Texas National Bank v. Sandia Mortgage Corporation v. William B. Nelson

872 F.2d 692, 8 U.C.C. Rep. Serv. 2d (West) 881, 1989 U.S. App. LEXIS 6574, 1989 WL 41432
CourtCourt of Appeals for the Fifth Circuit
DecidedMay 16, 1989
Docket88-1194
StatusPublished
Cited by39 cases

This text of 872 F.2d 692 (Texas National Bank v. Sandia Mortgage Corporation v. William B. Nelson) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Texas National Bank v. Sandia Mortgage Corporation v. William B. Nelson, 872 F.2d 692, 8 U.C.C. Rep. Serv. 2d (West) 881, 1989 U.S. App. LEXIS 6574, 1989 WL 41432 (5th Cir. 1989).

Opinions

GOLDBERG, Circuit Judge:

Without a moment’s hesitation, one may confidently say that Mark Twain, Winston Churchill, and Gertrude Stein possessed cute minds and nimble tongues. Defendant-appellant William B. Nelson (“Nelson”) also considered himself acutely ingenious. However, that which appears too cute, usually is. Nelson with a stroke of his pen, blocked defendant-appellee Sandia Mortgage Corporation (“Sandia”) from collecting $80,000 from a certificate of deposit (“CD”), number 3816, which Sandia held as collateral for a $608,000 loan. For reasons we shall explain, we affirm the district court because after raising Nelson’s pen-strokes to the light, we find his arguments to be translucent.

Nelson pledged an $80,000 CD, number 1995, to Sandia’s predecessor in interest. This pledge is memoralized in a security agreement. CD number 3816 represented the same $80,000 deposit that was originally made in CD number 1995. The number was different because the Texas National Bank (“Bank”) had automatically renewed the CD at the expiration of each term, consequently the numerical description of the deposit changed each renewal term. In a letter to the Bank, Nelson instructed the Bank not to pay the $80,000 to Sandia because the security agreement, which specifically referred to CD number 1995, did not cover its successor, CD number 3816.

There is cute, and then there is too cute. By his letter, Nelson breached a covenant he held with Sandia Mortgage Corporation. Nelson’s breach of a covenant now has a direct consequence which he must bear. Nelson must now pay Sandia’s attorney's fees which one might call a payment for being “too cute.”

The issue this appeal raises is the correct application of Texas’ statutory attorney fees’ statute, Tex.Civ.Prac. & Rem.Code Ann. § 38.001 et seq. (Vernon 1986) (“section 38.001”), to a dispute arising from a pledge of a certificate of deposit. The district court awarded Sandia $16,320.00 in attorney’s fees based upon Section 38.001. Nelson appeals this award. Nelson asserts three reasons that we should reverse the district court’s fee award: (1) Nelson did not breach any contract as required by section 38.001(8) to support an award of attorney’s fees; (2) Sandia did not make a sufficient presentation of Sandia’s claim to Nelson to satisfy section 38.002(2); and (3) the contract between Sandia and Nelson limits Nelson’s liabilities to the amount of the certificate of deposit ($80,000). As we shall explain, we reject all three of these arguments and affirm the district court’s award of attorney’s fees to Sandia based upon section 38.001 et seq.

I. FACTS

Nelson, on March 21, 1985, deposited $80,000 with Texas National Bank in the form of a 120 day CD, number 1995, that contained an automatic renewal provision. On the same day Nelson pledged CD number 1995 as collateral for a loan of $608,-000.00 from Action Mortgage Company, Inc. (Sandia’s predecessor in interest) to the Dooley Development Corporation (“Dooley”). Nelson agreed to pledge his $80,000 CD in return for the promise of an additional $80,000 in cash in the near future, funds which would be available because of the underlying Dooley Development Corporation real estate deal. Dooley defaulted on the $608,000 loan. The original CD number 1995 was renewed six times after March of 1985. In its final form, the $80,-000 CD bore the number 3816.

Sandia sent a demand letter dated October 20, 1986 to the Bank with a carbon copy (“cc”)1 to Nelson directing payment [695]*695of the CD’s proceeds. The letter, written by Sandia’s attorney, stated in full:

[Johnson & Swanson Letterhead]
October 20, 1986
CERTIFIED MAIL RETURN RECEIPT REQUESTED
Texas National Bank
8235 Douglas
Lock Box 66
Dallas, Texas 75225
Attention: Ms. Claudia Wehrmann
Re: Certificate of Deposit Issued to William B. Nelson
Gentlemen:
We represent, and write on behalf and at the request of, Sandia Mortgage Corporation (“Sandia”).
Sandia is the holder of Certificate of Deposit No. 3816 in the amount of $80,-000 (the “Certificate of Deposit”). The Certificate of Deposit was issued in renewal (through a series of interim renewals) of Certificate of Deposit No. 1995, in the amount of $80,000, which was originally pledged by William B. Nelson to Action Mortgage Company, Inc. pursuant to that certain Collateral Assignment of Certificate of Deposit (Security Agreement) dated March 21,1985 (the “Security Agreement”), to secure certain indebtedness owing by Dooley Development Corporation and all liens and security interests securing such indebtedness from Action Mortgage Company, Inc., and Sandia is the current holder of such indebtedness, liens, and security interests, including the liens and security interests in the Certificate of Deposit.
Dooley Development Corporation has defaulted in the payment when due of the indebtedness secured in part by the Certificate of Deposit. The Certificate of Deposit matured on July 30, 1986, and it is Sandia’s understanding that it has not been renewed. The Certificate of Deposit is presented herewith. Pursuant to the Security Agreement and the Uniform Commercial Code of the State of Texas, you are hereby notified and directed to pay the proceeds of the Certificate of Deposit, being the face amount thereof and all accrued interest thereon, to San-dia at 11104 Menaul, N.E., P.O. Box 11848, Albuquerque, New Mexico 87112; Attention: Mr. Larry Walker. Sandia will hold such proceeds as collateral for the indebtedness of Dooley Development Corporation owing to Sandia and will not immediately (but reserves the right at any time to) apply such proceeds to such indebtedness. The collection by Sandia of such proceeds shall not be deemed to be the acceptance or retention of such proceeds in satisfaction, in whole or in part, of the indebtedness secured thereby or an election of remedies by Sandia, and Sandia reserves any and all other rights and remedies which it might now or hereafter have in connection with the indebtedness owing to it by Dooley Development Corporation.
Please indicate your agreement to comply with the notification and direction set forth herein by executing the enclosed copy of this letter in the space provided below and returning such copy to the undersigned. If for any reason you are unable or unwilling to comply with such notification and direction, you are directed and instructed to immediately return the enclosed Certificate of Deposit to the undersigned.
Please do not hesitate to contact the undersigned at the direct dial number set forth above if you have any questions.
Very truly yours,
JOHNSON & SWANSON
By/s/ Kenneth A. Rogers
Kenneth A. Rogers
KAR/vh
cc: Mr. William B. Nelson
ACCEPTED AND AGREED TO:
TEXAS NATIONAL BANK
By-
Title: _

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Bluebook (online)
872 F.2d 692, 8 U.C.C. Rep. Serv. 2d (West) 881, 1989 U.S. App. LEXIS 6574, 1989 WL 41432, Counsel Stack Legal Research, https://law.counselstack.com/opinion/texas-national-bank-v-sandia-mortgage-corporation-v-william-b-nelson-ca5-1989.