Sunshine v. FDIC

USCA1 Opinion









July 6, 1995 [NOT FOR PUBLICATION]

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

____________________

No. 95-1025

SUNSHINE DEVELOPMENT, INC.,

Appellant,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,

Appellee.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Paul J. Barbadoro, U.S. District Judge] ___________________

____________________

Before

Boudin and Lynch, Circuit Judges, ______________

and Schwarzer,* Senior District Judge. _____________________

_____________________

William E. Aivalikles, with whom Law Office of William _______________________ _______________________
Aivalikles was on brief for appellant. __________
Daniel H. Kurtenbach, Counsel, with whom Ann S. Duross, _____________________ ______________
Assistant General Counsel, and Richard J. Osterman, Jr., Senior _________________________
Counsel, Federal Deposit Insurance Corporation, were on brief for
appellee.



____________________


____________________

* Of the District of Northern California, sitting by
designation.













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SCHWARZER, District Judge. Sunshine Development, Inc. SCHWARZER, District Judge ______________

("Sunshine") appeals from a judgment of the United States

District Court for the District of New Hampshire which affirmed a

judgment of the United States Bankruptcy Court for the District

of New Hampshire. We have jurisdiction of the appeal under 28

U.S.C. 1291. We affirm largely for the reasons stated in the

thoughtful opinion by the district court and add the following.

This appeal grows out of two actions consolidated

below. The first was filed by First Service Bank for Savings

("Bank") against Sunshine in the New Hampshire state court to

collect loans made by the Bank to Sunshine and to obtain an

attachment on property pledged by Sunshine as security for the

loans. The second was filed by Sunshine in the district court

against the Bank for breach of contract, breach of fiduciary

duties, negligence, interference with contractual relations,

conversion, and violation of the Racketeer Influenced and Corrupt

Organizations Act (18 U.S.C. 1961 et seq.). When the Federal _______

Deposit Insurance Corporation ("FDIC") was appointed liquidating

agent for the Bank, it was substituted in both actions and

removed the state court action to the district court. The

district court had jurisdiction over the removed action under 12

U.S.C. 1819(b)(1) and (b)(2)(A) and 28 U.S.C. 1331 and

1345. It had jurisdiction over Sunshine's action under 18 U.S.C.

1964 and 28 U.S.C. 1331 and 1332. When Sunshine filed for

protection under chapter 11 of the bankruptcy code, the district




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court referred both actions to the bankruptcy court where they

were consolidated.

With the consent of the parties, a jury trial was held

in the bankruptcy court in both actions. In the Bank s action

against Sunshine to collect the amounts due under the loans, the

jury ruled for Sunshine and awarded nothing. In Sunshine s

action against the Bank, the jury awarded $2,000,000. On the

FDIC s motion, the bankruptcy court, in a 21 page opinion, held

that the jury's verdict in both cases was "manifestly against the

clear weight of the evidence." (R. 11, 21, 30). It vacated the

jury's verdict, dismissed Sunshine's complaint, entered judgment

for FDIC in the amount of $2,727,856.12, and conditionally

granted a new trial. (Id.) __

Sunshine appealed to the district court under 28 U.S.C.

158(a). In a sixteen page opinion, the district court affirmed

the judgment of the bankruptcy court (R. 32, 47). The court

acknowledged that its review of the bankruptcy court's order was

plenary and that the reversal of the jury's verdict could not be

sustained "unless the evidence points so strongly and

overwhelmingly in favor of the moving party that no reasonable

jury could have returned a verdict adverse to that party."

Keisling v. Ser-Jobs For Progress, Inc., 19 F.3d 755, 759-60 (1st ________ ___________________________

Cir. 1994) (R. 34). Examining the evidence "in the light most

favorable to the non-moving party," (Id.), it reached the same __

conclusions as the bankruptcy court.




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For the reasons stated by the District Court, our

review too is plenary and we can sustain the judgment only if

there is no evidence on the basis of which a reasonable jury

could have found for Sunshine. We agree with the district

court's analysis that the burden of establishing payment was on

Sunshine and that it could not support a jury verdict merely by

pointing to deficiencies in the Bank s records (R. 36-37). At

oral argument, counsel was unable to point to any facts on the

basis of which a jury could have found that an additional credit

in the amount of $1,016,000, or any other amount, was due as

claimed by Sunshine. As the court below cogently pointed out, to

accept Sunshine s claim would require the jury to find both that

the Bank's records were incorrect in showing the $1,016,000 as

overfunding of another loan yet correct as reflecting a repayment

by Sunshine of $1,016,000 (R. 38-39). No evidence was offered to

support such a strained inference.

With respect to Sunshine's claim against the Bank for

breach of its duty of good faith and fair dealing, the

uncontradicted evidence established that one of its loans had an

overdue balance of over $500,000 and that the notes' cross-

default clauses triggered defaults in all outstanding loans,

justifying the attachment on the property put up as security and

the acceleration of the notes (R. 42-43). And it further

established that the Bank, in obtaining the attachment, had

deemed itself to be insecure because a current appraisal showed

the wholesale value of the security for the loans to be


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substantially below the amount of Sunshine's outstanding debt and

an FDIC examination report classified all of the loans as

"substandard," "doubtful," or "loss." (R. 44).

To refute this evidence reflecting that the Bank acted

in a commercially reasonable manner, Sunshine argued that the

appraiser s report showed the retail value of the Bank s security

to be greater than the amount due on the loans, but it presented

no evidence that the Bank s reliance on wholesale rather than

retail value was unreasonable. It also pointed to a report

prepared by a former Bank official months after the attachment

was obtained indicating optimism that the Bank will be able to

work out of these loans. But after-the-fact evidence does not

establish the lack of good faith of the decisions at the time of

the attachment and acceleration. Sunshine s evidence is not

sufficient to permit a reasonable jury to conclude that the Bank

acted unreasonably in deeming itself to be insecure and obtaining

the attachment, and on appeal, counsel have pointed to no

evidence that would support their claim.

The judgment is AFFIRMED. AFFIRMED
















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