April 7, 1993 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT
No. 92-1740
FLEET BANK OF MAINE,
Plaintiff, Appellee,
v.
HARVEY E. PRAWER and GILBERT PRAWER,
Defendants, Counterclaim Plaintiffs, Appellants,
and
FEDERAL DEPOSIT INSURANCE CORPORATION,
Counterclaim Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
Before
Breyer, Chief Judge,
Campbell and Bownes, Senior Circuit Judges.
Joseph J. Hahn with whom Bernstein, Shur, Sawyer & Nelson was on
brief for appellants. Alexandra L. Treadway with whom P. Benjamin Zuckerman and Verrill
& Dana were on brief for appellees.
CAMPBELL, Senior Circuit Judge. Maine Savings Bank
brought this action against appellants, Harvey E. Prawer and
Gilbert Prawer, to collect money owed to it under two
promissory notes the appellants had personally guaranteed.
The bank alleged that Limehouse Corporation ("Limehouse"), of
which Harvey Prawer was the president, defaulted on the notes
when it stopped making monthly interest payments.1
Appellants argued below, as the basis of their affirmative
defenses and their counterclaims against the bank, that
Limehouse stopped making payments because the bank had
reneged on an agreement to provide even more financing for
their real estate project. The United States District Court
for the District of Maine granted summary judgment for the
bank's successors in interest, appellees Fleet Bank of Maine
and the FDIC, and we affirm.
I.
The district court found the following facts to be
undisputed. In 1987 appellants Harvey and Gilbert Prawer, on
behalf of Limehouse, of which Harvey Prawer was president,
began negotiations with Maine Savings Bank ("the Bank") for
the financing of the purchase and development of 122 acres of
1. Limehouse Corporation is not a party to this action. The bank sued only Harvey E. Prawer and Gilbert Prawer in their individual capacities, as guarantors of one promissory note and co-makers of the other.
land in Scarborough, Maine. Appellants planned to subdivide
the property and market it as a planned residential community
known as "Coulthard Farms." At the time of the negotiations,
the total cost of the project was estimated to be $2,500,000,
consisting of $1,000,000 for the purchase of the real estate
and $1,500,000 for the construction of the infrastructure
roads, sewers, water supply and other structures needed to
transform the land into a residential community.
On October 1, 1987, the Bank issued a commitment
letter ("First Commitment Letter"), in which it offered to
lend $1,000,000 to Limehouse for purchase of the Coulthard
Farms property, for a term of "36 months, on demand
thereafter," at an adjustable rate, initially 10.50%. The
Letter specified that interest payments were to be made
monthly. By signing the Letter, Harvey Prawer agreed on
behalf of Limehouse to borrow the money "in accordance with
the [] terms and conditions" of the Letter, including
granting the Bank a mortgage on the property. One paragraph
of the four-page letter of terms and conditions said, "This
loan shall be repaid from the sale of the mortgaged property
or its refinancing into a residential subdivision development
loan."
On October 15, 1987, Harvey Prawer, as president of
Limehouse, executed a promissory note ("First Note") in the
amount of $1,000,000 to the Bank. Both Harvey and Gilbert
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Prawer, acting in their individual capacities, executed an
unconditional guaranty of the First Note. The First Note
obligated Limehouse to make monthly payments of the interest
due and to repay the principal sum on demand after October 1,
1990.2 A default provision defined "default" as including
failure to pay any installment of the interest due and
authorized the holder of the Note, in addition to the right
to demand payment after October 1, 1990, to declare the Note
immediately due and payable in full in the event of a
default.3 The provisions of the First Note, while
2. The First Note provided, in part:
For Value Received, On Demand after October 1, 1990, the undersigned promises to pay to the order of Maine Savings Bank, a Maine banking corporation, the sum of One Million Dollars ($1,000,000.00), or so much thereof as may be advanced, together with interest upon the principal sum thereof from time to time advanced, . . . ; which interest at said rates shall be paid monthly in arrears on the first day of each succeeding month hereafter, with a final payment of interest when the indebtedness evidenced hereby is paid in full.
3. The default provision of the First Note provided:
In case of default in the payment of any installment of interest due hereon, including default in the payment of any applicable late charge, and such default is continued for a period of one (1) month, or in case of default in any term or condition of a Mortgage and Security Agreement of even date, given as security herefor, the holder hereof at its option may declare due and payable at once the
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considerably more detailed, were consistent with the terms
outlined in the First Commitment Letter; but the Note
contained no reference to repayment from the sale of the
mortgaged property or its refinancing.
