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United States Court of Appeals,

Fifth Circuit.

No. 94-10607

Summary Calendar.

FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity,

Plaintiff-Counter Defendant-Appellee,

v.

Vinodbhai T. PATEL, a/k/a Vino T. Patel, Defendant-Counter

Plaintiff-Appellant,

v.

NATIONSBANK, f/k/a NCNB Texas National Bank NA, Counter

Defendant-Appellee.

March 2, 1995.

Appeal from the United States District Court for the Northern

District of Texas.

Before REAVLEY, DAVIS and DeMOSS, Circuit Judges.

REAVLEY, Circuit Judge:

This is an appeal from a judgment in favor of Federal Deposit

Insurance Corporation in its corporate capacity ("FDIC-C") and

NationsBank in a suit for collection of the deficiency balance

owing under a promissory note signed by Vinodbhai Patel. We affirm

in part and vacate and remand in part.

BACKGROUND

Patel executed a promissory note (the "Note") in the principal

amount of $2,500,000.00, payable to First RepublicBank Dallas, N.A.

("FRBD"). On July 29, 1988, the Comptroller of the Currency

declared FRBD insolvent and appointed the Federal Deposit Insurance

Corporation as Receiver ("FDIC-R").
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FDIC-R then transferred certain assets of FRBD to NCNB Texas

National Bank pursuant to a Purchase and Assumption Agreement.

NCNB subsequently changed its name to NationsBank. We will refer

to the bank by its current name of NationsBank. Among the assets

transferred from FDIC-R to NationsBank was the Note.

Patel defaulted on his obligations under the Note. After

applying all offsets and credits, there remained a principal Note

deficiency of $1,352,871.30. NationsBank filed an action in state

court to recover on the note. Patel answered and filed

counterclaims. NationsBank later transferred its interest in the

Note to FDIC-C.

FDIC-C intervened in the state action and removed the case to

federal district court. The federal district court realigned the

parties so that FDIC-C became plaintiff, Patel remained as

defendant, and NationsBank was aligned as counter-defendant. FDICC filed a motion for summary judgment, and the court granted that

motion on all claims and counterclaims, reserving only the issue of

whether FDIC-C had owner or holder status. After a non-jury trial,

the court found that FDIC-C was the holder of the Note. The court

entered judgment against Patel. The parties agree that Texas law

applies to the state law issues in the case.

DISCUSSION

A. Summary Judgment Evidence

Patel argues that the district court based its grant of

summary judgment on improper summary judgment evidence. Patel

claims that the district court based its decision to grant summary
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judgment largely on the affidavits of Steve Sieling and E. Patti

Stacey which provided information about the Note, the takeover of

FRBD, Patel's default and the balance remaining. He argues that

those affidavits were not proper summary judgment evidence, because

they were not based on personal knowledge. See Fed.R.Civ.P. 56(e).

Attached to the Sieling and Stacey affidavits are documents

which provide the factual basis needed for collection by FDIC-C on

the Note. Sieling and Stacey are qualified to speak from personal

knowledge that the documents attached to the affidavits are

admissible business records. See United States v. Duncan, 919 F.2d

981, 986 (5th Cir.1990), cert. denied, 500 U.S. 926, 111 S.Ct.

2036, 114 L.Ed.2d 121 (1991). Sieling was employed by AMRESCO

Management, Inc. ("AMRESCO") when he prepared the affidavit.

AMRESCO is the company which manages assets formerly owned by

NationsBank and now owned by FDIC-C, including the Note. He

previously worked for NationsBank. He manages the Patel Note file

and is responsible for collection of the Note. Stacey also works

for AMRESCO as the manager of the commercial loan portfolio managed

on behalf of FDIC-C. She previously worked for NationsBank and

also served as manager of loan processors with FRBD. She has been

familiar with each bank and servicing company's computer records

system. The documents and the affidavits which refer to them

constitute appropriate summary judgment evidence adequate to

support a grant of summary judgment in favor of recovery by FDIC-C

on the Note.

