C & H Nationwide Inc v. Norwest Bank Texas ( 2000 )

REVISED APRIL 21, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-10121
_____________________
C & H NATIONWIDE, INC
Plaintiff - Appellant
v.
NORWEST BANK TEXAS NA, Garnishee; ET AL
Defendants
WESLEY KENNEMER; CURLEY JOE TRUCKING
Appellees
_____________________
No. 99-10381
_____________________
C & H NATIONWIDE INC
Plaintiff - Appellant
v.
NORWEST BANK TEXAS NA; ET AL
Defendants
WESLEY KENNEMER; CURLEY JOE TRUCKING, INC
Appellees
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
_________________________________________________________________
March 8, 2000
Before KING, Chief Judge, and DUHÉ and DeMOSS, Circuit Judges.
KING, Chief Judge:
Plaintiff-Appellant C & H Nationwide, Inc., appeals from the
district court’s judgment dismissing C & H’s garnishment action
against Appellees Wesley Kennemer and Curley Joe Trucking, Inc.
(No. 99-10121), and the district court’s subsequent award of
attorney’s fees to Appellees (No. 99-10381). We dismiss appeal
99-10121 as moot, reverse the district court’s award of
attorney’s fees to Appellees, and deny all motions carried with
the case.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-Appellant C & H Nationwide, Inc. (“C & H”), and
Appellees Wesley Kennemer and Curley Joe Trucking, Inc.
(“Appellees”), make another appearance before us, albeit with a
much smaller entourage. In this latest battle in an ongoing
feud, we are called upon, ultimately, to answer one simple
question: Are Appellees entitled to $1,472.50 in attorney’s
fees? Unfortunately, answering that question requires that we
navigate through a rather dense and often confusing history.
C & H used to operate a motor carrier business. As we
understand the arrangement, C & H entered into contracts with
2
others, including Appellees (the “Owners-Operators”), to supply
the trucks and drivers for the enterprise. Under these
contracts, C & H forked over a portion of its take in exchange
for the equipment and services. Unfortunately, C & H did not
fare so well in the trucking business and consequently closed its
doors in late 1988.
In 1989, we decided, in an unrelated case, that motor
carriers who had billed at negotiated rates lower than tariff
rates filed with the Interstate Commerce Commission could bill
shippers for the difference. See Supreme Beef Processors v.
Yaquinto, 864 F.2d 388 (5th Cir. 1989). C & H, like many others,
had billed at negotiated rates and, after our decision in Supreme
Beef, sent out undercharge claims. A group of Owners-Operators,
including Appellees, decided that they had a right under the
contracts they had entered into with C & H to a portion of the
undercharge claims. It appears that C & H agreed, but the two
sides could not agree on whether the Owners-Operators were
entitled to a cut of the gross claims or the net collected
revenues.
The disgruntled Owners-Operators filed suit in state court
seeking damages for C & H’s failure to pay the contracted amount
of the claims and for its failure to give proper notice before
terminating the contracts when it closed down in 1988. The
Owners-Operators dismissed their suit, however, as part of
settlement negotiations between the two sides. The negotiations
3
proved fruitless, and eventually C & H filed suit seeking a
declaration of the parties’ rights and obligations under the
contracts. The Owners-Operators counterclaimed.
After a bench trial, the Owners-Operators were awarded
damages, and C & H was awarded a total of $213,847.64 in costs
and attorney’s fees. See District Court Order entered Dec. 8,
1998, at 1. In a subsequent appeal, we reversed part of the
district court’s judgment. See C & H Nationwide, Inc. v.
McDonald, No. 98-10564, at 4, 200 F.3d 815 (5th Cir. Nov. 2,
1999) (unpublished).
