Resolution Trust Corp. v. Crow, Civ. A. No. 3-89-2817-H.

• Decision Date: 01 March 1991
• Docket Number: Civ. A. No. 3-89-2817-H.
• Parties: RESOLUTION TRUST CORPORATION, as Conservator of First Savings of Arkansas, F.A., by the FEDERAL DEPOSIT INSURANCE CORPORATION as Managing Agent for the Conservator, Plaintiff and Counter-Defendant, v. Trammell CROW, Harlan R. Crow, Charles M. Holbrook, Tom Teague, Pear Ridge II Associates, Chasewood Pear II Associates, Quinten's Crossing Joint Venture, North Richland Hills Associates, Chasewood Partners-Tarrant County, Jupiter I Associates, and Chasewood Jupiter Road I, Defendants, Counter-Plaintiffs, and Third-Party Plaintiffs, v. RESOLUTION TRUST CORPORATION, as Receiver of First Federal Savings of Arkansas, F.A., and the Federal Deposit Insurance Corporation as the Managing Agent for Resolution Trust Corporation, Third-Party Defendants.
• Court: U.S. District Court — Northern District of Texas

763 F. Supp. 887

RESOLUTION TRUST CORPORATION, as Conservator of First Savings of Arkansas, F.A., by the FEDERAL DEPOSIT INSURANCE CORPORATION as Managing Agent for the Conservator, Plaintiff and Counter-Defendant, v. Trammell CROW, Harlan R. Crow, Charles M. Holbrook, Tom Teague, Pear Ridge II Associates, Chasewood Pear II Associates, Quinten's Crossing Joint Venture, North Richland Hills Associates, Chasewood Partners-Tarrant County, Jupiter I Associates, and Chasewood Jupiter Road I, Defendants, Counter-Plaintiffs, and Third-Party Plaintiffs, v. RESOLUTION TRUST CORPORATION, as Receiver of First Federal Savings of Arkansas, F.A., and the Federal Deposit Insurance Corporation as the Managing Agent for Resolution Trust Corporation, Third-Party Defendants.

Civ. A. No. 3-89-2817-H.

United States District Court, N.D. Texas, Dallas Division.

February 5, 1991.

On Motion for New Trial March 1, 1991.

Thomas R. Graber, Bradley A. Friedman, John H. Spellman, Howard D. Sorensen, Hopkins & Sutter, Dallas, Tex., for plaintiff and counter-defendant.

John Nabors, Jeff Travis, Liddell, Sapp, Zivley, Hill & LaBoon, Dallas, Tex., for defendants, counter plaintiffs, and third-party plaintiffs.

MEMORANDUM OPINION AND ORDER

SANDERS, Chief Judge.

Before the Court are the Motion for Summary Judgment of Plaintiff Resolution Trust Corporation as Conservator of First Savings of Arkansas, F.A. ("RTC/Conservator"), filed December 20, 1990; the Response of Defendants Trammell Crow, Harlan R. Crow, Charles M. Holbrook, Tom Teague, Pear Ridge II Associates, Chasewood Pear Ridge II Associates, Quinten's Crossing Joint Venture, North Richland Hills Associates, Chasewood Partners-Tarrant County, Jupiter I Associates, and Chasewood Jupiter I (collectively "Defendants"), filed January 24, 1991; the RTC/Conservator's Reply, filed February 4, 1991; Defendants Tom Teague and Chasewood Partners-Tarrant County's Motion for Judgment on the Pleadings, or in the Alternative, for Summary Judgment, filed December 21, 1990; and the RTC/Conservator's Response, filed January 10, 1991.¹

I. Background.

This is a note case arising out of several real estate loans made in north central Texas in the early 1980s. Like many such cases, the litigation process has aged this dispute considerably, so that the parties by their present motions are disputing liability on notes that were defaulted upon over three years ago. The RTC/Conservator initiated this action to foreclose upon certain properties which serve as security for loans made to or guaranteed by Defendants and to obtain a deficiency judgment against them. Defendants brought counterclaims and cross-claims against the FDIC/Manager and the RTC/Receiver for their alleged failure (and the alleged failure of their predecessors) to refinance or modify these loans pursuant to certain commitment letters.

In 1983, First Federal made loans totalling approximately $30 million to Defendants Pear Ridge II Associates, North Richland Hills Associates, and Jupiter I Associates for the construction of three apartment complexes known as Andrew's Mark, Quinten's Crossing, and Colin's Landing. The loans were secured by a pledge of the apartment projects and the execution of certain guaranties.² First Federal funded the Andrew's Mark and Colin's Landing loans with cash received from the sale of bonds issued by the Texas Housing Agency, and funded the Quinten's Crossing loan with cash received from the sale of bonds issued by the Tarrant County Housing Finance Corporation.

