First Gibraltar Bank v. Bradley ( 1996 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 95-20500
_______________________
FIRST GIBRALTAR BANK, FSB,
Plaintiff-Appellee,
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR GIBRALTAR SAVINGS ASSOCIATION,
Intervenor- Plaintiff,
Appellee,Cross-
Appellant,
versus
GARY L. BRADLEY AND JAMES D. GRESSETT AND
CIRCLE C DEVELOPMENT CORPORATION,
Defendants,
Intervenor Defendants,
Appellants,Cross-
Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
(CA-H-93-2558)
_________________________________________________________________
September 10, 1996
Before JONES, SMITH, and STEWART, Circuit Judges.
EDITH H. JONES, Circuit Judge:*
Gary L. Bradley (“Bradley”), James D. Gressett
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
(“Gressett”), and Circle C Development Corporation (“Circle C”)
appeal the district court’s summary judgment in favor of First
Gibraltar Bank (“FGB”), on FGB’s suit to recover over $80 million
on four promissory notes that Circle C executed in favor of
Gibraltar Savings Association (“Gibraltar”), and to recover from
Bradley and Gressett on their personal guarantees of those four
notes as well as on their separate, personal note for $15 million.
After reviewing the district court’s judgment de novo, this court
AFFIRMS.
FACTUAL BACKGROUND
This saga began in 1985 when Circle C, Bradley, and
Gressett entered into a series of loan agreements with Gibraltar
for the development of Circle C Ranch, a master planned community
located southwest of Austin, Texas. Gibraltar advanced nearly $80
million to Circle C on four loans (the “Project Notes”): the Land
Note, Amenities Note, Phase I Development Note, and Phase II
Development Note. Bradley and Gressett individually guaranteed 20%
of Circle C’s notes and were the borrowers under a fifth, unsecured
personal loan of $15 million (“Personal Note”).
The terms of the Personal Note required Bradley and
Gressett to make quarterly interest payments beginning in September
of 1985. Importantly, the Personal Note, though unsecured, and the
Project Notes contained cross-default provisions by which a default
under either the Personal Note or any of the Project Notes operated
2
as a default under all of the notes.
In May 1988, Bradley and Gressett defaulted on the
Personal Note when they failed to make a quarterly interest
payment. The next month, Gibraltar declared a default on the
Personal Note because they had failed to cure their delinquency.
Gibraltar accelerated the balance of the Personal Note and declared
it, with all accrued but unpaid interest, payable immediately.
In an effort to ameliorate the financial strain caused by
the default, Bradley and Gressett sold a 50% interest in Circle C
for over $1 million in cash and promissory notes totaling nearly
$30.5 million. Circle C was then restructured by transferring all
of its interests in the Circle C Ranch to the Circle C Development
Joint Venture (“Joint Venture”).
Besides these measures, Bradley and Gressett also
negotiated a work-out agreement with Gibraltar, titled a
Reinstatement Agreement and First Loan Modification (“Work-out
Agreement”).1 Pursuant to this agreement, executed November 3,
1988, Gibraltar rescinded the acceleration of the notes, while
Bradley and Gressett reaffirmed their obligations under the
Personal Note.
The Work-out Agreement proved unsuccessful. On December
1, 1988, less than one month after the work-out had been reached,
Bradley and Gressett again defaulted on the Personal Note when they
1
The effective date of the Work-out Agreement was September 1, 1988.
3
failed to make another quarterly interest payment. Threatened
under the notes’ cross-default provision, Bradley and Gressett
continued to seek nearly $20 million in additional funding for
their ranch project.
However, on December 27, 1988, the Federal Home Loan Bank
Board (“FHLBB”) declared Gibraltar insolvent and appointed the
FSLIC as receiver.2 Furthermore, the FHLBB determined that
Gibraltar had insufficient assets to satisfy its secured and
deposit liabilities, so that no assets were available to pay the
claims of general, unsecured creditors. As a result, on December
28, 1988, the FSLIC sold and endorsed many of Gibraltar’s assets,
including all of the Bradley-Gressett and Circle C Notes and
guarantees to FGB, the successor bank.3 Under the acquisition
agreement with FGB, the receiver retained virtually all of the
unsecured liabilities of Gibraltar, including any obligation to
fund further the ranch project.
