USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
_________________________
No. 96-1230
KENNETH V. HACHIKIAN,
Plaintiff, Appellant,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendant, Appellee.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge] ___________________
_________________________
Before
Selya, Circuit Judge, _____________
Torres* and Saris,** District Judges. _______________
_________________________
W. Paul Needham, with whom Kevin Hensley and Needham & ________________ ______________ __________
Warren were on brief, for appellant. ______
Karen A. Caplan, with whom Ann S. Duross, Richard J. _________________ ______________ ___________
Osterman, Jr., Clark Van Der Velde, and Thomas R. Paxman were on _____________ ____________________ ________________
brief, for appellee.
_________________________
September 11, 1996
_________________________
_______________
*Of the District of Rhode Island, sitting by designation.
**Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. Plaintiff-appellant Kenneth V. SELYA, Circuit Judge. _____________
Hachikian seeks to enforce, or in the alternative to obtain
damages for the breach of, an oral agreement that he allegedly
made with defendant-appellee Federal Deposit Insurance
Corporation (FDIC). The district court dashed his hopes by
granting the FDIC's motion for summary judgment. The court
reasoned that, even if a contract had been formed, it violated
the statute of frauds. We affirm, albeit on a different ground.
I. BACKGROUND I. BACKGROUND
Adhering to the familiar praxis, we recite the
pertinent facts in the light most favorable to the party who
unsuccessfully resisted summary judgment.
In his halcyon days the appellant borrowed liberally
from two Massachusetts-based financial institutions: Olympic
Bank and Bank Five for Savings. At the times relevant hereto the
Olympic debt consisted of (i) a $200,000 promissory note secured
by a third mortgage on the appellant's residence, (ii) a $115,000
promissory note secured by a pledge of shares in Chestnut Hill
Bank & Trust Co. (the CHBT stock), and (iii) personal guarantees
of two business loans which totaled over $3,100,000. The Bank
Five debt consisted of (i) a $168,750 loan secured by a fourth
mortgage on the appellant's residence, and (ii) a personal
guarantee of a business loan having a deficiency balance of
approximately $500,000. As luck would have it, both banks
foundered. In each instance the FDIC (a government agency
operating under federal statutory authority, see, e.g., 12 U.S.C. ___ ____
2
1814-1883 (1994)) was appointed as the receiver. It
administered the Olympic receivership from its Westborough,
Massachusetts consolidated office (WCO) and the Bank Five
receivership from its Franklin, Massachusetts consolidated office
(FCO).
With the specter of personal bankruptcy looming, the
appellant commenced negotiations for the settlement of his debts.
His attorney, Michael McLaughlin, wrote several letters to Kathy
Callen, a WCO account officer. After months of haggling over
possible settlement models, McLaughlin received a telephone call
from Callen on June 3, 1993, in which she stated that her agency
had approved the appellant's latest proposal. The next day,
McLaughlin wrote to Callen outlining the details of the bargain
that he believed had just been struck: in exchange for a release
of the appellant's indebtedness to both Olympic and Bank Five and
the discharge of the third and fourth mortgages that encumbered
his residence, the appellant agreed to (i) pay the FDIC $17,500
in cash, (ii) transfer to it the CHBT stock, and (iii) sell his
residence and remit the net sale proceeds (estimated to be in
excess of $100,000). The FDIC did not respond immediately to
McLaughlin's communique, but it later asserted (before any
performance took place) that, while it had approved a settlement
paradigm, it had never assented to, and Callen had never
acquiesced in, the settlement described by McLaughlin.1
____________________
1Although the FDIC did not contemporaneously provide the
appellant with a written description of the terms that in fact
had been approved on June 3, 1993, it told the appellant's
3
By October of 1993 the appellant knew that the FDIC
refused to abide by the terms that McLaughlin said constituted
the agreed settlement. In November, the appellant proposed a
new, more circumscribed agreement. This proposal envisioned that
the FDIC would discharge the two mortgages that it held on the
appellant's residence in return for the net proceeds derived from
a sale of that property. The appellant characterized this
proposal as being in mitigation of the damages stemming from the
FDIC's "breach" of the earlier "settlement agreement."
Peter Frazier, Callen's replacement as the WCO account
officer responsible for supervising the appellant's debts,
responded to the new proposal by letters dated November 30 and
December 21, respectively. The letters stated in substance that
while the FDIC agreed to release the third and fourth mortgages
on the appellant's residence in exchange for the avails of the
anticipated sale, the proceeds would merely be credited to the
appellant's account and the excess indebtedness would remain
"open and payable in full." Against this contentious backdrop,
the FDIC discharged both mortgages in December of 1993; the
appellant sold his home; and the FDIC received net sale proceeds
of approximately $103,000.
In January of 1994, the appellant's attorney again
wrote to the FDIC, reiterating his view that the December
transaction was accomplished merely as a means of mitigating the
____________________
counsel that the sanctioned settlement called solely for the
discharge of the indebtedness administered through the WCO, i.e.,
the appellant's obligations to Olympic.
