City of Arlington, Tex. v. FDIC
| Decision Date | 19 November 1990 |
| Docket Number | Civ. A. No. CA4-89-073-A. |
| Citation | 752 F. Supp. 219 |
| Parties | CITY OF ARLINGTON, TEXAS, a Municipal Corporation, v. FEDERAL DEPOSIT INSURANCE CORPORATION, As Manager of the FSLIC Resolution Fund, Statutory Successor to the Federal Savings and Loan Insurance Corporation, as Receiver for First Texas Savings Association, et al. |
| Court | U.S. District Court — Northern District of Texas |
C. Michael Moore, Locke, Purnell, Rain, Harrell, Dallas, Tex., for First Gibraltar Bank.
Walter G. Pettey III, Pettit & Martin, Dallas, Tex., Jordan Luke, Dorothy L. Nichols, Michael H. Solomon, Office of the General Counsel, Washington, D.C., Joe C. Holzer, Houston, Tex., and Larry D. Carlson, Robert W. Teeter, Baker & Botts, Dallas, Tex., Kirk K. Van Tine, Timothy S. Durst (Charles L. Cope II, and Christopher Bellotto, F.D.I.C., of counsel), Washington, D.C., for F.D.I.C.
Lee F. Christie, Pope, Hardwick, Christie, Harrell & Kelly, Alan Wilson, Simon, Anisman, Doby, Wilson & Skillern, Fort Worth, Tex., for plaintiffs.
Came on for consideration the motions of defendants Federal Deposit Insurance Corporation, as Manager of the FSLIC Resolution Fund, statutory successor to the Federal Savings and Loan Insurance Corporation, in its corporate capacity, ("FDIC/Manager-Fund") and First Gibraltar Bank, FSB, ("First Gibraltar") for summary judgment and the cross-motion of plaintiff, City of Arlington, Texas, ("plaintiff") for summary judgment. These three are the only remaining parties to this action. For the reasons stated herein, the Court finds that First Gibraltar's motion should be denied, plaintiff's cross-motion should be granted in major part, and FDIC/Manager-Fund's motion should be granted in part.
This action was commenced in state court as a suit by plaintiff against First Texas Savings Association ("First Texas") for relief based on allegations of impropriety on the part of First Texas in reference to an escrow account that existed at First Texas for the benefit of plaintiff. On December 27, 1988, First Texas was declared insolvent and Federal Savings and Loan Association ("FSLIC"), in its capacity as receiver for First Texas, removed the action to this Court.
By amended complaint, plaintiff named as additional defendants FSLIC, in its corporate capacity, and First Gibraltar, which had entered into an acquisition agreement in reference to First Texas with FSLIC, as receiver for First Texas. FSLIC, as receiver for First Texas, replaced First Texas as a defendant. By order signed in February 1990 Federal Deposit Insurance Corporation ("FDIC"), as manager of the FSLIC Resolution Fund, in its separate capacities as (1) statutory successor to FSLIC as receiver for First Texas and (2) statutory successor to FSLIC in its corporate capacity, was substituted for FSLIC, in its capacity as receiver for First Texas and in its corporate capacity, as a defendant. FDIC, as manager of the FSLIC Resolution Fund, as statutory successor to FSLIC as receiver for First Texas, was dismissed voluntarily by plaintiff. Each of the remaining parties has filed a motion for summary judgment, which will be discussed in more detail at a later point in this opinion.
The summary judgment record, which includes open court admissions, establishes as undisputed facts that:
First Texas was a state chartered savings and loan association whose deposits were insured by FSLIC. On May 16, 1985, First Texas entered into a loan agreement with Shady Valley West Joint Venture ("Joint Venture"), pursuant to which First Texas agreed to loan up to $29,620,000.00 to Joint Venture for acquisition and development of certain real property located in Arlington, Tarrant County, Texas. See Ex. A to the affidavit of Denise Locascio ("Locascio Aff.")1 In connection with the loan agreement, Joint Venture was required to post an irrevocable standby letter of credit in the amount of $4,100,000.00 "for the purpose of assuring First Texas that funds are and will be available for the construction of the said proposed Green Oaks Boulevard through the Property." Locascio Aff. Ex. D. The agreement relating to the letter of credit further provided:
In any event, all proceeds derived by First Texas pursuant to the letter of credit shall be used solely for the construction through the property of the proposed Green Oaks Boulevard between Texas Spur 303 and West Division Street.
