846 F.2d 221 (4th Cir. 1988), 86-3175, Federal Deposit Ins. Corp. v. Jones

Docket Nº:86-3175, 87-3046 and 87-3049.
Citation:846 F.2d 221
Party Name:FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, v. Alton E. JONES; Oscar E. Jones; Jill G. Jones, Defendants-Appellees. Alton E. JONES, Plaintiff-Appellee, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellant. (Two Cases)
Case Date:May 05, 1988
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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846 F.2d 221 (4th Cir. 1988)



Alton E. JONES; Oscar E. Jones; Jill G. Jones,


Alton E. JONES, Plaintiff-Appellee,



(Two Cases)

Nos. 86-3175, 87-3046 and 87-3049.

United States Court of Appeals, Fourth Circuit

May 5, 1988

        Argued Nov. 5, 1987.

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        John Randolph Pelzer, Charleston, S.C., (Dennis Christensen, Sullivans Island, S.C.,

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Pelzer & Associates, P.A., Charleston, S.C., John Francis Elmore, Federal Deposit Ins. Corp., on brief), for plaintiff-appellant.

        George Richardson Wieters (John W. Minor, Jr., Hughes & Wieters, P.A., Hilton Head Island, S.C., on brief), for defendants-appellees.

        Before RUSSELL, WILKINSON, and WILKINS, Circuit Judges.

        DONALD RUSSELL, Circuit Judge.

        Introductory to a discussion of the actual issues posed in the appeal of Federal Deposit Insurance Corporation's (hereafter "FDIC" or "creditor") motions, we take note of the fact that in one form or another, this case has engaged the attention of federal courts for some eleven years. This extended delay in resolution has not been due to the complexity of the legal issues involved or the development of an extensive factual record. The case is a simple one for collection of a debt, which debt with accumulated interest was about a million dollars at the time of the events involved in the present proceedings. The debtor, Alton E. Jones and Oscar E. Jones, father and son, and certain of their wholly owned subsidiaries (hereafter referred to either as "debtor" or "Jones"), has never denied this indebtedness at any time during the negotiations or litigation. The delay prior to the filing of this latest action was largely the result of the debtor's efforts to secure, either by an agreement or by a judicial decision, a compromise settlement of the debt. During its life, this matter has involved many hearings before three district judges, with different counsel representing the debtor at the various steps. The creditor has filed during this time at least two actions to recover on its indebtedness as well as an action in foreclosure. The first action was begun in 1976 but was dismissed when a compromise settlement was agreed on in 1979. The foreclosure action was filed between the settlement of the first action and the filing of the next action. This third action in the litigation between the parties was filed by the debtor against the creditor for specific performance of an alleged compromise settlement of the indebtedness reached allegedly in late 1981 after default by the debtor on his 1979 compromise agreement. This action, begun in early 1983, is hereafter referred to as "Jones I." Following the district court decision in that case and its affirmance in this court, the creditor sought to enforce the confession of judgment agreed to by the debtor in the 1979 settlement and reaffirmed in the decision in Jones I. In that connection it gave notice of the taking of the debtor's deposition in supplementary proceedings. With that action by the creditor, the debtor filed an action against the creditor, seeking the invalidation of the confession of judgment. That is the action, referred to hereafter as "Jones II," now before us on this appeal. In this action, the debtor sought an injunction and the creditor responded with its counter motions for an injunction and for summary judgment. The district court dismissed all motions, and the creditor has appealed the denial of its motions. We reverse.

        After Jones II had been begun, FDIC filed another action against Jones and the wife of one of the Jones, Jill G. Jones. In this action, FDIC sought the voidance of certain conveyances to Jill G. Jones and the recovery from her of the value of "the assets previously conveyed to her insofar as this is determined herein." In connection with that action, FDIC filed in the appropriate offices a lis pendens. The defendants-debtors immediately moved to dissolve the lis pendens in that action. After hearings, that motion was granted. FDIC appealed the granting of the motion dissolving the lis pendens. That appeal has been consolidated with the appeal in Jones II and will be resolved herein. We reverse that decision, too.

        We begin by reviewing the background of the litigation. The background is somewhat extensive but is essential to an understanding of the issues. After sketching that background, we review first the appeal in the action by Jones against FDIC and then the appeal in the suit of FDIC against Jones, et al.

