First Gibraltar Bank, FSB v. Smith

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 30, 1995
• Docket: 94-10385
• Status: Published

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 94-10385.

FIRST GIBRALTAR BANK, FSB, Plaintiff-Counter Defendant-Appellee,

v.

Jimmy D. SMITH, et al., Defendants,

Thomas A. Oddo, Defendant-Counter Plaintiff-Appellant.

Aug. 30, 1995.

Appeal from the United States District Court for the Northern District of Texas.

Before WISDOM, DUHÉ and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

Appellant Thomas A. Oddo ("Oddo") appeals both the district

court's dismissal of his counterclaims under both the Texas Debt

Collection Act, TEX.REV.CIV.STAT.ANN. art. 5069-11.01 et seq. and the

Federal Fair Debt Collection Act, 15 U.S.C. § 1692 et seq., and the

court's calculation of damages owed to Appellee First Gibraltar

Bank ("First Gibraltar") on the guaranty signed by Oddo. We

affirm.

I.

On June 12, 1985 Oddo entered into a limited partnership with

Jimmy D. Smith and others to acquire and develop property located

in Dallas County, Texas, eventually known as Meadowcreek Village

Apartments. The partnership borrowed $10,000,000.00 from First

Texas Bank. Oddo executed a guaranty providing that:

Notwithstanding anything contained herein to the contrary, the liability of Guarantors shall be limited to an amount equal to (i) any and all principal due and owing on the

1 Note up to but not exceeding $1,000,000.00, plus (ii) all accrued and unpaid interest on such amount plus (iii) ten percent (10%) of any and all amounts due and payable by Debtor in connection with the Note and any other instrument (the "Loan Documents") executed in connection with the lending transaction to which the Note relates, including, without limitation, accrued interest added to principal.

The underlying debt went into default and, in 1987, First

Texas Bank filed suit in Texas state court. In 1988 First Texas

Bank was declared insolvent and the Federal Savings and Loan

Insurance Corporation was appointed as receiver. First Gibraltar

subsequently purchased the assets of First Texas Bank. The state

court entered an interlocutory summary judgment in favor of First

Gibraltar on the guaranty signed by Oddo, ordering Oddo to pay

First Gibraltar $2,189,644.40 plus attorneys' fees, costs and

post-judgment interest.

After judgment was entered, the case was removed to federal

court. The district court dismissed Oddo's state and federal

consumer debt collection counterclaims, holding that the

transaction was commercial rather than for personal or household

use and that First Gibraltar was not a debt collector as

contemplated by both the federal and state fair debt collection

acts. The state court summary judgment award was left undisturbed.

II.

Oddo contends that the language of the guaranty limits his

liability to $1,000,000.00. He argues that the state court's

judgment of $2,189,644.40 exceeds the $1,000,000.00 cap provided in

the guaranty and is not supported by summary judgment evidence.

Once a state case is removed to the federal court, we review

2 any state court order as if it were a federal court order. Walker

v. F.D.I.C., 970 F.2d 114, 121 (5th Cir.1992). Thus, "[w]e review

the summary judgment award de novo, independently of the state or

federal district court, and resolving all reasonable doubts and

drawing all reasonable inferences in favor of the party opposing

summary judgment." Id. (citations omitted).

Our review of the summary judgment evidence before the state

court supports the court's award of $2,189,644.40. We find Oddo's

allegation that the guaranty limits his liability to $1,000,000.00

contrary to the plain language of the guaranty itself. The

guaranty specifically states that Oddo is liable for principal due

up to $1,000,000.00, plus interest on that amount, plus ten percent

of any and all amounts due and payable including interest.

Reviewing the affidavits and other summary judgment evidence

submitted to the state court in connection with the total amounts

due on the $10,000,000.00 loan at the time the state court

considered the motion, we conclude that the court's calculation of

$2,189,644.40 is reasonable and supported by the record. The

summary judgment evidence conclusively establishes that Oddo is

liable for at least the amount awarded by the state court.

III.

Oddo next contends that the district court erred in

dismissing his state and federal consumer debt collection claims

because First Gibraltar is a debt collector under both the state

and federal definitions. He argues that because First Gibraltar is

not the first owner of the loan and guaranty, it is engaging in the

3 collection of a debt for another.

The district court, after reviewing letter briefs submitted

at its request, found both the Federal Fair Debt Collection Act and

the Texas Debt Collection Act inapplicable to the case and

dismissed Oddo's fair debt collection claims raised in his First

Amended Counterclaim and Crossclaim as unfounded, apparently

concluding that Oddo had failed to state a claim for relief.

Although First Gibraltar did not file a Rule 12(b)(6) motion to

dismiss, the court was authorized to consider the sufficiency of

Oddo's counterclaims on its own initiative. Guthrie v. Tifco

Industries, 941 F.2d 374, 379 (5th Cir.1991), cert. denied, 503

U.S. 908, 112 S.Ct. 1267, 117 L.Ed.2d 495 (1992). Our review of

the district court's dismissal for failure to state a claim for

relief is de novo. Leffall v. Dallas Independent School Dist., 28

F.3d 521, 524 (5th Cir.1994).

The Federal Fair Debt Collection Act defines a debt collector

as:

any person who uses any instrumentality of interstate commerce or the mails in any business the principal purposes of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

15 U.S.C. § 1692a(6) (West Supp.1995). A debt is defined as "any

obligation or alleged obligation of a consumer to pay money arising

out of a transaction in which the money, property, insurance, or

services which are the subject of the transaction are primarily for

personal, family, or household purposes, whether or not such

obligation has been reduced to judgment." 15 U.S.C. § 1692a(5)

4 (1982). The Texas Debt Collection Act defines a debt as "any

obligation arising out of a consumer transaction." TEX.REV.STAT.ANN.

art. 5069-11.01(a) (Vernon 1987). A consumer is defined as "an

individual who owes or allegedly owes a debt created primarily for

personal, family or household purposes." TEX.REV.STAT.ANN. art.

5069-11.01(d) (Vernon 1987).

We find that, on its face, the language of the federal statute

does not include First Gibraltar because it is not collecting a

"debt" for itself or another, but rather, is attempting to enforce

an obligation under a guaranty agreement in connection with a

commercial transaction. The district court concluded that the

transaction, including the partnership's purchase of real estate,

was commercial, not for personal or household purposes. On appeal,

Oddo offers no evidence to suggest that the district court's

conclusion is erroneous. Because the guaranty agreement was not

personal in nature, it does not constitute a debt as defined by the

federal statute. Similarly, under the Texas statute, neither the

partnership nor Oddo himself qualifies as a consumer. Thus, we

find the obligation arising out of the commercial transaction does

not constitute a "debt" as defined under the Texas statue either.

Because the district court's conclusion is supported by the record,

we find that the district court was correct in dismissing Oddo's

claims under the Texas Debt Collection Act and the Federal Fair

Debt Collection Act.

IV.

For the reasons articulated above, the judgment of the

5 district court is AFFIRMED.