Fleet Bank of Maine v. Prawer, Civ. No. 91-0074-P-C.

• Decision Date: 03 April 1992
• Docket Number: Civ. No. 91-0074-P-C.
• Citation: 789 F. Supp. 451
• Parties: FLEET BANK OF MAINE, Plaintiff, v. Harvey E. PRAWER and Gilbert Prawer, Defendants and Counterclaim Plaintiffs, and Federal Deposit Insurance Corporation, Counterclaim Defendant.
• Court: U.S. District Court — District of Maine

789 F. Supp. 451

FLEET BANK OF MAINE, Plaintiff, v. Harvey E. PRAWER and Gilbert Prawer, Defendants and Counterclaim Plaintiffs and Federal Deposit Insurance Corporation, Counterclaim Defendant.

Civ. No. 91-0074-P-C.

United States District Court, D. Maine.

April 3, 1992.

Andrew Horton, Verrill & Dana, William Shumaker, Alexandra Treadway, Portland, Me., for Fleet Bank of Maine.

Joseph Hahn, Anthony Perkins, Gregory Tselikis, Bernstein, Shur, Sawyer, & Nelson, Portland, Me., for defendants Harvey and Gilbert Prawer.

William Shumaker, Andrew Horton, Verrill & Dana, Portland, Me., for FDIC.

ORDER GRANTING SUMMARY JUDGMENT OF PLAINTIFF FLEET BANK OF MAINE AND COUNTERCLAIM DEFENDANT FEDERAL DEPOSIT INSURANCE CORPORATION

GENE CARTER, Chief Judge.

This case involves the claims of Plaintiff Fleet Bank of Maine ("Fleet Bank" or "Plaintiff") for collection of amounts due under two promissory notes that are in default.¹ Defendant Harvey Prawer executed the first promissory note ("First Note") in the amount of $1,000,000 to Maine Savings Bank ("MSB") in his capacity as President of Limehouse Corporation ("Limehouse"). Both Harvey Prawer and co-Defendant Gilbert Prawer ("Defendants Prawer") signed a guaranty of the First Note as individuals. Defendants as comakers executed the second promissory note ("Second Note") in the amount of $200,000 to MSB.² Defendants defaulted on their obligations to MSB under these Notes.

Defendants Prawer raised several affirmative defenses to Plaintiff's claims and also counterclaimed against Plaintiff in three separate counts,³ based on two loan commitment letters ("Commitment Letters" or "Letters") issued to Defendants by MSB.

The Court now has before it Plaintiff Fleet Bank's and Counterclaim Defendant FDIC's Motions for Summary Judgment, filed on September 26, 1991 and February 26, 1992, respectively. The Court acts on these motions on the basis of the written submissions of the parties.⁴

I. Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment must be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The Court of Appeals for the First Circuit has articulated the legal standard to be applied in deciding motions for summary judgment:

The movant must adumbrate `an absence of evidence to support the nonmoving party's case.' Celotex Corp. v. Catrett, 477 U.S. 317, 325 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). When that is accomplished, the burden shifts to the opponent to establish the existence of a fact issue which is both `material,' in that it might affect the outcome of the litigation, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976), and `genuine,' in that a reasonable jury could, on the basis of the proffered proof, return a verdict for the opponent. Anderson, 477 U.S. at 248 106 S.Ct. at 2510; Oliver v. Digital Equipment Corp., 846 F.2d 103, 105 (1st Cir.1988). It is settled that the nonmovant may not rest upon mere allegations, but must adduce specific, provable facts demonstrating that there is a triable issue. `The evidence illustrating the factual controversy cannot be conjectural or problematic; it must have substance in the sense that it limns differing versions of the truth which a factfinder must resolve at an ensuing trial.' Mack v. Great Atlantic and Pacific Tea Co., 871 F.2d 179, 181 (1st Cir.1989). As the Supreme Court has said:

There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be entered.

Anderson, 477 U.S. at 249-59, 106 S.Ct. at 2510-11.

Brennan v. Hendrigan, 888 F.2d 189, 191-92 (1st Cir.1989).

The Court now looks to the supporting papers on the motions and the citations to materials of evidentiary quality in support of the issues which the Court must consider as a basis for its action upon the motions.

II. Facts

The Court finds the following facts to be undisputed on the record made on the motions.

During 1987, Defendants Prawer, through their representatives on behalf of Limehouse, of which Harvey Prawer was President, began negotiations with MSB for the financing of "Coulthard Farms," a planned community in Scarborough, Maine. During the time of the negotiations with MSB, the estimated costs of the project totalled $2,500,000, consisting of $1,000,000 for the purchase of the property and $1,500,000 for the construction of the infrastructure consisting of roads, sewers, water supply, and other necessary structures.

