United States Court of Appeals,

Fifth Circuit.

No. 90–2975.

PARK CLUB, INC., Park Club Ltd., and A. Dalton Smith, Jr., Plaintiffs–Appellants,

v.

RESOLUTION TRUST CORP., In Its Corporate Capacity and as Conservator for MeritBanc

Savings Association, Defendant–Appellee.

Aug. 7, 1992.

Appeals from the United States District Court for the Southern District of Texas.

Before KING, SMITH, and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

This suit, removed from state court, was brought by two borrowers and a guarantor against

a lending financial institution and the Federal Savings and Loan Insurance C orporati on (FSLIC),

asserting that the lender had failed to abide by its agreement to make a permanent loan and that the

FSLIC had interfered with a contractual relationship, and seeking a declaration that the guaranty is

unenforceable. The district court granted summary judgment in favor of the defendants. 742 F.Supp.

395. Concluding that summary judgment was inappropriate because of the existence of a factual

issue, we reverse and remand.

I.

With the exception of whether a certain letter agreement was approved by the bank's board

of directors, the facts are undisputed. MeritBanc Savings and Loan Association ("MeritBanc"), then

known as Hardin Savings and Loan Association ("Hardin"), loaned plaint iff Park Club, Inc. ("PCI"),

$8,250,000 for acquisition of a tract of land and construction thereon of apartments and a child care

facilit y. This was an interim construction loan evidenced by a promissory note for the same amount

and a deed of trust on the property, both executed by PCI, and an assignment of rents.

Plaint iff A. Dalton Smith, Jr., executed a guaranty of the loan. Contemporaneously,MeritBanc and PCI entered into a letter agreement by which MeritBanc appeared to commit to make

PCI a permanent loan to pay off the interim loan. The disputed issue of fact is whether that letter

agreement was approved by MeritBanc's board of directors.

MeritBanc subsequently placed itself under the supervisory control of the Texas Savings and

Loan Commissioner. Shortly thereaft er, t he note matured and was not paid, and Smith made no

payment on the guaranty. The Texas Savings and Loan Commissioner t hen placed MeritBanc in

conservatorship; the Federal Home Loan Bank Board then appointed the FSLIC as MeritBanc's

conservator.

II.

A.

In April 1989, PCI, Park Club, Ltd. ("PCL"), and Smith brought suit in state court against

MeritBanc for breach of contract and against the FSLIC for interfering with MeritBanc's contractual

relationship between and among MeritBanc, PCI, and PCL, and seeking a declaratory judgment that

Smith's guaranty was void and unenforceable. The defendants removed the matter to federal court.

The Resolution Trust Corporation ("RTC") was substituted for the FSLIC as conservator, and the

RTC in its corporate capacity was substituted for the FSLIC in its corporate capacity as defendant.

The plaint iffs alleged that MeritBanc had breached the letter agreement by failing to fund the

permanent loan, that MeritBanc had agreed orally to provide either PCI or PCL interim construction

financing to construct additional phase s of t he apartments, and that the FSLIC had tortiously

interfered.

The RTC, as conservator, counterclaimed against PCI for the principal, interest, and attorn eys'

fees due under the note and agains t Smit h pursuant to the guaranty . PCI and Smith answered by

asserting their claims for affirmative relief as affirmative defenses.B.

The RTC, as conservator and in its corporate capacity, moved for summary judgment, which

the district court granted. The court denied PCL's claim for affirmative relief as unenforceable under

the D'Oench, Duhme doctrine. S ee D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676,

86 L.Ed. 956 (1942). On the same basis, the court denied PCI's claim for affirmative relief and its

affirmative defense to liabilit y under the note and Smith's affirmative defense on the guaranty, holding

the letter agreement unenforceable under the D'Oench, Duhme doctri ne. The court deni ed the

plaint iff's torti ous interference cl aims on the ground that they had not met the requirements of the

Federal Tort Claims Act. Subsequent to the entry of final judgment, the Office of Thrift Supervision

closed MeritBanc and appointed the RTC as its receiver.

C.

On appeal, the plaint iffs argue that the district court erred in granting summary judgment and

assert that they are not estopped to assert their defenses because the note, providing for a variable

rate of interest, was non-negotiable. The plaint iffs aver that the requirements of D'Oench, Duhme

and its companion statute, 12 U.S.C. § 1823(e), have been met. Additionally, the plaintiffs contend

that their jury demand was struck improperly and that the district court was in error in establishing

a receivership over PCI.

The RTC answers that summary judgment was correct in that no rational trier of fact could

conclude that MeritBanc's board had approved the letter agreement and that, as D'Oench, Duhme

requires such agreements to be recorded and board approval is evidence of recordation, D'Oench,

Duhme has not been satisfied. In the alternative, the RTC argues that section 8.08(g) of the Texas

Savings and Loan Act, T EX .R EV .C IV .S TAT .A NN

. art. 852a, § 8.08(g), requires board approval. The

RTC also contends that the jury demand was untimely and that the receivership was justified.

