Capital Concepts Properties 85-1 v. Mutual First, Inc., 91-1965

• Decision Date: 30 September 1994
• Docket Number: No. 91-1965,91-1965
• Citation: 35 F.3d 170
• Parties: CAPITAL CONCEPTS PROPERTIES 85-1, a California limited partnership, on its own behalf and as liquidating trustee for Corporate I, Ltd., et al., Plaintiffs-Appellants, v. MUTUAL FIRST, INC., Resolution Trust Corporation, as Receiver for Sunbelt Savings, FSB and the Federal Deposit Insurance Corporation, Receiver for Sunbelt Savings Association of Texas, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 170

35 F.3d 170

CAPITAL CONCEPTS PROPERTIES 85-1, a California limited partnership, on its own behalf and as liquidating trustee for Corporate I, Ltd., et al Plaintiffs-Appellants, v. MUTUAL FIRST, INC., Resolution Trust Corporation, as Receiver for Sunbelt Savings, FSB and the Federal Deposit Insurance Corporation, Receiver for Sunbelt Savings Association of Texas, Defendants-Appellees.

No. 91-1965.

United States Court of Appeals Fifth Circuit.

Sept. 30, 1994.

Lawrence Fischman, Seeligson & Steinberg, Dallas, TX, for Capital Concepts Properties.

James Scott Watson, Sr. Atty., FDIC, Washington, DC, Charles I. Appler, Hopkins & Sutter, Dallas, TX, for FDIC in its Corp. capacity.

James L. Baldwin, Jr., Harvey Simon, Hutcheson & Grundy, Dallas, TX, Mary Hogan Greer, Hutcheson & Grundy, Houston, TX, for Resolution Trust Corp. as receiver & Mut. & FDIC as receiver for Sunbelt.

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

Before GARWOOD and BARKSDALE, Circuit Judges, and WALTER, ^* District Judge.

GARWOOD, Circuit Judge:

Plaintiffs-appellants Capital Concepts Properties 85-1 (CapCon 85-1) and Capital Concepts Properties 85-1D (CapCon 85-1D) (collectively referred to as "CapCon") appeal the district court's grant of summary judgment to defendants-appellees Mutual First, Inc. (Mutual First) and the Federal Deposit Insurance Corporation (FDIC), as Receiver for Sunbelt Savings Association of Texas and as Manager of the FSLIC Resolution Fund. We affirm.

Facts and Proceedings Below

On December 26, 1984, CapCon became the sole limited partner of Corporate I, a Texas limited partnership organized to construct the building that came to be known as Corporate I Plaza in Dallas, Texas (the Plaza). CapCon's investment in Corporate I consisted of a $1 million cash capital contribution and a capital contribution in the form of its $9 million promissory note payable to Corporate I and secured by CapCon's 90,000 shares of stock in Sunbelt Savings Association of Texas (Old Sunbelt). ¹ Old Sunbelt was the sole general partner of Corporate I. One month prior to CapCon's involvement in Corporate I, Corporate I obtained from San Jacinto Savings Association (San Jacinto) a $76 million loan to construct the Plaza and an agreement from San Jacinto to provide permanent financing. In exchange for the loan, Corporate I gave San Jacinto a promissory note secured by a deed of trust listing the Plaza as collateral (the San Jacinto Note).

In the fall of 1987, CapCon and Old Sunbelt learned that the Plaza would not be ready for occupancy and that Corporate I would not be able to pay off the San Jacinto Note when it matured on November 29, 1987. San Jacinto refused to extend the loan or fund its permanent loan commitment. Consequently, CapCon and Old Sunbelt entered into negotiations with each other regarding a possible restructure of Corporate I. These negotiations, in which the parties were represented by their respective counsel, lasted from September 1987 until November 25, 1987. During the negotiations, CapCon asserted that the Corporate I partnership agreement required Old Sunbelt to make a capital contribution to satisfy Corporate I's operating deficit, including payment of the San Jacinto Note. Old Sunbelt disagreed with CapCon's interpretation of the partnership agreement and represented that it would not and could not make such a contribution because of its supervisory agreement with the FSLIC. ²

In spite of its contention that Old Sunbelt's refusal to make the capital contribution was a breach of the partnership agreement, CapCon did not sue Old Sunbelt for specific performance or breach of contract. Instead, on November 25, 1987, CapCon executed a letter agreement in which CapCon (1) consented to the purchase of the San Jacinto Note by Old Sunbelt or one of its subsidiaries and (2) agreed not to interfere with any attempt by Old Sunbelt or one of its subsidiaries to foreclose on the Plaza after February 28, 1988. The agreement also provided that CapCon and Old Sunbelt would negotiate for certain modifications in the partnership agreement but that, in the event agreement could not be reached, Old Sunbelt would have the same rights on the note possessed by the previous lender, San Jacinto. Additionally, CapCon agreed that if Old Sunbelt exercised its rights as lender, CapCon would not assert that Old Sunbelt was not entitled to those rights or that Old Sunbelt had breached any duty owed to CapCon as general partner of Corporate I.

