Dean v. FDIC

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_____________________

No. 99-30674
_____________________

BARBARA CROWTHERS DEAN,

Plaintiff-Appellant,

v.

GENERAL FINANCIAL SERVICES, INC. and/or; FEDERAL
DEPOSIT INSURANCE CORPORATION, Successor of the
Federal Savings and Loan Insurance Corporation,

Defendants-Appellees.

_________________________________________________________________

Appeal from the United States District Court
for the Eastern District of Louisiana
Docket No. 97-CV-3708-B
_________________________________________________________________

January 5, 2000

Before KING, Chief Judge, and WIENER and BARKSDALE, Circuit
Judges.

PER CURIAM:*

Plaintiff-Appellant Barbara Crowthers Dean (“Dean”) appeals

from the district court’s entry of summary judgment in favor of

Defendants-Appellees (“Appellees”) General Financial Services

(“GFS”) and the Federal Deposit Insurance Corporation (“FDIC”) as

the successor of the Federal Savings and Loan Insurance

Corporation (“FSLIC”).

I. FACTUAL AND PROCEDURAL BACKGROUND

*
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this opinion should not be published and is not precedent except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.
 The facts giving rise to this case stretch back to 1983.

That year, Dean signed a note and mortgage with Colonial Mortgage

and Loan Corporation (“Colonial”). Colonial subsequently

assigned the note and mortgage to New Orleans Federal Savings and

Loan Corporation (“NOF”). NOF went into receivership in June

1986 with the FSLIC as receiver. Dean, apparently, failed to

make the installment payments on the loan and the FSLIC filed

suit for non-payment in Louisiana state court on November 6,

1987. Dean claims she was never served with notice of the suit,

despite the fact that return of service was filed with the court.

A preliminary default judgment was entered by the court on

December 16, 1987 and that judgment was confirmed by the court on

January 15, 1988. Despite her previous non-payment, Dean made

payments to the FSLIC between 1988 and May 1990. The FDIC

subsequently succeeded the interests of the FSLIC, and on June 5,

1995 assigned the judgment to GFS. GFS immediately set about

trying to collect the judgment. GFS sent a letter to Dean on

June 15, 1995, informing her that they had purchased her note

from the FDIC.

After a series of communications with Dean’s attorney, GFS

apparently decided that the dispute could not be solved amicably

and began foreclosure proceedings. Dean then filed this suit in

Louisiana state court to annul the 1988 judgment, alleging that

she had never been served with notice of the original suit and

that the judgment had been obtained through fraud or ill

practice. The case was subsequently removed to federal court.

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Dean amended her complaint in July 1998 seeking a declaratory

judgment that any attempts to collect on the 1988 judgment would

be barred because the prescriptive period in which to enforce the

judgment had run in January 1998.

While Dean’s action was pending in federal court, GFS filed

suit in Louisiana state court to revive the 1988 judgement. The

state trial court ruled that GFS could not revive the judgment

because the ten-year prescriptive period on the collection of

judgments had run. GFS subsequently appealed this decision to

the Louisiana Fourth Circuit Court of Appeal.

In a series of rulings, at issue here, the district court

granted summary judgment to Appellees on all of Dean’s claims.

First, the district court granted summary judgment to the

Appellees with respect to Dean’s action to annul the 1988

judgment. The court found that Dean had failed to present any

evidence showing that she was not properly served with notice of

the original suit. The court also held that the evidence

indicated that Dean was aware of the judgment, at the latest, by

July 31, 1995. Under Louisiana law, a party who believes that a

default judgment has been entered against her by fraud or ill

practice has one year to file suit from when she knew of, or

should have know of, the fraud or ill practice. Because Dean

discovered the existence of the judgment in July 1995 but did not

file her suit until November 19, 1996, the court ruled that her

claim had prescribed.

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 In a separate decision the court granted summary judgment to

GFS on Dean’s declaratory judgment action. Dean argued that she

never acknowledged the judgment or renounced prescription and,

therefore, the prescriptive period had run and GFS could not

maintain any collection action. GFS argued, however, that

because Dean had made payments to the FSLIC between 1988 and May

1990, she had acknowledged the judgment and therefore the

prescriptive period ran anew from the date of her last payment to

the FSLIC. The district court determined that Dean had renounced

prescription by continuing to make payments to the FSLIC after

the 1988 judgment and granted summary judgment to GFS.

Because we agree with the district court’s result in regards

to Dean’s attempt to annul the 1988 judgment, we AFFIRM the

district court’s entry of summary judgment in favor of the FDIC

and GFS on that issue. However, with respect to the issue of

prescription, we are Erie bound by the intervening decision of

the Louisiana Court of Appeals, which ruled (subsequent to the

district court’s decision) that the 1988 judgment had prescribed.

