Ford Motor Credit Co v. Lewis

• Court: Court of Appeals for the Fifth Circuit
• Decided: September 11, 2000
• Docket: 99-30608
• Status: Unpublished

Opinion

UNITED STATES COURT OF APPEALS For the Fifth Circuit __________________________________________

No. 99-30608 _________________________________________

FORD MOTOR CREDIT CO., Plaintiff-Appellant,

v.

ALEXIS V. LEWIS; ARTHUR C. LEWIS, III; PATRICIA ANN VOORHIES LEWIS; MARGUERITE LEWIS HAWKING, Defendants-Appellees.

__________________________________________

Appeal from the United States District Court for the Middle District of Louisiana (98-CV-743) __________________________________________ September 8, 2000

Before KING, Chief Judge, and REYNALDO G. GARZA and PARKER, Circuit Judges.

PER CURIAM:1

Ford Motor Credit Company appeals the federal district court’s stay of their declaratory

judgment action. For the reasons stated below, we affirm.

1 Factual and Procedural Background

On November 10, 1962, Ida Watson Lewis created four separate trusts (collectively

referred to hereinafter as “Trusts”) for the benefit of her grandchildren, Alexis Voorhies Lewis,

1 Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4. Arthur Cullen Lewis, III, Patricia Ann Voorhies Lewis, and Marguerite Brown Lewis.2 Ida

Watson Lewis named her son, the beneficiaries’ father, Arthur Cullen Lewis, Jr. (hereinafter

referred to as “Mr. Lewis”) the Trusts’ trustee. Mr. Lewis managed the four separate trusts as

though they were one. The Trusts collectively held equitable title to the Provincial North, the

Provincial South, and the Savoy Plaza Apartment Complexes. The trust instruments empowered

Mr. Lewis to borrow money for the Trusts and to secure such loans with the Trusts’ assets.

Mr. Lewis was a real estate developer in Baton Rouge, Louisiana. By August 1980, Mr.

Lewis was personally indebted to Fidelity National Bank of Baton Rouge (hereinafter referred to

as “Fidelity”) for approximately $2.3 million. Fidelity informed Mr. Lewis that it wished that he

satisfy his outstanding personal debt.

In October 1980, Mr. Lewis, as trustee for the Trusts, contacted Ford Motor Credit

Company (hereinafter referred to as “Ford”) seeking a loan for approximately $2.3 million on

behalf of the Trusts. Ford is a Delaware corporation doing business in Louisiana. Ford

performed its due diligence, and proposed to lend the Trusts $2.23 million.

On December 29, 1980, Ford entered into an agreement with Mr. Lewis, as trustee for the

Trusts, to lend the Trusts $2.23 million (hereinafter referred to as “Ford Loan”). The Ford Loan

was secured by collateral mortgages on the Provincial North, the Provincial South, and the Savoy

Plaza Apartment Complexes (hereinafter referred to as “Secured Property”). The Ford Loan was

an in rem obligation. Ford initially funded the Ford Loan by transferring $1.81 million to Mr.

Lewis’s personal account at Fidelity rather than the Trusts’ accounts.

Mr. Lewis, personally, borrowed an additional $500,000 from Capital Bank and Trust of

2 Marguerite Brown Lewis is now Marguerite Lewis Hawking.

2 Baton Rouge (hereinafter referred to as “Capital”). This second loan was secured by the withheld

Ford funds. The Capital loan was funded by transferring $500,000 to Mr. Lewis’s personal

account at Fidelity. Upon receipt of Ford’s $1.81 million and Capital’s $500,000, Mr. Lewis used

both the Ford and Capital funds to satisfy his personal debt to Fidelity.

In May 1981, Ford completed funding the $2.23 million loan by transferring the remaining

$420,000 to Mr. Lewis’s personal account at Fidelity. Mr. Lewis, in turn, used the $420,000 to

satisfy his personal debt to Capital. Mr. Lewis then used the income derived from the Secured

Property to make principal and interest payments on the Ford loan.

