Romines v. Great-West Life Assurance Co. ( 1996 )

___________
No. 94-3763
___________
Elmer Ernest Romines; *
Marjorie R. Romines; *
Marilyn F. Romines; *
Marjorie Ann Romines, *
* Appeal from the United States
Appellants, * District Court for the
* Eastern District of Missouri.
v. *
*
The Great-West Life Assurance *
Company, a corporation; Great- *
West Life Annuity Insurance *
Company, a corporation; *
Progressive Ozark Bank, a *
Federal Savings Bank, *
*
Appellees. *
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Submitted: April 10, 1995
Filed: January 19, 1996
___________
Before FAGG, Circuit Judge, HENLEY, Senior Circuit Judge, and
BOWMAN, Circuit Judge.
___________
HENLEY, Senior Circuit Judge.
This is a diversity of citizenship action by Elmer Ernest
Romines and his wife and daughters (collectively, Romines) against
Progressive Ozark Bank of Salem and Houston, Missouri (Progressive
Ozark Bank) and two insurance companies, Great-West Life Assurance
Company and Great-West Life Annuity Insurance Company
(collectively, Great-West). Romines sought declaratory and other
relief under a Consulting Agreement he entered with a predecessor
of Progressive Ozark Bank and under the provisions of two annuity
contracts purchased from Great-West to fund payments due under the
Consulting Agreement. The parties filed cross motions for summary
judgment and the district court1 granted summary judgment for
defendant, Progressive Ozark Bank. Romines v. Great-West Life
Assurance Co., 865 F. Supp. 607 (E.D. Mo. 1994). Romines filed a
timely notice of appeal from the judgement of the district court
under 28 U.S.C. § 1291. We affirm.
BACKGROUND
From October 1974 until his resignation in March 1991, Elmer
Romines served as president and chairman of the board of
Progressive Federal Savings Bank (Progressive Federal) of Houston,
Missouri. In order to allow Progressive Federal to begin a
transition to new management, in September 1988, Romines and
Progressive Federal entered into a Consulting Agreement. Under the
terms of the agreement, Romines would continue to serve in his
executive positions only so long as the bank board desired. In
addition, under the Consulting Agreement Romines agreed to take a
$12,000 per year reduction from his then current salary. In
return, the Consulting Agreement provided that Romines would be
paid $4,000 per month for consulting services for five years from
the date of the agreement and approximately $2,000 per month for an
additional ten years. As required by law, the Consulting Agreement
contained several provisions setting forth conditions to
Progressive Federal's obligation to continue payments under the
Consulting Agreement. Included in these conditions was a provision
that the Consulting Agreement would automatically terminate if
Progressive Federal was ever determined by federal regulators to be
in an unsafe and unsound financial condition.
To fund Romines' compensation under the Consulting Agreement,
Progressive Federal purchased two single premium annuities from
Great-West. The annuities provided that Progressive Federal was
1
The Honorable George F. Gunn, United States District Judge,
Eastern District of Missouri.
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the owner of the annuity policies, Elmer Romines was designated the
payee, and Romines' wife and daughters were named as beneficiaries
in the event of his death. Beginning November 1, 1988 and
continuing until its termination in March 1991, Romines was paid
under the annuities pursuant to the Consulting Agreement.
Like many savings banks, Progressive Federal faced financial
difficulties in the late 1980s. In the autumn of 1990, separate
examinations of Progressive Federal by the Federal Deposit
Insurance Corporation (FDIC) and the Office of Thrift Supervision
(OTS) concluded that Progressive Federal was technically insolvent.
FDIC and OTS gave Progressive Federal the choice of either pursuing
a merger with another financial institution or being placed in
receivership. Thus, on December 21, 1990, in lieu of receivership,
Progressive Federal and OTS entered into a Consent Agreement under
which Progressive Federal acknowledged that it was insolvent and
could be placed in receivership and that both Progressive Federal
and OTS would seek a healthier institution to merge with
Progressive Federal.
