
USCA1 Opinion

	




          February 16, 1993                            UNITED STATES COURT OF APPEALS                                For The First Circuit                                 ____________________        No. 92-1805                         RESOLUTION TRUST CORPORATION, ETC.,                                Plaintiffs, Appellees,                                          v.                               DANIEL M. DRISCOLL, JR.,                         INDIVIDUALLY AND AS HE IS TRUSTEE OF                          QUINAQUISSET REALTY TRUST, ET AL.,                               Defendants, Appellants.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. William G. Young, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                         Higginbotham, Senior Circuit Judge,*                                       ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            J. Daniel Lindley with whom Peter  Antell and Antell &  Associates            _________________           _____________     ____________________        were on brief for appellants.            James H.  Wexler with whom Bennett  H. Klein  and Kotin, Crabtree,            ________________           _________________      ________________        and Strong were on brief for appellees.        ___ ______                                 ____________________                                  February 16, 1993                                 ____________________        ____________________        *of the Third Circuit, sitting by designation.                 BOUDIN, Circuit Judge.   This appeal is one branch  of a                         _____________            complex  commercial  matter  still  pending  in the  district            court.  The case derives from a set of entangled transactions            that  have been  further complicated  by an  intervening bank            failure.    Perceiving reasons  for  a  prompt resolution  of            claims  against  one  party,  the district  court  entered  a            separate  final judgment as to  those claims, and this appeal            followed.  We affirm.                                          I.                 In the mid-1980's, the Fox Run  Realty Trust ("Fox Run")            set  out  to  develop   a  residential  complex  in  Mashpee,            Massachusetts, known as "Willowbend."   In December 1986, the            Quinaquisset  Realty Trust  ("Quinaquisset") conveyed  to Fox            Run 152 acres of land adjoining the Fox Run holding, allowing            the  project  to  be  expanded.   In  exchange,  Quinaquisset            received a large payment and the promise of a number of house            lots  and   of  condominiums   or  permits  for   them  after            subdivision  approval.  Fox Run's obligations to Quinaquisset            were secured  by a first mortgage  on the 152 acres.   At the            same time, Sentry Federal  Savings Bank ("Sentry") loaned Fox            Run $13  million to  finance Willowbend,  taking back  a note            secured by  a mortgage on Willowbend, subordinated  as to the            152 acres.                 In  October 1987,  Fox Run  conveyed to  Quinaquisset 20            house lots and the rights to 22 or 23 condominium permits (we                                         -2-                                         -2-            are given different numbers in the briefs).  The Quinaquisset            mortgage  on  the 152  acres was  discharged.   Fox  Run then            repurchased the permit rights for  cash and an unsecured $1.1            million  note   to  Quinaquisset.    Then,   in  April  1989,            Quinaquisset borrowed $950,000 from  Sentry, giving Sentry  a            note and  depositing with it  as collateral the  earlier $1.1            note  reflecting Fox  Run's debt  to Quinaquisset.    At this            point,  Fox Run was  indebted to  Quinaquisset and  both were            indebted to Sentry.                 In September 1989 Fox Run fell  into default on payments            to Sentry, and Sentry  began to foreclose on Willowbend.   In            April  1990, Sentry  and Fox  Run entered  into a  settlement            agreement; Fox Run  agreed to convey  title in Willowbend  to            Sentry  or  to  Evergreen Holding  Company  ("Evergreen"),  a            wholly  owned subsidiary of Sentry, and  Sentry agreed not to            claim  under  the  note   against  two  individuals  who  had            guaranteed  Fox Run's debt  to Sentry.   Sentry's mortgage on            Willowbend,  however, was  not  discharged; rather  Evergreen            took the property subject to Sentry's  power to sell pursuant            to the mortgage.                 In the meantime, it  appears that Fox Run had  ceased in            August 1989  to make  payments  to Quinaquisset  on the  $1.1            million note  payable to Quinaquisset  but held by  Sentry as            collateral.   In November  1989, Quinaquisset fell  behind in            payments on  its own $950,000 note  to Sentry.  In  May 1990,                                         -3-                                         -3-            Quinaquisset was in default,  and Sentry brought suit  on the            $950,000 note in Middlesex  Superior Court, claiming not only            against Quinaquisset's trustee, Daniel M. Driscoll, Jr.,  but            also against  a number of individuals who  had guaranteed the            note  ("the  guarantors").   