By November 1987, Borrowers defaulted on the required monthly loan payments, thereafter paying only the net operating income from the projects to First Federal. Beginning in June, 1988, First Federal and Borrowers began negotiations to work out the defaults through refinancing the bonds at a lower rate of interest and modifying the note interest rates accordingly. Although the Quinten's Crossing bond documents prevented refinancing the bonds, the parties did agree to reduce the interest rate on the Quinten's Crossing loan.

On June 16, 1988, First Federal sent the Borrowers three letters setting forth proposals to modify the loans. On June 28, 1988, First Federal sent three somewhat different letters concerning the modifications of the loans. The Borrowers, now Defendants, argue that these were commitment letters and that they constitute a contract by First Federal (and its successors) to restructure the loans; according to Defendants, the refusal to restructure the loans in accordance with these letters constitutes breach of contract, tortious conduct, and, of course, a defense to liability under the Notes and Guaranties. The RTC/Conservator points out that both sets of letters contain clauses that conditioned the restructuring of the loans "upon satisfaction with the terms of the Refunding Bond issue and related documents." Because of these clauses, says the RTC/Conservator, when the bond rating agency required First Federal to post annually the full principal amount of the bonds in cash — a condition beyond First Federal's capacity — the proposed loan modifications came to naught and First Federal cannot be bound by any of the other terms of the letters.³ Both sides agree that the loans were not refinanced.

In February 1989, the Federal Home Loan Bank Board determined that First Federal was insolvent and appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") as Conservator. In August, 1989, First Federal was declared insolvent and the RTC was appointed its Receiver. The RTC/Receiver, pursuant to a purchase and assumption agreement, conveyed substantially all of the assets of First Federal — including the notes, guaranties, and deeds of trust involved in this case — to a new institution, First Savings of Arkansas, F.A. The RTC was appointed Conservator of First Savings, and pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FDIC served as Managing Agent for the RTC.

The RTC/Conservator brought this action to foreclose the deeds of trust which secured all the loans, to obtain payment of outstanding principal and interest, and to enforce the guaranties.⁴ The Court addressed Defendants' counterclaims and cross-claims in its Memorandum Opinion and Order filed January 14, 1991, in which the RTC Counterdefendants' Motion to Dismiss was granted and the RTC's Motion for Summary Judgment was granted in part. By its present Motion for Summary Judgment the RTC/Conservator seeks to recover on the Notes and Guaranties and an order of sale and foreclosure on the deeds of trust. Defendants Tom Teague and Chasewood Partners-Tarrant County move for judgment on the pleadings or, alternatively, summary judgment on the basis of a purported release from personal liability as to the Quinten's Crossing loan contained in a loan modification document.

II. Summary Judgment.

Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment or partial judgment as a matter of law. See Fed.R.Civ.P. 56. As the Fifth Circuit stated in Christophersen v. Allied-Signal Corp., 902 F.2d 362, 364 (5th Cir. 1990), "before a court may grant summary judgment, the moving party must demonstrate that it is entitled to judgment as a matter of law because there is no actual dispute as to an essential element of the plaintiff's case." A movant for summary judgment need not support the motion with evidence negating the opponent's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

"Summary judgment reinforces the purpose of the Rules, to achieve the just, speedy, and inexpensive determination of actions, and, when appropriate, affords a merciful end to litigation that would otherwise be lengthy and expensive." Fontenot v. Upjohn Co., 780 F.2d 1190, 1197 (5th Cir.1986) (reinterpreting Federal Rule of Civil Procedure 56 to enhance judicial economy). The Fifth Circuit has held that the moving party is entitled to summary judgment when the nonmoving party fails to make a sufficient showing of proof, see id. at 1195-98, although all evidence must be viewed in the light most favorable to the motion's opponent. See Gremillion v. Gulf Coast Catering Co., 904 F.2d 290, 292 (5th Cir.1990). Summary judgment may be entered against a party if after adequate time for discovery the party fails to establish the existence of an element essential to his or her case and as to which he or she will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. at 324-26, 106 S.Ct. at 2553-54. "Typically, suits on promissory notes provide fit grist for the summary judgment mill." Federal Deposit Insurance Corp. v. Cardinal Oil Well Servicing Co., 837 F.2d 1369, 1371 (5th Cir.1988).

III. The Motion for Judgment on the Pleadings.

Defendants Tom Teague and Chasewood Partners-Tarrant County move for judgment on the pleadings or, alternatively, for summary judgment that they are not personally liable for the Quinten's Crossing debt because of a purported release contained in a loan modification document. Pursuant to Federal Rule of Civil Procedure 12(c), the Court treats this motion as one for summary judgment.

The Court finds that Teague and Chasewood Partners-Tarrant County have failed to meet their summary judgment burden. Specifically, the Court finds that the movants have failed to show that the modification agreement upon which their motion relies ever took effect. Indeed, the summary judgment evidence, including the deposition statements of Teague and Scott Robinson, shows that although the loan modification document may have been signed by the parties, it was materially breached immediately and never took effect.

"In Texas, the general rule is that reciprocal promises in a contract, absent intentions to the contrary, are presumed to be mutually dependant and the breach of one will...