F.D.I.C. v. Frates, 93-CV-123-H(J).
| Court | United States District Courts. 10th Circuit. Northern District of Oklahoma |
| Citation | 44 F.Supp.2d 1176 |
| Docket Number | No. 93-CV-123-H(J).,93-CV-123-H(J). |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Joseph A. FRATES, et al., Defendants. |
| Decision Date | 30 March 1999 |
v.
Joseph A. FRATES, et al., Defendants.
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Frederic Dorwart, Jean Michael Medina, Fred Dorwart, Lawyers, Tulsa, OK, Paul DeMuro, Frederic Dorwart Laywers, Tulsa, OK, for Joseph A. Frates, defendant.
Thorn Huffman, San Antonio, TX, pro se.
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James William Tilly, Craig Alan Fitzgerald, Tilly & Associates, Tulsa, OK, for David L. Fist, defendant.
Steven W. Simcoe, Kara Marie Dorssom, Barkley Rodolf, Tulsa, OK, Jeffrey C. Sacra, Holden Glendening & Turnbull, Tulsa, OK, for C. Michael Barkley, defendant.
William R. Turnbow, Andrew G. Lewis, Hershner Hunter Moulton Andrews & Neill, Eugene, OR, Carolyn Ann Arthur, Resolution Trust Corp., Dallas, TX, for Federal Deposit Insurance Corporation, counter-defendant.
Frederic Dorwart, Jean Michael Medina, Fred Dorwart, Lawyers, Tulsa, OK, for Joseph A. Frates, counter-claimant.
HOLMES, District Judge.
This matter comes before the Court on the Report and Recommendation of the United States Magistrate Judge (Docket # 392) with respect to Plaintiff's First Motion for Summary Judgment (Docket # 178), Plaintiff's Cross-Motion for Summary Judgment (Docket # 369), and Defendant Joseph A. Frates' Second Motion for Summary Judgment on Counts I and II (Docket # 356). Both Plaintiff and Defendant have filed objections to the report and recommendation and have filed responses to the objections.
When a party objects to the report and recommendation of a Magistrate Judge, Rule 72(b) of the Federal Rules of Civil Procedure provides in pertinent part that:
[t]he district judge to whom the case is assigned shall make a de novo determination upon the record, or after additional evidence, of any portion of the magistrate judge's disposition to which specific written objection has been made in accordance with this rule. The district judge may accept, reject, or modify the recommendation decision, receive further evidence, or recommit the matter to the magistrate judge with instructions.
Fed.R.Civ.P. 72(b).
Based upon a careful review of the Report and Recommendation of the Magistrate Judge, the objections and responses of the parties, and the record, the Court finds that the Report and Recommendation granting Defendant's Motion for Summary Judgment and denying Plaintiff's Motions for Summary Judgment should be, and is hereby, adopted. Plaintiff's First Motion for Summary Judgment (Docket # 178) and Plaintiff's Cross-Motion for Summary Judgment (Docket # 369) are hereby denied. Defendant Joseph A. Frates' Second Motion for Summary Judgment on Counts I and II (Docket # 356) is hereby granted.
IT IS SO ORDERED.
JOYNER, United States Magistrate Judge.
TABLE OF CONTENTS
I. INTRODUCTION ........................................................................ 1185
A. EQUIVEST'S ACQUISITION OF STATE ................................................. 1185
B. THE PLAYERS ..................................................................... 1185
C. THE SIERRA PROPERTY AND THE KAISER LITIGATION ................................... 1186
D. SUMMARY OF THE FDIC's CLAIMS .................................................... 1187
1. First for Relief — Mr. Frates' Obligation to Contribute Additional
Capital to State Pursuant to The Personal Guaranty Imposed on
Him By Condition 7 of FHLBB Resolution 86-1296 .................................... 1187
2. Second Claim for Relief — Mr. Frates' Breach Of An Oral Agreement
to Indemnify State Against Loss In Connection With the Sierra
Property and the Kaiser Litigation ................................................ 1188
II. FIRST CLAIM FOR RELIEF — MR. FRATES' OBLIGATION TO CONTRIBUTE
ADDITIONAL CAPITAL TO STATE PURSUANT TO THE PERSONAL GUARANTY IMPOSED ON
HIM BY CONDITION 7 OF FHLBB RESOLUTION 86-1296 .......................................... 1188
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A. HISTORICAL BACKGROUND OF THE SAVINGS AND LOAN INDUSTRY .......................... 1188
1. Statutory and Regulatory Framework Applicable to Federally Chartered
and Federally Insured Savings and Loan Associations ............................... 1188
2. Savings and Loan Association Charter Conversions and The Acquisition
of Savings and Loan Associations .................................................. 1189
