Black v. Federal Deposit Ins. Corp., 80-7196
| Citation | 640 F.2d 699 |
| Decision Date | 26 March 1981 |
| Docket Number | No. 80-7196,80-7196 |
| Parties | 7 Fed. R. Evid. Serv. 1837 Herbert R. BLACK, Thomas M. Daniels, Jr. and J. C. Clements, Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellee. . Unit B |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Pierce, Ranitz, Mahoney, Forbes & Coolidge, Morton G. Forbes, Thomas J. Mahoney, Jr., Savannah, Ga., for plaintiffs-appellants.
Bouhan, Williams & Levy, Leamon R. Holliday, III, Savannah, Ga., Frank L. Skillern, Jr., Gen. Counsel, Myers N. Fisher, Asst. Gen. Counsel, Ann Graham, FDIC, Washington, D. C., for defendant-appellee.
Appeal from the United States District Court for the Southern District of Georgia.
Before TUTTLE, RONEY and VANCE, Circuit Judges.
Black, Daniels, and Clements are three obligors who, on February 11, 1974, signed a note payable to Hamilton Mortgage Corporation for $458,000. This note was transferred to Hamilton National Bank and, upon that institution's insolvency, the Federal Deposit Insurance Corporation (FDIC) acquired it as a receiver of the bank. FDIC as receiver then sold the note to FDIC in its corporate capacity.
The purpose of this financing was to assist in the obligors' development of real estate. Under the "Acquisition and Development Loan Agreement" the lender was obligated to "make loans and advances to Borrower for the acquisition and development" of certain real estate. The sum of the advances was limited to $458,000.00. The obligor had the right to draw specified sums for such purposes. When at most $14,892.00 remained to be drawn from Hamilton Mortgage in October, 1975, the obligor requested a final draw of $23,455.82. Payments of principal by obligors due before the making of the final draw request were admittedly not made on time. Hamilton Mortgage never issued the final draw. Subsequently, the obligors requested "construction financing" for its now-developed real estate. They believed they were entitled to these loans under the "Acquisition and Development Loan Agreement." Neither Hamilton Mortgage nor FDIC ever granted their request.
The obligors sued FDIC alleging breach of the agreements made with Hamilton Mortgage. They sought affirmative damages against FDIC, cancellation of the principal indebtedness still owed, and cancellation of the deed that pledged the real estate for the payments of the note. FDIC counterclaimed for the principal and interest due on the note. On defendant's motion for summary judgment, the district court disallowed all of plaintiffs' claims for affirmative damages. After hearing evidence on whether Hamilton Mortgage or FDIC had breached any of their respective obligations, the court directed a verdict against obligors who thereby lost any right to set off against the amount owed FDIC. Subsequently, the court directed a verdict for FDIC on its counterclaim for principal and interest due. The plaintiffs-obligors appeal the district court's rulings.
The first question we reach is whether the district court correctly concluded that there was no evidence before that court showing a breach of contract by either Hamilton Mortgage or FDIC. We believe that the district court correctly directed verdict on this issue. Obligors argue that Hamilton Mortgage and FDIC failed fully to fund development financing and later failed to fund construction financing (for the construction of individual housing units). First, the argument based on development funding must fail. All three obligors testified that the interim payments were not paid by Black, Daniels, and Clements as due under the note. The Acquisition and Development Loan Agreement provided that the "Lender shall be under no obligation to make any advance if ... Borrower breaches or fails to perform, observe or meet any covenant or condition herein made, or made in any instrument executed pursuant hereto." But the lender could continue to make advances without waiving its right to demand payment or withhold further advances. Hamilton Mortgage, and later FDIC, therefore could not have breached by failing to advance additional funds for development. Even if the loan was not fully funded in this respect, the express terms of the contract hold that the obligors, once breaching by late payment, no longer had a contractual right to further advances for development. Second, the construction funding argument must fail. None of the papers constituting the agreement committed Hamilton Mortgage to make construction financing to these obligors. Rather these papers dealing with acquisition and development financing merely gave Hamilton Mortgage the "right of first refusal on all construction financing generated by this development." The obligors label this language as "commandatory," but plainly it only binds the obligors to give this right to Hamilton Mortgage who may nevertheless refuse it. ...
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