Twin Const., Inc. v. Boca Raton, Inc.

Decision Date01 March 1991
Docket NumberNo. 89-6103,89-6103
Citation925 F.2d 378
PartiesTWIN CONSTRUCTION, INC., a Florida Corporation, Plaintiff-Appellant, v. BOCA RATON, INCORPORATED, a Florida Corporation, Homes International Development Corporation, a Florida Corporation, Investors Two of Palm Beach, Inc., a Florida Corporation d/b/a Habitat, a shopping mall, a Florida general partnership, Albat Jansenson, Vernon Investments, Inc., Monte Campbell Crane Co., Inc., American Hi-Lift Corporation, Wolfgant Stau, d/b/a Stau Sign Studio, Federal Maintenance, Inc., C.S.R. Heavy Construction, Inc., Caufield Wheeler, Inc., Steven L. Cohen Architect, P.A., Underground Supply Company, Inc., jointly and severally, Defendants, Federal Deposit Insurance Corporation, as Receiver for Vernon Savings and Loan Association, FSA, Defendant-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

Kyle A. Silverman, Manley H. Thaler, Thaler & Thaler, P.A., West Palm Beach, Fla., for plaintiff-appellant.

Gary A. Woodfield, Edwards & Angell, Palm Beach, Fla., for FSLIC as receiver for Vernon.

Appeal from the United States District Court for the Southern District of Florida.

Before CLARK, Circuit Judge, and HILL * and COFFIN **, Senior Circuit Judges.

HILL, Senior Circuit Judge:

These consolidated cases present yet more litigation resulting from the savings and loan crisis. The cases stem from an attempt by a builder to obtain priority over a lender in connection with foreclosure on certain real property. Appellant Twin Construction, Inc. ("Twin") originally commenced an action in a Florida state court against Vernon Savings and Loan Association ("Old Vernon") and other defendants seeking to foreclose upon a mechanic's lien resulting from work performed on construction of a shopping center. Old Vernon, on the other hand, commenced its own action in a Florida state court in order to foreclose upon notes and mortgages and to enforce guarantees furnished in exchange for loans for the acquisition, development, and construction of the shopping center. Subsequently, the Federal Home Loan Bank Board appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") as receiver for Old Vernon, and FSLIC transferred substantially all of Old Vernon's assets to New Vernon. New Vernon, too, became insolvent, and FSLIC was appointed receiver. After FSLIC removed the above actions to federal court, the district court consolidated the cases. Concluding that FSLIC was entitled to priority as a matter of law, the district court then granted FSLIC's motion for summary judgment in both consolidated cases. This appeal followed.

I. INTRODUCTION
A. BACKGROUND

On May 30, 1985, Twin entered into a construction contract with Habitat, the Shopping Mall ("Owner") to build a shopping center to be known as Village Point in Boca Raton, Florida. Twin commenced work on July 1, 1985. Under the terms of the contract, Twin expressly agreed that any lien it might subsequently assert would be subordinated to a mortgage lien by the lender of funds for the project. Old Vernon agreed to provide funding for the development of the project on July 24, 1985. In return, Owner signed and delivered a promissory note for $8.9 million, secured by a mortgage on the real property. Old Vernon recorded the mortgage the following day in Palm Beach County, Florida.

In connection with the loan, Old Vernon also requested that Twin consent to an assignment from Owner to Old Vernon of Owner's rights under the construction contract. Contemporaneous with the signing of the note, on July 24, 1985, Twin signed and returned to Old Vernon a one-page Contractor's Consent form originally prepared by Old Vernon. Old Vernon did not sign the Contractor's Consent form, but did place the document in its records along with the other loan documents and did make the loan to Owner. Among other things, the form subordinated any "statutory mechanic's and materialmen's liens to which [Twin] may be or become entitled" to all liens and security interests of Old Vernon. Before signing and returning the form, Twin changed or added to three paragraphs. In paragraph five, Twin added the clause at issue in this case: "Lender will reserve sufficient funds in the Loan Agreement Account to satisfy the 'Agreement' between Owner and [Twin] and all payments for such purpose shall be made by check payable jointly to Owner and [Twin]." Although Twin's president sent a letter to Old Vernon's attorneys confirming the latter's agreement to Twin's change in paragraph one of the form, after carefully reviewing the record we have found no similar evidence of an agreement with respect to Twin's addition to paragraph five.

