Baumann v. Savers Federal Sav. & Loan Ass'n

• Decision Date: 09 July 1991
• Docket Number: No. 89-5208,89-5208
• Citation: 934 F.2d 1506
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: Stan BAUMANN, Plaintiff-Appellee, Cross-Appellant, v. SAVERS FEDERAL SAVINGS & LOAN ASSOC. and Resolution Trust Corporation, as conservator of Savers Federal Savings and Loan Association, Defendants-Appellants, Cross-Appellees.

Page 1506

934 F.2d 1506

60 USLW 2061

Stan BAUMANN, Plaintiff-Appellee, Cross-Appellant, v. SAVERS FEDERAL SAVINGS & LOAN ASSOC. and Resolution Trust Corporation, as conservator of Savers Federal Savings and Loan Association Defendants-Appellants, Cross-Appellees.

No. 89-5208.

United States Court of Appeals Eleventh Circuit.

July 9, 1991.

Jose I. Astigarraga, Steel Hector & Davis, Thomas R. Julin, Alicia R. Zalesin, Emily Wheeler, Miami, Fla., for defendants-appellants, cross-appellees.

Jesse Diner, Atkinson, Jenne, Diner, Stone & Cohen, Hollywood, Fla., Edward A. Perse, Miami, Fla., for plaintiff-appellee, cross-appellant.

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

Before KRAVITCH and BIRCH, Circuit Judges, and DYER, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

In D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), the Supreme Court first held that the Federal Deposit Insurance Corporation ("FDIC") is not bound by agreements between borrowers and financial institutions that are not expressed in the written agreements between the parties. In this case of first impression in this circuit, we must decide whether the Resolution Trust Corporation ("RTC") can raise the D'Oench doctrine for the first time on appeal. Because we hold that it can, we reverse and remand for a new trial.

I

In the early 1980s, Stan Baumann, a real estate developer, built an apartment complex in Gainesville, Florida. Baumann obtained loans for the project from Savers Federal Savings & Loan Association ("Savers Federal"). In 1984, Baumann decided to build a new project, and again contacted Savers Federal for financing. The new project (known as "Concept I") was to be a retail shopping center in Plantation, Florida. Concept I was to be anchored by a Winn-Dixie supermarket and later was to include a two-story office building.

Savers Federal initially loaned Baumann $7,500,000 for Concept I and received a mortgage and security interest. Baumann also gave Savers Federal a promissory note for the above amount, plus interest, costs, expenses, and disbursements. Baumann and his wife guaranteed the note. Finally, Baumann agreed to pay reasonable attorneys fees and other costs and expenses incurred in enforcing the guaranty.

Before construction began on Concept I, the City of Plantation Planning Board refused to approve Concept I and recommended that the proposed site for the project be rezoned to prevent certain commercial uses, including the Winn-Dixie store. Baumann filed suit against the City of Plantation. He later abandoned the suit however, and sought a compromise plan with the city.

In 1985, Baumann proposed Concept II, which he expected to receive approval from the city. Concept II envisioned a larger development, but with fewer retail units and more professional buildings. Concept II required more money, and Savers Federal agreed to increase the loan total to $9,750,000. Baumann therefore signed a second promissory note for the additional amount of $2,250,000. Baumann and his wife again guaranteed the loan. The revised loan allowed Baumann to build two buildings, but conditioned further advances on Baumann's pre-selling additional units. Once part of Concept II was completed, Savers Federal would then release its lien on real property for an established price.

By late 1986, after Savers Federal had advanced more than $8,000,000 of the loan amount, construction of Concept II had come to a halt. Baumann was in default on the loan and could not pay contractors. In December 1986, Baumann filed suit against Savers Federal, claiming that the failure of the project was due to Savers Federal's breach of the loan agreements and failure to cooperate with Baumann.

II

Baumann's suit originally was filed in Florida circuit court. Baumann's theories of recovery were breach of the loan agreement, breach of Savers Federal's statutory duty of good faith, tortious interference, conversion, conspiracy, civil theft, and fraud. Savers Federal counterclaimed, seeking to foreclose on the mortgage and to collect on the promissory note. Baumann's wife also was joined in the litigation, and Savers Federal sought to collect on the personal guaranty of Baumann and his wife for the principal of the loan, interest, and collection costs. The Baumanns defended on the ground that Savers Federal had impaired the collateral.

