United States Court of Appeals,
Fifth Circuit.
No. 94-10607
Summary Calendar.
FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity,
Plaintiff-Counter Defendant-Appellee,
v.
Vinodbhai T. PATEL, a/k/a Vino T. Patel, Defendant-Counter
Plaintiff-Appellant,
v.
NATIONSBANK, f/k/a NCNB Texas National Bank NA, Counter
Defendant-Appellee.
March 2, 1995.
Appeal from the United States District Court for the Northern
District of Texas.
Before REAVLEY, DAVIS and DeMOSS, Circuit Judges.
REAVLEY, Circuit Judge:
This is an appeal from a judgment in favor of Federal Deposit
Insurance Corporation in its corporate capacity ("FDIC-C") and
NationsBank in a suit for collection of the deficiency balance
owing under a promissory note signed by Vinodbhai Patel. We affirm
in part and vacate and remand in part.
BACKGROUND
Patel executed a promissory note (the "Note") in the principal
amount of $2,500,000.00, payable to First RepublicBank Dallas, N.A.
("FRBD"). On July 29, 1988, the Comptroller of the Currency
declared FRBD insolvent and appointed the Federal Deposit Insurance
Corporation as Receiver ("FDIC-R").
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FDIC-R then transferred certain assets of FRBD to NCNB Texas
National Bank pursuant to a Purchase and Assumption Agreement.
NCNB subsequently changed its name to NationsBank. We will refer
to the bank by its current name of NationsBank. Among the assets
transferred from FDIC-R to NationsBank was the Note.
Patel defaulted on his obligations under the Note. After
applying all offsets and credits, there remained a principal Note
deficiency of $1,352,871.30. NationsBank filed an action in state
court to recover on the note. Patel answered and filed
counterclaims. NationsBank later transferred its interest in the
Note to FDIC-C.
FDIC-C intervened in the state action and removed the case to
federal district court. The federal district court realigned the
parties so that FDIC-C became plaintiff, Patel remained as
defendant, and NationsBank was aligned as counter-defendant. FDIC-
C filed a motion for summary judgment, and the court granted that
motion on all claims and counterclaims, reserving only the issue of
whether FDIC-C had owner or holder status. After a non-jury trial,
the court found that FDIC-C was the holder of the Note. The court
entered judgment against Patel. The parties agree that Texas law
applies to the state law issues in the case.
DISCUSSION
A. Summary Judgment Evidence
Patel argues that the district court based its grant of
summary judgment on improper summary judgment evidence. Patel
claims that the district court based its decision to grant summary
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judgment largely on the affidavits of Steve Sieling and E. Patti
Stacey which provided information about the Note, the takeover of
FRBD, Patel's default and the balance remaining. He argues that
those affidavits were not proper summary judgment evidence, because
they were not based on personal knowledge. See Fed.R.Civ.P. 56(e).
Attached to the Sieling and Stacey affidavits are documents
which provide the factual basis needed for collection by FDIC-C on
the Note. Sieling and Stacey are qualified to speak from personal
knowledge that the documents attached to the affidavits are
admissible business records. See United States v. Duncan, 919 F.2d
981, 986 (5th Cir.1990), cert. denied, 500 U.S. 926, 111 S.Ct.
2036, 114 L.Ed.2d 121 (1991). Sieling was employed by AMRESCO
Management, Inc. ("AMRESCO") when he prepared the affidavit.
AMRESCO is the company which manages assets formerly owned by
NationsBank and now owned by FDIC-C, including the Note. He
previously worked for NationsBank. He manages the Patel Note file
and is responsible for collection of the Note. Stacey also works
for AMRESCO as the manager of the commercial loan portfolio managed
on behalf of FDIC-C. She previously worked for NationsBank and
also served as manager of loan processors with FRBD. She has been
familiar with each bank and servicing company's computer records
system. The documents and the affidavits which refer to them
constitute appropriate summary judgment evidence adequate to
support a grant of summary judgment in favor of recovery by FDIC-C
on the Note.