In February, 1986, Owner advised Twin that it could not pay the balance due under the contract. Twin alleges that it continued work under the contract because of the Contractor's Consent form and because of oral representations by Old Vernon that additional payment would be forthcoming from the loan proceeds. When the balance remained unpaid, on March 4, 1986, Twin filed a claim of lien on the Village Point project for approximately $1.5 million. On July 24, 1986, Twin commenced an action in the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County, Florida, against Old Vernon and other defendants. In Count I, Twin sought to foreclose its mechanic's lien and to elevate its lien above Old Vernon's because of the alleged oral representations from Old Vernon and because Old Vernon failed to reserve sufficient funds to satisfy Twin's construction contract and failed to make checks payable jointly to Owner and Twin. In a separate count, Twin also alleged claims against Old Vernon for fraud because of the oral representations. In yet another count, Twin alleged breach of contract based on the oral representations and on the Contractor's Consent form.

Owner also defaulted on the notes and mortgages due Old Vernon, and on August 27, 1986, Old Vernon commenced suit in the same Florida court to enforce the notes and mortgages. In seeking to foreclose on three notes and two mortgages, Old Vernon alleged that its lien had priority over Twin's. Twin's answer and counterclaim contained allegations similar to those in its own suit.

On March 20, 1987, the Federal Home Loan Bank Board determined that Old Vernon was insolvent and appointed FSLIC as receiver. FSLIC then created New Vernon and transferred substantially all the assets and liabilities of Old Vernon to New Vernon, including the loan documents at issue in this case. Shortly after its creation, New Vernon followed in its predecessor's footsteps, being declared insolvent and having FSLIC appointed as receiver.

FSLIC removed the actions to federal district court in December, 1988, and the district court thereafter consolidated them. FSLIC moved for summary judgment in both cases, claiming that, as a matter of law, the doctrine announced in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), precluded Twin from asserting its claims. Based on the D'Oench doctrine, the district court granted summary judgment on September 9, 1989. 721 F.Supp. 290. 1

B. CONTENTIONS

On appeal, Twin proffers several reasons why the D'Oench doctrine is inapplicable to this case. First, Twin contends that the D'Oench doctrine applies only to claims asserted by the maker of a note, and that any agreement between it and Old Vernon is thus not subject to D'Oench. Second, Twin claims that D'Oench is inapplicable where a deceptive or fraudulent scheme does not exist. Third, Twin asserts that where FSLIC has actual knowledge of a collateral agreement outside the terms of a note, D'Oench is inapplicable. Finally, citing the clause in paragraph five of the Contractor's Consent form, Twin maintains that this case falls outside the D'Oench doctrine because the alleged agreement is written rather than oral.

II. STANDARD OF REVIEW

The district court's grant of summary judgment is subject to de novo review. Vernon v. Resolution Trust Corp., 907 F.2d 1101, 1104 (11th Cir.1990). We must determine whether there is any genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). All the evidence and factual inferences therefrom are reviewed in the light most favorable to the party opposing the motion. Carriers Container Council, Inc. v. Mobile S.S. Assoc., 896 F.2d 1330, 1337, modified, 904 F.2d 28 (11th Cir.1990).

III. DISCUSSION
A. The development of the D'Oench doctrine and its codification demonstrate that appellant's first three contentions must fail

To analyze Twin's claims regarding the D'Oench doctrine requires an understanding of the evolution of the doctrine. In D'Oench, the petitioner provided a demand note to a bank. The petitioner's intention was to enable the bank to avoid reflecting a loss on its books from another debtor that had defaulted. The parties had an understanding that the bank would not collect on the note, as evidenced by a statement in the receipt the bank gave the petitioner. FDIC acquired the note five years later, as part of a purchase and assumption transaction, and demanded payment. FDIC learned of the existence of the receipt at this time. The Supreme Court permitted FDIC to enforce the note, finding a "federal policy to protect [FDIC] and the public funds which it administers against misrepresentations as to the securities or other assets in the portfolios of the banks which [FDIC] insures or to which it makes loans." D'Oench, 315 U.S. at 457, 62 S.Ct. at 679. Despite the maker's lack of intent to deceive FDIC (Congress had not even created FDIC at the time the maker executed the note), the Supreme Court declared that "[t]he test is whether the note was designed to deceive the creditors or the public authority or would tend to have that effect. It would be sufficient ... that the...

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