Excel Willowbrook, L.L.C. v. JP Morgan Chase Bank

• Decision Date: 10 January 2014
• Docket Number: 12–20382,12–20376,12–20375,12–20378,12–20377,12–20381,12–10784.,Nos. 12–20367,s. 12–20367
• Parties: EXCEL WILLOWBROOK, L.L.C.; Southside/3500, Ltd.; ORTB Wayside, Ltd.; MR/VM Partners, Ltd.; FL Westheimer Wilchrest, Ltd.; LSDSS Realty Group, L.L.C.; Excel Little York, Ltd.; 3300 Sage, Ltd., Plaintiffs–Appellees v. JP MORGAN CHASE BANK, NATIONAL ASSOCIATION., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. MR/VM Partners, Ltd., Plaintiff–Appellee v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. Southside/3500, Ltd., Plaintiff–Appellee v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. ORTB Wayside, Ltd., Plaintiff–Appellee v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. Excel Little York, Ltd., Plaintiff–Appellee v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. 3300 Sage, Ltd., Plaintiff–Appellee v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. FL Westheimer Wilchrest, Ltd.; LSDSS Realty Group, L.L.C., Plaintiffs–Appellees v. JPMorgan Chase Bank, N.A., Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant. Weichsel Farm Limited Partnership, Plaintiff–Appellee v. JP Morgan Chase Bank, N.A., Successor–in–Interest to Washington Mutual Bank, Defendant–Appellant, Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

740 F.3d 972

EXCEL WILLOWBROOK, L.L.C.; Southside/3500, Ltd.; ORTB Wayside, Ltd.; MR/VM Partners, Ltd.; FL Westheimer Wilchrest, Ltd.; LSDSS Realty Group, L.L.C.; Excel Little York, Ltd.; 3300 Sage, Ltd., Plaintiffs–Appellees

v.JP MORGAN CHASE BANK, NATIONAL ASSOCIATION., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

MR/VM Partners, Ltd., Plaintiff–Appellee

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

Southside/3500, Ltd., Plaintiff–Appellee

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

ORTB Wayside, Ltd., Plaintiff–Appellee

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

Excel Little York, Ltd., Plaintiff–Appellee

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

3300 Sage, Ltd., Plaintiff–Appellee

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

FL Westheimer Wilchrest, Ltd.; LSDSS Realty Group, L.L.C., Plaintiffs–Appellees

v.JPMorgan Chase Bank, N.A., Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

Weichsel Farm Limited Partnership, Plaintiff–Appellee

v.JP Morgan Chase Bank, N.A., Successor–in–Interest to Washington Mutual Bank, Defendant–Appellant,Federal Deposit Insurance Corporation, as Receiver for Washington Mutual Bank, Intervenor–Appellant.

Nos. 12–20367, 12–20375, 12–20376, 12–20377, 12–20378, 12–20381, 12–20382, 12–10784.

United States Court of Appeals, Fifth Circuit.

Jan. 10, 2014.

Roy Kemp Kasling, Kasling, Hemphill, Dolezal & Atwell, L.L.P., James Bruce Bennett, Cardwell, Hart & Bennett, L.L.P., Austin, TX, for Plaintiffs–Appellees.

Allyson Newton Ho, Morgan, Lewis & Bockius, L.L.P., Dallas, TX, Ira Claborn Rogers, Morgan, Lewis & Bockius, L.L.P., Houston, TX, for Defendant–Appellant.

Joseph Brooks, Federal Deposit Insurance Corporation, Appellate Litigation Unit–Legal Division, Arlington, VA, Kell Corrigan Mercer, Attorney, Husch Blackwell, L.L.P., Austin, TX, Ira Claborn Rogers, Morgan, Lewis & Bockius, L.L.P., Houston, TX, for Intervenor–Appellant.

Jeffrey Robert Seckel, Esq., McGuire, Craddock & Strother, P.C., Dallas, TX, for Plaintiff–Appellee (Weichsel Farm Limited Partnership).

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

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

Before HIGGINBOTHAM, CLEMENT, and PRADO, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Washington Mutual Bank failed in 2008. Acting as receiver, the FDIC conveyed substantially all of WaMu's assets and liabilities to JPMorgan Chase, including certain long-term real-estate leases. At issue in this case is whether the owners of the leased tracts can enforce the leases against Chase by virtue of the FDIC's conveyance. The district court awarded summary judgment to the landlords. We affirm.

I.

The facts of this case are straightforward and undisputed. In early 2008, Washington Mutual Bank (“WaMu”) entered into lease agreements (“the Leases”) with several landlords (“the Landlords”) for certain undeveloped tracts of land, which WaMu planned to use for future branch offices. However, WaMu failed on September 25, 2008, before it could complete any banking facilities on the tracts. Pursuant to its authority under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), the FDIC stepped into WaMu's shoes and assumed all of its assets and liabilities, including the Leases. The FDIC then solicited bids from private financial institutions for the purchase and assumption of those assets and liabilities, ultimately accepting a $1.8 billion bid by JP Morgan Chase Bank, N.A. (“Chase”).

