F.D.I.C. v. Fuller ( 1993 )

                           FOR THE FIFTH CIRCUIT
                                No. 92-1335
    REX P. FULLER, Individually and as
    Independent Executor of the Estate
    of R.P. Fuller, deceased,
    ANN FULLER CLAYTON, f/k/a Ann Fuller
    Lydick, and JANE FULLER JACKSON, d/b/a
    Lydick-Jackson Joint Venture,
                                                C    r    o   s       s   -
               Appeals from the United States District Court
                     for the Northern District of Texas
                              (June 21, 1993)
    Before WISDOM*, GARWOOD, and HIGGINBOTHAM, Circuit Judges.
    HIGGINBOTHAM, Circuit Judge:
          The FDIC sued on a promissory note executed by Rex P. Fuller
    on behalf of himself, his sisters, Ann Fuller Lydick Clayton and
          Because of illness, Judge John Minor Wisdom was not present
    at the oral argument of this case; however, having had available
    the tape of oral argument, he participated in this decision.
    Jane Fuller Jackson, and his father, R.P. Fuller in favor of
    Continental Illinois National Bank and Trust Company of Chicago in
    December 1984.      The makers defaulted in May 1986 and Continental
    accelerated   the     note    and   sued      in    September     1986.       Fuller1
    counterclaimed for fraud, racketeering, and civil conspiracy.
         In April 1987, Continental assigned Fuller's note to the FDIC
    in its corporate capacity.          The FDIC and the Fullers then began
    settlement negotiations agreeing to temporarily dismiss the suit
    during their effort. When no settlement was reached, the FDIC sued
    on the note in September 1990.
         Fuller answered the FDIC's claim in part by a plea of laches.
    At trial, the court rejected the defense of laches holding that
    laches cannot    be    asserted     against        the   FDIC   in   its   corporate
    capacity.   The jury returned a verdict in favor of the FDIC for the
    principal amount of $4,500,096.50.                 The court awarded the FDIC
    costs,   post-judgment       interest,       and    counsel     fees,   but   denied
    prejudgment interest.
         Fuller urges that the court erred in rejecting laches as a
    defense and asks for a trial of the issue.                The FDIC cross-appeals
    the denial of prejudgment interest.                 We do not reach the broad
    contention that laches is never a defense to a claim by the FDIC in
    its corporate capacity.       We conclude that laches is, in any event,
    not a defense to the legal claim against Fuller and that the
    district court did not err in not awarding prejudgment interest.
          We throughout refer to the makers as "Fuller."
         The FDIC argues that laches is not a defense to its legal
    claim, a suit on the note for debt.       The FDIC points out that it
    filed suit within the limitations period and that it is equally
    clear that the FDIC asserted a legal and not an equitable claim.
         The FDIC relies on Clark v. Amoco Production Co., 
    794 F.2d 967
    (5th Cir. 1986), in which we held that under Texas law, laches is
    usually not a defense unless the claim is "of an essentially
    equitable character."     Judge Rubin articulated the consistent
    principle behind laches as "equitable remedies are not available if
    granting the remedy would be inequitable to the defendant because
    of the plaintiff's long delay."       Environmental Defense Fund, Inc.
    v. Alexander, 
    614 F.2d 474
    , 478 (5th Cir.), cert. denied, 
    449 U.S. 919
     (1980). This principle illustrates the equitable nature of the
    laches defense, implying its inapplicability to claims for legal
    remedies.   In Franks v. Bowman Transp. Co., 
    495 F.2d 398
    , 406 (5th
    Cir. 1974), rev'd on other grounds, 
    424 U.S. 747
     (1976), we stated
    that "[i]n an equitable action, equitable defenses may be raised,
    and these include the doctrine of laches."      The converse would be
    that in legal actions, laches is not available.         See Morgan v.
    419 F.2d 993
    , 996 (7th Cir. 1969).
