D & N Bank v. U.S., 02-5130.

• Decision Date: 17 June 2003
• Docket Number: No. 02-5130.,No. 02-5144.,02-5130.,02-5144.
• Citation: 331 F.3d 1374
• Parties: D & N BANK A Federal Savings Bank, in its own right and as successor to Detroit & Northern Savings and Loan Association (now known as Republic Bank), Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

331 F.3d 1374

D & N BANK A Federal Savings Bank, in its own right and as successor to Detroit & Northern Savings and Loan Association (now known as Republic Bank), Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 02-5130.

No. 02-5144.

United States Court of Appeals, Federal Circuit.

June 17, 2003.

Howard N. Cayne, Arnold & Porter, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Melvin C. Garbow, David B. Bergman, Edward H. Sisson, and Brian C. Duffy.

David M. Cohen, Director, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief was Stuart E. Schiffer, Deputy Assistant Attorney General. Of counsel on the brief were Jeanne E. Davidson, Deputy Director; David D. Zimmerman, Gary J. Dernelle, and Elizabeth M. Hosford, Trial Attorneys.

Before MAYER, Chief Judge, MICHEL, and DYK, Circuit Judges.

MICHEL, Circuit Judge.

Before the United States Court of Federal Claims, D & N Bank ("D & N") sought damages in a breach of contract action that it argued arose from the 1989 enactment of the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (1989). D & N now appeals the decision of the United States Court of Federal Claims granting the government's motion for summary judgment of no contract liability. D & N Bank v. United States, No. 95-539(C) (Fed.Cl.2002) (order memorializing hearing on dispositive motions and resolving merits of count I of complaint). Because D & N has not demonstrated that there was a contract that could have been breached by FIRREA, we affirm.

Background

D & N maintains that the government breached an express or implied-in-fact contract guaranteeing D & N the right to designate as regulatory capital approximately $57 million in goodwill arising from D & N's acquisition of another thrift, First Federal Savings and Loan Association of Flint ("First Federal").¹ D & N also argued that it had a contract-based right to amortize the goodwill over a period of forty years.

The trial court concluded that D & N offered no evidence demonstrating it had a contract with the Federal Home Loan Bank Board ("Bank Board" or "FHLBB") and, in fact, that the evidence offered demonstrated the opposite. In its bench ruling, the trial court specifically noted the following evidence supporting its conclusion: (1) neither the plan of merger nor the merger agreement said anything about goodwill, the treatment thereof, or purchase method accounting; (2) the application for merger, which was lengthy and had many attachments, contained no specific reference to a commitment for long-term amortization and gave no hint that assurances were requested against changes in the law or that anything was requested other than approval of the merger under the then-current regulations; (3) the letter from the Bank Board regional director to the Bank Board described the merger proposal as planning to use purchase method accounting but had no mention of goodwill or assurances; (4) the Bank Board resolution approving the merger recited, as the basis for approval, that the merger qualified for approval under applicable provisions of statute, regulation, and Bank Board policy, but included no indication that the Bank Board intended to be assuming the risk of any change in such statutes or other regulations; (5) after the merger, D & N specifically requested forbearances concerning specific net worth items but said nothing about amortization of goodwill, indicating that the plaintiffs knew how to request forbearances specifically; and (6) D & N's common stock offering circular described the merger as accomplished on a voluntary basis without FSLIC assistance. In sum, the trial court concluded,

Nothing about the merger transaction suggests that plaintiff was looking for a guarantee, that a change in regulations generally applicable to thrifts would not apply to D & N. And even if such a suggestion could be found, nothing suggests that the Bank Board intended to be assuming the risk that the law might change concerning use of goodwill.

On appeal, D & N argues that the parties involved understood that the government committed to "permit D & N to recognize supervisory goodwill and amortize it over forty years" and that the documents and the testimony support its assertion. It also argues that the circumstances involved in its merger were analogous to those in other cases in which this court and the Supreme Court found that the parties had formed a valid contract and were entitled to damages as a result of the passage of FIRREA. Finally, D & N maintains that even if the court were to conclude that there was no express contract, there was an implied-in-fact contract between D & N and the Bank Board.

