FDIC v. Z & S Realty Company ( 1997 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 96-41270
Summary Calendar
____________________
FEDERAL DEPOSIT INSURANCE CORPORATION, As Manager of the
FSLIC Resolution Fund,
Plaintiff-Appellee,
v.
Z & S REALTY COMPANY; SCHMUEL S PINTER,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
(G-96-CV-180)
_________________________________________________________________
November 28, 1997
Before KING, HIGGINBOTHAM, and DUHÉ, Circuit Judges.
PER CURIAM:*
In a motion for panel rehearing, defendants-appellants Z & S
Realty Company and Schmuel S. Pinter seek to reinstate their
appeal following its dismissal by this court for inadequate
briefing. In their appellate brief, defendants-appellants argue
that the district court erred in denying their motion for
*
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this opinion should not be published and is not precedent except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.
continuance. In addition, they claim that the district court
incorrectly awarded plaintiff-appellee Federal Deposit Insurance
Corporation judgment against them on a non-recourse note and
incorrectly awarded plaintiff-appellee attorney’s fees without
contemporaneous time records. We grant defendants-appellants
petition for panel rehearing and reinstate their appeal, and we
affirm the judgment of the district court.
I. FACTUAL & PROCEDURAL BACKGROUND
Plaintiff-appellee Federal Deposit Insurance Corporation
(“FDIC”), as Manager of the FSLIC Resolution Fund, filed this
civil action against Z & S Realty Co. and its general partner,
Schmuel S. Pinter (collectively, “Defendants”), alleging that
Defendants had executed a note secured by real property and that
the FDIC had become a holder of that note by assignment. Upon
Defendants’ failure to pay the note when due, the FDIC foreclosed
and later bought the property at the foreclosure sale. After
Defendants refused to relinquish possession of the property, the
FDIC sought a temporary restraining order and an injunction
directing them to turn over possession of the property. The FDIC
also sought monetary damages in the form of (1) attorney’s fees
incurred to obtain possession of the property and to collect the
amount due under the note, (2) attorney’s fees incurred as a
result of Defendants’ failed attempt to have the FDIC’s attorney
sanctioned, and (3) damages under the partial-recourse provisions
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of the note for deficiency due to Defendants’ failure to maintain
the property and for rentals received after default on the note.
On September 12, 1996, the magistrate judge held an
evidentiary hearing to determine the FDIC’s damages. Thereafter,
the district court, relying on the magistrate judge’s recommended
findings of fact and conclusions of law, rendered judgment for
the FDIC, ordering that the FDIC was entitled to possession of
the real property and enjoining Defendants from interfering with
said possession. The district court also ordered Defendants to
pay damages of $17,872.25 plus interest for the unpaid principal
balance of the note out of the rents collected by Defendants
after the foreclosure. Finally, the district court awarded the
FDIC attorney’s fees totaling $28,169.35.
II. DISCUSSION
A. Motion for Rehearing
Defendants appealed the district court’s judgment, and this
court dismissed their appeal for failure to file a brief with
adequate record citations pursuant to Federal Rule of Appellate
Procedure 28(a)(4) and Fifth Circuit Rule 28.2.3. See Moore v.
FDIC, 993 F.2d 106, 107 (5th Cir. 1993). We noted that we would
reconsider the dismissal if Defendants filed a motion for
rehearing accompanied by a sufficient amended brief within forty-
five days. Because we find that Defendants’ amended brief
complies with applicable Rules of Appellate Procedure and Fifth
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Circuit Rules, we hereby reinstate the appeal.
B. Continuance
Defendants argue that the magistrate judge erred by refusing
to grant their motion for continuance of an evidentiary hearing
that conflicted with the Jewish holiday of Rosh Hashanah and took
place while Pinter’s mother was hospitalized. We disagree.
This court reviews a magistrate judge’s denial of a motion
for continuance for abuse of discretion. See Dorsey v. Scott
Wetzel Servs., Inc., 84 F.3d 170, 171 (5th Cir. 1996). As the
scope of that discretion is extremely wide, Command-Aire Corp. v.
Ontario Mechanical Sales and Serv., Inc., 963 F.2d 90, 96 (5th
Cir. 1992), this court will affirm such a ruling unless it was
arbitrary or clearly unreasonable, Transamerica Ins. Co. v.
Avnell, 66 F.3d 715, 721 (5th Cir. 1995).
In an order issued on May 17, 1996, the district court
scheduled an evidentiary hearing on damages for Friday, July 19,
1996. Pinter moved for continuance because of the Sabbath, and
although the district court initially denied the request, it
later granted the continuance out of concern for Pinter’s
religious beliefs. It therefore canceled the hearing and
referred the matter to a magistrate judge.
