IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 96-40401
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
11,950 ACRES OF LAND, ETC., ET AL.,
Defendants,
FIRST HEIGHTS BANK,
Defendant-Cross Defendant
Cross Claimant-Appellee,
versus
PACIFIC UNION COMPANY,
Defendant-Cross Claimant
Cross Defendant-Appellant.
_________________________________________________________________
Appeal from the United States District Court for the
Southern District of Texas
(B-93-CV-256)
_________________________________________________________________
March 18, 1997
Before JOLLY, JONES, and WIENER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:*
This appeal arises from a condemnation action by the United
States. It involves a disputed claim to the condemned land, which
is 11,950 acres located where the Rio Grande meets the Gulf of
*
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this opinion should not be published and is not precedent except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.
Mexico. The background of this case presents a morass of
historical or procedural facts involving more than one failed
savings and loan institution, the FDIC, the EPA, politics,
injunctions, and various lawsuits. To be sure, the case is no
stranger to this court. See In re FDIC, 58 F.3d 1055 (5th Cir.
1995); Sierra Club, Lone Star Chap. v. FDIC, 992 F.2d 545 (5th Cir.
1993). Most of this complexity, however, does not matter any more.
In the final analysis, this case turns on contract interpretation.
Pacific Union Company, the appellant, contracted with First Heights
Bank to purchase this land, but the FDIC had to approve the sale.
The FDIC approved the sale but subsequently withdrew its approval.
First Heights Bank then refused to complete the sale. We hold that
FDIC approval was a condition of this sale, that when the FDIC
withdrew its approval the condition failed, and that First Heights
Bank was relieved from performance under the contract. The
judgment of the magistrate judge in favor of First Heights Bank
will therefore be affirmed.
I
A
In the late 1980's, Champion Savings Association acquired
title to an 11,950-acre tract of land, known as Playa del Rio,
located at the southernmost tip of Texas. After acquiring title,
Champion Savings Association became insolvent and was dissolved.
The Federal Savings and Loan Insurance Corporation (“FSLIC”) was
appointed receiver. In 1988, as part of a purchase and acquisition
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agreement, FSLIC transferred Playa del Rio to Heights of Texas,
FSB, a predecessor to First Heights Bank, FSB (collectively “First
Heights”).
In 1992, First Heights and Pacific Union Company (“Pacific
Union”) entered into an “Unimproved Property Earnest Money
Contract.” This sale contract included a provision for the sale of
Playa del Rio to Pacific Union for $5,884,500.2 Under Article IX
of the sale contract, execution of the sale was “conditioned upon
and subject to various approval processes.” First, Article IX
required First Heights to submit the sale contract to its “internal
approval process.” Following the internal approval process, the
sale contract was to be “submitted for approval by the regulatory
authorities having jurisdiction over Seller which approval is
required prior to sale of the Subject Property.”
The regulatory authority referred to in Article IX is the
Federal Deposit Insurance Corporation (“FDIC”). Its authority
results from an Assistance Agreement between First Heights and
FSLIC that was entered into simultaneously with the purchase and
acquisition agreement by which FSLIC transferred Champion Savings
Association’s interest in Playa del Rio to First Heights.3 The
2
The sale contract also includes other provisions, concerning
personal property, that are not relevant to the current appeal.
3
In 1989, Congress enacted the Financial Institutions Reform,
Recovery, and Enforcement Act (“FIRREA”), which abolished the
Federal Home Loan Bank Board and the FSLIC. FIRREA also
established the FSLIC Resolution Fund and appointed the FDIC as
manager of the fund. Under FIRREA, the FDIC is now responsible for
-3-
Assistance Agreement obligated the FDIC to indemnify First Heights
for capital losses it incurred on the sale of certain “covered
assets,” provided First Heights first obtained FDIC approval of the
sale of those assets.4 Playa del Rio was a covered asset under the
Assistance Agreement and, thus, was subject to its provisions
requiring FDIC approval.5
On August 4, 1992, the internal approval process was
completed. Two days later, First Heights, pursuant to Article IX
of the sale contract, notified Pacific Union of the approval and
reminded Pacific Union that FDIC approval was still required. On
September 1, First Heights submitted the required approval form to
the FDIC, seeking approval of the sale contract. On September 4,
the FDIC granted its approval, and First Heights communicated this
approval to Pacific Union in writing on September 10. With the
approval processes required by the sale contract apparently
completed, the parties prepared, over the next several months, to
close the transaction.
approving First Heights’ asset sales requests. See 12 U.S.C. §
1821a(a); see also Sierra Club, Lone Star Chapter v. FDIC, 992 F.2d
545, 547 n.2 (5th Cir. 1993). Hereafter, all of these agencies
will be referred to as the FDIC.
