F.D.I.C. v. Hamilton, 94-6096

• Citation: 58 F.3d 1523
• Decision Date: 07 July 1995
• Docket Number: No. 94-6096,94-6096
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, acting in its corporate capacity, Plaintiff, v. Sandra B. HAMILTON, an individual; L.G. Hamilton, an individual, Defendants-Appellees, v. NCNB TEXAS NATIONAL BANK, and Nations Bank, Third-Party-Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1523

58 F.3d 1523

FEDERAL DEPOSIT INSURANCE CORPORATION, acting in its

corporate capacity, Plaintiff, v. Sandra B. HAMILTON, an individual; L.G. Hamilton, an individual, Defendants-Appellees, v. NCNB TEXAS NATIONAL BANK, and Nations Bank,

Third-Party-Defendant-Appellant.

No. 94-6096.

United States Court of Appeals, Tenth Circuit.

July 7, 1995.

Conner L. Helms (Drew Neville, Russell A. Cook, and Brinda K. White of Linn & Neville, P.C. with him on the briefs), of Woska, Hasbrook, Dowd, Underwood & Helms, Oklahoma City, OK, for appellees.

Kirk D. Fredrickson (Douglas N. Gould with him on the briefs), of Hall, Estill, Hardwick, Gable, Golden & Nelson, Oklahoma City, OK, for appellant.

Before ANDERSON, BARRETT and BALDOCK, Circuit Judges.

BARRETT, Senior Circuit Judge.

NationsBank of Texas, N.A. (NationsBank), formerly NCNB Texas National Bank, third party defendant, appeals from the judgment of the district court in favor of Sandra B. Hamilton and, her son, L.G. Brown Hamilton, collectively referred to as "the Hamiltons." ¹

Facts

On October 12, 1990, the Hamiltons entered into a Real Estate Lease Purchase Contract (the Agreement) with NationsBank regarding an 11,584 square foot residential property located at 1512 West Plato Road, Duncan, Oklahoma (the Property). The Agreement provided for a three year lease term with an option to purchase at any time during the lease term.

The Agreement obligated the Hamiltons to pay $1,400 monthly in rent, additional amounts for insurance and property taxes, and to repair the swimming pool during the first year of the lease term. NationsBank was to reimburse one-half of the pool repair expenses if the purchase option was not exercised. Under the Agreement, NationsBank was responsible for "maintenance and repair of all functions of the property to the extent such repairs and maintenance exceed $1,000 per year." (Appellant's Appendix, Vol. I at 6).

The Agreement allowed the Hamiltons, at their own expense, to construct a recording studio in the garage area of the Property and provided that in the event the Hamiltons did not purchase the Property the cost of reconverting the studio back into a garage would be offset against the obligation to reimburse one-half of the pool repair expenses. The Hamiltons intended to operate a recording studio with overnight accommodations for studio guests.

In November, 1990, NationsBank's asset manager, Tom Grimland (Grimland), toured the Property with the Hamiltons and identified certain items which the Hamiltons asked to be repaired. Grimland agreed on behalf of NationsBank to make certain of these repairs. The repair work was assigned to Harvey Garrett, the original builder of the home.

In January, 1991, Ward Warren (Warren) replaced Grimland as asset manager for the Property. Warren learned that the Hamiltons were having difficulty with Garrett. Warren toured the Property with the Hamiltons and they presented him with a list of items in need of repair or replacement. Warren discussed the list with Grimland and concluded that due to the extent of the needed repairs it would be appropriate to engage a construction consultant to oversee the project.

In March, 1991, George Gibson (Gibson) was hired by NationsBank as a construction consultant to identify the deficiencies at the Property and to secure repair bids. Gibson toured the Property on March 29, 1991, with the Hamiltons and prepared a schedule of proposed repairs. Len Lawson (Lawson) was selected, by the Hamiltons, as the contractor to perform the repairs and was asked to provide a cost estimate for each item.

In April, 1991, NationsBank unilaterally advised the Hamiltons that rental payments could be deferred in order to allow the parties to determine what amount of repair expenses incurred by the Hamiltons should be credited against their lease obligation. At this time, the Hamiltons provided Gibson with a list of additional repair items, largely consisting of electrical repairs. This list was incorporated by Gibson into a seven-page document entitled Expenditure Summary and Reconciliation (the Repair Summary).

In late April, 1991, Gibson revised the Repair Summary to include the cost estimates obtained from Lawson and to reflect his personal recommendations as to the allocation of financial responsibility for various repair items. At this time, the aggregate cost of the repairs was $37,955.51.

