Court Opinion

ID: 2962617
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:59:54.520893+00
Date Added: 2024-06-11T11:42:31.739506
License: Public Domain

USCA1 Opinion

	

          June 1, 1994          [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 93-2049                                   VINCENT GRANDE,                                Plaintiff - Appellant,                                          v.                         BANK OF NEW ENGLAND OLD COLONY, N.A.                      AND FEDERAL DEPOSIT INSURANCE CORPORATION,                               Defendants - Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Robert E. Keeton, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                              Torruella, Circuit Judge,                                         _____________                           Campbell, Senior Circuit Judge,                                     ____________________                               and Cyr, Circuit Judge.                                        _____________                                _____________________               Robert S. Wolfe, with whom Wolfe Associates, Alan R. Hoffman               _______________            ________________  _______________          and Lynch, Brewer, Hoffman & Sands, were on brief for appellant.              ______________________________               Claire  L.  McGuire,  Counsel,  Federal   Deposit  Insurance               ___________________          Corporation, with whom Ann  S. DuRoss, Assistant General Counsel,                                 ______________          Colleen B. Bombardier, Senior Counsel, Federal Deposit  Insurance          _____________________          Corporation, Paul  R.  Devin, Allan  N. David,  Sandra P.  Criss,                       _______________  _______________   ________________          Peabody & Arnold, Richard E. Gentilli and Kaye, Fialkow, Richmond          ________________  ___________________     _______________________          & Rothstein, were on brief for appellees.          ___________                                 ____________________                                 ____________________                    Per  Curiam.   In this  action, the  plaintiff, Vincent                    ___________          Grande,  as Trustee of R. D. Realty Trust, asserts several claims          against  the  Federal Deposit  Insurance Corporation  ("FDIC") as          receiver  for the Bank of  New England ("BNE").   As the district          court noted, the form of Grande's claims  is substantively driven          by  his desperate attempt to avoid  the reach of D'Oench, Duhme &                                                           ________________          Co. v.  Federal Deposit Ins. Corp., 315 U.S. 447, 457 (1942), and          ___     __________________________          its statutory cognate, 12 U.S.C.   1823(e).  After a bench trial,          the district  court found  that Grande's  attempts fell  short of          overcoming  the  nearly insurmountable  hurdle  that  the D'Oench                                                                    _______          Duhme doctrine presents,  and found in favor  of the FDIC on  all          _____          counts.  We affirm.                                      BACKGROUND                                      BACKGROUND                                      __________                    BNE held a first mortgage on a condominium development.          Manchester  Properties  Limited   Partnership  ("MPLP")  was  the          mortgagor.    Grande  held a  second  mortgage  on the  property.          Eventually,  the BNE  loan went  into  default, the  mortgage was          foreclosed, and the property was sold at a deficiency.                    Grande makes several claims  to attempt to recover some          of the foreclosure  proceeds despite BNE's priority  in its first          mortgage over  Grande's second  mortgage.  First,  Grande asserts          that BNE agreed to allow him and MPLP to exchange Grande's second          mortgage  for the first  condominium unit built.   Second, Grande          claims that even if  D'Oench, Duhme or 12  U.S.C.   1823(e)  bars                               ______________          direct claims based  on the purported  agreement between BNE  and          MPLP to allow an exchange (between MPLP and Grande) of the second                                         -2-          mortgage  for  a  condominium  unit,  BNE's  mortgage  should  be          equitably subordinated to Grande's  claims.  Third, Grande points          to  language in the first mortgage that Grande contends should be          read as permitting him to receive a portion of the  proceeds of a          foreclosure  sale,  before  the  first  mortgage  is   satisfied.          Fourth, Grande claims that he is entitled to recovery because BNE          negligently supervised construction  at the condominium  project,          and this  caused a  loss of approximately  $200,000 which  harmed          Grande.1                                   GRANDE'S CLAIMS                                   GRANDE'S CLAIMS                                   _______________                    With respect  to  Grande's first  contention, we  agree          with the district court that Grande's claim is barred by D'Oench,                                                                   ________          Duhme and 18 U.S.C.   1823(e).2  We will not  rehash the district          _____                                        ____________________          1  Grande has raised other subsidiary contentions on appeal.   We          have reviewed these issues and believe that they are meritless.          