Prior to our decision in C & H v. McDonald, C & H sought to
enforce its awards by garnishing accounts held by Appellees at
Defendant Norwest Bank - Texas, N.A. (“Norwest”). At the time,
Kennemer had over $4,000 on deposit in a checking account at
Norwest, which amount Norwest sequestered in its garnished funds
account. Appellees moved to dismiss the garnishment action,
alleging that it was prohibited by section 31.008 of the Texas
Finance Code.1 The district court agreed and dismissed the
1
Section 31.008, the statute in force at the time,
provided:
(a) An attachment, injunction, execution, or writ of
garnishment may not be issued against or served on a
financial institution in this state to collect a money
judgment or secure a prospective money judgment against the
financial institution before the judgment is final and all
appeals have been foreclosed by law.
(b) This section affects an attachment, injunction,
execution, or writ of garnishment issued to or served on a
4
garnishment action without prejudice; Kennemer’s funds were
consequently released from Norwest’s garnished funds account.
C & H timely appealed the district court’s judgment (No. 99-
10121). The court allowed Appellees to apply for attorney’s fees
and recoverable costs. The court eventually awarded Appellees
$1,472.50 in attorney’s fees.2 See Order entered Mar. 19, 1999,
at 6. C & H timely appealed this order (No. 99-10381). After
the district court awarded attorney’s fees in this case, the
state of Texas repealed section 31.008 and replaced it with Texas
Finance Code section 59.007.3
financial institution for the purpose of collecting a money
judgment or securing a prospective money judgment against a
depositor of or deposit account in the financial
institution.
TEX. FIN. CODE ANN. § 31.008 (West 1998) (repealed 1999).
2
Appellees moved for an award of attorney’s fees on the
ground that such fees are recoverable in Texas as actual damages
for wrongful garnishment. See Wesley Kennemer and Curly Joe
Trucking, Inc.’s Motion to Award Attorney Fees, filed Dec. 17,
1998, at 1.
3
Section 31.008 was repealed on May 31, 1999. See 1999
Tex. Sess. Law Serv., ch. 344, §§ 9.002(2), 9.004(a) (West).
Section 59.007, which replaced section 31.008, see id. § 2.016,
became effective on September 1, 1999. See id. § 9.004(b).
Section 59.007 provides:
(a) An attachment, injunction, execution, or writ of
garnishment may not be issued against or served on a
financial institution that has its principal office or a
branch in this state to collect a money judgment or secure a
prospective money judgment against the financial institution
before the judgment is final and all appeals have been
foreclosed by law.
(b) An attachment, injunction, execution, or writ of
5
Appellees have moved this court for damages and costs for a
frivolous appeal under Federal Rule of Appellate Procedure 38;
C & H responded to each motion and moved the court to award it
attorney’s fees in the amount of $500 for effort expended in
responding to Appellees’ frivolous motions. These motions have
been carried with the cases.
II. STANDARD OF REVIEW
Resolution of this case turns on the district court’s
interpretation of section 31.008 of the Texas Finance Code. This
court reviews questions of law, such as the proper construction
of a statute, de novo. See Woodfield v. Bowman, 193 F.3d 354,
358 (5th Cir. 1999).
III. JURISDICTION
Ours is a court of limited jurisdiction. Among the
limitations is the requirement that there be a live case or
controversy between the parties. See Hope Medical Group for
Women v. Edwards, 63 F.3d 418, 422 (5th Cir. 1995); Howard Gault
garnishment issued to or served on a financial institution
for the purpose of collecting a money judgment or securing a
prospective money judgment against a customer of the
financial institution is governed by Section 59.008 and not
this section.
TEX. FIN. CODE ANN. § 59.007 (West Supp. 1999). Section 59.008
deals generally with notice requirements. See id. § 59.008.
6
Co. v. Texas Rural Legal Aid, Inc., 848 F.2d 544, 557 (5th Cir.