B. District Court's Finding that FDIC-C Held Holder Status
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Patel argues that the district court erred in entering
judgment for FDIC-C, because FDIC-C never proved its status as
owner or holder of the Note. Patel claims that FDIC-C failed to
prove its chain of title. Specifically, Patel challenges the
endorsement on the Note showing the transfer from FDIC-R to
NationsBank, which was the transfer immediately preceding the
transfer to FDIC-C. To establish that transfer link, the district
court relied on a provision of the Texas Code which provides that
endorsements on negotiable instruments are presumed to be genuine
and authorized. Tex.Bus. & Com.Code Ann. § 3.307 (West 1994).
Patel claims that the presumption does not control, because the
Note was not a negotiable instrument under Texas law and because
evidence which the court found sufficient to defeat summary
judgment on the issue of holder or owner status must also
necessarily rebut the presumption.
We need not reach the issue of whether the presumption was
properly applied. Even if Patel is correct and the note was never
transferred to NationsBank after it was obtained by FDIC-R, Patel
must still pay the Note deficiency. The relevant transfer for the
purpose of collection by FDIC-C was the original transfer to the
FDIC from FRBD. As of that point, the FDIC was without question
the holder of the Note. The fact that FDIC-R later transferred the
Note to NationsBank and then repurchased the note as FDIC-C does
not affect the relevant chain of title which gave the FDIC status
as holder of the Note. It is unnecessary to prove the transfer
from FDIC-R to NationsBank to allow collection on the Note by FDIC-
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C. NationsBank makes no claim, for collection or otherwise, in
relation to the Note. The transfer to NationsBank therefore has no
relevance in this suit for collection by FDIC-C.
C. Applicable Interest Rate
Patel next argues that the district court erred in granting
summary judgment on the amount of interest due on the deficiency
amount. The Note provided for a floating rate of interest based on
the prime rate of FRBD, the original lending bank which later
failed. Patel argues that the court erred in substituting the
prime rate set by NCNB for the nonexistent FRBD prime rate and
granting summary judgment on the interest issue.
A panel of the Fifth Circuit has recently held that Texas
case law controls on this issue and that the district court may not
accept a substituted interest rate for the rate of a failed bank
unless the FDIC proves its reasonableness. F.D.I.C. v. Ambika
Investment Corp., 42 F.3d 641 (5th Cir.1994) (relying on Bailey,
Vaught, Robertson and Co. v. Remington Investments, Inc., 888
S.W.2d 860 (Tex.App.—Dallas 1994)). The Ambika Investment Corp.
decision makes clear that the reasonableness of a substituted rate
is an issue of fact. Id., slip op. at 6. Summary judgment on the
amount of interest due is improper where, as here, there is no
summary judgment evidence of the reasonableness of a substituted
rate. Id. We must therefore vacate the grant of summary judgment
on the interest calculation issue and remand to the district court
for a determination of the reasonableness of the substituted NCNB
rate and a determination of the amount of interest due under the
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appropriate rate.
D. Patel's Claim of Misrepresentation and Breach of Agreement
Patel asserts claims against NationsBank for
misrepresentation, breach of agreement and/or promissory estoppel.
He believes that his claims provide him with "defenses and/or
counterclaims" in this suit for recovery on the Note which should
have survived summary judgment.
Patel provided summary judgment evidence, in the form of an
affidavit signed by him, that Mr. Sanz, the Executive Vice
President of FRBD, had agreed to loan him funds or allow him to
draw funds out of CDs at the bank to finance the acquisition and
maintenance of a Days Inn franchise. Based on this representation,
Patel did purchase a Days Inn franchise. When FRBD went into
receivership and NationsBank took over the assets of the failed
bank, Patel asserts that he had discussions with NationsBank
officers. The NationsBank officers agreed that they would
restructure Patel's loan under the Note, allow Patel to draw funds
from the CDs or obtain other loan advances so that the Days Inn
franchise could be maintained. No funds were advanced and the CDs
were never released. Patel claims that his resulting inability to
secure funds prevented him from meeting the operating expenses of
the hotel, including the payment of franchise fees. As a result,
he lost the franchise and the value of the hotel property dropped
significantly.
The district court granted summary judgment against Patel's
claims. The court classified the claims as a defense based on
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ratification by NationsBank of the representations made by FRBD.
