Victor Hotel Corp. v. FCA Mortg. Corp.
| Decision Date | 17 April 1991 |
| Docket Number | No. 90-5124,90-5124 |
| Parties | VICTOR HOTEL CORP., Cardozo Hotel Corp., Senator Hotel Corp., Carlyle Hotel Corp. and The Royale Group, Ltd., Plaintiffs-Counterclaim Defendants-Appellants, v. FCA MORTGAGE CORP., Defendant-Counterclaim Plaintiff-Appellee. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant, v. ART DECO HOTEL CORP., et al., Counterclaim Defendant. Ocean Properties of Delaware, Deco Management Service Corp. and Global Financial Corp., Counterclaim Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Richard & Richard, Dennis Alan Richard, Miami, Fla., for Ocean, Global and Deco.
William C. Crenshaw, Valdes-Fauli, Cobb, Petrey & Bischoff, P.A., Miami, Fla., for FCA Mortg.
Appeal from the United States District Court for the Southern District of Florida.
Before HATCHETT and EDMONDSON, Circuit Judges, and PECKHAM *, Senior District Judge.
In this case, we examine the scope of the doctrine enunciated in D'Oench, Duhme and Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and affirm the district court concluding that D'Oench and its progeny effectively bar the claims and defenses presented.
In June, 1984, FCA Mortgage Corporation (FCA) agreed to make a $13,500,000 mortgage loan to Victor Hotel Corporation, Cardozo Hotel Corporation, Senator Hotel Corporation, and Carlyle Hotel Corporation, all subsidiaries of Art Deco Hotel Corporation (Hotel Corporations) to refinance and renovate six hotels in Miami's Art Deco district. The parties memorialized the agreement in writing, and FCA issued a promissory note for $13,500,000, secured by a lien on mortgages of the hotels.
In January, 1985, Hotel Corporations advised FCA that the original amount of the loan was insufficient to complete the renovation of the hotels. Consequently, Hotel Corporations requested an additional $2,200,000. FCA issued a second promissory note for $2,200,000 and executed a supplemental loan agreement with Hotel Corporations which increased the principal amount of the loan to $15,700,000.
In September, 1985, FCA further agreed to increase the principal amount of the loan by $1,419,861, for a total of $17,119,861. FCA secured the loan by placing a second lien on the mortgages of the hotels. Hotel Corporations agreed to repay the loan principal and interest in monthly installments. FCA thereafter breached the September 1985 agreement and refused to fund the additional advance.
Following the breach, Hotel Corporations filed suit against FCA in federal district court. In an oral ruling, the district court found in Hotel Corporations' favor requiring FCA to fund the $1,419,861 commitment. The district court also appointed a receiver to oversee the continuation of the hotel renovations.
On September 1, 1986, prior to the district court's entry of a written final judgment, Hotel Corporations and FCA entered into a settlement agreement which increased the loan principal by $11,781,000. According to the agreement, the increase in the loan principal was to complete renovations on the original six hotels and to pay certain taxes, insurance, and other expenses related to the hotels' operations. The settlement agreement also modified the existing loans and created a valid and enforceable indebtedness to FCA without defense, claim, or setoff in the principal sum of $16,554,073.28. Additionally, FCA earmarked funds from the increased principal to pay certain expenses of Hotel Corporations' parent corporation, the Royale Group, Ltd.
In September, 1986, at about the time of the settlement agreement, FCA informed Hotel Corporations that the value of the hotel renovation was too low in relation to the amount of the loan. Accordingly, Hotel Corporations presented FCA with a proposal for restructuring the project. The proposal included the acquisition of several new properties for renovation and an increase in the loan principal. FCA considered the restructuring plan as is evident from the following internal memorandum to the senior loan committee of FCA's parent corporation, American Savings and Loan Association. The memorandum states:
The Committee should note, however, that if this request (to reallocate funds) is granted, the borrowers will be requesting additional funds in the near future. If the borrowers proceed with the plans they presented last week, future requests will propose increasing our loan This document was the only indication that FCA considered future loans to complete the project.
by an amount estimated to be $17,865,000.