After FGB acquired the relevant notes, Bradley, Gressett,
and Circle C repeatedly sought additional funding from FGB. FGB
denied any obligation to make such advances, but it chose to fund
2
Under the Financial Institutions Reform, Recovery, and Enforcement
Act, the FDIC succeeded FSLIC as receiver.
3
The transaction is actually more complicated, but has been simplified
for the sake of clarity. First Texas Bank, FSB is the entity that originally
acquired the notes from the FSLIC. It later changed its name to First Gibraltar
Savings Association, FSB (“FGB”). FGB later changed its name to First Madison
Bank, FSB, and is now known as First Nationwide Bank, FSB. As will be discussed,
FGB initially filed the instant suit, so for clarity and simplicity, the appellee
will be referred to as FGB in this appeal.
4
the ranch project only to preserve the value of the collateral; the
funds, however, were advanced only after Bradley, Gressett, and
Circle C acknowledged that the advances were not a ratification or
assumption of Gibraltar’s obligations by FGB. During the first six
months of 1989, FGB advanced over $5 million to the ranch project
in an attempt to preserve its collateral.
Continued funding came to a screeching halt when FGB
received the results of an appraisal of the project in mid-1989:
according to the appraisal, over $80 million in debt was secured by
less than $29 million in collateral. Faced with this deficiency,
FGB refused to advance any more funds to the project unless
Bradley, Gressett, and Circle C executed letter agreements
confirming that they had no claims against FGB and waiving any
potential claims. During the year from September 1989 to September
1990, approximately 27 such letter agreements were executed.
Without long-term financing, the Circle C Ranch
Development could not survive, and the defendants were unable to
satisfy their financial obligations to FGB. FGB filed suit in
Texas state court in September 1990 seeking recovery under the
interlocking agreements. The defendants answered and asserted
various counterclaims against FGB, including fraud, breach of
contract, breach of fiduciary duty, and tortious interference with
contract. The defendants also contended that Gibraltar’s
insolvency and the appointment of the FSLIC as receiver for the
failed bank amounted to a repudiation of the debt. Further, the
5
defendants argued that FGB assumed Gibraltar’s funding obligations
when it received Gibraltar’s assets from the FSLIC.
Nearly three months after the lawsuit was filed in state
court, the Joint Venture filed for relief in bankruptcy. After a
reorganization plan was confirmed, the Joint Venture executed a
release of its claims against Gibraltar, FGB, the FSLIC, and the
FDIC.
While the litigation was pending in state court, FGB
twice filed motions for summary judgment. The state court denied
summary judgment, reasoning that a number of fact issues existed,
including whether FGB was actually the holder and owner of the
notes and individual guarantees of the defendants. The FDIC
intervened in the state action on August 18, 1993, asserting that
such intervention was required to protect any interest of the FDIC
that might be implicated by the litigation.4 The FDIC exercised
its statutory right to remove the case to federal court under 12
U.S.C. § 1819.
In federal district court, the FDIC and FGB each sought
summary judgment. The defendants moved to strike the FDIC’s
intervention and to remand the action to state court. The district
court granted summary judgment to FGB, and, as part of that
judgment, denied the motion to remand but dismissed the FDIC as a
4
Principally, the FDIC suggests that it had an interest in securing
a declaration from the court that it had authority, as receiver, to assign
Gibraltar’s assets to FGB unencumbered by Gibraltar’s unsecured liabilities.
6
party to the action. The defendants timely appealed, and the FDIC
has cross-appealed its dismissal from the case.
DISCUSSION
I. Removal Jurisdiction and FDIC’s Intervention
The defendants contend that the district court erred when
it denied their motion to strike the FDIC’s intervention and to
remand the action to state court. Specifically, the defendants
argue at length that because the FDIC had no interest in the
lawsuit and was never a proper party to the proceedings, a remand
to state court was required. FDIC argues that the district court’s
decision to dismiss it from the litigation was erroneous. This
court reviews for abuse of discretion the district court’s denial
of the motion to strike the FDIC’s intervention. See, e.g., Nutro
Products Corp. v. NCNB Texas Nat’l Bank, 35 F.3d 1021, 1023 (5th
Cir. 1994). Legal issues concerning the existence of federal
removal jurisdiction are reviewed de novo by this court. See,
e.g., Halferty v. Pulse Drug Co., 864 F.2d 1185, 1188 (5th Cir.
