Resolution Trust Corp. v. Eitmann ( 1993 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 91-3583
RESOLUTION TRUST CORPORATION as
Receiver for Security Homestead
Federal Savings and Loan Association,
Plaintiff-Appellee,
VERSUS
JOHN J. EITMANN, JR.
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
( June 15, 1993 )
Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
DeMoss, Circuit Judge:
Defendant John J. Eitmann, Jr. appeals an adverse summary
judgment in Security Homestead Association's suit to assess a
deficiency judgment against him and to enforce that judgment
against property which Eitmann owns. Concluding that the trial
court erred in entering summary judgment and that a third party
needs to be brought in to adequately determine the rights of all
parties in this proceeding, we vacate the summary judgment and
remand for further proceedings consistent with this opinion.
In June 1984 Eitmann and his sister obtained a loan from
Security Homestead, secured by property the Eitmanns owned at 1408
Beron Dr., in the Parish of Jefferson, Louisiana. Security
Homestead required that Eitmann pay the premiums on a policy of
private mortgage insurance issued by United Guaranty Residential
Insurance Company to Security Homestead. Although Eitmann paid the
premiums on the insurance policy, the insurance agreement was
solely between United Guaranty and Security Homestead. The only
documents evidencing the agreement between Eitmann and Security
Homestead regarding payment of these premiums were the notations
inserted on the closing statement prepared by the title company
when Eitmann originally acquired the property with money borrowed
from Security Homestead. In 1988 Eitmann defaulted on the loan
payments and Security Homestead instituted foreclosure proceedings
in Louisiana State Court. At the time of commencement of these
foreclosure proceedings, in March 1988, Eitmann was living at 1609
Airline Park Blvd., Metairie, Louisiana, and not at the address of
the Beron Drive property. Security Homestead purchased the Beron
Drive property at judicial auction in August 1988, and in January
1989, Security Homestead obtained a deficiency judgment against
Eitmann for the balance owed after crediting the value of the Beron
Drive property.
On February 9, 1989, United Guaranty paid $12,149.34 to
Security Homestead pursuant to a claim made by Security Homestead
on the private mortgage insurance policy. Shortly thereafter
Security Homestead requested the Louisiana Clerk of Court to issue
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a writ of fieri facias to seize and sell the property owned by
Eitmann on Airline Park Blvd. where he was then residing. The day
before the judicial sale of Eitmann's Airline Park property was to
take place, Eitmann filed a motion to enjoin the sale and a
petition to annul the deficiency judgment. Eitmann alleged that
the deficiency judgment failed to reflect that he was entitled to
a credit for $12,149.34 paid to Security by Homestead by United
Guaranty. The state court issued a temporary restraining order,
enjoining the sale of the Airline Park Blvd. property.
In December 1989, the Resolution Trust Corp. ("RTC") was
substituted for Security Homestead as plaintiff in the state court
action and removed the state case to federal court. In May 1990
the RTC filed a motion for summary judgment on the grounds that,
under the policy issued by United Guaranty, Eitmann had no right to
obtain a credit for amounts paid to Security Homestead by United
Guaranty. Because the policy was not before the district court,
that motion was denied. The RTC filed a second summary judgment
motion when the original of the policy between United Guaranty and
Security Homestead was submitted to the court pursuant to an
affidavit by the vice president of Security Homestead Federal
Savings Assn., who was the successor to the assets of Security
Homestead. Pursuant to a pretrial order entered into by the
parties and the court on November 23, 1990, some 40 uncontested
material facts were identified and agreed upon but there were also
seven contested material facts identified, and 13 contested issues
of law. The pretrial order also set December 3, 1990, at 10:00
3
a.m. as the trial date for the matter before the district judge
without a jury. One of the contested material facts was whether
United Guaranty "is attempting to directly collect its payment from
Eitmann."
OPINION
This dispute revolves around the question of whether or not
United Guaranty has a right of subrogation against Eitmann for the
sums it paid to Security Homestead on the private mortgage
insurance contract. In the letter of February 9, 1989, by which
United Guaranty sent its check to Security Homestead, United
Guaranty advised Security Homestead that it intended to contact the
borrower (Eitmann) in an effort to recover its loss and concluded
that letter to Security Homestead with the following words:
Your involvement will not be necessary unless
the matter reaches the point of litigation, at
which time we will contact your office to
discuss assignment of subrogation rights. If
this does not meet with your approval, please
let us know within 15 days of the date of this
letter.
Then on April 7, 1989, United Guaranty sent a letter to
Eitmann at his address on Airline Park Blvd. advising him as
follows:
Under State Law and the particular facts of
this case the lender has a legal right to
recover its loss from you up to $12,149.34
plus interest from the date of the foreclosure
sale and that right now rests with us as a
result of our claim payment to the lender.
(Emphasis added.)
