First Gibraltar Bank v. Bradley

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_______________________

No. 95-20500
_______________________

FIRST GIBRALTAR BANK, FSB,

Plaintiff-Appellee,

FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR GIBRALTAR SAVINGS ASSOCIATION,

Intervenor- Plaintiff,
Appellee,Cross-
Appellant,

versus

GARY L. BRADLEY AND JAMES D. GRESSETT AND
CIRCLE C DEVELOPMENT CORPORATION,

Defendants,
Intervenor Defendants,
Appellants,Cross-
Appellees.

_________________________________________________________________

Appeal from the United States District Court
for the Southern District of Texas
(CA-H-93-2558)
_________________________________________________________________
September 10, 1996
Before JONES, SMITH, and STEWART, Circuit Judges.

EDITH H. JONES, Circuit Judge:*

Gary L. Bradley (“Bradley”), James D. Gressett

*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
(“Gressett”), and Circle C Development Corporation (“Circle C”)

appeal the district court’s summary judgment in favor of First

Gibraltar Bank (“FGB”), on FGB’s suit to recover over $80 million

on four promissory notes that Circle C executed in favor of

Gibraltar Savings Association (“Gibraltar”), and to recover from

Bradley and Gressett on their personal guarantees of those four

notes as well as on their separate, personal note for $15 million.

After reviewing the district court’s judgment de novo, this court

AFFIRMS.

FACTUAL BACKGROUND

This saga began in 1985 when Circle C, Bradley, and

Gressett entered into a series of loan agreements with Gibraltar

for the development of Circle C Ranch, a master planned community

located southwest of Austin, Texas. Gibraltar advanced nearly $80

million to Circle C on four loans (the “Project Notes”): the Land

Note, Amenities Note, Phase I Development Note, and Phase II

Development Note. Bradley and Gressett individually guaranteed 20%

of Circle C’s notes and were the borrowers under a fifth, unsecured

personal loan of $15 million (“Personal Note”).

The terms of the Personal Note required Bradley and

Gressett to make quarterly interest payments beginning in September

of 1985. Importantly, the Personal Note, though unsecured, and the

Project Notes contained cross-default provisions by which a default

under either the Personal Note or any of the Project Notes operated

2
as a default under all of the notes.

In May 1988, Bradley and Gressett defaulted on the

Personal Note when they failed to make a quarterly interest

payment. The next month, Gibraltar declared a default on the

Personal Note because they had failed to cure their delinquency.

Gibraltar accelerated the balance of the Personal Note and declared

it, with all accrued but unpaid interest, payable immediately.

In an effort to ameliorate the financial strain caused by

the default, Bradley and Gressett sold a 50% interest in Circle C

for over $1 million in cash and promissory notes totaling nearly

$30.5 million. Circle C was then restructured by transferring all

of its interests in the Circle C Ranch to the Circle C Development

Joint Venture (“Joint Venture”).

Besides these measures, Bradley and Gressett also

negotiated a work-out agreement with Gibraltar, titled a

Reinstatement Agreement and First Loan Modification (“Work-out

Agreement”).1 Pursuant to this agreement, executed November 3,

1988, Gibraltar rescinded the acceleration of the notes, while

Bradley and Gressett reaffirmed their obligations under the

Personal Note.

The Work-out Agreement proved unsuccessful. On December

1, 1988, less than one month after the work-out had been reached,

Bradley and Gressett again defaulted on the Personal Note when they

1
The effective date of the Work-out Agreement was September 1, 1988.

3
failed to make another quarterly interest payment. Threatened

under the notes’ cross-default provision, Bradley and Gressett

continued to seek nearly $20 million in additional funding for

their ranch project.

However, on December 27, 1988, the Federal Home Loan Bank

Board (“FHLBB”) declared Gibraltar insolvent and appointed the

FSLIC as receiver.2 Furthermore, the FHLBB determined that

Gibraltar had insufficient assets to satisfy its secured and

deposit liabilities, so that no assets were available to pay the

claims of general, unsecured creditors. As a result, on December

28, 1988, the FSLIC sold and endorsed many of Gibraltar’s assets,

including all of the Bradley-Gressett and Circle C Notes and

guarantees to FGB, the successor bank.3 Under the acquisition

agreement with FGB, the receiver retained virtually all of the

unsecured liabilities of Gibraltar, including any obligation to

fund further the ranch project.