On the same date, the Bank and Limehouse entered
into a Mortgage and Security Agreement whereby the property
to be purchased by Limehouse for the Coulthard Farms project
was mortgaged to the Bank. One provision of the Mortgage
stated that, "Upon request of Grantor [Limehouse], Grantee
[the Bank] may, at its sole option, from time to time make
further advances to Grantor, provided, however, that the
total principal secured hereby and remaining unpaid,
including any such advances shall not at any time exceed the
sum of Two Million Five Hundred Thousand Dollars
($2,500,000.00)."
On September 7, 1988, the Bank issued a letter of
intent to the Maine Department of Environmental Protection,
vouching for the financial condition of Limehouse and
appellants and stating that the Bank intended to finance the
development of the Coulthard Farms project.
On December 21, 1988, the Bank issued another
commitment letter ("Second Commitment Letter") to Limehouse,
unpaid principal balance hereof, accrued interest and late charges, as applicable. The foregoing rights shall be in addition to the demand right of the holder hereof after October 1, 1990.
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offering to lend an additional $200,000 for a term of "12
months with interest only to be repaid from the refinancing
of the debt into a residential subdivision development loan."
Appellants accepted the terms and conditions of the Second
Commitment Letter by signing it in their individual
capacities.
On April 12, 1989, Harvey Prawer, as Limehouse
president, executed a promissory note ("Second Note") in the
amount of $200,000 "or so much thereof as may be advanced" to
the Bank. Both Harvey and Gilbert, acting in their
individual capacities, executed the Second Note as co-makers.
Only $100,000 in funds was advanced by the Bank to Limehouse.
The Second Note contained provisions for monthly interest
payments and default substantially identical to those of the
First Note. Like the First Note, the Second Note's terms
were consistent with those outlined in the Second Commitment
Letter, except there was no mention of repaying the interest
from the refinancing of the debt.
Sometime in 1990 Limehouse stopped making the
monthly interest payments due under the First and Second
Notes. The Bank notified Limehouse that it was in default,
but Limehouse did not cure the default. On August 30, 1990,
the Bank filed an action in Maine Superior Court against
Harvey Prawer and Gilbert Prawer, as guarantors of the First
Note and co-makers of the Second Note, seeking payment of the
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principal and unpaid interest on both Notes. (Under the
First Note the Bank alleged it was owed, as of August 9,
1990, $1,000,000 in principal and approximately $32,900
interest; under the Second Note, $100,000 in principal,
$3,100 in interest.) On September 26, 1990, the Prawers
answered the complaint, raised affirmative defenses, and made
counterclaims against the Bank.
Subsequently, Maine Savings Bank failed. The
Federal Deposit Insurance Corporation ("FDIC"), the receiver
of Maine Savings Bank, was substituted as the counterclaim
defendant, and Fleet Bank of Maine ("Fleet"), the purchaser
of the Bank's assets, was substituted as the plaintiff. The
case was removed by the FDIC to the United States District
Court for the District of Maine.
In September 1991, plaintiff Fleet filed a motion
for summary judgment. Counterclaim defendant FDIC filed its
motion for summary judgment in February 1992. The district
court granted both motions on April 3, 1992, finding that the
Prawers' affirmative defenses and counterclaims turned on the
same question: whether the two Commitment Letters issued by
the Bank conditioned repayment of the Notes upon the Bank's
ultimate refinancing of the debt. The district court held
that the D'Oench, Duhme doctrine prevented the Prawers from
using the Commitment Letters to defend against the efforts by
Fleet and the FDIC to collect on the facially unqualified
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Notes. See D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447
(1942). The Prawers appeal from the district court's order.4
II.
We review the district court's grant of summary
judgment de novo, looking at the record in the light most
favorable to appellants. August v. Offices Unlimited, Inc.,
981 F.2d 576, 580 (1st Cir. 1992). The district court based
summary judgment on the D'Oench, Duhme doctrine, but "we need
not limit ourselves to the exact grounds for decision
utilized below. We are free, on appeal, to affirm a judgment
on any independently sufficient ground." Aunyx Corp. v.
Canon U.S.A., Inc., 978 F.2d 3, 6 (1st Cir. 1992) (quoting
Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-61
(1st Cir. 1987)), cert. denied, 61 U.S.L.W. 3620 (U.S. Mar.
