Court Opinion

ID: 6493
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:18:02+00
Date Added: 2024-06-11T16:46:10.737096
License: Public Domain

United States Court of Appeals,

                             Fifth Circuit.

                              No. 93-1097.

              Daniel P. ROBINOWITZ, Plaintiff-Appellant,

                                      v.

                GIBRALTAR SAVINGS, et al., Defendants,

 FGMC Investment Corp., Shawmut First Mortgage Corp., f/k/a First
Gibraltar Mortgage Corp., and Resolution Trust Corporation, as
receiver for Gibraltar Savings, Defendants-Appellees.

                             June 28, 1994.

Appeal from the United States District Court for the Northern
District of Texas.

Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges.

     W. EUGENE DAVIS, Circuit Judge:

     Daniel    Robinowitz   appeals       the   district   court's   grant   of

summary judgment to the RTC based on its holding that all of

Robinowitz's claims are barred by the D'Oench Duhme doctrine.                We

affirm.

                                      I.

     In 1983, Daniel Robinowitz (Robinowitz) approached Gibraltar

Savings for financing.      He and FGMC Investment Corporation (FGIC)

entered into a partnership to purchase land for the development of

the Galleria project, a "multi-use" development to be built in

several phases in Metaire, Louisiana.            FGIC was the subsidiary of

First Gibraltar Mortgage Corporation (Shawmut).1             Shawmut was the

     1
      In December 1986, Gibraltar Savings sold the stock of First
Gibraltar Mortgage Corporation to Shawmut Bank who later sold its
stock to El Paso Federal Savings Association. In 1991, the RTC
was appointed receiver for El Paso.

                                      1
subsidiary of Gibraltar Savings.             Gibraltar Savings provided $9

million of financing for the purchase.

     In 1985, Galleria Land, Ltd., a limited partnership with

Robinowitz as one of its managing general partners, entered into a

joint venture with FGIC to hold the land purchased for the Galleria

project.    FGIC also entered into a joint venture with Galleria

Phase I., Ltd., also a limited partnership with Robinowitz as one

of its managing partners, to develop the first phase of the

Galleria project.      The joint venture agreements provided for joint

control and provided that Galleria Phase I, Ltd. was primarily

responsible for the development and management of the first phase

while FGIC was primarily responsible for obtaining financing for

the project.

     The    first   phase   of   the       Galleria   project    included   the

construction of a hotel to be funded in part by Embassy Suites.

After the construction of the hotel began, the New Orleans economy

softened, and Embassy Suites refused to fund the hotel.              Gibraltar

Savings agreed to loan the additional money needed for the hotel in

exchange for an increased ownership interest in it.

     By 1986, serious disputes had developed between Robinowitz and

FGIC and Gibraltar Savings.            The RTC asserts that Robinowitz

threatened to sue FGIC and Gibraltar Savings and that FGIC and

Gibraltar    Savings    became   concerned       about   their     significant

financial commitment to the project in the softening real estate

market.     The parties entered into discussions to settle their

disputes.    According to Robinowitz, Gibraltar Savings told him at

                                       2
the settlement meeting that it was not going to continue to fund

the hotel and that it was going to sell the Galleria project for

whatever it could get.      Robinowitz argues that because of these

representations, he decided to sell his interest in the project to

Gibraltar Savings.

     Initially, Robinowitz agreed to sell his interest for $20

million.     Gibraltar   Savings    refused    to   pay   this   amount,   and

Robinowitz contends that Gibraltar Savings pressured him into

settling by instructing the contractor to stop working and by

delaying progress payments and requests for reimbursement. Because

Robinowitz was unable to meet his operating expenses and debt

service, he agreed to sell his interest for $3.5 million.

     Robinowitz then entered into a Settlement and Mutual Release

Agreement with Gibraltar Savings, Shawmut and FGIC.                  In that

agreement,   Gibraltar    Savings    and      its   subsidiaries    released

Robinowitz from his obligations under the joint venture agreements.