B. District Court's Finding that FDIC-C Held Holder Status
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Patel argues that the district court erred in entering

judgment for FDIC-C, because FDIC-C never proved its status as

owner or holder of the Note. Patel claims that FDIC-C failed to

prove its chain of title. Specifically, Patel challenges the

endorsement on the Note showing the transfer from FDIC-R to

NationsBank, which was the transfer immediately preceding the

transfer to FDIC-C. To establish that transfer link, the district

court relied on a provision of the Texas Code which provides that

endorsements on negotiable instruments are presumed to be genuine

and authorized. Tex.Bus. & Com.Code Ann. § 3.307 (West 1994).

Patel claims that the presumption does not control, because the

Note was not a negotiable instrument under Texas law and because

evidence which the court found sufficient to defeat summary

judgment on the issue of holder or owner status must also

necessarily rebut the presumption.

We need not reach the issue of whether the presumption was

properly applied. Even if Patel is correct and the note was never

transferred to NationsBank after it was obtained by FDIC-R, Patel

must still pay the Note deficiency. The relevant transfer for the

purpose of collection by FDIC-C was the original transfer to the

FDIC from FRBD. As of that point, the FDIC was without question

the holder of the Note. The fact that FDIC-R later transferred the

Note to NationsBank and then repurchased the note as FDIC-C does

not affect the relevant chain of title which gave the FDIC status

as holder of the Note. It is unnecessary to prove the transfer

from FDIC-R to NationsBank to allow collection on the Note by FDIC-
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C. NationsBank makes no claim, for collection or otherwise, in

relation to the Note. The transfer to NationsBank therefore has no

relevance in this suit for collection by FDIC-C.

C. Applicable Interest Rate

 Patel next argues that the district court erred in granting

summary judgment on the amount of interest due on the deficiency

amount. The Note provided for a floating rate of interest based on

the prime rate of FRBD, the original lending bank which later

failed. Patel argues that the court erred in substituting the

prime rate set by NCNB for the nonexistent FRBD prime rate and

granting summary judgment on the interest issue.

A panel of the Fifth Circuit has recently held that Texas

case law controls on this issue and that the district court may not

accept a substituted interest rate for the rate of a failed bank

unless the FDIC proves its reasonableness. F.D.I.C. v. Ambika

Investment Corp., 42 F.3d 641 (5th Cir.1994) (relying on Bailey,

Vaught, Robertson and Co. v. Remington Investments, Inc., 888

S.W.2d 860 (Tex.App.—Dallas 1994)). The Ambika Investment Corp.

decision makes clear that the reasonableness of a substituted rate

is an issue of fact. Id., slip op. at 6. Summary judgment on the

amount of interest due is improper where, as here, there is no

summary judgment evidence of the reasonableness of a substituted

rate. Id. We must therefore vacate the grant of summary judgment

on the interest calculation issue and remand to the district court

for a determination of the reasonableness of the substituted NCNB

rate and a determination of the amount of interest due under the
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appropriate rate.

D. Patel's Claim of Misrepresentation and Breach of Agreement

Patel asserts claims against NationsBank for

misrepresentation, breach of agreement and/or promissory estoppel.

He believes that his claims provide him with "defenses and/or

counterclaims" in this suit for recovery on the Note which should

have survived summary judgment.

Patel provided summary judgment evidence, in the form of an

affidavit signed by him, that Mr. Sanz, the Executive Vice

President of FRBD, had agreed to loan him funds or allow him to

draw funds out of CDs at the bank to finance the acquisition and

maintenance of a Days Inn franchise. Based on this representation,

Patel did purchase a Days Inn franchise. When FRBD went into

receivership and NationsBank took over the assets of the failed

bank, Patel asserts that he had discussions with NationsBank

officers. The NationsBank officers agreed that they would

restructure Patel's loan under the Note, allow Patel to draw funds

from the CDs or obtain other loan advances so that the Days Inn

franchise could be maintained. No funds were advanced and the CDs

were never released. Patel claims that his resulting inability to

secure funds prevented him from meeting the operating expenses of

the hotel, including the payment of franchise fees. As a result,

he lost the franchise and the value of the hotel property dropped

significantly.

The district court granted summary judgment against Patel's

claims. The court classified the claims as a defense based on
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ratification by NationsBank of the representations made by FRBD.

