McVay v. Western Plains Service Corp.

• Decision Date: 14 July 1987
• Docket Number: No. 84-2384,84-2384
• Parties: Fed. Sec. L. Rep. P 93,309 Karen A. McVAY, Plaintiff/Appellant, v. WESTERN PLAINS SERVICE CORPORATION, Defendant/Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1395

823 F.2d 1395

Fed. Sec. L. Rep. P 93,309

Karen A. McVAY, Plaintiff/Appellant, v. WESTERN PLAINS SERVICE CORPORATION, Defendant/Appellee.

No. 84-2384.

United States Court of Appeals Tenth Circuit.

July 14, 1987.

Jack R. Gage of Hanes, Gage & Burke, P.C., Cheyenne, Wyo., for plaintiff/appellant.

G. Verne Goodsell of Gunderson, Palmer & Goodsell, Rapid City, S.D., and Nick G. Kalokathis of Lathrop & Uchner, P.C., Cheyenne, Wyo., for defendant/appellee.

Before LOGAN, ANDERSON and TACHA, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Cir.R. 34.1.8(c). The cause is therefore ordered submitted without oral argument.

Karen A. McVay appeals from a summary judgment of dismissal. In the capacity of a judgment creditor she sued Western Plains Service Corporation ("Western") seeking an assignment to her of an alleged property right under a mortgage held by Western. Western acknowledged it was the mortgagee on a certain piece of real property, and that a loan secured by the mortgage was in default. However, it denied ownership of any attachable property right, asserting it was merely acting as a trustee for lending institutions which had loaned money, the repayment of which was secured by the mortgage. The interests of the lending institutions were established by a written Loan Participation Agreement with, and Participation Certificates issued by, Western. On stipulated facts and cross motions for summary judgment, the district court, in a detailed opinion, ruled, inter alia, that Western held no more than a bare legal interest in the note and mortgage in question, and that such interest was without value susceptible of attachment. All valuable rights were owned by the lending institutions which funded the loan. We agree and affirm.

BACKGROUND

This case is presented to us on a narrow set of facts consisting mostly of the loan and loan participation documents: Loan Participation Agreement, Participation Certificates, note, and mortgage. There is a short stipulation of facts, including the described documents; brief affidavits submitted by Western; and copies of three documents filed in other litigation attached to McVay's motion below. The record as presented establishes the following facts.

On September 10, 1979, Helm Plan I ("Helm"), a real estate development entity, borrowed $600,000 for land acquisition and construction of a townhouse project in Casper, Wyoming. Western originated the loan with Helm and appeared throughout all the loan and security documents as the lender. A written loan commitment between Helm and Western was dated August 22, 1979, and shown to have been accepted by Helm on August 23, 1979. By a signed Loan Participation Agreement ("Agreement"), dated the same day, Western sold the entire loan, on the basis of a one-third participation each, to three savings and loan associations: Aberdeen Federal Savings & Loan Association, Aberdeen, South Dakota; Midwest Federal Savings & Loan Association, Minot, North Dakota; and First Dakota Home Savings & Loan Association, Pierre, South Dakota. ¹

In addition to the Agreement, Participation Certificates were also executed by Western and the savings and loan associations on the same date. The loan was funded and closed on September 10, 1979. On that date Helm signed its promissory note for the $600,000, and secured payment of the note by its mortgage on the acquired property. As stated, the note and mortgage listed Western as payee and mortgagee. All the loan funds were provided by the respective savings and loan associations ($200,000 each), as contemplated by the Agreement.

By virtue of the Agreement Western loaned no money and kept no interest in the loan itself. It received a fee for originating the loan and for servicing the transaction through collection and remittance of principal and interest payments, and other services. The Agreement provided that Western "will continue to hold legal title to such loan as trustee for the owner or owners of the respective participation interests therein." Agreement, par. IV, R. Vol. I at 44. Subsequently, Helm defaulted on its loan, leaving an unpaid principal balance of $300,000, plus interest, and the land was subject to foreclosure pursuant to the mortgage.

McVay, as a judgment creditor of Western, seeks an assignment to her of Western's mortgage interest in the Helm property pursuant to Wyo. Stat. Sec. 1-17-401, which provides:

When a judgment debtor does not have personal or real property sufficient to satisfy the judgment, any equitable interest he has as mortgagor, mortgagee or otherwise, or any interest he has in any joint stock company, money contract, claim or chose in action due or to become due to him, or in any judgment or order, or any money, goods or effects which he has in the possession of any person, is subject to the payment of the judgment by action. (emphasis added).