In early May, 1991, Warren asked the Hamiltons to prioritize the repairs so that the most important items could be completed first. Warren then met with his supervisors and the decision was made to immediately repair the most critical items, to address the remaining items later in conjunction with negotiation for a more definite lease agreement, and to discuss the distinction between functional and cosmetic repair.

On June 13, 1991, Warren notified the Hamiltons of these decisions, stating that: (1) many of the items fall into the category of capital improvements and repairs which are beyond the scope of the typical landlord/tenant relationship; and (2) a portion of the items would be performed immediately as a gesture of good faith while the balance would be addressed as part of the discussions in connection with finalizing the Agreement.

NationsBank then entered into two construction contracts addressing the major repair items. The contract work was completed by mid-July, 1991, at a total cost of $20,022.43. (Appendix Vol. I at 107).

In July, 1991, following completion of the repair contracts, Warren and his supervisor, David Wells (Wells), met with the Hamiltons. Wells allegedly told the Hamiltons that NationsBank "wanted out of the deal" and suggested the parties discuss sale of the Property to the Hamiltons, as well as having the Hamiltons take responsibility for the remaining repairs with a corresponding reduction in the purchase price by the amount of the repairs remaining unperformed.

The Hamiltons notified NationsBank on August 8, 1991, that they would submit a purchase offer as soon as they received the cost of repair estimates from Lawson. No purchase offer was submitted.

On October 2, 1991, NationsBank sent the Hamiltons a proposed draft of a more definitive lease agreement with an explanatory letter urging them to respond so that the balance of the repair items could be addressed. The letter stated, "We realize that there are additional repairs which need to be completed, however, we will only complete the repairs after the contract has been finalized and executed by you."

On November 6, 1991, the Hamiltons notified NationsBank that the new lease proposal was unacceptable, claiming that NationsBank was trying to change its responsibilities. The Hamiltons continued to occupy the Property and expend funds modifying and decorating the Property. The Hamiltons claimed that the amount of needed repairs had increased to $215,000 and that they had expended $40,010 for repairs which were the responsibility of NationsBank. The Hamiltons requested a rent abatement due to the uninhabitable conditions and claimed they had lost income due to the condition of the residence. Discussions ensued on the possibility of trading the Property for property Sandra Hamilton owned in Oklahoma City.

On November 30, 1991, NationsBank assigned its interest in the Property and related lease/purchase agreements to the Federal Deposit Insurance Corporation (FDIC) pursuant to an assistance agreement accompanying NationsBank's purchase of the assets of the failed First Republic Bank of Texas. NationsBank remained the Property manager.

Settlement negotiations ensued and on February 25, 1992, Warren communicated the FDIC's counteroffer of $270,000. Warren also explained that the remaining repairs in the Repair Summary would be completed at a cost of approximately $12,000, which would be deducted from the FDIC offer.

On March 18, 1992, the Hamiltons countered with a $160,000 offer claiming that the Property was still in need of extensive repairs which were the landlord's responsibility.

On May 12, 1992, the FDIC offered to sell the Property for $229,000 and waive all back rental claims. The fair market value of the Property according to a May, 1991, appraisal was $350,000.

Also, on May 12, 1992, the FDIC filed suit against the Hamiltons in the district court seeking a declaratory judgment that the Agreement be terminated, that FDIC was entitled to immediate possession of the Property, and for eviction and monetary recovery for breach of the Agreement based on the following contentions: (1) failure to pay rent and other lease obligations after demand; (2) failure to complete repair of the swimming pool during the first year of the lease term or thereafter; and (3) failure to enter into a more definitive lease purchase agreement, or even to reasonably negotiate such an agreement. The Hamiltons asserted that, at this time, most of the repairs in the Repair Summary had not been completed and that additional items were in need of repair.

On June 24, 1992, the Hamiltons filed counterclaims against the FDIC and NationsBank claiming breach of contract and fraud in the inducement of the contract. The third party claims against NationsBank were amended to include the allegation that NationsBank intentionally concealed its true intentions regarding repairs to induce the Hamiltons to remain on the Property and to continue to invest substantial amounts of money (the fraud claim).

On April 15, 1993, the court denied cross-motions for summary judgment and the case proceeded to trial to the court. At a hearing on September 17, 1993, the court announced the general structure of its ruling that: the Oklahoma Residential Landlord and Tenant Act (ORLTA) applies divisibly to the residential portions of the Property only; the ORLTA does not immunize a defrauding lessor from the normal common law consequence of its fraud; no fraud occurred with the original lease agreement or from Grimland's conduct; fraud...