Albany Savings Bank, FSB v. Halpin
| Decision Date | 26 June 1997 |
| Docket Number | D,No. 905,905 |
| Citation | 117 F.3d 669 |
| Parties | ALBANY SAVINGS BANK, FSB, Plaintiff-Appellant, v. Jack HALPIN and JoAnne C. Halpin, Defendants-Appellees. ocket 96-7393. |
| Court | U.S. Court of Appeals — Second Circuit |
Madeline H. Kibrick Kauffman, Albany, NY (Richard H. Weiner, Cooper, Erving, Savage, Nolan & Heller, LLP, Albany, NY, of counsel), for Plaintiff-Appellant.
Jack Halpin, pro se, Redding, CA (JoAnne Halpin, pro se, Redding, CA, Duncan Barr, San Francisco, CA, of counsel), for Defendants-Appellees.
Before: WALKER, PARKER and HEANEY *, Circuit Judges.
Plaintiff-appellant Albany Savings Bank, FSB ("the Bank" or "Albany Savings") appeals from a judgment of the United States District Court for the Northern District of New York (David N. Hurd, Magistrate Judge ) dismissing its complaint with prejudice. The Bank had executed a release in favor of the defendants-appellees, Jack and JoAnne Halpin, in connection with a real estate deal. The Halpins thereafter claimed that the release was a general one that relieved them of two other financial obligations they owed to the Bank, and ceased payment on those financial obligations. The Bank then sued for a declaration that the release did not cover the other two obligations, and sought to admit parol evidence to that effect. The Halpins filed an answer and counterclaim. Prior to trial, the Halpins moved for dismissal with prejudice of the Bank's complaint, relying on the broad language of the release and the parol evidence rule. Agreeing with the Halpins that the Bank's parol evidence should not be admitted, the district court granted their motion and dismissed the complaint with prejudice. The Bank then moved for dismissal of the Halpins' counterclaim, and the court granted the motion. Subsequently, the plaintiffs moved the court for reconsideration, but were denied. Because we hold that the release is ambiguous and, therefore, that the Bank's parol evidence should have been considered, we vacate and remand.
Appellees in this case, Jack and JoAnne Halpin, have a long-standing relationship with the appellant, Albany Savings, and its predecessor in interest, Champlain Valley Federal Savings & Loan Association. Of the many transactions between the parties, only three (all of which concern property located in Essex, New York) are relevant to this case. The first of these occurred in July 1988, when the Halpins obtained a loan from the Bank in the original principal amount of $75,000 secured by a mortgage on a parcel of real property known as the "Bailey House." The second occurred in June 1989, when the Halpins obtained another loan from the Bank, in the principal amount of $234,000, secured by a mortgage on a marina owned by the Halpins (the "marina mortgage"). The marina property consisted of two boat sheds, a gas dock, a wood shop, a machine shop, a store, and a house known as the "Cupola House." The final relevant transaction occurred on or about September 6, 1989, when the Halpins obtained a Home Equity Line of Credit Agreement ("Home Equity Credit Line") from the Bank, secured by a second mortgage on the Bailey House. The Halpins drew money from the Home Equity Credit Line, apparently for the purpose of making enhancements to the marina property.
In June 1990, the Halpins negotiated the sale of the Cupola House with a third party named Barry Hamilton. The Bank consented to release the Cupola House from the marina mortgage on the condition that the note be paid down $30,000. The Halpins paid the $30,000 and the transaction occurred.
In June 1993, the Halpins negotiated with Mr. Hamilton to purchase the remainder of the marina. Mr. Hamilton was to assume the marina loan and mortgage pursuant to the terms of the original note. The Bank approved this transaction conditional upon, inter alia, the marina note being paid down $50,000, and an exchange of releases. The Bank executed a release, prepared by its counsel, in favor of the Halpins on December 2, 1993. After negotiating a settlement regarding past due interest on the marina loan, the Halpins executed a substantially identical release in favor of the Bank on December 6, 1993. The closing on the marina property occurred on or about December 7, 1993.
On December 4, 1993, Jack Halpin drew down an additional $2700 on the Home Equity Credit Line, bringing the amount withdrawn to the maximum of $65,000. After the closing, the Halpins offered to return the $2700 to the Bank, and asserted that the release executed by the Bank on December 2 and delivered at the closing was a general release that excused payment of the remainder of the Bailey House mortgage and the Home Equity Credit Line. The Halpins refused to make any further payments on the Bailey House mortgage or the Home Equity Credit Line.
