     Case: 12-51083   Document: 00512953988        Page: 1   Date Filed: 03/02/2015




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                                      United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                    No. 12-51083                         March 2, 2015
                                                                        Lyle W. Cayce
CENTRAL SOUTHWEST TEXAS DEVELOPMENT, L.L.C.,                                 Clerk


             Plaintiff - Appellee

v.

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

             Defendant - Appellant

FDIC/ WASHINGTON MUTUAL BANK, Federal Deposit Insurance
Corporation, as Receiver for Washington Mutual Bank,

             Intervenor - Appellant




                Appeal from the United States District Court
                     for the Western District of Texas


Before STEWART, Chief Judge, and SOUTHWICK and COSTA, Circuit
Judges.
GREGG COSTA, Circuit Judge:
      This is yet another in a series of cases concerning an obscure but heavily
litigated consequence of the largest bank failure in U.S. history: the fate of
Washington Mutual’s (WaMu) leases for real estate on which bank branches
were as yet unbuilt at the time of the company’s collapse. In an earlier case
addressing this issue, Excel Willowbrook, L.L.C. v. JPMorgan Chase Bank,
N.A., 758 F.3d 592 (5th Cir. 2014), we held that WaMu’s landlords had
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standing to bring a breach of contract claim against JPMorgan Chase, which
had been assigned WaMu’s leases by virtue of its agreement to acquire WaMu
from the Federal Deposit Insurance Corporation (FDIC). In this case, although
its decision preceded Excel Willowbrook, the district court also ruled in favor
of the lessor, Central Southwest Texas Development. Appellants—both Chase
and the FDIC, which intervened in the case and briefed this appeal on Chase’s
behalf—urge us to distinguish this case from Excel Willowbrook on two
grounds, either of which would be sufficient for reversal: first, that Central
lacks prudential standing to sue because prior to WaMu’s failure it neither
owned nor possessed the property it agreed to lease, and therefore was not in
privity of estate with Chase; and second, that the lease was terminated by
mutual agreement. Concluding that the first issue was not raised below and
that there is no reason to disturb the trial court’s finding that no mutual
termination occurred, we affirm.
                                       I.
      Central and WaMu entered into a lease agreement in November 2007.
ROA 2123. Central was to construct a WaMu bank branch in Austin, and
deliver it to WaMu by January 1, 2008, after which WaMu would owe rent to
Central for the twenty-year term of the lease. ROA 2123. Central did not yet
have fee simple ownership of the property, but had contracted with Frank
Bomar to purchase it and had deposited $15,000 in earnest money in escrow.
ROA 2123, 1786. However, after a number of extensions of the deadline,
Central had not yet closed on the property at the time of WaMu’s collapse in
September 2008. ROA 2123–24. Nonetheless, according to the district court’s
findings, Central “regarded itself as being obligated to purchase the property
at all times relevant to this case.” Cent. Sw. Tex. Dev., L.L.C. v. JPMorgan
Chase Bank, N.A., 2012 WL 11937377, at *2 (W.D. Tex. Aug. 21, 2012).

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      WaMu was declared insolvent on September 25, 2008, and the FDIC was
appointed as its receiver. ROA 2125. That same day, Chase acquired most of
WaMu’s assets and liabilities under a Purchase and Assumption (P&A)
Agreement with the FDIC. ROA 2125. The P&A Agreement divided WaMu’s
real property interests into two categories: “Bank Premises” and “Other Real
Estate.” ROA 2125. Chase was to acquire all Other Real Estate under the
P&A Agreement, but it maintained the right to either accept or decline
assignment of Bank Premises assets within a 90-day period. ROA 2125. If
Chase declined, the FDIC would then be authorized to repudiate “burdensome”
leases if doing so would “promote the orderly administration of [WaMu’s]
affairs.” See 12 U.S.C. § 1821(e)(1)(B)–(C). The lessor of a repudiated lease is
only entitled to rent accruing before repudiation. 12 U.S.C. § 1821(e)(4)(B).
      Chase and the FDIC informed Central that the lease qualified as Bank
Premises, and that the FDIC would therefore be authorized to repudiate the
lease if Chase rejected it. ROA 2126; 2274–75. Having determined that Chase
was unlikely to accept the lease based on the proximity of Chase branches to
the leased property, Central saw the writing on the wall; a Central executive
emailed the FDIC, noted that a delay in Chase’s decision whether to accept the
lease would cause problems for Central, and asked to be “release[d] . . . from
the Lease obligation in order to pursue other options.”      ROA 2126, 1844.
Central was soon notified by Chase of its rejection of the lease and by the FDIC
of its repudiation. ROA 2126–27. Central subsequently closed on the property
with Bomar. ROA 2127. Having failed to find a replacement tenant, Central
sold the property the same day for $133,704.05 more than the $1,521,789.95 it
paid. ROA 2127.
      Central later concluded that the lease did not qualify as Bank Premises
under the P&A Agreement because no banking facilities were occupied (or even