After FGB acquired the relevant notes, Bradley, Gressett,

and Circle C repeatedly sought additional funding from FGB. FGB

denied any obligation to make such advances, but it chose to fund

2
Under the Financial Institutions Reform, Recovery, and Enforcement
Act, the FDIC succeeded FSLIC as receiver.
3
The transaction is actually more complicated, but has been simplified
for the sake of clarity. First Texas Bank, FSB is the entity that originally
acquired the notes from the FSLIC. It later changed its name to First Gibraltar
Savings Association, FSB (“FGB”). FGB later changed its name to First Madison
Bank, FSB, and is now known as First Nationwide Bank, FSB. As will be discussed,
FGB initially filed the instant suit, so for clarity and simplicity, the appellee
will be referred to as FGB in this appeal.

4
the ranch project only to preserve the value of the collateral; the

funds, however, were advanced only after Bradley, Gressett, and

Circle C acknowledged that the advances were not a ratification or

assumption of Gibraltar’s obligations by FGB. During the first six

months of 1989, FGB advanced over $5 million to the ranch project

in an attempt to preserve its collateral.

Continued funding came to a screeching halt when FGB

received the results of an appraisal of the project in mid-1989:

according to the appraisal, over $80 million in debt was secured by

less than $29 million in collateral. Faced with this deficiency,

FGB refused to advance any more funds to the project unless

Bradley, Gressett, and Circle C executed letter agreements

confirming that they had no claims against FGB and waiving any

potential claims. During the year from September 1989 to September

1990, approximately 27 such letter agreements were executed.

Without long-term financing, the Circle C Ranch

Development could not survive, and the defendants were unable to

satisfy their financial obligations to FGB. FGB filed suit in

Texas state court in September 1990 seeking recovery under the

interlocking agreements. The defendants answered and asserted

various counterclaims against FGB, including fraud, breach of

contract, breach of fiduciary duty, and tortious interference with

contract. The defendants also contended that Gibraltar’s

insolvency and the appointment of the FSLIC as receiver for the

failed bank amounted to a repudiation of the debt. Further, the

5
defendants argued that FGB assumed Gibraltar’s funding obligations

when it received Gibraltar’s assets from the FSLIC.

Nearly three months after the lawsuit was filed in state

court, the Joint Venture filed for relief in bankruptcy. After a

reorganization plan was confirmed, the Joint Venture executed a

release of its claims against Gibraltar, FGB, the FSLIC, and the

FDIC.

While the litigation was pending in state court, FGB

twice filed motions for summary judgment. The state court denied

summary judgment, reasoning that a number of fact issues existed,

including whether FGB was actually the holder and owner of the

notes and individual guarantees of the defendants. The FDIC

intervened in the state action on August 18, 1993, asserting that

such intervention was required to protect any interest of the FDIC

that might be implicated by the litigation.4 The FDIC exercised

its statutory right to remove the case to federal court under 12

U.S.C. § 1819.

In federal district court, the FDIC and FGB each sought

summary judgment. The defendants moved to strike the FDIC’s

intervention and to remand the action to state court. The district

court granted summary judgment to FGB, and, as part of that

judgment, denied the motion to remand but dismissed the FDIC as a

4
Principally, the FDIC suggests that it had an interest in securing
a declaration from the court that it had authority, as receiver, to assign
Gibraltar’s assets to FGB unencumbered by Gibraltar’s unsecured liabilities.

6
party to the action. The defendants timely appealed, and the FDIC

has cross-appealed its dismissal from the case.

DISCUSSION

I. Removal Jurisdiction and FDIC’s Intervention

The defendants contend that the district court erred when

it denied their motion to strike the FDIC’s intervention and to

remand the action to state court. Specifically, the defendants

argue at length that because the FDIC had no interest in the

lawsuit and was never a proper party to the proceedings, a remand

to state court was required. FDIC argues that the district court’s

decision to dismiss it from the litigation was erroneous. This

court reviews for abuse of discretion the district court’s denial

of the motion to strike the FDIC’s intervention. See, e.g., Nutro

Products Corp. v. NCNB Texas Nat’l Bank, 35 F.3d 1021, 1023 (5th

Cir. 1994). Legal issues concerning the existence of federal

removal jurisdiction are reviewed de novo by this court. See,

e.g., Halferty v. Pulse Drug Co., 864 F.2d 1185, 1188 (5th Cir.