1988). In their brief in No. 99-10121, Appellees asserted that
they had filed a cash and supersedeas bond, thereby rendering any
question regarding the garnishment action moot. C & H replied
that no supersedeas bond had been filed. Concerned that factors
other than the bond issue raised by the parties may have rendered
one or both of these appeals moot, we sua sponte requested
briefing on the subject and now determine our jurisdiction to
entertain these appeals. See Webb v. B.C. Rogers Poultry, Inc.,
174 F.3d 697, 699 (5th Cir. 1999).
The “case or controversy” requirement of Article III of the
United States Constitution prohibits federal courts from
considering questions “that cannot affect the rights of litigants
in the case before them.” North Carolina v. Rice, 404 U.S. 244,
246 (1971). Federal courts are not in the business of rendering
advisory opinions. See, e.g., United States v. Texas Tech Univ.,
171 F.3d 279, 286 (5th Cir. 1999). “The mootness doctrine
requires that the controversy posed by the plaintiff’s complaint
be ‘live’ not only at the time the plaintiff files the complaint
but also throughout the litigation process.” Rocky v. King, 900
F.2d 864, 866 (5th Cir. 1990). “This means that, throughout the
litigation, the plaintiff ‘must have suffered, or be threatened
with, an actual injury traceable to the defendant and likely to
be redressed by a favorable judicial decision.’” Spencer v.
7
Kemna, 523 U.S. 1, 7 (1998) (quoting Lewis v. Continental Bank
Corp., 494 U.S. 472, 477 (1990)).
A. Appeal 99-10121
Appeal 99-10121 deals directly with the issue at the heart
of this case, whether the district court correctly concluded that
section 31.008(b) precludes C & H from garnishing Appellees’ bank
accounts. As far as we can tell, there is no answer that we
could give to this question that would affect the right of C & H
to enforce its remaining judgment against Appellees. The
district court dismissed C & H’s garnishment action without
prejudice, leaving C & H free to reapply for a writ of
garnishment under section 59.007 at any point since it became
effective in September of last year.4 Moreover, the funds
sequestered by Norwest have been released and are, we assume,
long gone. Any ruling we might hand down regarding those funds,
and we are at a loss for what that ruling might be, would neither
add to nor detract from C & H’s judgment underlying the writ of
garnishment. When all the wrapping has been stripped away, we
are being asked simply to decide what a repealed statute upon
which no one, let alone the parties before us, may rely meant
when it was in force. Because a decision by this court regarding
the construction of section 31.008 can have no effect on the
4
As we explain, infra, the provision at issue here, section
31.008(b), was not carried over into section 59.007.
8
rights of the litigants before us, appeal 99-10121 is most
assuredly moot and must be dismissed.
B. Appeal 99-10381
Appeal 99-10381 asks whether, under Texas law, Appellees are
entitled to attorney’s fees in this case as parties against whom
a garnishment action was wrongfully initiated.5 The garnishment
action was only wrongful, in this case, if section 31.008
prohibited it. Addressing that question requires us to determine
whether the district court correctly construed section 31.008,
the very issue we decided was moot in appeal 99-10121. We have
previously held however that we can reach a now-moot substantive
issue when necessary to determine whether the district court
correctly awarded attorney’s fees under state law. See Wilfed
Academy of Hair and Beauty Culture v. Southern Ass’n of Colleges
and Sch., 957 F.2d 210, 213 (5th Cir. 1992). We are bound by the
decision in Wilfred, see Campbell v. Sonat Offshore Drilling,
Inc., 979 F.2d 1115, 1121 n.8 (5th Cir. 1992), and therefore
proceed to construe section 31.008.
5
C & H did not appeal the district court’s implicit
determination that under Texas law, attorney’s fees are available
as actual damages for the wrongful issuance of a writ of
garnishment. Even though we question the correctness of that
determination, see Beutel v. Paul, 741 S.W.2d 510, 514 (Tex. App.
1987, no writ) (stating that “attorney’s fees are not recoverable
as actual damages in a wrongful garnishment suit”), the issue is
not before us.
9
IV. SECTION 31.008
At the time of the district court’s ruling, section
31.008(a) provided, inter alia, that a “writ of garnishment may
not be . . . served on a financial institution . . . to collect a
money judgment . . . against the financial institution before
. . . all appeals have been foreclosed by law.” TEX. FIN. CODE
§ 31.008(a) (repealed 1999). Section 31.008(b) further provided
that “[t]his section affects a[] . . . writ of garnishment
. . .served on a financial institution for the purpose of
collecting a money judgment . . . against a depositor of . . .
the financial institution.” Id. § 31.008(b) (repealed 1999)
(emphasis added). The dispute here centers on whether section
31.008(b) precluded C & H from serving a writ of garnishment on
Norwest to collect its judgment against Appellees.
