Integon Life Ins. Corp. v. Browning
| Decision Date | 04 May 1993 |
| Docket Number | 92-8071,Nos. 91-8753,s. 91-8753 |
| Citation | 989 F.2d 1143 |
| Parties | INTEGON LIFE INSURANCE CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. Philip A. BROWNING, Jr., Pabgnes Hotels, Ltd., Browning Associates, Ltd., and J.A. Jones, Jr., Defendants-Appellees, Cross-Appellants. CHASTAIN PROPERTIES, INC., Philip A. Browning, Jr., Striton Properties, Inc., Browning Associates, Ltd., Scufflegrit, Ltd., Philip A. Browning and Associates, Inc., Plaintiffs-Counterclaim Defendants-Appellants-Cross-Appellees, v. The RESOLUTION TRUST CORPORATION, as Receiver of San Jacinto Savings Association and as Receiver of San Jacinto Savings Association, F.A., San Jac Mortgage Company, Defendants-Counterclaim Plaintiffs-Appellees, The Insurance Commissioner of the State of California, as conservator of Pacific Standard Life Insurance Company, Defendant-Counterclaim Plaintiff-Third-Party Plaintiff-Cross- Appellant Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
James Lee Paul, Russell Richard Grosse, Gambrell Clarke Anderson & Stolz, Atlanta, GA, for Browning, et al.
Thomas M. Byrne, Dulaney Lee O'Roark, III, Sutherland Asbill & Brennan, Atlanta, GA, for Integon Life Ins. Corp., et al.
J. Scott Jacobson, Robert F. Leverett, Holt Ney Zatcoff & Wasserman, Atlanta, GA, Jeffrey Ehrlich, Resolution Trust Corp., Washington, DC, for Resolution Trust Corp., et al.
Steven J. Green, Dept. of Justice, State of Cal., Sacramento, CA, Richard M. Kirby, David M. Monde, Jones Day Reavis & Pogue, Atlanta, GA, for Pacific Standard, et al.
Appeals from the United States District Court for the Northern District of Georgia.
Before FAY and BIRCH, Circuit Judges, and KAUFMAN *, Senior District Judge.
This case is a consolidated appeal concerning a series of complex real estate transactions and the application of the anti-tying provisions of the Home Owners' Loan Act ("HOLA"), 12 U.S.C. § 1464(q), to those transactions. For the reasons set forth below, the district court's decisions are AFFIRMED IN PART and REVERSED IN PART.
The two primary parties in this appeal are Philip A. Browning ("Browning") and the Southmark Corporation ("Southmark"), although most of the transactions that are the subject of this case occurred between Browning-controlled entities and Southmark subsidiaries. 1
Prior to 1986, Browning and other investors, through Chastain Properties, Ltd., owned property on Chastain Road in Cobb County, Georgia. 2 In early 1986, Browning decided to acquire his partners' interests in this investment, but needed financing to accomplish his plan. Shortly thereafter, Browning discussed possible financing with Southmark employees Arthur G. Weiss and Larry Ettner. At that time, Southmark's primary business was real estate investment.
According to Browning, Weiss stated that Southmark was generally not interested in making small loans, but that Southmark would be willing to make a loan (the "Chastain Loan") in the amount necessary for Browning to buy out his partners and also purchase a 109 acre tract of land adjoining the property owned by Chastain Properties, Ltd. Browning then contracted with his partners to acquire their interests in Chastain Properties, Ltd. and also contracted for the purchase of the 109 adjoining acres (collectively the "Chastain Property").
In late April, 1986, before the Chastain Loan closed, Weiss and Browning visited a 395 acre tract of land located on Scufflegrit Road in Cobb County, Georgia (the "Scufflegrit Property"). The Scufflegrit Property was owned by San Jac Mortgage Company ("San Jac Mortgage"), a Federal savings and loan association and a subsidiary of San Jacinto Savings Association ("San Jacinto Savings"), a subsidiary of Southmark. Weiss informed Browning that San Jac Mortgage was interested in selling the property and that Southmark would lend him the money for the purchase of the property. Browning asserts that Weiss also stated that unless Browning purchased the Scufflegrit Property, Southmark would not make the Chastain Loan. 3 Browning orally agreed to purchase the Scufflegrit property for $23 million.
On May 20, 1986, the Chastain Loan closed. San Jac Mortgage funded the loan, which totaled $11.2 million. 4 Browning used the loan proceeds to buy out his old partners and to purchase the 109 acre tract of land. At the closing Browning was represented by a large Atlanta law firm experienced in complex financial and real estate transactions.
