
USCA1 Opinion

	




                                                       UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-1418                            RESOLUTION TRUST CORPORATION,                            IN ITS CAPACITY AS RECEIVER FOR                       HOME FEDERAL SAVINGS BANK OF WORCESTER,                                 Plaintiff, Appellee,                                          v.                                   MICHAEL F. CARR,                                Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. A. David Mazzone, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                            Rosenn,* Senior Circuit Judge,                                     ____________________                               and Cyr, Circuit Judge.                                        _____________                                 ____________________            Mark  S. Furman with whom Edward R. Wiest and Tarlow, Breed, Hart,            _______________           _______________     ____________________        Murphy & Rodgers, P.C. were on brief for appellant.        ______________________            Thomas  Paul Gorman  with whom  Sherin &  Lodgen was  on brief for            ___________________             ________________        appellee.                                 ____________________                                  December 22, 1993                                _____________________        ______________________        *Of the Third Circuit, sitting by designation.                    ROSENN,  Senior Circuit  Judge.   This  appeal has  its                             _____________________          genesis  in the  real  estate recession  which  first struck  New          England and  many other parts  of the country several  years ago.          The malaise apparently not only adversely affected the appellant,          Michael  F. Carr,  a real  estate  developer, but  also the  Home          Federal  Savings  Bank   (the  Bank)  from  whom  he  borrowed  a          substantial sum of  money.  The Bank foreclosed  on an unimproved          ocean  lot Carr  mortgaged  to  it.   Ultimately,  the Bank  also          failed.  The  Resolution Trust Corporation  (RTC/Receiver) became          its Receiver.                    The RTC  succeeded the Bank  as plaintiff in  an action          brought  by the Bank,  a federally chartered  savings association          organized under the  laws of the United States,  in the Worcester          Superior Court of  Massachusetts against Carr.  The  Bank sued to          recover a  deficiency on  a promissory note  executed by  Carr as          evidence of  a loan from the  Bank in 1988  for $243,000, secured          with   a  first  mortgage  on  property  located  in  Marshfield,          Massachusetts.  While this litigation was  in process, Carr filed          a   complaint  in   the  state   court   for  Middlesex   County,          Massachusetts, alleging  wrongful  foreclosure  on  the  property          securing the note.  The court consolidated the actions.                    The RTC/Receiver removed the cases to the United States          District  Court for the District of  Massachusetts and then moved                                         -2-                                          2          for summary judgment.   The district court granted  the motion by          order  dated March  29,  1993.1   Carr  timely  appealed to  this          court.  We affirm.                                          I.                    Carr obtained  a first mortgage  loan from the  Bank on          his property at  45 Old Beach Road, Marshfield, Massachusetts, on          August  16, 1988.   Shortly before  the maturity  of the  note on          September  1,  1989,  Carr  requested  of the  Bank  a  one  year          extension.  The Bank's Executive Committee approved the extension          subject to a number of  conditions, including the payment by Carr          of a one percent extension fee in the amount of $2,430.                      The  Bank notified Carr  of the proposed  extension and          its conditions  by letter dated  September 13, 1989.   The letter          provided  that the commitment to extend  "shall expire on October          16, 1989, and  that a modification agreement must  be executed on          or  before  such  date."    The letter  also  required  that  the          commitment be accepted and  returned no later than September  22,          1989, together with Carr's  check for $2,430.   Accordingly, Carr          affixed  his signature in  acceptance of the  letter on September          20, 1989, and  tendered the required check.   The check, however,                                              ____________________             1The district court had subject matter jurisdiction under 12             U.S.C.   1441a(11) while we have jurisdiction pursuant to 28             U.S.C.   1291.                                         -3-                                          3          was  returned for insufficient  funds.  Thereafter,  Carr neither          paidtheextension feenorexecutedthe requiredmodificationagreement.                    The minutes  of the  Executive Committee approving  the          extension  of the  loan  and  fixing the  extension  fee made  no          mention of  a date for  the payment of  the extension fee  or any          details pertaining to the implementation of the extension.                    