4
The Assistance Agreement was designed to prevent First
Heights from suffering a loss on the sale of assets that Champion
Savings Association had carried on its books at an inflated value.
5
The book value of Playa del Rio is reportedly $7.4 million.
Thus, the proposed sale to Pacific Union for approximately $5.9
million would result in a capital loss of $1.5 million for First
Heights. This loss would be made up by the FDIC under the terms of
the Assistance Agreement.
-4-
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B
On January 3, 1993, the Sierra Club, the Frontera Audubon
Society, and Norman L. Richard (collectively, the “Sierra Club”)
filed suit against the FDIC in the United States District Court for
the Southern District of Texas, seeking to require the FDIC to
withdraw its approval of the sale of Playa del Rio to Pacific
Union. The complaint further sought to enjoin the FDIC’s approval
until the environmental impact of the sale was evaluated under the
National Environmental Policy Act (“NEPA”). In late January, the
district court judge granted the Sierra Club relief and ordered
that the FDIC
withdraw approval and withhold future approval for
Height[s]’ sale to development interests of the Playa
property and shall take no further action facilitating
the sale of the Playa del Rio property, pending
consideration by the FDIC Board of Directors of the
issues surrounding the FDIC’s approval or rescission of
the Playa del Rio sale request.
This order, notably, enjoined only the FDIC’s approval. It did not
enjoin the sale of Playa del Rio to Pacific Union under the sale
contract.
The FDIC appealed the order of the district court to this
court. At the same time, the FDIC, in a letter dated February 5,
1993, notified First Heights of the preliminary injunction order
and reported that it was in the process of appealing the order.
The letter also informed First Heights of the FDIC’s obligation to
comply with the order by withdrawing its approval of the sale
contract. The letter stated, in relevant part:
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Notwithstanding the FDIC’s appeal of the order,
until such time as it has been vacated or modified the
FDIC must comply with it. Accordingly, in compliance
with such order the FDIC formally withdraws its approval
of Asset Sale request #14-92-0059-01-MCA, pending further
order by the District Court or the Court of Appeals.
In view of the FDIC’s withdrawal of the previous
approval, Heights is advised that if it should consummate
the sale of the Playa del Rio to Pacific Union the FDIC
will be unable to approve or to provide the capital loss
coverage the Manager agreed to accept by approval of the
Asset Sale Request unless and until the court order is
vacated or modified.
C
On June 8, 1993, this court vacated the injunction and
remanded the action for further proceedings.6 Sierra Club, Lone
Star Chapter v. FDIC, 992 F.2d 545, 552 (5th Cir. 1993). Nine days
later, First Heights requested, under the terms of the sale
contract, that within five days Pacific Union either waive its
remaining title objections, and thereby place its $250,000 earnest
money at risk, or else terminate the sale contract. Pacific Union
declined to terminate the sale contract and on June 22 was deemed
to have waived all remaining title objections.
In late July 1993, First Heights resubmitted an asset sale
request for Playa del Rio to the FDIC for approval. On August 24,
6
The court held that the district court had jurisdiction to
enjoin the FDIC from approving the sale of Playa del Rio to Pacific
Union, that the Sierra Club had not yet demonstrated that it was
entitled to injunctive relief, and that the district court had not
complied with Federal Rule of Civil Procedure 52. Sierra Club,
Lone Star Chapter v. FDIC, 992 F.2d 545, 552 (5th Cir. 1993). This
suit was dismissed by the lower court on December 12, 1994, because
it was rendered moot by the condemnation action underlying this
appeal.
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1993, the FDIC denied this second approval request. The following
day, First Heights notified Pacific Union that the sale contract
was being terminated because it had been “disapproved by the
regulatory authorities having jurisdiction over Seller.” That same
day, First Heights and the FDIC jointly filed a declaratory
judgment action against Pacific Union in the United States District
Court for the Southern District of Texas, seeking a declaration
that the sale contract had no force and effect. On September 1,
1993, the scheduled closing date, Pacific Union appeared for
closing and tendered the full purchase price for Playa del Rio,
which was rejected.