1989). Because the parties’ contentions are interrelated, we will
discuss them together.
Defendants’ argument is difficult to follow, but they
seem to assert that FDIC was never a proper party to the case in
state or federal court, and that FDIC intervened “collusively” in
state court solely to assist FGB by removing the case to federal
court. FDIC responds to these assertions and to the district
7
court’s order of dismissal with these propositions: (1) the FDIC
has an interest in this litigation that entitles it to intervene
because the state court sought to adjudicate whether the FDIC had
assigned the notes and guarantees to FGB unencumbered by continuing
funding obligations; (2) the defendants asserted claims against
Gibraltar, and the FDIC is entitled to intervene when claims are
brought against a failed bank for which it was appointed receiver;
and (3) the FDIC satisfied the criteria for intervention under Fed.
R. Civ. P. 24 because it had agreed to indemnify FGB, the acquiring
bank.
There is no dispute that when the FDIC originally
intervened in the state court litigation, it did so pursuant to
Tex. R. Civ. P. 60, which allows any party to intervene in the
proceedings merely by filing pleadings.5 FDIC was thus a proper
party to the case in state court. What provoked FDIC’s
intervention was the state court’s cryptic ruling denying FGB’s
summary judgment motion and finding certain fact issues, including
“whether FGB is the holder and owner of the notes . . . .” The
state court also held “that fact issues exist whether the FDIC or
[FGB] is owner and holder of the notes and guarantees of the
defendants . . . .” These statements appeared to set for trial the
5
Tex. R. Civ. P. 60 provides that “[a]ny party may intervene by filing
a pleading, subject to being stricken out by the court for sufficient cause on
the motion of any party.” The intervening party may, however, be dismissed for
sufficient cause on the motion of any other party to the litigation. During oral
argument, the defendants conceded that the FDIC’s intervention under Rule 60 was
proper.
8
issue whether the FDIC still owned the assets,6 an issue sufficient
to warrant the agency’s intervention.7 The defendants’ arguments
to the contrary are specious.
The more interesting question is whether FDIC remained a
real party in interest in the federal court case, or whether the
district court properly dismissed it.
FDIC contends that its interest in the litigation also
arose from the counterclaims alleged by the defendants. Indeed, to
the extent that the counterclaims attack the actions of Gibraltar,
they challenge FDIC’s interests, if for no other reason than that
the agency assumed those liabilities when it purchased Gibraltar’s
assets.8 More to the point, the assistance agreement between the
6
The FDIC argues that the language of the state court opinion drew
into question the very authority granted the FDIC by Congress to dispose of
receivership assets when federally insured financial institutions fail.
7
Despite the state court’s language intimating the contrary, there is
no doubt that the FDIC has statutory authority to sell and dispose of
receivership assets. The statute expressly provides that the FDIC may, for
example, “take over the assets . . . and conduct all business of the
institution,” “collect all obligations and money due the institution,” and
“preserve and conserve the assets and property of such institution.” 12 U.S.C.
§ 1821(d)(2)(B)(i), (ii), and (iv). The FDIC may also “place the insured
depository institution in liquidation and proceed to realize upon the assets of
the institution . . . ,” including the “transfer [of] any asset or liability
ofthe institution in default . . . .” 12 U.S.C. § 1821(d)(2)(E), (G)(i)(II).
Given this unambiguous statutory language, this court has repeatedly recognized
that the FDIC’s enumerated powers as receiver are both extensive and
discretionary, free from court-imposed restraints. See, e.g., Ward v. RTC, 996
F.2d 99, 103-04 (5th Cir. 1993); 281-300 Joint Venture v. Onion, 938 F.2d 35, 39
(5th Cir. 1991), cert. denied, 502 U.S. 1057, 112 S. Ct. 933 (1992); see also,
12 U.S.C. § 1821(j)(providing that “no court may take any action, except at the
request of the Board of Directors by regulation or order, to restrain or affect
the exercise of powers or functions of the [FDIC] as a conservator or a
receiver”).
