UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 91-3583

RESOLUTION TRUST CORPORATION as

Receiver for Security Homestead

Federal Savings and Loan Association,

Plaintiff-Appellee,

VERSUS

JOHN J. EITMANN, JR.

Defendant-Appellant

.

Appeal from the United States District Court

for the Eastern District of Louisiana

( June 15, 1993 )

Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.

DeMoss, Circuit Judge:

Defendant John J. Eitmann, Jr. appeals an adverse summary

judgment in Security Homestead Association's suit to assess a

def iciency judgment against him and to enforce that judgment

against property which Eitmann own s. Concluding that the trial

court erred in entering summary judgment and that a third party

needs to be brought in to adequately determine the rights of all

parties in this proceeding, we vacate the summary judgment and

remand for further proceedings consistent with this opinion.2

In June 1984 Eitmann and his sister obtained a loan from

Security Homestead, secured by property the Eitmanns owned at 1408

Beron Dr., in the Parish of Jefferson, Louisiana. Security

Homestead required that Eitmann pay the premiums on a policy of

private m ortgage insurance issued by United Guaranty Residential

Insurance Company to Security Homestead. Although Eitmann paid the

premiums on the insurance policy, the insurance agreement was

solely between United Guaranty and Security Homestead . The only

documents evidencing the agreement between Eitm ann and Security

Homestead regarding payment of these premiums were the notations

inserted on the closing statement prepared by the title company

when Eitmann originally acquired the property with money borrowed

from Security Homestead. In 1988 Eitmann defaulted on the loan

payments and Security Homestead instituted foreclosure proceedings

in Louisiana Stat e Court. At the time of commencement of these

foreclosure proceedings, in March 1988, Eitmann was living at 1609

Airline Park Blvd., Metairie, Louisiana, and not at the address of

the Beron Drive property. Security Homestead purchased the Beron

Drive property at judicial auction in August 1988, and in January

1989, Securit y Homestead obtained a deficiency judgment against

Eitmann for the balance owed after crediting the value of the Beron

Drive property.

On February 9, 1989, United Guaranty paid $12,149.34 to

Security Homestead pursuant to a claim made by Security Homestead

on the private mortgage insurance policy. Shortly thereafter

Security Homestead requested the Louisiana Clerk of Court to issue3

a writ of fie ri facias to seize and sell the property owned by

Eitmann on Airline Park Blvd. where he was then residing. The day

before the judicial sale of Eitmann's Airline Park property was to

take place, Eitmann filed a motion to enjoin the sale and a

petition to annul the deficiency judgment. Eitmann alleged that

the deficiency judgment failed to reflect that he was entitled to

a credit for $12,149.34 paid to Security by Homestead by United

Guaranty. The state court issued a temporary restraining order,

enjoining the sale of the Airline Park Blvd. property.

In December 1989, the Resolution Trust Corp. ("RTC") was

substituted for Security Homestead as plaintiff in the state court

actio n and removed the state case to federal court. In May 1990

the RTC filed a motion for summary judgme nt on the grounds that,

under the policy issued by United Guaranty, Eitmann had no right to

obtain a credit for amounts paid to Security Homestead by United

Guaranty. Because the policy was not before the district court,

that motion was denied. The RTC filed a second summary judgment

motion when the original of the policy between United Guaranty and

Security Homestead was submitted to the court pursuant to an

affidavit by the vice president of Security Homestead Federal

Savings Assn., who was the successor to the assets of Security

Homestead. Pursuant to a pretrial order entered into by the

parties and the court on November 23, 1990, some 40 uncontested

material facts were identified and agreed upon but there were also

seven contested material facts identified, and 13 contested issues

of law. The pretrial order also set December 3, 1990, at 10:004

a.m . as the trial date for the matter before the district judge

without a jury. One of the contested material facts was whether

United Guaranty "is attempting to directly collect its payment from

Eitmann."

OPINION

This dispute revolves around the question of whether or not

United Guaranty has a right of subrogation against Eitmann for the

sums it paid to Security Homestead on the private mortgage

insurance contract. In the letter of February 9, 1989, by which

United Guaranty sent its check to Security Homestead, United

Guaranty advised Security Homestead that it intended to contact the

borrower (Eitmann) in an effort to recover its loss and concluded

that letter to Security Homestead with the following words:

Your involvement will not be necessary unless

the matter reaches the point of litigation, at

which time we will contact your offic e to

discuss assignment of subrogation rights. If

this does not meet with your approval, please

let us know within 15 days of the date of this

letter.

Then on April 7, 1989, United Guaranty sent a letter to

Eitmann at his address on Airline Park Blvd. advising him as

follows:

Under Stat e Law and the particular facts of

this case the lender has a legal right to

recover i ts loss from you up to $12,149.34

plus interest from the date of the foreclosure

sale and that right now rests with us as a result of our claim payment to the lender.

(Emphasis added.)

