Filed: Jun. 28, 1994
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals, Fifth Circuit. No. 93-1097. Daniel P. ROBINOWITZ, Plaintiff-Appellant, v. GIBRALTAR SAVINGS, et al., Defendants, FGMC Investment Corp., Shawmut First Mortgage Corp., f/k/a First Gibraltar Mortgage Corp., and Resolution Trust Corporation, as receiver for Gibraltar Savings, Defendants-Appellees. June 28, 1994. Appeal from the United States District Court for the Northern District of Texas. Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges. W. EUGENE DAVIS,
Summary: United States Court of Appeals, Fifth Circuit. No. 93-1097. Daniel P. ROBINOWITZ, Plaintiff-Appellant, v. GIBRALTAR SAVINGS, et al., Defendants, FGMC Investment Corp., Shawmut First Mortgage Corp., f/k/a First Gibraltar Mortgage Corp., and Resolution Trust Corporation, as receiver for Gibraltar Savings, Defendants-Appellees. June 28, 1994. Appeal from the United States District Court for the Northern District of Texas. Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges. W. EUGENE DAVIS, C..
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United States Court of Appeals,
Fifth Circuit.
No. 93-1097.
Daniel P. ROBINOWITZ, Plaintiff-Appellant,
v.
GIBRALTAR SAVINGS, et al., Defendants,
FGMC Investment Corp., Shawmut First Mortgage Corp., f/k/a First
Gibraltar Mortgage Corp., and Resolution Trust Corporation, as
receiver for Gibraltar Savings, Defendants-Appellees.
June 28, 1994.
Appeal from the United States District Court for the Northern
District of Texas.
Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Daniel Robinowitz appeals the district court's grant of
summary judgment to the RTC based on its holding that all of
Robinowitz's claims are barred by the D'Oench Duhme doctrine. We
affirm.
I.
In 1983, Daniel Robinowitz (Robinowitz) approached Gibraltar
Savings for financing. He and FGMC Investment Corporation (FGIC)
entered into a partnership to purchase land for the development of
the Galleria project, a "multi-use" development to be built in
several phases in Metaire, Louisiana. FGIC was the subsidiary of
First Gibraltar Mortgage Corporation (Shawmut).1 Shawmut was the
1
In December 1986, Gibraltar Savings sold the stock of First
Gibraltar Mortgage Corporation to Shawmut Bank who later sold its
stock to El Paso Federal Savings Association. In 1991, the RTC
was appointed receiver for El Paso.
1
subsidiary of Gibraltar Savings. Gibraltar Savings provided $9
million of financing for the purchase.
In 1985, Galleria Land, Ltd., a limited partnership with
Robinowitz as one of its managing general partners, entered into a
joint venture with FGIC to hold the land purchased for the Galleria
project. FGIC also entered into a joint venture with Galleria
Phase I., Ltd., also a limited partnership with Robinowitz as one
of its managing partners, to develop the first phase of the
Galleria project. The joint venture agreements provided for joint
control and provided that Galleria Phase I, Ltd. was primarily
responsible for the development and management of the first phase
while FGIC was primarily responsible for obtaining financing for
the project.
The first phase of the Galleria project included the
construction of a hotel to be funded in part by Embassy Suites.
After the construction of the hotel began, the New Orleans economy
softened, and Embassy Suites refused to fund the hotel. Gibraltar
Savings agreed to loan the additional money needed for the hotel in
exchange for an increased ownership interest in it.
By 1986, serious disputes had developed between Robinowitz and
FGIC and Gibraltar Savings. The RTC asserts that Robinowitz
threatened to sue FGIC and Gibraltar Savings and that FGIC and
Gibraltar Savings became concerned about their significant
financial commitment to the project in the softening real estate
market. The parties entered into discussions to settle their
disputes. According to Robinowitz, Gibraltar Savings told him at
2
the settlement meeting that it was not going to continue to fund
the hotel and that it was going to sell the Galleria project for
whatever it could get. Robinowitz argues that because of these
representations, he decided to sell his interest in the project to
Gibraltar Savings.