8
Because the FHLBB issued a worthlessness finding declaring Gibraltar
Savings insolvent and appointing the FDIC as receiver, any claims against
Gibraltar would be valid, if at all, against the receiver alone. See, e.g.,
9
FDIC and FGB guaranteed a rate of return on the book value of the
loans backed by the federal government; any risk of not ultimately
collecting the book value of the loan rested solely with the FDIC,
not FGB. Given the agency’s obligation to indemnify FGB, the
acquiring bank, FDIC had a concrete financial interest in the
litigation that would justify its status as a party.9
This court has recognized as much, holding that the FDIC
is a proper party in lawsuits raising allegations against a failed
bank, even when the FDIC’s statutory authority to transfer the
failed bank’s assets is not questioned and when the asset has been
assigned to a successor bank under a purchase agreement. Hence,
the FDIC is entitled to intervene in a lawsuit when claims are made
against a failed institution for which the FDIC acted as receiver.
First Indiana Bank, FSB v. FDIC, 964 F.2d 503, 507 (5th Cir. 1992).
9
In Pernie Bailey Drilling Co. v. FDIC, 905 F.2d 78, 80 (5th Cir.
1990), this court dismissed
Pernie Bailey’s assertion that FDIC is not a party to
the case. The designation of FDIC as a proper party
stems in part from its obligation to indemnify NCNB
under the terms of the [Purchase and Assumption]
Agreement. After assignment, NCNB became the proper
party to sue on the notes, but even so, FDIC is entitled
to defend a claim of recission. Although the notes were
assigned before removal, the FDIC remained the proper
party to defend all claims for damages against the
closed bank.
The defendants read Pernie Bailey very narrowly and urge that it merely found the
indemnification agreement relevant to the FDIC’s right to intervene and did not
hold that such an agreement, standing alone, would consistently warrant
intervention. But this court need not address whether such an indemnification
agreement would always justify FDIC intervention and concludes only that, under
the facts of this case, the indemnification agreement supports the conclusion
that the FDIC was entitled to participate in this litigation.
10
See, e.g., Bank One Texas Nat’l Ass’n v. Morrison, 26 F.3d 544, 547
(5th Cir. 1994) (whether the FDIC was a proper party “turns on
whether Morrison actually stated claims against [the failed bank]
in his counter-claim”); FSLIC v. Griffin, 935 F.2d 691, 696 (5th
Cir. 1991) (FDIC had a right to defend claims against a failed bank
where a party asserted four counterclaims against the FDIC as
receiver for the failed bank); Pernie Bailey, 905 F.2d 78, 80 (5th
Cir. 1990) (recognizing that “the FDIC remained the proper party to
defend all claims for damages against the closed bank”); Beighley
v. FDIC, 868 F.2d 776, 779-80 (5th Cir. 1989) (explaining that the
FDIC is the proper party to defend claims against the failed bank
even after the bank’s assets have been assigned).
But the defendants insist that the above authorities are
not persuasive because they do not assert any affirmative claim for
relief against Gibraltar, the FSLIC, or the FDIC. This attempt to
distinguish the caselaw is both misleading and unavailing. In
their Fifth Amended Answer and Sixth Amended Counterclaim filed in
state court and reasserted in federal district court, the
defendants do describe and allege various acts and omissions of
Gibraltar. For instance, the defendants assert that their
obligations under the loan agreements and guarantees are somehow
excused as a result of
Gibraltar Savings Association’s (the
Plaintiffs’ predecessor-in-interest) prior
material breaches of the contracts at issue.
Gibraltar . . . was closed and was unable to
11
fulfill its funding obligations under the loan
agreements. This failure constitutes a
material breach of the loan agreements and
preceded any alleged failure of the Defendants
to fulfill their obligations under the loan
agreements.
The defendants allege further that Gibraltar and the FSLIC either
negligently or intentionally prevented their performance of their
loan obligations; they contend that
[i]n order for the Defendants to be able to
meet their obligations under the various loan
agreements at issue in this case, the
Plaintiff and/or Gibraltar Savings, and/or the
FSLIC were obligated to fulfill their
obligations under these same loan agreements.
They did not do so. As a result, Circle C
Ranch was not able to generate the expected
profits that all parties realized would be the
source of funds used to pay off the
indebtedness at issue. Accordingly, the
Defendants’ ability to perform under these
loan agreements was rendered impossible.