9, 1993) (No. 92-1205). We do not reach D'Oench, Duhme here
because we find that appellees were entitled to summary
judgment as a matter of Maine contract law.5
Appellants admit that Limehouse stopped making the
Notes, but contend that its obligation to make monthly
4. The district court had jurisdiction over this matter pursuant to 12 U.S.C. 1819(b)(2)(A) and 28 U.S.C. 1331. This court has jurisdiction over this appeal pursuant to 28 U.S.C. 1291.
5. The parties agree that Maine law governs their respective rights and obligations, outside of the question of application of the federal D'Oench, Duhme doctrine.
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interest payments and repay the principal of the First and
Second Notes was conditioned upon a promise by the Bank to
provide financing for the development. While no such promise
is to be found in the provisions of either Note, appellants
point to the Commitment Letters as establishing such a
promise. Because the First Commitment Letter stated that,
"This loan shall be repaid from the sale of the mortgaged
property or its refinancing into a residential subdivision
development loan," appellants say that the repayment
obligations under the First Note were wholly contingent upon
the Bank's providing new financing for development of the
property. Because the Second Note described the loan term
as, "12 months with interest only to be repaid from the
refinancing of the debt into a residential subdivision
development loan," appellants contend that Limehouse's
obligations under the Second Note were likewise contingent
upon the Bank's providing of refinancing. Appellants further
insist that interpretation of the Notes is insulated from
summary judgment disposition as it is a mixed question of law
and fact.
A major problem with appellants' approach is that,
under Maine contract law, a court does not consider extrinsic
evidence in interpreting a contract unless the language of
the contract is ambiguous. Portland Valve, Inc. v. Rockwood
Systems Corp., 460 A.2d 1383, 1387 (Me. 1983).
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The issue of whether contract language is ambiguous is a question of law for the Court. The interpretation of an unambiguous written contract is a question of law for the Court; the interpretation of ambiguous language is a question for the factfinder. The interpretation of an unambiguous writing must be determined from the plain meaning of the language used and from the four corners of the instrument without resort to extrinsic evidence. Once an ambiguity is found then extrinsic evidence may be admitted and considered to show the intention of the parties. Contract language is ambiguous when it is reasonably susceptible of different interpretations.
Id. (citations omitted); see also Triple-A Baseball Club
Assoc. v. Northeastern Baseball, Inc., 832 F.2d 214, 220-21
(1st Cir. 1987) (summarizing Maine law of contract
interpretation), cert. denied, 485 U.S. 935 (1988). Here the
contract terms the repayment terms contained within the
four corners of the Notes are not at all ambiguous. In no
relevant way are they "reasonably susceptible of different
interpretations." Portland Valve, 460 A.2d at 1387. The
repayment terms are clear and unconditional: the maker of the
Note is obligated to make monthly interest payments; failure
to make interest payments constitutes a default; if the
grantor defaults, the grantee may demand full repayment of
the principal sum and accrued interest. There is no hint in
the Notes' language that the Bank's extension of refinancing
is a condition to full repayment upon default. Because the
Notes are unambiguous, appellants may not rely on the
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Commitment Letters to show that the terms of the Notes
differed from their plain meaning. Id.
Appellants argue that the Commitment Letters were
incorporated into the Notes and thus the Letters' terms,
including the Letters' references to refinancing, should be
considered as part and parcel of the parties' agreement. The
Letters were entirely incorporated into the Notes, it is
contended, because the Notes "referred to" the Mortgage and
the Mortgage "referred to" the First Commitment Letter. This
overlooks the limited nature of the cross-references. None
of the documents in question, nor anything else in the
record, suggests that the parties intended to incorporate
everything said in the Commitment Letters as conditions of
the Notes. The Notes provided that Limehouse would be in
default of the Note if it defaulted on its obligations under
the Mortgage and Security Agreement. The Mortgage and
Security Agreement stated that Limehouse must perform
whatever obligations it had under the terms of the First
Commitment Letter. Neither of these references says anything
about the requirement of monthly interest payments, the
provision of the Note as to which Limehouse defaulted.
Nothing is anywhere said that a failure by the Bank to meet
its purported refinancing assurances in the Commitment
Letters will constitute a defense to the borrower's default
upon the Notes.