Initially, Robinowitz agreed to sell his interest for $20
million. Gibraltar Savings refused to pay this amount, and
Robinowitz contends that Gibraltar Savings pressured him into
settling by instructing the contractor to stop working and by
delaying progress payments and requests for reimbursement. Because
Robinowitz was unable to meet his operating expenses and debt
service, he agreed to sell his interest for $3.5 million.
Robinowitz then entered into a Settlement and Mutual Release
Agreement with Gibraltar Savings, Shawmut and FGIC. In that
agreement, Gibraltar Savings and its subsidiaries released
Robinowitz from his obligations under the joint venture agreements.
In return Robinowitz released FGIC and Gibraltar Savings from all
claims and causes of action that Robinowitz had in connection with
any "dealings, transactions, agreements or understandings" with any
of the Defendants, "which have occurred prior to the date of this
Mutual Release."
Robinowitz alleges that, contrary to its representations,
Gibraltar Savings had no intention of selling the project, but
instead intended to squeeze him out of the project. He alleges
that the day before the parties executed the Settlement and Mutual
Release Agreement, Gibraltar Savings hired a long-term manager for
3
the Galleria project.
Robinowitz filed suit in state court for breach of fiduciary
duty, fraud, misrepresentation, and declaratory judgment against
Gibraltar Financial of California (a holding company that owned all
of Gibraltar Savings' stock),2 Gibraltar Savings, Shawmut and FGIC.
Robinowitz alleged that the Defendants breached their fiduciary
duties to him by fraudulently inducing him to sign the release and
to sell his partnership interests. Specifically, he alleged that
the Defendants misrepresented their true plans regarding the
Galleria project in order to induce him to sell his interest in the
project for a price well below the real value.
In 1988, the state trial court granted Defendants' motion for
summary judgment, ruling that Robinowitz's claims were foreclosed
by the Mutual Release and Settlement Agreement. However, the Texas
court of appeals reversed and remanded for trial, finding that a
fact issue existed as to "whether Gibraltar made material
misrepresentations which were fraudulent and in violation of its
fiduciary duty."3
On October 30, 1989, the RTC was appointed receiver for
Gibraltar Savings and intervened in the state court action,
removing it to district court. The RTC, Shawmut, and FGIC then
filed a motion for summary judgment on the grounds that
2
Gibraltar Financial settled with Robinowitz and was
dismissed in February 1993.
3
The Texas Court of Appeals labeled the Defendants
collectively "Gibraltar." Thus, it is unclear which Defendants
the court determined owed a fiduciary duty to Robinowitz.
4
Robinowitz's claims were barred by the D'Oench, Duhme doctrine and
related statutes. The district court granted Defendants' motion,
holding that because Gibraltar Savings' misrepresentations did not
appear in the Settlement and Mutual Release agreement or on any
document on file with Gibraltar Savings, Robinowitz had "lent
himself to a scheme or arrangement whereby banking authorities are
likely to be misled." Robinowitz timely appealed.
II.
The party moving for summary judgment "bears the initial
responsibility of informing the district court of the basis for its
motion, and identifying those portions of "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any,' which it believes
demonstrate the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323,
106 S. Ct. 2548, 2552,
91 L. Ed. 2d 265 (1986) (citations omitted). If the non-movant is
faced with a motion for summary judgment "made and supported" as
provided by Rule 56, the non-movant cannot survive the motion by
resting on the mere allegations of its pleadings. See Id.;
Slaughter v. Allstate Ins. Co.,
803 F.2d 857, 860 (5th Cir.1986).
Robinowitz makes several arguments as to why D'Oench Duhme
should not apply to this case. First, he contends that D'Oench
Duhme does not apply because the suit does not involve a note or
debt. Second, he argues that the doctrine does not apply to bar
claims for breach of fiduciary duty. Next, he argues that D'Oench
Duhme does not bar his claims against FGIC and Shawmut because they
5
are subsidiaries of a failed insured savings and loan institution
and not entitled to the jurisprudential and statutory bar.
