Amerifirst Properties, Inc. v. Federal Deposit Ins. Corp.

• Decision Date: 04 August 1989
• Docket Number: No. 87-2963,87-2963
• Citation: 880 F.2d 821
• Parties: , 1989-2 Trade Cases 68,711 AMERIFIRST PROPERTIES, INC., Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORP. (Receiver for Western Bank--Westheimer), Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 821

880 F.2d 821

58 USLW 2119, 1989-2 Trade Cases 68,711

AMERIFIRST PROPERTIES, INC., Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORP. (Receiver for Western Bank--Westheimer), Defendant-Appellee.

No. 87-2963.

United States Court of Appeals Fifth Circuit.

Aug. 4, 1989.

Wayne A. Risoli, Leymon L. Solomon, Honigman, Miller, Schwartz & Cohn, Houston, Tex., for plaintiff-appellant.

Stephen W. Lemmon, Thomas A. Collins, Mark Browning, Bernard Wm. Fischman, Denise L. Evans, Atty., FDIC, Houston, Tex., for defendant-appellee.

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

Before KING, WILLIAMS and SMITH, Circuit Judges.

KING, Circuit Judge:

The plaintiff-appellant brought suit against the defendant-appellee for violating the antitying provision of the Bank Holding Company Act Amendment. The defendant-appellee filed a motion to dismiss for failure to state a claim, Fed.R.Civ.P. 12(b)(6), and the district court granted it. Finding that the district court erred in concluding (1) that a loan must actually be funded in order to satisfy the meaning of "extended credit" under 12 U.S.C. Sec. 1972(1)(A) (1980) and (2) that the plaintiff-appellant failed to show that it had standing to sue, we reverse the district court and remand the case for further proceedings.

I.

Since all facts alleged by an appellant in its complaint are considered true on a review of a dismissal on a rule 12(b)(6) motion, Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972); National Enters. v. Mellon Fin. Servs. Corp., 847 F.2d 251, 252 (5th Cir.1988), we set forth the facts as alleged by the plaintiff-appellant, Amerifirst Properties, Inc. ("Amerifirst"), in its complaint. ¹ In April of 1986, Amerifirst commenced negotiations with the defendant-appellee, Western Bank-Westheimer (the "Bank"), for a $5,792,496 development loan. The loan was for the development of a real estate project known as Langham Chase (the "project"). The Bank subsequently informed Amerifirst that the development loan had been approved but that due to liquidity problems, the Bank was unable to issue a written commitment at that time. The Bank, however, did approve a six-month loan of $225,000 for the initial engineering and bridge costs of the project. The Bank funded this six-month loan on July 7, 1986, and represented to Amerifirst that the $225,000 was a "first draw" on the development loan.

During the time period when the Bank and Amerifirst were negotiating the development loan, the Bank held a seminar for potential investors in order to sell some of its "other real estate owned" ("ORE"). The Bank invited Amerifirst to this seminar. On or about August 19, 1986, Amerifirst submitted a revised development loan application in which it provided additional equity for the development loan by stating that Amerifirst would draw funds to purchase certain ORE from the Bank. The Bank suggested that Amerifirst consider a more expensive piece of ORE, known as "Lost Timbers," because the size of the Lost Timbers project would make the development loan more beneficial to the Bank and more likely for approval by the Bank. Amerifirst then revised its loan package request and proposed to borrow money to purchase Lost Timbers. The Bank verbally agreed to the revised loan package and requested some documentation on the project, which Amerifirst provided.

The Bank issued a development loan commitment ("loan commitment") on October 22, 1986, in which it agreed to a development loan of $5,593,500 to Amerifirst subject to certain conditions. One such condition was that the loan commitment was "subject to the purchase of certain ORE properties under negotiation with the borrower." Upon Amerifirst's request, the Bank made certain modifications to the loan commitment, and Amerifirst accepted the loan commitment on November 21, 1986. On February 3, 1987, however, the Bank informed Amerifirst that it had committed to selling Lost Timbers to a third party and that because Lost Timbers was sold and no other ORE was available for sale, the Bank could not fund the development loan. On February 5, 1987, the Bank informed Amerifirst that it was rescinding its loan commitment.

