Oklahoma Radio Associates v. F.D.I.C., No. 89-6434
| Citation | 987 F.2d 685 |
| Decision Date | 12 March 1993 |
| Docket Number | No. 89-6434 |
| Parties | OKLAHOMA RADIO ASSOCIATES, an Oklahoma general partnership of J. Patrick Collins and Greg L. Armstrong; J. Patrick Collins, an individual; and Greg L. Armstrong, an individual, Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Citizens National Bank and Trust Company, Defendant-Appellee, v. MAGNOLIA BROADCASTING COMPANY, INC., Third-Party Defendant-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
John C. McMurry (Gregg R. Maynard with him on the brief), Oklahoma City, OK, for plaintiffs-appellants and third party defendant-appellant.
E. Whitney Drake, Sp. Counsel, F.D.I.C., Washington, DC (Mark I. Rosen, Deputy Gen. Counsel, Ann S. DuRoss, Asst. Gen. Counsel, Joan E. Smiley, Sr. Counsel, F.D.I.C., Washington, DC, and R. Pope Van Cleef, Jr. of Bush & Underwood, Oklahoma City, OK, with her on the brief), for defendant-appellee.
Before TACHA, HOLLOWAY and BARRETT, Circuit Judges.
Oklahoma Radio Associates (ORA), Magnolia Broadcasting Co., Inc. (Magnolia), J. Patrick Collins and Gregg L. Armstrong, appeal the grant of summary judgment to the appellee Federal Deposit Insurance Corporation (FDIC) by the district court on a counterclaim against the plaintiffs on two promissory notes and accompanying guarantees. The district court held that plaintiffs-appellants were estopped from asserting agreements between themselves and Citizens National Bank and Trust Company of Oklahoma City (Citizens) which affect the maturity dates of the two promissory notes. We affirm the district court's grant of summary judgment on the Magnolia note and accompanying guarantees. However, we reverse the judgment with respect to the ORA note and remand for further proceedings.
ORA and its general partners, Collins and Armstrong, brought this action against the FDIC as receiver for Citizens, a failed national bank. ORA alleged that the FDIC had breached an agreement between Citizens and ORA to renew a $175,000 loan made by Citizens to ORA for the purpose of purchasing and operating an Oklahoma radio station. The FDIC then filed a counterclaim against ORA and a third party complaint against Magnolia, Collins and Armstrong. The counterclaim alleged that ORA was in default on a note, mortgage and security agreement discovered in Citizens' loan files after the bank's insolvency. The third party complaint alleged that Magnolia had defaulted on a similar note and other security documents and that Collins and Armstrong were guarantors of the Magnolia obligation.
The district court granted summary judgment in favor of the FDIC on its counterclaim and third party complaint, and an appeal was taken, Tenth Circuit No. 89-6107. This court, however, dismissed that appeal and remanded to the district court, stating in part that this "appeal is remanded to the district court for entry of a modified judgment pursuant to [Rule] 60(b)." On November 22, 1989, the district court entered a modified journal entry of judgment in favor of FDIC wherein ORA's liability was determined to be $158,109.80 of principal plus $70,722.76 in prejudgment interest. Magnolia's liability was determined to be $50,000 of principal, and interest was found due in the amount of $23,440.69 To facilitate an appeal, the parties stipulated to the interest rate used in this modified judgment. A second notice of appeal was filed on December 21, 1989, commencing the instant appeal.
The facts of the underlying transactions are as follows. In May 1985 Armstrong and Collins approached John Osborne, a Vice President of Citizens Bank, seeking financing to purchase a radio station. After Citizens agreed to provide funding to Collins and Armstrong, they formed ORA and Magnolia. ORA was to own the real estate and transmission facilities for the radio station, and Magnolia was to hold the radio station license.
On July 16, 1985, ORA executed a promissory note payable to Citizens for the amount of $175,000 with interest set at 1.75% above Citizens' floating daily rate (ORA note). The ORA note had a maturity date of October 15, 1985, ninety days later. ORA received the proceeds of this loan and purchased the radio station facilities. In conjunction with the ORA note, an additional note (the Magnolia note) was given by Magnolia to Citizens which provided for revolving credit of $50,000 at 1.75% interest above Citizens' floating daily rate also, with all unpaid interest and principal due at the end of a year from the signing of the note. Magnolia promptly received $50,000 from Citizens as the proceeds of this note.