Although Romines disagreed with a number of the factual
findings of the FDIC and OTS reports, neither he nor Progressive
Federal formally challenged the audit reports. Under Romines'
leadership the board of Progressive Federal discussed merger
options with a number of other institutions. In March 1991,
Romines recommended a merger with Ozark Rivers Savings Bank (Ozark
Bank) of Salem, Missouri.
At the same time as the merger negotiations were ongoing, the
OTS became concerned about Romines' continued leadership of
Progressive Federal. In particular, OTS noted that the FDIC and
OTS audits had shown questionable expenditures by Progressive
Federal on items for Romines and his family. Moreover, given the
bank's precarious financial situation, OTS questioned the
continuing payments to Romines under the Consulting Agreement.
Accordingly, on March 7, 1991, Lyle A. Townsend, OTS Assistant
Director, sent Progressive Federal a letter stating that because
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OTS had determined that Progressive Federal was insolvent and thus
in an unsafe and unsound condition, its obligations under the
Consulting Agreement had automatically terminated. The letter
directed Progressive Federal immediately to cease all payments to
Romines under the Consulting Agreement.
Progressive Federal's board met on March 13, 1991 and voted to
approve the merger with Ozark Bank. The board also reviewed the
March 7 OTS letter but resolved to continue paying Romines under
the Consulting Agreement at least until the merger was completed.
After the adoption of that resolution, Romines resigned his
official positions as President, Chairman and Director of the Bank,
but continued his management role at the bank and continued to
collect his consulting fees.
On March 21, 1991, OTS' Townsend again wrote to the
Progressive Federal board regarding the directed termination of the
Consulting Agreement. The letter warned the members of the board
of directors that they might be held personally liable for future
payments under the Consulting Agreement. The letter also stated
that OTS would not approve the proposed merger as long as the
Consulting Agreement was still in place. After this second
warning, at a special board meeting on March 26, 1991, Progressive
Federal's board unanimously voted to terminate the Consulting
Agreement. In addition, the board directed Great-West to make
Progressive Federal the payee and beneficiary for all future
payments under the annuities. On May 14, 1991, OTS' Regional
Deputy Director, Donald W. Wente, and its Regional Director, Billy
C. Wood, confirmed in writing that Progressive Federal was unsafe
and unsound to transact business because it had substantially
insufficient capital.
On May 30, 1991, Progressive Federal filed with OTS its
application for a voluntary supervisory conversion from a federally
chartered mutual savings bank to a federally chartered stock
savings bank and its simultaneous merger into Ozark Bank. The
application for the conversion and merger was approved by OTS on
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September 20, 1991. Thereafter the merged bank operated as
Progressive Ozark Federal Savings Bank.
PROCEEDINGS BELOW AND GROUNDS FOR APPEAL
In September 1992, Romines (of Virginia) brought this
diversity action against Progressive Ozark Bank (of Missouri) and
Great-West (of Colorado and Canada) seeking a declaration that the
termination of the Consulting Agreement was invalid and seeking
recovery of annuity payments not made to Romines since March 1991
(now totalling in excess of $150,000). After discovery, the
parties filed cross motions for summary judgment. The district
court granted summary judgment for Progressive Ozark Bank on
grounds that (1) the Consulting Agreement had automatically
terminated by operation of law and (2) Romines had no rights under
the Consulting Agreement which had vested prior to its termination.
On this appeal, Romines' primary challenges are to these two
aspects of the district court's decision. Romines argues that the
district court was incorrect in holding that the Consulting
Agreement had terminated by operation of law. Romines contends
that under the terms of the agreement and the controlling federal
regulations only a formal decision by the Secretary of the Office
of Thrift Supervision that the bank was insolvent would terminate
the agreement and that such a formal finding by the Secretary
himself was never issued. Alternatively, Romines urges that even
if the Consulting Agreement was lawfully terminated his rights to
annuity payments thereunder were vested prior to the termination
and thus could not be abrogated by the bank without breaching the
agreement.
In addition, Romines raises two subsidiary arguments. Romines
contends that the district court committed reversible error by
admitting into evidence internal, non-public documents of the OTS
and FDIC. Romines also contends that the district court erred in
holding its separate claims against Great-West on the annuity
contracts were moot.
