USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-2319
FRANKLIN W. SIMON,
WEBB PLACE CONDOMINIUMS, INC.
and GREYSTONE CONDOMINIUMS, INC.,
Plaintiffs, Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
as Receiver of 1st American Bank for Savings,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. A. David Mazzone, Senior U.S. District Judge]
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Before
Cyr, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Lee H. Kozol, with whom David A. Rich and Friedman & Atherton
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were on brief for appellants.
J. Scott Watson, with whom Ann S. DuRoss and Richard J. Osterman,
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Jr. were on brief for appellee.
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February 23, 1995
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CYR, Circuit Judge. Plaintiffs-appellants Franklin W.
CYR, Circuit Judge.
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Simon ("Simon"), Webb Place Condominiums, Inc. ("Webb Place") and
Greystone Condominiums, Inc. ("Greystone") initiated this action
in Massachusetts state court against the Federal Deposit Insur-
ance Corporation ("FDIC"), receiver of 1st American Bank for
Savings ("Bank"), seeking declaratory and equitable relief
relating to two real estate loan agreements between plaintiffs-
appellants and the Bank. Following removal, the United States
District Court for the District of Massachusetts dismissed the
action on jurisdictional grounds pursuant to the Financial
Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), 12
U.S.C. 1821(d)(13)(D) (1994). We affirm.
I
I
BACKGROUND
BACKGROUND
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In January 1988, Simon, president and sole stockholder
of Greystone and Webb Place (collectively: "Borrowers"), entered
into two mortgage loan agreements with the Bank, whereby Grey-
stone borrowed $2,500,000 and Webb Place borrowed a total of
$3,150,000 with which to finance condominium development pro-
jects. The loans were secured by mortgages on the properties to
be developed and by Simon's personal guaranty.
When the loans matured on January 31, 1990, the Borrow-
ers sought extensions and further advances to enable completion
of the projects. On August 14, 1990, with the outstanding loan
balances at $2,500,000 on the Greystone loan and $2,295,490 on
the Webb Place loan, the Borrowers entered into two separate Loan
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Modification Agreements ("Modification Agreements"), whereby the
Bank waived all accrued and future interest on the original
January 1988 loans and extended their maturity dates to May 31,
1992. The Bank further agreed to lend an additional $816,000 to
Greystone and $520,942 to Webb Place, to be disbursed upon the
Borrowers' request, for completion of the projects. Finally, the
Bank agreed to provide end-loan financing to individual buyers of
the completed condominium units.
The Borrowers in turn agreed to complete construction
of the mortgaged properties under the supervision of an indepen-
dent engineer, to devise a marketing plan acceptable to the Bank,
and to pay the Bank 100% of the net proceeds from the sale of any
unit in the mortgaged properties in return for a partial release
of the Bank's mortgage lien. Simon secured his loan guaranties
with two certificates of deposit and with mortgages on two real
estate properties owned by him. In return, the Bank agreed to
limit Simon's total liability on the personal guaranty to $900-
,000.
All construction loan requisitions by the Borrowers
were honored in due course by the Bank until October 18, 1990,
when a requisition for $204,657 was dishonored. The following
day, the Bank closed and FDIC was appointed receiver.
On October 24, FDIC published notice of its appointment
as receiver, alerting creditors that all claims against the Bank
were to be submitted to FDIC by January 23, 1991 ("bar date").
On October 25, FDIC mailed notice to all known Bank creditors
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and, on October 31, notice of FDIC's appointment as liquidating
agent of the Bank was mailed to plaintiffs-appellants. Although
plaintiffs-appellants did not receive FDIC's notice, they were
aware prior to the bar date that FDIC had been appointed receiver
of the Bank.
On October 31, plaintiffs-appellants requested that
FDIC advise as to its position respecting further loan disburse-
ments under the Modification Agreements. FDIC did not reply. On
November 27, plaintiffs-appellants informed FDIC that the Bank
was in default under the Modification Agreements for refusing
their October 18 requisition. Their letter demanded that the
Borrowers' requisitions be met and that the collateral securing
Simon's personal guaranty be released due to the Bank's default.
FDIC did not reply.
The present action was commenced on April 21, 1992, in
state court. Simon sued to recover all collateral pledged to
secure his personal guaranty and for a judicial declaration that
his personal obligations under the guaranty had been extinguished
as a result of the Bank's and FDIC's defaults under the Modifica-
tion Agreements. The Borrowers sought a judicial declaration
entitling them to a "priority position" among Bank creditors on
all obligations incurred by the Borrowers to third parties after
FDIC took possession of the Bank's assets.