In return Robinowitz released FGIC and Gibraltar Savings from all

claims and causes of action that Robinowitz had in connection with

any "dealings, transactions, agreements or understandings" with any

of the Defendants, "which have occurred prior to the date of this

Mutual Release."

     Robinowitz alleges that, contrary to its representations,

Gibraltar Savings had no intention of selling the project, but

instead intended to squeeze him out of the project.               He alleges

that the day before the parties executed the Settlement and Mutual

Release Agreement, Gibraltar Savings hired a long-term manager for

                                     3
the Galleria project.

       Robinowitz filed suit in state court for breach of fiduciary

duty, fraud, misrepresentation, and declaratory judgment against

Gibraltar Financial of California (a holding company that owned all

of Gibraltar Savings' stock),2 Gibraltar Savings, Shawmut and FGIC.

Robinowitz alleged that the Defendants breached their fiduciary

duties to him by fraudulently inducing him to sign the release and

to sell his partnership interests.                 Specifically, he alleged that

the    Defendants        misrepresented      their      true   plans   regarding    the

Galleria project in order to induce him to sell his interest in the

project for a price well below the real value.

       In 1988, the state trial court granted Defendants' motion for

summary judgment, ruling that Robinowitz's claims were foreclosed

by the Mutual Release and Settlement Agreement. However, the Texas

court of appeals reversed and remanded for trial, finding that a

fact       issue   existed      as    to   "whether      Gibraltar     made    material

misrepresentations which were fraudulent and in violation of its

fiduciary duty."3

       On October 30, 1989, the RTC was appointed receiver for

Gibraltar       Savings     and      intervened    in   the    state   court   action,

removing it to district court.                   The RTC, Shawmut, and FGIC then

filed       a   motion    for     summary    judgment      on    the   grounds     that

       2
      Gibraltar Financial settled with Robinowitz and was
dismissed in February 1993.
       3
      The Texas Court of Appeals labeled the Defendants
collectively "Gibraltar." Thus, it is unclear which Defendants
the court determined owed a fiduciary duty to Robinowitz.

                                             4
Robinowitz's claims were barred by the D'Oench, Duhme doctrine and

related statutes.      The district court granted Defendants' motion,

holding that because Gibraltar Savings' misrepresentations did not

appear in the Settlement and Mutual Release agreement or on any

document on file with Gibraltar Savings, Robinowitz had "lent

himself to a scheme or arrangement whereby banking authorities are

likely to be misled."      Robinowitz timely appealed.

                                    II.

     The party moving for summary judgment "bears the initial

responsibility of informing the district court of the basis for its

motion,    and     identifying   those    portions      of   "the    pleadings,

depositions, answers to interrogatories, and admissions on file,

together    with    the   affidavits,     if    any,'   which   it    believes

demonstrate the absence of a genuine issue of material fact."

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552,

91 L. Ed. 2d 265 (1986) (citations omitted).              If the non-movant is

faced with a motion for summary judgment "made and supported" as

provided by Rule 56, the non-movant cannot survive the motion by

resting on the mere allegations of its pleadings.                     See Id.;

Slaughter v. Allstate Ins. Co., 803 F.2d 857, 860 (5th Cir.1986).

     Robinowitz makes several arguments as to why D'Oench Duhme

should not apply to this case.           First, he contends that D'Oench

Duhme does not apply because the suit does not involve a note or

debt.     Second, he argues that the doctrine does not apply to bar

claims for breach of fiduciary duty.           Next, he argues that D'Oench

Duhme does not bar his claims against FGIC and Shawmut because they

                                     5
are subsidiaries of a failed insured savings and loan institution

and   not    entitled        to    the   jurisprudential   and       statutory     bar.

Robinowitz then argues that the RTC's knowledge at the time of suit

serves to preclude application of D'Oench.                     Finally, Robinowitz

argues     that    the   transaction,        the   settlement     of      real   estate

partnership agreements with a lender, is not a banking function and

is therefore not covered by D'Oench Duhme.                      We consider these

arguments below.

                                           III.

                                            A.

