Court Opinion

ID: 9461893
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:27:01.7371+00
Date Added: 2024-06-11T17:37:18.514560
License: Public Domain

TUTTLE, Circuit Judge
(dissenting).
With deference, I dissent.
In my view the majority can come to its conclusion that Nill’s two convictions should be reversed, and indeed the indictments dismissed, only by expressly rejecting this Court’s controlling decision of Capital National Bank of Tampa v. Hutchinson, 435 F.2d 46 (5th Cir. 1970) in which we thoroughly reviewed the Florida cases on novation, and held:
“Express agreement becomes unnecessary when the parties clearly manifest an intention to effect a novation. Assent to, and acceptance of, the terms of a novation may be implied from the facts and circumstances attending the transaction and the parties’ subsequent conduct.”
435 F.2d at 50.
Applying this standard to the facts of this case, I am firmly of the view that Nill could be properly found by the jury to have intended a novation when he arranged, drafted and had Lynch sign the $20,000 promissory note, thereby discharging the earlier Tile Company obligations. Accordingly, I believe the jury was correct to find that when Nill submitted claims against the Tile Company he did so in violation of 18 U.S.C. § 152, and when he withheld genuine bank records which would have shown the claims to be false, he committed a second violation of 18 U.S.C. § 152.
Four facts stand out as posing a jury question on whether' the Tile Company obligations were in fact discharged by the Lynch note:
(1) As the majority recognized, the record would support the inference that Nill had a vital interest in using the Lynch note to extinguish the earlier Tile Company obligations. Only through a novation would Nill accomplish the objective of concealing his possibly illegal and certainly unethical practices in violation of bank policy of lending excessive amounts of bank money to companies in which he held a substantial financial interest. Nill thus had an interest in using the Lynch note as a novation, not merely as a guarantee.
(2) The terms of .the Lynch note are quite explicit:
"THIS IS YOUR AUTHORITY TO DISBURSE TO:
JACKSONVILLE TILE COMPANY $10,144.44 Comm. Note 61595
JACKSONVILLE TILE COMPANY $ 3,612.96 Comm. Note 62045
INSTALLMENT LOAN OF GEORGE D. BOND, JR. $ 4,679.63 42321
BALANCE TO JAMES L. LYNCH $ 1,562.97"
Thus the bank is instructed to “disburse to” the four separate accounts the money obtained in exchange for the promissory note. Lynch entered into an unconditional obligation to repay the note within ninety days, at interest; this in no way resembles a mere guarantee of the Tile Company notes. The bank didn’t treat it as a guarantee, funds were disbursed to Lynch himself, the Bond note was discharged, and the loan liability cards and the “tickler cards” in the files of the two Tile Company notes were stampted to reflect the discharge of the two notes. This would certainly permit the jury to find that the Lynch *804note was not to guarantee the Tile Company notes, but to discharge them.
This theory that the Lynch note was only a guarantee was the only defense offered by Nill at trial; the jury could properly reject it. The bank had two standard forms of guaranteeing a third party’s obligations — and neither involved incurring an unconditional obligation. Indeed, Lynch himself had previously guaranteed a portion of the Tile Company’s obligations by endorsing the notes, not by obtaining a note in his own name.
(3) The Bank immediately treated the notes as discharged — the loan liability ledger cards were marked paid, and most significantly the index cards kept in the file with each promissory note known as “tickler cards” were also stamped PAID. The majority opinion does not mention these cards, yet testimony offered at trial established that these cards were the bank’s principal bookkeeping index system, and that the bank relied on the notations on these cards as showing the status of an account rather than the note itself. Thus the majority’s reliance on the fact that the bank did not stamp the promissory notes PAID is misplaced — in the bank’s view the more important record was the tickler card, and in both cases they were stamped PAID on the date of the Lynch note.
Bank officers testified at trial that it was the invariable practice of the bank to stamp the tickler cards and the notes at the same time; the only reason the two notes were not stamped PAID must have been, they testified, that the notes were removed from their proper files. The record is silent as to how these notes were removed — but given the fact that the notes must have been secreted elsewhere by someone, with the effect of preventing them from being stamped PAID, it seems odd to me to rely on this fact to show the notes were not discharged.
(4) Finally, and most importantly, Nill’s conduct in my view would permit the jury to find that he believed the Lynch note to have discharged the Tile Company’s debts. There could be no other reason for him to submit falsified bank records if he believed the Lynch note had not discharged the two Tile Company notes. Withholding the genuine bank documents, which would have alerted the trustee in bankruptcy that a novation might have occurred, in my view gives rise to the inference that Nill believed a novation had occurred.
The majority treats this submission of falsified bank records in an odd way. Without disputing that the evidence was certainly sufficient to find that Nill had forged the records he submitted, the majority finds that because it doesn’t believe a novation took place, then accordingly Nill’s submission of forged records is without legal significance and cannot have been done with the requisite fraudulent intent.
In sum, I believe there was ample evidence from which the jury could find that a novation had occurred and that Nill knew, it; that when he submitted a claim on behalf of the Bank he knew that in fact the Bank no longer was a creditor of the Tile Company. Had Lynch attempted to submit a claim on his own behalf there is no evidence he would have stood in as favorable a secured position as the Bank in obtaining partial payment from the bankrupt company — thus Nill could be found to have had the requisite fraudulent intent when he submitted a claim on behalf of the Bank which he knew to be false, and which he actually submitted on behalf of his friend Lynch. Although the majority does not mention it, the record shows that the money paid by the trustee to the bank was immediately deposited in Lynch’s account, at Nill’s direction.1
*805The majority rejects the jury verdict, but it is difficult to understand by what process it arrives at this decision. First the opinion reviews Florida law on novation and decides that the cases require evidence of an express agreement of novation.2