On November 29, 1987, with the consent of the FSLIC, Mutual First, a wholly owned subsidiary of Old Sunbelt, purchased the San Jacinto Note for $60 million. Mutual First borrowed from Old Sunbelt the funds used to purchase the San Jacinto Note. After Mutual First acquired the San Jacinto Note, Corporate I completed construction of the Plaza and obtained a certificate of occupancy, but was unable to lease the building.

On August 19, 1988, the Federal Home Loan Bank Board (FHLBB) declared Old Sunbelt insolvent and appointed the FSLIC as Receiver of the institution. ³ On the same day that the FHLBB declared Old Sunbelt insolvent, Sunbelt Savings, FSB (New Sunbelt), a mutual savings bank, acquired all assets of Old Sunbelt pursuant to a purchase and assumption agreement between New Sunbelt and the FSLIC.

As part of the purchase agreement, New Sunbelt acquired all of the stock of Mutual First as well as the obligation owed by Mutual First to Old Sunbelt for the $60 million loan used to purchase the San Jacinto Note. On December 29, 1988, Mutual First executed a promissory note to New Sunbelt evidencing the $60 million obligation (the Mutual First Note). On December 30, 1988, New Sunbelt sold the Mutual First Note to FSLIC-Corporate. The Mutual First Note is now owned and held by the FDIC, as manager of the FSLIC Resolution Trust Fund, the statutory successor to FSLIC-Corporate.

Mutual First continues to hold the San Jacinto Note. Because Mutual First's second parent, New Sunbelt, recently has been placed into receivership, Mutual First is now owned by the RTC as receiver for New Sunbelt.

No payments have been made on the San Jacinto Note, and on August 5, 1989, Mutual First initiated an action to foreclose on the deed of trust. In response, on August 31, 1989, CapCon initiated an action in Texas state court against Mutual First, the FDIC, and the RTC. The Texas court granted CapCon a temporary restraining order enjoining a foreclosure sale scheduled for September 5, 1989. Thereafter, the FDIC removed the case to federal court.

In their action against the defendants, CapCon sought a declaratory judgment that the $60 million Old Sunbelt loaned to Mutual First was a capital contribution to Corporate I which extinguished the underlying deed of trust and Mutual First's right to foreclose. Alternatively, CapCon requested that Corporate I's debt to Mutual First be set off against Mutual First's debt to Old Sunbelt, or that the defendants' claims against Corporate I be equitably subordinated to CapCon's claim for return of its capital contribution. ⁴ CapCon based its equitable subordination claim upon its assertion that, during the negotiations leading up to CapCon's execution of the letter agreement, Old Sunbelt fraudulently concealed a "secret agreement" between Old Sunbelt and San Jacinto for certain additional collateral pledged to secure the San Jacinto Note. After discovery, the FDIC, Mutual First, and CapCon moved for summary judgment.

On August 7, 1991, the district court granted summary judgment in favor of the FDIC and Mutual First and denied CapCon's motion for summary judgment. The court held, inter alia, that (1) CapCon's claim that the loan from Old Sunbelt to Mutual First was a capital contribution to Corporate I is barred by the explicit terms of the letter agreement as well as the D'Oench, Duhme doctrine; (2) CapCon is not entitled to force setoff of the promissory notes to which it is not a party and, even if it were so entitled, the parties to the two debts had no mutuality of obligation; and (3) CapCon is not entitled to equitable subordination of any claims against Corporate I because CapCon offered no competent summary judgment evidence that the letter agreement was induced by fraud, and because any such allegation would be barred by the D'Oench, Duhme doctrine. CapCon now appeals the district court's decision.

Discussion

Standard Of Review

This case comes to us from a grant of summary judgment against the party with the burden of proof at trial. Summary judgment is proper after adequate time for discovery and upon appropriate motion against a party which fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. FED.R.CIV.P. 56(c). If the nonmoving party bears the burden of proof on the issue at trial, "the burden on the moving party may be discharged by 'showing'--that is, pointing out to the district court--that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986).

Once the movant has pointed out that the nonmoving party's case is deficient, the nonmoving party has the burden of establishing the existence of material factual issues. In its assessment of the motion, the court is not required to contain its review of the record to those portions to which the moving party refers. Indeed, a "[summary judgment] motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323, 106 S.Ct. at 2553.

In reviewing the summary judgment, we review the record de novo, Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992), and we...