1989). Because the parties’ contentions are interrelated, we will

discuss them together.

Defendants’ argument is difficult to follow, but they

seem to assert that FDIC was never a proper party to the case in

state or federal court, and that FDIC intervened “collusively” in

state court solely to assist FGB by removing the case to federal

court. FDIC responds to these assertions and to the district

7
court’s order of dismissal with these propositions: (1) the FDIC

has an interest in this litigation that entitles it to intervene

because the state court sought to adjudicate whether the FDIC had

assigned the notes and guarantees to FGB unencumbered by continuing

funding obligations; (2) the defendants asserted claims against

Gibraltar, and the FDIC is entitled to intervene when claims are

brought against a failed bank for which it was appointed receiver;

and (3) the FDIC satisfied the criteria for intervention under Fed.

R. Civ. P. 24 because it had agreed to indemnify FGB, the acquiring

bank.

There is no dispute that when the FDIC originally

intervened in the state court litigation, it did so pursuant to

Tex. R. Civ. P. 60, which allows any party to intervene in the

proceedings merely by filing pleadings.5 FDIC was thus a proper

party to the case in state court. What provoked FDIC’s

intervention was the state court’s cryptic ruling denying FGB’s

summary judgment motion and finding certain fact issues, including

“whether FGB is the holder and owner of the notes . . . .” The

state court also held “that fact issues exist whether the FDIC or

[FGB] is owner and holder of the notes and guarantees of the

defendants . . . .” These statements appeared to set for trial the

5
Tex. R. Civ. P. 60 provides that “[a]ny party may intervene by filing
a pleading, subject to being stricken out by the court for sufficient cause on
the motion of any party.” The intervening party may, however, be dismissed for
sufficient cause on the motion of any other party to the litigation. During oral
argument, the defendants conceded that the FDIC’s intervention under Rule 60 was
proper.

8
issue whether the FDIC still owned the assets,6 an issue sufficient

to warrant the agency’s intervention.7 The defendants’ arguments

to the contrary are specious.

The more interesting question is whether FDIC remained a

real party in interest in the federal court case, or whether the

district court properly dismissed it.

FDIC contends that its interest in the litigation also

arose from the counterclaims alleged by the defendants. Indeed, to

the extent that the counterclaims attack the actions of Gibraltar,

they challenge FDIC’s interests, if for no other reason than that

the agency assumed those liabilities when it purchased Gibraltar’s

assets.8 More to the point, the assistance agreement between the

6
The FDIC argues that the language of the state court opinion drew
into question the very authority granted the FDIC by Congress to dispose of
receivership assets when federally insured financial institutions fail.
7
Despite the state court’s language intimating the contrary, there is
no doubt that the FDIC has statutory authority to sell and dispose of
receivership assets. The statute expressly provides that the FDIC may, for
example, “take over the assets . . . and conduct all business of the
institution,” “collect all obligations and money due the institution,” and
“preserve and conserve the assets and property of such institution.” 12 U.S.C.
§ 1821(d)(2)(B)(i), (ii), and (iv). The FDIC may also “place the insured
depository institution in liquidation and proceed to realize upon the assets of
the institution . . . ,” including the “transfer [of] any asset or liability
ofthe institution in default . . . .” 12 U.S.C. § 1821(d)(2)(E), (G)(i)(II).
Given this unambiguous statutory language, this court has repeatedly recognized
that the FDIC’s enumerated powers as receiver are both extensive and
discretionary, free from court-imposed restraints. See, e.g., Ward v. RTC, 996
F.2d 99, 103-04 (5th Cir. 1993); 281-300 Joint Venture v. Onion, 938 F.2d 35, 39
(5th Cir. 1991), cert. denied, 502 U.S. 1057, 112 S. Ct. 933 (1992); see also,
12 U.S.C. § 1821(j)(providing that “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 [FDIC] as a conservator or a
receiver”).
8
Because the FHLBB issued a worthlessness finding declaring Gibraltar
Savings insolvent and appointing the FDIC as receiver, any claims against
Gibraltar would be valid, if at all, against the receiver alone. See, e.g.,

