1

United States Court of Appeals,

Fifth Circuit.

No. 93-2742

Summary Calendar.

Alan GRANADER, Plaintiff-Appellant,

v.

Jim D. McBEE, Defendant-Appellee.

June 22, 1994.

Appeal from the United States District Court for the Southern

District of Texas.

Before REYNALDO G. GARZA, SMITH and WIENER, Circuit Judges.

PER CURIAM:

Alan Granader ("Granader") appeals the district court's grant

of summary judgment against him, and the district court's award of

Rule 11 sanctions. Finding no error, we AFFIRM the district court

on both points of appeal.

I. FACTS

In December of 1988, Alan Granader borrowed $50,000 from First

National Bank of Texas ("Bank") to purchase 5,000 shares of Bank

common stock for his children. When the Bank did not deliver his

stock, Granader made inquiries about the status of the stock. Upon

being provided a copy of the stock certificates in 1989, Granader

discovered that the stock had been incorrectly issued in his name,

rather than his children's names. He also discovered that the

stock was not a new issue, but a transfer of Jim D. McBee's, the

Bank's president, stock. In spite of this information, Granader

did not file suit or seek a correction.
 

1A prior panel of this court granted the FDIC's motion to

remand on the basis that it had not asked for summary judgment,

and Granader was not given proper notice that the district court

was going to grant summary judgment in favor of the FDIC. 

2

On July 23, 1992, the Bank was declared insolvent at which

time the FDIC was appointed Receiver of the Bank. Granader filed

a suit in Harris County state court against Jim D. McBee ("McBee")

and the FDIC. The FDIC removed the suit to federal court. McBee

moved for summary judgment and the district court granted summary

judgment in favor of McBee and the FDIC.1 McBee later filed a

motion for Rule 11 sanctions against Granader. The district court

granted the motion and ordered Granader to pay $8,890 in sanctions.

Granader timely appealed to this court.

II. DISCUSSION

Granader claims the district court erred in granting summary

judgment in favor of McBee, and in granting McBee's motion for Rule

11 sanctions.

A. Did the district court err in granting summary judgment?

Granader asserts that the district court erred in granting

summary judgment in favor of McBee, because McBee failed to meet

his summary judgment burden. Granader argues that the district

court granted summary judgment on all of his claims even though

McBee's motion failed to mention his claim under Section 33 of the

Texas Securities Act and his shareholder derivative claim.

Granader argues that silence and omission cannot inform the

district court of anything, nor identify parts of the record to

support summary judgment. See N.L. Industries v. GHR Energy Corp.,
 

2Dan Granader was a First National Bank of Texas board

member. 

3

940 F.2d 957, 965 (5th Cir.1991), cert. denied, --- U.S. ----, 112

S.Ct. 873, 116 L.Ed.2d 778 (1992) (This court rejected as

"disingenuous" defendant's efforts to support summary judgment on

all claims where it only sought summary judgment as to some

claims.).

Granader argues that in granting summary judgment on the

non-contract claims, the district court relied on the inaccurate

view that he brought his cause of action only after the Bank failed

and he lost his investment. Granader claims that he sued McBee in

1991 and sued the Bank on July 22, 1992, before the Bank failed on

July 23, 1992.

Granader also argues that even if we believe that McBee met

his summary judgment burden, clearly he met his burden of showing

that genuine issues of material fact exist. Granader claims that

McBee's motion is predicated on the following two arguments: (1)

McBee made no representations to Granader, hence, Granader could

not have relied on same; and (2) there was no agreement between

McBee and Granader. Granader, however, claims that he presented

evidence that McBee made oral representations about the Bank's

stock in at least one Bank board meeting and that these

representations were directly relayed to Granader by his brother,

Dan Granader.2 Granader also claims that he presented evidence

that McBee made written representations about the Bank's stock in

materials that the Bank directly relayed to Granader. Granader
4

concludes that because of the conflicting evidence, fact questions

exist for jury resolution.

Granader further argues that a substantial portion of his suit

effectively involves fraud and misrepresentation of one specie or

another. Granader claims that under Texas law, "whether a fraud

has been committed is a fact question to be determined by the trier

of facts." Berquist v. Onisiforou, 731 S.W.2d 577, 580

(Tex.App.—Houston [14th Dist.] 1987, no writ). Finally, Granader

argues that there are fact questions present in his shareholder

derivative claim. He claims that although the funds from his

purchase of "new issue" stock were to go to the Bank to provide

additional working capital, the funds instead were diverted to

McBee in exchange for "old stock."

We review the district court's grant of summary judgment by

reviewing the record under the same standards which guided the

district court. Alexandria Associates, LTD., v. Mitchell Co., 2

F.3d 598, 600 (5th Cir.1993). A grant of summary judgment is

proper when no genuine issue of material fact exists that would

necessitate a trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-

25, 106 S.Ct. 2548, 2552-54, 91 L.Ed.2d 265 (1986). In determining

whether the grant was proper all fact questions are viewed in the

light most favorable to the nonmovant. Questions of law, however,

are decided de novo. Walker v. Sears, Roebuck & Co., 853 F.2d 355,

358 (5th Cir.1988). The moving party has the burden of showing

that there is no genuine issue of material fact and that the moving

party is entitled to judgment as a matter of law. Williams v.
5

Adams, 836 F.2d 958, 960 (5th Cir.), reh. denied, en banc, 844 F.2d

788 (5th Cir.1988). Once the movant carries this burden, the

burden shifts to the nonmovant to show that summary judgment should

not be granted. Celotex, 477 U.S. at 324-25, 106 S.Ct. at 2553-54.