After removal, the federal district court granted the
FDIC motion for summary judgment. It found that neither Simon
nor the Borrowers had filed proofs of claim with FDIC despite
4
having received actual notice of FDIC's appointment. Plaintiffs-
appellants thus having failed to exhaust their administrative
remedies, the district court ruled that their claims were barred
under 12 U.S.C. 1821(d)(13)(D)(i).
II
II
DISCUSSION
DISCUSSION
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Summary judgment rulings are reviewed de novo to
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determine whether the "'pleadings, depositions, answers to inter-
rogatories, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a
matter of law.'" Gaskell v. The Harvard Coop. Soc'y, 3 F.3d 495,
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497 (1st Cir. 1993) (quoting Fed. R. Civ. P. 56(c)). We view the
evidence in the light most favorable to the party resisting
summary judgment. Velez-Gomez v. SMA Life Assurance Co., 8 F.3d
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873, 874-75 (1st Cir. 1993).
A. The Simon Guaranty
A. The Simon Guaranty
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Simon contends that FDIC surrendered all claims to the
collateral pledged to secure his personal guaranty because the
Bank's (and FDIC's subsequent) breach of the Modification Agree-
ments discharged Simon from all liability.
Section 1821(d)(13)(D)(i) bars all claims against the
assets of a failed financial institution which have not been
presented under the administrative claims review process (-
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"ACRP"), see 12 U.S.C. 1821(d)(3)-(10), governing the filing,
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determination, and payment of claims against the assets of failed
financial institutions following FDIC's appointment as receiver.
Heno v. FDIC, 20 F.3d 1204, 1206-07 (1st Cir. 1994). Upon its
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appointment as receiver, FDIC is required to publish notice that
the failed institution's creditors must file claims with FDIC by
a specified date not less than ninety days after the date of
publication. 12 U.S.C. 1821(d)(3)(B). FDIC is also required
to mail notice to all known creditors of the failed institution.
Id. 1821(d)(3)(C). It has 180 days from the date of filing to
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allow or disallow claims. Id. 1821(d)(5)(A)(i). Claimants
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have sixty days from the date of disallowance, or from the
expiration of the 180-day administrative decision deadline,
within which to seek judicial review in an appropriate United
States district court. Id. 1821(d)(6)(A). Failure to comply
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with the ACRP deprives the courts of subject matter jurisdiction
over any claim to assets of the failed financial institution.
See id. 1821(d)(13)(D)(i).
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Simon argues that the instant claim for the return of
all collateral securing his personal guaranty is not subject to
the ACRP because it is not a creditor's claim against the Bank's
assets but merely a defense to the contingent loan guaranty held
by the Bank. Cf. In re Purcell, 141 B.R. 480, 485 (Bankr. D. Vt.
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1992), aff'd, 150 B.R. 111 (D. Vt. 1993). But see Deera Homes,
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Inc. v. Metrobank for Sav., FSB, 812 F. Supp. 375, 377-78 (E.D.-
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N.Y. 1993). As Simon sees it, therefore, he is entitled to a
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judgment declaring that the Modification Agreements were breached
by the Bank and, consequently, his personal guaranty is unen-
forceable and the collateral pledged to secure it must be surren-
dered.
Throughout the litigation, Simon has maintained that
the Bank breached the Modification Agreements the day before the
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Bank closed, by refusing to honor the Borrowers' October 18
construction loan requisition. At oral argument, he conceded
that the personal guaranty was no longer executory by the time
FDIC became receiver on October 19, 1990. Cf. infra Section
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II.B. Similarly, his claim to the collateral securing the
personal guaranty consistently has been based on the Bank's
October 18 breach of the Modification Agreements. Moreover,
Simon's November 27 letter to FDIC demanded both that the Bank
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release the collateral securing his personal guaranty and that
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the Bank honor the Borrowers' requisitions from October 18.
Thus, Simon's position is and always has been that the
Bank's pre-receivership refusal to honor the Borrowers' October
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18 loan requisition constituted a material breach of the Modifi-
cation Agreements, entitling him to recover his collateral. It
is clear, therefore, that the claim to the collateral securing
the personal guaranty is barred as a "claim or action for payment
from . . . the assets" of a failed financial institution for
which FDIC has been appointed receiver. See 12 U.S.C.
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1821(d)(13)(D)(i).