In an order issued on July 17, 1996, the magistrate judge
rescheduled the hearing for August 7, 1996. Two days before the
hearing, Pinter’s newly retained counsel filed a motion for
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continuance, which the magistrate judge granted. In an order
issued on August 5, 1996, the magistrate reset the hearing for
September 12, 1996. On September 4, only eight days before the
hearing and one month after the hearing date was set, Pinter
again moved for continuance because September 14 was the Jewish
holiday Rosh Hashanah. Additionally, two days before the
hearing, Pinter filed a letter, not in the form of a formal
pleading, again requesting continuance of the hearing. Attached
to the letter was an unauthenticated, handwritten note stating
that Pinter’s mother was in the hospital. The magistrate judge
denied the continuance, noting that the request was not in proper
pleading form, the note was not authenticated, and the hearing
could be completed in time for Pinter to participate in the
holiday. In view of these facts, we cannot say that the
magistrate judge abused his discretion in denying Pinter’s
request for continuance.
C. Judgment for Deficiency out of Rents
Defendants next argue that the district court erred in
awarding a deficiency judgment on a partial non-recourse note.
Although the note lists several exceptions to its non-recourse
provisions, Defendants claim that only one exception, exception
(g), might apply to this case and that the FDIC waived the
application of that exception in its closing argument.
The FDIC responds that although Defendants objected to the
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magistrate judge’s ultimate conclusion, they did not specifically
object to the sufficiency of the proof or argue that the FDIC had
waived its claim to the deficiency. They therefore argue that
this court should review the district court’s decision only for
plain error. They further contend that they did not waive their
claim to the deficiency. We agree.
Exception (g) of the note allows recourse for “rentals
received by or on behalf of Maker subsequent to the default by
Maker under this note or any Security Documents.” The FDIC
introduced proof that the property was in default as of February
1995, that it foreclosed on March 5, 1995, that the Defendants
received over $192,000 in rentals after the default occurred, and
that after the foreclosure sale a deficiency of $17,872.25
remained. In accordance with this evidence, the magistrate judge
found that the FDIC was entitled to recover $17,872.25 plus
interest.
This circuit has determined that a party’s failure to object
to a magistrate judge’s report and recommendation should be
treated as a forfeiture and therefore is reviewed only for plain
error. Douglass v. United Serv. Auto. Ass’n, 79 F.3d 1415, 1428-
29 (5th Cir. 1996) (en banc). We have explained that
failure to object timely to a magistrate judge’s report
and recommendation bars a party, except upon grounds of
plain error . . . from attacking on appeal not only the
proposed factual findings . . . but also the proposed
legal conclusions, accepted . . . by the district
court, provided that the party has been served with
notice that such consequences will result from a
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failure to object.
Id. at 1417. In this case, Defendants were advised of the
consequences of failing to object properly. Although Defendants
filed written objections, they did not argue that the FDIC had
waived its claim for the amount of the deficiency,1 and our
review is therefore limited to plain error. Thus, in order to
prevail, Defendants must show “(1) that an error occurred; (2)
that the error was plain, which means clear or obvious; (3) the
plain error must affect substantial rights; and (4) not
correcting the error would ‘seriously affect the fairness,
integrity or public reputation of judicial proceedings.’”
Highlands Ins. Co. v. National Union Fire Ins. Co., 27 F.3d 1027,
1032 (5th Cir. 1994) (quoting United States v. Olano, 507 U.S.
725, 736 (1993)).
Having reviewed the record, we can find no evidence that the
FDIC waived its claim to the deficiency. Even the portion of the
hearing transcript cited by Defendants does not support their
1
Defendants’ entire objection to the magistrate judge’s
recommendation that they be held liable for the deficiency plus
interest reads as follows:
Defendants object to the finding that they are
bound and liable for interest on the unpaid principal
balance of SEVENTEEN THOUSAND EIGHT HUNDRED SEVENTY TWO
AND 25/100 ($17,872.25) from March 5, 1996 at a rate of
18% per annum until entry of judgment because of
pursuant to Plaintiff’s Exhibit 1, this is a non-
recourse note and that the individual Defendants are
not liable for any type of deficiency judgment, absent
specific circumstances that are not applicable here.
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waiver contention. Further, Defendants offer no argument that
the district court’s legal conclusions were in error, and the
record contains adequate proof of the damages. We therefore find
that the district court did not err in holding that the FDIC was
entitled to $17,872.25 plus interest out of the rentals recovered
after Defendants defaulted.