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We consider each of Romines' contentions in order.
STANDARD OF REVIEW
We review a district court's grant of summary judgment de novo
and under the same standard which governed the district court's
decision. Lenhardt v. Basic Inst. of Technology, Inc., 55 F.3d
377, 379 (8th Cir. 1995). The question is whether the record, when
viewed in the light most favorable to the non-moving party, shows
that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(c); Maitland v. University of Minnesota, 43 F.3d 357,
360 (8th Cir. 1994).
APPLICABLE FEDERAL STATUTE AND REGULATIONS
Federally chartered savings banks such as Progressive Federal
are subject to an extensive scheme of federal regulation including
the Home Owners' Loan Act of 1933, as amended, 12 U.S.C. §§ 1461-
1468c, and regulations issued pursuant to the Act, 12 C.F.R. §§
500-591.
Among the regulations promulgated pursuant to the Act
applicable at the time the Consulting Agreement became effective in
1988 was the requirement that every federally insured savings bank
include in each of its employment agreements the following:
(b) Required Provisions. Each employment
contract shall provide that:
(5) All obligations under the contract shall be
terminated, except to the extent determined that
continuation of the contract is necessary for the
continued operation of the association,
(ii) by the Federal Home Loan Bank Board, at the time
the Bank Board or its Principal Supervisory Agent (as
defined in 12 U.S.C. § 561.35 Subchapter D) approves a
supervisory merger to resolve problems related to
operation of the association or when the association is
determined by the Board to be in an unsafe or unsound
condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
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12 C.F.R. § 563.39(b)(5)(ii) (emphasis added). Paragraph seven of
the Consulting Agreement incorporated the above language verbatim.
After the Consulting Agreement was entered, but before it was
terminated by the board of directors, Congress enacted the
Financial Institutions, Reform, Recovery and Enforcement Act of
1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 183, which
substantially amended the Home Owners' Loan Act. Among the changes
brought by FIRREA was the replacement of the Federal Home Loan Bank
Board by the Office of Thrift Supervision as the primary regulator
of savings and loan associations and savings banks. Section
563.39(b)(5)(ii) was therefore modified to read as follows:
(b) Required Provisions. Each employment
contract shall provide that:
(5) All obligations under the contract shall be
terminated, except to the extent determined that
continuation of the contract is necessary of [sic] the
continued operation of the association
(ii) By the Director or his or her designee, at the time
the Director or his or her designee approves a
supervisory merger to resolve problems related to the
operation of the association or when the association is
determined by the Director to be in an unsafe or unsound
condition.
Any rights of the parties that have already vested,
however, shall not be affected by such action.
12 C.F.R. § 563.39(b)(5)(ii) (emphasis added). Thus, under the
amended statute and implementing regulations, all employment
contracts entered by savings and loans would still automatically
terminate in the event the institution was found unsafe; however,
responsibility for the determination was transferred to the
Director of the new Office of Thrift Supervision.
Although the text of the Consulting Agreement included the
language mandated by the pre-FIRREA version of § 563.39, both the
appellants and the appellees have argued this appeal based on their
interpretation of the post-FIRREA regulations. We will therefore
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assume (without deciding) for purposes of our discussion here that
the amended statute and regulations apply.
TERMINATION OF THE CONSULTING AGREEMENT BY OPERATION OF LAW
Both appellants and appellees assume that the Consulting
Agreement between Romines and Progressive Federal was an
"employment contract" covered by Section 563.39 and we accept that
assumption for purposes of this appeal. The parties dispute,
however, the question whether the Consulting Agreement was
automatically terminated by operation of law under Section 563.39.
Great-West and Progressive Ozark Bank contend, and the
district court held, that Romines had no further right to collect
under the Consulting Agreement once the Office of Thrift
Supervision determined that Progressive Federal was unsafe and
unsound. They argue that pursuant to Section 563.39 the Consulting
Agreement terminated automatically upon the finding of unsafe and
unsound condition and that Romines' right to payments under the
Agreement also were terminated as a matter of law. We agree.