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built) by the time of WaMu’s failure. 1 That means the lease was “Other Real
Estate” that passed to Chase when it acquired WaMu. See Excel Willowbrook,
758 F.3d at 595–96 (“[U]nder the plain language of the Agreement, the Leases
[for banking facilities unoccupied at the time of WaMu’s failure] qualified as
Other Real Estate assigned outright to Chase.”).
       With this new understanding of the lease’s status, Central filed this
lawsuit against Chase for breach. Red Br. 5. The FDIC intervened on Chase’s
side. After Central moved for summary judgment, the district court held that
the lease was not a Bank Premises lease, and therefore that Chase could not
decline assignment under the P&A Agreement. ROA 1574. Consistent with
our later ruling in Excel Willowbrook, the district court also held that this
assignment created privity of estate between Central and Chase, and therefore
that Central had standing to assert its interpretation of the P&A Agreement.
ROA 1574–75. Chase also moved for summary judgment on the ground that
the email communications between the parties constituted a mutual
termination of the lease. ROA 2042–43. The district court denied that motion,
holding that “there is at least a fact issue as to whether Plaintiff’s
communications with the FDIC and Chase constituted a termination or a
request to terminate.” ROA 2048.
       The case proceeded to a bench trial to resolve the remaining issues. The
district court ruled that Chase’s attempted rejection of the lease was an
anticipatory breach, entitling Central to contract damages and excusing it from
further performance.         ROA 2130–33.         The court then addressed Chase’s


       1 The P&A Agreement defined Bank Premises as “the banking houses, drive-in
banking facilities, and teller facilities (staffed or automated) together with appurtenant
parking, storage and service facilities and structures connecting remote facilities to banking
houses, and land on which the foregoing are located, that are owned or leased by [WaMu] and
that are occupied by [WaMu] as of Bank Closing.” ROA 459.
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defense that the lease had been terminated by mutual agreement. ROA 2137.
It found that Chase’s and the FDIC’s communications with Central concerning
the P&A Agreement constituted negligent misrepresentations on which
Central reasonably relied, noting “it is reasonable to rely when the federal
agency which oversees the banking industry . . . tells you that your banking
lease       may   be   lawfully   rejected”    and   that   Central     understood      the
misrepresentation about the effect of the P&A Agreement to be factual in
nature. Cent. Sw., 2012 WL 11937377, at *9. It also found that “the emails do
not constitute a request to terminate” but rather “constitute a request for
Chase to finalize its own rejection of the lease as quickly as possible.” Id. In
the alternative, the court held that Chase and the FDIC were estopped from
asserting that Central requested termination of the lease “because their
misrepresentations induced [Central] to send the emails in question.” Id. at
*10. The court ultimately awarded Central over $1.3 million in damages, 2 plus
prejudgment interest and attorneys’ fees. ROA 2152–53. Chase and the FDIC
appealed.
                                              II.
         “The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.” One
Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 262 (5th Cir.
2011). The district court’s grant of summary judgment is also reviewed de
novo. Noble Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642, 645 (5th Cir.
2008).




        2The district court calculated the award by subtracting the “fair rental value” from
the rent due under the lease, determining the present value of that amount, and reducing
the resulting value by Central’s profit from the sale of the property. ROA 2146, 2149.
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                                               A.
        We begin with the FDIC’s argument that Central lacks prudential
standing to assert its interpretation of the P&A Agreement. The contours of
this issue are particularly well-defined by our recent decision in Excel
Willowbrook.         As in this case, in Excel Willowbrook Chase and the FDIC
disputed WaMu’s landlords’ prudential standing to assert an interpretation of
the P&A Agreement, to which they were not parties. 3 758 F.3d at 596. We
first addressed the argument that the landlords had standing as third-party
beneficiaries of the P&A Agreement.                 Id. at 596–99.     “In the interest of
maintaining uniformity in the construction and enforcement of federal
contracts,” an issue governed by federal common law, we followed our sister
circuits and held that the presumption against third-party beneficiary status
under government contracts decided the question in Chase’s favor. Id.
        We nonetheless found standing on an alternative ground: that “the P&A
Agreement accomplished a complete, present conveyance of the Leases that . . .
creates privity of estate with Chase and gives the Landlords the legal right to
enforce the Leases against Chase.” Id. at 599. Privity of estate allows a
landlord to hold its original tenant’s assignees contractually liable under the
lease despite the lack of contractual privity. Id. We rejected the FDIC’s
position (and disagreed with the Eleventh Circuit’s holding) that the landlords
had to establish standing to interpret the P&A Agreement before the landlords
could establish privity of estate, noting that “a landlord always needs to prove
the content of the conveyance between the original tenant and the subsequent
tenant in order to establish privity of estate with the latter.”                 Id. at 603