Secondly, while not in so many words reversing this Court’s decision in Capital National Bank which, after all, had construed precisely the same two cases discussed by the majority, and many more in addition to the two cases relied upon by the majority, the majority suggests that Capital National Bank cannot apply to this case because it was decided after Nill submitted his claim, and Nill had a right to rely on the weight of Florida authority on point. This is an odd view; this Court was bound by Erie to adhere to the controlling Florida law in Capital National Bank — and by applying Erie principles this Court determined that the weight of Florida authority did not require an express agreement of novation. To suggest that Capital National Bank announced a change in the Florida law on novation and thus may be given only prospective application completely misreads the opinion, and given the fact the Court was Erie-bound in the case, tacitly reverses the case. I cannot agree.
“We are bound by this Court’s prior decisions on what is the law of a state in a diversity case, just as we are bound by prior decisions of this Court on what is federal law.”
Newell v. Harold Shaffer Leasing Co., 489 F.2d 103, 107 (5th Cir. 1974).3
There has been no intervening Florida state decision which undermined the Court’s decision in Capital National Bank, and thus I think it is clear we are bound by it. Thus
“whether a novation exists, in any situation depends on factual allegations and proof, not legal conclusions.”
435 F.2d at 50. The question of intent should be left to the jury, for
“[ojnly when the intention and purpose of the taking of the promissory note appears conclusively to have been for the purpose of further securing an antecedent obligation will there remain no factual issue as to intent for the jury.”
435 F.2d at 51.
The question of novation thus depends entirely on the factual issue of the intent of the parties. The jury resolved this question, implicitly finding a novation by finding Nill guilty of submitting a false claim to the trustee in bankruptcy. The majority now reverses this jury finding on the ground that
“under the facts of this case [Nill] is entitled to the benefit of the later stated rule that the existence or absence of a clear manifestation of an intention to have so agreed [to novation] is a jury question. On the latter premise, he could not be branded criminally for submitting the claim and, if *806it was contested, to have the factual issue decided in the bankruptcy court.”
As I understood this passage, the majority holds either (1) the jury verdict must be reversed because the question of intent is a jury question, or (2) the proper forum for deciding whether novation occurred and whether the claim submitted was consequently a false one is in the bankruptcy court itself. The first simply is incomprehensible; we don’t reverse a jury verdict because a jury question is presented, unless there was insufficient evidence for the jury to have decided novation occurred — and the majority nowhere discusses the sufficiency of the evidence as to intent save to announce:
“In the absence of a clear agreement (and there was none shown by the evidence in this case) there must be a clear manifestation of an intention that such was the agreement. In the end, this amounts to the same thing.”
The majority does not discuss the facts I have set out which in my view presented a jury question as to the intent of the parties. It is clear to me that there was sufficient evidence, manifested by the conduct of the parties and the terms of their agreement, for the jury to find novation.
The second possible construction of the majority’s holding is even less persuasive, however. The bankruptcy court which the majority says should have decided whether a novation took place was never apprised that the question existed: it didn’t receive genuine bank documents showing the Tile Company’s accounts as discharged, it received forged documents showing nothing of the Lynch note. Further it is unclear to me who would challenge the Nill claim thereby contesting the question and posing the issue for resolution by the bankruptcy court — the bank was not aware of the bankruptcy proceedings, as Nill had persuaded the trustee to forward subpoenas to him personally.
The notion that the falseness of the claim submitted by Nill should only be determined in the bankruptcy proceedings reflects what I believe to be the central thrust of the majority’s opinion— that 18 U.S.C. § 152 involves only trivial offenses which should not be the subject of a prosecution in federal court. Unless the majority means to overrule this act of Congress making it a criminal offense to fraudulently submit a false claim in bankruptcy proceedings or to withhold genuine relevant documents from the trustee in bankruptcy, I fail to see how the court can hold that a jury in a federal criminal prosecution could not decide whether Nill’s claim was false, but that this question should be left to the bankruptcy court. As I understand the opinion, then, it stands for the view that even if the Tile Company debt had been discharged and Nill knew it and submitted a claim he knew to be false, the jury nonetheless could never find the requisite fraudulent intent — in short, that 18 U.S.C. § 152 no longer can serve as the basis for a criminal prosecution. The majority thus holds, as a matter of law, such a claim is merely “erroneous” and can never be “wilfully fraudulent.” It is only by so holding that the majority can justify its mandate to the district court to dismiss the indictments: the court thus holds not only that the evidence below was not sufficient to uphold the jury’s verdict, but that no evidence can be offered which would prove Nill guilty of a violation of 18 U.S.C. § 152.
I disagree.
I also disagree with the majority’s disposition of Count II, but as the majority only tracks its previous discussion in dealing with Count I, I do not discuss the question further.
.1 would finally reject the defendant’s claim of prejudice arising from the Government’s cross-examination of Nill as to his financial ventures. I believe the trial court properly exercised its discretion in permitting this cross-examination. Nill’s pattern of self-dealing was important in evaluating why he would take the steps he did in concealing his involvement with „ the Tile Company. Only after realizing the nature of Nill’s financial scheming could the jury appre*807cíate the risks the defendant faced should the general counsel of the Bank learn of the Tile Company’s bankruptcy and thence of Nill’s pattern of self-dealing, lending bank funds to corporations in which he had a substantial financial interest. I believe Nill’s financial schemes were relevant to his motive and intent in concealing his true involvement in the Tile Company from bank officers.
While the majority does not reach the other claims of error made by the defendant, I have considered them and find them to be without merit. I would affirm the convictions.