III.A.

Recently we reiterated that "[t]he personal defenses to which the maker is entitled must, of

course, be based on documents of the savings institution at the time of its insolvency and not upon

secret agreements unenforceable under D'Oench, Duhme

. ..." R TC v. Montross, 944 F.2d 227,

228–29 (5th Cir.1991) (en banc) (per curiam). This requirement applies irrespective of whether the

note is negotiable. I

d. Under D 'Oench Duhme, agreements, to be enforceable, must be recorded.

FDIC v. Hamilton, 939 F.2d 1225, 1228 (5th Cir.1991). Section 1823(e)(3) specifies that no such

agreement is valid against the RTC unless it was "approved by the board of di rectors of the

depository institution or its loan committee, which approval shall be reflected in the minutes of said

board or committee...."

S ection 8.08(g)(3) of the Texas Savings and Loan Act, similarly, provides that duri ng a

conservatorship, a prior agreement is unenforceable against a lending institution unless the agreement

was approved by the board of directors. Thus, the RTC's defense based upon that section likewise

depends upon whether MeritBanc's board approved the letter agreement.

B.

The critical issue, then, as we have said, is whether the letter agreement promising permanent

financing was approved by MeritBanc's board of directors. In the posture of this case, the question

of law before us is whether the plaint iffs presented sufficient summary judgment evidence to create

an issue of fact so as to defeat the motion for summary judgment.

The plaint iffs rely in part upon the deposition testimony of Douglas Gwin, a former employee

of MeritBanc who was in charge of coordinating the documentation for the loan, based upon the loan

committee's instructions. He testified that "[t]here was a permanent loan commitment of some sort"

and that James Cauley, MeritBanc's Executive Vice President, had drafted and signed it. He stated

that he did not know whether the letter agreement had been approved by the board or whether it waspart of the loan package that was presented to the board for approval.

The plaint iffs place more reliance upon Cauley's deposition testimony. Cauley was a member

of the loan committee. He stated that meetings of the loan committee were both formal and informal

and that loans were approved by the signature of three committee mem bers. Once the l oan

committee had recommended or approved a loan, the board "basically ratified at the monthly meetings

the action of the loan comm it t ee." He described this as ratifying or approving the loans "in

retrospect." He testified further that there was not a separate system of appro ving a commitment

asso ciat ed with a loan but that the board would have been informed of the existence of t he

commitment at the time the construction loan was made.

Thus, the practice was to inform the board, when the construction loan was to be considered,

that a permanent loan commitment had been issued i n co nnection therewith. So, in the ordinary

manner of handling loa ns at MeritBanc, the approval of the construction loan would have

encompassed both the construction loan and the permanent loan commitment.

Thus, Caule y co ncluded, the board's approval of the interim loan included approval of the

permanent loan commitment. His reasoning was that, as a matter of common sense, before the board

would have approved such a sizable loan, it would have required knowledge of how the loan was to

be taken off t he asso ciat ion's books when construction was completed; therefore, in the ordinary

cour se o f business, when the construction loan was considered and approved, the permanent loan

would have been considered and approved, as well. Cauley added that no new funds were required

to close the permanent loan commitment and that closing the permanent loan would have required

nothing more than preparing new documents in the form of a permanent loan and checking for any

new liens.

The minutes of MeritBanc's executive committee, dated January 23, 1989, approximately onemonth after the loan matured, show the following:

... Mr. Cauley advised the Park Club package is being prepared to send to the Federal

Home Loan Bank, [sic] this commitment expired December 31, 1988; however, we received

a request in November to either fund the permanent loan or provide additional construction

financing. The Association is to obtain a legal opinion that the permanent loan is a bonafide

[sic] commitment.

. . . . .

Mr. Cauley advised that Park Club, I nc. , $1.8 million loan, is saying there is a

commitme nt o ut st anding for the permanent loan. He added that the commitment for the

permanent loan included language which put the commitment contingent on regulatory

restrictions.

The commitment r eferred to is in the form of a letter on Hardin's stationery, dated June 30, 1987,

addressed to Smith of Park Club and signed by Cauley, stating that "[t]his letter evidences the

commitment of Hardin

... to make a loan to Park Club, Inc. ... for a permanent first lien mortgage

loan in the amount o f $8,250,000.00 to refinance the construction loan on Park Club Community

Apartments." On October 14, 1988, Smith wrote Cauley requesting the closing of the permanent

loan. On November 3, 1988, Cauley wrote an attorney, asking for preparation of permanent loan

documents and stating, "MeritBanc Savings Association is prepared to fund a first lien mortgage in

the form described below...."

As we might expect, the RTC relies upon other evidence in the summary judgment record.