9
FDIC and FGB guaranteed a rate of return on the book value of the

loans backed by the federal government; any risk of not ultimately

collecting the book value of the loan rested solely with the FDIC,

not FGB. Given the agency’s obligation to indemnify FGB, the

acquiring bank, FDIC had a concrete financial interest in the

litigation that would justify its status as a party.9

This court has recognized as much, holding that the FDIC

is a proper party in lawsuits raising allegations against a failed

bank, even when the FDIC’s statutory authority to transfer the

failed bank’s assets is not questioned and when the asset has been

assigned to a successor bank under a purchase agreement. Hence,

the FDIC is entitled to intervene in a lawsuit when claims are made

against a failed institution for which the FDIC acted as receiver.

First Indiana Bank, FSB v. FDIC, 964 F.2d 503, 507 (5th Cir. 1992).
9
In Pernie Bailey Drilling Co. v. FDIC, 905 F.2d 78, 80 (5th Cir.
1990), this court dismissed
Pernie Bailey’s assertion that FDIC is not a party to
the case. The designation of FDIC as a proper party
stems in part from its obligation to indemnify NCNB
under the terms of the [Purchase and Assumption]
Agreement. After assignment, NCNB became the proper
party to sue on the notes, but even so, FDIC is entitled
to defend a claim of recission. Although the notes were
assigned before removal, the FDIC remained the proper
party to defend all claims for damages against the
closed bank.

The defendants read Pernie Bailey very narrowly and urge that it merely found the
indemnification agreement relevant to the FDIC’s right to intervene and did not
hold that such an agreement, standing alone, would consistently warrant
intervention. But this court need not address whether such an indemnification
agreement would always justify FDIC intervention and concludes only that, under
the facts of this case, the indemnification agreement supports the conclusion
that the FDIC was entitled to participate in this litigation.

10
See, e.g., Bank One Texas Nat’l Ass’n v. Morrison, 26 F.3d 544, 547

(5th Cir. 1994) (whether the FDIC was a proper party “turns on

whether Morrison actually stated claims against [the failed bank]

in his counter-claim”); FSLIC v. Griffin, 935 F.2d 691, 696 (5th

Cir. 1991) (FDIC had a right to defend claims against a failed bank

where a party asserted four counterclaims against the FDIC as

receiver for the failed bank); Pernie Bailey, 905 F.2d 78, 80 (5th

Cir. 1990) (recognizing that “the FDIC remained the proper party to

defend all claims for damages against the closed bank”); Beighley

v. FDIC, 868 F.2d 776, 779-80 (5th Cir. 1989) (explaining that the

FDIC is the proper party to defend claims against the failed bank

even after the bank’s assets have been assigned).

But the defendants insist that the above authorities are

not persuasive because they do not assert any affirmative claim for

relief against Gibraltar, the FSLIC, or the FDIC. This attempt to

distinguish the caselaw is both misleading and unavailing. In

their Fifth Amended Answer and Sixth Amended Counterclaim filed in

state court and reasserted in federal district court, the

defendants do describe and allege various acts and omissions of

Gibraltar. For instance, the defendants assert that their

obligations under the loan agreements and guarantees are somehow

excused as a result of

Gibraltar Savings Association’s (the
Plaintiffs’ predecessor-in-interest) prior
material breaches of the contracts at issue.
Gibraltar . . . was closed and was unable to

11
 fulfill its funding obligations under the loan
agreements. This failure constitutes a
material breach of the loan agreements and
preceded any alleged failure of the Defendants
to fulfill their obligations under the loan
agreements.

The defendants allege further that Gibraltar and the FSLIC either

negligently or intentionally prevented their performance of their

loan obligations; they contend that

[i]n order for the Defendants to be able to
meet their obligations under the various loan
agreements at issue in this case, the
Plaintiff and/or Gibraltar Savings, and/or the
FSLIC were obligated to fulfill their
obligations under these same loan agreements.
They did not do so. As a result, Circle C
Ranch was not able to generate the expected
profits that all parties realized would be the
source of funds used to pay off the
indebtedness at issue. Accordingly, the
Defendants’ ability to perform under these
loan agreements was rendered impossible.