          Robinowitz first argues that the D'Oench Duhme doctrine and

§ 1823 of FIRREA should not apply to bar his claim for breach of

fiduciary duty because that claim is unrelated to a note or debt.4

According to Robinowitz, D'Oench Duhme applies only when a party is

attempting        to   use    an   unrecorded      agreement    as    a   defense   to

collection efforts by a receiver of a debt or obligation.

      Our cases do not support Robinowitz's argument for such a

narrow application of D'Oench Duhme.                 We have held that D'Oench

Duhme also applies in a case "with an affirmative claim, against

      4
      Section 1823 of FIRREA is the statutory codification of the
common law D'Oench Duhme doctrine. It provides that "[n]o
agreement which tends to diminish or defeat the interest of the
Corporation 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 Corporation unless such agreement—1)
is in writing, 2) was executed by the depository institution ...
3) was approved by the board of directors of the depository
institution or its loan committee, ... and 4) has been,
continuously, from the time of its execution, an official record
of the depository institution." 12 U.S.C. § 1823(e) (1989).

                                            6
FDIC-Receiver, with no note whose terms are subjected to a secret

protocol."    Bowen v. FDIC, 915 F.2d 1013, 1015 (5th Cir.1990);    see

also Beighley v. FDIC, 868 F.2d 776, 783-84 (5th Cir.1989) (holding

that D'Oench Duhme barred the plaintiff's claims for breach of

contract, breach of fiduciary duty, promissory estoppel, and fraud

arising from an unwritten agreement by the bank to finance a third

party's purchase of collateral from the plaintiff).

     Robinowitz's argument that D'Oench Duhme has no application

because the suit is not related to a note or debt is therefore

without merit.

                                  B.

     Robinowitz next argues that although courts have, in dicta,

purported to apply D'Oench Duhme to bar claims for breach of

fiduciary duty where no fiduciary relationship was proven, no cases

have held that D'Oench Duhme bars claims for breach of fiduciary

duty where the fiduciary relationship is established.         He argues

that the fiduciary relationship has been established here because

he and the Defendants entered written partnership agreements.        He

argues that his claim is based on these agreements, not Defendants'

oral assertion that they were going to stop financing the project.

         We   disagree.    Even   assuming   proof   of   a   fiduciary

relationship,5 Robinowitz's claims are based not on any partnership

     5
      The RTC argues that there is no fiduciary relationship
between Gibraltar Savings and Robinowitz because Gibraltar
Savings was not a party to any of the joint ventures and argues
there is no fiduciary relationship between Robinowitz and Shawmut
because Shawmut was a partner only under the 1983 joint venture
that terminated in 1985. However, the Texas court of appeals in
reversing the state court's grant of summary judgment to the bank

                                  7
agreements but on Defendants' alleged oral misrepresentation during

the settlement meeting about their future intentions to immediately

dispose of the Galleria project.              According to Robinowitz, this

alleged      representation       induced    him     to     sign     the      Settlement

Agreement.       The alleged misrepresentation was not written or

recorded according to the requirements of § 1823.

       Robinowitz's     claim     is   analogous       to     one       for   fraudulent

inducement which is barred by D'Oench Duhme.                     Langley v. FDIC, 484
U.S. 86, 108 S. Ct. 396, 98 L. Ed. 2d 340 (1987).                       In Langley, the

plaintiffs claimed that the Bank fraudulently induced them to

borrow funds to invest in property by orally misrepresenting the

size    of    the     property.        The    Court        held     that      the    oral

misrepresentation       regarding      the    nature        of    the     property    was

sufficient to constitute an "agreement" within the meaning of §

1823.   Id. at 92, 108 S.Ct. at 401.           It then held that even if the

misrepresentation was fraudulent, § 1823 still barred a claim based

on the representation unless it met the recording requirements.

