IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-30594
JERRY BONNEAU; JERRY BONNEAU, MRS.;
ELLIS ERWIN; ELLIS ERWIN, MRS.;
CHARLES AMES; J. W. WILLIAMS,
Plaintiffs-Appellants,
versus
FARM CREDIT BANK OF TEXAS,
doing business as FCS Servicing;
AGAMERICA FCB doing business as
FCS Servicing; AG FIRST FARM
CREDIT BANK doing business as
FCS Servicing; AGRIBANK FCB;
COBANK doing business as FCS
Servicing; FARM CREDIT BANK OF
WICHITA doing business as FCS
Servicing; ST. PAUL BANK doing
business as FCS Servicing;
WESTERN FARM CREDIT BANK doing
business as FCS Servicing,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
(96-CV-12)
March 13, 1997
Before GARWOOD, WIENER and DeMOSS, Circuit Judges.
PER CURIAM:*
Plaintiffs-Appellants (“Makers”) in this uncertified class
action suit complain on appeal that the district court erred in
granting motions —— the first filed by Farm Credit Bank of Texas
(FCBT) and the rest seriatim by the remaining defendants —— to
dismiss the Makers’ action pursuant to Federal Rule of Civil
Procedure 12(b)(6). More specifically, the Makers have urged on
appeal that their pleadings were sufficient to entitle them to go
forward with efforts to prove that the defendants had (1) breached
loan contracts by failing to adjust the interest rates on
promissory notes executed by the Makers, (2) breached fiduciary
duties owed to the Makers, and (3) violated the RICO and mail fraud
statutes of the United States.
After hearing the oral arguments of counsel, reviewing the
Makers’ pleadings, studying the briefs of the parties and the
record, such as it is at the Rule 12(b)(6) level, and analyzing the
opinion of the district court, our plenary review of this case
convinces us beyond doubt that the Makers can prove no set of facts
under their pleadings that would entitle them to any of the relief
*
Pursuant to Local Rule 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this opinion should not be published and is not precedent except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 Local Rule 47.5.4.
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sought.
The Makers’ positions are grounded in the contention that
their respective promissory notes given to the now-defunct Federal
Land Bank of Jackson (FLBJ), which was put into receivership by the
Farm Credit Administration (FCA), were “variable interest rate”
notes. Stripped of all obfuscatingly complex mischaracterizations
and misapprehensions, that contention is facially false. Unlike
true variable interest rate notes, the interest on which fluctuates
on the basis of objective economic indicia, either at stated
intervals or on objectively determined occurrences —— and not on
the volition of one of the parties alone —— the instant notes were,
as a matter of law, tantamount to fixed rate notes bearing interest
at the most recent rate established from time to time by the FLBJ
if, but only if, the FLBJ exercised its unilateral option —— not
obligation —— to change that rate. No future holder of the notes,
such as the FCBT, was empowered to take any action to vary the
interest rate of the note, whether up or down, from the interest
rate last established by the FLBJ. Neither did any maker of a note
have the contractual right to insist that the interest rate on his
note be varied.
The operable facts alleged or implied by the Makers in the
pleadings and accepted as true for Rule 12(b)(6) purposes are that
(1) after the FLBJ went into receivership, at a time when its
established interest rate for such loans was 12.25% per annum, the
Makers’ notes were acquired by the FCBT; (2) the established
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interest rate at the FLBJ had not changed for several years prior
to such acquisitions, has never changed since, and is unlikely ever
to be changed, given FLBJ’s insolvency and receivership status;
(3) the interest rate of 12.25%, which had been in effect since
1985, was therefore going to be treated by the FCBT as “fixed” (not
converted unilaterally by the FCBT to a fixed rate note) because
FCBT did not have the right under either the contract documents or
federal law to adjust the interest rates on the notes; (4) the
Makers’ stock in the FLBJ had been retired by its receiver and the
stock’s par value applied to reduce the balance of the Makers’
loans; and (5) the FCBT had invited each Maker and all others
similarly situated to join the FCBT in executing a modification
agreement that would, inter alia, authorize the FCBT to adjust
interest rates on such notes (a result of which would be an
immediate reduction to 11.25% per annum) and to become members of
the FCBT’s farm bank cooperative by purchasing stock therein ——
which could be accomplished without additional cash outlay from the
Makers by their authorizing the FCBT to transfer the par value of
the Makers’ former stock in the FLBJ (which had been credited
previously to their loan balance) to finance the purchase of stock
in the FCBT, thereby further reducing the interest rates on the
Maker’s note to equal the rate that the FCBT was charging its own
stockholders on their loans. In light of these allegations and the
inferences therefrom, we agree with the district court that the
Makers could prove no set of facts that would alter the conclusions
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that (a) they had no legal right to demand a reduction in their
rate of interest as long as no action was taken by the FLBJ’s
receiver to change the longstanding 12.25% per annum interest rate
of that institution; (b) they had no legal right to insist on any
modification of the terms of their notes; (c) the proposal of the
FCBT was purely gratuitous and if accepted by the Makers would,
without cost or expense to the Makers, place them on an even
footing with the FCBT’s own member-borrowers; (d) the modifications
proposed by the FCBT could only be accomplished through a bilateral
amendment executed by the Makers and the FCBT; and (e) the FCBT’s
reduction of the rate of interest on the notes in the absence of
such a bilateral modification would itself constitute a breach of
contract, not the opposite as contended by the Makers, i.e., that
the FCBT’s refusal to reduce the interest rates on the loans
unilaterally placed the FCBT in violation of the FCA and in breach
of the contract. Given these conclusions that are apparent from
the Makers’ pleadings, we are firmly convinced that the legal
position asserted by Makers in the district court —— and, even
more so, their prosecution of the instant appeal —— are
unmeritorious, approaching frivolousness, and thus constitute
proper grist for the Rule 12(b)(6) mill. For the Makers to
institute litigation of this nature and prosecute it on appeal in
the face of the FCBT’s gratuitous and facially fair and reasonable
modification invitation impresses us as a classic example of the
maxim, “No good deed goes unpunished.”
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For essentially the same reasons that are reflected in the
district court’s thorough opinion, its order dismissing the Makers’
action is, in all respects.
AFFIRMED.
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