A party opposing a properly supported motion for summary judgment

may not rest upon mere allegations or denials of pleading, but must

set forth specific facts showing the existence of a genuine issue

for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57,

106 S.Ct. 2505, 2514-15, 91 L.Ed.2d 202 (1986).

The district court properly granted summary judgment in

McBee's favor. McBee disproved, as a matter of law, at least one

essential element of each of Granader's causes of action. By

Granader's own admission, there was no agreement between him and

McBee. Furthermore, they never discussed the purchase of the

Bank's stock. Hence, Granader cannot prove his cause of action for

breach of contract, because the uncontroverted evidence is that

there was no agreement whatsoever between Granader and McBee.

Granader also cannot prove his cause of action for common law

or securities fraud. Reliance is an element of both common law and

statutory fraud in a securities transaction. Haralson v. E.F.

Hutton Group, Inc., 919 F.2d 1014, 1025 n. 4 (5th Cir.1990) (Texas

imposes civil liability for false representations of material facts

or material promises that are relied on by [a plaintiff] in

entering into [a real estate or stock] contract.). By his own

admission, Granader cannot prove that he relied upon any

representation, communication or statement by McBee when he
6

purchased the Bank's stock.

Furthermore, Granader cannot prove that McBee's conduct

constitutes grounds for recision pursuant to Section 33 of the

Texas Securities Act. Although reliance is not required in a

Section 33 action, materiality is. An omitted fact is material if,

there is a

substantial likelihood that, under all the circumstances, the

omitted fact would have assumed actual significance in the

deliberations of the reasonable shareholder. Put another way,

there must be a substantial likelihood that the disclosure of

the omitted fact would have been viewed by the reasonable

investor as having significantly altered the "total mix" of

information made available.

TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct.

2126, 2132, 48 L.Ed.2d 757 (1976). Granader's complaint that he

would not have purchased the stock if he had known that the stock

would be issued in his name rather than his children's names, does

not, as a matter of law, rise to the level of materiality.

Finally, Granader cannot prove his claim for negligent

misrepresentation. Reliance is an element of negligent

misrepresentation. Federal Land Bank Ass'n of Tyler v. Sloane, 825

S.W.2d 439, 442 (Tex.1991). By Granader's own admission, he cannot

prove that he acted in reliance upon any representation,

communication or statement by McBee when he purchased the stock.

B. Did the district court err in granting the motion for Rule 11

sanctions?

Granader argues that the district court's order granting Rule

11 sanctions should be reversed. He claims that the district

court's order fails to meet the requirements for appellate review.

He asserts that the district court failed to: (1) enter specific
7

factual findings; (2) indicate in the record all the factors it

considered in choosing the attorney's fee award as a sanction; (3)

state in the record which alternative sanctions, if any, it also

considered; and (4) explain why the sanction it imposed was the

least severe sanction adequate to serve the purposes of Rule 11.

See Akin v. Q-L Investments, Inc., 959 F.2d 521, 534-35 (5th

Cir.1992).

Granader also asserts that the order constitutes an abuse of

discretion. Granader claims that the order is based on the

district court's erroneous view that his suit against McBee was

wholly frivolous. Granader further asserts that the order

constitutes an abuse of discretion because McBee waited until

termination of the suit to file his motion for Rule 11 sanctions.

Granader claims that this court has condemned this practice as

untimely, a failure to mitigate, and retaliatory. Thomas v.

Capital Sec. Services, Inc., 836 F.2d 866, 881 (5th Cir.1988) (en

banc).

As Granader points out, we review a district court's award of

sanctions for an abuse of discretion. Akin, 959 F.2d at 534

(citing, Thomas, 836 F.2d at 872.). The district court, in its

order awarding the sanctions, stated,

[McBee's] cross-motion for sanctions is GRANTED in the amount

of $8,890.00. It is the Court's opinion that the plaintiff's

suit against Jim D. McBee is wholly frivolous and should not

have been brought. The evidence shows no representations made

by McBee and no reliance on McBee by Granader. The

plaintiff's insistence on suing McBee is disingenuous to say

the least.

Contrary to Granader's assertions, the district court's order
8

adequately meets the requirements for appellate review set out in

Akin. The district court made specific factual findings. The

district court found Granader's suit wholly frivolous, and stated

that it should not have been brought. It based this decision on

the fact that the evidence showed that McBee made no

representations and no reliance on McBee by Granader.

 This court has stated that the relevant policy concerns

underlying Rule 11 are as follows:

"On the one hand, rule 11 sanctions are designed to deter

frivolous lawsuits. Sanctions also insure, to a large degree,

that victims of frivolous lawsuits do not pay the expensive

legal fees associated with defending such law suits....

On the other hand rule 11 only authorizes "reasonable' fees,

not necessarily actual fees."

Thomas, 836 F.2d at 879 (quoting, United Food & Commercial Workers

v. Armour and Co., 106 F.R.D. 345, 348-49 (1985)). When the

district court stated that Granader's suit was wholly frivolous and

should not have been brought, it explained why the award of McBee's

attorney's fees was the least severe sanction adequate to serve the

purposes of Rule 11.

Therefore, we find that the district court did not abuse its

discretion in awarding Rule 11 sanctions against Granader.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the district court's

grant of summary judgment in favor of McBee, and award of Rule 11

sanctions against Granader.