4
damages caused by the FDIC's repudiation of the earlier (June
1993) pact. He also demanded that the FDIC cancel all the
appellant's notes and guarantees. The agency refused to grant a
global release. In short order, the appellant sued in federal
district court seeking money damages, specific performance, and a
declaratory judgment upholding the supposed June 1993 agreement.
The FDIC denied the material allegations of the
complaint and moved for brevis disposition. It argued, among ______
other things, that the district court lacked jurisdiction because
the appellant had failed to comply with the administrative claims
review process; that no agreement came into being in June of 1993
because there had been no meeting of the minds; that, regardless
of what Callen may have stated, it never had approved the
settlement terms chronicled by McLaughlin; and that, even if an
oral contract had been formed, it was unenforceable under the
statute of frauds. The district court rejected the FDIC's
jurisdictional argument2 but determined that the oral contract
violated the statute of frauds, Mass. Gen. L. ch. 259, 1
(1996), and granted judgment accordingly. See Hachikian v. FDIC, ___ _________ ____
914 F. Supp. 14, 17 (D. Mass. 1996). This appeal ensued.
II. ANALYSIS II. ANALYSIS
The Civil Rules provide that summary judgment may
flourish when "there is no genuine issue as to any material fact
and . . . the moving party is entitled to a judgment as a matter
____________________
2The FDIC has not pursued this issue on appeal, and we take
no view of it.
5
of law." Fed. R. Civ. P. 56(c). On appeal from the entry of
summary judgment we review the district court's decision de novo,
construing the record in the light most congenial to the
nonmovant and resolving all reasonable inferences in that party's
favor. See Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, ___ _______________ __________________
581 (1st Cir. 1994). We are not wed to the lower court's
rationale, but may affirm the entry of summary judgment on any
alternate ground made manifest by the record. See Garside v. ___ _______
Osco Drug, Inc., 895 F.2d 46, 48-49 (1st Cir. 1990); __________________
Polyplastics, Inc., v. Transconex, Inc., 827 F.2d 859, 860-61 ___________________ ________________
(1st Cir. 1987).
The statute of frauds question is freighted with com-
plexity, see generally Restatement (Second) of Contracts 147(2) ___ _________
(1979) (explaining that when the duty to perform those "promises
in a contract which subject it to the [statute of frauds] . . .
has been discharged," the statute of frauds "does not prevent
enforcement of the remaining promises"), and we need not reach it
here. The short answer to the appellant's importunings is that
the purported agreement on which the appellant bases his suit
never came into being. To be sure, the FDIC approved a potential
settlement on June 3, 1993 but the agency's records
conclusively demonstrate that the contemplated settlement
involved only that portion of the appellant's indebtedness that
came under the aegis of the WCO. The appellant has not shown
(and, indeed, does not aver) that the FDIC duly authorized a
global settlement of his aggregate (i.e., WCO plus FCO)
6
indebtedness. He claims only that a representative of the FDIC
Callen assured his attorney that such a settlement had been
approved by the appropriate plenipotentiaries within the agency.
Even assuming, as we must, the accuracy of the appellant's
version of Callen's statement, this is simply too porous a
foundation on which to posit liability on the part of a
government agency.
Dealing with the sovereign brings to bear a special set
of rules that are more demanding than those that apply when one
deals with a private party. See, e.g., Rock Island, Ark. & La. ___ ____ _______________________
R.R. Co. v. United States, 254 U.S. 141, 143 (1920) (Holmes, J.) ________ _____________
(warning that citizens "must turn square corners when they deal
with the Government"). Thus, for example, parties seeking to
recover against the United States in an action ex contractu have __ _________
the burden of demonstrating affirmatively that the agent who
purported to bind the government had actual authority to do so.
See H. Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. ___ ________________ ______________
Cir. 1989). This rule is dispositive here.
The FDIC's board of directors is permitted by statute
to authorize agents and employees to exercise the powers granted
to the agency by Congress. See 12 U.S.C. 1819(a). The FDIC ___
asserts without contradiction that its board passed a resolution
concerning the delegation of authority to dispose of corporate
assets (like the debts Hachikian owed to failed banks and which
were inherited by the FDIC qua receiver), and that this ___
resolution was in effect at all relevant times. By its terms,
7
the resolution delegates authority to a Credit Review Committee
(CRC) to approve the settlement of debts on the order of
magnitude owed by the appellant. In contrast, the resolution
cedes no authority to account officers (such as Callen) to
approve such settlements. This description of the settlement-
approving process is uncontradicted, and, in fact, the appellant
admits that Callen had no authority to approve a settlement
herself. He also acknowledges that he understood all along that
only the CRC could accept his settlement offer and bind the
agency to it. On a record that is barren of any evidence that ___
the CRC approved a settlement embodying a global release of the
appellant's obligations, no reasonable factfinder could conclude
that the purported agreement on which the appellant's claim
depends ever materialized.