On October 7, 1982, Mr. Lewis, as trustee for the Trusts, transferred the Trusts’ interests

in the Secured Property to Consolidated Lewis Investment Corporation–Limited Partnership

(hereinafter referred to as “Lewis Limited Partnership”). The Secured Property was transferred

subject to Ford’s interest. In exchange for the transfer, each of the individual Trusts received an

interest in the Lewis Limited Partnership. The Lewis Limited Partnership’s general partner was a

Louisiana corporation. Mr. Lewis was the president of that Louisiana corporation. In Mr.

Lewis’s capacity as president of the Louisiana corporation, he had virtually the same control over

the Secured Property as when he was trustee.

After the transfer, the Lewis Limited Partnership made all principal and interest payments

on the Ford Loan. In June 1983, the Lewis Limited Partnership repaid the loan in full. Ford then

released its mortgages on the Secured Property.

On July 23, 1985, Mr. Lewis died. Patricia Ann Voorhies Lewis, Mr. Lewis’s wife,

succeeded him as trustee of the Trusts. On May 7, 1986, Fidelity filed a collection action in

Louisiana’s 19th Judicial District Court against the Lewis Limited Partnership and Alexis

3 Voorhies Lewis, Arthur Cullen Lewis, III, Patricia Ann Lewis, and Marguerite Lewis Hawking

(collectively referred to hereinafter as the “Lewis Children”). Fidelity brought suit to collect

outstanding debts that the Lewis Limited Partnership had incurred, guaranteed or succeeded to.

On August 20, 1986, the Lewis Limited Partnership filed for Chapter 11 bankruptcy protection.

On September 25, 1986, Patricia Ann Voorhies Lewis died. Pursuant to the trust

instruments, the Trusts terminated upon Mrs. Lewis’s death. The Trusts’ property was

distributed to the Lewis Children. Thereby each of the Lewis Children became an individual

partner in the Lewis Limited Partnership.

On December 30, 1987, the Lewis Limited Partnership filed a reconventional demand and

cross-claim against Mr. Lewis, Ford, and Hibernia National Bank (hereinafter referred to as

“Hibernia”) in the Louisiana state court collection action. Hibernia is Fidelity’s successor. The

Lewis Limited Partnership alleged that Fidelity pressured Mr. Lewis into borrowing the $2.23

million from Ford to pay Mr. Lewis’s personal debts to Fidelity. The Lewis Limited Partnership

further alleged that Ford conspired with Mr. Lewis to misappropriate the Ford Loan proceeds,

that Ford knew that Mr. Lewis borrowed the $2.23 million in his capacity as the Trusts’ trustee,

but was going to use the $2.23 million to meet his personal obligation to Fidelity. The Lewis

Limited Partnership sought to recover the $2.23 million paid to Ford, alleging that the repayment

of the $2.23 million was a “payment of a thing not due” under the Louisiana Civil Code.

On January 29, 1988 and February 19, 1988, pursuant to 28 U.S.C. § 1452(a), Hibernia

and Ford respectively removed the Louisiana state court action to federal district court. The

federal district court then transferred the action to the bankruptcy court overseeing the Lewis

Limited Partnership’s Chapter 11 bankruptcy. During the pendency of the bankruptcy

4 proceeding, the Lewis Limited Partnership and the Lewis Children settled their claims against

Fidelity and Hibernia, as Fidelity’s successor.

After settling their claims with Fidelity and Hibernia, Marguerite Lewis Hawking and

Patricia Lewis filed separate actions against Ford in Louisiana’s 19th and 24th Judicial District

Courts, respectively. They alleged that Ford conspired with Mr. Lewis to misappropriate the

Ford Loan proceeds, that Ford knew that Mr. Lewis borrowed the $2.23 million in his capacity as

the Trusts’ trustee, but was going to use the $2.23 million to meet his personal obligation to

Fidelity. Ford removed Marguerite Lewis Hawking’s action to federal district court. The federal

district court then transferred the action to the bankruptcy court overseeing the Lewis Limited

Partnership’s Chapter 11 bankruptcy. Patricia Lewis dismissed her Louisiana state court action

against Ford.

