Gustin v. FDIC, 93-0054-CV-W-1.

• Decision Date: 20 October 1993
• Docket Number: No. 93-0054-CV-W-1.,93-0054-CV-W-1.
• Parties: Abe J. GUSTIN, Jr., Plaintiff/Counterclaim Defendant, v. The FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for The Merchants Bank, Defendant/Counterclaim Plaintiff and Boatmen's First National Bank of Kansas City, Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — Western District of Missouri

835 F. Supp. 503

Abe J. GUSTIN, Jr., Plaintiff/Counterclaim Defendant, v. The FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for The Merchants Bank, Defendant/Counterclaim Plaintiff and Boatmen's First National Bank of Kansas City, Defendant/Counterclaim Plaintiff.

No. 93-0054-CV-W-1.

United States District Court, W.D. Missouri, W.D.

October 20, 1993.

James Borthwick, William Sanders, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, MO, for plaintiff.

James F. Duncan, David L. Skidgel, Leonard Wagner, Daniel Fowler, Watson, Ess, Marshall & Enggas, Kansas City, MO, for Boatmen's.

Mark McGrory, Morrison and Hecker, Kansas City, MO, for F.D.I.C.

ORDER

WHIPPLE, District Judge.

Before the Court is Boatmen's Bank's Motion for Summary Judgment on Abe Gustin's Second Amended Complaint and Count I of Boatmen's Counterclaim.¹ This lawsuit arises out of a series of promissory notes issued by Gustin to Merchants Bank which were subsequently transferred to Boatmen's. Gustin brought suit praying this Court to find the bulk of these notes void as a result of misconduct by Merchants. Boatmen's contends that Gustin's claims are barred by a settlement signed by Gustin and by the D'Oench, Duhme doctrine, codified at 12 U.S.C. § 1823(e). After due consideration of the record, the Court finds both of Boatmen's arguments persuasive and thus, grants said motion.

I. Standard for Summary Judgment

A movant is entitled to summary judgment pursuant to Federal Rule of Civil Procedure 56(c), "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 judgment as a matter of law." The moving party bears the burden of proof. Aetna Life Insurance Co. v. Great National Corp., 818 F.2d 19, 20 (8th Cir.1987).

After the moving party discharges this burden, the non-moving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). Instead, the nonmoving party bears the burden of setting forth specific facts showing that there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

When considering a motion for summary judgment, the court must scrutinize the evidence in the light most favorable to the nonmoving party, according the non-moving party the benefit of every factual inference. Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.1983). In addition, the court is required to resolve all doubts as to the facts or existence of any material fact against the moving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207, 210 (8th Cir. 1976). With these principles in mind, the Court turns to an examination of the facts.²

II. Facts

Based on Gustin's employment history, it is clear that he is a veteran businessman with a great deal of experience in financial matters. From 1977 to 1980, Gustin was president of ABA Distributorship, which sold beer wholesale in North Kansas City. From 1980 until approximately 1985, Gustin was president, and later chairman of the board of Juneau Holding Company, which owned eighteen Taco Bell restaurants. Gustin has been associated with Applebee's International, Inc. since 1983 and currently is its president, chief executive officer, and chairman of the board. At each of these companies, Gustin's responsibilities included oversight of financial matters and obtaining loans.

In September of 1991, Merchant's held several notes signed by Gustin on the face of which the total principal exceeded $9.3 million. Some of these notes were issued in connection with Gustin's purchase of CameraAmerica Franchising stock in 1985 and Applebee's stock in 1988. Other notes were signed, co-signed or guaranteed by Gustin as a result of strong arm tactics by Merchants which included threats to call past loans due and to refuse to make future loans.³ Gustin alleges that these tactics constituted antitying violations pursuant to 12 U.S.C. § 1972.⁴

Gustin made some payments on these notes until September of 1989,⁵ after which, none were forthcoming. In September of 1991, Gustin and his attorney met with John Houston, the president of Merchants, and Pete Roszel, an officer of Merchants, in Houston's office. In that meeting, Gustin told Houston that he was not responsible for and did not intend to pay much of the debt Merchants claimed Gustin owed. Houston responded that because Gustin had signed the notes, Gustin was responsible for their repayment. At this meeting, Merchants threatened to call the notes signed by Gustin unless Gustin would sign a settlement which consolidated the prior notes. Gustin initially refused to do such and left the meeting. That night, Gustin told Eugene Pereira, an advisor to Merchants and its former president, that he intended to file a lawsuit against Merchants the next day.⁶ Pereira asked Gustin to wait.

