Opinion ID: 552196
Heading Depth: 2
Heading Rank: 4

Heading: Collapse of the S&Ls

Text: 23 Southmark had signed a contract to purchase the S&Ls and paid $5.5 million of earnest money in March 1985, but this contract was contingent on Southmark's satisfaction with the S&Ls' books after closely reviewing the S&Ls' business records. Hutton knew by April 1985 that Southmark had decided not to purchase the S&Ls under its March contract. In negotiations with another potential purchaser, Yang's investment banking team described as onerous the conditions that Aubin demanded as part of the S&Ls' sale. 24 Southmark would be the S&Ls' only serious prospect. Yang tried at least through November 1985 to find a suitor for the S&Ls without success. Meanwhile, state and federal regulators assessed the S&Ls' financial viability. Besides backing sizeable loans in what was becoming a soft real estate market, the S&Ls held significant equity interests in real estate ventures with declining values. Mismanagement also figured in the S&Ls' financial decline. For example, after the Facility Agreement was executed, Haralson took home a monthly management fee of at least $109,000. The S&Ls' directors allowed Aubin to substitute 171 residential lots of unknown value for $4 million of collateral securing a loan to one of his companies. Only three months before they were closed by federal regulators, the S&Ls purchased luxury automobiles for eleven employees to boost their sagging moral. 2 25 Late in 1985, Lynch was obviously worried about whether Mercury's stock was sufficient security for the approximately $48 million that Hutton advanced under the Note. On several occasions, Hutton officials discussed the S&Ls with federal and Texas regulators. Hutton ultimately received no payments on the Note and nothing for its security. On March 14, 1986, the Federal Home Loan Bank Board (FHLBB) appointed a conservator for the S&Ls, citing dissipation of assets, insolvency, mismanagement, and unsafe and unsound lending practices. The parties then filed the claims and counterclaims at issue here. 26 Both sides have employed a shotgun approach in presenting their pleadings, motions, briefs, and arguments. To decide some 30 summary judgment motions and responses, the district court reviewed the voluminous summary judgment evidence that consisted of hundreds of exhibits and scores of lengthy depositions. The court decided that the summary judgment record conclusively determined all genuine issues of material fact as to all causes of action pleaded by Hutton as well as the Aubin parties. The court awarded Hutton Group judgment against RBI for the amount due on the Note and dismissed all other claims. Both Hutton and the Aubin parties appeal.