F.D.I.C. v. Bender

• Citation: 127 F.3d 58
• Decision Date: 23 September 1997
• Docket Number: 96-5137,Nos. 96-5126,s. 96-5126
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Madison National Bank, Appellee, v. Morton A. BENDER, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 58

127 F.3d 58

326 U.S.App.D.C. 390

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Madison National Bank, Appellee, v. Morton A. BENDER, et al., Appellants.

Nos. 96-5126, 96-5137.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 2, 1997.

Decided Sept. 23, 1997.

Appeals from the United States District Court for the District of Columbia (No. 93cv00864).

Ross D. Cooper, Washington, DC, argued the cause for appellants, with whom Nelson Deckelbaum was on the briefs.

Sharon M. Murphy, Attorney, United States Department of Justice, Washington, DC, argued the cause for appellee, with whom Eric H. Holder, Jr., United States Attorney at the time the brief was filed, Frank W. Hunger, Assistant Attorney General, United States Department of Justice, J. Christopher Kohn, Director, Ruth A. Harvey, Attorney, and J. Scott Watson, Counsel, Federal Deposit Insurance Corporation, were on the brief for appellee.

Before: WALD, WILLIAMS and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

On October 27, 1994, the district court granted summary judgment to the Federal Deposit Insurance Corporation ("FDIC") in its action against Van Dorn Retail Management, Inc. ("Van Dorn Retail") to recover the amounts due on several promissory notes, including attorneys' fees of 15 percent of the outstanding balance as provided in the notes. See FDIC v. Bender, Civ. No. 93-0864 (D.D.C. Oct. 27, 1994). Similarly, on February 28, 1996, the district court granted summary judgment to the FDIC in its action against Morton Bender ("Bender") as guarantor of the loan to Van Dorn Retail, holding that Bender's opposition to the motion for summary judgment was untimely. See FDIC v. Bender, Civ. No. 93-0864 (D.D.C. Feb. 28, 1996). In this consolidated appeal, Van Dorn Retail now challenges the district court's refusal to reconsider its award of 15 percent attorneys' fees to the FDIC, and Bender challenges the district court's treatment of the FDIC's motion for summary judgment as conceded. We hold that the district court erred with respect to Van Dorn Retail, but not with respect to Bender, in granting summary judgment on the fee issue to the FDIC, but because these results run the risk of creating inconsistent obligations between Van Dorn Retail and Bender as guarantor, we remand both cases to the district court for renewed consideration.

I. BACKGROUND

On December 1, 1986, Morton Bender, on behalf of MAB Development, Inc., executed and delivered to Madison National Bank ("Madison") a promissory note in which MAB Development, Inc., promised to pay a principal amount of $1,700,000 plus interest. On or about December 4, 1986, this note was replaced with six separate notes from Morton Bender, Scott Bender, Kenneth Bender, Jeffrey Bender, Lisa Bender, and Jay Bender. Each maker promised to make quarterly payments until December 4, 1991, when the balance payable under the note would become due. On December 31, 1986, Morton Bender executed a personal guaranty of each of the six notes.

In addition, on December 1, 1989, Morton Bender executed and delivered to Madison a promissory note, of which he was sole maker, in which he promised to pay a principal amount of $2,000,000 plus interest by December 1, 1990. This additional note provided that should it go into default, Bender would be liable for attorneys' fees in the amount of 15 percent of the outstanding balance of principal and interest. On April 5, 1990, N Street Follies, a limited partnership of which Morton Bender was general partner, executed and delivered to Madison a promissory note in which it agreed to pay a principal amount of $2,500,000 plus interest by April 5, 1991. Morton Bender also executed a personal guaranty of this note, which, similar to the note on which Bender was sole maker, provided for attorneys' fees of 15 percent upon default.

Finally, on January 21, 1991, Morton Bender, acting as secretary of Van Dorn Retail, executed and delivered to Madison a promissory note in which Van Dorn Retail agreed to pay a principal amount of $2,500,000 plus interest on demand. This note, too, provided for attorneys' fees of 15 percent upon default.

On May 10, 1991, Madison was declared insolvent, and the FDIC was appointed as receiver pursuant to 12 U.S.C. § 1819. As such, it succeeded to all of Madison's rights under the promissory notes. When each of these promissory notes and guaranties went into default, the FDIC brought suit in district court on April 26, 1993, seeking judgment against the Benders and N Street Follies (collectively, the "Bender Defendants") and Van Dorn Retail for the amount due, costs, and, where applicable, the full 15 percent in attorneys' fees.