After accepting Chase's bid, the FDIC and Chase executed the Purchase and Assumption Agreement (the “P & A Agreement” or “Agreement”). As relevant here, the Agreement split WaMu's real-estate assets into “Bank Premises” and “Other Real Estate,” giving Chase a 90–day option to either accept or reject assets that qualified as Bank Premises but assigning all Other Real Estate to Chase outright. The Agreement defined Bank Premises to include all banking facilities that WaMu owned or leased and actually occupied as of September 25, 2008, the date on which WaMu closed its doors.¹ The Agreement defined Other Real Estate to include “all interests in real estate” that did not qualify as Banking Premises, including all “leasehold rights.” ² It is undisputed that WaMu had not yet completed or occupied banking facilities on any of the tracts subject to the Leases as of September 25, 2008. Hence, under the plain language of the Agreement, the Leases qualified as Other Real Estate assigned outright to Chase. Notably, Chase not only accepted the Leases but “expressly assume[d]” and “agree[d] to pay, perform and discharge” all of WaMu's liabilities—liabilities that included WaMu's obligations under the Leases.

Even though the Agreement thus appeared to give Chase no option to reject the Leases or WaMu's obligations thereunder, the FDIC has maintained at all times that “both the FDIC and Chase ... understood that all of the Leases are Bank Premises leases and that Chase therefore had a 90–day option to accept assignment of each Lease.” Consistent with this “understanding,” Chase rejected the Leases within 90 days. The FDIC accepted Chase's purported exercise of its option and therefore continued to retain the Leases in its capacity as WaMu's receiver. Thereafter, the FDIC determined that compliance with the Leases would be burdensome to the WaMu receivership and, pursuant to its statutory authority under FIRREA, elected to repudiate the Leases.

The Landlords brought eight separate cases against Chase, alleging breach of the Leases. Seven of the cases were either filed in or removed to the Southern District of Texas, where they were eventually consolidated. The eighth case was filed in the Northern District of Texas. The FDIC intervened on behalf of Chase in all eight cases and moved for summary judgment. It contended that the Landlords lacked “standing” to interpret or enforce the P & A Agreement, as they were neither parties nor intended beneficiaries to the Agreement. Hence, the FDIC reasoned, they lacked a legal basis to assert the Leases against Chase.

The Landlords cross-moved for summary judgment, rejoining that they were quintessential creditor beneficiaries to the P & A Agreement and thus had a contractual right to enforce Chase's promise to assume WaMu's obligations under the Leases. In the alternative, the Landlords urged that the P & A Agreement unambiguously assigned the Leases to Chase, that the Agreement thus brought Chase into “privity of estate” with the Landlords, and that under elementary principles of Texas landlord-tenant law, the Landlords therefore had a right to hold Chase liable for breach of the Leases even if the Landlords lacked contractual authority to enforce the P & A Agreement.

The district courts granted partial summary judgment to the Landlords in all eight cases, reserving only the question of damages. The parties then stipulated to damages, and the district courts entered final judgments. Although the Southern District agreed with the FDIC that the Landlords were not third-party beneficiaries to the P & A Agreement, both district courts concluded that the Agreement unambiguously assigned the Leases to Chase without giving Chase any option to repudiate, thereby bringing Chase into privity of estate with the Landlords and giving the Landlords a right to hold Chase liable for breach of the Leases. The FDIC appeals on behalf of Chase in its capacity as intervenor. All eight cases are consolidated on appeal.

II.

The threshold issue on appeal is whether the Landlords qualify as intended beneficiaries to the P & A Agreement, in which case they have a contractual right to enforce Chase's promise to assume WaMu's obligations under the Leases. As the FDIC observes, the Eleventh Circuit and the Ninth Circuit have both recently addressed this question, declining to afford similarly situated landlords third-party beneficiary status under the same P & A Agreement at issue in this case.³ Our sister circuits reasoned that there is a presumption against third-party beneficiary status under government contracts—a presumption that, while it does not require the party seeking enforcement to be “specifically or individually identified in the contract” to be overcome, does require proof that it “fall[s] within a class clearly intended to benefit” from the assignment.⁴ As the FDIC's assignment to Chase included a no-beneficiaries clause, the courts reasoned, the landlords could not possibly overcome this presumption.⁵ We are not so sure.

The interpretation and effect of the P & A Agreement is governed by the federal common law of contracts,⁶ which draws on the “the core principles of the common law of contracts that are in force in most states.” ⁷ One of those principles is that a promisor who agrees to satisfy an obligation that the promisee owes to a third party thereby confers enforcement rights to the third party, who qualifies as a creditor beneficiary to the contract.⁸ In the landlord—tenant context, it is thus well established that a landlord is a creditor beneficiary to an assignment of a lease by the original tenant to a subsequent tenant-at least if the subsequent tenant expressly agrees to perform the original tenant's obligations under the lease.⁹ Here, Chase not only accepted the FDIC's...