The court relied on Horton v. Robinson, 776 S.W.2d 260, 267
(Tex.App.—El Paso 1989), to hold that NationsBank could not have
ratified the agreement made with FRBD, because the agreement was
not made on behalf of NationsBank and did not purport to bind
NationsBank.
However, Patel pleaded the existence of independent
representations by NationsBank. See Record at I, 39-40. Patel's
summary judgment evidence included an affidavit by Patel which
stated that independent representations were made by NationsBank.
See Record at II, 352-54. Other documentary summary judgment
evidence also supports Patel's claims that NationsBank officers
made promises to Patel. See Record at II, 363. Neither
NationsBank nor FDIC ever presented any summary judgment evidence
to contradict those factual assertions. Given the uncontradicted
summary judgment evidence of independent action by NationsBank, the
district court erred in disposing of the claims on the ratification
basis. But summary judgment was still proper as to Patel's claims,
because the claims cannot provide Patel with relief. See Schuster
v. Martin, 861 F.2d 1369, 1371 (5th Cir.1988) (summary judgment may
be upheld on different grounds than those relied on by the district
court).
Patel's claims against NationsBank cannot serve as a defense
to recovery under the Note. The claims are against NationsBank,
but NationsBank does not hold the Note and does not request payment
on the Note.
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The claims against NationsBank cannot serve as a defense
against FDIC-C, because the D'Oench, Duhme doctrine and 12 U.S.C.
§ 1823(e) insure that any undocumented representations made by
NationsBank before FDIC-C purchased the note do not bind FDIC-C and
do not bar recovery by FDIC-C of the Note amount. D'Oench, Duhme
& Co. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942);
12 U.S.C. § 1823(e). The D'Oench, Duhme doctrine and section
1823(e) likewise prohibit any counterclaim for a setoff against the
recovery by FDIC-C based on undocumented side agreements made by
NationsBank. See Beighley v. F.D.I.C., 868 F.2d 776, 784 (5th
Cir.1989).
Patel may only assert his claims against NationsBank as an
affirmative action for damages independent of the issue of
collection under the Note. Nothing in the D'Oench, Duhme doctrine
or elsewhere prevents a claim against the FDIC or a takeover bank
based on their own representations or actions. See F.D.I.C. v.
Blue Rock Shopping Center, 766 F.2d 744, 753 (3rd Cir.1985);
F.D.I.C. v. Harrison, 735 F.2d 408, 412 (11th Cir.1984). However,
Patel's action is doomed to fail. We affirm the district court's
grant of summary judgment, because Patel's evidence presents no
issue supporting a recovery from NationsBank.
If NationsBank indeed made promises to Patel to extend
additional credit or to otherwise provide funds, there was no
consideration given by Patel for such promises. No contract was
formed, and no breach could have occurred. Additionally, Texas law
prohibits breach of contract claims, such as Patel's, which are
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based on alleged oral agreements to modify the conditions of a
written loan agreement. See Stavert Properties, Inc. v.
RepublicBank of Northern Hills, 696 S.W.2d 278, 280-81
(Tex.App.—San Antonio 1985, writ ref'd n.r.e.).
Nor can Patel support his promissory estoppel action or his
action based on misrepresentation or fraud, because Texas law
requires a showing of detrimental reliance for both of those causes
of action. Sears Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282
(Tex.1994) (fraud or misrepresentation); Aubrey v. Workman, 384
S.W.2d 389, 393 (Tex.Civ.App.—Fort Worth 1964, writ ref'd n.r.e.)
(promissory estoppel). Looking only at the representations alleged
to have been made by NationsBank, those actions or representations
of NationsBank did not affect the positions of the parties. Patel
had already made the loan and franchise commitments before
NationsBank entered the picture. NationsBank did not induce Patel
to sign the Note, to buy the franchise or to take any other action.
Patel would have been unable to maintain the hotel franchise and
make payments on the Note regardless of whether NationsBank agreed
to provide further financing and failed to do so or never made any
such agreement. NationsBank did not cause the harm alleged by
Patel.
The case is remanded for a determination of the reasonableness
of the interest rate used by the district court to calculate the
judgment amount in the proceedings below. Otherwise, the judgment
is affirmed.
AFFIRMED IN PART, VACATED IN PART; AND REMANDED.
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