Bailey v. METRO FEDERAL SAV. & LOAN ASS'N

• Court: U.S. District Court — Western District of Louisiana
• Writing for the Court: Jeff E. Townsend, Jr., Lake Charles, La., for Metro Federal Sav. & Loan
• Citation: Bailey v. METRO FEDERAL SAV. & LOAN ASS'N, 642 F. Supp. 616 (W.D. La. 1986)
• Decision Date: 28 July 1986
• Docket Number: Civ. A. No. 84-0905.
• Parties: John D. BAILEY, et al. v. METRO FEDERAL SAVINGS AND LOAN ASSOCIATION OF LAKE CHARLES, et al.

642 F. Supp. 616

John D. BAILEY, et al. v. METRO FEDERAL SAVINGS AND LOAN ASSOCIATION OF LAKE CHARLES, et al.

Civ. A. No. 84-0905.

United States District Court, W.D. Louisiana, Lake Charles Division.

July 28, 1986.

H. Lee Leonard, Voorhies & Labbe, Lafayette, La., for plaintiff.

Jeff E. Townsend, Jr., Lake Charles, La., for Metro Federal Sav. & Loan.

James C. Gulotta, Jr., Charles Stern, Stone, Pigman, Walther, Whittmann & Hutchinson, New Orleans, La., William K. Black, David A. Felt, Federal Home Loan

Bank Bd., Washington, D.C., for FSLIC as receiver for Metro.

Edward B. Dubuisson, Dubuisson & Dubuisson, Opelousas, La., for Nat'l Union Fire Ins.

Ben W. Lightfoot, Durrett, Hardin, Hunter, Dameron & Fritchie, Baton Rouge, La., for North River Ins. Co.

RULING

VERON, District Judge.

This matter is before the Court upon the motion of plaintiffs, John D. Bailey, Robert L. Abshire, and Scott J. Pias, for summary judgment upon the counterclaims of the Metro Federal Savings and Loan Association of Lake Charles, through its receiver, the Federal Savings & Loan Insurance Corporation FSLIC. Also before the Court is the FSLIC's motion for summary judgment on its counterclaims against John D. Bailey, Robert L. Abshire, Scott J. Pias, and Kathleen Clower Pias. Before addressing the relative merits of the motions under consideration, it is necessary to set forth the travel of the case to date and also to set forth those factual issues which are not in dispute.

I. FINDINGS OF FACT AND TRAVEL OF CASE

The plaintiffs, John D. Bailey, Robert L. Abshire, and Scott J. Pias commenced this action by filing a petition in the Fourteenth Judicial District Court for the Parish of Calcasieu, State of Louisiana, naming Metro Federal Savings and Loan Association of Lake Charles, the FSLIC, and David L. Levingston as defendants. In that petition and by subsequent amended complaints, plaintiffs have asserted and it is undisputed that Bailey executed a promissory note on December 17, 1980 in the principal amount of $798,044, secured by a mortgage granted to Metro Federal affecting a parcel of real property situated in Sulphur, Louisiana; that Abshire similarly executed a promissory note in the amount of $684,596 on December 17, 1980 secured by a mortgage granted to Metro Federal on a parcel of real property adjacent to that property mortgaged by Bailey; and that Scott J. Pias and Kathleen Clower Pias executed a promissory note in the amount of $617,360 secured by a mortgage granted to Metro Federal, secured by a mortgage on a parcel of real property adjacent to that property mortgaged by Bailey and Abshire.

A point of contention between the parties, however, arises as to plaintiffs' further allegation that prior to the closing of these loan transactions, defendant Levingston, acting for Metro Federal, orally agreed to give plaintiffs¹ a counterletter which would state, contrary to the particular loan documents, that Pias and Abshire were only nominal parties and that Bailey was to be the sole obligor on all three loans, and furthermore that all three loans were assumable. Nonetheless, it is undisputed that no such counter-letter was ever issued. In their complaint, the three plaintiffs seek judgment to reform the notes and mortgages in order to reflect that Bailey is the sole obligor and that the loans are assumable. In addition, Bailey seeks monetary damages as a result of his purported opportunity to sell the mortgaged properties at a favorable price when Metro Federal refused to allow a prospective purchaser to assume the mortgages. In addition, plaintiff Scott J. Pias claims indemnity for any damages he is assessed in a separate lawsuit in which he is a named defendant in his capacity as record owner of one of the three parcels of property at issue.

As receiver for Metro Federal,² which is yet undergoing liquidation proceedings, the FSLIC removed plaintiffs' action from state court pursuant to 12 U.S.C. § 1730(k)(1). Following that removal, the FSLIC filed its answer in which it admitted execution of the notes and mortgages, denied the existence of any oral agreement concerning the counter-letter, asserted a cross-claim against co-defendant Levingston, filed a third-party claim against MGIC Indemnity Corporation, North River Insurance Company, and National Union Fire Insurance Company of Pittsburgh, and furthermore filed a counterclaim against the three plaintiffs, and also against Kathleen Clower Pias pursuant to Federal Rule of Civil Procedure 13(h), for the full amounts due and owing the FSLIC in its capacity as receiver for Metro Federal as the result of their defaults upon the respective promissory notes.