For  simplicity,  we will  refer            collectively  to the  trustee and  guarantors, appellants  in            this court, as "Quinaquisset."                 Sentry  also  proceeded with  efforts  to  foreclose the            Willowbend mortgage,  seeking to  sell both the  property and            the associated rights to the condominium permits that Fox Run            had transferred  to Quinaquisset  and then reacquired.   When            Quinaquisset  threatened   to  delay  the  mortgage  sale  by            litigation, Sentry and Quinaquisset entered into an agreement            on  June 22, 1990.   That agreement (in  the first paragraph)            released Sentry's  mortgage on  the 20 house  lots previously            conveyed   to  Quinaquisset;  and  Quinaquisset,  subject  to            certain  reservations  of  rights  described  in  the margin,            agreed  (in   the  second   paragraph)  not  to   enjoin  the            foreclosure sale  "or to  take any further  action subsequent            thereto with reference to the validity of said foreclosure or            the  [m]ortgages relating  thereto."1   The foreclosure  sale                                            ____________________                 1This  promise was  qualified in  the same  paragraph by            this language: "provided, however, that Quinaquisset reserves            its  rights, claims  and remedies,  if any,  relating to  (i)            Sentry's   dealings  with  [the   two  individuals   who  had            guaranteed  Fox  Run's note  to  Sentry],  and (ii)  Sentry's            dealings with  Quinaquisset  regarding the  [m]ortgage  being            released  . .  . ."    In the  third  paragraph, the  parties                                         -4-                                         -4-            proceeded,  there  were multiple  bidders,  and  at the  sale            Evergreen acquired Willowbend.                 In  September 1990,  Sentry  failed and  the  Resolution            Trust Company ("RTC") became its receiver.  The RTC created a            new  bank  entity; the  RTC  became  conservator of  the  new            entity,  which  received   various  Sentry  assets  including            Evergreen.  The RTC,  as receiver for Sentry, removed  to the            district  court  the litigation  in Middlesex  Superior Court            brought  by Sentry  against  Quinaquisset to  recover on  the            $950,000 note.                                           II.                 On May  22, 1991, Quinaquisset  filed a new  pleading in            the  district  court action,  including  for  the first  time            Evergreen,   now   named   as  a   third   party   defendant.            Quinaquisset's amended consolidated answer,  counterclaim and            third party complaint  is one of those documents that portend            a lot of litigation.  Claims were directed against the RTC as            receiver  for  Sentry  and  conservator of  the  new  entity,            against Fox Run's trustees, and against Evergreen; there were            12  counts,  alleging  multiple  wrongs  and  numerous  legal            theories; and the relief  sought included recision of various            transactions, imposition of constructive trusts, and damages.                                            ____________________            agreed,  "with the  exception  of the  foregoing, to  reserve            without prejudice  their rights,  claims or remedies"  in the            Middlesex Superior Court action.                                         -5-                                         -5-                 As only the  claims against  Evergreen are  at issue  on            this appeal, we confine ourselves to the procedural steps and            rulings  concerning  it.    Describing  the  claims   against            Evergreen  is not  easy because  very little  in the  May 22,            1991, pleading  relates directly to  it.  There  are specific            allegations against others,  notably Sentry, including claims            of misrepresentation  and trickery  in the  transactions that            led  to  Quinaquisset's   discharge  of  its  mortgage,   the            reconveyance  of  the  permit  rights to  Fox  Run,  Sentry's            refusal to fund interest  payments by Fox Run on  its debt to            Quinaquisset, and  alleged attempts by Sentry  to cloud title            to the  house lots  conveyed to  Quinaquisset.   The pleading            does  claim that  Evergreen  holds  the  permit rights  in  a            constructive  trust  and  seeks   recision  of  the  original            transfer to Fox Run.                 In June 1991, Evergreen filed a motion to dismiss or for            summary judgment.  On September 10, 1991,  the district court            granted summary  judgment for Evergreen on  the count seeking            recision,  concluding  that  the  recision  count  sought  to            challenge Evergreen's title to Willowbend; this, the district            court found, was inconsistent with Quinaquisset's obligations            under  the agreement of June 22, 1990, quoted above, that had            permitted the mortgage sale  to proceed.  