On July 9, 1997, Ford then filed a counterclaim against the Lewis Limited Partnership and

the Lewis Children in the bankruptcy court seeking a declaratory judgment decreeing that the

claims against it were not legally viable, and in the alternative, if the claims against it were legally

viable, a ruling on who, between the Lewis Limited Partnership and the Lewis Children, owned

the cause of action. Ford filed a motion for summary judgment on its counterclaim with the

bankruptcy court.

On December 22, 1997, the bankruptcy court ruled that if any cause of action against Ford

existed, it consisted of two separate claims: first, the Lewis Children’s claims for any damages

incurred prior to October 7, 1982, as beneficiaries of the Trusts, and second, the Lewis Limited

Partnership’s claim for any damages incurred from October 7, 1982 forward. The bankruptcy

court severed the Lewis Children’s claims, the pre-October 7, 1982 claims, from the Lewis

5 Limited Partnership’s claim, the post-October 7, 1982 claims. The bankruptcy court then

remanded the Lewis Children’s claims against Ford back to state court from which they arose,

Louisiana’s 19th Judicial District Court. With regards to the Lewis Limited Partnership’s claim,

the bankruptcy court recommended to the district court that it grant Ford’s motion for summary

judgment and dismiss the Lewis Limited Partnership’s claim. On August 11, 1998, the federal

district court entered a judgment affirming the bankruptcy court’s recommendation and granted

Ford’s motion for summary judgment with regards to the Lewis Limited Partnership’s claim and

affirmed the remand of the Lewis Children’s claims back to the state court from which they arose.

After the federal district court affirmed the bankruptcy court, Ford on August 24, 1998, again

filed a complaint for declaratory judgment in federal district court against the Lewis Children.

Ford again sought a decree that the Lewis Children did not have legally viable claims. In

response, Alexis Voorhies Lewis and Arthur Cullen Lewis, III filed a motion to dismiss Ford’s

complaint based on abstention. Marguerite Lewis Hawking filed a motion to dismiss or in the

alternative to stay. Patricia Ann Voohires Lewis did not make an appearance.

During the interim, the Lewis Limited Partnership appealed the August 11, 1998 summary

judgment and Ford cross-appealed the remand of the Lewis Children’s claims. On May 4, 2000 a

panel of this court affirmed the district court’s grant of the August 11, 1998 summary judgment

with regards to the Lewis Limited Partnership’s claim and refused, for lack of appellate

jurisdiction, to hear Ford’s appeal of the remand of the Lewis Children’s claims back to the state

court from which they arose. See Hawking v. Ford Motor Credit Co., 210 F.3d 540, 550 (5th

Cir. 2000).

On May 5, 1999, the federal district court entered an order denying Alexis Voorhies

6 Lewis’s, Arthur Cullen Lewis, III’s, and Marguerite Lewis Hawking’s motions to dismiss Ford’s

August 24, 1998 complaint for declaratory judgment, but granted Marguerite Lewis Hawking’s

motion to stay the proceedings pending the resolution of the Lewis Children’s remanded state

court claims which arose out of the bankruptcy court’s December 22, 1997 ruling. On June 2,

1999, Ford perfected its notice of appeal from the May 5, 1999 order which stayed its August 24,

1998 declaratory judgment action. It is the propriety of the May 5, 1999 stay that we address

today.

2. Discussion

The appellant, Ford, argues that under 28 U.S.C. § 1291 this Court has jurisdiction over

this appeal. Ford further contends that the federal district court abused its discretion when it

stayed Ford’s August 24, 1998 declaratory judgment action pending the resolution of the Lewis

Children’s remanded state court claims. We hold that this Court has jurisdiction over this appeal

pursuant to 28 U.S.C. § 1291, and that the federal district court properly stayed this matter

pending the resolution of the Lewis Children’s remanded state court claims.

