tex. Comm’n App. 1941), the court concluded that it was
“obvious” that an abstract that recited that the judgment bore
interest at 10% per annum where the judgment did not provide for
interest was not substantially compliant with the precursor to §
52.003(a) and thus did not create a judgment lien.
We find that the rule of Tolivar’s Estate is controlling and
disposes of the question whether the abstract in this case is
substantially compliant with § 52.003(a). Like the abstract in
that case, the abstract here contains a rate of interest not
specified in the underlying judgment. Accordingly, we conclude
that the abstract here fails to comply with § 52.003(a) and thus is
ineffective to create a lien on the Johnstons’ Tarrant County
property. In light of the clear rule of Tolivar’s Estate, we are
not persuaded by DeVoll’s effort to characterize the discrepancy
between 10% per annum and $9.75 per diem as de minimus.
4
DeVoll’s attempt to explain the inclusion of the 10% post-
judgment interest rate in the abstract as proper pursuant to Texas
Finance Code § 304.003 is likewise unavailing.2 As an initial
matter, we observe that there is no record evidence that indicates
that § 304.003, rather than its counterpart, § 304.002, applies in
the present case; the record is completely devoid of evidence
regarding whether a contract gave rise to the judgment and, if so,
whether it specified an interest rate.3 Further, we question
whether either section applies to this judgment. Although Texas
courts have not yet addressed whether a foreign judgment made
enforceable in Texas pursuant to the UEFJA bears post-judgment
interest at the rate established in the judgment-rendering state
(here, Illinois), or whether it takes on the prevailing rate in the
judgment-enforcing state (here, Texas),4 it is clear that under
2
DeVoll suggests that the 10% interest rate automatically
became part of the judgment by virtue of Texas Finance Code §
304.003, which provides for a 10% rate in some circumstances,
once it became enforceable in Texas. The Johnstons counter that
§ 304.003, which specifies the interest rate applicable to
judgments for which there is no underlying contract that
specifies an interest rate, is not applicable in this case,
asserting instead that the interest rate is governed by §
304.002, which prescribes the interest rate for a judgment based
on a contract that provides for interest.
3
However, we note that DeVoll argued to the bankruptcy
court that the $9.75 per diem rate is a contract rate. Although
DeVoll did not offer any evidence in support of this argument,
such an argument obviously runs counter to his contention that §
304.003 applies here.
4
We observe that the majority of states that have
addressed the issue hold that judgment interest is determined
according to the law of the jurisdiction that awarded the
5
Texas law judgment interest rates are a matter of substantive law
controlled by the law of the state where the cause of action arose.
Bott v. American Hydrocarbon Corp., 458 F.2d 229, 231 (5th Cir.
1972); Bergstrom Air Force Base Fed. Credit Union v. Mellon
Mortgage, Inc.-East, 674 S.W.2d 845, 851 (Tex. App. 1984); cf. Mike
Smith Pontiac GMC, Inc. v. Mercedes-Benz of N. Am., 741 A.2d 462,
466-67 (Md. 1999). It is therefore doubtful that the interest
rates specified in the Texas Finance Code apply here.
II. DEVOLL’S NEW ARGUMENT
In his reply brief, DeVoll contends, for the first time on
appeal, that the bankruptcy court erred in calculating the amount
of his claim by not including extra days for leap years and quarter
days when computing the amount of post-judgment interest due. As
DeVoll raised this issue for the first time in his reply brief, the
Johnstons have not responded to this argument.
We generally do not consider arguments raised for the first
time on appeal in a reply brief. Cavallini v. State Farm Mut. Auto
Ins. Co., 44 F.3d 256, 260 n.9 (5th Cir. 1995); Insilco Corp. v.
United States (In re Insilco Corp.), 53 F.3d 95, 99-100 (5th Cir.
judgment. See, e.g., Mich. Comp. Laws § 691.1176; Hosp. Serv.
Plan v. Warehouse Prod. & Sales Employees Union, 429 N.Y.S.2d 31,
32 (N.Y. App. Div. 1980); Dooley v. Rubin, 618 A.2d 1014, 1017-18
(Pa. Super. Ct. 1993). But see, e.g., Mike Smith Pontiac GMC,
Inc. v. Mercedes-Benz of N. Am., 741 A.2d 462, 469-70 & n.8 (Md.
1999) (holding that the rate of post-judgment interest on a
foreign judgment enforced in Maryland is determined by the law of
the forum, rather than by that of the judgment-rendering state,
but recognizing that this position espouses the minority view).
6
1995). At most, our review would be under a plain error standard,
which requires that the error be “clear” or “obvious” and that it
affect substantial rights as well as the fairness, integrity, or
public reputation of judicial proceedings. Dufrene v. Browning-
Ferris, Inc., 207 F.3d 264, 268 (5th Cir. 2000). DeVoll’s
contentions do not satisfy this narrow standard of review; even
assuming an error, there has been no showing that the alleged
calculation error affects substantial rights or that it impugns the
integrity of judicial proceedings. Accordingly, we do not consider
DeVoll’s new argument.
III. CONCLUSION
For the foregoing reasons, the order of the district court is
AFFIRMED.
7