Bourque v. Federal Deposit Insurance

United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit

No. 94-1568

RAYMOND BOURQUE,

Plaintiff, Appellant,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER/LIQUIDATOR AGENT FOR
EASTLAND BANK AND NEWMARK INVESTMENTS, INC.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Francis J. Boyle, Senior U.S. District Judge]

Before

Boudin, Circuit Judge,

Bownes, Senior Circuit Judge,

and Stahl, Circuit Judge.

Robert Corrente with whom Anthony F. Cottone and Corrente, Brill

& Kusinitz, Ltd. were on brief for appellant.

Sharon C. Boyle with whom Marian Van Soelen, and Russell L. Chin

and Associates, P.C. were on brief for appellees.

December 28, 1994

STAHL, Circuit Judge. Plaintiff-appellant Raymond
STAHL, Circuit Judge.

Bourque commenced this breach of contract action in district

court against defendants-appellees Federal Deposit Insurance

Corporation ("FDIC") and Newmark Investments, Inc.

("Newmark") (collectively, "defendants"). Bourque claims

that the FDIC and Newmark agreed to sell him a piece of

property in Woonsocket, Rhode Island, for $130,000. The

defendants denied that a contract had been formed and filed

separate motions for summary judgment. The district court

granted defendants' motions, and Bourque appeals. We affirm.

I.
I.

BACKGROUND
BACKGROUND

The FDIC is the receiver and liquidating agent of

Eastland Savings Bank of Woonsocket. In its capacity as

receiver, the FDIC is the sole shareholder of Newmark, a

wholly-owned subsidiary of Eastland. In December 1992,

Newmark retained the FDIC to market its real estate assets,

including the property at issue here.

On June 1, 1993, Bourque's attorney, Edward J.

Casey, wrote to FDIC account officer Curtis Cain that Bourque

was interested in purchasing the property at 846 Cumberland

Hill Road in Woonsocket (the "Property"). Casey asked Cain

whether he was "the person handling the asset," whether he

had authority "to discuss" the Property, and what the current

status of the Property was. At Cain's direction, Cain's

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assistant contacted Casey and informed him that Cain was

indeed the person "handling" the Property, but she apparently

did not inform Casey of any limitations on Cain's authority

to sell the Property.

On June 11, 1993, Casey sent Cain a letter offering

to buy the Property on Bourque's behalf for $105,500. Casey

enclosed a $10,000 earnest money deposit and an FDIC

purchase-and-sale agreement form signed by Bourque that

described the Property and the terms of the offer.

Cain's response, dated June 23, 1993, (the "June 23

letter") was printed on FDIC Division of Liquidation

letterhead and bore the heading "NOTICE OF REJECTION OF
NOTICE OF REJECTION OF

OFFER". The letter's critical paragraph read as follows:
OFFER

This letter is to advise you that FDIC is
unable to accept Mr. Bourque's offer.
FDIC's counter offer is $130,000.00. All
offers are subject to approval by the
appropriate FDIC delegated authority.
FDIC has the right to accept or reject
any and all offers. I am returning your
customer's contract of sale and earnest
money deposit. If your customer wishes
to accept this counter offer, please
return the amended Purchase & Sale
Agreement to me.

Cain did not return Bourque's $10,000 deposit. Indeed, the

FDIC deposited the check "by mistake," according to the

deposition testimony of Cain's supervisor, Donald Lund. Cain

also failed, contrary to FDIC policy, to attach a standard

"Letter of Understanding" to the FDIC purchase-and-sale

agreement form he returned to Casey along with the rejection

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notice. That form letter explicitly states that the FDIC

account officer has no delegated authority to accept an offer

and that "[n]o contract will arise" until the appropriate

delegated authority notifies the offeror that it has accepted

the offer. Under FDIC policy, account officers may suggest

and negotiate terms and recommend appropriate offers for

approval by the proper delegated authority, but they do not

have the authority to liquidate FDIC assets by binding

contracts. That authority is conferred on other job titles;

in this case, the sale of the Property could have been

approved by an FDIC assistant managing liquidator. Other

than Cain's June 23 letter, there is no evidence that anyone

at the FDIC communicated this policy to Casey or Bourque in

connection with the transaction before this dispute arose.