Id. at 93-94, 108 S.Ct. at 402.              Robinowitz's claim that an oral

misrepresentation fraudulently induced him to enter the settlement

agreement,     like     the   Langleys'      claim        that     the     bank's    oral

misrepresentation regarding the property induced them to borrow

funds, is also barred by D'Oench Duhme.               See also, FDIC v. Payne,

973 F.2d 403 (5th Cir.1992) (D'Oench Duhme doctrine bars Payne's

found that there was a fact issue as to "whether [defendants]
made material misrepresentations which were fraudulent and in
violation of its fiduciary duty." The district court did not
discuss whether Robinowitz had established a fiduciary duty
between himself and Defendants.

                                         8
claim     of     fraudulent     inducement     based      on    bank's   oral

misrepresentation about financial condition of person Payne agreed

to guarantee);       Beighley v. FDIC, 868 F.2d at 784 n. 12 (D'Oench

Duhme bars Beighley's claim for breach of fiduciary duty arising

out of bank's alleged oral agreement to finance the purchase of

collateral property).

                                        C.

     Next, Robinowitz argues that even if D'Oench Duhme applies to

bar claims based on fraudulent inducement, it does not bar claims

against        subsidiaries    and      sub-subsidiaries       of   protected

institutions.6        This    circuit   has   not   yet   addressed   whether

subsidiaries may assert defenses available under D'Oench Duhme.

See, Alexandria Associates v. Mitchell, 2 F.3d 598, 601 n. 10 (5th

Cir.1993) (choosing not to address issue).

     At least three other circuits have addressed this issue.             All

of them reached the conclusion that wholly-owned subsidiaries of

failed institutions may also assert D'Oench Duhme defenses to bar

claims based on secret or oral agreements.          See, Sweeney v. RTC, 16
F.3d 1 (1st Cir.1994) (D'Oench Duhme extends to the financial

interest of any wholly owned subsidiary of a failed institution);

Oliver v. RTC, 955 F.2d 583, 585-86 (8th Cir.1992) ("D'Oench

doctrine extends broadly to cover any secret agreement adversely

affecting the value of a financial interest that has come within

     6
      Shawmut was a wholly-owned subsidiary of Gibraltar Savings
and FGIC was a wholly-owned subsidiary of Shawmut at the time of
the events giving rise to Robinowitz's claims. Shawmut's stock
was sold in 1989 to El Paso Savings Association, which was put
into receivership in 1991.

                                        9
the RTC's control as receiver of a failed financial institution"

including the financial interest of wholly-owned subsidiaries);

Victor Hotel Corp. v. FCA Mortgage Corp., 928 F.2d 1077 (11th

Cir.1991) (same).

      We agree with our sister circuits that the D'Oench Duhme

defense is available to wholly owned subsidiaries of the insured

institution.    Federal regulators have to "rely on a financial

institution's   records   and     its     assets,   such   as   wholly-owned

subsidiaries,   to   determine    solvency    for   regulatory    purposes."

Victor Hotel, 928 F.2d at 1083.         They must be able to examine the

records of the subsidiary, as well as the parent, especially since

the subsidiary may constitute a major asset of the parent.             Such

reliance is necessary to enable the federal regulators to persuade

solvent banks to assume the accounts of the failed institutions.

Therefore, the district court correctly extended the D'Oench Duhme

defense to Shawmut and FGIC.

                                     D.

      Robinowitz next argues that if RTC has knowledge of the side

agreement or secret promise, then D'Oench Duhme does not apply.

Robinowitz asserts that the RTC knew about his claim at least two

years before the RTC took over Gibraltar Savings.               Robinowitz's

suit had been pending against Shawmut for two years and had been

appealed to the Texas appellate and Texas Supreme Court before RTC

assumed Gibraltar Savings.       However, the Supreme Court has already

addressed this issue and held that knowledge by the FDIC is

irrelevant:

                                     10
     [K]nowledge of the misrepresentation by the FDIC prior to its
     acquisition of the note is not relevant to whether § 1823(e)
     applies.... An agreement is an agreement whether or not the
     FDIC knows of it....     The statutory requirements that an
     agreement be approved by the bank's board or loan committee
     and filed contemporaneously in the bank's records assure
     prudent consideration of the loan before it is made, and
     protect against collusive reconstruction of the loan terms by
     bank officials and borrowers.... Knowledge by the FDIC could
     substitute for the latter protection only if it existed at the
     very moment the agreement was concluded, and could substitute
     for the former assurance not at all.