D
The United States instituted this condemnation proceeding
against Playa del Rio on December 8, 1993. Both First Heights and
Pacific Union appeared, claiming title to Playa del Rio and
therefore the right to the condemnation award.7 First Heights
asserted a cross-claim against Pacific Union, seeking a declaration
that the parties’ sale contract had terminated and that Pacific
Union had no rights under the contract.8 Pacific Union answered,
denying that First Heights was entitled to the relief sought.
Pacific Union subsequently filed a cross-claim against First
7
First Heights appeared in the action as title owner, and
Pacific Union appeared, claiming rights under the sale contract.
8
This is the same declaration sought in the declaratory
judgment action jointly filed by First Heights and the FDIC.
-8-
Heights and moved to compel joinder of the FDIC. First Heights
then moved for summary judgment.
On November 28, 1995, a magistrate judge9 granted First
Heights’ motion for summary judgment and held that Pacific Union’s
motion to join the FDIC was moot. In sum, the magistrate judge
concluded that the injunction voided the initial FDIC approval and
that the subsequent ruling of this court did not revive the
necessary approval. Two months later, the magistrate judge entered
final judgment under Federal Rule of Civil Procedure 54(b) for
First Heights on its claim of title to Playa del Rio.10 Pacific
Union timely appealed.
II
A
We review the magistrate judge’s grant of summary judgment de
novo, using the same standard employed by the court below. See
Garcia v. Elf Atochem N. Am., 28 F.3d 446, 449 (5th Cir. 1994).
Summary judgment is warranted only if “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
9
The parties consented to a trial before a magistrate judge
and to appeal the judgment of the magistrate judge to this court.
See 28 U.S.C. § 636(c).
10
The magistrate judge initially dismissed with prejudice
Pacific Union’s cross-claims against First Heights and dismissed
with prejudice Pacific Union as a party to the proceeding. Pacific
Union timely requested amendment of the judgment, and the
magistrate judge subsequently altered the judgment to dismiss
Pacific Union’s “damage claims” without prejudice. Pacific Union
does not appeal with respect to those claims.
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the affidavits, if any, show that there is no genuine issue of
material fact and that the moving party is entitled to judgment as
a mater of law.” Fed. R. Civ. P. 56(c). We review the facts in
the light most favorable to the nonmoving party and affirm the
grant of summary judgment only “[i]f the record taken as a whole
could not lead a rational jury to find for the nonmoving party.”
Garcia, 28 F.3d at 449. Our review is not limited to the reasons
given by the lower court; instead, we may affirm the grant of
summary judgment on any appropriate ground supported by the record.
See, e.g., Davis v. Liberty Mut. Ins. Co., 525 F.2d 1204, 1207 (5th
Cir. 1976). Bearing this familiar standard in mind, we turn now to
the issues presented by this appeal.
B
Notwithstanding the legal, administrative and political
machinations that color this case, the resolution of the simple
question on appeal--who has the right to ownership of Playa del
Rio--requires only an interpretation of the language found in
Article IX of the sale contract. The dispute concerns the meaning
of the provision that the sale contract be “submitted for approval
to the [FDIC] which approval is required prior to sale of the
Subject Property.” First Heights contends that the contract term
required FDIC approval at the time of closing--a fact that did not
occur. Pacific Union, however, contends that once the initial FDIC
approval was obtained, the approval conditions were satisfied and
the sale contract was binding; consequently, the later revocation
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and denial of approval is irrelevant because the condition of FDIC
approval had been satisfied. Thus, the question before the court
is whether Article IX required approval as a one-time event, after
which the contract condition was conclusively satisfied and no
longer relevant, or whether FDIC approval was required upon
closing.
Pacific Union advances two primary arguments on appeal: First,
the plain language of the contract suggests that the requisite
approval was a process that once completed had no further bearing
on the execution of the contract; and second, in the alternative,
the contract provision was ambiguous and, thus, a fact question
existed concerning the parties’ intent. These two arguments can be
addressed by a single analysis.
C
We look to Texas law for guidance in interpreting this
contract.11 A contract is ambiguous if its meaning is unclear or
11
Section 7.2 of the sale contract expressly provided that the
“[c]ontract shall be construed under and in accordance with the
laws of the State of Texas and all obligations of the parties are
performable in Cameron County, Texas.” A federal court follows the
choice of law rules of the forum in which it sits; thus, Texas
choice of law rules apply to this appeal. See Klaxon v. Stentor
Elec. Mfg. Co., 61 S.Ct. 1020, 1021 (1941). Under Texas law, “[a]n
express agreement of the parties that the contract is to be
governed by the laws of a particular state will be given effect if
the contract bears a reasonable relation to the chosen state and no
countervailing public policy of the forum demands otherwise.”
DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 678 (Tex. 1990)
(quoting First Commerce Realty Investors v. K-F Land Co., 617
S.W.2d 806, 808-09 (Tex. Ct. App. 1981)). Clearly, there is a
“reasonable relation” between the contract and Texas, and there is
no “countervailing public policy” weighing against the use of Texas
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its terms are susceptible to more than a single interpretation.
See Exxon Corp. v. West Tex. Gathering Co., 868 S.W.2d 299, 302
(Tex. 1993). A determination of ambiguity is a question of law
that is based upon an “examin[ation of] the contract as a whole in
light of the circumstances present when the contract was entered.”
Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., No. 94-1206,
1996 WL 596806, at *2 (Tex. Oct. 18, 1996). An ambiguous contract
is one that can be given two or more reasonable interpretations.
Id. Ambiguity does not arise, however, merely because the parties
to a contract suggest differing interpretations. Forbau v. Aetna
Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). Instead, ambiguity
arises only if both interpretations are reasonable. National Union
Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).
When interpreting contract language, the “court’s primary concern
is to give effect to the written expression of the parties’
intent.” Forbau, 876 S.W.2d at 133.
Thus, in order to determine the appropriateness of the
magistrate judge’s grant of summary judgment, we must decide
whether the approval condition has more than one reasonable
interpretation, a finding that would preclude summary judgment. We
turn now to the sale contract.
law to interpret the contract.
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D
Article IX of the sale contract is entitled “Required
Approvals.”12 The first sentence of the Article reads as follows:
12
Article IX appears in the contract as follows:
IX. REQUIRED APPROVALS
This Contract is conditioned upon and subject to
various approval processes. Seller operates pursuant to
an internal approval process which requires approval by
certain authorized committees and its Senior Asset
Management Committee. Thereafter, this Contract shall be
submitted for approval by the regulatory authorities
having jurisdiction over Seller which approval is
required prior to sale of the Subject Property. Seller’s
execution of this Contract is contingent upon such
approvals. Execution of this Contract by Seller is not
binding upon Seller pending completion of the approval
process. Seller shall promptly notify Buyer, in writing,
after approval of this Contract by Seller’s Senior Asset
Management Committee and the appropriate regulatory
authorities. Buyer may not, and agrees it will not rely
upon any oral discussions, representations, agreements or
the like, unless contained in a letter addressed to Buyer
executed by Seller stating: (I) the status of the
approval process, or (ii) that certain approvals have
been received. Buyer waives all rights against Seller,
its officers, employees, representatives, attorneys,
agents, independent contractors and affiliates relating
to any representations relating to this matter and agrees
not to sue or otherwise hold such parties liable for any
reliance by Buyer on such representations.
Seller will recommend regulatory approval of this
Contract and will submit all reasonably necessary
documentation in support thereof through appropriate
channels. Seller cannot and does not make any
representations regarding the ultimate approval or
disapproval of this Contract. In the event of
disapproval of this Contract, Seller shall notify Buyer
and this Contract shall terminate, Buyer shall be
returned the Earnest Money and all parties shall be
released from any liability hereunder. If regulatory
approval or disapproval is not obtained within one
hundred twenty (120) days after the Effective Dated, then
either party may terminate this Contract by written
notice served upon the other party between the expiration
of such one hundred twenty (120) day period and the date
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“This Contract is conditioned upon and subject to various approval
processes.” The Article further states that the “Seller’s
execution of this Contract is contingent upon such approvals.”
Article IX also makes clear that, “[i]n the event of disapproval of
this Contract, Seller shall notify Buyer and this Contract shall
terminate.” Among the approvals required was that of the FDIC.
We think that Article IX, and specifically the language we
have quoted and underscored above, could hardly make clearer the
significance and importance to First Heights of FDIC approval of
the sale of Playa del Rio. The reason underlying the importance of
approval to First Heights is, in its essence, undisputed: The FDIC
had agreed that, so long as it approved the sale of Playa del Rio,
it would reimburse First Heights for the difference between the
book value of the property and the sale price. It is undisputed
that Pacific Union knew of the Assistance Agreement and that FDIC
approval was a “deal point” with First Heights, that is, without
FDIC approval, there was no deal. Based on the record before us,
the FDIC had no obligation to any of the parties to continue its
approval once given. The FDIC has been consistent in its position
upon which regulatory approval is obtained, in which
event the Earnest Money shall be refunded to Buyer and
both parties shall be released from any liability
hereunder. Seller has disclosed to Buyer and Buyer
acknowledges that the approval process of the regulatory
authorities is confidential, that Buyer may not be
involved in the process and that direct documentation of
the process and any acceptance or rejection is not
possible. Buyer covenants to take no action to influence
or interfere with the regulatory approval process.