John Chiungos, another FDIC account officer, however,

testified at his deposition that he had explained the policy

to Casey in connection with another, smaller transaction in

January 1993. At his deposition, Casey at first testified

that he had never had prior dealings with the FDIC; then,

when confronted with documentary evidence of the prior

transaction, he said he had "completely forgot" about it. In

any event, Casey did not rebut Chiungos' testimony that

Chiungos had explained the FDIC liquidation policy to Casey

at least on one prior occasion.

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On June 25, 1993, Casey returned to Cain the

purchase-and-sale agreement, which was signed by Bourque and

amended to indicate a $130,000 purchase price (the

"Agreement"). The Agreement set forth July 30, 1993, as the

closing date for the transaction.

On July 7, 1993, another FDIC account officer,

Elizabeth M. Carroll, informed Casey by telephone that the

FDIC had received an offer on the Property substantially in

excess of $130,000.1 Casey responded by sending Carroll a

letter stating that Bourque considered the parties to be

bound by contract and that Bourque would litigate, if

necessary, to obtain the benefit of his bargain.

On July 27, 1993, Carroll sent a letter to Bruce E.

Thompson, Casey's law partner, stating that the FDIC would

not accept Bourque's $130,000 offer, but that Bourque could

submit another offer of at least $250,000 by that afternoon

for consideration by the appropriate FDIC delegated

authority. In her letter, Carroll wrote:

1. Prior to working for the FDIC, Carroll worked for seven
years at Eastland, initially as an assistant to Arthur
Gauthier, Eastland's executive vice-president for real
estate. Gauthier is the real estate agent who brokered this
higher (and ultimately successful) offer for the Property,
and his office stands to receive a 4.5% commission on the
$253,000 transaction. Carroll's supervisor, Donald Lund,
testified at his deposition that had he known of Carroll's
past working relationship with Gauthier, he would not have
let her market the Property to him. While these questionable
dealings indicate that the FDIC may wish to review its
oversight practices, they do not animate our decision in this
case.

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After reviewing the file and conferring
with the previous account officer, it is
clear that the FDIC's policy that account
officers have no authority to bind the
FDIC or its subsidiary corporation was
communicated to your client. Mr. Cain
indicated to your client that his
authority is limited to recommending an
offer and that all final offers are
subject to approval by the appropriate
delegated authority.

On August 2, after the FDIC refused to sell the

property to Bourque, Bourque filed a notice of lis pendens on

the property and instituted this action, seeking specific

performance from either FDIC or Newmark, and damages from the

FDIC.2

The defendants filed separate summary judgment

motions, arguing that there was no contract between the

parties, that the alleged contract violated Rhode Island's

Statute of Frauds and that Cain did not have actual or

apparent authority to bind the FDIC or Newmark. A magistrate

judge recommended that the motions be granted, and following

oral argument, the district court adopted that

recommendation.3 This appeal ensued.

2. On August 9, 1993, the FDIC entered into an agreement to
sell the Property to Supreme Corporation of Goshen, Indiana,
for $253,000. The closing of that sale has been postponed
pending the outcome of this case.

3. Although the district court's order does not so state,
the transcript of the oral argument clearly indicates that
the district court based its decision on the contract
formation issue and never reached the apparent or actual
authority issues. The district court also suggested that had
it found that a contract was formed, it would also have held

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II.
II.

DISCUSSION
DISCUSSION

We begin by reviewing traditional summary judgment

principles and how they apply in contract formation disputes.

With those principles in mind, we then turn to Bourque's

substantive argument that summary judgment is inappropriate.

Because our resolution of the contract formation issue is

dispositive, we do not reach the statute of frauds or agency

issues.

A. Summary Judgment in Contract Formation Disputes

We accord a district court's grant of summary

judgment no deference; the scope of our review is plenary.

Alan Corp. v. International Surplus Lines Ins. Co., 22 F.3d

339, 341 (1st Cir. 1994). We affirm a grant of summary

judgment if our evaluation of the parties' proof on file --

viewing the evidence in the light most favorable to the

nonmovant -- reveals "that there is no genuine issue as to

any material fact and that the moving party is entitled to

judgment as a matter of law." NASCO, Inc. v. Public Storage,

Inc., 29 F.3d 28, 32 (1st Cir. 1994) (quoting Fed. R. Civ. P.