Id. at 94-95, 108 S.Ct. at 402-403.          See also, Bell & Murphy v.

Interfirst, 894 F.2d 750, 753 (5th Cir.), cert. denied, 498 U.S.
895, 111 S. Ct. 244, 112 L. Ed. 2d 203 (1990) (D'Oench bars claim even

though lawsuit was filed against financial institution before it

was declared insolvent).        The key factor in the application of the

D'Oench Duhme doctrine is whether the borrower "lent himself to a

scheme or arrangement whereby banking authorities are likely to be

misled."     Bowen v. FDIC, 915 F.2d 1013, 1015 (5th Cir.1990)

(quoting D'Oench ).     Robinowitz lent himself to such a scheme or

arrangement when he failed to include in the Settlement Agreement

the alleged condition, that he was selling his interest in the

project because Gibraltar Savings was withdrawing its support.

McMillan   v.   MBank   Forth    Worth,   N.A.,   4 F.3d 362,   368   (5th

Cir.1993).

                                     E.

     Finally, Robinowitz argues that the real estate partnership

transactions at issue here are outside the traditional banking

function, and therefore are not covered by D'Oench Duhme.                  He

relies on the recent decision in Alexandria Associates, Ltd. v.

Mitchell Co., 2 F.3d 598 (5th Cir.1993), in which this court

                                     11
declined       to    apply    D'Oench    Duhme       to     the   commercial   sale    of

partnership interests in a real estate development venture by a

third generation subsidiary of a failed institution.

       In Alexandria, the third generation subsidiary of Altus Bank,

the Mitchells, formed limited partnerships to build, own and

operate apartment building complexes through HUD financing.                          They

sold       partnership       interests    in        the     apartment    complexes     to

plaintiffs, LaSala and Alexandria.                   Alexandria then attempted to

syndicate its partnership interests, in order to pay off its

purchase loan indebtedness, and when its attempts failed, sued the

Mitchells      alleging       common    law    fraud       and    violations   of   state

securities law based on the Mitchells' oral misrepresentations of

the value of the property.               Id. at 600.          This court declined to

extend D'Oench Duhme to these non-banking transactions:                        "[B]anks

simply do not engage in the sale of partnership interests in real

estate development ventures in the ordinary course of banking

business."7

           Alexandria is distinguishable from today's case and does not

control it.         Although Gibraltar Savings had a proprietary interest

in   the     real    estate    at   issue,         its    primary   relationship     with

Robinowitz was as a lender.             Unlike the parent bank in Alexandria,

which did not make any loans on the project, Gibraltar Savings had

about $100 million in outstanding loans on the Galleria project;

       7
      This court recognized that a regulatory agency serving as a
conservator or receiver of a failed institution might engage in
liquidation of that bank's assets and be within the D'Oench Duhme
doctrine. Id. at 603, n. 30.

                                              12
including $69 million in permanent loan commitments and $9 million

that Robinowitz borrowed to fund the original land purchase.           Thus

Gibraltar was performing a quintessential banking function. One of

Robinowitz's main complaints is that Gibraltar Savings tightened

the funding spigot to pressure him into selling his interest.          The

Defendants here sought to settle disputes over their financing of

a   project,   not    to   make   an    ordinary   commercial   investment.

Therefore, D'Oench Duhme applies to bar Robinowitz's claims.            OPS

Shopping Center v. FDIC, 992 F.2d 306 (11th Cir.1993) (D'Oench

Duhme    applies     to    bar    claims     involving   ordinary   banking

transactions).

                                       IV.

      D'Oench Duhme applies to bar all of Robinowitz's claims based

on alleged oral misrepresentations made by officers of a failed

institution.       We therefore AFFIRM the judgment of the district

court.

                                       13