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that it had the right to withdraw its approval, and that, upon
withdrawal of approval, it had no further obligation to indemnify
First Heights for its loss. There is no provision in the contract
to the contrary, and the FDIC’s position is not disputed by the
parties. Clearly, when the FDIC withdrew its approval and
subsequently refused to approve the new request, First Heights was
exposed to the very loss that the condition of approval was
designed, and was understood by the parties, specifically to
prevent.
On the other hand, Pacific Union’s interpretation that the
condition was satisfied by the first approval and that the
subsequent withdrawal and refusal were of no contractual relevance,
totally vitiates the purpose of the condition. Pacific Union’s
position would require First Heights to consummate the sale without
FDIC approval, which would relieve the FDIC of its indemnification
obligations. In turn, this interpretation would strip First
Heights of the benefit of indemnification and loss protection,
which it sought expressly to preserve. Furthermore, to interpret
Article IX as Pacific Union urges, would require First Heights to
complete the sale of Playa del Rio for $1.5 million dollars less
than the contract itself anticipated, a point fully understood by
the parties.
We thus conclude that Pacific Union’s interpretation is
unreasonable and that, because the interpretation advanced by First
Heights is the only reasonable interpretation of the approval
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provision, the contract is not ambiguous. Summary judgment was
therefore appropriate.13
E
Pacific Union asserts that, even if the provision is
interpreted to require valid FDIC approval at the time of closing,
First Heights has waived this condition precedent and is now
estopped from relying upon the withdrawal and subsequent denial of
FDIC approval to avoid the contract obligation to convey Playa del
Rio to Pacific Union.
Waiver results from the express relinquishment of a right or
from intentional conduct inconsistent with the exercise of that
right. See First Interstate Bank of Ariz. v. Interfund Corp., 924
F.2d 588, 594-95 (5th Cir. 1991); Sun Exploration & Prod. Co. v.
Benton, 728 S.W.2d 35, 37 (Tex. 1987). Quasi-estoppel precludes a
party from asserting, to the disadvantage of another, a right
inconsistent with a position previously taken. Missouri Pac. R.R.
Co. v. Harbison-Fischer Mfg. Co., 26 F.3d 531, 537 (5th Cir. 1994);
Steubner Realty 19, Ltd. v. Cravens Road 88, Ltd., 817 S.W.2d 160,
164 (Tex. Ct. App. 1991).
13
Our interpretation of Article IX renders unnecessary any
discussion of whether FDIC approval, withdrawn by the letter to
First Heights, was revived by the order of this court vacating and
remanding the Sierra Club injunction. We conclude that the
condition of approval required FDIC approval upon closing, and the
formal disapproval clearly establishes that the condition was not
met at closing.
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Pacific Union’s waiver and estoppel argument is without merit,
because the parties entered into a series of letter agreements,
after the withdrawal of approval, delaying the date of closing and
specifically providing:
By execution of this letter, neither party hereto waives
any of its claims, causes of action, rights or remedies
with regard to the Contract and each of such claims,
causes of action, rights or remedies are reserved
including, without limitation, those pursuant to Article
IX of the Contract. In addition, neither party makes any
representations or warranties, express or implied, beyond
those set forth in the Contract.
Through these agreements, First Heights expressly preserved its
rights under Article IX and cannot therefore be said to have waived
those rights. Furthermore, there is no evidence that First Heights
ever took a position other than the position that FDIC approval was
necessary to the closing of the contract.
III
For the foregoing reasons, we find that the sale contract was
not ambiguous and only reasonably can be interpreted to require
FDIC approval at the time of closing. To interpret the condition
in any other way would nullify the purpose of the inclusion of the
condition, which was to protect First Heights from bearing the
burden of closing the sale without assurance of reimbursement from
the FDIC. Further, we find that Pacific Union failed to raise a
fact issue with respect to its defenses of waiver and quasi-
estoppel. Our holding renders moot Pacific Union’s appeal from the
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magistrate judge’s refusal to compel joinder of the FDIC as a party
to this action.14
The judgment of the magistrate judge is
A F F I R M E D.
14
Our holding also makes it unnecessary for us to consider the
argument advanced by First Heights that the contract obligations
should be discharged by operation of the principle of “frustration
of purpose.”
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