Engstrom v. First National Bank of Eagle Lake

United States Court of Appeals,
Fifth Circuit.
No. 93-2719.
John T. ENGSTROM, and Lyndia Engstrom, Individually and as next
friends for Andrea Engstrom, John T. Engstrom, Melissa Engstrom and
Cynthia Engstrom, Etc., et al., Plaintiffs-Appellants, Cross-
Appellees,
v.
The FIRST NATIONAL BANK OF EAGLE LAKE, Defendant-Appellee, Cross-
Appellant.
March 29, 1995.
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
judgments 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
*
District Judge of the Eastern District of Louisiana,
sitting by designation.
1
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, First National's vice president, and obtained First
National's consent to sell the equipment at private sales and to
apply 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. (collectively "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
2
forbid the sale of the property during a military personnel's
service period without a court order. He also filed pendent 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 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 reviews a district court's grant of summary
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.
3
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 Machinists & Aerospace
Workers, Lodge No. 2504 v. Intercontinental Mfg. Co., 812 F.2d 219,
222 (5th Cir.1987). There must be evidence giving rise to
reasonable inferences that support the non-moving party's position.
St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir.1987).
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 of civil liabilities 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. 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, 113 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 equitable
consideration of the rights of parties to the end that their
respective interests may be properly conserved. New York Life Ins.
4
Co. v. Litke, 181 Misc. 32, 45 N.Y.S.2d 576, 582 (1943)
Amongst the Relief Act's many provisions is a prohibition
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 obligation, or for
any other breach of the terms thereof ... shall be valid if
made during the period of military service or within three
months thereafter.... [emphasis ours].
This provision applies to obligations incurred before or during
military service. 50 U.S.C.App. § 532(2). A serviceman 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 member 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 equipment.
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
5
his deposition, John Engstrom testified that before he left he
arranged with Clipson and Wegenhoft to sell some of his equipment
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 person 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 weekend. Clipson also stated that he obtained the
permission of the bank to sell the property. In his deposition,
Wegenhoft testified that he had not directed the equipment 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 Clipson, 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 equipment 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
6
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 auction].
A No, John [Engstrom] asked me to do it.
First National also thought that Engstrom had given Clipson
permission to sell the equipment at auction:
Q So, the bank didn't sell it at the auction sale.
A No.
Q Who did?
A John Engstrom instructed Jim Clipson to deliver it to the sale.
Well, that's my understanding; 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 reasons. 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
7
National's acquiescence to Clipson's sale of the equipment or that
First National's organization of the auction where the equipment
was sold makes it liable under the Relief Act.1
In his brief, Engstrom strenuously argues that Clipson 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
judgement purposes, 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 amendments 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
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]"
a sale to be made. This section of the Relief Act is a criminal
statute and is not apropos to this discussion.
8
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 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
reviews a district court's denial of leave to amend a complaint for
abuse of discretion. 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 considered these claims under the factors
enunciated in Foman and allowed the amendments. After thoroughly
examining the record and the applicable law, we find no abuse of
9
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 state court.2 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 jurisdiction 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 Petroleum 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 routinely resolved, the district court did
not abuse its discretion 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 (5th Cir.1994).
10
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.
11