D. Proof of Attorney’s Fees
Relying on Fifth Circuit Rule 47.8.1, Defendants next argue
that the district court erred in awarding $7,390.62 in attorney’s
fees to the FDIC’s New York counsel because the fees were not
proved by contemporaneous time records. In response, the FDIC
argues that Rule 47.8.1 does not require that the records be
produced to the court unless the reasonableness of the hours
claimed becomes an issue and the parties are unable to resolve
it. They claim that because Defendants never questioned the
reasonableness of the hours claimed and never requested that the
contemporaneous time records be produced, the district court did
not err in awarding them fees.
The issue of attorney’s fees arose after Pinter filed a
motion for sanctions against Walter Cooke, the FDIC’s counsel, in
a bankruptcy proceeding involving a company known as Hardware by
Kramer, Inc. Cooke hired the New York law firm of Fox & Horan to
represent him, and the FDIC agreed to reimburse him. Cooke
testified at the evidentiary hearing to prove up the attorney’s
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fees, and the record also includes a summary of Fox & Horan’s
work. Additionally, the court admitted into evidence the
deposition of Kathleen Kundar, the attorney who performed the
majority of the legal services. Kundar testified about the
number of hours that her firm spent on the matter and described
the services rendered. Defendants’ counsel cross-examined her
about the time that she spent on the matter. Although he
questioned Kundar as to whether she had prepared contemporaneous
time records, which she had, Defendants’ counsel did not request
the records. Nevertheless, at the evidentiary hearing,
Defendants objected to the lack of contemporaneous time records,
arguing that the summary that had been provided to them was
insufficient. The magistrate judge overruled the objection and
stated that it would review the deposition testimony. It then
recommended an award of $7,390.62 to the FDIC, and the district
court adopted that recommendation.
We review both the district court’s decision to grant
attorney’s fees to a prevailing party and its decision regarding
the amount of fees awarded for abuse of discretion. See Heasley
v. Commissioner of Internal Revenue, 967 F.2d 116, 123 (5th Cir.
1992). We review the district court’s subsidiary findings of
fact only for clear error. See id.Fifth Circuit Rule 47.8.1 states that “[p]etitions or
motions for the award of attorney’s fees should always be
supported by contemporaneous time records recording all work for
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which a fee is claimed and reflecting the hours or fractional
hours of work done and the specific professional level of
services performed by each lawyer for whom compensation is
sought.” 5TH CIR. R. 47.8.1.2 Nevertheless, this court has held
that “[f]ailing to provide contemporaneous billing statements
does not preclude an award of fees per se, as long as the
evidence produced is adequate to determine reasonable hours.”
Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 325 (5th
Cir. 1995); see also Dennis v. Warren, 779 F.2d 245, 249 (5th
Cir. 1985) (upholding district court’s award of attorney’s fees
despite lack of contemporaneous records). In this case, the
request for attorney’s fees was supported by the sworn deposition
testimony of Kundar and by a summary of her work. In addition,
Kundar was subject to cross-examination by Defendants’ attorney,
who did not request that she provide Defendants with copies of
2
This court has not held that Fifth Circuit Rule 47.8.1
applies to a district court’s award of attorney’s fees. In
Purcell v. Seguin State Bank and Trust Co., 999 F.2d 950 (5th
Cir. 1993), this court held that Western District of Texas Local
Rule CV-7(j), rather than Fifth Circuit Rule 47.8.1 applied. Id.
at 962. The Southern District has no comparable rule, and in
other cases this court has failed to clarify the applicability of
Rule 47.8.1 to district court proceedings. See, e.g., Alberti v.
Klevenhagen, 896 F.2d 927, 931 (discussing pre-1983 award of
attorney’s fees by district court and noting that Fifth Circuit
Rule 47.8.1 applies to later awards of attorney’s fees), vacated
in part on other grounds, 903 F.2d 352 (5th Cir. 1990); Dennis v.
Warren, 779 F.2d 245, 249 (5th Cir. 1985) (declining to decide
whether Fifth Circuit Rule 47.8.1 applied to a district court
proceeding). While we assume, solely for purposes of this
appeal, that Rule 47.8.1 does apply to the district court’s award
of attorney’s fees, we decline to express an opinion on the
merits of that issue.
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the contemporaneous records that she testified she had made.
More importantly, Defendants do not complain that the fees
awarded were unreasonable, nor do they challenge the legal basis
for the fees. Additionally, Defendants have neither argued nor
attempted to demonstrate that they were prejudiced by the lack of
contemporaneous records. We therefore conclude that the district
court did not abuse its discretion in awarding the FDIC the
requested attorney’s fees.
III. CONCLUSION
For the foregoing reasons, the motion for rehearing is
GRANTED, the appeal is REINSTATED, and the judgment of the
district court is AFFIRMED.
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