Simon concedes that the two real estate mortgages
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securing his personal guaranty are bank "assets." Claims for the
recovery of bank assets are barred absent compliance with the
ACRP. Id. Simon was aware of FDIC's appointment as receiver on
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October 19, 1990, well before the ACRP bar date. Furthermore,
Simon concededly knew, before the bar date, that he had a claim
against FDIC for the return of the collateral. In these circum-
stances, the failure to comply with the ACRP deprived the dis-
trict court of jurisdiction over Simon's claim for recovery of
the collateral securing his personal guaranty.1
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1Notwithstanding the jurisdictional bar to Simon's claim for
the return of his collateral, he contends that the district court
should have declared his personal guaranty discharged by the
Bank's material breach of its Modification Agreements with the
Borrowers, see, e.g., Ward v. American Mut. Liab. Ins. Co., 443
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N.E.2d 1342, 1344 (Mass. App. 1983), and that such a claim for
declaratory relief is not barred because it does not seek "pay-
ment from" the Bank's "assets." Simon's complaint demanded a
declaration extinguishing any personal liability arising under
his loan guaranty; that is, precluding any future judgment
against him for any deficiency over and above the amounts recov-
erable by FDIC on the collateral securing his personal guaranty.
Although the claim to the collateral is barred as one against
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"the [Bank's] assets," 12 U.S.C. 1821(d)(13)(D)(i), the judi-
cial declaration requested by Simon is said to be purely defen-
sive, designed to preempt any obligation on the part of Simon to
make future payments to FDIC. See, e.g., National Union Fire
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Ins. Co. v. City Sav., FSB, 28 F.3d 376 (3d Cir. 1994) (holding
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that 1821(d)(13)(D)(i) bars contracting party from preemptive
judicial declaration that contracting party is not liable on
contract with failed institution, even though claim cannot be
brought under ACRP; contracting party must await suit by receiver
to enforce contract, at which time contracting party may raise
rescission as affirmative defense to receiver's contract action).
Simon urges us to reject the Third Circuit's interpretation in
National Union, 28 F.3d at 386-89, that the alternate clause in
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1821(d)(13)(D) (viz., "action[s] seeking a determination of
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rights with respect to [] the [bank's] assets,") bars his pre-
emptive claim for declaratory relief.
We find this an inappropriate setting for resolving the
question in National Union, which was not raised below. In
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addition, dismissal of these claims by the district court was in
all events proper, since Simon's claimed entitlement to discharge
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B. The Borrowers' Claims
B. The Borrowers' Claims
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The Borrowers seek compensatory damages for FDIC's
alleged post-bar-date repudiation of their pre-receivership
Modification Agreements with the Bank. See id. 1821(e)(3)(i).
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The Borrowers assert that all obligations they incurred to third
parties after FDIC was appointed receiver are entitled to priori-
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ty status against Bank assets, on the theory that the Modifica-
tion Agreements remained executory at the time FDIC was appointed
receiver. Consequently, the Borrowers argue, the executory
Modification Agreements remained open to affirmance or repudia-
tion by FDIC within a reasonable period following its appoint-
ment. See id. 1821(e)(1)-(2). Since FDIC has yet to affirm
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the Modification Agreements, the Borrowers conclude that the
agreements have been repudiated.
Their claim is premature, for failure to exhaust
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fails as a matter of Massachusetts law. See Levy v. FDIC, 7 F.3d
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1054, 1056 (1st Cir. 1993) (appellate court is "free to affirm a
district court's ruling 'on any ground supported in the record
even if the issue was not pleaded, tried or otherwise referred to
in the proceeding below'") (citations omitted). The Massachu-
setts cases cited by Simon stand only for the generic contract-
law proposition that a material breach excuses future performance
by the non-breaching party. These cases do not purport to hold,
however, that a loan guarantor is relieved from liability for
delinquent pre-breach loan advances to the borrowers. The
outstanding balances due by the Borrowers total well in excess of
Simon's $900,000 unconditional guaranty. See generally Fleet
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Nat'l Bank v. Liuzzo, 766 F. Supp. 61, 65 (D.R.I. 1991) (describ-
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ing nonmutality of promise to repay loan). Finally, Simon not
only cites no contractual provision that even purports to entitle
him to such blanket relief, but his January 1988 personal guaran-
ty, incorporated by reference in the modified guaranty, is
couched in unconditional language. ("The Guarantor's liability
hereunder is absolute and unlimited . . . ."). Thus, the request
for declaratory relief was properly rejected.
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administrative remedies. See Heno v. FDIC, 20 F.3d at 1212-13
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(publishing FDIC internal manual procedures for filing claims
arising from FDIC's post-bar-date repudiation of executory pre-
receivership contracts with failed institution). In Heno, we
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deferred to FDIC's construction of its enabling statute as
according the agency first opportunity to evaluate alleged post-
bar-date claims, including those arising after the ninety-day
period following notice of FDIC's appointment as receiver, id. at
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1209. As the Borrowers have yet to exhaust their administrative
remedies pursuant to the internal agency procedures published in
Heno, we affirm the district court judgment, without prejudice to
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Borrowers' subsequent submission of an administrative claim to
FDIC.
The district court judgment is affirmed. The parties
The district court judgment is affirmed. The parties
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are to bear their own costs.
are to bear their own costs.
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