The Bank insisted that the transaction giving rise to the release involved only the marina property and had nothing whatsoever to do with the Bailey House mortgage or the Home Equity Credit Line. The balance of the latter two loans totalled $135,000 at the time of the closing and the Bank received no money in payment on them. 1 The Bank requested execution of a more clearly worded special release, but the Halpins refused.
In April 1994, the Bank sued the Halpins in the Supreme Court of the State of New York for Albany County. The Halpins removed the action to the United States District Court for the Northern District of New York based on diversity jurisdiction. The Halpins filed an answer and counterclaim that alleged that the Bank had violated the Home Owners' Loan Act ( 12 U.S.C. §§ 1464(q)(1) & (q)(3)) when it demanded additional security in exchange for assigning the marina mortgage to Mr. Hamilton in June 1993, and that the Bank had caused the Halpins damage when it had advised a potential buyer of the Cupola House (who had preceded Mr. Hamilton) that the purchase price was excessive and had caused the buyer to back away from the deal. The Bank replied to the counterclaim, arguing inter alia that the July 1993 and December 1993 releases it received from the Halpins protected it from any liability.
In April 1995, the case was referred by consent to Magistrate Judge David N. Hurd for trial. Prior to the opening of the Bank's case, counsel for the Halpins made a motion in limine seeking to preclude parol evidence in connection with the disputed release. The Bank intended to introduce parol evidence to show that the release was meant to apply only to the marina mortgage. Magistrate Judge Hurd granted the motion, holding that parol evidence would not be admissible as to the release. The Halpins then moved to have the case dismissed because the Bank's claim that the release was limited despite its broad language relied exclusively on the parol evidence. The court granted the Halpins' motion. The Bank then moved to have the Halpins' counterclaim dismissed on the same ground on which the Bank's claims had been dismissed: to avoid the release executed by them in favor of the Bank, the Halpins would have to rely exclusively on parol evidence, which the court had just ruled would not be admissible. The court granted this motion and dismissed the counterclaim. Subsequently, the Bank moved the court for reconsideration of its ruling, but was denied. The Bank filed this appeal.
As an initial matter, the Halpins contend that the Bank's failure to argue below that parol evidence should be admitted to explain ambiguity in the release forecloses this line of attack on appeal. We do not agree that the Bank failed to raise its ambiguity argument below. At the pre-trial conference at which the district court dismissed the Bank's claims, counsel for the Bank responded to the court's stated position that the release was an unambiguous general release in the following manner:
The issue of being clear or not is addressed specifically in the bank's release.... [I]n the last paragraph of the release the language is not the traditional language of a release. Normally a release, if you bought one, a Bloomburg release or whatever, the next to last paragraph that reads ["]they ever had,["] et cetera, the period would be at the end of the second line of that paragraph, your Honor. Then there are some additional words that are not normally in a release, which presents a different situation, ["]limited however to any claim or cause of action. ["] So that we are dealing with a release, at that point in the release, that is ambiguous, there isn't any question about it. This is not a clear cut release.
While the Bank's argument is no model of clarity, it does highlight specific language and claim explicitly that the language renders the release ambiguous. Moreover, it does so in the context of urging the district court to admit the parol evidence. The Bank therefore adequately raised the issue of ambiguity to the district court and thus preserved the parol evidence issue for appeal; we therefore reject the Halpins' waiver argument.
The Bank argues that it should have been allowed to introduce parol evidence relating to the December 2 release. The Halpins argue that such evidence is barred by the parol evidence rule. The district court agreed with the Halpins. It noted that the Bank had not claimed fraud, duress, illegality or mutual mistake, and that the Bank was arguing only that it should be allowed to admit parol evidence to show the scope of the release. After reviewing the case law cited by the Bank, the district court concluded that "[a] close reading of the case law thus establishes that under New York state law where there is no ambiguity and the facts do not fall within one of the categories which provide an exemption from the parol evidence rule, the intent of the parties as to the scope of the release must be derived from the language of the release itself." Albany Sav. Bank v. Halpin, 918...
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