On May 5, 1987, Amerifirst filed suit against the Bank, alleging a violation of the antitying provision, 12 U.S.C. Sec. 1972(1) (1980), of the Bank Holding Company Act Amendment ("BHCAA") and several violations of state law. On June 1, 1987, the Bank filed a petition for removal to federal district court, and the motion was granted. The Bank subsequently filed a motion to dismiss, pursuant to rule 12(b)(6), for failure to state a tying claim under the BHCAA. On July 23, 1987, the district court granted the Bank's motion to dismiss, reasoning that Amerifirst had failed to state a tying claim under the BHCAA because (1) the Bank never actually extended credit to Amerifirst since the loan was never consummated and (2) the facts that Amerifirst pled in its complaint did not support Amerifirst's "conclusory allegation" that its injuries were a direct consequence of the alleged tying violation. Because the remaining claims were state law claims, the district court remanded the case to state court. Amerifirst filed timely notice of appeal. ²

II.

As previously mentioned, we consider all facts alleged by Amerifirst in its complaint to be true. Cruz, 405 U.S. at 322, 92 S.Ct. at 1081; National Enters., 847 F.2d at 252. Furthermore, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his [or her] claim which would entitle him [or her] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957) (footnote omitted).

A. Extension of Credit

Section 1972(1)(A) states: "A bank shall not in any manner extend credit ... on the condition or requirement--(A) that the customer shall obtain some additional credit, property, or service from such bank other than a loan, discount, deposit, or trust service...." 12 U.S.C. Sec. 1972(1)(A). ³ The district court dismissed Amerifirst's complaint on the ground that the Bank never extended credit to Amerifirst because the loan was not consummated. The issue therefore becomes whether a loan commitment constitutes "extending credit" within the meaning of section 1972(1)(A) when the loan is never actually funded. Since the term "extend credit" is not defined by the statute itself, we turn to legislative history and to case law.

The Senate Report, discussing tying arrangements under the BHCAA, states: "The language of the bill makes clear that the availability to a potential customer of any credit, property, or service of a bank may not be conditioned upon that customer's use of any other credit, property, or service offered by the bank...." Senate Comm. on Banking and Currency, Bank Holding Company Act, S.Rep. No. 1084, 91st Cong., 2d Sess. (1970) (emphasis added), reprinted in 1970 U.S.Code Cong. & Admin.News 5519, 5535. The word availability in the legislative history certainly indicates that Congress intended the term "extend credit" to include loan commitments in which the loan was eventually never funded.

The Senate Report also states that the antitying provision "is intended to provide specific statutory assurance that the use of the economic power of a bank will not lead to a lessening of competition or unfair competitive practices." Id. Citing this legislative history, the court in Nordic Bank PLC v. Trend Group, Ltd., 619 F.Supp. 542 (S.D.N.Y.1985), stated:

Nowhere does the legislative history or the language of the BHCA define the term "extension of credit." That term must be construed to accord with the underlying purpose of the anti-tying provisions. A particular practice should be considered an "extension of credit" if it manifests the improper use of economic leverage that the Act seeks to prevent.

Id. at 554. We agree that such an interpretation of "extension of credit" is consistent with Congress' intent. Clearly, the conditioning of a loan upon Amerifirst's purchase of the Bank's ORE was an "improper use of economic leverage that the Act seeks to prevent," id., and the ultimate non-funding of the loan by the Bank did not alleviate this economic leverage.

This conclusion is also supported by the applicable case law. The bank in Swerdloff v. Miami Nat'l Bank, 584 F.2d 54 (5th Cir.1978), conditioned the continuation of a loan arrangement upon the transfer, by the two 100% shareholders of the corporation, of 51% of the capital stock to one of the bank's customers. The two stockholders refused to transfer the stock, and the bank retaliated by terminating the financial arrangement. In reversing the district court's grant of a motion for a judgment on the pleadings, Fed.R.Civ.P. 12(c), we stated:

[T]he bank discontinued the corporation's credit in retaliation for the [shareholders'] refusal to comply with its demand. Simply by demanding that the [shareholders] sell their stock, however, the bank violated the statutory prohibition. Even if the [shareholders] had sold their stock, the bank had continued the loan, and the corporation had prospered, the plaintiffs might still have had a cause of action under Sec. 1975 for any damages they incurred.

Id. at 60 (emphasis added). Obviously, the bank in Swerdloff did not fund the latter loans--the loans which were tied to the transfer of the stock. Yet, we concluded that the bank had violated section 1972(3) ⁴ simply by demanding the sale of the stock. Regardless of whether the tie was actually consummated ⁵--the stock was actually sold--or whether the remainder of the loans was actually funded, the bank violated the antitying provision of the BHCAA.

Our holding in Swerdloff further bolsters our conclusion that the Bank extended credit to Amerifirst when we consider the Bank's six-month loan of $225,000 to Amerifirst. Taking Amerifirst's...