Appeals from the United States District Court for the Northern District of Texas. D.C. DOCKET NUMBER CA5-90-192-C. JUDGE Sam R. Cummings
Before Wisdom,*fn* Garwood, and Higginbotham, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
The FDIC sued on a promissory note executed by Rex P. Fuller on behalf of himself, his sisters, Ann Fuller Lydick Clayton and Jane Fuller Jackson, and his father, R.P. Fuller in favor of Continental Illinois National Bank and Trust Company of Chicago in December 1984. The makers defaulted in May 1986 and Continental accelerated the note and sued in September 1986. Fuller*fn1 counterclaimed for fraud, racketeering, and civil conspiracy.
In April 1987, Continental assigned Fuller's note to the FDIC in its corporate capacity. The FDIC and the Fullers then began settlement negotiations agreeing to temporarily dismiss the suit during their effort. When no settlement was reached, the FDIC sued on the note in September 1990.
Fuller answered the FDIC's claim in part by a plea of laches. At trial, the court rejected the defense of laches holding that laches cannot be asserted against the FDIC in its corporate capacity. The jury returned a verdict in favor of the FDIC for the principal amount of $4,500,096.50. The court awarded the FDIC costs, post-judgment interest, and counsel fees, but denied prejudgment interest.
Fuller urges that the court erred in rejecting laches as a defense and asks for a trial of the issue. The FDIC cross-appeals the denial of prejudgment interest. We do not reach the broad contention that laches is never a defense to a claim by the FDIC in its corporate capacity. We conclude that laches is, in any event, not a defense to the legal claim against Fuller and that the district court did not err in not awarding prejudgment interest.
The FDIC argues that laches is not a defense to its legal claim, a suit on the note for debt. The FDIC points out that it filed suit within the limitations period and that it is equally clear that the FDIC asserted a legal and not an equitable claim.
The FDIC relies on Clark v. Amoco Production Co., 794 F.2d 967 (5th Cir. 1986), in which we held that under Texas law, laches is usually not a defense unless the claim is "of an essentially equitable character." Judge Rubin articulated the consistent principle behind laches as "equitable remedies are not available if granting the remedy would be inequitable to the defendant because of the plaintiff's long delay." Environmental Defense Fund, Inc. v. Alexander, 614 F.2d 474, 478 (5th Cir.), cert. denied, 449 U.S. 919, 66 L. Ed. 2d 146, 101 S. Ct. 316 (1980). This principle illustrates the equitable nature of the laches defense, implying its inapplicability to claims for legal remedies. In Franks v. Bowman Transp. Co., 495 F.2d 398, 406 (5th Cir. 1974), rev'd on other grounds, 424 U.S. 747, 47 L. Ed. 2d 444, 96 S. Ct. 1251 (1976), we stated that "in an equitable action, equitable defenses may be raised, and these include the doctrine of laches." The converse would be that in legal actions, laches is not available. See Morgan v. Koch, 419 F.2d 993, 996 (7th Cir. 1969).
This would end the matter but, we are told, there is an exception to this general rule. In "extraordinary circumstances," laches may be asserted before limitations has run. Of course, this sidesteps the issue of whether laches can bar a legal claim filed within the statute of limitations and the only relevant Fifth Circuit precedent we are pointed to involved claims that the Court characterized as "essentially equitable" in nature. See, e.g., Franks, 495 F.2d at 406. The appellants do gain some support from S.E.R., Jobs For Progress, Inc. v. United States, 759 F.2d 1, 8 (Fed. Cir. 1985), where the Court stated that laches is not inapplicable in contract cases per se. Instead, the Federal Circuit stated that laches cannot be asserted against legal claims where a statute of limitations is available to preclude recovery on stale claims "unless the offended party has been unmistakably prejudiced by the delay." Id. at 9. We question this "exception" because it does not admit principled limits but we need not cross this bridge because even if we assume laches is available in "extraordinary" circumstances or where the defendant is "unmistakably prejudiced," nothing supports its application here.
Fuller argues that the FDIC's delay of two years caused the loss of witnesses and access to evidence that would have supported third party claims of fraud, racketeering, and civil conspiracy against Continental. In the dismissal agreement, Fuller agreed not to refile claims against Continental until or unless the FDIC refiled suit. The decision not to pursue discovery regarding these claims was unilateral.
Fuller alleges that a key witness died during negotiations, another witness could no longer recollect the relevant events and involved employees of Continental left the company's employment and cannot be located. Yet Fuller admits that the death was one month after the original case was dismissed, a loss hardly the result of the delay. In addition, he does not allege that he had been aware of the whereabouts of the missing witnesses when the case was dismissed and later lost track of them. There is no contention that the witness with the failed memory had any recollection of the events when the case was originally dismissed. Two ...