The plaintiffs claim that throughout their negotiations with Citizens, they informed the bank that a five year repayment period was a necessary precondition to the venture. They assert that they told Osborne that it would take a minimum of five years for the radio station to generate sufficient profits to repay the loan. The plaintiffs claim that Citizens agreed to this arrangement; however, the notes were to be renewed annually, in accordance with banking industry business practice, to enable the bank to "reprice" the interest rate in accord with prevailing rates.
A July 16, 1985, letter from Osborne to Armstrong was relied on by plaintiffs below in response to the FDIC counterclaim. This letter is said to show agreement for renewal of the $175,000 ORA note on a 60-month basis with a series of one year notes. See Part III, infra. The plaintiffs further rely on the loan application dated June 28, 1985, for the $175,000 loan to ORA as showing the bank's agreement for renewal of the ORA notes by the application's statement referring to maturity of the first note: "[a]t the 90 day maturity monthly payments of $4,000 (P & I) will begin which represents a 5 year or 60 month amortization." Doc. 70, Exh. 2 to Exh. A, Osborne Aff. Osborne's affidavit states that he caused the letter agreement and the loan application to be placed in the ORA file at Citizens Bank. The plaintiffs also insist that Osborne orally promised to roll any remaining amount due on the Magnolia note into the ORA note after the first year, in conjunction with the main agreement to renew.
On October 15, 1985, the ninety-day ORA note was renewed. The new note provided for payments in the sum of $4,000 per month. The note also stated that "[a]ll payments [are] to be applied first to accrued interest and then to principal, with outstanding principal balance plus unpaid accrued interest due on or before 8-15-86." The new ORA note had a block captioned heading saying "maturity date" under which the words "on demand no later than 8-15-86" appeared.
On August 14, 1986, the Comptroller of the Currency closed Citizens and the FDIC was appointed receiver. The Magnolia note and the ORA note, which had been renewed on October 15, 1985, matured the following day, August 15, 1986. After a review of the bank's records, FDIC elected to liquidate the bank. In mid-September 1986, Magnolia and ORA received letters from the FDIC demanding payment on the notes. Collins and Armstrong contacted an FDIC account officer and maintained that Citizens had promised to automatically renew the ORA note over the five year period and to roll Magnolia's note into ORA's. FDIC refused to renew or roll over either note and ORA and Magnolia ceased further payments. The plaintiffs assert that the FDIC's refusal to renew eventually forced the radio station out of business. This litigation followed.
In the district court, the plaintiffs defended against FDIC's counterclaim on the notes by introducing the letter dated July 16, 1985, from Osborne to Armstrong on Citizens' letterhead. In relevant part, the letter provides:
Pursuant to our discussion this morning, I am writing to letter [sic] to confirm certain agreements. The initial note in the amount of $175,000.00 to Oklahoma Radio Associates is a ninety (90) day note with interest only due at maturity. At that time the note will be renewed on a 60 month basis with a series of one year notes, with monthly payments of $4,000.00 to be applied first to interest, then to principal.
Doc. 70, Exh. 1 to Osborne Aff. (Osborne letter). The plaintiffs also relied on the loan application dated June 28, 1985, for the ORA note, which stated:
This advance will be serviced by interest only first 90 days. At the 90 day maturity monthly payments of $4,000 (P & I) will begin which represents a five year or sixty month amortization.
The FDIC liquidation assistant, Ms. Northcutt, indicated that the ORA loan application was found in Citizens' files. The FDIC disputed whether the letter of July 16, 1985, was also in the bank's files at the time of insolvency. Compare Doc. 70, Osborne Aff. at 3 () with id., Northcutt Depo. at 9, 14 ().
FDIC moved for summary judgment on its counterclaim for recovery on the notes. FDIC asserted that ORA and Magnolia were estopped from raising the "side" agreements to renew the ORA note and roll over the Magnolia note as defenses to the counterclaim. The plaintiffs responded and filed a cross-motion for partial summary judgment on their breach of contract claim. The district judge granted summary judgment in favor of FDIC and dismissed the plaintiffs' cross-motion for partial summary judgment as moot, stating in part:
It is critically important that the bank's written records can be presumed to be what they say, and not overstate the bank's assets. Side agreements that would alter the terms of a note must be suspect.... In the case at bar there is a note that has an express, and unambiguous maturity date of 'On Demand No Later...
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