C & H argues that former section 31.008(b) is ambiguous on
its face because it is not clear from the statute what “affects”
means. Moreover, it asserts that the language of section
31.008(b) was the product of a drafting error. C & H insists
that the legislative history of section 31.008 supports this
assertion and that section 59.007 was enacted, in large part, to
correct the drafting error. Appellees, on the other hand, cite
United Servs. Auto. Ass’n v. Perry for the proposition that a
statute can only be considered ambiguous if it “is susceptible of
more than one accepted meaning.” 102 F.3d 144, 146 (5th Cir.
10
1996). They argue that former section 31.008 is not ambiguous
because it only lends itself to one meaning. “[T]he one and only
meaning is clear: C & H cannot garnish Kennemer’s bank account
until all appeals are final. What other ‘affect’ [sic] could
subsection (b) reasonably have?” Appellees’ Brief (No. 99-10381)
at 8. According to Appellees, we are bound by the literal
language of section 31.008.
Appellees’ reliance on United Services is problematic in two
regards. First, Appellees misconstrue the language of United
Services. In that case, we stated, “A statute is ambiguous if it
is susceptible of more than one accepted meaning.” 102 F.3d at
146. We never stated that the mentioned condition was the
exclusive indication of ambiguity, as Appellees contend. Second,
we were there construing a federal statute under the Chevron
doctrine. See id. at 145. We do not necessarily construe a
state statute under the same framework we use to construe a
federal statute. When considering a state statute, we are “bound
to answer the question the way the state’s highest court would
resolve the issue.” Occidental Chem. Corp. v. Elliott
Turbomachinery Co., 84 F.3d 172, 175 (5th Cir. 1996). Therefore,
the statutory construction techniques employed in United Services
are inapposite here.
Appellees’ further citation to Ex parte Vaccarezza, 105 S.W.
1119, 1123-24 (Tex. Crim. App. 1907), for the same proposition
likewise misconstrues the discussion in that case. While the
11
proposition for which it is cited is contained in the opinion,
Appellees fail to acknowledge that it is merely the quotation of
a treatise in a concurring opinion. The majority opinion in that
case states the rule as follows:
The intention of the Legislature is the aim of statutory
construction, and where, though not expressed, it is clearly
manifested by implication from the language used, we cannot
say that it should not have effect. That which is not
expressed in words may be plainly imported by implication.
And, again, Chief Justice Moore, in the case of Russell v.
Farquhar, 55 Tex. 359, lays down the rule for the
construction of statutes very clearly, as follows: “If
courts were in all cases to be controlled in their
construction of statutes by the mere literal meaning of the
words in which they are couched, it might well be admitted
that appellants’ objection to the evidence was well taken;
but such is not the case. To be thus controlled, as has
often been held, would be for the courts in a blind effort
to refrain from an interference with legislative authority
by their failure to apply well-regulated rules of
construction, to, in fact, abrogate their own power and
usurp that of the Legislature, and cause the law to be held
indirectly the contrary of that which the Legislature had,
in fact, intended to enact. While it is for the Legislature
to make the law, it is the duty of the courts to try out the
right of intendment of statutes upon which they are called
to pass, and by their proper construction to ascertain and
enforce them according to their true intent; for it is this
intent which constitutes and is in fact the law, and not the
mere verbiage used by inadvertence or otherwise by the
Legislature to express its intent, and to follow which would
pervert that intent.”
Id. at 1120 (quoting Russell v. Farquhar, 55 Tex. 355, 359
(1881)).
The Texas Code Construction Act6 supports the holding in Ex
parte Vaccarezza. It provides that:
6
The Code Construction Act applies to section 31.008. See
TEX. FIN. CODE ANN. § 1.002 (West 1998).