We agree with the trial court that the documents and testimony of the parties involved do not, even when interpreted in a way most favorable to the appellant, show any mutual intent to contract. We thus hold that the trial court correctly granted summary judgment to the government on contract liability. We have jurisdiction under 28 U.S.C. § 1295(a)(3) (2000).

Discussion

We review a grant of summary judgment by the Court of Federal Claims de novo. Winstar Corp. v. United States, 64 F.3d 1531, 1539 (Fed.Cir.1995) (en banc). In the circumstances of this case, whether a contract exists is a mixed question of law and fact. Cienega Gardens v. United States, 194 F.3d 1231, 1239 (Fed. Cir.1998). We review the trial court's conclusions independently and its findings of fact for clear error. Glendale Fed. Bank v. United States, 239 F.3d 1374, 1379 (Fed. Cir.2001).

I.

D & N argues that the totality of the circumstances of its merger and all of the documents and actions when viewed together form a contract.² The flaw in this argument is that while it would make a good starting point for D & N's assertion that there was a binding contract, there needs to be something more than a cloud of evidence that could be consistent with a contract to prove a contract and enforceable contract rights. D & N seemingly believes that the quantity of evidence showing interactions between the merging thrifts and between the thrifts and the Bank Board makes up for missing contract elements. Although a contract may arise as a result of the confluence of multiple documents, there must still be a clear indication of intent to contract and the other requirements for concluding that a contract was formed. See Cal. Fed. Bank, FSB v. United States, 245 F.3d 1342, 1347 (Fed.Cir.2001) ("We agree with the Court of Federal Claims that `if the factual records of individual cases show intent to contract with the government for specified treatment of goodwill, and documents such as correspondence, memoranda and [FHLBB] resolutions confirm that intent, the absence of an [assistance agreement] or [supervisory action agreement] should be irrelevant to the finding that a contract existed.'" (quoting Cal. Fed. Bank v. United States, 39 Fed. Cl. 753 (1997))).

The elements necessary to determine that a contract exists are the same for both of the appellant's theories for recovery, breach of contract and breach of implied-in-fact contract. One must show (1) mutuality of intent to contract; (2) consideration; and (3) lack of ambiguity in offer and acceptance. Lewis v. United States, 70 F.3d 597, 600 (Fed.Cir.1995). When the United States is a party, a fourth requirement is added: the government representative whose conduct is relied upon must have actual authority to bind the government in contract. Id. We need not reach all four requirements in this case because D & N's proof fails on the first — there is no proof of mutuality of intent to contract.

In its brief D & N cites four documents or types of documents as reflecting the existence of a contract: (1) a merger agreement conditioned upon government approval of the purchase method accounting; (2) internal government memoranda; (3) a Bank Board Resolution conditioning approval of the merger on the submission of detailed accounting analyses of the supervisory goodwill resulting from the purchase method of accounting; and (4) the submission of an accountant's letter satisfying the condition of the Bank Board Resolution. However, none of these documents purports to be a contract between D & N and the government or indicates that it binds parties on either side of this transaction. Further, even when the documents are considered in conjunction with one another, the government's intention to be bound is nowhere to be found. No document expresses the government's intention to contract at all, much less contract to permit certain accounting treatment. In fact, any suggestion that the government impliedly had the intent to contract as to the treatment of goodwill because of its approval of the merger is implausible because none of the documents proffered by D & N mentions goodwill or the accounting treatment thereof.

When pressed at oral argument, D & N admitted that the only piece of paper that can be viewed as indicating a promise by someone with any authority is the Bank Board Resolution.³ This document, however, only shows the Bank Board's approval of the merger. Mere approval of the merger does not amount to intent to contract. The Bank Board, in its regulatory capacity, must approve all mergers. See 12 U.S.C. § 1730(q) (1982); see also 12 C.F.R. §§ 546.2(c), 563.22(a) (1982). An agency's performance of its regulatory or sovereign functions does not create contractual obligations. See New Era Constr. v. United States, 890 F.2d 1152, 1155 (Fed. Cir.1989) ("[T]he government's involvement in the financing and supervision of a contract between a public agency and a private contractor does not create a contract between the government and the contractor, for the breach of which the contractor may sue the government."). Something more is necessary. The Bank Board...