Over the next three months, Merchants continued to employ economic coercion as a tactic to force Gustin to sign the settlement. During this time, Gustin (represented by an attorney) and Houston negotiated various aspects of the settlement, with both parties drafting a number of versions of such. As a result of these negotiations, a Settlement Agreement, Restated Promissory Note, and Restated Stock Pledge Agreement were executed by Merchants and Gustin on December 23, 1991. Said documents reduced the amount of Gustin's indebtedness from $9,459,289.39 to $9.1 million, and set a rate of interest of eight percent (8%) per annum on the unpaid principal. This amount was to be paid largely from the sale of pledged Applebee's stock. In addition, the settlement extended the time provided for repayment of the indebtedness and provided for a mutual release which stated in part:

(d) Waiver. Gustin hereby waives, discharges and releases forever any and all existing claims, defenses and rights of setoff that he may have against the Bank or which might affect the enforceability by the Bank of its rights and remedies under any of the Loan Documents.

According to the Settlement Agreement, Gustin was to make quarterly principal payments by May 30, 1992 and by late September of 1992, or else surrender shares of the pledged stock. Gustin did not make either of these payments, nor did he notify Merchants of a surrender of shares. In addition, an annual payment of principal was due under the Settlement Agreement in December of 1992, but again was not forthcoming. In fact, Gustin never made a single payment called for under the Settlement Agreement and stated at his deposition that he never had any intention of making such payments unless ordered to do so by the courts.

On November 20, 1992, Merchants was declared insolvent and the Federal Deposit Insurance Corporation ("FDIC") was appointed its liquidating agent by the Circuit Court of Jackson County pursuant to Mo. Rev.Stat. § 361.365. FDIC and Bridge Bank, a national banking association chartered as a bridge bank in accordance with 12 U.S.C. § 1821(n), entered into an agreement whereby Bridge Bank acquired certain assets, including the Settlement Agreement, Restated Promissory Note, and Restated Stock Pledge Agreement. On March 1, 1993, the Court entered an order prohibiting Defendants from selling, transferring or disposing of any of said stock. Boatmen's purchased the note and accompanying documents for $5.7 million on April 23, 1993. This amount represented the note's "book value" as carried on Merchants' books and was determined in accordance with the market value of the pledged stock at that time.

On July 14, 1993, Gustin filed his Second Amended Complaint against FDIC and Boatmen's seeking monetary damages, declaratory relief, an accounting and an injunction prohibiting Boatmen's from selling Gustin's pledged stock. It alleges the following: (1) Merchants violated the anti-tying statute by exploiting its economic power over Gustin requiring him to become further indebted to Merchants; (2) Merchants procured Gustin's agreement to the aforementioned transactions by duress and coercion, making the Settlement Agreement, Restated Promissory Note, and other agreements and notes completely void; and (3) Merchants breached its common law duty to Gustin of good faith and fair dealing in the performance of its contracts with Gustin.

On July 29, 1993, Boatmen's responded by filing a Counterclaim against Gustin seeking $9.1 million together with interest⁷ and attorney's fees.⁸ As of August 16, 1993, Boatmen's claim exceeded $10.5 million, including principal of $9.1 million, accrued interest in the amount of $1,347,305.56, and attorneys' fees in excess of $100,000. Boatmen's holds 1,616,666 shares of Gustin's stock in Applebee's as collateral for the contested indebtedness. As of August 9, 1993, the value of said stock was approximately $34 million.

III. Discussion

A. Pre-Settlement Misconduct Waived by Settlement

Settlement agreements are favored by the courts. Caleshu v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 737 F.Supp. 1070, 1086 (E.D.Mo.1990), aff'd without opinion, 985 F.2d 564 (8th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1963, 118 L.Ed.2d 564 (1992). Voluntary settlement of a dispute accompanied by a release avoids the expense of litigation, promotes certainty for the parties, and relieves a strained judicial system; therefore, settlement agreements should be encouraged. Anselmo v. Manufacturer's Life Ins. Co., 595 F.Supp. 541, 551 (W.D.Mo.1984), aff'd, 771 F.2d 417 (8th Cir.1985).

Settlement agreements are contracts and as such, they are subject to general rules of contract construction. N.L.R.B. v. Superior Forwarding, Inc., 762 F.2d 695, 697 (8th Cir.1985). Under Missouri law, whether a contract was in...