12
In construing a statute, whether or not the statute is
considered ambiguous on its face, a court may consider among
other matters the:
(1) object sought to be attained;
(2) circumstances under which the statute was enacted;
(3) legislative history;
(4) common law or former statutory provisions,
including laws on the same or similar subjects;
(5) consequences of a particular construction;
(6) administrative construction of the statute; and
(7) title (caption), preamble, and emergency provision.
TEX. GOV. CODE § 311.023. The Texas Supreme Court has recently
commented on the Texas Code Construction Act:
Under the Code Construction Act, . . . courts may consider
prior law, the circumstances under which the law was
enacted, and legislative history among other matters to aid
them in construing a code provision “whether or not the
statute is considered ambiguous on its face.” But prior law
and legislative history cannot be used to alter or disregard
the express terms of a . . . provision when its meaning is
clear from the code when considered in its entirety, unless
there is an error such as a typographical one.
Fleming Foods v. Rylander, 6 S.W.3d 278, 283-84 (Tex. 1999)
(internal citations omitted and emphasis added).
Even if former section 31.008 were clear on its face,
C & H’s allegation that section 31.008(b) is the product of a
drafting error allows us to look past the literal language of the
provision. When viewed in context of the entire statute,
however, we conclude that the meaning of former section 31.008(b)
is not clear. Just exactly how a limitation on the ability to
serve a writ of garnishment on a bank to collect a judgment
against that bank (section 31.008(a)) “affects” garnishments
served to collect a judgment against a depositor of the bank is
ambiguous. If the legislature had intended to prohibit
13
garnishments against depositors until all appeals had been
exhausted, it could have clearly provided that a writ of
garnishment “may not be . . . served . . . before . . . all
appeals have been foreclosed,” as it did in section 31.008(a).
Legislative history indicates that the provision, as
enacted, was the product of a drafting error. Section 31.008 was
enacted in 1997 as part of the original adoption of the Texas
Finance Code. See 1997 Tex. Sess. Law Serv. ch. 1008, § 1
(West). It derived from Texas Civil Statutes article 342-609,
and the Texas legislature did not intend to significantly alter
the substantive content of the provision along the way.7 Article
7
Section 31.008 was simply a recodification of section
8.002 of the Texas Banking Act of 1995 without substantive
change. See 1995 Tex. Sess. Law Serv. ch. 914, § 1 (West)
(adopting section 8.002, which was codified at TEX. REV. CIV. STAT.
ANN. art. 342-8.002 (West repealed 1997)); 1997 Tex. Sess. Law
Serv. ch. 1008, § 6(a) (West) (repealing section 8.002); id. § 1
(stating that the purpose of the Finance Code adopted by chapter
1008 of the 1997 Session Law was, in part, to revise “the state’s
general and permanent statute law without substantive change”)
(codified at TEX. FIN. CODE ANN. § 1.001 (West 1998)). Indeed,
section 31.008(b) read exactly as section 8.002(b) had. Section
8.002, in turn, was based on Texas Revised Civil Statute article
342-609 and was intended to clarify, but not significantly alter,
that provision. See Tex. Banking Act of 1995, Tex. Dept. of
Banking Leg. Proposal at 26 (1995) (“Section 8.002 is based on
current Article 342-609 without significant change but including
clarifications. Generally, a bank is not required to post
security for a judgment to prevent execution while the judgment
is being appealed. National banks have a similar provision in 12
U.S.C. § 91.”); Tex. H. Fin. Insts. Comm. Rep. (Substituted)
C.S.H.B. 1543, at 13 (1995) (“Section 8.002 is based on current
Article 342-609 without significant change but including
clarifications.”).
14
342-609 was originally enacted in 1989.8 See 1989 Tex. Sess. Law
Serv. ch. 1196, § 7 (West). The text of article 342-609 gives no
indication that it was intended to prevent a writ of garnishment
against a depositor of a bank from being served on the bank, and
the House Committee Report for H.B. 871, the original Bill
containing the provision, explained that the purpose of the
provision was to “exempt[] financial institutions from the
requirement of posting appeal bonds.” Tex. H. Fin. Insts. Comm.
