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USCA1 Opinion
June 1, 1994 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-2049
VINCENT GRANDE,
Plaintiff - Appellant,
v.
BANK OF NEW ENGLAND OLD COLONY, N.A.
AND FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendants - Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
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Before
Torruella, Circuit Judge,
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Campbell, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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Robert S. Wolfe, with whom Wolfe Associates, Alan R. Hoffman
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and Lynch, Brewer, Hoffman & Sands, were on brief for appellant.
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Claire L. McGuire, Counsel, Federal Deposit Insurance
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Corporation, with whom Ann S. DuRoss, Assistant General Counsel,
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Colleen B. Bombardier, Senior Counsel, Federal Deposit Insurance
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Corporation, Paul R. Devin, Allan N. David, Sandra P. Criss,
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Peabody & Arnold, Richard E. Gentilli and Kaye, Fialkow, Richmond
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& Rothstein, were on brief for appellees.
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Per Curiam. In this action, the plaintiff, Vincent
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Grande, as Trustee of R. D. Realty Trust, asserts several claims
against the Federal Deposit Insurance Corporation ("FDIC") as
receiver for the Bank of New England ("BNE"). As the district
court noted, the form of Grande's claims is substantively driven
by his desperate attempt to avoid the reach of D'Oench, Duhme &
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Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 457 (1942), and
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its statutory cognate, 12 U.S.C. 1823(e). After a bench trial,
the district court found that Grande's attempts fell short of
overcoming the nearly insurmountable hurdle that the D'Oench
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Duhme doctrine presents, and found in favor of the FDIC on all
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counts. We affirm.
BACKGROUND
BACKGROUND
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BNE held a first mortgage on a condominium development.
Manchester Properties Limited Partnership ("MPLP") was the
mortgagor. Grande held a second mortgage on the property.
Eventually, the BNE loan went into default, the mortgage was
foreclosed, and the property was sold at a deficiency.
Grande makes several claims to attempt to recover some
of the foreclosure proceeds despite BNE's priority in its first
mortgage over Grande's second mortgage. First, Grande asserts
that BNE agreed to allow him and MPLP to exchange Grande's second
mortgage for the first condominium unit built. Second, Grande
claims that even if D'Oench, Duhme or 12 U.S.C. 1823(e) bars
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direct claims based on the purported agreement between BNE and
MPLP to allow an exchange (between MPLP and Grande) of the second
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mortgage for a condominium unit, BNE's mortgage should be
equitably subordinated to Grande's claims. Third, Grande points
to language in the first mortgage that Grande contends should be
read as permitting him to receive a portion of the proceeds of a
foreclosure sale, before the first mortgage is satisfied.
Fourth, Grande claims that he is entitled to recovery because BNE
negligently supervised construction at the condominium project,
and this caused a loss of approximately $200,000 which harmed
Grande.1
GRANDE'S CLAIMS
GRANDE'S CLAIMS
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With respect to Grande's first contention, we agree
with the district court that Grande's claim is barred by D'Oench,
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Duhme and 18 U.S.C. 1823(e).2 We will not rehash the district
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1 Grande has raised other subsidiary contentions on appeal. We
have reviewed these issues and believe that they are meritless.
2 12 U.S.C. 1823(e) expressly provides:
No agreement which tends to diminish or
defeat the interest of [the FDIC] in any
asset acquired by it under this section or
section 1821 of this title, either as
security for a loan or by purchase or as
receiver of any insured depository
institution, shall be valid against [the
FDIC] unless such agreement --
1) is in writing,
2) was executed by the depository
institution and any person claiming an
adverse interest thereunder, including
the obligor, contemporaneously with the
acquisition of the asset by the
depository institution,
3) was approved by the board of directors
of the depository institution or its loan
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court's thorough discussion of the barriers D'Oench, Duhme and 12
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U.S.C. 1823(e) present to claims against the FDIC, and the
expansive reach of the D'Oench, Duhme doctrine. See Grande v.
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Federal Deposit Insurance Corp., No. 91-10080, slip op. at 3-6
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(D. Mass. September 7, 1993). Rather, we conclude that Grande's
claim that BNE agreed to an exchange of Grande's second mortgage
for a condominium unit does not comport with the requirements of
D'Oench, Duhme and 12 U.S.C. 1823(e), and therefore Grande
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cannot rely on this agreement as a basis for recovery against the
FDIC. Under D'Oench, Duhme, bank borrowers or guarantors are
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prohibited from using secret or unrecorded side agreements to
defend against efforts by the FDIC to collect on promissory notes
that it has acquired from a failed bank. See D'Oench, Duhme, 315
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U.S. at 460. Similarly, 12 U.S.C. 1823(e) codifies this
principle and requires, in pertinent part to this appeal, that no
agreement which tends to diminish the interest of the FDIC in any
asset acquired by it as receiver, shall be valid against the FDIC
unless it is "approved by the board of directors of the
depository institution or its loan committee, which approval
shall be reflected in the minutes of said board or committee."
Grande has failed to prove that the exchange was
approved by the relevant BNE credit committee, and more
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committee, which approval shall be
reflected in the minutes of said board or
committee, and
4) has been, continuously, from the time
of its execution, an official record of
the depository institution.