We do not believe that Romines' contrary arguments - that some
formal hearing procedure was mandated by Section 563.39 and that a
personal finding of unsafe and unsound condition by the Secretary
of the Office of Thrift Supervision was necessary - are consistent
with either the letter or spirit of the regulation.
The Home Owner's Loan Act which established the Office of
Thrift Supervision granted broad authority to the Director of OTS
to provide for the "examination, safe and sound operation, and
regulation of savings associations [and savings banks]. 12 U.S.C.
§ 1463(a)(1). Similarly, the Act broadly authorized the Director
to issue "such regulations as the Director determines to be
appropriate to carry out the responsibilities" of OTS, 12 U.S.C.
§ 1463(a)(2), and to delegate "to any employee, representative, or
agent any power of the Director," 12 U.S.C. § 1462a(h)(4)(a).
Among the regulations adopted by the Director to carry out
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this broad authority was Section 563.39 providing for the
termination of employment contracts. Section 563.39 was intended
to afford federal regulators the flexibility to monitor and remedy
abusive or excessive employment contracts entered into by
institutions that later default or need regulatory assistance to
survive. See 47 Fed. Reg. 17,471 (1982). In particular, Section
563.39 provides that employment contracts terminate automatically
-and replacement agreements have to be approved by the regulators -
upon default or a finding of unsafe and unsound condition. Section
563.39 mandates no particular form of proceeding or finding for the
termination of such employment contracts but merely says that "all
obligations under the contract shall be terminated . . . by the
Director or his or her designee, . . . when the association is
determined by the Director to be in an unsafe or unsound
condition."
In this case, both Romines and the bank were put on notice as
early as the fall 1990 audit reports and the December 1990 Consent
Agreement that Progressive Federal was insolvent under OTS
accounting guidelines and could not continue to be operated in its
present form. The Office of Thrift Supervision then confirmed in
the March 7, 1991 letter from OTS Assistant Director Townsend that
the institution's financial condition was unsafe and unsound and
that all employment contracts were accordingly terminated.
Townsend indicated in the letter that alternate compensation
arrangements could be established with Romines but that any such
arrangements required the approval of the OTS. The Progressive
Federal Board decided to terminate the Consulting Agreement but no
alternate compensation arrangements were ever made.
At no point did Romines or Progressive Federal ever request
any formal hearing on the institution's solvency or challenge any
of the essential factual findings of the FDIC or OTS audits.
Romines and Progressive Federal consistently dealt with Assistant
Director Townsend and at no time challenged his authority to act on
the Director's behalf. Indeed, in the December 1990 Consent
Agreement, negotiated and signed by Townsend on behalf of OTS and
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negotiated and signed by Romines on behalf of Progressive Federal,
Progressive Federal acknowledged that it was insolvent and agreed
to seek a merger partner in lieu of receivership or liquidation.
Moreover, by signing the Consent Agreement Romines explicitly
agreed to the Consent Agreement's recital of the authority of
Townsend as the local OTS official authorized to review both
expenditures in general and employment contracts in particular.
Based on these facts, we believe that there is no doubt that
by the time payments to Romines under the Consulting Agreement were
halted at the end of March 1991 there had been a determination by
OTS communicated to Progressive Federal that it was in an unsafe
and unsound condition and that Romines' employment contract was
accordingly terminated as required by law.
Our conclusion is fully consistent with the decisions of other
courts which have considered the termination of employment
contracts under Section 563.39. In several similar cases involving
employees of failed savings institutions, courts have ruled that
employment contracts were automatically terminated when the bank or
savings and loan was found to be in an unsafe and unsound condition
or when a receiver was appointed.
In Modzelewski v. RTC, 14 F.3d 1374 (9th Cir. 1994), for
example, the Ninth Circuit held that the Salary Continuation
Agreements between a savings and loan and two officers were
automatically terminated under Section 563.39 when the Resolution
Trust Corporation took over the institution as receiver and that
summary judgment on that issue was appropriate. Similarly, in
Aronson v. RTC, 38 F.3d 1110 (9th Cir. 1994), the Ninth Circuit
held that the district court was correct to dismiss the claim of a
former savings bank officer for salary under an oral employment
agreement, because the agreement was terminated under Section
563.39 when the RTC assumed control of the bank.