On April  21, 1992,            the  court  granted summary  judgment  for  Evergreen on  the            remaining  counts.  The court did not issue a written opinion                                         -6-                                         -6-            but  it  appears  that  the  dismissal was  premised  on  the            D'Oench, Duhme doctrine, which limits claims based on matters            ______________            not reflected in  bank records.  See D'Oench, Duhme  & Co. v.                                             ___ ____________________            FDIC, 315 U.S. 447 (1942).2            ____                 On May 12, 1992, the district court ordered the separate            entry of  judgment  in  favor  of Evergreen  on  all  counts,            finding pursuant to  Fed. R. Civ. P. 54(b)  that there was no            just reason  for  delay.   We  pass over  related  procedural            history and  note that the  reason for the  separate judgment            stemmed from  an earlier determination by  the district court            that  the recision  claim against  Evergreen needed  a prompt            definitive resolution  so that  Evergreen could complete  the            sale   of  Willowbend   to  a   prospective  buyer.     Since            Quinaquisset was  seeking immediate  appellate review  of the            recision claim,  the district court thought  it suitable that            all  claims against Evergreen should  be before this court at            the same time.     Thus, the judgment  dismissing all  claims            against Evergreen is properly  before us; the balance of  the                                            ____________________                 2The  district  court  relied   on  the  doctrine  in  a            memorandum  and  order of  July  19,  1991, granting  summary            judgment  to  the  RTC  on all  counts  except  the  recision            request;  that  request had  been dismissed  by the  court in            early May  1991 based on the agreement  of June 22, 1990.  In            an order dated  May 12,  1992, the court  indicated that  the            same reasoning was implicated in Evergreen's case.                                         -7-                                         -7-            litigation involving other  parties remains  in the  district            court.3                                            ____________________                 3Quinaquisset contests the Rule 54(b)  certification but            its  argument is unpersuasive.  The thread of the argument is            that to  enter a judgment  facilitating a sale  of Willowbend            could  impair  Quinaquisset's  prospects  of  recovering  the            permit rights.  If so,  Quinaquisset was free to seek  a stay            of judgment from  the district  court or from  us.  Absent  a            showing that would warrant a stay, the desire to facilitate a            sale of assets, in connection with  a bank reorganization, is            a  perfectly good  ground for  the Rule  54(b) determination.            See generally  Curtiss-Wright Corp. v.  General Electric Co.,            _____________  ___________________      ___________________            446 U.S. 1, 8 (1980).                                         -8-                                         -8-                                         III.                 Like  the  district  court  we separate  the  claim  for            recision  against Evergreen  from the  balance of  the claims            against  it.   Our reason  for doing  so is  that a  claim to            recover  property  is   the  one  line  of   attack  made  by            Quinaquisset that we can imagine succeeding against Evergreen            without a separate showing  of wrongful conduct by Evergreen.                                                            ____________            Putting to one side a possible D'Oench,  Duhme defense, there                                           _______________            might  be  circumstances   in  which  Evergreen--without  any            wrongdoing  on   its  part--became  a   holder  of   property            wrongfully taken by  Sentry or others from Quinaquisset.   In            that case,  whether by  recision, constructive trust  or some            other theory  or device, perhaps the property  could (in some            circumstances)  be reached  even though  in the  hands of  an            innocent possessor.                 The district court foreclosed this possibility by ruling            on September  10,  1991, that  the June  22, 1990,  agreement            between  the parties  prevented  such a  recovery.   Treating            Evergreen's title  as derived from the  foreclosure sale, the            district  court interpreted  the  agreement  as preventing  a            subsequent  attack  on the  resulting  title  and ruled  that            "Evergreen owns the  property free of any title defect  . . .            ."  Quinaquisset asserts that the district court misconstrued            the agreement, ignoring the reservation of rights provisos.                                         -9-                                         -9-                 Subject  to the rights reservations, Quinaquisset agreed            in  the June 22 document not to obstruct the foreclosure sale            "or  to  take  any  further action  subsequent  thereto  with            reference  to  the  validity  of  said  foreclosures  or  the            [m]ortgages  relating thereto . . . ."  Evergreen argues that            "[t]he    clear meaning  of  the [agreement]  . .  .  is that            Quinaquisset agrees not  to take any  action to challenge  or            impair the foreclosure purchaser's title in Willowbend."  The            reservations  of  rights, it  argues,  were  meant to  retain            Quinaquisset's damage claims, and  not its right to institute            a  future  action  affecting   title  to  Willowbend  or  the            attendant permit rights.                 We think this interpretation not quite so clear as  does            Evergreen, the agreement being something less than a model of            clarity.   There  is, after  all, no  express promise  not to            "challenge or  impair  the foreclosure  purchaser's title  in            Willowbend."  But we agree that Evergreen's reading, endorsed            by  the  district  court,  is  better  than  any  alternative            reading, considering  the general language used ("any further            action  .  .  .  with  reference  to  the  validity  of  said            foreclosures or  the [m]ortgages relating  thereto") together            with the  purpose to protect the  foreclosure-sale buyer that            one  would expect in such circumstances.  If the "any further            action"  promise is  read in  this way,  then  it is  easy to                                         -10-                                         -10-            construe  the  even  more  general  language  of  the  rights            reservations to relate to other claims such as damages.                 We might  be more hesitant  to reach this  conclusion if            Quinaquisset had offered to us and the district court another            reasonable reading of the "any  further action" clause, or if            it  pointed to evidence produced or  promised in the district            court  to show that the  parties intended the  clause to have            some other meaning.   But no other reading has  been tendered            and  no   such  evidence   has  been  proffered.     Instead,            Quinaquisset emphasizes the rights reservations which, as  we            have noted, are quite  general, ought not readily be  read to            take back  in the proviso  what Quinaquisset appears  to have            promised immediately before, and  can easily be understood to            refer to other remedies such as damages.                 Given  the  district  court's  interpretation  which  we            sustain it becomes fruitless for Quinaquisset to argue, as it            does  at  length, that  it might  otherwise  have a  claim to            recover  the permits  from Evergreen.   Assuming it  had such            claims,  whether by  recision or  constructive trust,  it has            surrendered them  by  the agreement.    This court  need  not            decide  Quinaquisset's alternative,  last ditch  and facially            doubtful argument that  Evergreen never acquired the  permits            at all  (allegedly because  their acquisition  by Fox  Run in            October  1987  was  "illegal");  the  claim  cut  off by  the            judgment is  Quinaquisset's claim  to  recover property  from                                         -11-                                         -11-            Evergreen.    The judgment  does  not  address property  that            Evergreen never received in the foreclosure.                                         IV.                 Turning now to  the remaining claims  against Evergreen,            we sustain their  dismissal on  a ground not  adopted by  the            district court.  See Doe v.  Anrig, 728 F.2d 30, 32 (1st Cir.                             ___ ___     _____            1984) (court "free to affirm . . . on any ground supported by            the record").    Both parties  treat  the district  court  as            having  dismissed those  claims in  reliance on  the D'Oench,                                                                 ________            Duhme  doctrine, and we believe this is  so.  But there is no            _____            district  court opinion applying D'Oench, Duhme to Evergreen.                                             ______________            Although  the  district court  did  discuss  the doctrine  as            applied  to  the  RTC,   Quinaquisset  seeks  to  distinguish            Evergreen's status under  the doctrine.  We  think that there            is  in  the  foreground  of  this  case  another   basis  for            sustaining  the  dismissal--the  failure  to  state  a  claim            against Evergreen--and we rest  our affirmance on that basis.                 Evergreen is admittedly a  separate corporation and  was            apparently  not  a party  to  Fox  Run's  acquisition of  the            permits or the  Fox Run-Sentry agreement.   