In the FSLIC's third-party complaint, the MGIC Indemnity Corporation was named as a defendant pursuant to a blanket bond which it issued to Metro Federal, providing coverage for losses resulting from certain kinds of acts of Metro Federal's employees. The North River Insurance Company was also named as a third-party defendant as it is alleged to have provided particular insurance coverage to officers, directors, and employees of Metro Federal. In addition, National Union Fire Insurance Company of Pittsburgh was named as a third-party defendant pursuant to its purported professional liability coverage for any act of co-defendant Levingston's professional legal services.

Subsequent to the filing of defendants' answers, plaintiffs amended their complaint to assert a direct cause of action against National Union Fire Insurance Company of Pittsburgh, North River Insurance Company, MGIC Indemnity Corporation, and the Federal Home Loan Bank Board. The MGIC Indemnity Corporation and the Federal Home Loan Bank Board were subsequently dismissed from this action as direct defendants.

In pressing its counterclaim, the FSLIC sets forth sufficient facts to establish that the plaintiffs have defaulted in regard to paying the installments due on the notes, that they have failed to pay ad valorem taxes, and that the FSLIC has therefore been properly entitled to have accelerated the notes and have the mortgaged properties seized and sold by executory process. As such, this Court ordered the mortgaged properties be seized by the United States Marshal in preparation for sale in accordance with provisions of the Louisiana Code of Civil Procedure pertaining to executory process. Plaintiffs moved to enjoin the sale of the properties but the motion was denied in accordance with the well established law set forth in the Supreme Court's decision of D'Oench, Duhme & Co. v. Federal Deposit Insurance Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). In denying the injunction sought by the plaintiffs, this Court instructed the United States Marshal to sell the three properties "in accordance with their mortgages, after advertisements and formalities, with the sale to be with the benefit of appraisement."

On December 7, 1984, appraisals were submitted as follows on the parcels of property which were to be sold at the Marshal's sale:

Appraisals submitted by counter-claimant, FSLIC—

Bailey (Tract 1)          $483,000
                Abshire (Tract 2)         $469,000
                Pias (Tract 3)            $564,000
                

Appraisals submitted by plaintiffs and counter-defendants—

Bailey (Tract 1)         $1,094,400
                Abshire (Tract 2)        $  938,880
                Pias (Tract 3)           $  846,720
                

In view of the substantial discrepancies between the appraisals submitted by the parties, the Court ordered the appointment of a third appraiser whose following evaluations were treated as binding:

Bailey (Tract 1)         $398,720
                Abshire (Tract 2)        $360,640
                Pias (Tract 3)           $360,640
                

Two days after this Court ordered the Marshal's sale, Tower Securities Corporation made an offer for the three properties, combined, in the amount of $1.45 million, which offer was rejected by the FSLIC. It also appears that, prior to the Marshal's sale, the FSLIC, through its broker, Century Twenty One Flavin Realty, listed the three properties for sale in the amount of $1.9 million, and thereafter, but also before the Marshal's sale, listed the properties for sale in the amount of $1.5 million. Other offers to buy are alleged to have been made at different times but the Court considers them to be unimportant apart from the fact of showing that various parties did have a particular interest in obtaining the properties.

Approximately two months after this Court required the properties at issue to be sold at public Marshal's sale, the FSLIC entered into a contract with a Mr. Fortune of Baton Rouge whereby it was agreed that if the FSLIC acquired all three tracts of property at the judicial sale, it would resell the three tracts to Fortune as one unit for a total price of $1.1 million. Subsequently, a Mr. Albert Mistretta met with Daniel Flavin, a real estate broker who had been retained by Paul Lancaster, special representative of the FSLIC, and was specifically advised that the FSLIC would bid up the property at the Marshal's sale to $2.2 million. Mistretta was further advised that the FSLIC would not enter into any agreement with him for any post-Marshal's sale purchase of the property because of the FSLIC's "binding contract" with Fortune. Moreover, Mistretta was told that Mr. Fortune had provided the FSLIC with a $25,000 non-returnable deposit in regard to the purchase sale agreement. As a result of the representations of Flavin, Mistretta traveled to Baton Rouge to deal directly with Mr. Fortune rather than make any apparently fruitless bid at the public Marshal's sale. In this vein, Mr. Jerome Johnson, also of Mistretta's group, was also told by Flavin that the property was under contract with Fortune for $1.1 million but that Fortune would be willing to sell it to the Mistretta group for a profit.

From the numerous depositions and affidavits on file, it is clear that the retained broker for the FSLIC, Daniel Flavin, told a number of potential bidders that the FSLIC was going to...