Rep., Bill Analysis for H.B. 871, at 1 (1989). The reason for
this exemption is clear from the report. Under prior law, “[t]he
requirement . . . that a bank file a supersedeas bond when
appealing lender liability lawsuits contribute[d] to . . . banks
quickly being rendered insolvent by single court decisions.” Id.
The provision was intended to protect banks, not their
depositors.
8
Article 342-609 provided, in pertinent part:
ATTACHMENT, INJUNCTION, OR EXECUTION
Sec. 1 An attachment, injunction, or execution may not be
enforced against a financial institution unless
there is a final judgment in the proceeding in
which the attachment, injunction, or execution is
issued.
Sec. 2 For the purposes if this article, a judgment is
final if all appeals have been exhausted or
foreclosed by law.
1989 Tex. Sess. Law Serv. ch. 1196, § 6 (West). Article 342-609
had a minor amendment in 1993. See 1993 Tex. Sess. Law Serv. ch.
1050, § 8 (West). That amendment is not material to our
discussion.
15
A review of section 59.007, the successor to section 31.008,
supports the conclusion that the provision was not intended to
have an impact on garnishments against bank customers. Section
59.007(b) deleted the “affects” language at issue here and
provides instead that writs of garnishment against depositors are
controlled by another section of the Finance Code that deals
mainly with notice requirements.
Finally, interpreting former section 31.008(b) as Appellees
suggest we do would lead to the result that no writs of
garnishment could be served on financial institutions to collect
money judgments against anyone until all available appeals had
been exhausted. This construction is a drastic departure from
existing law and settled expectations. It could, potentially,
force a judgment creditor to wait years before being able to
collect a judgment rendered in his favor without the protection
of a supersedeas bond. In the face of an ambiguous statutory
provision, we are loathe to impute such an intent to the Texas
legislature without clearer indication in the legislative history
that such was their true objective.
After reviewing the legislative history, prior and
subsequent provisions governing the same transactions, the object
sought to be attained in passing the original provision, and the
consequences of construing the provision as Appellees suggest, we
easily conclude that legislative intent was to protect financial
institutions from default by prohibiting, prior to the exhaustion
16
of available appeals, a writ of garnishment from being served on
a financial institution to secure a money judgment against the
institution itself, while at the same time leaving judgment
creditors free to secure a money judgment against depositors of
the financial institution through a writ of garnishment. Section
31.008 should not have been construed to preclude the writ of
garnishment served on Norwest in this case.
Based on this construction, the district court’s
construction of the statute was in error, C & H’s garnishment
action was not wrongful, and the order awarding attorney’s fees
to Appellees must be reversed.
V. FRIVOLOUS APPEALS AND MOTIONS
Federal Rule of Appellate Procedure 38 provides that “[i]f a
court of appeals determines that an appeal is frivolous, it may,
after a separately filed motion or notice from the court and
reasonable opportunity to respond, award just damages and single
or double costs to the appellee.” Appellees argue that C & H’s
case is frivolous, entitling Appellees to damages and costs under
Rule 38. In its responses to Appellees’ motions, C & H argues
that the motions are themselves frivolous, entitling it to
attorney’s fees of $500.
As to Appellees’ motions, “[a]n appeal is frivolous if it
relies on legal points that are not arguable on their merits.”
17
Walker v. City of Bogalusa, 168 F.3d 237, 241 (5th Cir. 1999)
(internal quotation marks omitted). C & H’s legal points form
the basis of our opinion and are not frivolous under this
standard. Appellees are not entitled to damages and costs under
Rule 38. As to C & H’s cross-motions, it does not point to a
provision entitling it to attorney’s fees for a frivolous motion.
If it intended to rely on Rule 38 as well, its reliance was
misplaced. “[B]y its very language, the rule applies only to
appellees and only to frivolous appeals.” Id. C & H is not
entitled to attorney’s fees.
VI. CONCLUSION
For the foregoing reasons, we DISMISS No. 99-10121 as moot,
REVERSE the district court’s award of attorney’s fees to
Appellees in No. 99-10381, and DENY all motions carried with the
case. In No. 99-10121, each party shall bear its own costs; in
No. 99-10381, Appellees shall bear the costs.
18