Nat'l Enterprises v. First Western ( 1997 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 17 1997
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
NATIONAL ENTERPRISES, INC.,
Plaintiff-Appellant,
v. No. 96-2168
(D.C. No. CIV 94-1012 JC/LFG)
FIRST WESTERN FINANCIAL (D. N.M.)
CORPORATION, a New Mexico
corporation; HOWARD T. VAN
PELT; and JAMES E. HAWORTH,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before BRORBY, LOGAN, and HENRY, Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore
ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Plaintiff National Enterprises, Inc., the assignee and holder of a $100,000
promissory note, commenced this action to collect from the maker, defendant
First Western Financial Corporation, and the guarantors, defendants Howard T.
Van Pelt and James E. Haworth. On cross motions for summary judgment, the
district court entered judgment in favor of defendants, based on its determination
that a settlement agreement reached in an earlier action unambiguously
encompassed the promissory note. We exercise appellate jurisdiction over the
district court’s judgment and final order pursuant to 28 U.S.C. § 1291 and
we reverse.
BACKGROUND
On December 1, 1985, Las Lomas Joint Venture (Las Lomas), an entity
50% owned by First Western Financial Corporation (First Western) and 50%
owned by VMH Partners, a general partnership formed by Van Pelt, Haworth, and
another individual, borrowed $8.9 million from Sandia Federal Savings & Loan
Association (Sandia) for development of an apartment and day-care facility in
El Paso, Texas (the project). The loan was evidenced by an $8.9 million
promissory note, guaranteed by the individual partners in VMH Partners, and
secured by a deed of trust on the joint venture’s property.
The first deed of trust provided that it would also secure “all other direct
and indirect indebtedness now or at any time in the future owing or to be owing
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by [Las Lomas to Sandia], regardless of how evidenced or incurred, it being
understood that it is contemplated that [Las Lomas] will become further indebted
to [Sandia] in the future.” Appellee’s Suppl. App. at 195. According to
defendants, the parties anticipated the need for an additional $500,000 loan,
due to Sandia’s failure to honor its previous commitment to participate in the
project as an equity partner. Sandia’s internal documents show requests from
First Western for loans “in conjunction with financing” the project. Appellant’s
App. at 51-52.
The project did experience a budget shortfall. On July 16, 1986, Sandia
loaned $100,000 to First Western, which was “used in connection with the
operations” of the project. Appellant’s App. at 46. The promissory note
evidencing this loan is the subject of this action.
Both Sandia and the project experienced financial difficulties. In 1989,
Sandia failed and was placed into receivership by the Resolution Trust
Corporation (RTC). Las Lomas defaulted on the $8.9 million loan; First Western
defaulted on the $100,000 loan. In July 1990, Las Lomas filed a lender liability
action against the RTC as receiver for Sandia, alleging that Sandia had caused
the project’s deficiencies by, among other things, reneging on its agreement to
participate in the project and breaking its commitment to loan the additional
$500,000. The Complaint did not mention the $100,000 loan to First Western.
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The RTC, Las Lomas, and the guarantors settled the lender liability action
in July 1992. The Compromise and Settlement Agreement (the agreement)
resolved “the remaining balance owed under the Loan and . . . all matters, claims,
causes of action, rights, liabilities and obligations between and among them
relating to or arising out of the Loan, the Loan Documents, and the Suit.” Id.
at 16. According to the agreement definitions, (1) “the Loan” was the $8.9
million loan, id. at 14; (2) the “Loan Documents” consisted of the $8.9 million
note, deed of trust, guaranty agreements, assignment of leases and rents, financing
statements, and “any and all other documents, instruments and agreements
executed in connection with or to secure the Note,” id. at 14-15; (3) the “Suit”
was the lender liability action, id. at 15; and (4) the “Borrower” was Las Lomas,
id. at 14.
To settle the suit, Las Lomas relinquished possession and control of the
project and paid $500,000 to the RTC. In return, the RTC agreed, “for itself
and its successors and assigns, [to] RELEASE, ACQUIT and FOREVER
DISCHARGE Borrower and Guarantors . . . from any and all claims, demands,
obligations, and causes of action of any nature whatsoever relating to or in any
way arising out of the Note and the Loan Documents.” Id. at 17-18. The RTC,
however, did not “waive any rights it may have against any person not a party
hereto.” Id. at 20. Las Lomas and the guarantors released the RTC from all
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claims, “whether known or unknown, present or future, relating to or in any
way arising out of the Note, the Loan Documents, the Property and the Suit . . . .”
Id. at 17. Miscellaneous terms included an integration clause, a statement that the
parties entered into the agreement to “avoid litigation and buy peace,” and a
provision requiring the agreement to be interpreted under Texas law. Id. at 19-20.
On behalf of Las Lomas, the agreement was signed by Van Pelt, as president of
general partner First Western, and Haworth, as partner of general partner VMH
Partners. Haworth and Van Pelt also signed as guarantors. See id. at 21.
In September 1994, the RTC filed this collection action on the $100,000
note and then assigned the note to National Enterprises. 1 On cross motions for
summary judgment, the district court determined that the settlement agreement
was unambiguous and that it “resolve[d] all loans and issues concerning the
Las Lomas project.” Id. at 158. The court therefore granted defendants’ motion
for summary judgment. 2 National Enterprises now appeals.