Numerous cases in the federal district courts have also
followed this reasoning and held that employment contracts had
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automatically terminated under Section 563.39. See, e.g., Crocker
v. RTC, 839 F. Supp. 1291 (N.D. Ill. 1993) (claim of chairman of
savings association for consulting fees under employment agreement
rejected because contract automatically terminated under Section
563.39 when RTC became conservator); Cohen v. RTC, 193 U.S. Dist.
LEXIS 7317 (Civ. No. 90-1065) (S.D. Cal. 1993) (retention bonus
agreement with savings bank vice president automatically terminated
under Section 563.39 based on OTS letter that institution was
unsafe and unsound); Barnes v. RTC, 1992 U.S. Dist. LEXIS 1841
(Civ. No. 91-2011) (D. Kan. 1992) (employment contract of director
of savings association division terminated under Section 563.39
when RTC became conservator).
The only case cited by Romines in support of his argument that
the Consulting Agreement did not terminate by operation of law,
FSLIC v. Quinn, 922 F.2d 1251 (6th Cir. 1991), is inapposite. In
Quinn, thrift officials Quinn and Gannon were recruited by the
FSLIC as receiver to manage a failing savings and loan association.
Later, when efforts to save the troubled thrift were unsuccessful,
it was sold to another institution and the employment contracts of
Quinn and Gannon were terminated. The FSLIC then filed suit for
declaratory and injunctive relief on the ground that it did not owe
severance benefits to Quinn and Gannon under the employment
contracts.
The Sixth Circuit noted that because the FSLIC had determined
that the thrift was in "unsafe or unsound condition" any obligation
of FSLIC under the contracts pursuant to Section 563.39 would
ordinarily be deemed terminated. 922 F.2d at 1253. However, the
court held that on the peculiar facts of the case an exception to
automatic termination under Section 563.39 applied. The FSLIC had
itself recruited and hired Quinn and Gannon to manage the thrift
after it became unsafe and the FSLIC had also specifically
negotiated with the officials to pay them severance benefits if
their employment was terminated before the end of their contract.
The Sixth Circuit found that these actions by the FSLIC amounted to
an FSLIC determination that the services of the two managers were
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necessary to keep the thrift afloat. 922 F.2d at 1253.
Accordingly, the court held that under an exception in Section
563.39 "continuation of the contract [was] necessary [to] the
continued operation of the institution," 12 C.F.R. § 563.39(b)(5),
and the FSLIC was accordingly obligated to pay the severance
benefits. 922 F.2d at 1256.
Quinn simply does not stand for the proposition asserted by
Romines that his employment contract did not terminate when the OTS
found that Progressive Federal was unsafe or unsound. It merely
holds that in certain circumstances a separate exception in Section
563.39 may foreclose the argument that an employment contract was
terminated if the regulatory agency has in effect determined that
continuation of the contract was necessary. We note that there is
absolutely no contention by appellants here that this exception in
Section 563.39 applies to Romines. Moreover, there are no facts to
suggest that OTS, Progressive Federal or anyone else considered
Romines' continued services under the Consulting Agreement to be
necessary to the continued operation of the savings bank.
Similarly, Quinn does not stand for the additional
proposition, asserted by Romines, that the Office of Thrift
Supervision was obligated to hold a formal hearing on Progressive
Federal's insolvency and that the OTS Director was required to
issue a formal order that the savings bank was in an unsafe or
unsound condition. Indeed, Quinn supports the opposite conclusion:
that no particular form of agency action is required. In Quinn, as
in this case, the regulatory agency and the troubled thrift entered
into a consent agreement in lieu of formal proceedings. 922 F.2d
at 1256 n.5. In Quinn, as in this case, the agency's course of
administrative actions - even absent a formal agency proceeding on
the bank's unsafe condition - was held by the Sixth Circuit to be
"equivalent to a finding of 'unsafe and unsound' conditions." 922
F.2d at 1245.