. A corporate officer who claims the status of a secured creditor has the burden of proving far more than an outsider, like the Bank, must prove: “[D]isallowance or subordination of the claim of a controlling officer of a bankrupt corporation is determined ‘in light of equitable considerations’ and his dealings with the bankrupt are subjected to rigorous scrutiny, the burden being on him to prove not only good faith but inherent fairness from the viewpoint *805of the corporation. The bankruptcy court should sift the circumstances surrounding any claim to see that no injustice is done, particularly, when the claim is one by an officer, director or stockholder, and disallowance or subordination may be grounded simply on violation of rules of fair play and good conscience.” 3A Collier on Bankruptcy fl 63.06[5.-3] at 1791 (14th Ed.) Thus I shouldn’t think it is necessary to show that in fact Lynch’s claim would have been subordinated to the claims of other secured creditors — for this decision should have been left to the bankruptcy court. Rather, Nill’s conduct could have been found to have the requisite' fraudulent intent from his refusal to permit the bankruptcy court to evaluate the merits of Lynch’s claim, thus giving rise to the inference that Nill believed the Bank would receive better treatment at the hands of the bankruptcy trustee than would Lynch, a half-owner of the company.

. While the majority says the record doesn’t disclose an express agreement on novation, I don’t agree that this is correct. I think the majority is confusing a “written” agreement with an “express agreement” — for it does seem that Lynch and Nill “expressly” agreed as to the effect of the Lynch note, but since the exact terms of their agreement weren’t set out in writing, it became a jury question.

. We have many times reaffirmed the principle that one panel of this Court will not overrule the decision of another panel unless it is done by an en banc Court, or there has been an intervening change in the law. Linebery v. United States, 512 F.2d 510 (5th Cir., 1975) and cases cited therein.