HMS Property Management Group, Inc. v. Miller

• Decision Date: 31 October 1995
• Docket Number: 94-3669,Nos. 94-3668,s. 94-3668
• Parties: NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. HMS PROPERTY MANAGEMENT GROUP, INC., and Equitable Partners, Inc., Plaintiffs-Appellants, v. Philip S. MILLER et al., Federal Deposit Insurance Corporation, as receiver for Cypress Savings Association Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 537

69 F.3d 537

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

HMS PROPERTY MANAGEMENT GROUP, INC., and Equitable Partners, Inc., Plaintiffs-Appellants, v. Philip S. MILLER et al.,

Federal Deposit Insurance Corporation, as receiver for

Cypress Savings Association Defendant-Appellee.

Nos. 94-3668, 94-3669.

United States Court of Appeals, Sixth Circuit.

Oct. 31, 1995.

Before: JONES and DAUGHTREY, Circuit Judges; and GIBSON, District Judge. ^*

PER CURIAM.

Plaintiffs-appellants HMS Property Management Group, Inc. ("HMS") and Equitable Partners, Inc. ("Equitable") appeal from an order of the district court granting the defendant-appellee Federal Deposit Insurance Corporation ("FDIC") motion to dismiss the appellants' third amended complaint. Appellants variously claim that the FDIC breached a sale agreement for real properties, a proposed modification to the sale agreement, a management agreement, and is otherwise liable to them on the basis of promissory estoppel. The issue this appeal presents is whether the district court properly determined that no relief could be granted under any set of facts that could be proved consistent with the allegations in the complaint. For the following reasons, the Court affirms the district court's dismissal of appellants' claims as to the breach of the sale agreement, the breach of the proposed modification to the sale agreement, and promissory estoppel. However, the Court remands appellants' claim as to the breach of the management agreement for further proceedings.

I.

Appellants are each closely held corporations that build, buy, sell, and manage hotels and condominiums. Their principal and president is W. David Temel. The Federal Deposit Insurance Corporation, as successor to the Federal Savings and Loan Corporation ("FSLIC"), is the receiver for the Cypress Savings Association ("Cypress"), the mortgagee of the three properties involved in this action, a motel, hotel, and condominium development (collectively the "properties"). Cypress foreclosed on the properties when the owners of the properties defaulted. Later, Cypress itself entered a receivership under FSLIC, to which the FDIC succeeded.

The owners of the properties, defendants Richfield Associates, Ltd. ("Richfield"), Claridge Manor Company, Ltd. ("Claridge"), and Universe Boulevard, Inc. ("Universe") (collectively the "Sellers"), entered into a Sale Agreement with Equitable as purchaser for the properties. The Sale Agreement provided that the FSLIC, as receiver for Cypress, would assign to Equitable all of its interest as receiver of Cypress in the three properties and execute certain releases in exchange for $8,300,000 of the total $10,500,000 sales price. The Sale Agreement required closing by September 30, 1989. On June 14, 1989, a "special representative" of the FSLIC accepted the Sale Agreement.

On August 9, 1989, Congress abolished the FSLIC and substituted the FDIC in its place. Accordingly, the FDIC became the receiver for Cypress. After the substitution but before the closing, asbestos was discovered at one of the properties. Allegedly, as a result of the asbestos and the agency changeover, Equitable did not exercise its right to close under the Sale Agreement, did not tender performance on or before September 30, 1989, and, consequently, the sale did not close by September 30, 1989.

In a letter written by Temel and dated October 5, 1989, a modification to the Sale Agreement was proposed, extending the closing date and providing for the sale of only two of the properties for $3,000,000, subject to the FDIC's written approval. The FDIC allegedly indicated that it would soon approve the proposed modification. However, the FDIC did not approve the proposed modification in any written document.

Equitable alleges that based on the proposed modification it obtained feasibility and environmental studies and incurred loan commitment fees. Further, HMS, which is not a party to the Sale Agreement, alleges that, based on the representations of the FDIC, it assumed liability for Equitable's loan commitment fees and entered a Management Agreement with the FDIC for one of the properties located in Jefferson City, Missouri. Appellants also allege that in a related Missouri state court action, a judge, based on the FDIC's representations, ordered HMS to take immediate possession and management of the property. However, neither the judge's order nor the Management Agreement explicitly referenced the Sale Agreement or any proposed modification of it. Equitable and HMS further claim that they expended over $1,000,000 and exposed themselves to personal liability to obtain a franchise license for the property.

II.

Prior to the present action, the FDIC and Equitable were parties to a declaratory action in Florida, which determined that the FDIC was entitled to certain escrow funds for the failure of the Sale Agreement to close by September 30, 1989, and that the FDIC was not bound by any proposed modification to the Sale Agreement. Equitable appealed and the appellate court affirmed.

HMS and Equitable originally filed this action in an Ohio state court on July 3, 1990. The FDIC removed to federal court on August 6, 1990. On August 23, 1993, after two previous motions, appellants moved for the third time to amend their complaint and dismissed three of the original defendants, leaving only the FDIC and the Sellers. On September 13, 1993, the district court granted plaintiffs' third motion to amend their complaint.

The third amended complaint contained five counts. Count I alleged that the FDIC breached the Sale Agreement by failing to document, execute, and close. Count II alleged that the FDIC breached a...