2  12 U.S.C.   1823(e) expressly provides:                    No  agreement  which  tends  to  diminish  or                    defeat  the  interest  of [the  FDIC]  in any                    asset  acquired by it  under this  section or                    section   1821  of  this   title,  either  as                    security  for a  loan  or by  purchase or  as                    receiver    of    any   insured    depository                    institution,  shall  be  valid  against  [the                    FDIC] unless such agreement --                      1) is in writing,                      2)   was   executed  by   the  depository                      institution  and  any person  claiming an                      adverse  interest  thereunder,  including                      the  obligor, contemporaneously  with the                      acquisition   of   the   asset   by   the                      depository institution,                      3) was approved by the board of directors                      of the depository institution or its loan                                         -3-          court's thorough discussion of the barriers D'Oench, Duhme and 12                                                      ______________          U.S.C.    1823(e) present  to claims  against the  FDIC, and  the          expansive  reach of the D'Oench,  Duhme doctrine.   See Grande v.                                  _______________             ___ ______          Federal Deposit Insurance  Corp., No. 91-10080,  slip op. at  3-6          ________________________________          (D.  Mass. September 7, 1993).  Rather, we conclude that Grande's          claim  that BNE agreed to an exchange of Grande's second mortgage          for  a condominium unit does not comport with the requirements of          D'Oench,  Duhme and  12  U.S.C.   1823(e),  and therefore  Grande          _______________          cannot rely on this agreement as a basis for recovery against the          FDIC.    Under D'Oench,  Duhme, bank borrowers  or guarantors are                         _______________          prohibited  from using  secret or  unrecorded side  agreements to          defend against efforts by the FDIC to collect on promissory notes          that it has acquired from a failed bank.  See D'Oench, Duhme, 315                                                    ___ ______________          U.S.  at  460.  Similarly,  12  U.S.C.    1823(e)  codifies  this          principle and requires, in pertinent part to this appeal, that no          agreement which tends to diminish the interest of the FDIC in any          asset acquired by it as receiver, shall be valid against the FDIC          unless  it  is  "approved  by  the  board  of  directors  of  the          depository  institution or  its  loan committee,  which  approval          shall be reflected in the minutes of said board or committee."                    Grande  has  failed  to  prove that  the  exchange  was          approved  by   the  relevant  BNE  credit   committee,  and  more                                        ____________________                      committee,   which   approval  shall   be                      reflected in the minutes of said board or                      committee, and                      4) has been,  continuously, from the time                      of  its execution, an  official record of                      the depository institution.                                         -4-          importantly, that  this approval  was officially recorded  in the          requisite committee minutes.   Rather, Grande proffers and relies          upon  evidence of  negotiations  between BNE,  MPLP, and  Grande,          regarding the proposed  exchange.  As  the district court  found,          this evidence is insufficient to  satisfy the requirements of  12          U.S.C.    1823(e).  Furthermore, Grande's  arguments that certain          documents  were  incorporated  into  other  documents  that  were          approved  by  the  credit  committee are  unsubstantiated.    Put          simply,  the minutes of BNE's credit committee do not contain any          mention  of  an agreement  permitting  the  exchange of  Grande's          second mortgage for the condominium unit.  Therefore, 12 U.S.C.            1823(e) and  D'Oench, Duhme bar  Grande's claims against  the BNE                       ______________          based on this alleged agreement.                    Grande alternatively claims that even if his claims are          barred by D'Oench, Duhme and 12 U.S.C.   1823(e), the doctrine of                    ______________          equitable subordination requires that  Grande's mortgage be given          priority.   To  make out  a  claim for  equitable  subordination,          traditionally a bankruptcy  doctrine, a party must  prove that 1)          the  claimant engaged in some sort of inequitable conduct; 2) the          misconduct  resulted in  injury  to the  bankrupt's creditors  or          conferred  an unfair advantage on the  claimant; and 3) equitable          subordination  of   the  claim  is  not   inconsistent  with  the          provisions  of  the Bankruptcy  Code.   In  re 604  Columbus Ave.                                                  _________________________          Realty Trust,  968 F.2d  1332, 1353  (1st  Cir. 1992)  (citations          ____________          omitted).  Thus, to support a claim in  this context, Grande must          first prove that BNE engaged in some sort of inequitable conduct.                                         -5-          As evidence of such inequitable conduct, Grande contends that the          BNE  improperly  administered the  construction  loan  and, as  a          result,  some $200,000  of construction  funds were  not properly          disbursed.   