F.D.I.C. v. LeBlanc

Decision Date06 November 1995
Docket NumberNo. 95-1641,95-1641
PartiesFEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of New Bank of New England, N.A., Plaintiff, Appellee, v. Donald L. LeBLANC and LeBlanc Associates, Inc., Defendants, Appellants. . Heard
CourtU.S. Court of Appeals — First Circuit

Robert B. Fredericks, Falmouth, MA, for appellants.

Lawrence H. Richmond, Washington, DC, with whom Ann S. DuRoss and Colleen B. Bombardier were on brief, for appellee.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and BOUDIN, Circuit Judge.

BOWNES, Senior Circuit Judge.

This appeal concerns federal banking law and the scope of the federal estoppel doctrine established by the Supreme Court's decision in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and 12 U.S.C. § 1823(e). Defendant-appellant Donald L. LeBlanc seeks review of the district court's order granting the FDIC's motion for summary judgment. The district court held that the defenses and counterclaims LeBlanc raised in response to the FDIC's affirmative suit to recover the deficiency owed on a mortgage note he and his company, LeBlanc Associates, (collectively "LeBlanc") executed on January 5, 1989, were barred by both Massachusetts law and the D'Oench doctrine. We affirm this decision, but on slightly different grounds than those articulated by the district court. Title 28 U.S.C. § 1291 provides jurisdiction.

I. BACKGROUND

For the purpose of reviewing the district court's grant of summary judgment, we summarize the facts in the light most favorable to the nonmoving party. Levy v. FDIC, 7 F.3d 1054, 1056 (1st Cir.1993). In 1987, appellant acquired the 54-acre parcel at issue in this case. The parcel, which is located in Falmouth, Massachusetts, and abuts a 900-acre, partially-completed, residential community called Falmouth Woods, is accessible by only one road, Falmouth Woods Road. Though appellant purchased the parcel without first obtaining a right of way over Falmouth Woods Road, his intent was ultimately to acquire such an easement and to develop his parcel into a six-lot, multifamily subdivision called Prospect Hills. At the time LeBlanc purchased the property, both the Falmouth Woods development and Falmouth Woods Road, which fronts the LeBlanc parcel's western boundary, were owned by the Falmouth Woods Development Corporation ("FWDC"), a Massachusetts corporation.

On January 5, 1989, to finance development of the Prospect Hills parcel, LeBlanc obtained a $750,000.00 loan from the Bank of New England South, N.A., which later merged into Bank of New England, N.A. ("BNE"). The loan, which both parties agree was not conditioned upon LeBlanc's acquiring an easement across Falmouth Woods Road, was secured by a personal guaranty note executed by LeBlanc and a mortgage on the 54-acre parcel. Payment on the note was to be monthly, beginning in February of 1989, with the provision that the principal balance, plus accrued and unpaid interest, were to be paid by January 4, 1992.

LeBlanc obtained approval and a permit for the Prospect Hills subdivision from the Falmouth Planning Board and, in the Fall of 1989, began meeting with FWDC to discuss securing access rights over Falmouth Woods Road. During negotiations, FWDC verbally agreed to grant LeBlanc an easement for utilities and right of way across Falmouth Woods Road. A written agreement regarding the easement, however, was never prepared. Before the sale of the easement could be BNE, which had loaned FWDC $28 million prior to extending LeBlanc the loan to develop Prospect Hills and, as a result, held a mortgage in the Falmouth Woods property, sought and obtained relief from the automatic stay placed on FWDC's estate as a result of the bankruptcy filing. BNE operated the Falmouth Woods property as a mortgagee in possession, briefly continuing service at the Falmouth Woods golf course, and tried to sell Falmouth Woods subdivision lots. It eventually foreclosed its mortgage and purchased the property at the subsequent foreclosure sale. Because FWDC's mortgage did not include the fee interest in Falmouth Woods Road, the foreclosure sale purchase left BNE with title to Falmouth Woods and an easement over Falmouth Woods Road. The fee interest in the road remained with the bankruptcy trustee assigned to manage FWDC's assets.

recorded, FWDC began experiencing financial difficulties and filed for Chapter 11 bankruptcy in March of 1990.

The Falmouth Woods property changed hands several times after BNE's foreclosure-sale purchase, thwarting LeBlanc's efforts to obtain an easement over Falmouth Woods Road. In September 1990, BNE transferred the Falmouth Woods property to its wholly-owned subsidiary, Falmouth Land Company ("FLC"). In January 1991, the Comptroller of the Currency of the United States of America ("COC") declared BNE insolvent and appointed the FDIC receiver of BNE. The COC also chartered the New Bank of New England, N.A. ("NBNE"), pursuant to 12 U.S.C. § 1821(n), as a bridge bank to acquire the assets formerly held by BNE. Thus, NBNE held title to the FWDC property, as well as LeBlanc's $750,000.00 note and guaranty from January to July of 1991.