(emphasis in original). The allegations against Gibraltar
continue, as the defendants suggest that they are excused from
performance under the loan agreements “by the breach of Gibraltar
Savings of its duty of good faith and fair dealing owed to the
Defendants.” The plain language of the pleadings filed by the
defendants in state court and reasserted in federal district court
belies their assertion that this lawsuit does not implicate
Gibraltar or the FDIC.
Further, in Morrison, this court explained that the FDIC
can intervene even when the defendant does not assert any
counterclaims against the failed bank. Morrison, 26 F.3d at 547-
12
48. FDIC intervention is appropriate when, as here, the defendants
assert defenses or claims which reference or rely on the actions of
the failed bank or its receiver. In Morrison, intervention was
appropriate because
[i]nterspersed among his defenses, Morrison
challenges the guaranty as having ‘been
executed under duress, that there was a
failure of consideration and that his
signature was obtained by fraud,’ defenses
which clearly go to the actions of [the
insolvent] Mbank. The combination of
allegations in the counter-claim leads us to
conclude that the FDIC validly perceived that
Morrison was asserting claims against the
Mbank receivership estate and that its
intervention was proper.
Id. at 547. In the present case, the FDIC reasonably reached a
similar conclusion from the language of the defendants’ answer and
counterclaims.10
As in Morrison, the FDIC was entitled to be a party in
this case, the case was properly removed, and the district court
did not abuse its discretion when it denied the defendants’ motion
to strike FDIC. Also, because federal jurisdiction is assessed at
the time of removal, the district court’s ultimate dismissal of the
FDIC did not affect the court’s subject matter jurisdiction. See,
e.g., id. The disposition of FDIC’s appeal to this court adds one
last wrinkle to the parties’ procedural arguments. Not that this
question matters much, but the parties may think it anomalous that
10
Because there are other grounds on which to conclude that the FDIC
was entitled to intervene in this case, the court need not discuss whether the
FDIC also satisfied the criteria for intervention under Fed. R. Civ. P. 24(a)(2).
13
after defending FDIC’s status as a party in state court and for
removal purposes, we will nevertheless affirm its dismissal by the
district court. We do this not because the agency’s participation
was “unnecessary,” however, but because, after the district court
decided to grant summary judgment for FGB, any threat to FDIC’s
interests terminated. At that point, FDIC could have followed the
route it did in Morrison, supra, by withdrawing from the case. The
district court did not afford FDIC that option, but FDIC has not
sought “reversal” of the dismissal on appeal, instead praying for
affirmance of the judgment for FGB. In sum, we may affirm FDIC’s
dismissal even while disagreeing with the district court’s reason
for it.
II. Standing11
The district court held that the borrowers lacked
standing to raise any claims against FGB. The court also found
that Bradley and Gressett, as shareholders and principals of Circle
C, could not assert personal claims for wrongs done to the
corporation. Moreover, the district court ruled that Circle C had
assigned all of its claims to the Joint Venture, which had in turn
released FGB as part of its bankruptcy reorganization.
While the district court was correct that Bradley and
11
Our discussion here is limited only to the issue of standing; whether
the defendants have waived claims which they would otherwise have standing to
raise will be discussed separately.
14
Gressett do not have standing as shareholders and principals,12 they
do have standing as guarantors of the loans to assert the defenses
that would have been available to the borrowers. See, e.g.,
Mayfield v. Hicks, 575 S.W.2d 571, 574 (Tex. App.--Dallas 1978,
writ ref’d n.r.e.) (recognizing that in Texas the general rule is
that “guarantors have the right to raise any defenses to the
guaranteed obligation that the principal may have.”); Stephens v.
First Bank & Trust of Richardson, 540 S.W.2d 572 (Tex. App.--Waco
1976, writ ref’d n.r.e.).
Circle C, by contrast, does not have standing to assert
any claims against FGB. Circle C assigned all of its rights under
the loan agreements to the Joint Venture. The language of the
assignment was sweeping and divested Circle C of all its interests
and rights, transferring these to the Joint Venture.13 For
instance, when the Joint Venture accepted the assigned assets, it
did so pursuant to a clause stating
subject to all the liabilities and obligations
incurred in connection with the Assets as they
12
See, e.g., Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990)
(holding that “[a] corporate stockholder cannot recover damages personally for
a wrong done solely to the corporation, even though he may be injured by that
wrong”).