1
National Enterprises was substituted as a party and the RTC was dismissed
on September 14, 1995. Generally, “jurisdiction is to be determined by facts
existing at the time of filing suit.” Penteco Corp. Ltd. Partnership v. Union Gas
Sys., Inc., 929 F.2d 1519, 1522 n.2 (10th Cir. 1991). We note, however, that the
Third Circuit recently refused to apply the “time of filing” rule to jurisdiction
under § 1441a. See New Rock Asset Partners, L.P. v. Preferred Entity
Advancements, Inc., 101 F.3d 1492, 1503-04 (3d Cir. 1996). Although the logic
underlying the New Rock determination may have merit, this court has not
considered or adopted this exception to the time of filing rule.
2
In the district court, defendants also claimed that they were entitled to
(continued...)
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DISCUSSION
“We review the grant of summary judgment de novo, applying the same
standard as the district court. Summary judgment is appropriate when there is no
genuine dispute over a material fact and the moving party is entitled to judgment
as a matter of law. We consider the record in the light most favorable to the
non-moving party.” United States v. Sackett, 114 F.3d 1050, 1051 (10th Cir.
1997) (quotations and citations omitted). “Where, as here, the parties file cross
motions for summary judgment, we are entitled to assume that no evidence needs
to be considered other than that filed by the parties, but summary judgment is
nevertheless inappropriate if disputes remain as to material facts.” James Barlow
Family Ltd. Partnership v. David M. Munson, Inc., No. 96-1202, 1997 WL
525196, *2 (10th Cir. Aug. 26, 1997).
As with any other contract, the presence of ambiguity in a term of a
settlement agreement is to be determined as a matter of law. See Carland v.
Metropolitan Life Ins. Co., 935 F.2d 1114, 1120 (10th Cir. 1991). “Under Texas
law, a contract is ambiguous if, after applying established rules of interpretation,
2
(...continued)
summary judgment because National Enterprises does not have the original note
in its possession and the note lacks proper endorsement. The district court did not
evaluate these contentions, defendants do not pursue them on appeal, and we do
not address them in this order and judgment.
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the written instrument remains reasonably susceptible to more than one meaning.”
Triad Elec. & Controls, Inc. v. Power Sys. Eng’g, Inc., 117 F.3d 180, 191
(5th Cir. 1997) (quotations and citations omitted).
Ambiguity may be patent, that is, evident on the face of the contract, or it
may be latent.
A latent ambiguity arises when a contract which is unambiguous on
its face is applied to the subject matter with which it deals and an
ambiguity appears by reason of some collateral matter. If a latent
ambiguity arises from this application, parol evidence is admissible
for the purpose of ascertaining the true intention of the parties as
expressed in the agreement.
National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520
(Tex. 1995) (citations omitted). Once a writing is found to be ambiguous,
determination of the parties’ intent through extrinsic evidence presents a question
of fact. See Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir. 1982)
(applying Texas law).
In this instance, the release language of the agreement is apparently clear.
A latent ambiguity emerges, however, when the focus is on whether the agreement
releases First Western and the guarantors from liability on the $100,000 note.
The circumstances surrounding the execution of the agreement suggest two
reasonable meanings.
The district court accepted defendants’ position that the “agreement . . .
resolve[d] all loans and issues concerning the entire Las Lomas project.”
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Appellants’ App. at 158. This expansive view of “documents . . . executed in
connection with” the $8.9 million note and “matters . . . relating to or arising out
of the Loan,” Appellants’ App. at 15-16, is plausible, in that (1) the parties
contemplated additional loans for the project at the time they closed the $8.9
million loan; (2) the parties agreed that the deed of trust securing the $8.9 million
note would also secure later borrowings; (3) the proceeds from the $100,000 loan
went toward the project; and (4) the parties expressed their intention to buy peace
and avoid litigation.
On the other hand, an intention to exclude the $100,000 note from the
scope of the agreement is suggested by the specific listing of only the $8.9 million
loan, the accompanying documents, and the lender liability suit. Support for this
narrower interpretation can be found in several aspects of the parties’ dealings:
for instance, (1) First Western, not Las Lomas, was the maker of the $100,000
note; (2) First Western signed the agreement solely in the capacity of general
partner of Las Lomas; (3) Las Lomas made no mention of the $100,000 note in its
lender liability complaint; (4) Sandia evidently failed to link the two loans in its
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records; 3 and (5) the RTC was released from known or unknown claims relating to
the Las Lomas property, as well as the note, loan documents, and lawsuit.
Because the agreement is reasonably susceptible to more than one meaning,
it is ambiguous. Moreover, the determination of the agreement’s scope is a
question of fact which cannot be resolved on this record. The parties’
contradictory versions of the circumstances surrounding the execution of the
agreement create a genuine issue of material fact as to whether the parties
intended to discharge defendants from liability under the $100,000 note.
Summary judgment is therefore inappropriate.
3
In its brief, National Enterprises argues that the D’Oench, Duhme doctrine
bars defendants’ efforts to link the $100,000 and $8.9 million loans. See
D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) (holding that borrowers or
guarantors are estopped from using unrecorded side agreements to defend against
efforts by the FDIC or its assignees to collect on promissory notes acquired from
a failed banking institution); 12 U.S.C. § 1823(e) (codifying the doctrine). The
D’Oench doctrine plays no part in our determination that the settlement agreement
contains a latent ambiguity, and we do not address the doctrine in this order and
judgment. We note, however, that an analysis of the doctrine may become
necessary on remand if the defendants continue to argue that the note was to be
“repaid, if at all, only from the project’s positive cash flow or from the ultimate
sale of the apartments from proceeds in excess of the first mortgage balance.”
Appellant’s App. at 47.
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We REVERSE the district court's grant of summary judgment in favor of
defendants, and REMAND for further proceedings.
Entered for the Court
Robert H. Henry
Circuit Judge
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