(emphasis in original). The allegations against Gibraltar

continue, as the defendants suggest that they are excused from

performance under the loan agreements “by the breach of Gibraltar

Savings of its duty of good faith and fair dealing owed to the

Defendants.” The plain language of the pleadings filed by the

defendants in state court and reasserted in federal district court

belies their assertion that this lawsuit does not implicate

Gibraltar or the FDIC.

Further, in Morrison, this court explained that the FDIC

can intervene even when the defendant does not assert any

counterclaims against the failed bank. Morrison, 26 F.3d at 547-

12
48. FDIC intervention is appropriate when, as here, the defendants

assert defenses or claims which reference or rely on the actions of

the failed bank or its receiver. In Morrison, intervention was

appropriate because

[i]nterspersed among his defenses, Morrison
challenges the guaranty as having ‘been
executed under duress, that there was a
failure of consideration and that his
signature was obtained by fraud,’ defenses
which clearly go to the actions of [the
insolvent] Mbank. The combination of
allegations in the counter-claim leads us to
conclude that the FDIC validly perceived that
Morrison was asserting claims against the
Mbank receivership estate and that its
intervention was proper.

Id. at 547. In the present case, the FDIC reasonably reached a

similar conclusion from the language of the defendants’ answer and

counterclaims.10

As in Morrison, the FDIC was entitled to be a party in

this case, the case was properly removed, and the district court

did not abuse its discretion when it denied the defendants’ motion

to strike FDIC. Also, because federal jurisdiction is assessed at

the time of removal, the district court’s ultimate dismissal of the

FDIC did not affect the court’s subject matter jurisdiction. See,

e.g., id. The disposition of FDIC’s appeal to this court adds one

last wrinkle to the parties’ procedural arguments. Not that this

question matters much, but the parties may think it anomalous that

10
Because there are other grounds on which to conclude that the FDIC
was entitled to intervene in this case, the court need not discuss whether the
FDIC also satisfied the criteria for intervention under Fed. R. Civ. P. 24(a)(2).

13
after defending FDIC’s status as a party in state court and for

removal purposes, we will nevertheless affirm its dismissal by the

district court. We do this not because the agency’s participation

was “unnecessary,” however, but because, after the district court

decided to grant summary judgment for FGB, any threat to FDIC’s

interests terminated. At that point, FDIC could have followed the

route it did in Morrison, supra, by withdrawing from the case. The

district court did not afford FDIC that option, but FDIC has not

sought “reversal” of the dismissal on appeal, instead praying for

affirmance of the judgment for FGB. In sum, we may affirm FDIC’s

dismissal even while disagreeing with the district court’s reason

for it.

II. Standing11

The district court held that the borrowers lacked

standing to raise any claims against FGB. The court also found

that Bradley and Gressett, as shareholders and principals of Circle

C, could not assert personal claims for wrongs done to the

corporation. Moreover, the district court ruled that Circle C had

assigned all of its claims to the Joint Venture, which had in turn

released FGB as part of its bankruptcy reorganization.

While the district court was correct that Bradley and

11
Our discussion here is limited only to the issue of standing; whether
the defendants have waived claims which they would otherwise have standing to
raise will be discussed separately.

14
Gressett do not have standing as shareholders and principals,12 they

do have standing as guarantors of the loans to assert the defenses

that would have been available to the borrowers. See, e.g.,

Mayfield v. Hicks, 575 S.W.2d 571, 574 (Tex. App.--Dallas 1978,

writ ref’d n.r.e.) (recognizing that in Texas the general rule is

that “guarantors have the right to raise any defenses to the

guaranteed obligation that the principal may have.”); Stephens v.

First Bank & Trust of Richardson, 540 S.W.2d 572 (Tex. App.--Waco

1976, writ ref’d n.r.e.).

Circle C, by contrast, does not have standing to assert

any claims against FGB. Circle C assigned all of its rights under

the loan agreements to the Joint Venture. The language of the

assignment was sweeping and divested Circle C of all its interests

and rights, transferring these to the Joint Venture.13 For

instance, when the Joint Venture accepted the assigned assets, it

did so pursuant to a clause stating

subject to all the liabilities and obligations
incurred in connection with the Assets as they

12
See, e.g., Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990)
(holding that “[a] corporate stockholder cannot recover damages personally for
a wrong done solely to the corporation, even though he may be injured by that
wrong”).
13
The defendants urge that even though the Joint Venture owns all of
Circle C’s interest in the loans and project, the Joint Venture would somehow not
own Circle C’s claims for fraudulent inducement or for violations of the other
duties alleged by the defendants. The defendants cite no authority for this
proposition and it is contradicted by the sweeping language of the assignment
agreement. While Circle C could have expressly provided in the assignment
agreement that the right to assert its claims for these alleged violations was
retained by Circle C rather than assigned to the Joint Venture, no such provision
is found in the agreement.