Therefore, we REVERSE the district court’s judgment dismissing

Dean’s declaratory judgment action.

II. DISCUSSION

Dean advances two issues on appeal. Dean argues that the

district court improperly granted the Appellees summary judgment

on her attempt to annul the 1988 judgment and she also contends

that the district court improperly granted GFS summary judgment

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on her declaratory judgment action. We discuss each of these

issues in turn.

We review the district court’s grant of summary judgment de

novo, applying the same standards as the court below. See

Matagorda County v. Law, 19 F.3d 215, 217 (5th Cir. 1994).

Summary judgment is proper when there is no genuine issue of

material fact and the moving party is entitled to judgment as a

matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett,

477 U.S. 317 (1986). A dispute regarding a material fact is

“genuine” if the evidence is such that a reasonable jury could

find in favor of the nonmoving party. See Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986).

1. Annulment of the 1988 Judgment

Dean argues that the 1988 judgment should be annulled for

two reasons. First, she claims that she was never properly

served with notice of the underlying lawsuit. Second, Dean

claims that the judgment was obtained through fraud or ill

practices.

a. Annulment for Failure to Properly Serve Notice

Dean argues that because she was not properly served with

original notice of the suit that culminated in the 1988 default

judgment, the judgment should be annulled. The FDIC produced a

return of service form that indicated that Dean had been

personally served on November 21, 1987. The form was signed

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“David Gathers per Saulny.” The FDIC also submitted an affidavit

from Deputy Gathers in which he attested to personally serving

Dean on November 21, 1987.

We begin by noting that a sheriff’s return of service is

entitled great weight and is presumed to be correct. See La.

Code Civ. Proc. Ann. art. 1292 (West 1984). Return of service is

prima facie evidence that service was effectuated. See Blue,

Williams & Buckley v. Brian Investments, Ltd., 706 So.2d 999,

1003 (La. Ct. App. 1997). If a return of service form is

produced, the party attacking service must prove by “clear and

convincing” evidence that they were not served with process. Id.

at 1004. Dean’s assertion that she was not actually served,

standing alone, fails to sufficiently rebut the presumption of

service. See Roper v. Dailey, 393 So.2d 85, 88 (La. 1980). Even

though Deputy Gathers did not personally sign the return of

service, his affidavit is viewed as an allowable amendment to the

return. See Petruit v. Leblanc, 216 So.2d 863 (La. Ct. App.

1968).

Dean has failed to overcome the presumption of service

established by the return of service form and Deputy Gather’s

affidavit. Dean offers only her own uncorroborated assertion

that she was not served and the affidavit of her son stating that

Dean never mentioned to him that she was being sued. Dean offers

no reasons why she could not have been served as the return of

service indicated. Moreover, her son’s affidavit that she never

mentioned the suit to him has no bearing on whether Dean was

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actually served. Dean has wholly failed to offer any evidence

creating a genuine issue of fact as to whether she was served.

b. Annulment for Fraud or Ill Practice

A final judgment may be annulled if it was obtained through

fraud or ill practice. See La. Code Civ. Proc. Ann. art. 2004

(West 1990). A suit to annul a judgment obtained by fraud or ill

practice must be brought within one year from when the fraud or

ill practice is, or should have been, discovered. See id.;

Gennuso v. State, 339 So.2d 335 (La. 1976); Kambitsis v.

Schwegmann Giant Supermarkets, 665 So.2d 500, 502 (La. Ct. App.

1995).

Dean claims that she did not receive a copy of the judgment

until December 1995. While this may be true, we agree with the

district court that, before she actually received a copy of the

judgment, Dean should have been on notice that it had been

entered. Once Dean had sufficient information to incite

curiosity, excite attention, or put a reasonably minded person on

guard, she had, or should have had, the “constructive knowledge

necessary to start the running of prescription.” LeCompte v.

Stat-Dep’t of Health and Human Resources- S. Louisiana Med. Ctr.,

723 So.2d 474, 476 (La. Ct. App. 1998).

On July 31, 1995, Dean’s attorney wrote to GFS inquiring as

to the details of the 1988 judgment. We agree with the district

court that this letter indicates that Dean had knowledge of the

1988 judgment by July 31, 1995, at the very latest. Knowledge of

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the judgment should have been sufficient to put Dean on notice

that the judgment may have been obtained through fraud or ill

practice. This indicates sufficient knowledge to begin the

running of the prescriptive period. Because Dean did not file

this action until over a year after having discovered the

existence of the judgment, her claim is prescribed and the

district court correctly granted summary judgment to FDIC and

GFS.