This letter went on to request Eitmann to contact United Guaranty
and discuss a repayment arrangement. The subrogation rights of
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United Guaranty are defined in paragraph 19 of the private mortgage
insurance agreement, which provides as follows:
19. Limited Subrogation Rights: The Company
[United Guaranty] shall be subrogated to all
of the rights of the insured [Security
Homestead] against the Borrower [Eitmann]
and/or all other parties liable for the
payment of the Loan arising out of or
connected with the loan to the extent of the
payment of benefits by the company under the
Policy (I) In all cases where the Real Estate
[the Beron Drive property] does not consist of
a single family dwelling occupied by the
borrower, and (II) when the Insured agrees
that the company shall have subrogation
rights. Except as herein provided, the
company shall have no subrogation rights
against the Borrower.
Relying on various affidavits furnished by Security Homestead
personnel that "neither Security Homestead nor its successors have
ever agreed that United Guaranty would have subrogation rights in
connection with the Eitmann loan," the trial court concluded, that
"since United Guaranty has no right to recover from Eitmann the
amount it paid to Security Homestead, defendant is not in any
danger of paying twice." We disagree with this conclusion of the
trial court for two reasons:
A. First, there is nothing in the summary judgment
record which determines whether the Beron Drive property was
or was not a "single family dwelling occupied by the borrower"
within the meaning of subclause (I) of paragraph 19. The
record infers that at the time of the commencement of the
foreclosure proceeding and thereafter, Eitmann was residing in
the Airline Park Blvd. property and this could well afford
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United Guaranty a basis for claiming a right of subrogation;
and
B. Second, the letters described above from United
Guaranty to Security Homestead and to Eitmann both strongly
infer that United Guaranty thought it had the right to assert
a subrogation claim against Eitmann.
Paragraph 19 of the private mortgage insurance agreement is
certainly not a paragon of clarity; and we think a genuine issue of
material fact exists as to the intentions of the parties regarding
subrogation rights of United Guaranty against Eitmann under the
facts of this case.
More fundamentally, absent the joinder of United Guaranty in
this proceeding, we do not see how any conclusions which might be
made in this proceeding would be binding upon United Guaranty; and
in order to avoid the possibility that Eitmann might be required to
pay the full deficiency balance being asserted by the RTC and also
the $12,149.34 subrogation claim being asserted by United Guaranty,
we think justice will be better served by vacating the summary
judgment herein, and remanding this case to the district court with
instructions that the district court afford Eitmann an opportunity
to file a third party claim against United Guaranty to determine
its subrogation rights against him.
Judgment of the trial court is VACATED and case REMANDED to
the trial for further proceedings consistent herewith.
c:br:opin:91-3593u:mek 6
KING, Circuit Judge, dissenting:
The issue presented by the parties in this case is
straightforward: whether, by asserting that Security's deficiency
judgment against him should be annulled pursuant to Louisiana law,
Eitmann has raised a genuine issue of material fact. Because I
believe that Eitmann has failed to establish a basis upon which to
annul Security's deficiency judgment, I respectfully dissent from
the majority's decision to vacate the judgment of the district
court and remand this case to give Eitmann another bite at the
apple.
"On an appeal from summary judgment, the reviewing court
cannot consider arguments or factual allegations raised for the
first time . . . ." James v. McCaw Cellular Communications, Inc.,
988 F.2d 583, 585 (5th Cir. 1993); see also McCann v. Texas City
Refining, Inc., 984 F.2d 667, 673 (5th Cir. 1993) ("It is the
unwavering rule in this Circuit that issues raised for the first
time on appeal are reviewed only for plain error."). We have also
held repeatedly that "issues not briefed, or set forth in the list
of issues presented, are waived." Atwood v. Union Carbide Corp.,
847 F.2d 278, 280 (5th Cir. 1988), cert. denied, 489 U.S. 1079, 109
S. Ct. 1531 (1989).
Eitmann's only challenge to the deficiency judgment against
him is that it should be annulled pursuant to Article 2004 of the
Louisiana Code of Civil Procedure.1 Eitmann asserts that, because
1
Although, on appeal, Eitmann has also raised a disclosure
challenge to his arrangement with Security pursuant to the Truth in
Lending Act, 15 U.S.C. § 1601, et seq., Eitmann did not adequately
raise this issue below. Therefore, it is not properly before this
court. James v. McCaw, 988 F.2d at 585; see also McCann v. Texas,
Security received a payment of $12,149.34 from Guaranty after
obtaining its deficiency judgment against him, Security's
enforcement of its deficiency judgment would constitute an
"unconscionable and ill practice." Therefore, according to
Eitmann, Security's deficiency judgment should be annulled pursuant
to Article 2004 of the Louisiana Code of Civil Procedure, which
provides that "[a] final judgment obtained by fraud or ill
practices may be annulled."