In sum, we find that based on the undisputed facts the
Consulting Agreement was clearly terminated by operation of law and
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we believe that the district court was correct to grant summary
judgment on this issue. Romines' contention that termination of
the Consulting Agreement required some additional action by the
Director of OTS was incorrect as a matter of law. Accordingly, no
disputed material issue of fact remained and summary judgment was
appropriate.
NO RIGHTS TO PAYMENT VESTED PRIOR TO TERMINATION
Romines' alternative argument for reversal - that even if the
Consulting Agreement was properly terminated by operation of law
his rights to payment thereunder were vested prior to termination
-is also unpersuasive.
Section 563.39 provides that although a savings institution is
determined to be in unsafe or unsound condition and accordingly
employment contracts covered by Section 563.39 are terminated, "any
rights of the parties that have already vested . . . shall not be
affected by such action." 12 C.F.R. § 563.39(b)(5). There is no
definition of what is a "vested" right under either Section 563.39
or its authorizing legislation. Every court which has considered
the issue, however, has held that a right is vested if it is
unconditional, i.e., the employee holding the right is entitled to
claim immediate payment. See, e.g., Aronson, 38 F.3d at 1113;
Modzelewski, 14 F.3d at 1378. This definition furthers the
statute's policy of distinguishing between contract rights in the
nature of pension or retirement benefits which have already accrued
and should not be affected by termination of the contract on one
hand, and contract rights for payment for services not yet rendered
for which no payment should be owed on the other hand.
In this case we believe there is little doubt that the
payments to be made to Romines under the Consulting Agreement were
payments in return for services he was to render. He was entitled
to be paid for those management services he had already provided
until the end of March 1991. However, he had no unconditional
right to receive payment for consulting services which he never
provided.
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Romines raises the additional claim that because the
Consulting Agreement provided that he would not be terminated
"without cause" he had a vested right to receive payments under the
agreement unless some cause for termination was put forward. This
is incorrect as a matter of law. The terms of the Consulting
Agreement specifically incorporated the language of Section 563.39
(5) providing that the agreement could be automatically terminated
by operation of law as well as for cause.
Numerous courts have held that a "without cause" provision
does not preclude termination of the contract by operation of law
under Section 563.39. In Rush v. FDIC, 747 F. Supp. 575 (N.D. Cal.
1990), for example, the court held that Rush had no vested right to
payment under an employment contract which guaranteed payment of
severance benefits equalling one year's salary of $105,000 if he
was terminated without cause. The court held that the right to the
severance benefit vested only upon the occurrence of the condition:
termination without cause. Because the employee's contract
terminated by operation of law (when the bank was declared
insolvent) before the condition was met, his right remained merely
conditional and not vested. Accord, Aronson v. RTC, 38 F.3d 1110
(9th Cir. 1994) (right to pension benefit not vested if employment
contract terminated by operation of law before employee reached
retirement age); Modzelewski v. RTC, 14 F.3d 1374 (9th Cir. 1994)
(same); Crocker v. RTC, 839 F. Supp. 1291 (N.D. Ill. 1993) (right
of former thrift chairman to consulting fee not vested if
employment contract terminated by operation of law prior to
termination without cause).
Romines' argument that Modzelewski and Aronson support his
contention that his right to payment under the Consulting Agreement
had vested prior to its termination under Section 563.39 is
misplaced. Romines contends that once the agreement was entered
into and became effective in 1988 he had an immediate right to
payment. Romines' argument, however, seriously misstates the
holding of the cited cases. In both Modzelewski and Aronson the
Ninth Circuit made clear that the right to payment does not vest
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merely upon the signing of an employment contract but only when all
conditions to payment are satisfied. In the case of retirement
benefits, Modzelewski and Aronson hold that the right to payment of
retirement benefits vests only when the employee reaches the
required retirement age.
