Barrows v. RTC

• Court: Court of Appeals for the First Circuit
• Decided: November 15, 1994
• Docket: 94-1555
• Status: Published

Opinion

USCA1 Opinion

November 15, 1994
                                [NOT FOR PUBLICATION]

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

No. 94-1555 

                                    JERRY BARROWS,

                                Plaintiff, Appellant,

                                          v.

                        RESOLUTION TRUST CORPORATION, ET AL.,

                                Defendants, Appellees.

____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Joseph A. DiClerico, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                  Cyr, Circuit Judge,
                                       _____________
                            Bownes, Senior Circuit Judge,
                                    ____________________
                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________

            Jerry Barrows on brief pro se.
            _____________
            McLane,  Graf, Raulerson  &  Middleton,  Professional Association,
            _________________________________________________________________
        Ralph F. Holmes and Suzanne M. Gorman on brief for appellee.
        _______________     _________________

____________________

____________________



Per  Curiam.   This appeal  has its  origin in  a lender
                 ___________

            liability  lawsuit  brought   by  plaintiff-appellant   Jerry

            Barrows  against  First  Northern  Cooperative  Bank  in  New

            Hampshire  state court.  Before  the case came  to trial, the

            bank failed and the  Resolution Trust Corporation ("RTC") was

            appointed as receiver.   The RTC removed the suit  to federal

            district court and  moved for summary judgment.  The district

            court  granted  summary  judgment  on  thirteen  out  of  the

            fourteen counts  of the first amended complaint.  Following a

            trial  on  the  merits,  judgment  was entered  in  favor  of

            appellant on the  sole remaining count.  Barrows  appeals pro
                                                                      ___

            se from various interlocutory  rulings of the district court,
            __

            including the grant of partial summary judgment.  We affirm.

                                          I.

                 The history  of this case  is quite complicated,  and we

            recount only those facts necessary to an understanding of our

            decision.   On October 17, 1988, Barrows filed an eight count

            complaint  against  First Northern  Cooperative  Bank in  New

            Hampshire state court alleging  breach of contract, breach of

            warranty, tortious interference  with contractual  relations,

            and slander.  While  the lawsuit was pending in  state court,

            Barrows entered  into bankruptcy and a  trustee was appointed

            for his estate.  Although the trustee expressed his intent to

            pursue  the action, no formal substitution  of the trustee as



plaintiff  took place at that time, and the case continued to

            be prosecuted by Barrows.  

                 Following  substitution  of  the  RTC for  the  bank  as

            defendant and removal of the case to federal district  court,

            the  RTC  moved  for  a stay  of  court  proceedings  pending

            exhaustion  of administrative  remedies.   Barrows moved  for

            leave to amend  his complaint.  By order  dated June 7, 1991,

            Magistrate  Judge Barry  imposed a  180-day stay  and granted

            Barrows  leave   until  July  8,  1991  to  file  an  amended

            complaint.    On  July  8,  1991, Barrows  filed  an  amended

            complaint which omitted  his previous allegations  of slander

            and breach  of warranty  but added several  counts, including

            claims for  negligence, breach of covenant of  good faith and

            fair  dealing, negligent misrepresentation,  and violation of

            the Racketeer Influenced and Corrupt Organizations laws.  The

            amended   complaint   also   added   individual   defendants.

            Following the expiration of the 180-day period, the RTC filed

            an amended answer on December 27, 1991.

                 On February  19, 1992,  Magistrate Judge Arenas  ordered

            that  the bankruptcy  trustee  be  substituted as  plaintiff.

            Over the next  several months, the action  was dismissed with

            respect to most of  the individual defendants.  On  August 6,

            1992, Magistrate Judge Arenas ordered plaintiff to show cause

            within  fifteen days  why  he should  not recommend  that the

            action   be  dismissed  with  respect  to  certain  remaining

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individual defendants.   Sometime thereafter, the  bankruptcy

            trustee abandoned the action to Barrows.  Neither the trustee

            nor Barrows ever  responded directly to the  show cause order

            by  addressing  why   the  action  should   continue  against

            remaining  individual   defendants.    On  October  6,  1992,

            however, Barrows filed a second amended complaint.

                 On  April 23, 1993, the  RTC filed a  motion for summary

            judgment based on the  first amended complaint.  On  June 11,

            1993,  the  district  court   held  a  status  conference  to

            determine, inter  alia, which complaint  was presently before
                       _____  ____

            the  court.  The court found that the first amended complaint

            was  the operative  complaint,  and that  the second  amended

            complaint  "was filed  without court  permission and  without

            consent  of  the parties"  and,  accordingly,  had "no  legal

            effect pursuant to  Fed. R. Civ.  P. 15(a)."   On August  19,

            1993, the district  court granted summary judgment to the RTC

            on 13  out of the 14 counts in the first amended complaint on

            the grounds  that Barrows' claims failed to satisfy 12 U.S.C.