She advances multiple arguments in support of her theory that Western held a valuable equitable property interest under the mortgage:

(a) Western is shown as the lender under all of the documents relating to the transaction and the payee/mortgagee under the note and mortgage; therefore it owns both legal and equitable interests in the note and mortgage. The lending institutions own nothing more than an interest in Western. The Participation Certificates "were like stock certificates and no more represented equitable interest in the mortgage than a share of stock in Ford Motor Company represents an equitable interest in Ford Motor Company's building headquarters in Dearborn, Michigan." Appellant's Opening Brief at 5.

(b) Only the real party in interest can foreclose a mortgage under Wyoming law. Western, as named mortgagee, commenced foreclosure proceedings. This proves, therefore, that Western is the real party in interest, i.e., the equitable owner.

(c) Western is barred by the doctrine of judicial estoppel from denying ownership of an equitable interest because in other cases the savings and loans have resisted personal jurisdiction on grounds that they were "merely shareholders" of Western.

(d) The Loan Participation Agreement does not create a trust under Wyoming law. Therefore, Western cannot be a trustee as claimed.

(e) The district court erred in finding that a resulting trust was established by the sale of Participation Certificates by Western to the savings and loans.

(f) The district court erred in its ruling that McVay failed to join indispensable parties.

Many of those arguments were not raised before the district court. In its "Motion For Summary Judgment and Memorandum in Support Thereof" filed in the district court, McVay made three arguments, in the following order: (1) Judicial Estoppel; (2) Piercing the Corporate Veil; and (3) The Participation Agreement Does Not Satisfy the Requirements to Create a Trust. R.Vol. I at 85-90. However, Western does not object to the new arguments or versions of arguments presented here which were not presented to the district court, and in the interest of laying this There may be more to this case than meets the eye in the record. Additional ongoing litigation is referred to involving these and other parties. McVay's counsel has made unsupported factual assertions and related arguments in his brief to us, and did so in his memorandum to the district court, with respect to the composition and purpose of Western, and motives of the lending institutions. We disregard all such references and arguments. McVay chose to present this matter on a narrow stipulated record from which legal arguments have been fashioned. The district court properly confined itself strictly to the record and questions before it and so do we.

matter to rest we entertain the arguments presented.

In reviewing a grant of summary judgment, this court views the case in the same way that the district court viewed it. Baker v. Penn Mut. Life Ins. Co., 788 F.2d 650, 653 (10th Cir.1986); Gomez v. American Elec. Power Serv. Corp., 726 F.2d 649, 651 (10th Cir.1984); Western Casualty & Sur. Co. v. National Union Fire Ins. Co., 677 F.2d 789, 791 n. 1 (10th Cir.1982). In determining whether any genuine issues of material fact exist, the record must be construed liberally in favor of the party opposing the summary judgment. Fed.R.Civ.P. 56(c); Franks v. Nimmo, 796 F.2d 1230, 1235 (10th Cir.1986). However, conclusory allegations will not suffice to establish an issue of fact. R-G Denver, Ltd. v. First City Holdings of Colorado, Inc., 789 F.2d 1469, 1471 (10th Cir.1986).

Jurisdiction in this case is based on diversity of citizenship. The parties appear to agree that Wyoming law governs.

I.

We reject McVay's argument that Western possessed equitable ownership of the note and mortgage because it was named as the lender/payee/mortgagee. We likewise reject the corollary argument that the participating lenders, by virtue of the participation certificates, had nothing more than a shareholder-type of interest in, or, presumably, a contract action against Western.

In general, loan participations are a common and wholesome credit device. They have many purposes, one of which is the accumulation of funds from several lenders for loans not otherwise available to borrowers from a single institution. Lenders benefit by reducing exposure to loss in a single transaction, as well as by additional opportunities for placing funds at interest. ² In a typical loan participation among banks the lead bank enters into participation agreements with the other banks but acts in relation to the loan and borrower much as Western did in this case. For example, the lead bank will appear as the only party on the note and mortgage. It also generally services the loan, which includes the right to make...