Robinowitz then argues that the RTC's knowledge at the time of suit
serves to preclude application of D'Oench. Finally, Robinowitz
argues that the transaction, the settlement of real estate
partnership agreements with a lender, is not a banking function and
is therefore not covered by D'Oench Duhme. We consider these
arguments below.
III.
A.
Robinowitz first argues that the D'Oench Duhme doctrine and
§ 1823 of FIRREA should not apply to bar his claim for breach of
fiduciary duty because that claim is unrelated to a note or debt.4
According to Robinowitz, D'Oench Duhme applies only when a party is
attempting to use an unrecorded agreement as a defense to
collection efforts by a receiver of a debt or obligation.
Our cases do not support Robinowitz's argument for such a
narrow application of D'Oench Duhme. We have held that D'Oench
Duhme also applies in a case "with an affirmative claim, against
4
Section 1823 of FIRREA is the statutory codification of the
common law D'Oench Duhme doctrine. It provides that "[n]o
agreement which tends to diminish or defeat the interest of the
Corporation in any asset acquired by it under this section or
section 1821 of this title, either as security for a loan or by
purchase or as receiver of any insured depository institution,
shall be valid against the Corporation unless such agreement—1)
is in writing, 2) was executed by the depository institution ...
3) was approved by the board of directors of the depository
institution or its loan committee, ... and 4) has been,
continuously, from the time of its execution, an official record
of the depository institution." 12 U.S.C. § 1823(e) (1989).
6
FDIC-Receiver, with no note whose terms are subjected to a secret
protocol." Bowen v. FDIC, 915 F.2d 1013, 1015 (5th Cir.1990); see
also Beighley v. FDIC,
868 F.2d 776, 783-84 (5th Cir.1989) (holding
that D'Oench Duhme barred the plaintiff's claims for breach of
contract, breach of fiduciary duty, promissory estoppel, and fraud
arising from an unwritten agreement by the bank to finance a third
party's purchase of collateral from the plaintiff).
Robinowitz's argument that D'Oench Duhme has no application
because the suit is not related to a note or debt is therefore
without merit.
B.
Robinowitz next argues that although courts have, in dicta,
purported to apply D'Oench Duhme to bar claims for breach of
fiduciary duty where no fiduciary relationship was proven, no cases
have held that D'Oench Duhme bars claims for breach of fiduciary
duty where the fiduciary relationship is established. He argues
that the fiduciary relationship has been established here because
he and the Defendants entered written partnership agreements. He
argues that his claim is based on these agreements, not Defendants'
oral assertion that they were going to stop financing the project.
We disagree. Even assuming proof of a fiduciary
relationship,5 Robinowitz's claims are based not on any partnership
5
The RTC argues that there is no fiduciary relationship
between Gibraltar Savings and Robinowitz because Gibraltar
Savings was not a party to any of the joint ventures and argues
there is no fiduciary relationship between Robinowitz and Shawmut
because Shawmut was a partner only under the 1983 joint venture
that terminated in 1985. However, the Texas court of appeals in
reversing the state court's grant of summary judgment to the bank
7
agreements but on Defendants' alleged oral misrepresentation during
the settlement meeting about their future intentions to immediately
dispose of the Galleria project. According to Robinowitz, this
alleged representation induced him to sign the Settlement
Agreement. The alleged misrepresentation was not written or
recorded according to the requirements of § 1823.
Robinowitz's claim is analogous to one for fraudulent
inducement which is barred by D'Oench Duhme. Langley v. FDIC, 484
U.S. 86,
108 S. Ct. 396,
98 L. Ed. 2d 340 (1987). In Langley, the
plaintiffs claimed that the Bank fraudulently induced them to
borrow funds to invest in property by orally misrepresenting the
size of the property. The Court held that the oral
misrepresentation regarding the nature of the property was
sufficient to constitute an "agreement" within the meaning of §
1823.
