Ferguson v. Federal Deposit Insurance , 164 F.3d 894 ( 1999 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 97-10315
No. 97-10624
____________________
SEARCY M. FERGUSON, JR.,
Plaintiff-Appellant,
versus
FEDERAL DEPOSIT INSURANCE CORPORATION, Etc., Et Al.,
Defendants,
FEDERAL DEPOSIT INSURANCE CORPORATION, in its
Corporate capacity as Liquidator of the
Union Bank & Trust,
Defendant-Appellee.
_________________________________________________________________
Appeals from the United States District Court
for the Northern District of Texas
_________________________________________________________________
January 6, 1999
Before HIGGINBOTHAM, DAVIS, and BARKSDALE, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge.
As Appellant Searcy M. Ferguson, Jr. conceded at oral argument
for this appeal, the disposition of this case hinges on the
following issue: whether the agents of the Federal Deposit
Insurance Corporation dealing with Ferguson had authority to enter
into a global settlement of his indebtedness on numerous promissory
notes. We AFFIRM.
I.
During the 1980s, Ferguson was a shareholder and officer of
Union Bank and Trust. In 1986 and 1987, Ferguson borrowed several
million dollars from Union Bank pursuant to nine promissory notes
(the Nine Notes). Union Bank failed in 1988, and the FDIC was
appointed receiver.
At that time, the Nine Notes were delinquent. In May 1988,
the Nine Notes were transferred, pursuant to a contract of sale,
from the FDIC as receiver to the FDIC in its corporate capacity.
In September 1988, Ferguson contacted Ronald Bieker, the FDIC
assistant account officer assigned to Ferguson’s account, regarding
a settlement of the Nine Notes. The offer was rejected.
Also in September 1988, Ferguson contracted to sell property
he owned in Kaufman County, Texas (the Kaufman Property), part of
which served as part or all of the collateral for seven of the Nine
Notes. Ferguson claims that he then offered to pay the FDIC $1.727
million from the Kaufman Property sale for a release of liens on
the Kaufman Property and a global settlement of the Nine Notes; and
that the FDIC accepted this offer.
The FDIC counters that Ferguson offered to pay $1.365 million
(the principal and interest due on only one of the notes) in
exchange for a release of the liens on the Kaufman Property; and
that Ferguson also offered to pay the balances on two additional
notes, for a total of $1.727 million for the three notes.
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On 14 November 1988, Ferguson’s escrow agent, by letter to the
FDIC, provided three checks payable to the FDIC (totaling $1.727
million), as well as seven standard Texas release of lien forms for
the Kaufman Property. Each release of lien form contained a
covenant that the “holder of the note acknowledges its payment and
releases the property from the lien”. The releases were forwarded
to Anna Croteau, Department Head of Commercial Loans at the FDIC
and a member of the Senior Credit Review Committee. She executed
the releases.
In February 1989, Ferguson attempted to settle the
indebtedness on the remaining notes. The FDIC maintains that he
did so because he was aware that he had only settled as to three of
the notes. Ferguson, however, claims that he made the efforts only
after the FDIC surprised him by claiming that what he understood to
be a global settlement was instead only a settlement on three of
the notes and a release of the liens on the Kaufman Property. In
any event, these subsequent negotiations failed.
In the fall of 1991, Ferguson filed this action in Texas state
court, seeking, inter alia, a declaratory judgment that the FDIC
received full payment through an accord and satisfaction or a
novation, or that the FDIC was precluded from recovery based on
estoppel, ratification, waiver, release, and failure of
consideration. The FDIC removed this action to federal court,
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denied liability on Ferguson’s claims, and counterclaimed for the
indebtedness on the remaining six notes.
The FDIC moved for summary judgment on Ferguson’s affirmative
defenses of accord and satisfaction, novation, waiver, estoppel,
failure of consideration, fraud, and ratification, based, among
other things, on its contention that only the FDIC Credit Review
Committee had the authority to approve a global settlement. In
support of this claim, the FDIC submitted evidence that Bieker and
Croteau lacked such authority.
On cross-motions for summary judgment, the district court
ruled that the evidence submitted by the FDIC was not rebutted by
Ferguson; and that it established that Bieker and Croteau did not
have authority to negotiate a global settlement or release a note.
Based on its lack of authority ruling, the district court granted
summary judgment for the FDIC on Ferguson’s defenses of accord and
satisfaction, novation, waiver, estoppel, failure of consideration,
fraud, and ratification.