        3   Eight similar suits were consolidated in the Excel Willowbrook appeal. 758 F.3d at
596.
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(emphasis in original) (discussing Interface Kanner, LLC v. JPMorgan Chase
Bank, N.A., 704 F.3d 927, 933 (11th Cir.), cert. denied, 134 S. Ct. 175 (2013)).
Observing that this holding would not interfere with the FDIC’s ability to
administer failed banks because the agency, by assigning the leases to Chase,
chose not to exercise its repudiation authority, we affirmed the district court’s
ruling in favor of the landlords. Id. Other federal courts of appeal, addressing
similar cases, have reached a different conclusion. See Hillside Metro Assocs.,
LLC v. JPMorgan Chase Bank, N.A., 747 F.3d 44, 50 n.5 (2d Cir. 2014);
Interface Kanner, 704 F.3d at 933; see also GECCMC 2005-C1 Plummer St.
Office Ltd. P’ship v. JPMorgan Chase Bank, N.A., 671 F.3d 1027 (9th Cir. 2012)
(ruling in favor of Chase without addressing privity of estate).
      The FDIC attempts to avoid Excel Willowbrook by arguing that Central
has a weaker case for privity than those plaintiffs because Central “was never
in possession of the lot covered by the Lease at any time before the FDIC
repudiated the Lease.”    FDIC Br. 22–23.      Its argument against Central’s
standing to sue thus turns on its characterization of Central’s contract with
Bomar to purchase the property as a mere option contract that gave Central
no possessory interest.
      But we need not address whether Central’s contract to purchase the
property was an option contract, or whether an option contract would deprive
Central of privity of estate with Chase, because this defense was never raised
in the district court. See State Indus. Prods. Corp. v. Beta Tech. Inc., 575 F.3d
450, 456 (5th Cir. 2009) (“Under our general rule, arguments not raised before
the district court are waived and will not be considered on appeal unless the
party can demonstrate ‘extraordinary circumstances.’”). Appellants maintain
that they raised the defense sufficiently, pointing to their statement in the
district court that Central did not own the property, and therefore could not

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have leased what it did not possess. FDIC Reply Br. 4; ROA 1712–13. This
argument, however, was advanced to show that Chase had the right to
unilaterally rescind the lease under a provision that allowed WaMu to
terminate if Central had not obtained fee title to the property by a certain date.
ROA 1712–13. That is a different issue than the FDIC’s contention on appeal
that Central’s lack of title to the property deprives the company of privity of
estate with Chase. Although we recognize that there is no bright-line rule for
determining whether a matter was raised below, United States v. Brown, 561
F.3d 420, 435 n.12 (5th Cir. 2009), we find that the arguments in the district
court were insufficient to put the court and Central on notice of the defense
that the FDIC has raised on appeal. See Dallas Gas Partners, L.P. v. Prospect
Energy Corp., 733 F.3d 148, 157 (5th Cir. 2013) (noting that a party must
“press” an issue “to such a degree that the district court has an opportunity to
rule on it”); see also Kelly v. Foti, 77 F.3d 819, 823 (5th Cir. 1996) (“The raising
party must present the issue so that it places the opposing party and the court
on notice that a new issue is being raised.” (quoting Portis v. First Nat’l Bank,
34 F.3d 325, 331 (5th Cir. 1995)). In order to address the defense now, we
would be forced to analyze it “without the benefit of a full record or lower court
determination.” See New Orleans Depot Servs., Inc. v. Dir., Office of Worker’s
Comp. Programs, 718 F.3d 384, 387–88 (5th Cir. 2013) (quoting 19 JAMES W.
MOORE ET AL., MOORE’S FEDERAL PRACTICE § 205.05[1], at 205–57 (3d ed.
2011)).
      Furthermore, the forfeiture inquiry, like other aspects of this case, is
aided by Excel Willowbrook. There, Chase and the FDIC asserted a similar
exception to privity of estate but focused on the lack of possession on the other
side of the landlord-tenant relationship, arguing that “privity of estate cannot
come into existence unless the assignee tenant [Chase] actually takes