This letter went on to request Eitmann to contact United Guaranty

and discuss a repayment arrangement. The subrogation rights of5

United Guaranty are defined in paragraph 19 of the private mortgage

insurance agreement, which provides as follows:

19. Limited Subrogation Rights: The Company

[United Guaranty] shall be subrogated to all

of the rights of the insured [Security

Homestead] against the Borrower [Eitmann]

and/or all other parties liable for the

payment of the Loan arising out of or

connected with the loan t o the extent of the

payment of benefits by the comp any under the

Policy (I) In all cases where the Real Estate

[the Beron Drive property] does not consist of

a single family dwelling occupied by the

borrower, and (II) when the Insured agrees

that the company shall have subrogation

rights. Except as herein provided, the

company shall have no subrogation rights

against the Borrower.

Relying on various affidavits furnis h ed by Security Homestead

personnel that "neither Security Homestead nor its successors have

ever agreed that United Guaranty would have subrogation rights in

connection with the Eitmann loan," the trial court concluded, that

"since United Guaranty has no right to recover from Eitmann the

amount it paid to Security Homestead, defendant is not in any

danger of paying twice." We disagree with this conclusion of the

trial court for two reasons:

A. First, there is nothing in the summary judgment

record which determines whether the Beron Drive property was

or was not a "single family dwelling occupied by the borrower"

within the meaning of subclause (I) of paragraph 19. The

record infers that at the time of the commencement of the

foreclosure proceeding and thereafter, Eitmann was residing in

the Airline Park Blvd. property and this co uld well afford6 c:br:opin:91-3593u:mek United Guaranty a basis for claiming a right of subrogation;

and

B. Second, the letters described above from United

Guaranty to Security Homestead and to Eitmann both strongly

infer that United Guaranty thought it had the right to assert

a subrogation claim against Eitmann.

Paragraph 19 of the private mortgage insuran ce agreement is

certainly not a paragon of clarity; and we think a genuine issue of

material fact exists as to the intentions of the parties regarding

subrogat ion rights of United Guaranty against Eitmann under the

facts of this case.

More fundamentally, absent the joinder of United Guaranty in

this proceeding, we do not see how any conclusions which might be

made in this proceeding would be binding upon United Guaranty; and

in order to avoid the possibility that Eitmann might be required to

pay the full deficiency balance being asserted by the RTC and also

the $12,149.34 subrogation claim being asserted by United Guaranty,

we think justice will be better served by vacating the summary

judgment herein, and remanding this case to the district court with

instructions that the district court afford Eitmann an opportunity

to file a third party claim against United Guaranty to determine

its subrogation rights against him.

Judgment of the trial court is VACATED and case REMANDED to

the trial for further proceedings consistent herewith.1 Although, on appeal, Eitmann has also raised a disclosure

challenge to his arrangement with Security pursuant to the Truth in

Lending Act, 15 U.S.C. § 1601, et seq.

, Eitmann did not adequately

raise this issue below. Therefore, it is not properly before this

court. J ames v. McCaw

, 988 F.2d at 585; see also McCann v. Texas

, KING, Circuit Judge, dissenting:

The issue presented by the partie s in this case is

straightforward: whether, by asserting that Security's deficiency

judgment against him should be annulled pursuant to Louisiana law,

Eitmann has raised a genu ine issue of material fact. Because I

believe that Eitmann has failed to establish a basis upon which to

annul Security's deficiency judgment, I respectfully dissent from

the majority's decision to vacate the judgment of the district

court a nd remand this case to give Eitmann another bite at the

apple.

"On an appeal from summary judgment, the reviewing court

cannot consider arguments or fac tual allegations raised for the

first time

. . . ." J ames v. McCaw Cellular Communications, Inc.

,

988 F.2d 583, 585 (5th Cir. 1993); s ee also McCann v. Texas City

Refining, Inc.

, 984 F.2d 667, 673 (5th Cir. 1993) ("It is the

unwavering rule in this Circuit that issues raised for the first

time on appeal are reviewed only for plain error."). We have also

held repeatedly that "issues not briefed, or set forth in the list

of issues presented, are waived." Atwood v. Union Carbide Corp.

,

847 F.2d 278, 280 (5th Cir. 1988), cert. denied

, 489 U.S. 1079, 109

S. Ct. 1531 (1989).

Eitmann's only chal lenge to the deficiency judgment against

him is that it should be annulled pursuant to Article 2004 of the

Louisiana Code of Civil Procedure. 1 Eitmann asserts that, because984 F.2d at 673.

8 c:br:opin:91-3593u:mek Security received a payment of $12,149.34 from Guaranty after

obtaining its deficiency judgment against him, Security's

enforcement of its deficiency judgment would constitute an

"unconscionable and ill practice." Therefore, according to

Eitmann, Security's deficiency judgment should be annulled pursuant

to Article 2004 of the Louisiana Code of Civil Procedure, which

provides that " [a] final judgment obtained by fraud or ill

practices may be annulled."