              1823(e) and the common law D'Oench doctrine.  On August 26,
                                         _______

            1993,  Barrows filed a motion to "alter or amend" the court's

            summary  judgment  order.    This  motion  was  denied.    On

            September  15,  1993, Barrows  filed  a motion  to  enforce a

            settlement  agreement that he  and First Northern Cooperative

            Bank  had allegedly  entered  into in  January 1991,  shortly

            before the RTC was appointed as receiver.  The district court

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denied this motion as  untimely.  Final judgment  was entered

            on February 24, 1994.  This appeal followed.

                                         II.

                 We begin  by addressing  some of the  alleged procedural

            errors.  Contrary  to the position taken  by appellant, there

            was  no error  in  substituting the  RTC as  party-defendant.

            Pursuant to 12  U.S.C.    1441a(b)(4) and 1821(d)(2), the RTC

            succeeded to "all rights,  titles, powers, and privileges" of

            the failed bank.    Fed. R. Civ. P.  25(c) gives the district

            court  discretion  to substitute  a party  "[i]n case  of any

            transfer of interest."  There are many cases in which the RTC

            as  receiver is  substituted, as  a matter  of course,  for a

            failed  bank.  See, e.g., RTC v. Hallmark Builders, Inc., 996
                           ___  ____  ___    _______________________

            F.2d  1144, 1147  (11th Cir.  1993) (substitution  of RTC  as

            plaintiff); Pierce & Assoc.  v. RTC, 987 F.2d 663,  664 (10th
                        _______________     ___

            Cir.  1993)  (substitution of  RTC  as  defendant); Payne  v.
                                                                _____

            Security  Sav. & Loan Ass'n,  924 F.2d 109,  110-11 (7th Cir.
            ___________________________

            1991) (same).    Appellant  has advanced no  plausible ground

            why the RTC's  motion for  substitution in  the instant  case

            should have been denied or why a hearing was necessary.  

                 We also  reject appellant's  argument that  the district

            court  erred in proceeding with the case after the RTC failed

            to make  a determination  of his administrative  claim within

            180 days.  The stay order,  by its very terms, granted a stay

            of only  180 days.   Upon the  expiration of this  period, on

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December 4, 1991, the district  court appropriately continued

            with the case.  Cf. Marquis v. FDIC, 965 F.2d 1148, 1155 (1st
                            ___ _______    ____

            Cir.  1992) (contemplating  that once  the FDIC  steps in  as

            receiver, the district  court would in  the vast majority  of

            cases  "hold  pending  litigation   in  abeyance  until   the

            administrative review process has run its course, or 180 days

            has passed, whichever first occurs").

                 We  are also persuaded,  for the  reasons stated  in the

            district court's  order dated June  11, 1993, that  the court

            did not err in  finding that the first amended  complaint was

            the operative  complaint.   For  the  first time  on  appeal,

            appellant argues that the  first amended complaint, which was

            filed  on his  behalf, could not  be the  operative complaint

            because  it  was filed  after the  action  had vested  in the

            bankruptcy  trustee for the benefit of  the estate but before

            the trustee abandoned  the action.   This argument is  waived

            since it was not raised below.   See United States v. Palmer,
                                             ___ _____________    ______

            956 F.2d 3, 6 (1st Cir. 1992).  Moreover, we note that at the

            time the first amended  complaint was filed, the  trustee had

            not yet been substituted as plaintiff.  Under Fed. R. Civ. P.

            25(c), it was proper, in the absence of such substitution, to

            continue  the  action  by  Barrows.    See  United  States v.
                                                   ___  ______________

            Transocean Air Lines, Inc., 356 F.2d 702, 704 (5th Cir. 1966)
            __________________________

            (adjudication in  bankruptcy of  carrier did not,  of itself,

            substitute  bankruptcy trustee  as party to  action); Liberty
                                                                  _______

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Broadcasting  Sys., Inc.  v.  Albertson, 15  F.R.D. 121,  122
            ________________________      _________

            (W.D.N.Y.  1953)  (where no  motion  was  made to  substitute

            bankruptcy trustee  as plaintiff,  it was proper  to continue

            the action as originally instituted).

                                         III.

                 We now  turn to  appellant's argument that  the district

            court  erred  in failing  to  enforce  an alleged  settlement

            agreement that appellant and First  Northern Cooperative Bank

            entered into  in January  1991, shortly  before  the RTC  was

            appointed as receiver.  According to Barrows, the bank agreed

            to provide  him  with  various  loans  in  exchange  for  his

            dropping the lawsuit.  Following its appointment as receiver,

            however, the RTC allegedly refused to honor the agreement.