Accordingly, only two issues were tried to the jury: (1) what
amount the FDIC was entitled to recover on the remaining six notes;
and (2) whether Ferguson established the affirmative defense that
the FDIC failed to pay the six notes in accordance with his
instructions. The jury found that Ferguson failed to prove this
defense and, among other things, awarded principal and interest due
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the FDIC. The district court entered judgment for the FDIC for,
inter alia, $520,797.
II.
Ferguson challenges three rulings by the district court: (1)
the partial summary judgment in favor of the FDIC on the issue of
authority; (2) the admission of parol evidence regarding the terms
of the releases; and (3) the admission of evidence concerning the
subsequent settlement negotiations. At oral argument, Ferguson
conceded that, if he did not prevail on the authority issue, “the
other two issues are really moot”. Accordingly, because we
conclude that Bieker and Croteau lacked authority to enter into a
global settlement, we need not address the other two issues. (On
motion by the FDIC, its cross-appeal was dismissed.)
For the authority issue, decided by summary judgment, we
conduct the requisite de novo review. E.g., Thompson v. Georgia
Pacific Corp., 993 F.2d 1166, 1167 (5th Cir. 1993). Viewing the
evidence in the light most favorable to the nonmovant, we will
affirm “when the pleadings and evidence illustrate that no genuine
issue exists as to any material fact and that the movant is
entitled to judgment or partial judgment as a matter of law”.
Burns v. Harris County Bail Bond Board, 139 F.3d 513, 517-18 (5th
Cir. 1998); Hogan Systems, Inc. v. Cybresource Int’l, Inc., 158
F.3d 319, 322 (5th Cir.), rehearing and suggestion for rehearing en
banc denied, ___ F.3d ___ (5th Cir. 1998); Pollock v. FDIC, 17 F.3d
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798, 802 (5th Cir. 1994); see FED. R. CIV. P. 56. “To win summary
judgment, the movant must show that the evidence in the record
would not permit the nonmovant to carry its burden of proof at
trial.” Smith v. Brenoettsy, 158 F.3d 908, 911 (5th Cir. 1998).
To rebut this, the nonmovant may then present evidence showing that
a material fact issue exists to be resolved at trial. Id.; Burns,
139 F.3d at 518.
A.
Ferguson first contends that the district court erred in
applying federal, rather than Texas, law to his affirmative
defenses (accord and satisfaction, novation, waiver, estoppel,
failure of consideration, fraud, and ratification). Ferguson bases
this claim on O’Melveny & Myers v. FDIC, 512 U.S. 79 (1994), in
which the Supreme Court held that, in an action by the FDIC, acting
as receiver, in which the defendant raised the affirmative defense
of imputation, the State’s law controlled. Id. at 81-82, 86.
Reminding that “[t]here is no federal general common law”, id. at
83 (quoting Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)), the
Court noted that the FDIC had not identified any “significant
conflict [between the use of state law and] some federal policy or
interest”, id. at 88 (quoting Wallis v. Pan American Petroleum
Corp., 384 U.S. 63, 68 (1966)); and that the FDIC, because it was
acting as receiver, was asserting the rights of the failed bank,
rather than its own. Id. at 85.
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In maintaining that O’Melveny requires the application of
Texas state law here, Ferguson relies upon FDIC v. Massingill, 30
F.3d 601 (5th Cir. 1994), and Davidson v. FDIC, 44 F.3d 246, 250
(5th Cir. 1995), two post-O’Melveny decisions addressing similar
issues. Further, Ferguson asserts that there is no conflicting
federal interest at stake to justify the use of federal law.
1.
The FDIC responds in part that Ferguson is precluded from
presenting this issue, claiming that he failed to raise it in
district court. Needless to say, we “will not address an argument
raised by a party for the first time on appeal ... unless it meets
the plain error standard”. Forbush v. J.C. Penney Co., 98 F.3d
817, 822 (5th Cir. 1996).
Obviously, Ferguson did not need to plead the applicability of
Texas law in order to preserve this choice of law question. Kucel
v. Walter E. Heller & Co., 813 F.2d 67, 74 (5th Cir. 1987). On the
other hand, he did have “an obligation to call the applicability of
another state’s law to the [district] court’s attention in time to
be properly considered”. Id.
Although he should have more completely presented the
applicability-of-Texas-law-issue, Ferguson did raise it in district
court. Among other things, in his summary judgment motion, as well
as in his response to the FDIC’s, Ferguson supported his
affirmative defenses with Texas law.
