Heno v. FDIC

CourtCourt of Appeals for the First Circuit
DecidedApril 22, 1994
Docket92-1936
StatusPublished

This text of Heno v. FDIC (Heno v. FDIC) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heno v. FDIC, (1st Cir. 1994).

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

No. 92-1936

FLOYD V. HENO,

Plaintiff, Appellant,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Robert E. Keeton, U.S. District Judge]

Before

Breyer, Chief Judge,

Campbell, Senior Circuit Judge,

and Cyr, Circuit Judge.

Robert G. Wilson IV, with whom Robert G. Wilson III and Law

Offices of Robert G. Wilson III were on brief for appellant.

Robert R. Pierce, with whom Russell F. Conn and Conn,

Kavanaugh, Rosenthal & Peisch were on brief for appellee.

April 22, 1994

CYR, Circuit Judge. Plaintiff Floyd Heno appeals from CYR, Circuit Judge.

a district court order dismissing claims for compensatory and

injunctive relief brought against the Federal Deposit Insurance

Corporation ("FDIC") under the Financial Institutions Reform and

Recovery Act ("FIRREA"). In an earlier opinion, see Heno v.

FDIC, 996 F.2d 429 (1st Cir. 1993), we affirmed the district

court order dismissing the claim for injunctive relief pursuant

to Federal Rule of Civil Procedure 12(b)(6), but vacated its Rule

12(b)(1) order dismissing the claim for compensatory relief.

Thereafter, we granted FDIC's petition for panel rehearing on the

claim for compensatory relief, see Fed. R. App. P. 40, and

allowed further briefing, argument, and supplementation of the

appellate record relating to the proper interpretation of FIRREA

1821(d), (e), 12 U.S.C. 1821(d), (e). We now withdraw our

original opinion, and substitute the present opinion.

I

BACKGROUND

A. The "Claim"

We review a Rule 12(b)(6) dismissal de novo, crediting

all allegations in the complaint and drawing all reasonable

inferences favorable to the plaintiff. Scheuer v. Rhodes, 416

U.S. 232, 236 (1974); Rumford Pharmacy, Inc. v. East Providence,

970 F.2d 996, 997 (1st Cir. 1992). Similarly, a Rule 12(b)(1)

dismissal is reviewed de novo where, as here, the only issue is

the legal sufficiency of undisputed jurisdictional facts. See

Eaton v. Dorchester Dev., Inc., 692 F.2d 727, 732 (11th Cir.

1982); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884,

891 (3d Cir. 1977).

The complaint alleges that Heno sold Balcol Corporation

a 104-acre tract of real property in 1986, for which Balcol gave

Heno a promissory note secured by a first mortgage on the

undeveloped property. In September 1987, Balcol began to develop

the property, known as the Prospect Heights residential

subdivision, and obtained construction financing through Home

National Bank of Milford ("Bank"). Heno agreed to subordinate

his first mortgage to the Bank's construction loan mortgage. In

return for the release of Heno's second mortgage lien as each lot

was sold, Balcol and the Bank promised to release $19,125 from

the sale proceeds.

By April 1990, Balcol and Prospect Heights were exper-

iencing financial difficulties, and the three principal parties

entered into a recapitalization agreement. Heno agreed to accept

$5,000 (rather than $19,125) per lot for releasing his second

mortgage lien on the next nine lots sold by Balcol. Balcol and

the Bank agreed: (1) to transfer two additional lots to Heno

(Lots 82 and 111), free and clear of the Bank's first mortgage

liens, at the time Heno released his second mortgage lien on the

ninth lot; and (2) to deposit the net proceeds from the nine lots

in escrow with the Bank. The escrow monies were to be used

exclusively for immediate completion of roadwork in the project

andto defray Balcol's firstmortgage interest paymentsto the Bank.

Although Balcol conveyed Lots 82 and 111 to Heno on

May 2, 1990, the Bank did not release its first mortgage liens on

the lots. During April and May 1990, seven of the nine original

lots were sold by the Bank after Heno had released his second

mortgage liens. By June 1, 1990, more than $232,000 had been

deposited in escrow with the Bank pursuant to the

recapitalization agreement among Heno, Balcol, and the Bank.

Ultimately, the eighth and ninth lots were sold, and the net

proceeds, approximating $90,000, were deposited with FDIC.1 The

complaint alleges, hence we must assume, that $125,000 was to

have been devoted to roadwork at the project.2

On June 1, 1990, the Bank was declared insolvent and

FDIC was appointed receiver. At an unspecified later date, FDIC

applied the escrow monies toward the principal due on Balcol's

first mortgage loan account with the Bank, contrary to the

express terms of the recapitalization agreement. Heno's counsel

thereafter held discussions with FDIC, and was informed by Balcol

that FDIC would determine, after obtaining an appraisal of the

Prospect Heights project, whether to release the Bank's first

mortgage liens on Lots 82 and 111, the two additional lots at

1The complaint does not specify the date(s) of these sales, but the proceeds were deposited with FDIC on or about October 1, 1990.

2At oral argument, Heno's counsel represented that the roadwork was never performed.

issue on appeal. On December 13, 1990,3 and again on

February 19, 1991, Heno submitted written requests for action by

FDIC, but to no avail.4 Subsequently, FDIC foreclosed on the

Prospect Heights subdivision, including Lots 82 and 111. The

escrow monies were neither redeposited nor applied toward the

purposes agreed upon under the recapitalization agreement.

On October 18, 1991, Heno initiated the present action

to enjoin FDIC's sale of Lots 82 and 111 and to compel it to

redeposit the escrow monies previously misapplied to Balcol's

first mortgage with the Bank. The complaint demanded an

equitable accounting of the escrow monies, and compensatory

3Heno's December 13 letter specifically requested release of the Bank's first mortgage liens on Lots 82 and 111 and served "notice of [Heno's] contingent interest in [the escrow account]." The letter went on to say:

Heno should receive either the lot releases or that portion of the escrow account attributable to his participation in the agreement. Under well established

fiduciary and equitable principles, if the FDIC is not

going to honor the purposes of the escrow account, that

portion of the escrow account attributable to Heno's

participation should be returned to him, and not used

by the Receiver to reduce Balcol's obligation.

(Emphasis added.) Heno's complaint demands an equitable accounting of the escrow monies, and, accordingly, does not specify the exact amount claimed.

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Related

D'Oench, Duhme & Co. v. Federal Deposit Insurance
315 U.S. 447 (Supreme Court, 1942)
Scheuer v. Rhodes
416 U.S. 232 (Supreme Court, 1974)
Rumford Pharmacy, Inc. v. City of East Providence
970 F.2d 996 (First Circuit, 1992)
Tuxedo Beach Club Corp. v. City Federal Savings Bank
749 F. Supp. 635 (D. New Jersey, 1990)

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