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possession of the underlying property.” Excel Willowbrook, 758 F.3d at 601
(emphasis in original). We held, however, that the argument was forfeited for
failure to raise it in the district court (as well as in the briefs on appeal), even
though the general issue of privity of estate was contested below. Id.
       We may excuse forfeiture when the new issue is “a pure question of law
and a miscarriage of justice would result from our failure to consider it.” State
Indus., 575 F.3d at 456. That is not the case here. Although the FDIC contends
that failure to consider its defense would be a miscarriage of justice because
the district court’s decision was “patently erroneous in light of controlling
precedent,” see AG Acceptance Corp. v. Veigel, 564 F.3d 695, 701 (5th Cir. 2009),
Texas law does not provide a straightforward answer to whether this is an
option contract. 4 Nor does Texas law directly address whether an option
contract would preclude privity. 5 It is also far from clear whether the interests



       4 To determine whether an earnest money real estate contract is an option contract or
a contract of sale, Texas courts examine a number of factors. The “primary test” is “whether
the contract imposes a mandatory obligation upon the seller to accept a sum stipulated as
liquidated damages in lieu of the purchaser’s further liability.” Chambers Cnty. v. TSP Dev.,
Ltd., 63 S.W.3d 835, 838 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). Absent such a
provision, the agreement is typically a contract of sale. City of Harlingen v. Obra Homes,
Inc., 2005 WL 74121, at *6 (Tex. App.—Corpus Christi Jan. 13, 2005, no pet.). Courts also
ask “whether the language of the contract is prospective,” “whether time is of the essence,”
and “whether the language of the contract itself conveys to the party seeking standing any
rights to possess or enjoy the property.” Id.
        The “primary” first consideration counsels against a finding that Cenral had an option
contract. Although the contract between Central and Bomar was amended to release the
earnest money to Bomar, it does not appear that it foreclosed Bomar’s ability to seek other
relief, because it also provided that “[a]ll terms and provisions . . . that have not been
specifically modified . . . remain in full force and effect.” ROA 1801. The other three factors,
however, point in the direction of an option contract. Given these conflicting indications, it
is not obvious how Texas courts would characterize the contract.
       5 The FDIC cites cases for the proposition that an option contract does not pass title
to the optionee, see, e.g., Lefevere v. Sears, 629 S.W.2d 768, 770 (Tex. App.—El Paso 1981, no
writ), but Central cites cases for the proposition that an option contract gives the optionee an
equitable interest in the land, see, e.g., Goswami v. Metro. Sav. & Loan Ass’n, 751 S.W.2d
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of justice favor excusing the forfeiture in order to allow Chase to avoid the
obligations it would have had but for Central’s lack of possession. Cf. Lorino
v. Crawford Packing Co., 142 Tex. 51, 62 (1943) (holding that tenants are
generally estopped from contesting landlords’ title).              And although an
intervening, precedential decision in a related case might warrant greater
flexibility in allowing a party to raise new issues in response to that ruling,
Excel Willowbrook relied on the same privity analysis that Central argued in
the district court and that the court adopted. ROA 145–46.
      We therefore do not address the FDIC’s defense that Central lacks
privity with Chase as the result of its failure to possess the property in
question.
                                           B.
      We thus turn to the district court’s bench trial ruling in Central’s favor
on the merits.     The FDIC’s argument for reversal is that the lease was
terminated by the mutual agreement of the parties, and therefore that it was
error to hold Chase liable for breach. FDIC Br. 26–28. The argument focuses
on an email exchange in which a Central executive emailed an FDIC
representative, stating that “[w]e have been told that Chase will not be making
any decisions on which WaMu Leases Chase plans to accept or reject until Mid
to Late December” and that the delay was posing a risk to the company. ROA
1846. He asked that “that WaMu and/or Chase release my group from the
Lease obligation . . . . with in [sic] the next week or so.” Id.
      The FDIC disputes the district court’s finding that Central was the
victim of a negligent misrepresentation concerning Chase’s authority to decline