13
The defendants urge that even though the Joint Venture owns all of
Circle C’s interest in the loans and project, the Joint Venture would somehow not
own Circle C’s claims for fraudulent inducement or for violations of the other
duties alleged by the defendants. The defendants cite no authority for this
proposition and it is contradicted by the sweeping language of the assignment
agreement. While Circle C could have expressly provided in the assignment
agreement that the right to assert its claims for these alleged violations was
retained by Circle C rather than assigned to the Joint Venture, no such provision
is found in the agreement.
15
exist on the date hereof, whether fixed,
contingent, known or unknown, including, but
not limited to, the satisfaction of any
judgment, order, or decree which may be
entered against [Circle C] in any pending suit
as a result of such liabilities and
obligations. Nothing contained in this
Assignment shall, or shall be construed to,
prejudice the right of [the Joint Venture] to
contest any claim or demand as fully as
[Circle C] might have done [before the
Assignment].
(emphasis added). Moreover, as was previously discussed, the Joint
Venture later filed for bankruptcy and released its claims against
FGB as part of its plan for reorganization. As a result, the
district court correctly observed that Circle C lost standing to
raise claims against FGB when it assigned its entire interest in
the loan agreements and project to the Joint Venture; if the Joint
Venture could have asserted any claims against FGB prior to
bankruptcy, those claims now belong to the bankruptcy estate and
have been released.14
III. Waiver
Because only Bradley and Gressett have standing as
guarantors of the loans to assert the defenses that would have been
available to the borrowers, this court must now consider whether
Bradley and Gressett have waived their rights to assert such
defenses.
14
The defendants counter that Circle C explicitly reserved its right
in the bankruptcy release to assert certain claims. This argument is not
meaningful, however, because Circle C no longer has standing to raise any
affirmative claims against FGB.
16
The district court found that Bradley and Gressett had
repeatedly waived the defenses and counterclaims that they
attempted to assert. Specifically, the court found that Bradley
and Gressett waived these claims against Gibraltar in both the
Work-out Agreement and a Fourth Loan Modification, executed on
November 3, 1988. Further, the court found that Bradley and
Gressett had waived their claims and defenses against FGB in at
least 27 letter agreements that FGB required them to execute before
it advanced funds to preserve the value of the collateral.
The defendants disagree, contending that they have
specifically reserved their rights to raise the instant claims and
defenses. At oral argument, the defendants were willing to concede
only that they waived all claims and defenses prior to November 3,
1988.
The defendants’ contention is only partially correct.
There is no doubt that the defendants waived all claims and
defenses prior to November 3, 1988. The Work-out Agreement
expressly provides in § 11.3 that Bradley and Gressett waive “any
and all such offsets, claims, defenses or counterclaims” of “any
nature whatsoever . . . to any of the terms, conditions or
provisions” of their Personal Note and loan agreement.
Additionally, in connection with the fourth loan modification,
Bradley and Gressett executed a guarantor’s ratification agreement
in which they
represent[ed] and warrant[ed] to Lender that
17
as of the date of this Guarantor’s
Ratification there exists no offset, claim,
defense or counterclaim of any nature
whatsoever to any of the terms, conditions of
provisions of the Guaranty and . . . to the
extent such offsets, claims, defenses or
counterclaims do exist, Guarantor hereby
expressly and knowingly waives any and all
such offsets, claims, defenses or
counterclaims.
This language speaks for itself.
When FGB purchased Gibraltar’s assets from the FDIC, it
refused to advance funds to the defendants to preserve the value of
the collateral unless the defendants executed a letter agreement
acknowledging that FGB did not have a continuing obligation to fund
the project; 27 such letter agreements were executed between
September 27, 1989 and September 25, 1990. The agreements provided
that “FGB has not assumed any responsibility or liability for
performance of the obligations of [Gibraltar] under the Loan
Documents including, without limitation, the obligations of the
Closed Association to fund the loan described in the Loan
Documents.”15 The letter agreements also state that
15
See Letter from FGB to Defendants, dated September 25, 1989, and
signed by the defendants on September 27, 1989 (emphasis added) at 2. The
relevant provisions in the remaining 26 letters are virtually identical.