56(c)). An issue is only "genuine" if there is sufficient

evidence to permit a reasonable jury to resolve the point in

the nonmoving party's favor, NASCO, 29 F.3d at 32, while a

fact is only "material" if it has "`the potential to affect

that Rhode Island's Statue of Frauds was satisfied.

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the outcome of the suit under the applicable law.'" Id.

(quoting Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701,

703 (1st Cir. 1993)).

It is an axiom of modern contract law that the

formation of a contract requires the "manifestation of mutual

assent" by the parties to the agreement. See Restatement

(Second) of Contracts 17 (1981). Under Rhode Island's law

of contracts,4 we look to the parties' words and actions to

determine whether they have manifested the objective intent

to promise or be bound. Smith v. Boyd, 553 A.2d 131, 133

(R.I. 1989). This manifestation "almost invariably takes the

form of an offer or proposal by one party accepted by the

other party or parties." McLaughlin v. Stevens, 296 F. Supp.

610, 613 (D.R.I. 1969) (interpreting Rhode Island law).

Determining whether there was mutual assent may involve

factual questions: What did the parties say (or do) to

manifest their intent? Were the parties' understandings of

each other's actions reasonable under all the circumstances?

Answering these questions is the province of the factfinder

and not the court. See Salem Laundry Co. v. New England

Teamsters and Trucking Indus. Pension Fund, 829 F.2d 278, 280

(1st Cir. 1987) (stating that it is "a question of fact

4. The parties do not dispute that Rhode Island contract law
governs the interpretation and construction of the alleged
contract. To the extent that Rhode Island case law does not
directly address the issues here, we look to other sources of
general contract law, as would a Rhode Island court.

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whether any particular conduct or actions imply a contractual

understanding" (internal quotation omitted)).

Like other questions of fact, however, there is

sometimes no genuine issue as to whether the parties' conduct

implied a "contractual understanding." The words and actions

that allegedly formed a contract may be "`so clear themselves

that reasonable people could not differ over their meaning.'"

FDIC v. Singh, 977 F.2d 18, 21 (1st Cir. 1992) (quoting

Boston Five Cents Sav. Bank v. Secretary of Dep't of HUD, 768

F.2d 5, 8 (1st Cir. 1985)). In such cases, "the judge must

decide the issue himself, just as he decides any factual

issue in respect to which reasonable people cannot differ."

Boston Five Cents Sav. Bank, 768 F.2d at 8. Even if the

language of a purported contract is ambiguous, summary

judgment is appropriate when the extrinsic evidence about the

parties' meaning is "`so one-sided that no reasonable person

could decide the contrary.'" Allen v. Adage, Inc., 967 F.2d

695, 698 (1st Cir. 1992) (quoting Boston Five Cents Sav.

Bank, 768 F.2d at 8). A corollary of this last proposition

is that even if the language of purported assent is

susceptible of more than one reasonable interpretation,

summary judgment is nevertheless appropriate if none of those

interpretations would support the nonmovant's legal argument.

See O'Connor v. McKanna, 359 A.2d 350, 354 (R.I. 1976)

(stating that summary judgment must be denied if the

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factfinder "could reasonably adopt the opposing party's

version as to what was said and done and intended by the

parties"); Knight v. Sharif, 875 F.2d 516, 523 (5th Cir.

1989) (granting summary judgment in contract formation

dispute where nonmovant was unable to "provide a plausible

interpretation" of the documents at issue that would support

his argument that a contract had been formed).

Placed in the context of this case, Bourque can

avoid summary judgment only if we are able to discern a

reasonable interpretation of Cain's June 23 letter that

supports Bourque's legal argument -- that Cain's June 23

letter constituted an unequivocal offer to sell Bourque the

Property for $130,000. This we are unable to do.