15
 exist on the date hereof, whether fixed,
contingent, known or unknown, including, but
not limited to, the satisfaction of any
judgment, order, or decree which may be
entered against [Circle C] in any pending suit
as a result of such liabilities and
obligations. Nothing contained in this
Assignment shall, or shall be construed to,
prejudice the right of [the Joint Venture] to
contest any claim or demand as fully as
[Circle C] might have done [before the
Assignment].

(emphasis added). Moreover, as was previously discussed, the Joint

Venture later filed for bankruptcy and released its claims against

FGB as part of its plan for reorganization. As a result, the

district court correctly observed that Circle C lost standing to

raise claims against FGB when it assigned its entire interest in

the loan agreements and project to the Joint Venture; if the Joint

Venture could have asserted any claims against FGB prior to

bankruptcy, those claims now belong to the bankruptcy estate and

have been released.14

III. Waiver

Because only Bradley and Gressett have standing as

guarantors of the loans to assert the defenses that would have been

available to the borrowers, this court must now consider whether

Bradley and Gressett have waived their rights to assert such

defenses.

14
The defendants counter that Circle C explicitly reserved its right
in the bankruptcy release to assert certain claims. This argument is not
meaningful, however, because Circle C no longer has standing to raise any
affirmative claims against FGB.

16
 The district court found that Bradley and Gressett had

repeatedly waived the defenses and counterclaims that they

attempted to assert. Specifically, the court found that Bradley

and Gressett waived these claims against Gibraltar in both the

Work-out Agreement and a Fourth Loan Modification, executed on

November 3, 1988. Further, the court found that Bradley and

Gressett had waived their claims and defenses against FGB in at

least 27 letter agreements that FGB required them to execute before

it advanced funds to preserve the value of the collateral.

The defendants disagree, contending that they have

specifically reserved their rights to raise the instant claims and

defenses. At oral argument, the defendants were willing to concede

only that they waived all claims and defenses prior to November 3,

1988.

The defendants’ contention is only partially correct.

There is no doubt that the defendants waived all claims and

defenses prior to November 3, 1988. The Work-out Agreement

expressly provides in § 11.3 that Bradley and Gressett waive “any

and all such offsets, claims, defenses or counterclaims” of “any

nature whatsoever . . . to any of the terms, conditions or

provisions” of their Personal Note and loan agreement.

Additionally, in connection with the fourth loan modification,

Bradley and Gressett executed a guarantor’s ratification agreement

in which they

represent[ed] and warrant[ed] to Lender that

17
 as of the date of this Guarantor’s
Ratification there exists no offset, claim,
defense or counterclaim of any nature
whatsoever to any of the terms, conditions of
provisions of the Guaranty and . . . to the
extent such offsets, claims, defenses or
counterclaims do exist, Guarantor hereby
expressly and knowingly waives any and all
such offsets, claims, defenses or
counterclaims.

This language speaks for itself.

When FGB purchased Gibraltar’s assets from the FDIC, it

refused to advance funds to the defendants to preserve the value of

the collateral unless the defendants executed a letter agreement

acknowledging that FGB did not have a continuing obligation to fund

the project; 27 such letter agreements were executed between

September 27, 1989 and September 25, 1990. The agreements provided

that “FGB has not assumed any responsibility or liability for

performance of the obligations of [Gibraltar] under the Loan

Documents including, without limitation, the obligations of the

Closed Association to fund the loan described in the Loan

Documents.”15 The letter agreements also state that

15
See Letter from FGB to Defendants, dated September 25, 1989, and
signed by the defendants on September 27, 1989 (emphasis added) at 2. The
relevant provisions in the remaining 26 letters are virtually identical.
Indeed, any suggestion that FGB had a continuing obligation to fund
the project is frivolous; the agreement provides that
(I) no such action shall be deemed or construed, whether
by operation of law, the principles of equity or
otherwise, as an assumption by or agreement of [FGB], or
a course of dealing which obligates [FGB], to keep,
perform, or observe the responsibilities, obligations
and covenants, express or implied of [Gibraltar] under
the Loan Documents, (ii) [FGB] has no such obligation to
the Borrower, the Guarantors or any other party in
respect to the Loan Documents, (iii) neither the
Borrower nor such Guarantors will assert as a result of