Perusing the record in the light most flattering to the
appellant, we are left with this scenario: on June 3, 1993, the
CRC approved a settlement applicable only to the indebtedness
managed by the WCO for the consideration limned by McLaughlin,
and on the same day Callen mistakenly informed McLaughlin that
the CRC had approved a global settlement that included the debts
administered through both the WCO and the FCO. This scenario
cannot support a breach-of-contract claim because the CRC (and,
hence, the FDIC) never accepted the terms offered by the
appellant.
Nevertheless, the appellant has a fallback position:
Callen, he says, may have lacked actual authority to compromise
8
debts but she had actual authority to communicate the CRC's
wishes to debtors. The government is therefore bound, this
thesis runs, by her communication. The thesis will not wash.
Callen's miscommunication of the CRC's position could not bind
the FDIC inasmuch as the federal government may only be bound by
officials vested with lawful authority to do so. As the Court
has held:
[C]ontracts, express or implied, may be
judicially enforced against the Government of
the United States. But such a liability can
be created only by some officer of the
Government lawfully invested with power to
make such contracts or to perform acts from
which they may be lawfully implied.
Eastern Extension, Australasia & China Tel. Co. v. United States, _______________________________________________ _____________
251 U.S. 355, 366 (1920).
Nor can the appellant rewardingly rely on Callen's
authority to communicate the CRC's decisions to debtors as the
tie that binds the FDIC to the global settlement. Callen's
authority was restricted to communicating what the CRC in fact
decided. Though her mistaken communication may well have seemed
to be authorized at the time, the upshot of the web of legal
rules requiring proof of a government actor's actual authority is
that apparent authority cannot serve as a means of holding the
federal sovereign to a contract. The Supreme Court succinctly
stated this principle of contract formation:
Whatever the form in which the Government
functions, anyone entering into an
arrangement with the Government takes the
risk of having accurately ascertained that he
who purports to act for the Government stays
within the bounds of his authority.
9
Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947). ________________________ _______
This means that if the federal actor did not possess actual
authority, the claimed contract fails. See, e.g., United States ___ ____ _____________
v. Beebe, 180 U.S. 343, 351-55 (1901); Urso v. United States, 72 _____ ____ _____________
F.3d 59, 60 (7th Cir. 1995); Caci, Inc. v. Stone, 990 F.2d 1233, __________ _____
1236 (Fed. Cir. 1993); Prater v. United States, 612 F.2d 157, 160 ______ _____________
(5th Cir. 1980). So it is here.
If more were needed and we doubt that it is policy
rationales for this rule can be extrapolated from the closely
related theory that equitable estoppel is generally inapplicable
to the federal government when its employees induce reliance by
their unauthorized actions.3 See, e.g., Merrill, 332 U.S. at ___ ____ _______
384-85. Judicial enforcement of unauthorized contracts would
"expand the power of federal officials beyond specific
legislative limits," thereby raising serious separation of powers
concerns. Falcone v. Pierce, 864 F.2d 226, 229 (1st Cir. 1988). _______ ______
Furthermore, enforcing such agreements would put the public purse
at undue risk. See id. (explaining that "in order to protect the ___ ___
resources essential to maintain government for all people, it may
be necessary in some instances to deny compensation to
individuals harmed by government misconduct").
____________________
3In all events, estoppel is not a viable alternative here.
In the first place, the appellant expressly disclaimed any
reliance on an estoppel theory. In the second place, estoppel as
a means of binding the federal government to unauthorized
agreements has been almost universally rejected. See, e.g., Utah ___ ____ ____
Power & Light Co. v. United States, 243 U.S. 389, 408-09 (1917); _________________ _____________
FDIC v. Roldan Fonseca, 795 F.2d 1102, 1107-08 (1st Cir. 1986); ____ ______________
Phelps v. FEMA, 785 F.2d 13, 17 (1st Cir. 1986). ______ ____
10
III. CONCLUSION III. CONCLUSION
We need go no further.4 Not only did Callen lack
actual authority to bind the FDIC, but the appellant understood
that reality throughout the negotiations. In the absence of any
significantly probative evidence either that the delegation of
authority extended further than the documentary submissions show,
or that the CRC approved a global settlement, the "contract" on
which the appellant sues is nothing more than wishful thinking.
Affirmed. Affirmed. ________
____________________
4The FDIC contests the federal courts' subject matter
jurisdiction over the appellant's claims for equitable relief,
e.g., specific performance. Its objection is premised on 12
U.S.C. 1821(j), a statute that, with certain exceptions not
relevant here, prohibits courts from "tak[ing] any action . . .
to restrain or affect the exercise of powers or functions of the
[FDIC] as a conservator or receiver." Since "[i]t is a familiar
tenet that when an appeal presents a jurisdictional quandary, yet
the merits of the underlying issue, if reached, will in any event
be resolved in favor of the party challenging the court's
jurisdiction, then the court may forsake the jurisdictional
riddle and simply dispose of the appeal on the merits," United ______
States v. Stoller, 78 F.3d 710, 715 (1st Cir. 1996) (collecting ______ _______
cases), petition for cert. filed, 64 U.S.L.W. 3823 (May 29, 1996) ________________________
(No. 95-1936), we leave the FDIC's jurisdictional argument for
another day.
11