Hillman v. Resolution Trust Corp.

• Citation: 66 F.3d 141
• Decision Date: 14 September 1995
• Docket Number: No. 94-2691,94-2691
• Parties: George C. HILLMAN and Lars I. Ivarson, Plaintiffs-Appellees, v. RESOLUTION TRUST CORPORATION, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 141

66 F.3d 141

George C. HILLMAN and Lars I. Ivarson, Plaintiffs-Appellees, v. RESOLUTION TRUST CORPORATION, Defendant-Appellant.

No. 94-2691.

United States Court of Appeals Seventh Circuit.

Argued April 17, 1995.

Decided Sept. 14, 1995.

George C. Hillman, pro se.

Lars I. Ivarson, pro se.

E. Glenn Rippie, F. Thomas Hecht, (argued), Karen A. Dort, Hopkins & Sutter, Chicago, IL, for defendant-appellant.

Before CUMMINGS, COFFEY and EASTERBROOK, Circuit Judges.

CUMMINGS, Circuit Judge.

The Resolution Trust Corporation ("RTC"), as receiver for Independence Federal Savings ("Independence"), sought to recover on a group of notes (the "Notes") written by plaintiffs and held by the bank. Plaintiffs defended against collection on the Notes while also bringing a fraud claim against the RTC as receiver for Independence. Neither side emerged victorious: the district judge granted the RTC summary judgment on its collection attempt but held that plaintiffs could proceed with their fraud claim based on statements contained in an offering memorandum. The RTC contends that this latter claim involving the offering memorandum is precluded by the D'Oench doctrine ¹ and 12 U.S.C. Sec. 1823(e), common law and statutory bars to the raising of affirmative defenses or claims against the RTC's attempt to collect as receiver on obligations owed to insolvent institutions. ² We have this

case on interlocutory appeal, ostensibly to resolve the applicability of D'Oench and Sec. 1823(e).

BACKGROUND

The RTC presented its motion against plaintiffs' claim as one to dismiss; the district judge converted it into a motion for summary judgment. This Court reviews de novo the denial of summary judgment when presented on interlocutory appeal. East Food & Liquor, Inc. v. United States, 50 F.3d 1405, 1410 (7th Cir.1995). We review the facts alleged in the complaint and the legitimate inferences to be drawn therefrom in the light most favorable to plaintiffs. Id. They are as follows: Beginning in June 1986 and continuing through October of that year, plaintiffs wrote the Notes to acquire limited partnership interests in an entity called Northbrook Columbus Limited Partnership ("NCLP"). In August 1986, NCLP in turn purchased a large stake in an Illinois hotel property (the "Hotel"). The Hotel had been put up for syndicated sale by First Real Estate Development Corporation ("FRED"), a wholly owned subsidiary of Independence. In addition to holding two junior mortgages on the Hotel, Independence allegedly secured an appraisal of the property and--according to plaintiffs, although Independence disputes the claimed authorship--prepared an offering memorandum detailing the Hotel's prospects. This offering memorandum, plaintiffs claim, made fraudulent misrepresentations as to the Hotel's worth by incorporating false assurances that the appraisal was an accurate valuation of the property, that the Hotel would retain its Holiday Inn franchise, that Independence would provide necessary financing for repairs to maintain that franchise, and that Allstate Insurance Company would continue to lease space for corporate meetings at the Hotel. In fact the repairs were not forthcoming, Allstate had already made plans to move its meetings to another location, and the Holiday Inn people also decamped soon after the ink dried on plaintiffs' signatures.

Several months after NCLP's acquisition of a stake in the Hotel, in December 1986 Independence persuaded the partnership to refinance the property by consolidating Independence's third and fourth mortgages. NCLP assigned the Notes, worth approximately $1 million, to Independence in exchange for a smaller lien. Things went downhill from there: the Hotel soon went bankrupt, followed by NCLP and not long after by Independence. The RTC was appointed conservator for Independence in 1989 and became its receiver in 1990.

Plaintiffs brought claims against the RTC, as receiver for Independence, of fraudulent misrepresentation, negligent supervision, and unjust enrichment resulting from the bank's handling of the Hotel sale and subsequent refinancing. The complaint requested $4.5 million in damages and further sought injunctive relief against the RTC's enforcement of the Notes. The RTC counterclaimed for a judgment on the Notes and moved to dismiss plaintiffs' fraud claim, asserting in both cases that the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) foreclosed plaintiffs' efforts. As stated above, the district judge held for the RTC on its counterclaim in an unappealed judgment but allowed plaintiffs to proceed with their fraud case, although the judge limited the fraud claim to statements made or omitted from the offering memorandum. See Mem.Op. June 8, 1992, 1992 WL 137650 Mem.Op. Dec. 8, 1992, 1992 WL 370554.

The RTC now argues that the district judge misapprehended the D'Oench doctrine and Sec. 1823(e) in allowing the offering memorandum to serve as the potential predicate for a fraud claim. That may be; but before even concerning ourselves with the district judge's analysis of D'Oench and related cases we must decide whether the offering memorandum can in fact serve as the basis for an allegation of fraud against Independence. If not, then plaintiffs have no case regardless of the strictures of D'Oench, and we need not consider the parameters of that doctrine. Although this Court did not gain jurisdiction over the interlocutory appeal by virtue of the factual dispute over the sufficiency of the offering memorandum--the controlling question presented to us was the interpretation of D'Oench and Sec. 1823(e)--we are not constrained in our appellate review to the controlling question alone, but may consider other pertinent issues reflected in the district court's order. Nuclear Engineering Co. v. Scott, 660 F.2d 241, 246 (7th Cir.1981), certiorari denied, 455 U.S. 993, 102 S.Ct. 1622, 71 L.Ed.2d 855; see also Ducre v. Exec. Officers of Halter Marine, Inc., 752 F.2d 976, 983 n. 16 (5th Cir.1985). Certainly the substance, or lack thereof, in plaintiffs' underlying fraud claim is an issue appropriate for our evaluation.

The district judge refused to consider RTC's argument that plaintiffs introduced insufficient evidence regarding Independence's purported fraud to survive a motion for summary judgment. This refusal, based on the judge's perception that the RTC had waited too long to raise the...