On July 13, 1991, the COC dissolved NBNE and appointed the FDIC as receiver of the bank, pursuant to 12 U.S.C. § 1821(n)(12). The FDIC then acquired Falmouth Woods and assumed the note and the mortgage on the LeBlanc parcel. On August 13, 1991, the FDIC took title to the fee interest in Falmouth Woods Road in the name of FLC, the NBNE subsidiary. NBNE had purchased the fee interest in Falmouth Woods Road from the FWDC's bankruptcy trustee in May 1991.

LeBlanc pursued his easement request with each of Falmouth Woods's owners because the Prospect Hills parcel, initially appraised at $1,980,000.00, was virtually worthless without access to Falmouth Woods Road. Negotiations with BNE, FLC, and Oak Tree Capitol ("Oak Tree"), a company which functioned as asset manager for both FLC and BNE, were unsuccessful. Attempts to obtain a right of way from NBNE and the FDIC were also unsuccessful, primarily because both entities engaged in actions which blocked LeBlanc's acquisition efforts. NBNE contested LeBlanc's efforts to resolve his road access problems through direct negotiations with the FWDC bankruptcy trustee and was ultimately successful in outbidding LeBlanc for the fee interest in Falmouth Woods Road. According to LeBlanc, NBNE officials also misrepresented the fact that they were marketing the Falmouth Woods property without reservation of rights or notice of claims. LeBlanc further asserts that NBNE attempted to accelerate payment on his note by declining to honor a loan commitment made to another LeBlanc development entity, DDM Development Corporation ("DDM"), and making an easement across Falmouth Woods Road contingent upon increased collateralization of the note or a reduction in principal. LeBlanc imputes a similar bad intent to the FDIC, which failed to convey him an easement during work-out negotiations on the note.

Payments on LeBlanc's $750,000.00 note were current and regular until the Fall of 1991. Then, in a November 13, 1991, letter, LeBlanc informed the FDIC, which held title to Falmouth Woods and Falmouth Woods Road at that time, that its refusal to convey the requested easement entitled him to discontinue payments on the $750,000.00 note and that he would not resume payments until the easement matter was resolved. On November 21, 1991, the FDIC made a demand for full payment of the outstanding note balance. When LeBlanc failed to make the requested payment, the FDIC, on August 7, 1992, foreclosed and sold the Prospect Hills

                property for $235,000.00 at auction.   Appellant's son, Mark LeBlanc, as Trustee of the McAuliffe Nominee Trust, purchased the property.   The deficiency due on LeBlanc's note, the subject of the instant appeal, has not yet been paid
                
II. PROCEDURAL HISTORY

On June 19, 1992, the FDIC filed an action in the District Court for the District of Massachusetts, seeking the deficiency balance on LeBlanc's note. On August 21, 1992, LeBlanc filed an answer and three count counterclaim, alleging that the FDIC's refusal to grant LeBlanc an easement across Falmouth Woods Road violated state law. Count I of the counterclaim alleged that the FDIC's actions breached the implied covenant of good faith and fair dealing implicit in all contracts made under Massachusetts law. See Mass. Gen. L. ch. 106 § 1-203 (1990). Count II alleged a breach of contract under Mass. Gen. L. ch. 106 § 9-106, which governs secured transactions. Count III raised claims in tort for intentional infliction of emotional distress.

On February 17, 1993, before a magistrate judge, the FDIC moved for judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c), and argued that the federal estoppel doctrine established by the Supreme Court's decision in D'Oench, Duhme & Co. v. FDIC, 315 U.S. at 447, 62 S.Ct. at 676, and 12 U.S.C. § 1823(e) barred LeBlanc from asserting his defenses and three counterclaims. LeBlanc contended that neither section 1823(e) nor the common law D'Oench doctrine it codifies preempted his counterclaims. He maintained that, under Massachusetts common law and the Uniform Commercial Code ("UCC"), the duties allegedly breached by the FDIC arose out of the performance and administration of the note and not out of an unauthorized side agreement.

In a May 13, 1993, order, the magistrate judge allowed, in part, and denied, in part, the FDIC's Rule 12(c) motion. The court found that the principal allegations raised by LeBlanc's counterclaims rested on an "implied" and, under the D'Oench doctrine, unenforceable "agreement that the FDIC affirmatively assist LeBlanc ... in [his] attempt to acquire a right of way over the road." It, therefore, dismissed those allegations in counts I and III of appellant's counterclaim which relied on that agreement, holding that all other allegations, taken as...

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