Jackson v. F.D.I.C. ( 1992 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 92-2194
Summary Calendar
RANDOLPH S. JACKSON and MARTHA S. JACKSON,
Plaintiffs-Appellants,
VERSUS
FEDERAL DEPOSIT INSURANCE CORPORATION,
as receiver for MBANK HOUSTON, N. A.,
Defendant-Appellee.
Appeal from the United States District Court
For the Southern District of Texas
(CA-H-89-1447)
(November 19, 1992)
Before KING, DAVIS, and WIENER, Circuit Judges.
PER CURIAM:*
Randolph S. Jackson sued MBank Houston, N.A. (MBank) in
Texas state court for breach of contract and promissory estoppel
in connection with MBank's refusal to lend money to Jackson
despite its allegedly having promised to do so. Before Jackson's
*
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular
cases on the basis of well-settled principles of law imposes
needless expense on the public and burdens on the legal
profession." Pursuant to that Rule, the Court has determined
that this opinion should not be published.
case came to trial, MBank was declared insolvent and the FDIC was
appointed as receiver. The FDIC removed the suit to federal
district court, and asserted, in a subsequent motion for summary
judgment, that Jackson's claims were barred by the D'Oench Duhme
doctrine and applicable provisions of FIRREA.1 The district
court granted this motion for summary judgment. Agreeing with
that court, we affirm.
I.
FACTS AND PROCEEDINGS
Jackson was a manager employed by the Monsanto company at
its Texas City, Texas petrochemical plant when it was purchased
by the Sterling Chemical Company. As a part of Sterling's
purchase, it proposed to sell specified quantities of its own
capital stock to named key Monsanto employees at a price of $10
per share. Jackson was one such employee and was authorized to
purchase up to 833 shares of Sterling stock.
Sterling arranged with MBank to provide financing to the
former Monsanto employees for their purchase of Sterling stock.
MBank agreed to finance sixty percent of the stock purchase price
for each qualified employee. Jackson prepared a loan application
and a personal financial statement, and apparently was approved
for a $5,000 loan, just over sixty percent of the purchase price
for his maximum authorized 833 shares.
Jackson attended the scheduled group closing for these
employee stock purchase. He took with him a cashier's check for
1
12 U.S.C. § 1811 et seq.
2
$2,000 as his forty percent of the purchase price for the number
of Sterling shares that he had decided to purchase))500 shares
rather than the full 833 shares authorized. The MBank personnel
at the closing tendered a $5000 check to Jackson, but refused to
make a smaller loan. Jackson refused the $5,000 loan and instead
used his own $2000 to purchase 200 shares of Sterling stock.
Within thirty months, the value of the Sterling stock had
skyrocketed,2 so Jackson filed the subject suit against MBank in
Texas state court, alleging breach of contract and promissory
estoppel for the bank's failure to lend him the $3,000 for the
employee stock purchase. Shortly after MBank filed its general
denial, it was declared insolvent and placed under FDIC
receivership. The FDIC removed the action to federal court and
moved for summary judgment arguing, inter alia, that Jackson's
claims were barred by the D'Oench Duhme doctrine and
§ 1821(d)(9)(A) of FIRREA3 because the claims were based on
unrecorded and unwritten agreements.
The magistrate judge recommended that this motion be
granted. At the time that this recommendation was made, the FDIC
had produced no documents relating to Jackson's claims. The FDIC
2
The stock Jackson could have purchased for $3,000 in 1986
apparently had increased in value to approximately $500,000 by
the time he filed his suit against MBank in 1989.
3
12 U.S.C. § 1821(d)(9)(a) reads in pertinent part: "[A]ny
agreement which does not meet the requirements set forth in
section 13(e) [12 U.S.C. § 1823(e)] shall not form the basis of,
or substantially comprise, a claim against the receiver or the
Corporation." 12 U.S.C. § 1823(e) in turn constitutes a partial
codification of the D'Oench Duhme doctrine.
3
later produced several related MBank documents, which were
referenced in Jackson's supplemental response to the FDIC's
motion for summary judgment.
The district court subsequently granted summary judgment for
the FDIC, adopting the magistrate judge's recommendation without
expressly addressing the MBank documents produced by the FDIC
after that recommendation had been made. Jackson timely appeals.
II.
STANDARD OF REVIEW
The grant of a motion for summary judgment is reviewed de
novo, using the same criteria employed by the district court.4
This court must "review the evidence and inferences to be drawn
therefrom in the light most favorable to the nonmoving party."5
"[T]he plain language of Rule 56(c) mandates the entry of summary
judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at
trial."6
4
U.S. Fidelity & Guaranty Co. v. Wigginton, 964 F.2d 487,
489 (5th Cir. 1992); Walker v. Sears, Roebuck & Co., 853 F.2d
355, 358 (5th Cir. 1988).