At trial, Baumann contended that the loan was to be a "100% financed loan," meaning that Baumann would not have to contribute any of his own money. Baumann alleged that Savers Federal had explained that Baumann was a preferred customer and that Savers Federal would be his partner in the project and would do everything possible to ensure the timely and efficient completion of the project. Baumann also claimed that it was Savers Federal's lack of cooperation in adjusting Baumann's interest payments that prevented him from pursuing his suit against the City of Plantation. Baumann further asserted that Savers Federal continually delayed advancing funds to Baumann, resulting in work stoppages and liens being placed on the property. Savers Federal, on the other hand, claimed that it had done everything required of it under the loan documents, and that any delays in the project were due to other factors, not the fault of Savers Federal. Savers Federal also argued that Baumann had not proved any damages.

On December 1, 1988, the jury returned a verdict. It found that Savers Federal had breached its loan agreements with Baumann and its statutory duty of good faith. The jury also found that Savers Federal had impaired Baumann's collateral. The jury awarded $15,400,000 for the breach of contract and breach of good faith, and $8,740,000 for the impairment of collateral. On December 29, 1989, the court decided Savers Federal's counterclaim, which had not been submitted to the jury. The court held that Savers Federal could foreclose on its mortgage, and therefore was entitled to $8,034,797.10. The court did not allow costs and fees, however, based on its finding that Savers Federal had unclean hands. On January 25, 1989, the court entered a final judgment, awarding Baumann $15,400,000 and Savers Federal $8,034,797.10, for a net judgment of $7,365,202.90 in favor of Baumann. In making this calculation, the court ignored the jury's award to Baumann of $8,740,000 for the impairment of collateral.

On February 10, 1989, Savers Federal was declared insolvent by the Federal Home Loan Bank Board, which appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") conservator of Savers Federal. By virtue of its status as conservator, FSLIC became a party to this litigation. On February 13, 1989, pursuant to 12 U.S.C.A. Sec. 1730(k)(1)(C), ¹ FSLIC removed the case from the Florida court to federal district court. FSLIC and Savers Federal then filed a notice of appeal in this court from the final judgment rendered on January 25, 1989. On March 10, 1989, Baumann filed a notice of cross-appeal. Also on March 10, the district court remanded the case to state court. On April 24, however, this court granted FSLIC and Savers Federal's petition for writ of mandamus, allowing the case to remain in federal court and treating the proceedings in the state court as if they had occurred in the federal district court. In re Savers Federal Sav. & Loan Ass'n, 872 F.2d 963 (11th Cir.1989).

On August 9, 1989, President Bush signed into law the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, 103 Stat. 183 (1989). Under section 501(a) of FIRREA, 103 Stat. at 370, the Resolution Trust Corporation ("RTC") was substituted for FSLIC in situations, such as this case, where FSLIC was acting as conservator of a financial institution. On October 4, 1989, the Office of Thrift Supervision ("OTS") directed that a purchase and assumption transaction take place. First, Savers Federal was transferred from conservatorship to receivership. Also, OTS chartered another institution, Savers Savings Association ("Savers Savings"). Savers Savings then purchased all assets of Savers Federal, including Savers Federal's claims against Baumann. Liabilities of Savers Federal, including Baumann's claim against Savers Federal, were retained by RTC as receiver of Savers Federal. Simultaneously, OTS declared Savers Savings insolvent and appointed RTC as conservator.

After various administrative proceedings took place pursuant to the purchase and assumption agreement, RTC, as receiver of Savers Federal, disallowed Baumann's claim on May 29, 1990, stating that the claim should not be upheld on appeal. Baumann then elected to forego further administrative proceedings and allow the present appeal to determine the outcome of his case.

III

The first issue we must address is whether the doctrine of D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), applies in this case. In D'Oench, a bank and its customer engaged in a scheme whereby the customer provided a demand note to the bank, which the bank reflected on its books; the bank promised, however, that it would not actually collect on the note, a factor the bank did not reflect on its books. The FDIC later became the successor in interest to the bank and attempted to collect on the note. The customer argued that the parties had an agreement that the bank would not collect on the note. In rejecting the customer's defense, the Supreme Court stated that "federal policy ... protect[s] [FDIC] and the public funds 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." Id. at 457, 62 S.Ct. at 679. The Court therefore held that because the agreement not to collect on the note was not recorded in the bank's records, the customer was barred from enforcing the...