B. STATE'S CONVERSION TO A STOCK ASSOCIATION AND EQUIVEST'S ACQUISITION OF
STATE ................................................................................ 1190
C. MR. FRATES CANNOT ATTACK THE FHLBB's RESOLUTIONS ................................ 1194
1. This Court Lacks Subject Matter Jurisdiction to Entertain Mr.
Frates' Objections to the FHLBB's Resolutions ..................................... 1196
D. THE FDIC MAY ENFORCE THE FHLBB's RESOLUTIONS .................................... 1199
1. The Undersigned's Prior Order — Focusing the Dispute ................... 1199
2. The FHLBB's Resolutions are Administrative Orders, Not Contracts ............. 1200
3. Enforcement of the FHLBB's Administrative Orders by the FDIC as
the FSLIC ......................................................................... 1201
a. The FSLIC's Right to Enforce the Resolutions .............................. 1201
b. Statute of Limitations .................................................... 1202
4. Enforcement of the FHLBB's Administrative Orders by the FDIC as
State ............................................................................. 1203
E. UNDER THE FHLBB's RESOLUTIONS, MR. FRATES' OBLIGATION TO CONTRIBUTE
ADDITIONAL CAPITAL TO STATE HAS NOT BEEN TRIGGERED ................................... 1204
1. The 5% Limit on Mr. Frates' Personal Guaranty ................................ 1204
a. FDIC's Interpretive Arguments Based on Mr. Frates' Subjective
Intent ....................................................................... 1206
b. FDIC's Interpretive Arguments Based on the Language of the
FHLBB's Resolutions .......................................................... 1208
c. Calculation of the 5% Limit On Mr. Frates' Personal Guaranty .............. 1209
2. Timing of New Appraisals ..................................................... 1210
F. CONCLUSION ...................................................................... 1210
III. SECOND CLAIM FOR RELIEF — MR. FRATES' BREACH OF AN ORAL
AGREEMENT TO INDEMNIFY STATE AGAINST LOSS IN CONNECTION WITH THE SIERRA
PROPERTY AND THE KAISER LITIGATION ..................................................... 1211
A. SUMMARY OF THE EVIDENCE ......................................................... 1211
B. THERE ARE GENUINE ISSUES OF MATERIAL FACT REGARDING THE EXISTENCE OF
A PROMISE BY MR. FRATES AND/OR THE FRATES GROUP TO INDEMNIFY STATE
AGAINST ANY LOSS AS A RESULT OF THE KAISER LITIGATION ................................ 1219
C. THE PARTIES' ARGUMENTS IN FAVOR OF SUMMARY JUDGMENT AS A MATTER OF
LAW .................................................................................. 1220
1. The FDIC's Argument — Dench and 12 U.S.C. § 1823(e) ............... 1220
2. Mr. Frates' Arguments ........................................................ 1221
a. Contractual Validation .................................................... 1221
i. The Consideration Doctrine ............................................. 1221
ii. The Promissory Estoppel Doctrine ...................................... 1222
b. Statute of Frauds ......................................................... 1224
c. No Showing of Superior Title and No Notice or Opportunity to
Defend ..................................................................................... 1224
d. Indemnity Against Judgment and Failure to Mitigate Damages ................ 1225
e. No Prior Judgment Against the Frates Group ................................ 1226
f. No Damages Suffered by State .............................................. 1228
g. Terms of Indemnity Agreement Not Definite ................................. 1228
D. CONCLUSION ...................................................................... 1229
RECOMMENDATION ......................................................................... 1229
OBJECTIONS ............................................................................. 1229
The following motions are now before the Court:
1. "Plaintiff's First Motion for Summary Judgment (Breach of Contract and Warranty Claims)," [Doc. No. 178];1
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2. "Defendant Joseph A. Frates' Second2 Motion for Summary Judgment on Counts I and II," [Doc. No. 356];3 and
3. "Plaintiff's Cross-Motion for Summary Judgment [regarding Mr. Frates' Second Motion for Summary Judgment on Counts I and II]," [Doc. No. 369].
All of these motions seek summary adjudication of the First and Second Claims For Relief in the Federal Deposit Insurance Corporation's ("FDIC") Third Amended Complaint. See Doc. No. 140. The First and Second Claims For Relief state causes of action solely against Defendant Joseph A. Frates.4 The undersigned has thoroughly reviewed the parties' briefs and the evidentiary materials submitted. The undersigned offers this report and recommends that Mr. Frates' motions for summary judgment be GRANTED and the FDIC's motions for summary judgment be DENIED.
As to the First Claim for Relief the undersigned finds that Mr. Frates had an enforceable obligation to personally guarantee Equivest Financial Corporation's ("Equivest") obligation to contribute additional capital to State Federal Savings and Loan Association ("State"), but that Mr. Frates' obligation was not triggered because a contribution was not necessary to raise State's regulatory capital to 5% of State's total liabilities as of December 30, 1986....
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