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2.
As Ferguson correctly notes, in both Davidson and Massingill,
our court recognized the import of O’Melveny. Massingill, 30 F.3d
at 604, held that the defense of impairment of collateral in an
FDIC collection action was controlled by state, rather than
federal, law. And Davidson, 44 F.3d at 249, held that the state
statute of limitations applied to a deed of trust acquired by the
FDIC as receiver before the enactment of one of the provisions of
the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, 12 U.S.C. § 1821(d)(2)(A)(i), Pub. L. No. 101-73, 103 Stat.
183 (1989). Our court noted, based on O’Melveny, that the FDIC had
not advanced a significant federal interest warranting displacement
of state law through its argument that an adverse decision would
have a general impact on the public fisc; and that the FDIC was
acting in its capacity as a receiver when it acted, rather than in
its corporate capacity. Id. at 250, 252.
Thus, we are faced with whether Texas or federal law should be
applied to the authority issue. Although the district court
delineated alternative reasons why Ferguson’s affirmative defenses
failed, it stated that, as Ferguson concedes here, the authority
issue was controlling. We agree with the district court that
federal law applies to the authority issue.
Although O’Melveny disclaimed again the existence of a general
federal common law and required the application of state law to
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claims made by or against the FDIC in its capacity as a receiver,
it did not purport to overrule case law holding that the Government
is not bound by the actions of agents acting outside the scope of
their authority.
Whatever the form in which the Government
functions, anyone entering into an arrangement
with the Government takes the risk of having
accurately ascertained that he who purports to
act for the Government stays within the bounds
of his authority.... And this is so even
though, as here, the agent himself may have
been unaware of the limitations upon his
authority.
Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947).
“[T]hose who deal with the Government are expected to know the law
and may not rely on the conduct of Government agents contrary to
law.” Heckler v. Community Health Services, 467 U.S. 51, 63
(1984). Moreover, both the Supreme Court and our court have held
that, in most cases, the Government cannot be estopped based on
unauthorized representations made by its agents. See, e.g., Office
of Personnel Management v. Richmond, 496 U.S. 414, 432-33 (1990)
(no estoppel against Government for payment of public funds);
United States v. Perez-Torres, 15 F.3d 403, 407 (5th Cir. 1994)
(difficult to succeed in estopping Government based on
representations of its agents, and “change in position in
reasonable reliance on the misrepresentation” must be
demonstrated); Fano v. O’Neill, 806 F.2d 1262, 1265 (5th Cir. 1987)
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(“party seeking to estop the government bears a quite heavy
burden”).
Further, as stated in Davidson, “[t]he Supreme Court has
recently made clear [in O’Melveny] that the capacity in which the
FDIC acts may have a determinative impact on whether a state or
federal rule should control”. Davidson, 44 F.3d at 251. Here,
Bieker and Croteau were acting as agents of the FDIC-Corporate.
They derived their authority (if any) from the FDIC in its
corporate capacity, because the FDIC-Corporate purchased the Nine
Notes in May 1988, before any settlement negotiations between
Ferguson and the FDIC began. See Beighley v. FDIC, 868 F.2d 776,
779 n.7 (5th Cir. 1989) (FDIC as receiver sells assets of failed
bank to FDIC as insurer, acting in its corporate capacity, and
FDIC-Corporate then “attempts to collect on these assets to reduce
loss to the insurance fund”).
This is unlike the situation in O’Melveny, in which the Court
noted that “[t]he rules of decision at issue here do not govern the
primary conduct of the United States or any of its agents or
contractors, but affect only the FDIC’s rights and liabilities, as
receiver, with respect to primary conduct on the part of private
actors that has already occurred”. O’Melveny, 512 U.S. at 88
(emphasis added). Here, it is the action of the Government agents
and their authority to so act that is at issue, rather than the
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impact on the FDIC, acting as receiver, of imputing the prior acts
of agents of the failed bank.
In Massingill, 30 F.3d at 604, our court noted that applying
federal law to the appellant’s impairment of collateral defense
would require the creation of a substantive federal common law rule
of decision, which would run contrary to O’Melveny. But here, the
rule that the Government is not liable for the unauthorized acts of
its agents has been long-established.
The case at hand is also distinguishable from Davidson, 44
F.3d at 251, in which our court emphasized that the FDIC was acting
“in the limited capacity of receiver”. Again, concerning the Nine
Notes, the FDIC was acting in its corporate capacity as the holder
of those notes.