Indeed, any suggestion that FGB had a continuing obligation to fund
the project is frivolous; the agreement provides that
(I) no such action shall be deemed or construed, whether
by operation of law, the principles of equity or
otherwise, as an assumption by or agreement of [FGB], or
a course of dealing which obligates [FGB], to keep,
perform, or observe the responsibilities, obligations
and covenants, express or implied of [Gibraltar] under
the Loan Documents, (ii) [FGB] has no such obligation to
the Borrower, the Guarantors or any other party in
respect to the Loan Documents, (iii) neither the
Borrower nor such Guarantors will assert as a result of
18
the Borrower and the . . . Guarantors each
waives and releases any and all offsets,
claims, defenses, or counterclaims of any
nature whatsoever which any of them has or may
have against [FGB], provided, however, that
the Borrower and the undersigned Guarantors
reserve any defense or offset (but not any
other claims or rights) with respect to the
enforceability of the Loan Documents now held
by [FGB] arising from the acts or omissions of
the Closed Association or of the FSLIC, acting
in its capacity as receiver of the Closed
Association, or any successor of the FSLIC
acting in that same capacity (acknowledging,
without prejudice, that [FGB] denies both the
existence of all such defenses or offsets and
the applicability thereof to the
enforceability of the Loan Documents in the
hands of [FGB], and [FGB] expressly reserves
all rights to deny, challenge and defend
against any such defense or offset . . . .
Id. at 3 (emphasis added). Under these provisions, Bradley and
Gressett waived their claims against FGB and reserved only those
defenses or offsets arising from the acts of Gibraltar, the FSLIC,
or the FDIC. However, as FGB correctly argues, given the fact that
Bradley and Gressett waived their claims against FGB and that they
expressly and unequivocally acknowledge that FGB has no obligation
to them to fund the project, the rights reserved by Bradley and
the execution of the partial release(s) described in
this letter or the negotiations and conversations
between [FGB], the Borrower and such Guarantors in
respect thereto, whether at law or in equity, that [FGB]
has assumed such obligations or is otherwise responsible
in any manner for the performance of the obligations,
covenants and agreements of the Closed Association
described in the Loan Documents including, without
limitation, the commitment to loan funds as described in
said instruments . . . .
Id. at 2-3.
19
Gressett against Gibraltar, the FSLIC, or the FDIC would be
meaningful only in a lawsuit against those entities; these rights
are irrelevant in the instant case.
Careful review of the record thus demonstrates that
Bradley and Gressett waived not only all of their claims prior to
November 3, 1988, but also their claims against FGB; hence, Bradley
and Gressett have waived all of their claims except during the
period from November 4, 1988 to December 28, 1988, the date that
FGB acquired Gibraltar’s assets.
Recognizing that the letter agreements otherwise destroy
the viability of their claims against FGB, the defendants suggest
that these agreements are somehow the product of “economic duress.”
They contend that they were in a “dire situation” and that “[t]hey
were therefore, out of fear of economic loss, forced to accept
whatever FGB would give them, on whatever terms FGB required.”
This argument is unsupported by either the law or the record. In
Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 560 n.11 (5th Cir.
1991), this court explained that
[t]he test for [economic] duress [under Texas
law] includes the following factors: (1) there
can be no duress unless there is a threat to
do some act which the party threatening has no
legal right to do; (2) there must be some
illegal exaction or some fraud or deception;
(3) the restraint must be imminent and such as
to destroy free agency without present means
of protection. Further, economic duress can
be claimed only when the party against whom it
is claimed was responsible for a claimant’s
financial distress.
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(citations omitted); see also, Callum Highlands, Ltd. v. Washington
Capital Dus, Inc., 66 F.3d 89 (5th Cir. 1995). FGB had a legal
right to condition any further funding to preserve the project’s
capital on execution of the letter agreements. Defendants offered
no evidence that FGB exacted these agreements through fraud or
deception or that the defendants were otherwise forced or coerced
into executing the agreements twenty-seven times. Finally, the
defendants’ financial woes began long before they executed any
agreement with FGB; FGB was not responsible for the defendants’
financial distress.
Because the defendants have waived all of their claims
against FGB, this court need not address the merits of the various
claims for breach of the lending agreements, breach of fiduciary
duty, fraud, estoppel, etc.
CONCLUSION
For the foregoing reasons, the judgment of the district
court granting summary judgment in favor of FGB and dismissing the
FDIC as a party, is AFFIRMED.
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