5
U.S. Fidelity & Guaranty Co., 964 F.2d at 489; Baton Rouge
Building & Construction Trades Council v. Jacobs Constructors,
Inc., 804 F.2d 879, 881 (5th Cir. 1986).
6
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
4
III.
ANALYSIS
Jackson argues that the instant case does not fall within
the ambit of D'Oench Duhme because he is asserting an affirmative
claim against MBank and the FDIC, rather than a defense to a
claim against him. He further asserts that D'Oench Duhme is
inapplicable because his claim does not tend to diminish or
defeat the FDIC's interest in any particular asset. Jackson
claims alternatively that even if D'Oench Duhme does apply to the
present situation he has produced sufficient documentation of the
loan agreement to defeat summary judgment. We now analyze each
of Jackson's arguments in turn.
A. Affirmative Claims
Jackson's initial claim))that D'Oench Duhme does not bar his
claim because it is an affirmative claim))is based on a single
sentence in one opinion of the Tenth Circuit. In Grubb v. FDIC,7
that court stated: "By its very terms, however, the D'Oench rule
only prevents parties from raising defenses against the FDIC."8
When viewed in context of the full opinion, however, that
statement is recognizable as but one of several alternative bases
relied on by the Tenth Circuit for its decision. Further, that
statement has been criticized repeatedly by district courts
7
868 F.2d 1151 (10th Cir. 1989).
8
Id. at 1159.
5
within the Tenth Circuit.9
Of greater significance to the instant case is Jackson's
failure to cite the several opposite rulings of the Fifth
Circuit))rulings that constitute binding precedent here. We have
never refused to apply D'Oench Duhme merely because a party had
asserted an affirmative claim rather than a defense against the
insolvent institution or the FDIC.10 To the contrary, we have
consistently applied D'Oench Duhme to claims for affirmative
relief.11 Even if we were of a mind to do so, we could not
9
Adams v. Walker, 767 F. Supp. 1099, 1106 (D. Kan. 1991)
("The Tenth Circuit's statement in Grubb is basically dicta
offered without any explanation or analysis . . . . This court
does not feel constrained to follow the dicta in Grubb . . . .);
Torke v. FDIC, 761 F. Supp. 754, 756-57 (D. Colo. 1991);
Castleglen, Inc. v. Commonwealth Savings Ass'n, 728 F. Supp. 656,
664 (D. Utah 1989) (refusing to interpret Grubb as barring the
application of D'Oench Duhme to all affirmative claims as
"contrary to the great weight of authority and [being]
analytically unsound.").
10
E.g., Texas Refrigeration Supply, Inc. v. FDIC, 953 F.2d
975, 979 (5th Cir. 1992) ("[O]ne who has dealt with a failed
FDIC-insured institution may not assert a claim or defense
against the FDIC that depends on some understanding that is not
reflected in the insolvent bank's records."); Chatham Ventures,
Inc. v. FDIC, 651 F.2d 355, 359 (5th Cir. 1981), cert. denied,
456 U.S. 972 (1982) ("The statutory protection of section 1823(e)
shields the FDIC from defenses or claims . . . .").
11
Texas Refrigeration Supply, Inc. v. FDIC, 953 F.2d 975(5th Cir. 1992) (applying D'Oench Duhme to affirmative claims of
breach of contract, negligence, breach of fiduciary duty,
promissory estoppel, misrepresentation, breach of good faith, and
deceptive trade practices, but not to claims of wrongful
acceleration or unreasonable disposal of collateral); Bowen v.
FDIC, 915 F.2d 1013, 1015 (5th Cir. 1990) (applying D'Oench Duhme
to affirmative claims of promissory estoppel, breach of fiduciary
duty and duty of good faith and fair dealing, and constructive
fraud); Kilpatrick v. Riddle, 907 F.2d 1523 (5th Cir. 1990),
cert. denied, 111 S.Ct. 954, 112 L. Ed.2d 1042 (1991) (applying
D'Oench Duhme to affirmative claim of bank fraud); Bell & Murphy
& Assoc., Inc. v. Interfirst Bank Gateway, N.A., 894 F.2d 750,
6
abandon well established precedent in order to follow this
questionable alternative ground for the holding in Grubb.
Instead, we reaffirm that D'Oench Duhme and FIRREA may bar an
affirmative claim against the FDIC, just as it may bar a defense
to a claim by the FDIC.