Thus, the district court correctly applied federal law to the
issue of whether Bieker and Croteau had authority to enter into a
global settlement.
B.
The district court held also that Bieker and Croteau lacked
authority to enter into a settlement. We agree.
On the cross-motions for summary judgment, the FDIC presented
evidence that all settlements had to be approved by the Credit
Review Committee. Ferguson presented no evidence that Bieker or
Croteau were given the authority to enter into a global settlement,
but instead based his claims upon their actions.
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1.
Because Ferguson asserted affirmative defenses, he would have
had the burden of proving them at trial. See, e.g., Crescent
Towing & Salvage Co., Inc. v. M/V Anax, 40 F.3d 741, 744 (5th Cir.
1994); Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).
And, as stated, the Government is not bound by the unauthorized
acts of its agents. E.g., Richmond, 496 U.S. at 419-20
(“Government could not be bound by the mistaken representations of
an agent unless it were clear that the representations were within
the scope of the agent’s authority”); Heckler, 467 U.S. at 63 (“Men
must turn square corners when they deal with the Government”
(quoting Rock Island, A. & L.R. Co. v. United States, 254 U.S. 141,
143 (1920)); Merrill, 332 U.S. at 383-84; Rosas v. United States
Small Business Admin., 964 F.2d 351, 360 (5th Cir. 1992) (“It is a
familiar tenet of government contracts that the government cannot
be bound by the unauthorized acts of its agents”); United States v.
D’Apice, 664 F.2d 75, 78 (5th Cir. 1981) (“It is well established
that the federal government will not be bound by a contract or
agreement entered into by one of its agents unless such agent is
acting within the limits of his actual authority”);Dresser Indus.,
Inc. v. United States, 596 F.2d 1231, 1236 (5th Cir. 1979); Hicks
v. Harris, 606 F.2d 65, 68-69 (5th Cir. 1979); Robinson v. Vollert,
602 F.2d 87, 94 (5th Cir. 1979); United States v. State of Florida,
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482 F.2d 205, 210 (5th Cir. 1973); Posey v. United States, 449 F.2d
228, 234 (5th Cir. 1971).
Thus, to have succeeded at trial, Ferguson would have had to
prove that Bieker and Croteau acted with authority; but, as noted,
on summary judgment, he presented no evidence on this point.
Additionally, at least two other federal court decisions have
recognized that the Credit Review Committee is the only FDIC entity
that can approve settlements. FDIC v. Royal Park No. 14, Ltd., 2
F.3d 637, 641 (5th Cir. 1993) (affirming grant of summary judgment
and noting district court’s observation that Credit Review
Committee is only entity with authority to approve settlements);
FDIC v. Spain, 796 F. Supp. 241, 243 (W.D. Tex. 1992) (finding that
only Credit Review Committee had authority to settle). Further,
summary judgment evidence presented by the FDIC shows that the
Credit Review Committee was solely responsible for the approval of
settlements and that it did not approve a global settlement.
2.
Ferguson also contends that, even if Bieker and Croteau lacked
actual authority to enter into a global settlement, they had
apparent authority to do so, citing Valley Ranch Dev. Co. v. FDIC,
960 F.2d 550, 554 (5th Cir. 1992), for the proposition that
apparent authority exists if a reasonable person, using diligence
and discretion, would have believed that Bieker and Croteau had the
authority to enter into a global settlement. In support of his
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apparent authority claim, Ferguson points to the actions of Bieker
and Croteau in negotiating settlements, Croteau’s signing the lien
releases when the cover letter required the signature of an
authorized representative, and the FDIC’s failure to communicate to
Ferguson the FDIC’s internal restrictions on the authority of
Bieker and Croteau.
As discussed, those dealing with agents of the Government risk
that they have accurately determined that the agent is acting
within the bounds of his authority, Merrill, 332 U.S. at 384. Even
assuming that the basis for Ferguson’s apparent authority
contention is correct as a matter of law, the contention still
fails; he did not present any evidence upon which we can conclude
that a reasonable person, exercising diligence and discretion,
would have believed that Bieker and Croteau had the authority to
enter into a global settlement.
III.
Because Ferguson conceded at oral argument that the authority
issue is dispositive, and because we conclude that Bieker and
Croteau did not have the requisite settlement authority, the
judgment is
AFFIRMED.
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