B. The Law of Offers

An offer is a "manifestation of willingness to

enter into a bargain, so made as to justify another person in

understanding that his assent to that bargain is invited and

will conclude it." Restatement (Second) of Contracts 24 at

71 (1981) (emphasis supplied). See also 1 Corbin on

Contracts 1.11 at 31 (rev. ed. 1993) ("So long as it is

reasonably apparent that some further act of the purported

offeror is necessary, the purported offeree has no power to

create contractual relations, and there is as yet no

operative offer.").

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The fact that a party uses the word "offer" or

"counteroffer" in a communication with another party "is

deserving of weight, but it is not controlling, and a court

may decide that what is called an offer is merely an

invitation to the recipient to make an offer." E. Allen

Farnsworth, Contracts 3.10, at 139 (2d ed. 1990). "On the

other hand, the insertion into a proposal of a clause that

reserves to its maker the power to close the deal is a

compelling indication that the proposal is not an offer."

Id. Thus, in Foster & Kleiser v. Baltimore County, 470 A.2d

1322, 1326 (Md. Ct. Spec. App. 1984), an agreement by which

Baltimore County purported to purchase land, but that

contained a clause stating that the agreement was null and

void if not approved by the county council, was held merely

part of preliminary negotiations because the seller of the

land "could not have accepted [the county's] `offer' without

further action by the County." See also Dillon v. AFBIC Dev.

Corp., 420 F. Supp. 572 (S.D. Ala. 1976), aff'd in part and

rev'd in part, 597 F.2d 556 (5th Cir. 1979) (holding that

woman's "offer" to purchase house "subject to approval" by

husband lacked clarity of intent and mutuality of obligation

and was therefore not an offer that, without more, could bind

the parties); Engineering Assocs. v. Irving Place Assocs.,

622 P.2d 784, 787 (Utah 1980) (holding that letter "offering"

to make mortgage loan, with the agreement to become binding

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upon execution of documents by "offeror's" chairman, was

merely invitation to submit offer, because purported offeror

"reserved to itself the last act in the formation of any

agreement between the parties").

Bourque argues that cases such as Dillon and Foster

& Kleiser are inapposite because the purported offerors in

those cases clearly reserved authority to take further

action, while Cain did no such thing. We agree that Cain

could have expressed his intention with more clarity, and we

do not base our decision primarily on these cases. Rather,

we recognize that where intent and the meaning of contract

language are at issue, cases in which different parties had

an entirely different set of communications are of limited

precedential value. Nevertheless, we think that these cases

do support the general principle that unequivocal language of

offer or acceptance cannot be taken in isolation from other,

qualifying language in the document and that where the

unqualified statement and the qualification coexist, the

qualification is likely to control, at least in the context

of offer and acceptances.

C. Interpreting the June 23 Letter

In arguing that Cain's June 23 letter contained an

offer that bound the FDIC and Newmark, Bourque focuses our

attention on the second and sixth sentences of the letter's

critical paragraph: "FDIC's counter offer is $130,000.00. .

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. . If your customer wishes to accept this counter offer,

please return the amended Purchase & Sale Agreement to me."

Bourque argues that these words are unequivocal, conveying no

possible meaning other than that the FDIC was offering the

Property to Bourque for the stated price, and that Bourque

could accept the offer in the prescribed manner.

If Cain had written no more than those two

sentences, then Bourque's acceptance may well have formed a

contract between the parties. But Cain's letter did say

more, and it is a fundamental tenet of Rhode Island and

general contract law that "[i]n ascertaining what the

[parties'] intent is we must look at the instrument as a

whole and not at some detached portion thereof." Hill v. M.

S. Alper & Son, Inc., 256 A.2d 10, 15 (R.I. 1969). See also

In re Newport Plaza Assoc., 985 F.2d 640, 646 (1st Cir. 1993)

(applying Rhode Island law and stating that "a court is duty

bound to construe contractual terms in the context of the

contract as a whole"); Dial Media, Inc. v. Schiff, 612 F.

Supp. 1483, 1488 (D.R.I. 1985) ("An interpretation which

gives reasonable and effective meaning to all manifestations

of intent is to be preferred to one which leaves part of the

manifestation of no effect.") (emphasis supplied).

Immediately following the sentence "FDIC's counter

offer is $130,000.00," Cain wrote: "All offers are subject

to approval by the appropriate FDIC delegated authority.