2.1 This Court Has Jurisdiction over this Appeal Pursuant to 28 U.S.C. § 1291

Since we find that there is jurisdiction pursuant to 28 U.S.C. § 1291, we will not address

Ford’s argument that jurisdiction exists because of the collateral order doctrine. Generally, an

order granting a stay of proceeding is not considered a final judgment. See Kershaw v. Shalala, 9

F.3d 11, 14 (5th Cir. 1993). Thus, an order granting a stay of proceeding is usually not

appealable pursuant to 28 U.S.C. § 1291. See id. at 14. However, if the resolution of a pending

state court proceeding will resolve all of the federal suit’s issues, thus having a res judicata effect

on the stayed federal proceeding, the order granting the stay of proceeding is considered a final

7 judgment for purposes of 28 U.S.C. § 1291. See Granite State Ins. Co. v. Tandy Corp., 986 F.2d

94, 95 (5th Cir. 1992), cert. dismissed, 507 U.S. 1026, 113 S. Ct. 1836, 123 L. Ed. 2d 463

(1993). Thus this order is appealable pursuant to 28 U.S.C. § 1291.

In the instant case, the federal district court stayed Ford’s August 24, 1998 declaratory

judgment action pending the resolution of the Lewis Children’s remanded state court claims. The

state court proceeding will determine whether the Lewis Children have legally viable claims

against Ford. In Ford’s August 24, 1998 complaint for declaratory judgment, Ford solely seeks a

decree that the Lewis Children’s claims against it are not legally viable. Thus, the state court

proceeding will resolve the declaratory judgment action’s only issue. Since the state court

proceeding will resolve the declaratory judgment action’s only issue, the order granting the stay of

proceeding is considered a final judgment for purposes of 28 U.S.C. § 1291. Therefore, we find

that jurisdiction exists pursuant to 28 U.S.C. § 1291.

2.2 The Federal District Court Properly Stayed Ford’s Declaratory Judgment Action

Pending the Resolution of the Remanded State Court Claims

A district court’s decision to stay a declaratory judgment action is reviewed for an abuse

of discretion. See Granite State Ins. Co., 986 F.2d at 96; Mission Ins. Co. v. Puritan Fashions

Corp., 706 F.2d 599, 601 (5th Cir. 1983). A district court may not stay a declaratory judgment

action on the basis of a whim or personal disinclination. See Granite State Ins. Co., 986 F.2d at

96; Hollis v. Itawamba County Loans, 657 F.2d 746, 750 (5th Cir. 1981). It may stay a

declaratory judgment action when there is a pending state court action in which all of the matters

in controversy may be fully litigated. See Granite State Ins. Co., 986 F.2d at 96 (emphasis

added); Rowan Companies Inc. v. Griffin, 876 F.2d 26, 28 (5th Cir. 1989).

8 In the instant case, the federal district court stayed Ford’s August 24, 1998 declaratory

judgment action pending the resolution of the Lewis Children’s remanded state court claims. In

the declaratory action, Ford and the Lewis Children are adversaries. In the state court proceeding

Ford and the Lewis Children are adversaries. In Ford’s August 24, 1998 complaint for

declaratory judgment, Ford solely seeks a decree that the Lewis Children’s claims against it are

not legally viable. The state court proceeding will determine whether the Lewis Children have any

legally viable claims. Thus, the state court proceeding provides a venue where all of the

declaratory judgment action’s matters in controversy will be fully litigated. Moreover, it is

doubtful that Ford or the Lewis Children will litigate any less energetically in state court than in

federal court. Since the state court proceeding provides a venue where all of the declaratory

judgment action’s matters in controversy will be fully litigated, the district court was within its

discretion to stay Ford’s declaratory judgment action. Accordingly, we AFFIRM the district

court’s judgment.