The FDIC moved for summary judgment on all of the notes on February 4, 1994. The Bender Defendants and Van Dorn Retail, who were represented by the same counsel, jointly opposed the motion, arguing, among other things, that the 15 percent attorneys' fees requested in the FDIC's motion were "not only unreasonable, but clearly unconscionable" because, though based on the contractual rates provided for in the notes, they bore no relationship to the reasonable fees actually incurred. The district court granted the FDIC's motion on October 27, 1994, ruling that because the defendants "have not produced any evidence other than the mere allegation that the attorney's fees are unconscionable to combat plaintiff's motion for summary judgment[,] the court must grant plaintiff's motion for summary judgment."

The Bender Defendants (but not Van Dorn Retail, which had obtained separate counsel) filed a motion for reconsideration on November 8, 1994, citing FDIC v. Hadid, 947 F.2d 1153 (4th Cir.1991), as authority for the proposition that under District of Columbia law the court may hold an evidentiary hearing if there is a legitimate dispute as to the reasonableness of a contractual attorneys' fee provision. The court denied the motion on February 28, 1996, erroneously stating that the Bender Defendants had not sought reconsideration of the ruling on attorneys' fees. The Bender Defendants (this time joined by Van Dorn Retail) filed a motion for reconsideration of this ruling on March 13, 1996, pointing out that they had, in fact, sought reconsideration of the fee award in their earlier motion. The court, recognizing its error, granted the motion in favor of the Bender Defendants on April 17, 1996, and required the FDIC to submit a motion for attorneys' fees addressing the reasonableness of the 15-percent provision. However, it denied Van Dorn Retail any relief, noting that Van Dorn Retail had not filed a motion for reconsideration in November and thus could not ask the court to reconsider its February decision.

In the meantime, the FDIC had been granted leave on May 17, 1994, to amend its complaint to include a new count against Bender as guarantor of the loan to Van Dorn Retail, which provided for 15 percent attorneys' fees, as well as a count against Delburt Van Dorn, Marc Goodman, Cindy Van Dorn, John C. Richards, and Connie J. Richards (the "Van Dorn Guarantors"), none of whom is a party to this appeal, as guarantors of the same loan. The FDIC subsequently moved for summary judgment on the amended complaint on November 10, 1994. The Van Dorn Guarantors filed an opposition to the motion on December 9, 1994, alleging that a material issue of fact existed with respect to the amount of attorneys' fees. The Bender Defendants ¹ filed an opposition to the motion on December 19, 1994, which stated that the Bender Defendants joined the opposition of the Van Dorn Guarantors. This opposition was challenged by the FDIC as untimely filed. On February 28, 1996, the district court granted the FDIC's motion as to the Bender Defendants in its entirety, ruling that the opposition was filed beyond the time limit prescribed in Local Rule 108(b) and that the FDIC's motion was thereby conceded. As to the Van Dorn Guarantors, the district court granted the FDIC's motion with respect to the amount due on the notes but reserved judgment as to the amount of attorneys' fees, holding that because the Van Dorn Guarantors had challenged the reasonableness of the contractual provision in their opposition to the FDIC's motion for summary judgment, the court, pursuant to District law, would not enforce the 15-percent provision "absent a showing by plaintiff that the amount is reasonable." The Bender Defendants and Van Dorn Retail appeal from these rulings, both arguing that the district court erred in not affording them a similar opportunity to contest the 15-percent fee provision.

II. DISCUSSION

A. Van Dorn Retail's Appeal

Although Van Dorn Retail has styled its appeal as a challenge to the district court's failure to extend to it the benefit of the reconsideration afforded the Bender Defendants on the fee issue, we believe that it is more properly considered as a direct challenge to the original grant of summary judgment in favor of the FDIC as to the 15 percent attorneys' fees provided in the note. Although Federal Rule of Appellate Procedure 4(a)(1) requires that appeals be taken within 30 days after the date of entry of the judgment appealed from, Federal Rule of Appellate Procedure 4(a)(4) provides that if any party files a timely motion under Rule 59, the time for appeal for all parties runs from the entry of the order disposing of the last such motion. The Bender Defendants filed two motions for reconsideration; the last, filed on March 13, 1996, was granted on April 17, 1996. Van Dorn Retail's appeal was filed on May 8, 1996, and thus may be considered a timely filed appeal from the initial grant of summary judgment. As a result, we do not need to reach Van Dorn Retail's challenge to the district court's denial of reconsideration.

This court reviews de novo the district court's order granting the FDIC's motion for summary judgment. Consumer Fed'n of Am. and ...