FCA later advised Hotel Corporations that it did not have the authority to approve additional increases to the loan. FCA agreed, however, to reallocate the existing loan proceeds by permitting Hotel Corporations to use a portion of the proceeds to purchase additional properties.
Relying on the reallocation agreement and the possibility of a future loan, Hotel Corporations began buying new properties. In December, 1986, Hotel Corporations entered into a "First Amendment" to the restated loan agreement in which FCA reallocated $379,000 of the then existing loan proceeds to purchase the Flambeau Apartments. In late December, 1986, FCA entered into a "Second Amendment" to the restated loan agreement which provided for the reallocation of $409,912 of the existing loan proceeds for down payment and other expenses in acquiring Tides Hotel and Helen's Molnar Apartments.
In May, 1987, FCA and Hotel Corporations entered into a "Third Amendment" to the restated loan agreement in which FCA reallocated $545,505 of the existing loan proceeds to purchase Splendor Apartments and to pay certain expenses in connection with acquiring the Flambeau Apartments. As Hotel Corporations acquired each new property, FCA expanded the existing loan proceeds to include the property. Nonetheless, FCA and Hotel Corporations did not have an express written agreement endorsed by FCA's board of directors or loan committee stating that FCA would guarantee further loans to Hotel Corporations. Furthermore, each amendment to the September, 1986, settlement agreement contains the following language:
No commitment. Borrowers acknowledge and agree that lender has no commitment or other obligation of any nature with respect to the Additional Property, the renovation or demolition of any improvements thereon, or the construction of new improvements thereon, and except as set forth in the loan agreement, as modified thereby, lender has no commitment or other obligation of any nature relating to Borrowers, Guarantors, or any affiliate of either, for any purpose whatsoever.
Following the May, 1987, third amendment to the loan agreement, FCA informed Hotel Corporations that it did not intend to go forward with the expanded project and would not increase the amount of the loan. This announcement left Hotel Corporations with a shortage of funds with which to complete the original six hotels because most of the existing loan proceeds had been reallocated to purchase additional properties. Due to the lack of funds, Hotel Corporations, which before the denial of the loan increase had failed to complete the Senator and Victor Hotels, now had to delay completion on two of the original six hotels. Thus, in December, 1987, FCA advised Hotel Corporations that it considered the restated loan agreement to be in default.
In April, 1988, FCA filed a motion to accelerate Hotel Corporations' debt and foreclose on the mortgages securing the debt. In May, 1988, FCA filed a counterclaim and a motion for summary judgment seeking foreclosure of the mortgages on the seven hotels and three apartment buildings, intangible personal property pertaining to the hotel and apartment buildings, money judgment based upon a guaranty and various promissory notes executed by the Royale Group, Ltd., and the appointment of a receiver. In September, 1988, Hotel Corporations filed a complaint against FCA alleging breach of contract, restitution, and fraudulent inducement.
Prior to September 5, 1988, FCA was a wholly-owned subsidiary of American Savings and Loan Association. On September 5th, the Federal Home Loan Bank Board appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver for American Savings and Loan Association ("Old American"). As receiver, FSLIC absorbed Old American, succeeding to its Additionally, FSLIC-Receiver executed an assistance agreement ("first assistance agreement") which provided two basic forms of financial assistance to New American in connection with its acquisition of FCA and Old American's other assets: (1) initial capital in the amount of $248,000,000 and (2) reimbursements for New American's losses on "covered assets." Losses incurred in connection with FCA would in fact be a loss on covered assets triggering FSLIC-Corporate's responsibility under the first assistance agreement. The first assistance agreement terminated when New American's assets were sold in December, 1988. As part of the sale, American Savings Bank acquired some of New American's assets while New West Savings and Loan Association (New West) acquired FCA. FSLIC executed a "second assistance agreement" with New West obligating FSLIC-Corporate to subsidize all net losses incurred in connection with New West and FCA.
rights, titles, powers and privileges and those of its officers, directors, and members. 12 C.F.R. Sec. 457.7 (1988). FSLIC then transferred all of its right, title, and interest in substantially all of Old American's assets, including the FCA stocks, to American Savings, a federal savings and loan association ("New American").
Following the formation of New American, FCA filed a second motion for summary judgment in the district court stating that the doctrine enunciated in D'Oench, Duhme...
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