Locascio Aff. Ex. D. The letter of credit was amended several times to extend the maturity date.
On June 3, 1986, Joint Venture and First Texas entered into a letter agreement modifying the terms of the loan agreement to provide, among other things, that First Texas would hold the sum of $2,300,000.00 "for the construction costs relating to Green Oaks Boulevard ..." Locascio Aff. Ex. H. First Texas submitted a draw request pursuant to the terms of the letter of credit and on June 6, 1986, a total of $2,697,993.70 was wired to First Texas. Locascio Aff. Ex. K. Said sum was deposited in First Texas Money Maker Plus Account No. XX-XXX-XXX-X ("the Account"). The Account was styled "FTSA Tr for Shady Valley J.V.," which stood for "First Texas Savings Association as Trustee for Shady Valley Joint Venture." Pursuant to the terms of the June 3 agreement, the Account was reduced by the sum of $297,993.70.
Subsequently, Joint Venture requested that the Account be used to pay monthly interest due on the loan. The request was denied "with the understanding that after the completion of Green Oaks Boulevard all moneys remaining in said account will be returned," once again referencing the specific purpose for which funds had been deposited into the Account. Locascio Aff. Ex. O.
On or about September 26, 1986, First Texas and Joint Venture entered into a modification agreement, which purported to authorize withdrawal of all sums in excess of $2,100,000.00 out of the Account (which was erroneously referred to as "Certificate of Deposit No. XXXXXXXXX") and to provide that the funds remaining in the Account would secure payment of the loan. The modification stated:
Provided there is no event of default under any of the loan documents, the remaining amount in Certificate of Deposit No. XXXXXXXXX shall be utilized to construct Green Oaks Boulevard and the bridge in accordance with the prior agreement between borrower and lender.
Locascio Aff. Ex. P.
At or about the same time, Joint Venture, First Texas, and plaintiff entered into an escrow agreement ("escrow agreement") setting forth the obligations of the parties with respect to the construction of a part of Green Oaks Boulevard. It was dated September 24, 1986, signed on behalf of Joint Venture shortly thereafter, and accepted by signatures on behalf of First Texas and plaintiff, respectively, on September 29, 1986, after the execution of the above-referenced modification agreement. Locascio Aff.Ex. Q. The controversy centers around the escrow agreement.
First Texas kept and maintained a copy of the escrow agreement in its records. Locascio Aff. page 7. It said that plaintiff was requiring the sum of $2,100,000.00 to be "escrowed to complete the construction of a portion of Green Oaks Boulevard from Spur 303 to Orion Parkway ..." (which was referred to in the letter agreement by the word of art "work"). Locascio Aff. Ex. Q. The escrow agreement defined the rights of parties to the escrowed funds as follows:
Locascio Aff. Ex. Q, pages 1-2.
The intent of the parties was that the Account would be the "Escrow Account-Arlington" that was contemplated by the escrow agreement; and, once the agreement was made, the parties considered that the Account was the "Escrow Account-Arlington." First Gibraltar's second supplemental interrogatory answers, Ans. 17. In other words, the placement by First Texas of $2,100,000.00 in a separate account was accomplished by allowing the Account to remain in existence at First Texas, and all parties viewed the Account to be the "Escrow Account-Arlington," and as satisfying the requirements of the escrow agreement that First Texas place the sum of $2,100,000.00 in a separate account bearing the account designation "Escrow Account-Arlington." The failure to change the account name to "Escrow Account-Arlington was the result of neglect on the part of First Texas. First Texas records always showed the true nature of the Account and plaintiff's beneficial interest in the Account. At or about the time plaintiff executed the escrow agreement, an officer of First Texas told the attorney for plaintiff that the account contemplated by the escrow agreement was established. Doegey Aff., p. 2.2
Joint Venture defaulted on its loan agreement with First...
To continue reading
Request your trial
-
City of Arlington, Tex. v. F.D.I.C.
...complete recitation of the facts underlying the instant appeal are found in the district court decision. City of Arlington v. Federal Deposit Ins. Corp., 752 F.Supp. 219 (N.D.Tex.1990).2 First Texas Savings Association as Trustee for Shady Valley Joint Venture.3 After signing the escrow agr......