Barrows v. RTC

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[NOT FOR PUBLICATION]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

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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).

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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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