                 As an initial  matter, we agree with  the district court

            that the  motion to  enforce settlement agreement,  which was

            filed on September  15, 1993, was untimely.  In so ruling, we

            do  not  rely, as  did the  district court,  in part,  on the

            timely  filing   requirement  of  Fed.  R.   Civ.  P.  59(e).

            Appellant's motion to enforce  settlement could not  properly

            be treated as a motion to alter or  amend judgment under Rule

            59(e)  because this  rule  applies only  to final  judgments.

            See,  e.g.,  Fayetteville Investors  v.  Commercial Builders,
            ___   ____   ______________________      ____________________

            Inc.,  936  F.2d 1462,  1472 (4th  Cir.  1991).   The partial
            ____

            summary judgment which appellant sought to set aside  was not

            a final judgment.   See Fed.  R. Civ.  P. 54.   In our  view,
                                ___

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appellant's motion to enforce was untimely not because it was

            filed more than ten days after the entry of summary judgment,

            but rather  because it was  filed over  two and a  half years

            after  the date of the  alleged agreement and  after the case

            was over  with respect to  all but appellant's  one remaining

            claim which survived summary judgment.

                 Moreover,   the  district   court  was   precluded  from

            enforcing  the agreement by  12 U.S.C.    1821(j),  the anti-

            injunction provision of the Financial Institutions Reform and

            Recovery Act.  Section 1821(j) provides that:

                      Except  as provided  in this  section, no
                      court may take any action,  except at the
                      request  of  the  Board of  Directors  by
                      regulation  or  order,  to   restrain  or
                      affect   the   exercise   of  powers   or
                      functions of  the [RTC] as  a conservator
                      or a receiver.

            12 U.S.C.   1821(j).  In refusing to provide appellant with a

            loan, the RTC was  acting pursuant to its statutory  power to

            "preserve and conserve the assets and property" of the failed

            institution.   See  12  U.S.C.    1821(d)(2)(B).   Under  the
                           ___

            circumstances, the district court was without jurisdiction to

            enforce  the alleged agreement.   Cf. Volges v.  RTC, 32 F.3d
                                              ___ ______     ___

            50,  52 (2d  Cir.  1994) (section  1821(j) deprived  district

            court of  jurisdiction to enjoin the RTC  from auctioning off

            mortgages  owned by failed  depository institution); Lloyd v.
                                                                 _____

            FDIC, 22 F.3d 335, 336 (1st Cir. 1994) (holding that district
            ____

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court lacked jurisdiction to  enjoin FDIC from foreclosing on

            mortgaged property).

IV.

                 We next  address appellant's argument that  the district

            court erred in granting partial summary judgment for the RTC.

            "Summary judgment is appropriate  where the record, viewed in

            the light most favorable  to the nonmoving party, reveals  no

            genuine issue as to  any material fact, and the  moving party

            is  entitled to  judgment as  a matter  of law."   Commercial
                                                               __________

            Union  Ins. Co. v. Walbrook Ins.  Co., 7 F.3d 1047, 1050 (1st
            _______________    __________________

            Cir. 1993).   The moving  party bears the  burden of  showing

            that  there is no genuine,  material factual issue.   Snow v.
                                                                  ____

            Harnischfeger  Corp., 12  F.3d  1154, 1157  (1st Cir.  1993),
            ____________________

            cert. denied, 115 S. Ct. 56 (1994).  However, once the moving
            ____________

            party  has  made  a  properly supported  motion  for  summary

            judgment, the  adverse party  "must set forth  specific facts

            showing there is a genuine issue for trial."  Fed. R. Civ. P.

            56(e); Anderson  v. Liberty  Lobby, Inc., 477  U.S. 242,  250
                   ________     ____________________

            (1986).    We review  a grant  of  summary judgment  de novo.
                                                                 __ ____

            Snow, 12 F.3d at 1157.
            ____

                 Appellant argues  that  the district  court should  have

            refrained from ruling on  the summary judgment motion because

            the RTC had yet to make a determination on his administrative

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claim.  He also argues that a ruling on  the summary judgment

            motion  was  improper  since  he  had  reached  a  settlement

            agreement  with the bank.  We pass the question whether these

            arguments were properly preserved and reject them in light of

            our  previous   discussion.    The  district  court  properly

            proceeded with  the case once  the 180-day stay  expired, and

            the  court was  without jurisdiction  to enforce  the alleged

            settlement agreement.