A judgment has been obtained by fraud or ill practices

pursuant to Article 2004 when (1) the circumstances under which the

judgment was rendered show the deprivation of legal rights of the

litigant who seeks relief, and (2) the enforcement of the judgment

would be unconscionable and inequitable. State v. Batchelor , 597

So.2d 1132, 1135 (La. App.), writ denied

, 604 So.2d 964 (La. 1992);

Kem Search, Inc. v. Sheffield

, 434 So.2d 1067, 1070 (La. 1983).

Security obtained its deficiency judgment against Eitmann so that

it could collect the unpaid balance of the loan it made to him, and

Eitmann never appealed from t hat judgment. Eitmann brought this

action only when Security sought to enforce its deficiency judgment

by seizing his Airline Park property. Moreover, Security received

no money pursuant to its policy with Guaranty until after it had

obtained its deficiency judgment against Eitm ann, and the record2 Under Louisiana law, a third-party-beneficiary contract

will be found "only when the contract clearly contemplated the

benefit to the third person as its condition or consideration[,]"

and the benefit bestowed to the third party must be more than

merely incidental to the contract. N ew Orleans Public Service,

Inc. v. United Gas Pipe Line Co.

, 732 F.2d 452, 467 (5th Cir. 1984)

(emphasis in original), cert. denied

, 469 U.S. 1019, 105 S. Ct. 434

(1984); see Wallace v. Texaco, Inc.

, 681 F.2d 1088, 1090 (5th Cir.

1982) (t he contract must reveal that the contracting parties

intended to benefit the third party); see also L A

. C IV

. C ODE A NN

. ART

. 1978 (West 1990) ("A contracting party may stipulate a benefit for

a third person called a third party beneficiary."). The

unambi guous language of paragraph 26 of the mortgage insurance

policy in the case before us expressly states that Eitmann is not

a beneficiary, and paragraph 18 expressly states that Security did

not give up its right to collect the full amount of the loan from

Eitmann by entering into its agreement with G uaranty.

Specifically, paragraph 26 provides that "[t]he Borrower or any

successive owner of the Real Estate is not included as a beneficiary or an insured under the Policy." Paragraph 18 provides

that "[a]ny payment pursuant to Section 18(a) or Section 18(b)

hereof shall not be applied, or be considered by the borrower to be

applied, to the payment of the Loan."

3 W illiams v. N.Y. Fire & Marine Ins. Co.

, 427 So.2d 938, 939

(La.App. 1983).

9 establishes that Eitmann is neither a party to nor beneficiary of

that policy. 2

The majority believes that Guaranty's potential subrogation

rights against Eitmann pursuant to th e mortgage insurance policy

present a basis for Eitmann's assertion that the deficiency

judgment against him was rendered under circumstances showing a

deprivation of hi s legal rights in accordance with Article 2004.

It is well established under Louisiana law that "[a]n action for

nullity cannot be substituted for a timely appeal[,]" 3 and that "a

judgment should not be annulled under ordinary circumstances simply

because there was lack of diligent presentation of a valid defense

which could have been pleaded before judgment." W illiams

, 42710 c:br:opin:91-3593u:mek So. 2d at 940; M uller v. Michel Lecler, Inc

., 266 So.2d 916, 918

(La.App. 1972). Because (1) Eitmann's challenge is based upon an

insurance policy to which Eitmann w as neither a party nor

beneficiary, (2) as is evidenced by his payment of premiums on the

insurance policy and the fact that it was a precondition for

obtaining his loan from Security, Eitmann knew of the policy's

existence at the time Security br ought its deficiency action

against him but never raised any issue about mortgage insurance or

subrogation when challenging that action, (3) Eitmann never

appealed from the underlying deficiency judgment, and (4) Security

received no payment under the terms of its policy with Guaranty

until after obtaining a deficiency judgment against Eitmann , I

cannot join the majority in concluding that Eitmann's Article 2004

claim has any merit and that a rational trier of fact could find in

his favor. S ee Will iams , 427 So.2d at 939-40; s ee also Amoco

Production Co. v. Horwell Energy, Inc. , 969 F.2d 146, 147-48 (5th

Cir. 1992) (If a rational trier of fact, based upon the record as

a whole, could not find for the non-moving party, there is no

genuine issue for trial).

Private mortgage insurance like that structured by Secu rity

and Guaranty is somewhat troubling in that borrowers like Eitmann

pay premiums for insurance from which the only benefit that they

derive is obtaining a loan that they might not otherwise be able to

obtai n. Nevertheless, we are not Eitmann's attorneys; we are

judges an d we do not have a roving warrant to correct Eitmann's

litigation mistakes in this lawsuit and the predecessor suit on a11

note because we are troubled by private mortgage insu rance

generally. Eitmann has failed to establish a legitimate claim

pursuant to section 2004, and this is the only claim Eitmann's

attorneys have properly brought befor e us. Accordingly, I would

conclude that the RTC in its capacity as conservator and receiver

for Security was entitled to summary judgment as a matter of law,

and I would affirm. S ee F ED

. R. C IV

. P. 56 (c); Amoco

, 969 F.2d at

147-48.