The Consulting Agreement between Romines and the bank was not
a pension or retirement plan for which he had immediate right to
claim payment upon reaching a certain age. It was a contract for
Romines to provide management services to the bank in return for
monthly payments. Romines' right to payment of the entire total
amount of consulting fees did not vest upon the signing of the
Consulting Agreement but accrued monthly as he provided the
services contracted for. When the Consulting Agreement was
terminated by operation of law under Section 563.39, Romines lost
the right to claim payment for consulting services he would have
provided in the future had the agreement not been terminated.
We believe that this holding is consistent with the policy
behind Section 563.39 of allowing the OTS the flexibility it needs
to deal with troubled savings institutions while at the same time
ensuring payment to employees of salary and benefits already
earned. As other courts have noted, Section 563.39 "is necessary
to relieve a troubled or insolvent savings and loan institution
from burdensome obligations such as substantial contracts for
severance pay. The interpretation that plaintiff urges - that
severance agreements vest upon formation - denies the [agency] the
flexibility it required to manage unsound savings and loan
associations." Rush v. FDIC, 747 F. Supp. 575, 578 (N.D. Cal.
1990). Accord, Rice v. RTC, 785 F. Supp. 1385, 1391 (D. Ariz.
1992), rev'd on other grounds, Modzelewski v. RTC, 14 F.3d 1374
(9th Cir. 1994).
Accordingly, we follow other federal courts that have
considered this issue and hold that on the undisputed facts Romines
did not have a vested right to payment under the Consulting
Agreement which survived the termination of the contract under
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563.39. The district court properly granted summary judgment for
appellees on this issue.
THE DISTRICT COURT DID NOT ERR BY ADMITTING INTO EVIDENCE FDIC AND
OTS DOCUMENTS
Romines contends that the district court committed reversible
error by admitting into evidence the reports of the OTS and FDIC
audits which found Progressive Federal was insolvent as well as the
May 1991 OTS letter confirming that Progressive Federal was in
unsafe and unsound condition. Romines' principal contention
appears to be that these documents were irrelevant as a matter of
law because they were not documents of public record.
We reject this claim. The audit reports as well as the OTS
letter were clearly relevant to determining the central issue
raised by Romines' lawsuit, the question whether Progressive
Federal's employment contracts were terminated by operation of law
because the bank was found to be in unsafe and unsound condition.
The district court did not err by admitting these documents into
evidence or relying in part upon them in reaching its decision.
ROMINES HAS NO INDEPENDENT RIGHT TO RECOVER FROM GREAT WEST UNDER
THE ANNUITY CONTRACTS
We also reject Romines' final claim: that even if Progressive
Ozark is not obligated to him for the amount of consulting fees he
would have earned under the Consulting Agreement he is nonetheless
entitled to recover that same amount from Great-West. Romines
contends that, because he was designated the payee on the annuities
issued by Great-West and his family members were designated the
beneficiaries in the event of his death, their right to payment
under the annuities was irrevocable. Thus, Romines argues that
Great-West had no right to make payments under the annuities to
Progressive Federal (and after the merger to Progressive Ozark)
rather than to Romines once the Consulting Agreement was
terminated.
Nothing in the terms of the annuity contracts supports the
suggestion that the payee designations were irrevocable. Indeed,
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because the contracts clearly stated that the bank was the owner of
the annuity contracts we believe the implicit assumption was that
as owner the bank could also change the payee. Romines has cited
no case law or other authority to support his claim that the payee
and beneficiaries should be assumed to be irrevocably designated.
Moreover, Romines has offered no basis at all in public policy for
allowing him to recover from Great-West what we have held he is not
entitled to recover from Progressive Ozark.
Although the district court granted Progressive Ozark's motion
for summary judgment, it denied the motion of Great-West as moot.
We believe that the logic of the district court's decision was that
if Romines had no right to payment under the Consulting Agreement
with Progressive Ozark, then by definition he had no right to
payment under the annuity contracts which were entered solely to
fund the consulting fee payments. Thus, we conclude that the
district court implicitly and correctly held that the termination
of the Consulting Agreement also terminated Romines' right to claim
payment from Great-West under the annuity contracts entered into to
fund the consulting fee payments.
For the reasons stated above, the judgment of the district
court is in all respects affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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