18
 the Borrower and the . . . Guarantors each
waives and releases any and all offsets,
claims, defenses, or counterclaims of any
nature whatsoever which any of them has or may
have against [FGB], provided, however, that
the Borrower and the undersigned Guarantors
reserve any defense or offset (but not any
other claims or rights) with respect to the
enforceability of the Loan Documents now held
by [FGB] arising from the acts or omissions of
the Closed Association or of the FSLIC, acting
in its capacity as receiver of the Closed
Association, or any successor of the FSLIC
acting in that same capacity (acknowledging,
without prejudice, that [FGB] denies both the
existence of all such defenses or offsets and
the applicability thereof to the
enforceability of the Loan Documents in the
hands of [FGB], and [FGB] expressly reserves
all rights to deny, challenge and defend
against any such defense or offset . . . .

Id. at 3 (emphasis added). Under these provisions, Bradley and

Gressett waived their claims against FGB and reserved only those

defenses or offsets arising from the acts of Gibraltar, the FSLIC,

or the FDIC. However, as FGB correctly argues, given the fact that

Bradley and Gressett waived their claims against FGB and that they

expressly and unequivocally acknowledge that FGB has no obligation

to them to fund the project, the rights reserved by Bradley and

the execution of the partial release(s) described in
this letter or the negotiations and conversations
between [FGB], the Borrower and such Guarantors in
respect thereto, whether at law or in equity, that [FGB]
has assumed such obligations or is otherwise responsible
in any manner for the performance of the obligations,
covenants and agreements of the Closed Association
described in the Loan Documents including, without
limitation, the commitment to loan funds as described in
said instruments . . . .

Id. at 2-3.

19
Gressett against Gibraltar, the FSLIC, or the FDIC would be

meaningful only in a lawsuit against those entities; these rights

are irrelevant in the instant case.

Careful review of the record thus demonstrates that

Bradley and Gressett waived not only all of their claims prior to

November 3, 1988, but also their claims against FGB; hence, Bradley

and Gressett have waived all of their claims except during the

period from November 4, 1988 to December 28, 1988, the date that

FGB acquired Gibraltar’s assets.

Recognizing that the letter agreements otherwise destroy

the viability of their claims against FGB, the defendants suggest

that these agreements are somehow the product of “economic duress.”

They contend that they were in a “dire situation” and that “[t]hey

were therefore, out of fear of economic loss, forced to accept

whatever FGB would give them, on whatever terms FGB required.”

This argument is unsupported by either the law or the record. In

Lee v. Wal-Mart Stores, Inc., 943 F.2d 554, 560 n.11 (5th Cir.

1991), this court explained that

[t]he test for [economic] duress [under Texas
law] includes the following factors: (1) there
can be no duress unless there is a threat to
do some act which the party threatening has no
legal right to do; (2) there must be some
illegal exaction or some fraud or deception;
(3) the restraint must be imminent and such as
to destroy free agency without present means
of protection. Further, economic duress can
be claimed only when the party against whom it
is claimed was responsible for a claimant’s
financial distress.

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(citations omitted); see also, Callum Highlands, Ltd. v. Washington

Capital Dus, Inc., 66 F.3d 89 (5th Cir. 1995). FGB had a legal

right to condition any further funding to preserve the project’s

capital on execution of the letter agreements. Defendants offered

no evidence that FGB exacted these agreements through fraud or

deception or that the defendants were otherwise forced or coerced

into executing the agreements twenty-seven times. Finally, the

defendants’ financial woes began long before they executed any

agreement with FGB; FGB was not responsible for the defendants’

financial distress.

Because the defendants have waived all of their claims

against FGB, this court need not address the merits of the various

claims for breach of the lending agreements, breach of fiduciary

duty, fraud, estoppel, etc.

CONCLUSION

For the foregoing reasons, the judgment of the district

court granting summary judgment in favor of FGB and dismissing the

FDIC as a party, is AFFIRMED.

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