Opinion ID: 552196
Heading Depth: 3
Heading Rank: 1

Heading: Haralson's Breach

Text: 109 Haralson promised Hutton that Mercury's and Milam's businesses shall be operated in ordinary course and no debts shall be incurred or other transactions entered into except in the ordinary course of business. Facility Agreement p 2.h. The district court granted Haralson's conclusory motion for summary judgment on Hutton's breach of contract claim, stating that [m]ismanagement was apparently within the S&Ls' ordinary course of business and Hutton knew this when it ratified the facility agreement. 110 But the Participation Agreements only reaffirmed Haralson's obligation to operate the S&Ls in the ordinary course. Even with all that Hutton knew about Aubin and Haralson by June 7, 1985, the record contains no evidence that Hutton encouraged or permitted Aubin and Haralson to lie, cheat, and steal in the ordinary course of their business. Hutton's mere awareness of a possible breach of contract claim and its failure to register disapproval are insufficient to constitute waiver or estoppel. See Union Free School Dist. v. New York State Div. of Human Rights, 43 A.D.2d 31, 349 N.Y.S.2d 757, 762 (1973), appeal dismissed, 33 N.Y.2d 975, 353 N.Y.S.2d 739, 309 N.E.2d 137 (1974). 111 We reject the district court's interpretation of ordinary course, and hold that Haralson obligated himself to operate the S&Ls in accordance with the manner in which honest managers generally operate savings and loan institutions. The parties used ordinary course to protect Hutton's collateral while affording the S&Ls some freedom to make legitimate business mistakes. No other meaning of ordinary course accords with the sense of the remainder of the contract. See Laba v. Carey, 29 N.Y.2d 302, 308, 277 N.E.2d 641, 644, 327 N.Y.S.2d 613, 618 (1971) (as between possible interpretations of an allegedly ambiguous term, that will be chosen which best accords with the sense of the remainder of the contract). Even if Hutton was aware that the S&Ls were mismanaged before March 8, 1985, Haralson agreed to manage with at least the median level of competence thereafter. 112 Whether a transaction is prudent or negligent is not determinative of whether the S&Ls were run in the ordinary course. Especially in present times, commission of one improper or negligent act by a savings and loan employee or agent does not necessarily distinguish the operation of one savings and loan institution from another. However, a pattern of such conduct would distinguish the S&Ls. 113 Hutton contends that the facts found in Haralson v. Federal Home Loan Bank Bd., 721 F.Supp. 1344 (D.D.C.1989) (Haralson's unsuccessful challenge to the FHLBB's takeover of the S&Ls) establish as a matter of law that Haralson did not manage the S&Ls in the ordinary course. Though the record contains abundant evidence of a pattern of unwise, unsound, and negligent transactions, [w]e are fundamentally a court of review, not of first analysis. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 210 (5th Cir.), cert. denied, 488 U.S. 926, 109 S.Ct. 310, 102 L.Ed.2d 329 (1988). On remand, the district court must consider Hutton's breach of contract claims using our interpretation of ordinary course before we will address the matter. 15