The complaint may            in  a literal  sense "charge" Evergreen  with wrongs  such as            fraud, misappropriation, and unfair competition; but no facts            are  ever alleged  that connect  Evergreen with  the wrongful            acts  described.   The  complaint  does  nakedly assert  that                                         -12-                                         -12-            Evergreen is the "alter ego" of Sentry, the implication being            that it  is thereby  responsible for Sentry's  conduct.   Yet            Quinaquisset  alleges no  facts that,  if proved,  would even            arguably permit a court to impose liability on Evergreen  for            the  acts of  its parent  under  an alter  ego  theory.   See                                                                      ___            generally  United Electrical,  Radio and  Machine Workers  of            _________  __________________________________________________            America v.  163 Pleasant  Street Corporation, 960  F.2d 1080,            _______     ________________________________            1092 (1st Cir. 1992).                 Similarly,  the  complaint  asserts  in  one  conclusory            sentence  that Fox  Run's  obligations to  Quinaquisset  were            "assumed  by  Sentry   or  Evergreen"  when   Willowbend  was            acquired.  Nothing  else in the complaint  identifies any act            or document reflecting such an assumption by Evergreen of Fox            Run's debt  to Quinaquisset or remotely  suggests the factual            basis for this claim.  Factual allegations in a complaint are            assumed  to be true when a court  is passing upon a motion to            dismiss,  but  this  tolerance   does  not  extend  to  legal            conclusions, Kadar Corp. v.  Milbury, 549 F.2d 230, 235  (1st                         _______________________            Cir.  1977), or to "bald  assertions."  Chongris  v. Board of                                                    ________     ________            Appeals of the Town of  Andover, 811 F.2d 36, 37 (1st  Cir.),            _______________________________            cert. denied 483 U.S. 1021 (1987).            ____  ______                 It  is, of  course, true  that at  the start  of complex            litigation  a party  may not  have all  the facts,  so courts            normally  hesitate to dismiss under Fed.  R. Civ. P. 12(b)(6)            at the outset.   At the start, a reasonable  basis for belief                                         -13-                                         -13-            and an outline of what one might reasonably hope to prove may            suffice to permit discovery and ward off premature motions to            dismiss.   But Quinaquisset's complaint  against Evergreen is            deficient;   this  litigation  has persisted  for almost  two            years;  and yet  even  now Quinaquisset  is  still unable  to            explain  what  exactly  it  is  that  Evergreen  did that  is            wrongful.  The only claims at issue on this appeal are  those            relating  to Evergreen.   No amount of  embellished attack on            Fox  Run, Sentry or the RTC can replace what Quinaquisset has            still not supplied: a single, coherent, specific  description            of what Evergreen has done that is wrongful.                 Our appraisal of Quinaquisset's claims against Evergreen            is without prejudice to whatever claims it may assert against            others.   Part of its predicament  may be of its  own making:            for unexplained  reasons, it released  a mortgage on  part of            Willowbend, reconveyed valuable permit rights to Fox Run, and            took back an unsecured note on which Fox Run later defaulted.            On  the other hand,  this misstep, if  such it was,  does not            preclude  the   possibility  that   out  of  the   welter  of            surrounding events  a claim was created  against other active            participants.  Whether this  is so, and if so  whether such a            claim is  nevertheless barred by D'Oench,  Duhme, are matters                                             _______________            on which we have no occasion to pass at this time.                 We conclude that, apart from seeking to recover property            from Evergreen, Quinaquisset has failed to state a claim upon                                         -14-                                         -14-            which  relief can be granted.  The property recovery claim is            barred by the agreement for reasons already stated.  Thus the            balance of the claims fail under Fed. R. Civ. P. 12(b)(6) and            on this ground  we affirm the  district court's dismissal  of            those  claims.  It will  be time enough  to consider D'Oench,                                                                 ________            Duhme  when  the rest  of  this  litigation, now  nine-tenths            _____            submerged like the proverbial iceberg, reaches this court.                 Affirmed.                  ________                                         -15-                                         -15-