The district court found, however, that there was no          evidence  that these unaccounted for  funds did not,  in fact, go          into the  project, and thus  there is no predicate  for a finding          that any wrongdoing  occurred on  the part of  any BNE  employee.          Additionally, the district court found that Grande did not suffer          any harm  based on the alleged  inequitable conduct of BNE.    We          see no reason to  disturb either of the district  court's factual          findings.3   Grande has therefore failed to sustain his burden of          proof on the equitable subordination claim, and we need not reach          the question of whether Grande's equitable subordination claim is          barred as a matter of law based on D'Oench, Duhme and 12 U.S.C.                                               ______________          1823(e).4                                        ____________________          3  We review a district court's finding of facts in a bench trial          under the clear error  standard.  Dedham Water Co.  v. Cumberland                                            ________________     __________          Farms Dairy, 972 F.2d 453, 457 (1st Cir. 1992).          ___________          4   Grande also brought a claim under Mass. Gen. L. ch. 93A based          upon alleged unfair  actions taken  by BNE.   The district  court          found  that Grande failed to  satisfy his burden  of proving that          BNE made misrepresentations  or otherwise  acted unfairly  toward          MPLP  or Grande.  While  Grande argues that  the district court's          factual  Mass. Gen. L. ch. 93A findings were "fatally flawed," he          has  not pointed  to any  specific evidence  in the  record which          demonstrates  that these  findings were  clearly erroneous.   The          fact   that  certain   evidence   was   susceptible  of   another          interpretation  is insufficient  to show that  the interpretation          chosen  by the district court was erroneous.  Rather, where there          are  two permissible  views of  the evidence,  the interpretation          assigned  by the  district court  must be  adopted.   Williams v.                                                                ________          Poulos, 11  F.3d 271, 278 (1st Cir.  1993).  Therefore, we credit          ______          the  district court's findings and affirm its ruling on the Mass.          Gen. L. ch. 93A claim.                                         -6-                    Grande's third contention is a breach of contract claim          to the effect  that language  in BNE's first  mortgage should  be          read  as modifying  the  priorities of  the  mortgages to  permit          Grande  to receive a portion  of the proceeds  of the foreclosure          sale.    We  agree with  the  district  court's  ruling that  the          language in the documents that Grande relies upon simply does not          support  his interpretation  that the  priority of  the mortgages          should  be altered.  For  instance, Grande points  to language in          Schedule A of  the first  mortgage deed, which  provided for  the          payment   of  release   fees  to   Grande  under   the  following          circumstances:                      The   Mortgagee   shall   issue   partial                      releases of this mortgage for  each newly                      constructed unit upon  the payment to  it                      by  the  Mortgagor   of  ninety   percent                      (90.0%) of the  proceeds, net  reasonable                      costs of conveyance  and partial  release                      fee of Forty-seven  thousand two  hundred                      twenty-two   and    22/100   ($47,222.22)                      dollars  per  unit   to  the   Mortgagee,                      Vincent Grande, Trustee . . .          This language cannot reasonably be read to change the priority so          that  the first mortgage is  subordinated to the  interest of the          second  mortgagee.    Rather,   the  provision  seems  to  simply          anticipate  the payment of release fees on completed units at the          time  they were  sold.   No  units were  completed  prior to  the          default.   Moreover, upon foreclosure, Grande's  rights under the          second  mortgage, including  the  payment of  release fees,  were          extinguished.  See Duff v. United States Trust Co., 327 Mass. 17,                         ___ ____    _______________________          20, 97 N.E.2d  189, 191 (1951)  (an agreement to  give a  partial          release is only effective until default under the mortgage).                                         -7-                    Grande's  final contention  is that  he is  entitled to          recovery based  upon BNE's negligent supervision  of construction          on  the project, causing a  loss of approximately  $200,000.  The          district  court  found that  Grande  failed  to proffer  credible          evidence   demonstrating   that    BNE   negligently    inspected          construction  on  the project  and/or  improperly advanced  funds          under the construction loan  agreement.  The district  court also          found that  Grande failed to prove  that he was damaged,  or that          the  value  of  the  property  was  impaired,  by  BNE's  alleged          negligence.  Again,  we have not been  shown any evidence  in the          record  which  demonstrates  why  these  findings   were  clearly          erroneous.     Therefore,  Grande's  claim   based  on  negligent          supervision also fails.                    For the foregoing reasons, the decision of the district          court is affirmed.                   ________                                         -8-