                 Appellant's sole challenge to the merits of the district

            court's summary judgment ruling is with respect to Counts I -

            III of the first amended complaint.  In these counts, Barrows

            alleged that the bank had  agreed to issue an "unconditional"

            letter of credit, and that it breached this agreement  (Count

            1),  was negligent  (Count 2),  and intentionally  interfered

            with his contractual relationship with a seller (Count 3), by

            issuing  a standby  letter  of credit.    In its  motion  for

            summary judgment, the RTC argued that these  claims failed to

            satisfy 12 U.S.C.    1823(e) and the D'Oench doctrine.1   The
                                                 _______

                                
            ____________________

            1.  The district court's  summary judgment  order contains  a
            thorough  discussion  of  the   D'Oench  doctrine,  and   its
                                            _______
            statutory  counterpart, 12  U.S.C.    1823(e).   The  D'Oench
                                                                  _______
            doctrine has its origins in D'Oench, Duhme & Co. v. FDIC, 315
                                        ____________________    ____
            U.S.  447 (1942).   The  evolved doctrine  bars defenses  and
            affirmative claims against the RTC, following its appointment
            as conservator  or receiver to a failed  institution, as long
            as  those claims arise out  of an unrecorded  agreement.  See
                                                                      ___
            McCullough  v.  FDIC,  987  F.2d 870,  874  (1st  Cir.  1993)
            __________      ____
            (observing  that D'Oench  doctrine  bars  affirmative  claims
                             _______
            whether  cloaked in  terms of  contract or  tort, as  long as
            those  claims arise  out of  an alleged  "secret" agreement).
            Section 1823(e) bars claims  or defenses asserted against the

                                         -10-



district  court  agreed,  and  found,   in  particular,  that

            appellant  had "failed  to show  a  dispute of  material fact

            exist[ed] concerning  whether the letter  of credit  contract

            was  approved  by  the  Bank's  board  of  directors  or loan

            committee."  See 12 U.S.C.   1823(e)(3). 
                         ___

                 Appellant argues that   1823(e) does not bar  his claims

            in Counts I-III  because the alleged  agreement related to  a

            bank  liability,  not an  asset.   See  Agri Export  Coop. v.
                                               ___  __________________

            Universal Sav. Assoc'n, 767 F. Supp. 824, 833 (S.D.Tex. 1991)
            ______________________

            (observing that a letter  of credit is a bank  obligation and

            not an asset).   This argument was not properly  preserved in

            the district court, and, hence, is waived.  Moreover, even if

            we  were to  reach the  issue, we  would affirm  the judgment

            below.  The  D'Oench doctrine is in  certain respects broader
                         _______

            than   1823(e) and is not constrained by any requirement that

                                
            ____________________

            RTC based on any agreement "which tends to diminish or defeat
            the interest of the [RTC] in any asset acquired by it" from a
            failed institution 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 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.

            12 U.S.C.   1823(e). 

                                         -11-



the agreement relate to  a specific asset. See Hall  v. FDIC,
                                                       ___ ____     ____

            920 F.2d 334,  339 (6th  Cir. 1990), cert.  denied, 501  U.S.
                                                 _____________

            1231 (1991); Winterbrook  Realty, Inc. v. FDIC,  820 F. Supp.
                         _________________________    ____

            27, 30-31 (D.N.H. 1993).  Since there is no evidence that the

            alleged  agreement to  issue  an  "unconditional"  letter  of

            credit was  recorded in  bank records, the  D'Oench doctrine,
                                                        _______

            independently of    1823(e), bars appellant's  claims arising

            out  of  this agreement.2   See  Nutro  Prods. Corp.  v. NCNB
                                        ___  ___________________     ____

            Texas  Nat'l Bank, 1994  WL 530166, at *4  (5th Cir. Oct. 17,
            _________________

            1994)  (holding that D'Oench doctrine precluded consideration
                                 _______

            of unrecorded  agreement to extend expiration  date in letter

            of credit); Timberland  Design, Inc. v. First  Serv. Bank For
                        ________________________    _____________________

            Sav.,  932  F.2d 46  (1st  Cir. 1991)  (holding  that D'Oench
            ____                                                  _______

            doctrine  barred  claim  based  on  unrecorded  agreement  to

            provide a future loan). 

                                          V.

                 We  have  carefully  considered   appellant's  remaining

            arguments and are persuaded that they are without merit.

                 Affirmed.
                 ________

____________________

            2.  Appellant,  in  an apparent  attempt  to  prove that  the
            alleged  agreement  was  recorded, includes  copies  of  bank
            records in his  reply brief.   Since these  records were  not
            filed as exhibits in the district court, they are not part of
            the record on  appeal and  cannot inform our  decision.   See
                                                                      ___
            Fed. R. App. P. 10(a).  We note,  however, that these records
            tend to  show that the bank agreed  to issue a standby letter
            of  credit  and  not  the "unconditional"  letter  of  credit
            appellant claims he was promised.

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