Although Jackson failed to discuss the relevant cases from
this circuit in his argument that D'Oench Duhme should only
prevent parties from raising defenses to the FDIC, he
nevertheless attempts to rebut the FDIC's reliance on Fifth
Circuit precedent anticipatorily. Jackson tries to distinguish
his situation from previous decisions in this circuit that apply
D'Oench Duhme to affirmative claims. He notes that in all cases
cited by the FDIC, the party asserting the affirmative claim had
some pre-existing borrowing relationship with the bank. In the
instant case, however, there apparently was no relationship
between Jackson and MBank other than the loan at issue.
We find this to be a distinction without a difference, and
clearly one insufficient to prevent the application of D'Oench
Duhme to Jackson's claim. Even though in prior cases, ongoing
lending relationships may have existed, the existence or
nonexistence of such relationships was not dispositive. In
neither Bell & Murphy & Assoc., Inc. v. Interfirst Bank Gateway,
753 (5th Cir.), cert. denied, 111 S.Ct. 244, 112 L. Ed.2d 203(1990) (applying D'Oench Duhme to affirmative claims of
fraudulent misrepresentation and breach of contract regarding
future loans); Beighley v. FDIC, 868 F.2d 776, 783-84 (5th Cir.
1989) (applying D'Oench Duhme to affirmative claims of breach of
contract, fraud, breach of fiduciary duty, promissory estoppel
and breach of agency contract).
7
N.A.,12 or Beighley v. FDIC13, is there evidence that the
plaintiffs were in default on their loans at the times they filed
their respective affirmative claims. Although the FDIC
eventually asserted a counterclaim against Beighley to enforce
his promissory note, no existing loan played any part in the
litigation between Bell & Murphy and the FDIC.
B. No Specific Asset Involved
Jackson next argues that his affirmative claims against
MBank and the FDIC do not involve a specific asset and thus could
not diminish or defeat the FDIC's interest in any such asset,
thereby preventing application of D'Oench Duhme. Again, our
decisions in Bell & Murphy14 and Beighley15 are instructive on
this argument.16
In Bell & Murphy, the plaintiff entered into an agreement
with a bank under which it was to make various loans to the
plaintiff. This agreement was embodied in a letter, but was
12
894 F.2d 750.
13
868 F.2d 776.
14
894 F.2d 750 (5th Cir. 1990).
15
868 F.2d 776 (5th Cir. 1989).
16
The only reference to either Bell & Murphy or Beighley in
the plaintiff's brief to this court is buried in a string cite in
support of the unremarkable proposition that D'Oench Duhme
"simply precludes the use of any unwritten promise, a promise
which does not appear as a written and approved agreement in the
records of the bank, as a claim or defense against the FDIC."
(Emphasis in original). In passing we note with interest that
Jackson speaks of "claim or defense" in this part of his brief
despite his simultaneous assertion that D'Oench Duhme only
applies to defenses against the FDIC.
8
never reflected in the bank's official records. The loans were
never made to the plaintiff who sued alleging that it had been
induced by the bank to enter the agreement through fraudulent
misrepresentations, and that the bank had breached its
obligations under that agreement. The plaintiff in Bell & Murphy
argued that its affirmative claim against the bank was not barred
by D'Oench Duhme because the agreement in question did not
diminish or defeat the FDIC's interest in any specific asset
acquired from the bank. Although the agreement clearly could
affect the total worth of the bank, it would not diminish the
value to the bank of the plaintiff's admitted debts from other
transactions. In response, this court stated: "We find this
inventive argument to be meritless in light of our recent holding
in Beighley that the D'Oench Duhme rule bars affirmative claims
based upon unrecorded agreements to extend future loans."17
Moreover, Jackson's attempted reliance on Olney Savings &
Loan Ass'n v. Trinity Banc Savings Ass'n18 is misplaced. In
Olney, we refused to apply D'Oench Duhme because the FSLIC has
acquired no "right, title, or interest" that could be diminished
or defeated by Olney's claims.19 Prior to the FSLIC take over of
Trinity Bank, Olney had sued Trinity successfully for recision of
a loan agreement and for damages. The FSLIC placed Trinity in
17
Bell & Murphy, 894 F.2d at 753 (citing Beighley v. FDIC,
868 F.2d 776).
18
885 F.2d 266 (5th Cir. 1989).
19
Id. at 275.