A judgment has been obtained by fraud or ill practices
pursuant to Article 2004 when (1) the circumstances under which the
judgment was rendered show the deprivation of legal rights of the
litigant who seeks relief, and (2) the enforcement of the judgment
would be unconscionable and inequitable. State v. Batchelor, 597
So. 2d 1132, 1135 (La. App.), writ denied, 604 So. 2d 964 (La. 1992);
Kem Search, Inc. v. Sheffield, 434 So. 2d 1067, 1070 (La. 1983).
Security obtained its deficiency judgment against Eitmann so that
it could collect the unpaid balance of the loan it made to him, and
Eitmann never appealed from that judgment. Eitmann brought this
action only when Security sought to enforce its deficiency judgment
by seizing his Airline Park property. Moreover, Security received
no money pursuant to its policy with Guaranty until after it had
obtained its deficiency judgment against Eitmann, and the record
984 F.2d at 673.
c:br:opin:91-3593u:mek 8
establishes that Eitmann is neither a party to nor beneficiary of
that policy.2
The majority believes that Guaranty's potential subrogation
rights against Eitmann pursuant to the mortgage insurance policy
present a basis for Eitmann's assertion that the deficiency
judgment against him was rendered under circumstances showing a
deprivation of his legal rights in accordance with Article 2004.
It is well established under Louisiana law that "[a]n action for
nullity cannot be substituted for a timely appeal[,]"3 and that "a
judgment should not be annulled under ordinary circumstances simply
because there was lack of diligent presentation of a valid defense
which could have been pleaded before judgment." Williams, 427
2
Under Louisiana law, a third-party-beneficiary contract
will be found "only when the contract clearly contemplated the
benefit to the third person as its condition or consideration[,]"
and the benefit bestowed to the third party must be more than
merely incidental to the contract. New Orleans Public Service,
Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 467 (5th Cir. 1984)
(emphasis in original), cert. denied, 469 U.S. 1019, 105 S. Ct. 434
(1984); see Wallace v. Texaco, Inc., 681 F.2d 1088, 1090 (5th Cir.
1982) (the contract must reveal that the contracting parties
intended to benefit the third party); see also LA. CIV. CODE ANN. ART.
1978 (West 1990) ("A contracting party may stipulate a benefit for
a third person called a third party beneficiary."). The
unambiguous language of paragraph 26 of the mortgage insurance
policy in the case before us expressly states that Eitmann is not
a beneficiary, and paragraph 18 expressly states that Security did
not give up its right to collect the full amount of the loan from
Eitmann by entering into its agreement with Guaranty.
Specifically, paragraph 26 provides that "[t]he Borrower or any
successive owner of the Real Estate is not included as a
beneficiary or an insured under the Policy." Paragraph 18 provides
that "[a]ny payment pursuant to Section 18(a) or Section 18(b)
hereof shall not be applied, or be considered by the borrower to be
applied, to the payment of the Loan."
3
Will. v. N.Y. Fire & Marine Ins. Co., 427 So. 2d 938, 939
(La.App. 1983).
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So. 2d at 940; Muller v. Michel Lecler, Inc., 266 So. 2d 916, 918
(La.App. 1972). Because (1) Eitmann's challenge is based upon an
insurance policy to which Eitmann was neither a party nor
beneficiary, (2) as is evidenced by his payment of premiums on the
insurance policy and the fact that it was a precondition for
obtaining his loan from Security, Eitmann knew of the policy's
existence at the time Security brought its deficiency action
against him but never raised any issue about mortgage insurance or
subrogation when challenging that action, (3) Eitmann never
appealed from the underlying deficiency judgment, and (4) Security
received no payment under the terms of its policy with Guaranty
until after obtaining a deficiency judgment against Eitmann, I
cannot join the majority in concluding that Eitmann's Article 2004
claim has any merit and that a rational trier of fact could find in
his favor. See Williams, 427 So. 2d at 939-40; see also Amoco
Production Co. v. Horwell Energy, Inc., 969 F.2d 146, 147-48 (5th
Cir. 1992) (If a rational trier of fact, based upon the record as
a whole, could not find for the non-moving party, there is no
genuine issue for trial).
Private mortgage insurance like that structured by Security
and Guaranty is somewhat troubling in that borrowers like Eitmann
pay premiums for insurance from which the only benefit that they
derive is obtaining a loan that they might not otherwise be able to
obtain. Nevertheless, we are not Eitmann's attorneys; we are
judges and we do not have a roving warrant to correct Eitmann's
litigation mistakes in this lawsuit and the predecessor suit on a
c:br:opin:91-3593u:mek 10
note because we are troubled by private mortgage insurance
generally. Eitmann has failed to establish a legitimate claim
pursuant to section 2004, and this is the only claim Eitmann's
attorneys have properly brought before us. Accordingly, I would
conclude that the RTC in its capacity as conservator and receiver
for Security was entitled to summary judgment as a matter of law,
and I would affirm. See FED. R. CIV. P. 56 (c); Amoco, 969 F.2d at
147-48.
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