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importantly, that this approval was officially recorded in the
requisite committee minutes. Rather, Grande proffers and relies
upon evidence of negotiations between BNE, MPLP, and Grande,
regarding the proposed exchange. As the district court found,
this evidence is insufficient to satisfy the requirements of 12
U.S.C. 1823(e). Furthermore, Grande's arguments that certain
documents were incorporated into other documents that were
approved by the credit committee are unsubstantiated. Put
simply, the minutes of BNE's credit committee do not contain any
mention of an agreement permitting the exchange of Grande's
second mortgage for the condominium unit. Therefore, 12 U.S.C.
1823(e) and D'Oench, Duhme bar Grande's claims against the BNE
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based on this alleged agreement.
Grande alternatively claims that even if his claims are
barred by D'Oench, Duhme and 12 U.S.C. 1823(e), the doctrine of
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equitable subordination requires that Grande's mortgage be given
priority. To make out a claim for equitable subordination,
traditionally a bankruptcy doctrine, a party must prove that 1)
the claimant engaged in some sort of inequitable conduct; 2) the
misconduct resulted in injury to the bankrupt's creditors or
conferred an unfair advantage on the claimant; and 3) equitable
subordination of the claim is not inconsistent with the
provisions of the Bankruptcy Code. In re 604 Columbus Ave.
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Realty Trust, 968 F.2d 1332, 1353 (1st Cir. 1992) (citations
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omitted). Thus, to support a claim in this context, Grande must
first prove that BNE engaged in some sort of inequitable conduct.
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As evidence of such inequitable conduct, Grande contends that the
BNE improperly administered the construction loan and, as a
result, some $200,000 of construction funds were not properly
disbursed. The district court found, however, that there was no
evidence that these unaccounted for funds did not, in fact, go
into the project, and thus there is no predicate for a finding
that any wrongdoing occurred on the part of any BNE employee.
Additionally, the district court found that Grande did not suffer
any harm based on the alleged inequitable conduct of BNE. We
see no reason to disturb either of the district court's factual
findings.3 Grande has therefore failed to sustain his burden of
proof on the equitable subordination claim, and we need not reach
the question of whether Grande's equitable subordination claim is
barred as a matter of law based on D'Oench, Duhme and 12 U.S.C.
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1823(e).4
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3 We review a district court's finding of facts in a bench trial
under the clear error standard. Dedham Water Co. v. Cumberland
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Farms Dairy, 972 F.2d 453, 457 (1st Cir. 1992).
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4 Grande also brought a claim under Mass. Gen. L. ch. 93A based
upon alleged unfair actions taken by BNE. The district court
found that Grande failed to satisfy his burden of proving that
BNE made misrepresentations or otherwise acted unfairly toward
MPLP or Grande. While Grande argues that the district court's
factual Mass. Gen. L. ch. 93A findings were "fatally flawed," he
has not pointed to any specific evidence in the record which
demonstrates that these findings were clearly erroneous. The
fact that certain evidence was susceptible of another
interpretation is insufficient to show that the interpretation
chosen by the district court was erroneous. Rather, where there
are two permissible views of the evidence, the interpretation
assigned by the district court must be adopted. Williams v.
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Poulos, 11 F.3d 271, 278 (1st Cir. 1993). Therefore, we credit
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the district court's findings and affirm its ruling on the Mass.
Gen. L. ch. 93A claim.
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Grande's third contention is a breach of contract claim
to the effect that language in BNE's first mortgage should be
read as modifying the priorities of the mortgages to permit
Grande to receive a portion of the proceeds of the foreclosure
sale. We agree with the district court's ruling that the
language in the documents that Grande relies upon simply does not
support his interpretation that the priority of the mortgages
should be altered. For instance, Grande points to language in
Schedule A of the first mortgage deed, which provided for the
payment of release fees to Grande under the following
circumstances:
The Mortgagee shall issue partial
releases of this mortgage for each newly
constructed unit upon the payment to it
by the Mortgagor of ninety percent
(90.0%) of the proceeds, net reasonable
costs of conveyance and partial release
fee of Forty-seven thousand two hundred
twenty-two and 22/100 ($47,222.22)
dollars per unit to the Mortgagee,
Vincent Grande, Trustee . . .
This language cannot reasonably be read to change the priority so
that the first mortgage is subordinated to the interest of the
second mortgagee. Rather, the provision seems to simply
anticipate the payment of release fees on completed units at the
time they were sold. No units were completed prior to the
default. Moreover, upon foreclosure, Grande's rights under the
second mortgage, including the payment of release fees, were
extinguished. See Duff v. United States Trust Co., 327 Mass. 17,
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20, 97 N.E.2d 189, 191 (1951) (an agreement to give a partial
release is only effective until default under the mortgage).
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Grande's final contention is that he is entitled to
recovery based upon BNE's negligent supervision of construction
on the project, causing a loss of approximately $200,000. The
district court found that Grande failed to proffer credible
evidence demonstrating that BNE negligently inspected
construction on the project and/or improperly advanced funds
under the construction loan agreement. The district court also
found that Grande failed to prove that he was damaged, or that
the value of the property was impaired, by BNE's alleged
negligence. Again, we have not been shown any evidence in the
record which demonstrates why these findings were clearly
erroneous. Therefore, Grande's claim based on negligent
supervision also fails.
For the foregoing reasons, the decision of the district
court is affirmed.
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Document Info
Docket Number： 93-2049
Filed Date： 6/1/1994
Precedential Status： Precedential
Modified Date： 3/3/2016