         This would end the matter but, we are told, there is an
    exception to this general rule.   In "extraordinary circumstances,"
    laches may be asserted before limitations has run. Of course, this
    sidesteps the issue of whether laches can bar a legal claim filed
    within the statute of limitations and the only relevant Fifth
    Circuit precedent we are pointed to involved claims that the Court
    characterized as "essentially equitable" in nature.          See, e.g.,
    Franks, 495 F.2d at 406.    The appellants do gain some support from
    S.E.R., Jobs For Progress, Inc. v. United States, 
    759 F.2d 1
    , 8
    (Fed. Cir. 1985), where the Court stated that laches is not
    inapplicable in contract cases per se.             Instead, the Federal
    Circuit stated that laches cannot be asserted against legal claims
    where a statute of limitations is available to preclude recovery on
    stale claims "unless the offended party has been unmistakably
    prejudiced by the delay."    Id. at 9.     We question this "exception"
    because it does not admit principled limits but we need not cross
    this bridge because even if we assume laches is available in
    "extraordinary"   circumstances       or   where    the   defendant   is
    "unmistakably prejudiced," nothing supports its application here.
         Fuller argues that the FDIC's delay of two years caused the
    loss of witnesses and access to evidence that would have supported
    third party claims of fraud, racketeering, and civil conspiracy
    against Continental. In the dismissal agreement, Fuller agreed not
    to refile claims against Continental until or unless the FDIC
    refiled suit. The decision not to pursue discovery regarding these
    claims was unilateral.
         Fuller alleges that a key witness died during negotiations,
    another witness could no longer recollect the relevant events and
    involved employees of Continental left the company's employment and
    cannot be located.   Yet Fuller admits that the death was one month
    after the original case was dismissed, a loss hardly the result of
    the delay.   In addition, he does not allege that he had been aware
    of the whereabouts of the missing witnesses when the case was
    dismissed and later lost track of them.    There is no contention
    that the witness with the failed memory had any recollection of the
    events when the case was originally dismissed.   Two years does not
    account for the witness's inability to recall events from ten years
    ago. Those events were eight years old when Fuller first filed his
         The FDIC denies that any delay caused the loss of any claims.
    In Matter of Bohart, 
    743 F.2d 313
     (5th Cir. 1984), we held that
    loss of a claim during a delay is not enough.    Rather, the delay
    must cause the loss.   Id. at 326-27.    Fuller was free to pursue
    discovery during negotiations. In addition, there is no suggestion
    that he would have had access to the "lost" evidence before the
         At trial, FDIC employee Winget, the only witness to testify
    regarding the amount due on the note, testified that the principal
    amount due was $4,500,096.50.   He also testified that the accrued
    interest as of January 3, 1992, was $2,239,273.62.   Winget did not
    personally calculate the interest due.
         The promissory note provided for payment of interest by Fuller
    as follows:
         . . plus interest (on the basis of a year consisting of 365,
         or when appropriate 366, days) from the date hereof until
         maturity at a fluctuating rate per annum equal to the sum of
         the prime interest rate of the Bank [Continental] (being at
         any time the rate per annum then most recently announced by
         the Bank at Chicago, Illinois as its prime rate) in effect
         from time to time, plus one percent (1%), such rate to change
         concurrently with each change in said prime rate as publicly
           announced by the Bank, on the principal balance hereof
           remaining from time to time unpaid, payable monthly on the
           first day of each month hereafter, commencing January 1, 1985,
           and at maturity, and with interest after maturity (whether by
           acceleration or otherwise) on said principal balance until
           paid at a rate per annum which is in effect from time to time
           (but not less than the prime rate in effect at maturity), plus
           two percent (2%), all such payments of principal and interest
           to be made in lawful money of the United States in immediately
           available funds.
    There was no evidence regarding Continental's prime rate or dates
    on which it changed.
           In   closing   argument,   the    FDIC   requested   a   total   award,
    including principal and interest, in excess of $6.7 million.               The
    jury awarded $4,500,096.50.       The district court denied the FDIC's
    motion to amend the judgment to include an award for the alleged
    prejudgment interest.       We review the district court's denial of
    this motion for abuse of discretion.            Midland West Corp. v. FDIC,
    911 F.2d 1141
    , 1145 (5th Cir. 1990).
           Fuller vigorously contested the FDIC's proof of the amount
    due.    In particular, he argued to the jury that Winget had no
    personal knowledge regarding the facts and calculations leading to
    his interest amount testimony.          Fuller asked the jury to award no
    money where the FDIC failed to proof the amount                  due with a
    preponderance of the evidence.          The most likely inference from the
    jury's award is that it rejected the interest testimony.                We are
    not persuaded that the district court abused its discretion by
    declining to amend the judgment.