2. Dean’s Declaratory Judgment Action

In her amended complaint Dean argued that the court should

enter a declaratory judgment holding that the prescriptive period

for enforcement of the 1988 judgment had run. The district

court, however, determined that because Dean had continued to

make payments to the FSLIC between 1988 and May 1990, she had

renounced prescription.

There is a ten-year prescriptive period for the collection

of money judgments. See La. Civ. Code Ann. art. 3501 (West

1994). Dean argues that any effort by GFS to collect the 1988

judgment is prescribed because it did not file suit by January

11, 1998--ten-years after the entry of the default judgment. GFS

contends that because Dean continued to make payments to the

FSLIC between 1988 and May 1990, she acknowledged the judgment

and therefore the prescriptive period runs anew from her last

payment. Dean counters that the payments to the FSLIC were not

8
an acknowledgment of the judgment but were merely payments on the

underlying mortgage.

GFS points to Lima v. Schmidt, 595 So.2d 624 (La. 1992), and

La. Civ. Code Ann. art. 3464 (West 1994), to support its

proposition that the 1988 judgment has not prescribed.

Prescriptive statutes are “strictly construed against

prescription and in favor of the obligation sought to be

extinguished.” Lima, 595 So.2d at 629; see also Sotomayor v.

Lewis, 673 So.2d 1201, 1205 (La. Ct. App. 1996) (noting that

“prescription should be strictly construed against the

extinguishment of a claim.”). However, when a petition, on its

face, shows that the prescriptive period has run, “the burden is

on the [creditor] to show why the claim has not prescribed.”

Lima, 595 So.2d at 628 (citations omitted). The Louisiana Civil

Code provides that prescription is interrupted when one

acknowledges “the right of the person against whom he had

commenced to prescribe.” La. Civ. Code Ann. art. 3464 (West

1994). “If prescription is interrupted, the time that has run is

not counted. Prescription commences to run anew from the last

day of interruption.” La. Civ. Code Ann. art. 3466 (West 1994).

The Louisiana Supreme Court has held that a “clear and

direct” acknowledgment is not necessary to halt prescription but

that a “simple acknowledgment...requiring no particular form” is

sufficient. Lima, 595 So.2d at 632. A party may acknowledge the

rights of another without any particular formality. See Flowers

v. United States Fidelity & Guaranty Co., 381 So.2d 378, 380 (La.

9
1979). Acknowledgment of a right may be “oral or written, formal

or informal, express or tacit.” La. Civ. Code Ann. art 3464,

comment (e) (West 1994); see also Lima, 595 So.2d. at 634;

Chapital v. Guaranty Savings & Homestead Ass’n., 681 So.2d 1307,

1310 (La. Ct. App. 1996). Tacit acknowledgment “occurs when a

debtor performs acts of reparation or indemnity, makes an

unconditional offer or payment, or lulls the creditor into

believing he will not contest liability.” Lima, 595 So.2d at

634. Tacit acknowledgment “may be inferred from specific facts

and circumstances.” Id. at 632; see also Settoon Marine, Inc. v.

Great Lakes Dredge & Dock Co., 657 So.2d 537, 539 (La. Ct. App.

1995).

We find GFS’s argument, that the prescriptive period on the

1988 judgment has not run because Dean tacitly acknowledged the

judgment, to be persuasive. Nonetheless, we are Erie bound by

the recent decision of the Louisiana Fourth Circuit Court of

Appeal affirming the state trial court’s decision that the

prescriptive period on the 1988 judgment had run. See General

Financial Services, Inc. v. Dean, No. 99-CA-1798 (La.Ct.App.

1999). The Louisiana appellate court, citing Cassiere v. Cuban

Coffee Mills, 74 So.2d 193 (La. 1954), ruled that acknowledgment

of a judgment does not halt the running of prescription and that

a revival of judgment action, brought within the prescriptive

period, is “the exclusive method by which the running of

prescription on a money judgment may be prevented.” The court

found that GFS had not filed a revival action within ten years of

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the original judgment and therefore the 1988 judgment had

prescribed. As a court bound by the principles of Erie R.R. Co.

v. Tompkins, 304 U.S. 64 (1938), and its progeny, we must accept

the decision of the Louisiana appellate court.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the

district court in favor of the FDIC and GFS dismissing Dean’s

action to have the 1988 judgment declared a nullity but REVERSE

the court’s judgment dismissing Dean’s declaratory judgment

action. Each party shall bear its own costs.

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