Den Norske Bank AS v. First Nat. Bank of Boston
Decision Date | 07 November 1995 |
Docket Number | No. 95-1682,95-1682 |
Citation | 75 F.3d 49 |
Parties | DEN NORSKE BANK AS, Plaintiff, Appellant, v. The FIRST NATIONAL BANK OF BOSTON, et al., Defendants, Appellees. . Heard |
Court | U.S. Court of Appeals — First Circuit |
Glen Banks, with whom Steven C. Koppell and Fulbright & Jaworski, LLP, New York City, were on brief, for appellant.
Joseph L. Kociubes, with whom Mark W. Batten and Bingham, Dana & Gould, Boston, MA, were on brief, for appellees.
Plaintiff Den norske Bank AS ("Den norske") appeals from a district court order granting summary judgment to defendant First National Bank of Boston ("First National") 1 on its claims for breach of contract and breach of fiduciary duty. We vacate the judgment.
In 1985, First National loaned $43.2 million to Glades Roads Associates ("Glades Roads") to construct an office building in Florida, and took a first mortgage on the Project. In 1986, appellant Den norske entered into a Loan Participation Agreement ("Agreement") 2 with First National. Den norske purchased approximately 17% (or $7.5 million) of the Glades Roads loan. First National retained an 83% interest in the loan, and served as "Principal"--the party charged with administering the loan. The Agreement also provided, in pertinent part:
11. Approval of Principal's Actions. Principal [First National] agrees that it shall not without prior written agreement by all Participants: (1) reduce the amount of the Loan principal or interest payments; (2) reduce the Loan interest rate; (3) postpone for a period of more than 60 days any due date for payment of the Loan principal; (4) release or subordinate any of the collateral or waive any claim against any guarantor or person who may be secondarily liable who would have a material, adverse effect on the collection and enforcement of the Loan or the Loan documents; (5) suspend the accrual of Loan interest.
In other matters concerning the routine administration of the loan, [First National] agrees not to deviate from the Loan Documents unless the majority (dollars outstanding) of the lending institutions agree to the change provided [First National] is in the majority. In all cases where a consensus cannot be reached on matters of administration that is acceptable to [First National], [First National] agrees to adhere to the Loan Documents.
In all cases pertaining to default, [First National ] agrees to adhere to [Section ] 13.
....
13. Loan Default Procedures. [First National] and Participants agree that in case of default, courses of action will be agreed to by a majority (dollars outstanding) of the lending institutions providing [First National] is in the majority. In cases where a consensus cannot be reached on matters pertaining to default that is acceptable to [First National], then [First National] agrees to adhere to the Loan Documents for all appropriate remedies.... (Emphasis added.)
In July 1991, Glades Roads defaulted on the note. At the time of the default, First National still held its 83% interest in the note; Den norske 17%. First National invoked the acceleration clause, made demand for the entire outstanding loan principal and accrued interest, then commenced foreclosure proceedings. In September 1991, however, First National asked Ernst & Young to evaluate the comparative benefit to First National of (i) an immediate foreclosure and (ii) a negotiated loan restructuring agreement whereby Glades Roads would make an immediate payment of $8 million and a five-year balloon payment of $17 million In 1992, Den norske brought this diversity action against First National in federal district court, alleging that First National's failure to obtain "prior written agreement by all Participants" with the Glades Roads loan forgiveness arrangement, pursuant to § 11 of the Agreement, supra pp. 2-3, constituted breach of contract, breach of fiduciary duty, and an unfair trade practice. The district court initially denied cross-motions for summary judgment, finding §§ 11 and 13 of the Agreement ambiguous. Den Norske Bank AS v. First Nat'l Bank of Boston, 838 F.Supp. 19 (D.Mass.1993). 3
and First National in turn would "forgive" $9.6 million. Valuing the Glades Roads project at $24.7 million, Ernst & Young recommended restructuring rather than foreclosure. Den norske, believing that the Project was worth far more, preferred to foreclose, hold the property for five years, and collect rental income. First National rejected the Den norske proposal and opted for its own five-year restructuring plan
Following discovery, however, the court reconsidered, eventually awarding summary judgment to defendant First National on the remaining Den norske claims. Den Norske Bank AS v. First Nat'l Bank of Boston, No. 92-11294-NMG, 1993 WL 773796 . The court concluded that § 11 unambiguously entitled Den norske to veto a loan forgiveness only in the pre-default stage of "routine" loan administration, but that § 13 gave First National the right to choose any "course of action" thereafter. Id. at * 3. The court ruled also that even if the Agreement were determined ambiguous, Den norske's extrinsic evidence was insufficient to support a rational inference that the parties intended to give Den norske a post-default veto. Id. at * 4 ().
DISCUSSION
Den norske presents a two-part challenge to the summary judgment ruling. First, it contends that proper contract interpretation requires summary judgment against First National because § 11 unambiguously ordains that First National cannot unilaterally "reduce the amount of the [Glades Road] Loan principal" under any circumstances, including the borrower's default, and no provision in § 13 countermands the specific prohibition in § 11. Second, even assuming §§ 11 and 13 were ambiguous or inconsistent, Den norske's extrinsic evidence raises genuine factual disputes--as to whether the contracting parties intended to afford Den norske a unilateral veto over any post-default loan forgiveness [hereinafter: "veto"]--which cannot be resolved at summary judgment.
Interpretation of the Agreement is governed by Massachusetts law. See Agreement § 22. Normally, contract interpretation is a question of law for the court. Fairfield 274-278 Clarendon Trust v. Dwek, 970 F.2d 990, 993 (1st Cir.1992); Freelander v. G. & K. Realty Corp., 357 Mass. 512, 258 N.E.2d 786, 788 (1970). Should the court find the contract language unambiguous, we interpret it according to its plain terms. See Dwek, 970 F.2d at 993; Hiller v. Submarine Signal Co., 325 Mass. 546, 91 N.E.2d 667, 669-70 (1950).
We examine a grant of summary judgment de novo, with a view to whether there is a "genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Byrd v. Ronayne, 61 F.3d 1026, 1030 (1st Cir.1995). Once the moving party (First National) makes this showing, the party bearing the ultimate burden of proof (Den norske) cannot rest on mere allegations, but must proffer sufficient competent evidence upon which a rational trier of fact could find in its favor. See, e.g., Milton v. Van Dorn Co., 961 F.2d 965, 969 (1st Cir.1992) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). " '[A]n argument between parties about the meaning of a[n] [ambiguous] contract is typically an argument about a "material fact," ' " and summary judgment is normally unwarranted unless " 'the [extrinsic] evidence presented about the parties' intended meaning [is] so one-sided that no reasonable person could decide [to] the contrary.' " Allen v. Adage, Inc., 967 F.2d 695, 698 (1st Cir.1992) (quoting Boston Five Cents Sav. Bank v. Secretary of Dep't of HUD, 768 F.2d 5, 8 (1st Cir.1985)); Blanchard v. Peerless Ins. Co., 958 F.2d 483, 491 (1st Cir.1991) (same). Nonetheless, we must resolve all genuine factual disputes, and any competing rational inferences, in the light most favorable to Den norske, the party against whom summary...
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