487, 489 (Tex. 1988). None of this authority squarely addresses whether an optionee lacks
privity of estate with the assignee of its lease.
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the lease under the P&A Agreement. The FDIC draws an analogy to the Texas
law of fraud, under which a statement about the legal effect of a document is
typically considered an opinion, and therefore does not usually support an
action for fraud. See Fina Supply, Inc. v. Abilene Nat’l Bank, 726 S.W.2d 537,
540 (Tex. 1987). The district court, however, found an exception because the
statements about the effect of the P&A Agreement were “understood . . . to be
factual in nature” and because “it is reasonable to rely when the federal agency
which oversees the banking industry, and has just taken over one of the
nation’s largest banks, tells you that your banking lease may be lawfully
rejected by both it and the new tenant.” Cent. Sw., 2012 WL 11937377, at *9
(citing Fina Supply, 726 S.W.2d at 540). 6
       Once again, however, we need not address the substance of the FDIC’s
argument. Whether the statements about the P&A Agreement amounted to
negligent misrepresentations is beside the point if an alternate holding of the
district court stands. Distinct from its determination that Central was the
victim of a negligent misrepresentation, the court also held:
       Taking together O’Farrell’s testimony at trial, and the email
       communications as a whole, the Court finds the emails do not
       constitute a request to terminate. Rather, they constitute a request
       for Chase to finalize its own rejection of the lease as quickly as
       possible, so that [Central] could proceed to mitigate by finding a
       new tenant, or selling the property.




       6 Fina Supply states that “[a] party having superior knowledge, who takes advantage
of another’s ignorance of the law to deceive him by studied concealment or misrepresentation,
can be held responsible for this conduct,” and that “misrepresentations involving a point of
law will be considered misrepresentations of fact if they were intended and understood as
such.” 726 S.W.2d at 540. That case dealt with an intentional fraud claim; Central has not
cited any authority applying the same exceptions when negligent misrepresentation of the
legal effect of a document is asserted.
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Cent. Sw., 2012 WL 11937377, at *8–9 (emphasis added) (“Chase’s [mutual
termination] arguments fail both factually and as a matter of law.”). If the
district court was correct that no termination occurred, 7 then it does not matter
whether      statements       about      the        P&A     Agreement      amounted        to
misrepresentations that could void the termination.
       We agree with the district court’s finding that Central’s emails did not
seek a termination of the lease. The FDIC makes much of the district court’s
statement that Central “wanted out of [the lease] like a person in a burning
house.” ROA 2355. Central, however, sought to be released from the lease
according to its incorrect understanding of the terms of the P&A Agreement
and the FDIC’s repudiation authority—it never sought a contractual
rescission. See Tex. Gas Utilities Co. v. Barrett, 460 S.W.2d 409, 414 (Tex.
1970) (“[P]arties may rescind their contract by mutual agreement and thereby
discharge themselves from their respective duties. The mutual release of the
rights of the parties is regarded as a sufficient consideration for the
agreement.”). The same email requesting that Chase “release [Central] from
the Lease obligation” notes that “[w]e have been told that Chase will not be
making any decisions on which WaMu Leases Chase plans to accept or reject
until Mid to Late December” and explains the problems that this delay was



       7 Although the FDIC disputes whether this finding was clear in the record, our review
convinces us that it was, based on the portions quoted above. The confusion on this point
may be due to the fact that the district court’s negligent misrepresentation analysis preceded
its ruling that Central never requested to terminate the lease, which in turn preceded its
holding that the opposing parties were estopped from arguing termination after inducing
Central’s request through misrepresentations. ROA 2137–40. We believe it did so because
its analysis of the FDIC’s misrepresentation informed its resolution of both of those
questions. With regard to its holding that no termination occurred, though, the court’s legal
conclusion about negligent misrepresentation was immaterial—it merely used the FDIC’s
misrepresentation to help make clear why Central’s email, read in context, should not be
interpreted as a request to terminate the lease, as we discuss below.
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causing for Central. ROA 1844. The district court did not err in concluding
that Central was referring to Chase’s supposed 90-day option to accept or reject
the lease. Central was operating according to its misunderstanding that the
lease was for Bank Premises under the P&A Agreement, and was thus
requesting that Chase and the FDIC speed up the rejection and repudiation
process that Central had been told they were authorized to perform. And this
is exactly what Appellants did in response—Chase made it known that it
intended to reject the lease in November, and the FDIC subsequently “put the
repudiation process on a fast track.” ROA 1843. As the district court noted in
denying summary judgment, the “FDIC’s subsequent putative treatment of the
lease provides further confirmation: having received Chase’s notice that it did
not wish to assume the Lease, FDIC attempted to use its statutory authority
to ‘disaffirm’ the lease—an act which would have been futile and redundant if”
the lease had already been terminated. ROA 2046. In light of the language of
the email and the surrounding circumstances, we find no error in the district
court’s finding that the email did not amount to a request to mutually rescind
the lease.
      We therefore AFFIRM the district court’s judgment in favor of Central.




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