On October 1, 1987, MSB issued a First Mortgage commitment letter ("First Commitment Letter") on the planned project in the amount of $1,000,000 for a term of 36 months, and on demand thereafter, for the purpose of purchasing the Coulthard Farms property. The First Commitment Letter noted that "this loan shall be repaid from the sale of the mortgaged property or its refinancing into a residential subdivision development loan." Affidavit of Gilbert Prawer ("Gilbert Prawer Affidavit"), Exhibit A, ¶ 7.

On October 15, 1987, Harvey Prawer, as President of Limehouse, executed the First Note in the amount of $1,000,000, on behalf of Limehouse in favor of MSB. Both Harvey and Gilbert Prawer, each acting in his individual capacity, executed an unconditional guaranty of the First Note. On the same date, MSB and Limehouse entered into a Mortgage and Security Agreement whereby the property to be purchased by Limehouse for the Coulthard Farms project was mortgaged to the Bank. As part of the First Mortgage, MSB agreed that upon request, but at its option, it would make further advances to Limehouse up to a maximum of $2,500,000.

On September 7, 1988, MSB issued a Letter of Intent to the Maine Department of Environmental Protection, stating that it intended to finance the development of the "Coulthard Farms" project.

On December 21, 1988, MSB issued a second "First Mortgage Commitment" letter ("Second Commitment Letter") regarding Coulthard Farms, agreeing to provide an additional $200,000 for a term of "12 months with interest only to be repaid from the refinancing of the debt into a residential subdivision development loan." Gilbert Prawer Affidavit, Exhibit B, ¶ 3.

On April 12, 1989, Harvey Prawer, individually and as President of Limehouse, executed the Second Note in the initial amount of $200,000 in favor of MSB. Defendants Harvey and Gilbert Prawer, each acting in his individual capacity, executed the Second Note as comakers. $100,000 was drawn on the Second Note.

The Court has carefully reviewed the facial content of the First and Second Notes. The determination of whether there is any ambiguity in their terms on the issue of whether they are fully integrated documents is a question of law under Maine law. See Portland Valve, Inc. v. Rockwood Systems Corp., 460 A.2d 1383, 1387 (Me.1983). The Court is satisfied that as a matter of law there is no ambiguity in either the First or Second Notes on this point and finds as a matter of law that each is a fully integrated document.

Limehouse has defaulted on its obligations to MSB and Fleet Bank by failing to pay sums when due under the First and Second Notes. See Affidavit of Fleet Bank of Maine, ¶¶ 6-7, 12-13. As a result, on August 30, 1990, MSB filed an action against Defendants Prawer on their Guarantees, as executed on behalf of Limehouse, pertaining to these Notes. On September 26, 1990, Defendants Prawer filed their Answer, Affirmative Defenses to MSB's Complaint, and Counterclaim. On September 26, 1991, Plaintiff Fleet Bank filed its Motion for Summary Judgment. On February 26, 1992, Counterclaim Defendant FDIC filed its Motion for Summary Judgment. For the reasons that follow, the Court will grant both Plaintiff's and Counterclaim Defendant's Motions for Summary Judgment.

III. Discussion

A.

The D'Oench, Duhme doctrine, a federal common law estoppel doctrine, prohibits borrowers or guarantors from using secret or unrecorded side agreements to defend against efforts by the FDIC or its assignees to collect on promissory notes that it has acquired from a failed bank. See D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 460, 62 S.Ct. 676, 680, 86 L.Ed. 956 (1942). This Court has invoked the doctrine in granting summary judgment in favor of the FDIC or its assignees to prohibit makers or guarantors of facially unqualified notes from using side agreements to defend against efforts by the FDIC or its assignees to collect on such notes. See, e.g., Fleet Bank of Maine v. Steeves, 785 F.Supp. 209, 215-16 (D.Me.1992) (Carter, C.J.); Fleet Bank of Maine v. Wilson, 780 F.Supp. 841, 846 (D.Me.1991) (Carter, C.J.); New Maine National Bank v. Benner, 774 F.Supp. 36, 39 (D.Me.1991) (Carter, C.J.); Bateman v. FDIC, 766 F.Supp. 1194, 1199 (D.Me.1991) (Carter, C.J.); New Maine National Bank v. Seydler, 765 F.Supp. 770, 773-74 (D.Me.1991) (Carter, C.J.).

This Court has held that the D'Oench, Duhme doctrine applies to third-party assignees of the FDIC, including Fleet Bank. See Steeves, at 214; Wilson, 780 F.Supp. at 846. See also Federal Savings and Loan Insurance Corp. v. Griffin, 935 F.2d 691, 698 (5th Cir.1991); FDIC v. Newhart, 892 F.2d 47, 50 (8th Cir.1989); Adams v. Walker, 767 F.Supp. 1099, 1106 (D.Kan.1991); Adams v. Madison Realty & Development, Inc., 746 F.Supp. 419, 430 (D.N.J. 1990). Similarly, the Court has applied the common law doctrine's codification in 12 U.S.C. section 1823(e) to third-party assignees of the FDIC. See Steeves, at 214-216; Wilson, 780 F.Supp. at 845. See also Madison Realty...