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FDIC has the right to accept or reject any and all offers."

The defendants argue that these sentences clearly and

unambiguously attached a condition to Cain's $130,000

counteroffer: the approval of the offer by the appropriate

FDIC authority. Bourque argues that these sentences, when

read in the context of the entire paragraph and Casey's prior

communications with Cain, did nothing to dispel his

reasonable understanding that he could indeed enter into a

binding contract by performing the act prescribed by Cain in

the letter's final sentence. At the very least, Bourque

argues, the paragraph is ambiguous and should be construed

against the FDIC, since it drafted the document.

At oral argument, Bourque's counsel stated that,

under the circumstances of this case,5 where Cain had told

Casey that he was the person "handling" the Property, the

paragraph at issue could only mean that the writer of the

letter himself -- i.e., Cain -- was the appropriate FDIC

delegated authority and that he included the "subject to

approval" language even though he had already approved the

$130,000 figure. This interpretation, rather than giving a

"reasonable and effective meaning" to the paragraph's third

5. In his brief, Bourque points to the FDIC's deposit of his
$10,000 earnest money check as another reason why summary
judgment should not be granted. He fails to explain,
however, exactly how this action could be understood as a
manifestation of intent in light of Cain's express statement
in the June 23 letter that he was returning the check to
Bourque.

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and fourth sentences, foists upon them a tortured, illogical

reading. An offer cannot be both subject to approval and

already approved: it is either one or the other.6 Nor

would one reasonably expect the "appropriate delegated

authority" -- even of the FDIC -- to refer to himself in the

third person in proclaiming that he retained the power to

approve all offers. One would understand that the

appropriate authority must be someone else.

Bourque attempts to avoid these linguistic

obstacles by emphasizing that, on its own terms, Cain's

letter distinguishes "counter offers" from "offers." Thus,

so this argument goes, the third and fourth sentences of the

letter reserve FDIC approval only for "offers" -- i.e.,

offers to buy the Property for less than $130,000 -- and not

for the FDIC's "counter offer" to sell it at the specified

6. Under Rhode Island contract law, "unless a plain and
unambiguous intent to the contrary is manifested, the words
used in the contract are assigned their ordinary meaning."
Westinghouse Broadcasting Co. v. Dial Media, Inc., 410 A.2d

986, 991 (R.I. 1980). "[W]e look in the first instance to
the dictionary meaning of the language at issue to determine
its ordinary meaning." Id. at 992 n.11. The word "subject,"

when used as an adjective, has several possible meanings,
according to Webster's Third New International Dictionary.

The only meaning that makes any sense in the context of the
June 23 letter, however, is "likely to be conditioned,
affected, or modified in some indicated way: having a
contingent relation to something and usu[ally] dependent on
such relation for final form, validity, or significance."
Webster's Third New International Dictionary 2275 (1986).

This meaning, implying future action, is inconsistent with
Bourque's purported understanding that the offer had already
been approved.

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price, which the paragraph's final sentence unambiguously

holds out for acceptance by a prescribed method. This

interpretation fails too, however, for it places undue

reliance on the presence of the words "counter" and "accept,"

while glossing over the manifestation of reluctance to be

bound contained in the third and fourth sentences.

It is axiomatic that a counteroffer is simply an

offer that operates also as a rejection of a previous offer;

it is still very much an offer. See Restatement (Second) of

Contracts 39 (1981). Bourque's argument assumes that the

use of the word "counter" by Cain removed the FDIC's $130,000

"offer" from the set of offers referred to in the very next

sentence: "All offers are subject to approval by the

appropriate FDIC delegated authority." (emphasis supplied)

There is nothing magical about the word "counter," however;

it is merely a descriptive term, letting us know that another

offer preceded the counteroffer and was rejected, either

explicitly or implicitly by the making of the counteroffer.

Bourque responds to the fact that a counteroffer is

"technically" an offer by calling it a "legalistic

obfuscation" that ignores the fact that the FDIC "explicitly

empowered Bourque to accept its counteroffer, and told him

how to do so."