9
conservatorship after Trinity had already posted a supersedeas
bond to stay execution of the damage award to Olney pending
appeal. When the FSLIC took over Trinity, the loan agreement had
already been declared void; consequently there was no interest
for the FSLIC to acquire with regard to the agreement itself.20
The FSLIC also claimed that it had an interest in the damage
award assessed against Trinity. Those funds had already been
removed from the assets available to the FSLIC for distribution,
however, as a result of the entry of judgment and the posting of
the supersedeas bond.21 Therefore, the FSLIC had no interest
that could be diminished or defeated by Olney's claims. In
contrast, Jackson's claims had not been determined by the court
prior to the FDIC's intervention.
Olney simply is not applicable here. Jackson's claim
against MBank and the FDIC, which is based on an alleged
agreement with MBank, still tends to diminish or defeat the
FDIC's interest in the general assets of MBank acquired by the
FDIC. Application of D'Oench Duhme and FIRREA in the instant
case is consistent with the established purpose of the doctrine:
"Fundamentally, D'Oench attempts to ensure that FDIC examiners
can accurately assess the condition of a bank based on its
books."22 Clearly, the financial condition of a bank can be
20
Id.21
Id. at 274.
22
Bowen v. FDIC, 915 F.2d 1013, 1016 (5th Cir. 1990);
Langley v. FDIC, 484 U.S. 86, 91-91 (1987).
10
affected by an affirmative claim against the bank as well as by a
defense to a claim the bank possesses against a borrower. We
hold that Jackson's affirmative claim is subject to D'Oench Duhme
and FIRREA.
C. Sufficiency of the Writing
To avoid conflicting with the requirements of D'Oench Duhme
and FIRREA, agreements (such as Jackson's) between borrowers and
banks generally must be in writing, and must be properly
executed, approved, and recorded in the official records of the
bank. In support of his claim, Jackson submitted to the district
court the following documents: his personal financial statement;
his loan application; Sterling's loan application for the
purchase of the Monsanto plant; and Sterling's loan application
for the purchase of stock to be used in the employee stock
ownership plan. Assuming, without so deciding, that these
documents were properly executed, approved, and recorded, they
still fail satisfy the requirements of D'Oench Duhme and FIRREA.
Jackson's claim against MBank and the FDIC centers on the
bank's refusal to lend him $3,000 for his purchase of 500 shares
of Sterling stock. Jackson's loan application states
unambiguously that Jackson is applying for a $5,000 loan and that
the collateral will consist of 833 shares of Sterling stock.
Across the face of this loan application is written: "Customer
cancelled loan." The documents on file with the bank establish
only that Jackson applied for a $5,000 loan and that he
subsequently cancelled that loan. To a bank examiner or anyone
11
else unfamiliar with the facts not contained within the four
corners of these documents, they reflect nothing of Jackson's
applying for "up to" $5,000 or purchasing "up to" 833 shares of
stock. Without more, they do not constitute either a contract
with, or a promise by, the bank to loan $3,000 to Jackson for the
purchase of 500 shares of Sterling stock. Consequently, Jackson
has failed to establish a genuine issue as to the existence of
any agreement regarding a $3,000 loan that complies with the
requirements of D'Oench Duhme or FIRREA. As the documents
produced between the time of the magistrate's recommendation and
the granting of summary judgment do not defeat the application of
D'Oench Duhme or FIRREA, the failure of the district court to
discuss them in the order granting summary judgment is
immaterial.
IV.
CONCLUSION
Jackson's claim against MBank and the FDIC falls within the
ambit of D'Oench Duhme and FIRREA. He is asserting a claim
against the FDIC that if successful would clearly diminish or
defeat the value of the assets acquired from MBank by the FDIC.
The fact that Jackson is asserting an affirmative claim against
the FDIC rather than a defense to a claim by the FDIC does not
change this analysis. Similarly, our analysis is unaffected by
the fact that Jackson's claim does not affect the FDIC's interest
in a specific asset, but only in the total worth of the bank.
In response to the FDIC's motion for summary judgment,
12
Jackson produced some documentation of activities among himself,
MBank, and Sterling. But, as those documents fail to establish a
genuine issue as to the existence of a written agreement meeting
the requirements of D'Oench Duhme and FIRREA, expressly
evidencing either a loan of $3,000 or one of "up to" $5,000,
Jackson cannot prevail. For the foregoing reasons, the district
court's grant of the FDIC's motion for summary judgment is
AFFIRMED.23
23
The FDIC asserts in its brief that Jackson's appeal is
frivolous and requests this court to award damages under Fed. R.
App. P. 38. The FDIC argues that sanctions are merited because
Jackson pursued the appeal of a case governed by well-settled
precedent and failed to address squarely that controlling
precedent. Although Jackson's appeal demonstrates a multitude of
deficiencies, they are not so egregious as to require sanctions.
Consequently, we decline the FDIC's invitation.
13