Id. at 92, 108 S.Ct. at 401. It then held that even if the
misrepresentation was fraudulent, § 1823 still barred a claim based
on the representation unless it met the recording requirements.
Id. at 93-94, 108 S.Ct. at 402. Robinowitz's claim that an oral
misrepresentation fraudulently induced him to enter the settlement
agreement, like the Langleys' claim that the bank's oral
misrepresentation regarding the property induced them to borrow
funds, is also barred by D'Oench Duhme. See also, FDIC v. Payne,
973 F.2d 403 (5th Cir.1992) (D'Oench Duhme doctrine bars Payne's
found that there was a fact issue as to "whether [defendants]
made material misrepresentations which were fraudulent and in
violation of its fiduciary duty." The district court did not
discuss whether Robinowitz had established a fiduciary duty
between himself and Defendants.
8
claim of fraudulent inducement based on bank's oral
misrepresentation about financial condition of person Payne agreed
to guarantee); Beighley v. FDIC, 868 F.2d at 784 n. 12 (D'Oench
Duhme bars Beighley's claim for breach of fiduciary duty arising
out of bank's alleged oral agreement to finance the purchase of
collateral property).
C.
Next, Robinowitz argues that even if D'Oench Duhme applies to
bar claims based on fraudulent inducement, it does not bar claims
against subsidiaries and sub-subsidiaries of protected
institutions.6 This circuit has not yet addressed whether
subsidiaries may assert defenses available under D'Oench Duhme.
See, Alexandria Associates v. Mitchell, 2 F.3d 598, 601 n. 10 (5th
Cir.1993) (choosing not to address issue).
At least three other circuits have addressed this issue. All
of them reached the conclusion that wholly-owned subsidiaries of
failed institutions may also assert D'Oench Duhme defenses to bar
claims based on secret or oral agreements. See, Sweeney v. RTC, 16
F.3d 1 (1st Cir.1994) (D'Oench Duhme extends to the financial
interest of any wholly owned subsidiary of a failed institution);
Oliver v. RTC,
955 F.2d 583, 585-86 (8th Cir.1992) ("D'Oench
doctrine extends broadly to cover any secret agreement adversely
affecting the value of a financial interest that has come within
6
Shawmut was a wholly-owned subsidiary of Gibraltar Savings
and FGIC was a wholly-owned subsidiary of Shawmut at the time of
the events giving rise to Robinowitz's claims. Shawmut's stock
was sold in 1989 to El Paso Savings Association, which was put
into receivership in 1991.
9
the RTC's control as receiver of a failed financial institution"
including the financial interest of wholly-owned subsidiaries);
Victor Hotel Corp. v. FCA Mortgage Corp., 928 F.2d 1077 (11th
Cir.1991) (same).
We agree with our sister circuits that the D'Oench Duhme
defense is available to wholly owned subsidiaries of the insured
institution. Federal regulators have to "rely on a financial
institution's records and its assets, such as wholly-owned
subsidiaries, to determine solvency for regulatory purposes."
Victor Hotel, 928 F.2d at 1083. They must be able to examine the
records of the subsidiary, as well as the parent, especially since
the subsidiary may constitute a major asset of the parent. Such
reliance is necessary to enable the federal regulators to persuade
solvent banks to assume the accounts of the failed institutions.
Therefore, the district court correctly extended the D'Oench Duhme
defense to Shawmut and FGIC.
D.
Robinowitz next argues that if RTC has knowledge of the side
agreement or secret promise, then D'Oench Duhme does not apply.