We respond thusly. First, it is hardly a

technical, legalistic obfuscation to say that counteroffers

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are offers; we think that is rather elementary. Second,

Casey is a lawyer, and had some familiarity with how the FDIC

works; even if this argument is "legalistic," it is not one

that should have entirely eluded him when he read the letter.

See Trifiro v. New York Life Ins. Co., 845 F.2d 30, 33 (1st

Cir. 1988) (stating that when confronted with conflicting

manifestations of intent, "a reasonable person investigates

matters further; he receives assurances or clarification

before relying"). Third, the FDIC only "empowered Bourque to

accept its counteroffer" according to the terms of that

offer, which included obtaining the approval of the

appropriate delegated authority. See In re Newport Plaza

Assoc., 985 F.2d at 645 (stating that under Rhode Island law,

the offeror controls the offer and the terms of its

acceptance).

Bourque attaches great significance to the fact

that Cain, through his assistant, confirmed to Bourque that

he was indeed the person "handling" the Property and that he

did not expressly state that his authority to sell the

Property was limited.

We deal with the latter point first. Cain did in

fact state that his authority was limited, by informing Casey

that "[a]ll offers are subject to approval by the appropriate

delegated authority." As we explained above, Cain cannot

reasonably be viewed as referring to himself here. As for

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Cain's statement that he was "handling" the Property, he was

indeed: he was handling bids on the Property, much like a

real estate agent or a loan officer at a bank "handles"

preliminary negotiations before submitting a tentative

agreement or offer to the principal for approval. "Handling"

is not a synonym for "authorized to sell." Hence, Cain's

answer to Casey's query that he was the FDIC person with whom

Casey should be dealing was correct, and should not have

suggested to Casey that Cain was vested with authority to

close a deal for the Property.

While hardly a model of clarity,7 we nevertheless

hold that the only reasonable interpretation of the entire

paragraph at issue places the recipient of the letter on

notice that the FDIC's "counter offer" of $130,000 was

subject to further approval. This interpretation gives a

reasonable meaning to each sentence; it alters the plain

7. Following the initiation of this lawsuit, the FDIC
changed the "macros" on account officers' computers so that
they could not fire off "counteroffers" with a simple
keystroke. If Cain were to write his letter today, it would
not contain the word "counteroffer," but would instead invite
another offer from Bourque.
We agree that handling the transaction in this way
provides the potential buyer virtually no opportunity to
mistake the FDIC's communication as an offer, and we would no
doubt not be deciding this case had the FDIC taken this step
in responding to Bourque's first offer. Nevertheless, just
as a subsequent modification does not prove negligence in a
defective design case (indeed, it is not even admissible for
that purpose under the Federal Rules of Evidence), the FDIC's
change is not probative of what Cain's letter meant to a
reasonable reader in Bourque's position (i.e., one aided by
an attorney such as Casey).

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meaning of the paragraph's second and last sentences -- the

apparent extension of an offer and the invitation of

acceptance by a prescribed method -- only if one reads those

particular sentences in isolation. When read as a whole, as

it must be read, the paragraph sets forth with sufficient

clarity that the recipient may "accept" Cain's "counteroffer"

of $130,000, but only subject to final approval by the

appropriate FDIC authority. We are unable to discern any

other reading of the paragraph -- and Bourque has not guided

us to one -- that gives some reasonable meaning to each

sentence.

D. Conclusion: The June 23 Letter Was Not an Offer

Because the only reasonable interpretation of the

June 23 letter is that Casey's "acceptance" of the

counteroffer would still be subject to approval, Casey was

not justified in believing that his assent to the offer would

conclude the deal; it was "reasonably apparent" that some

further act by the FDIC would be necessary to close the deal.

Cain's June 23 letter, therefore, even though it used the

words "counter offer," was no offer at all; it was instead an

invitation for Bourque to make an offer to buy the Property

for $130,000. Bourque made that offer when he returned the

amended purchase-and-sale agreement to the FDIC. The FDIC

never accepted the offer, however, so as a matter of law, no

contract was ever formed between the parties.

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Thus, the defendants are entitled to summary

judgment and the district court's decision is

AFFIRMED. Costs to appellee.
AFFIRMED. Costs to appellee.

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