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        There is little dispute about the relevant facts since these have been exposed in earlier aspects of this case. Nor can there be much doubt about the applicable law. The indebtedness involved in the proceeding originated in various loans secured in the early 70's by Jones from the American Bank & Trust Company, a banking corporation organized and operating under the laws of South Carolina (hereafter Bank) with its deposits protected by FDIC. This indebtedness was partially secured by mortgages on real estate in a number of South Carolina counties. When the Bank became insolvent in 1974, most, if not all, of its assets, including the Jones indebtedness, were assigned and transferred for value to FDIC. Jones having defaulted on his indebtedness, the FDIC filed suit on the debt and began foreclosure proceedings of the real estate mortgages securing the indebtedness on June 5, 1976.

        Jones asserted no defense to these actions but was anxious to work out a compromise settlement of his indebtedness to avoid the entry of a judgment against him which would be detrimental to his business interests. He accordingly began urgent negotiations to this end. In those negotiations, Jones submitted an offer of settlement to the FDIC. Under this offer, Jones was to make payment of "certain sums of money ... [to] be paid to the FDIC on or before specific dates" 1 and, upon the payment of all such sums, the indebtedness of Jones to the FDIC was to be extinguished. The offer also provided that, in event of default, the FDIC could enter judgment for the full balance due and could foreclose, without objection by Jones, the mortgages securing the debt. Along with the proposal, Jones submitted "Confession of Judgment [in favor of the FDIC] for all of the principal, interest and advances in the sum of $905,087.00 for filing in event of a default and further agreed that upon failure to meet payment schedule [Jones] would consent to the entry of a decree of foreclosure and sale on the mortgages held by the FDIC." This offer was dated March 2, 1979. It was clearly understood that acceptance of the offer could not be agreed to by the then local representative of the FDIC but required the approval of the Board of Directors of the FDIC in Washington. The offer was thereafter accepted and approved by the Board of Directors of the FDIC and the offer thereby ripened into a final, binding contract.

        Jones made the payments provided in the 1979 agreement until early 1981, 2 when default occurred. Jones, however, requested the FDIC not to file immediately the "confession of judgment" until negotiations could be had on a possible modification of the 1979 agreement. These negotiations began between Jones, represented by his counsel, James Quackenbush, and the FDIC, represented by Francis G. Banffy, its local liquidator, assisted by FDIC's local counsel, Pelzer and Chard. While the negotiations were proceeding and before any agreement on the local level could be arrived at, the parties made a separate and independent agreement that, because of the deterioration occurring in the secured property, immediate foreclosure proceedings should begin even while the negotiations for a modification of the 1979 agreement were proceeding and that, as an accommodation to Jones, the FDIC would forego taking in those proceedings a default judgment against Jones in return for Jones' agreement not to use such failure as a defense to the confession of judgment given the FDIC by Jones under the 1979 settlement agreement. Since this agreement is central to the issue raised by Jones in his suit against FDIC, we describe in some detail the agreement.

        The agreement which was annexed as an exhibit to FDIC's answer and counterclaim in the present suit began with two preambles, agreed to by the parties. The first was to the effect that "the parties hereto have commenced negotiations for the modification of said confession of judgment

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agreement." Since this agreement was submitted on October 26, 1981, that being the date Jones delivered the signed agreement to the representative of FDIC, this statement is important in demonstrating that as of that date the parties had not gotten beyond negotiating for a settlement and definitely had not agreed on a settlement. The second preamble was a statement that "the parties hereto recognize and acknowledge that all parties would benefit by the foreclosure of the mortgages...." In the agreement itself, the parties agreed that the "Federal Deposit Insurance Corporation, with the knowledge and approval of [Jones] commenced foreclosure proceedings...." However, in the next paragraph, the agreement states the reason for the agreement: "That a deficiency judgment in said foreclosure actions would be of serious detriment to the financial and professional interests of [Jones]...." It then declares that "[Jones] desire[s] that Federal Deposit Insurance Corporation waive its rights to a deficiency in this action" and offers in return:

"4. That in the event Federal Deposit Insurance Corporation elects to file the aforesaid confession of judgment pursuant to the terms of the confession of judgment agreement or any...

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