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The Notes are at least partially integrated
agreements for purposes of the parol evidence rule. They
appear on their face to express the parties' final agreement
as to the terms for Limehouse's repayment of the funds
advanced. See Interstate Indus. Uniform Rental Serv., Inc.
v. Lepage Bakery, Inc., 413 A.2d 516, 519-20 (Me. 1980)
(applying test for integrated agreements and stating that
question of integration is determined by the court);
Restatement (Second) of Contracts 209, 210 (1981). Signed
by both parties, the Notes contain detailed terms and
conditions for repayment of the interest and principal of the
loans, specifying schedules for repayment, penalties for late
payments, calculation of the interest rate, and processes for
handling defaults. See Restatement (Second) of Contracts
209(3) ("Where the parties reduce an agreement to a writing
which in view of its completeness and specificity reasonably
appears to be a complete agreement, it is taken to be an
integrated agreement unless it is established by other
evidence that the writing did not constitute a final
expression.") The lack of specificity in the Commitment
Letters in addition to the time delay between issuance of
the Letters and execution of the Notes (two weeks between the
First Letter and First Note, four months between the Second
Letter and Note) strongly suggests that the parties
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intended the Notes, not the Letters, to be the final
expressions of the repayment terms.
"A binding integrated agreement discharges prior
agreements to the extent that it is inconsistent with them."
Restatement (Second) of Contracts 213(1); Astor v. Boulos
Co., 451 A.2d 903, 905 (Me. 1982) (applying Restatement
213). If the references in the Commitment Letters to
"refinancing" mean what appellants claim they mean that
the parties agreed to make Limehouse's obligation to repay
the loans contingent on refinancing of the debt then to
that extent the Letters are inconsistent, prior agreements
which are discharged by the partially integrated agreements,
i.e., the Notes. See Astor, 451 A.2d at 905-06.
In connection with their counterclaims, appellants
have urged that the Bank breached the terms of a binding
contract when it failed to provide development financing and
so caused an unspecified amount of financial damage to
appellants. In support of this contention, appellants assert
that the Bank "knew" and the parties "understood" that the
Bank would make a development loan in the future. "Mere
allegations, or conjecture unsupported in the record, are
insufficient to raise a genuine issue of material fact."
August, 981 F.2d at 580. To avoid summary judgment, they
"must be able to point to specific, competent evidence" in
support of their claims. Id.
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Appellants point to only a few isolated fragments
of evidence to establish the existence of the contract they
assert: (1) the sentences in the two Commitment Letters which
refer to "refinancing"; (2) the Bank's statement in its
letter to the Maine Department of Environmental Protection
that it was the Bank's "intention to finance the development
of this project, once all requisite approvals are in place.";
(3) the Mortgage and Security Agreement's provision that the
Bank could, "at its sole option," advance up to $2,500,000 to
Limehouse upon its request; and (4) oral statements by Bank
officials on May 22, 1990, indicating that the Bank had
changed its plans and decided not to loan Limehouse any more
than the $1,200,000 already extended.
"For there to be a contract under Maine law, the
parties must have manifested their mutual assent to all of
the material terms of the agreement." Maine Surgical Supply
Co. v. Intermedics Orthopedics, Inc., 756 F. Supp. 597, 602
(D. Me. 1991); Ouellette v. Bolduc, 440 A.2d 1042, 1045 (Me.
1982). "The terms of the contract must be reasonably
certain, such that they provide a basis for determining the
existence of a breach and for giving an appropriate remedy."
Maine Surgical Supply Co., 756 F. Supp. at 602; Roy v. Danis,
553 A.2d 663, 664 (Me. 1989). The asserted facts appellants
rely upon are wholly inadequate to show the existence of a
legally binding contract by the Bank to provide financing
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beyond the two loans made. Unlike the loans for $1,000,000
and $200,000, there is no commitment letter in the record
which bound the Bank to providing development financing to
Limehouse. Nothing is offered by appellants to show the loan
amount, interest rate, period of repayment, repayment terms,
conditions, or other material terms of the alleged agreement
for this financing. Mere declarations of intention to enter
into a future agreement which is, at most, what the
statements in the Commitment Letters and in the letter to the
Maine Department of Environmental Protection are do not
create a binding contract. Maine Surgical Supply Co., 756 F.
Supp. at 602. Appellants failed to establish a genuine issue
of material fact over the existence of a binding agreement
obligating the Bank to provide financing beyond the two loans
made.
III.
In sum, the record is without material facts which,
viewed in the light most favorable to appellants, would
create a genuine issue under Maine contract law as to whether
Limehouse could justifiably refuse to pay the amounts due
under the Notes because of the Bank's nonperformance of its
claimed obligation, as a condition to collection of its
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Notes, to have provided development financing.6 Without
need to inquire into the application here of the D'Oench,
Duhme doctrine, we rule as a matter of Maine contract law
that appellees were entitled to summary judgment in their
favor.
Affirmed. Costs to appellees.
6. We have considered all of appellants' other arguments, mostly variations on the same theme, and find no merit in them.
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