The documentation evidencing the loan included a commitment, a loan agreement, a promissory note, and two security deeds. Article 6.17 of both deeds to secure debt stated:
The Loan Instruments constitute the entire understanding and agreement between Grantor [Browning] and Grantee [San Jac Mortgage Company] with respect to the transactions arising in connection with the Indebtedness and supersede all prior written or oral understandings and agreements between Grantor and Grantee with respect thereto. Grantor hereby acknowledges that, except as incorporated in writing in the Loan Instruments, there are not, and were not, and no persons are or were authorized by Grantee to make, any representations, understandings, stipulations, agreements or promises, whether oral or written.
R6-45 Ex. 1-8 (Appeal No. 91-8753). The security deeds defined "Loan Instruments" as the "Deed to Secure Debt, the Note, the Loan Agreement and any other instrument given to evidence, govern or further secure the Indebtedness, including without limitation, any guaranty of the Indebtedness or any part thereof." Id., Ex. 1-4. None of the Loan Instruments referred to the Scufflegrit Property or indicated that a condition to the receipt of the Chastain Loan was Browning's agreement to purchase the Scufflegrit Property.
Following the Chastain Loan closing, Weiss informed Browning that Southmark was interested in selling another tract of land located near Loop 120 and Interstate 75 in Cobb County, Georgia (the "Loop 120 Property"). After discussions, Browning orally committed to purchase the property for $5.3 million.
The closings for the Scufflegrit Property and the Loop 120 Property purchases were scheduled for June 30, 1986. Browning, however, needed a down payment of twenty percent on both properties. To satisfy that need, Browning and Southmark structured three loans that were secured by property that Browning already owned. Thus, Browning encumbered property he already owned in order to raise money to purchase the Scufflegrit and Loop 120 Properties.
The first of these down payment loans was a $1.8 million loan secured by Browning's property located on Bells Ferry Road in Cobb County, Georgia (the "Bells Ferry Property"). The loan was funded by Integon, a subsidiary of Southmark, and closed on June 27, 1986 (the "Bells Ferry Loan"). 5 Browning executed a partial guaranty as part of the Bells Ferry Loan (the "Bells Ferry Guaranty"). Several months later, Integon assigned the loan and guaranty to Pacific Standard Life Insurance Company ("Pacific"), another Southmark subsidiary. 6
The second down payment loan was a $2 million loan secured by the Kingsland Holiday Inn located in Kingsland, Georgia (the "Kingsland Property"). The loan was made by Southmark and closed on June 30, 1986. 7 At the closing, Integon executed a letter of intent to refinance the $2 million loan and to refinance the existing indebtedness on the Kingsland Property.
The third down payment loan was a $2.5 million loan secured by property located on Old Peachtree Road in Gwinnett County, Georgia (the "Old Peachtree Property"). The loan was made by Southmark and closed on June 30, 1986. 8 Again at this closing, Integon executed another letter of intent to refinance this loan. Integon subsequently fulfilled its letter of intent and refinanced the loan.
The closings for the Scufflegrit Property and the Loop 120 Property took place on June 30, 1986. Browning used the proceeds from the loans on the Bells Ferry Property, the Kingsland Property and the Old Peachtree Property to fund the down payments for both purchases. During the closings, Browning threatened to walk out if the terms of the purchase agreements were not altered to his liking. The terms were altered and the closings proceeded. Browning purchased the Scufflegrit Property for $23 million from San Jac Mortgage. 9 Browning paid $4.6 million as a down payment. The balance of $18.4 million was funded through a loan from San Jac Mortgage. Browning purchased the Loop 120 Property for $5.3 million from Southmark. 10 Browning paid $1.1 million as a down payment and obtained financing for the balance through Southmark. As part of the Loop 120 Property purchase agreement, Southmark agreed to repurchase the property if it proved to be undevelopable. Browning, subsequently, exercised his option and sold the Loop 120 Property back to Southmark in March, 1987.
On September 23, 1986, Integon refinanced the $2 million Kingsland Property loan in fulfillment of its letter of intent. The new loan totaled $6.825 million and was secured by the Kingsland Property (the "Kingsland Loan"). The loan proceeds were paid to Browning and evidenced by a promissory note. 11 Browning used approximately $5.3 million of the refinancing proceeds to satisfy the existing construction loan on the property. The balance of the refinancing loan was used to satisfy the initial Kingsland Property loan made by Southmark on June 30, 1986. 12 Browning also executed a partial guaranty of the loan (the "Kingsland Guaranty"). The guaranty was limited to 25 percent of the principal, 100 percent of all accrued interest and any collection costs.
This appeal is a consolidation of two cases. The common issue concerns the alleged violation of the anti-tying provisions of HOLA arising from the tying of the Chastain Loan to the purchase of the Scufflegrit Property and the Loop 120 Property. Also at issue are the Bells...
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