The court relied on Horton v. Robinson, 776 S.W.2d 260, 267

(Tex.App.—El Paso 1989), to hold that NationsBank could not have

ratified the agreement made with FRBD, because the agreement was

not made on behalf of NationsBank and did not purport to bind

NationsBank.

However, Patel pleaded the existence of independent

representations by NationsBank. See Record at I, 39-40. Patel's

summary judgment evidence included an affidavit by Patel which

stated that independent representations were made by NationsBank.

See Record at II, 352-54. Other documentary summary judgment

evidence also supports Patel's claims that NationsBank officers

made promises to Patel. See Record at II, 363. Neither

NationsBank nor FDIC ever presented any summary judgment evidence

to contradict those factual assertions. Given the uncontradicted

summary judgment evidence of independent action by NationsBank, the

district court erred in disposing of the claims on the ratification

basis. But summary judgment was still proper as to Patel's claims,

because the claims cannot provide Patel with relief. See Schuster

v. Martin, 861 F.2d 1369, 1371 (5th Cir.1988) (summary judgment may

be upheld on different grounds than those relied on by the district

court).

Patel's claims against NationsBank cannot serve as a defense

to recovery under the Note. The claims are against NationsBank,

but NationsBank does not hold the Note and does not request payment

on the Note.
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The claims against NationsBank cannot serve as a defense

against FDIC-C, because the D'Oench, Duhme doctrine and 12 U.S.C.

§ 1823(e) insure that any undocumented representations made by

NationsBank before FDIC-C purchased the note do not bind FDIC-C and

do not bar recovery by FDIC-C of the Note amount. D'Oench, Duhme

& Co. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942);

12 U.S.C. § 1823(e). The D'Oench, Duhme doctrine and section

1823(e) likewise prohibit any counterclaim for a setoff against the

recovery by FDIC-C based on undocumented side agreements made by

NationsBank. See Beighley v. F.D.I.C., 868 F.2d 776, 784 (5th

Cir.1989).

Patel may only assert his claims against NationsBank as an

affirmative action for damages independent of the issue of

collection under the Note. Nothing in the D'Oench, Duhme doctrine

or elsewhere prevents a claim against the FDIC or a takeover bank

based on their own representations or actions. See F.D.I.C. v.

Blue Rock Shopping Center, 766 F.2d 744, 753 (3rd Cir.1985);

F.D.I.C. v. Harrison, 735 F.2d 408, 412 (11th Cir.1984). However,

Patel's action is doomed to fail. We affirm the district court's

grant of summary judgment, because Patel's evidence presents no

issue supporting a recovery from NationsBank.

If NationsBank indeed made promises to Patel to extend

additional credit or to otherwise provide funds, there was no

consideration given by Patel for such promises. No contract was

formed, and no breach could have occurred. Additionally, Texas law

prohibits breach of contract claims, such as Patel's, which are
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based on alleged oral agreements to modify the conditions of a

written loan agreement. See Stavert Properties, Inc. v.

RepublicBank of Northern Hills, 696 S.W.2d 278, 280-81

(Tex.App.—San Antonio 1985, writ ref'd n.r.e.).

 Nor can Patel support his promissory estoppel action or his

action based on misrepresentation or fraud, because Texas law

requires a showing of detrimental reliance for both of those causes

of action. Sears Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282

(Tex.1994) (fraud or misrepresentation); Aubrey v. Workman, 384

S.W.2d 389, 393 (Tex.Civ.App.—Fort Worth 1964, writ ref'd n.r.e.)

(promissory estoppel). Looking only at the representations alleged

to have been made by NationsBank, those actions or representations

of NationsBank did not affect the positions of the parties. Patel

had already made the loan and franchise commitments before

NationsBank entered the picture. NationsBank did not induce Patel

to sign the Note, to buy the franchise or to take any other action.

Patel would have been unable to maintain the hotel franchise and

make payments on the Note regardless of whether NationsBank agreed

to provide further financing and failed to do so or never made any

such agreement. NationsBank did not cause the harm alleged by

Patel.

The case is remanded for a determination of the reasonableness

of the interest rate used by the district court to calculate the

judgment amount in the proceedings below. Otherwise, the judgment

is affirmed.

AFFIRMED IN PART, VACATED IN PART; AND REMANDED.
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