It observes that the minutes of the August 19, 1987, board meeting, under "Details of Loans Closed,"

show t he t erms of the Park Club interim loan but make no mention of the permanent loan or

permanent loan commitment. The RTC notes that Cauley testified in deposition that he could not

recall the letter agreement's having been discussed at that meeting and never testified that the board

in fact had approved that agreement. Mo reo ver, on the same page reflecting the Park Club

construction loan, the minutes list other permanent loans closed, without mention of the Park Club

commitment.

C."Where the record taken as a whole could not lead a rational trier of fact to find for the

non-moving party, there is no "genuine issue for trial.' " M atsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (citing First Nat'l Bank v.

Cities Serv. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592–93, 20 L.Ed.2d 569 (1968)). As this is a

matter of law, we do not defer to the district court but apply the same standard to th e summary

judgment record as did the district court. See Hamilton, 939 F.2d at 1228.

The district court appears to have based its conclusion, i.e., that the board never approved

the permanen t lo an co mmitment, primarily upon an evaluation of whether Cauley's testimony

sufficiently establishes the board's custom and routine practice. The court concluded that there was

no showing of systematic conduct and that "[e]ven if the Board had a practice of spe cifically not

approving loans based on their categorization, the evidence before this Court indicates that on the

date in question, the Board departed from the routine" of "specifically not approving loans based on

their categorization" by listing approved loans as either interim or permanent.

All this shows, however, is that there is a disput e as to what the normal procedures of the

board were and whether, on the occasion in question, those procedures were followed. We agree that

on the basis of the evidence heretofore presented, the RTC appears to have the better side of the case:

On their face and standing alone, the board minutes are compelling, and their plain meaning appears

to indicate that no permanent commitment was approved. Cauley's testimony calls that into question,

albeit just barely.

Although it is a close question, we cannot say that, under the Matsushita standard, a rational

trier of fact could not find that the permanent financing was approved. We also are mindful that at

trial presumably there would be other evidence, subject to t he credibility determinations of the

factfinder, that would bear on this issue. The plaintiffs have presented enough evidence on summary

judgment to afford them that opportunity at trial.IV.

Because we remand for trial on the question of board approval, we now must address the

question of whether the district court erred in striking plaint iff's jury demand. The plaintiffs made no

jury demand in state court and filed their demand in federal court almost ten months after removal,

long after the ten days permitted by F ED .R.C IV .P. 81(c). The RTC concedes that the demand was

t imely as to its counterclaim but argues that the jury should be empaneled only as to the issues raised

in the counterclaim.

The parties agree that th e t est fo r determining whether a request for a jury on the

counterclaim entitles a party to a jury on the complaint is whether the counterclaim is compulsory,

i.e., "arises out of the subject matter of plaintiff's legal claim." 5 James W. Moore et al., M OORE ' S

F EDERAL P RACTICE ¶ 38.39[2 ], at 38–367 (2d ed. 1992). The parties also agree that the test for

whether a counterclaim is compulsory is set forth in Plant v. Blazer Finan. Servs., 598 F.2d 1357,

1360 (5t h Cir.1979): (1) whether the issues of fact and law raised by the claim and counterclaim

largely are the same ; (2) whether r es judicata would bar a subsequent suit on defendant's claim

absent the compulsory counterclaim rule; (3) whether substantially the same evidence will support

o r refute plaint iff's claim as well as defendant's counterclaim; and (4) whether there is any lo gical

relationship between the claim and the counterclaim. "An affirmative answer to any of the four

questions indicates the counterclaim is compulsory." Id. at 1360–61. This standard is taken from

F ED .R.C IV .P. 13(a), which pro vides t hat a counterclaim is compulsory if it "arises out of the

transaction or occurrence that is the subject matter of the opposing party's claim."

We have little difficulty in concluding that the instant counterclaim satisfies at least the first

and fourth tests. The issues of fact and law greatly overlap, and certainly there is a "logical

relationship" between the claim and counterclaim. Both regard the same instrument s and

transactions, and a jury would hear substantially the same facts in regard to both. Accordingly, the

district court was in error in striking plaintiff's demand for a jury.V.

The plaintiffs complain that the district court appointed an interim receiver to collect and

disburse rents until entry of final judgment, after Smith was unable to explain how the apartments and

child care center were able to generate a profit but were unable to pay property taxes or debt service.

No person ever was appointed as receiver, however, and plaint iffs have no t alleged any particular

harm from the order that was entered. Thus, to the extent that there is st ill a live controversy

regarding this matter, we affirm the order of the district court, as there appear to have been sufficient

grounds for appointment of a receiver.

The district court should not have left th e mat t er in an uncertain status, however.

Accordingly, we instruct that on remand, the court should either go forward with appointment of a

receiver or vacate its prior order appointing one.

VI.

In summary, this matter is not appropriate for summary judgment, as any disputed issues of

fact must be determined by a jury. The judgment of t he district court is AFFIRMED in part,

REVERSED in part, and REMANDED.