Robinowitz asserts that the RTC knew about his claim at least two
years before the RTC took over Gibraltar Savings. Robinowitz's
suit had been pending against Shawmut for two years and had been
appealed to the Texas appellate and Texas Supreme Court before RTC
assumed Gibraltar Savings. However, the Supreme Court has already
addressed this issue and held that knowledge by the FDIC is
irrelevant:
10
[K]nowledge of the misrepresentation by the FDIC prior to its
acquisition of the note is not relevant to whether § 1823(e)
applies.... An agreement is an agreement whether or not the
FDIC knows of it.... The statutory requirements that an
agreement be approved by the bank's board or loan committee
and filed contemporaneously in the bank's records assure
prudent consideration of the loan before it is made, and
protect against collusive reconstruction of the loan terms by
bank officials and borrowers.... Knowledge by the FDIC could
substitute for the latter protection only if it existed at the
very moment the agreement was concluded, and could substitute
for the former assurance not at all.
Id. at 94-95, 108 S.Ct. at 402-403. See also, Bell & Murphy v.
Interfirst,
894 F.2d 750, 753 (5th Cir.), cert. denied,
498 U.S.
895,
111 S. Ct. 244,
112 L. Ed. 2d 203 (1990) (D'Oench bars claim even
though lawsuit was filed against financial institution before it
was declared insolvent). The key factor in the application of the
D'Oench Duhme doctrine is whether the borrower "lent himself to a
scheme or arrangement whereby banking authorities are likely to be
misled." Bowen v. FDIC,
915 F.2d 1013, 1015 (5th Cir.1990)
(quoting D'Oench ). Robinowitz lent himself to such a scheme or
arrangement when he failed to include in the Settlement Agreement
the alleged condition, that he was selling his interest in the
project because Gibraltar Savings was withdrawing its support.
McMillan v. MBank Forth Worth, N.A.,
4 F.3d 362, 368 (5th
Cir.1993).
E.
Finally, Robinowitz argues that the real estate partnership
transactions at issue here are outside the traditional banking
function, and therefore are not covered by D'Oench Duhme. He
relies on the recent decision in Alexandria Associates, Ltd. v.
Mitchell Co., 2 F.3d 598 (5th Cir.1993), in which this court
11
declined to apply D'Oench Duhme to the commercial sale of
partnership interests in a real estate development venture by a
third generation subsidiary of a failed institution.
In Alexandria, the third generation subsidiary of Altus Bank,
the Mitchells, formed limited partnerships to build, own and
operate apartment building complexes through HUD financing. They
sold partnership interests in the apartment complexes to
plaintiffs, LaSala and Alexandria. Alexandria then attempted to
syndicate its partnership interests, in order to pay off its
purchase loan indebtedness, and when its attempts failed, sued the
Mitchells alleging common law fraud and violations of state
securities law based on the Mitchells' oral misrepresentations of
the value of the property. Id. at 600. This court declined to
extend D'Oench Duhme to these non-banking transactions: "[B]anks
simply do not engage in the sale of partnership interests in real
estate development ventures in the ordinary course of banking
business."7
Alexandria is distinguishable from today's case and does not
control it. Although Gibraltar Savings had a proprietary interest
in the real estate at issue, its primary relationship with
Robinowitz was as a lender. Unlike the parent bank in Alexandria,
which did not make any loans on the project, Gibraltar Savings had
about $100 million in outstanding loans on the Galleria project;
7
This court recognized that a regulatory agency serving as a
conservator or receiver of a failed institution might engage in
liquidation of that bank's assets and be within the D'Oench Duhme
doctrine. Id. at 603, n. 30.
12
including $69 million in permanent loan commitments and $9 million
that Robinowitz borrowed to fund the original land purchase. Thus
Gibraltar was performing a quintessential banking function. One of
Robinowitz's main complaints is that Gibraltar Savings tightened
the funding spigot to pressure him into selling his interest. The
Defendants here sought to settle disputes over their financing of
a project, not to make an ordinary commercial investment.
Therefore, D'Oench Duhme applies to bar Robinowitz's claims. OPS
Shopping Center v. FDIC, 992 F.2d 306 (11th Cir.1993) (D'Oench
Duhme applies to bar claims involving ordinary banking
transactions).
IV.
D'Oench Duhme applies to bar all of Robinowitz's claims based
on alleged oral misrepresentations made by officers of a failed
institution. We therefore AFFIRM the judgment of the district
court.
13