In   response  to   the  RTC's   interrogatories,  Carr          testified that he advised the Bank's counsel in late September or          early October 1989  that he had  another loan  with the Bank  for          $1,500,000 which he expected to  refinance at the end of October,          and that counsel  agreed that payment of the  extension fee could          be deferred until the refinancing of his other  loan.  He further          testified that sometime after October  24, 1989, he spoke to Paul          Engstrom, Jr., a  senior loan counselor of the  Bank, advised him          of the upcoming closing on the $1,500,000 loan, and that Engstrom          orally agreed to defer payment due under the extension until that          closing.                    On October 24,  1989, the Bank  informed Carr that  his          extension fee, as well as his monthly payment checks on the note,          had  been returned  for insufficient  funds.   The Bank  demanded          payment of the  total arrearage and the extension  fee by October          30, but  as of  November 16, 1989,  Carr had  not responded.   On          November 17,  1989, payment not  having been made, the  Bank made                                         -4-                                          4          formal  demand under the defaulted promissory note.  Negotiations          between  Carr and  the  Bank  again ensued  but  they reached  no          agreement.    The  Bank  commenced  foreclosure  proceedings  and          ultimately  purchased the  mortgaged land  in April  1990 at  the          foreclosure sale for $195,000.                      In his  action in  the Middlesex  Court, Carr  asserted          that the  Bank actually had agreed to extend  the due date of the          note for one  year, from September 1, 1989, to September 1, 1990,          but the  terms were changed  in the preparation of  the extension          draft.  Carr  further claimed that the September  1989 minutes of          the Bank  reflected an  appraisal of  the Marshfield  property at          $325,000  and that  Carr's appraiser  subsequently  valued it  at          $350,000.   Carr therefore  sought relief  because of  a wrongful          foreclosure in  the face of  an agreement  to extend the  note to          September  1,  1990, unjust  enrichment  to the  Bank,  breach of          covenant of good  faith and fair dealing, and  failure to conduct          the  foreclosure sale  in a  commercially reasonable manner.   He          also sought reconveyance of the  property.  In addition, he filed          a counterclaim in the consolidated actions in the Worcester Court          substantially identical to his complaint in the Middlesex Court.                    The district  court, after the RTC removed  the case to          federal court, granted  the RTC's motion for  summary judgment in          the  consolidated  matters   based  on  the   undisputed  record,                                         -5-                                          5          including  a Statement of Undisputed Facts, affidavits, and other          supporting documentation filed by the RTC.                                         II.                    The principal issues raised on appeal by Carr are:  (1)          The Bank agreed to extend the maturity date of the $243,000 note.          (2) The gap between the appraised value of the mortgaged property          and  the  price  obtained  at  foreclosure  sale  barred  summary          judgment  against him  for  the  deficiency  because  there  were          genuine issues of material fact whether  the foreclosure sale was          conducted in good faith and in a commercially reasonable manner.                    Federal  Rule of  Civil Procedure  56(c) provides  that          summary  judgment may  only be  entered "if  there is  no genuine          issue  as to any material fact."  In reviewing a summary judgment          order entered by a district court, this court has plenary powers.          See, e.g., Garside v. Osco Drug, Inc.,  976 F.2d 77, 78 (1st Cir.          ___  ____  __________________________          1992); Olivera  v. Nestle Puerto Rico, Inc., 922 F.2d 43, 45 (1st                 ____________________________________          Cir. 1990).   The court, in making its review,  must "look at the          record in the light most  favorable to the party opposing summary          judgment and accept  all reasonable inferences favorable  to such          party arising from the record."  Id. at 45 (citations omitted).                                           ___                                         III.                    Carr first  argues that  the minutes  of the  Executive          Committee did not refer to a  date for closing or for payment  of                                         -6-                                          6          the extension fee and that the deadlines in the commitment letter          "were  not  conditions of  the  loan  extension approved  in  the          Executive  Committee minutes."   Therefore,  he  asserts that  in          light of the  difference between the minutes and  the language of          the  extension  commitment,  and  his  affidavit  that  the  Bank          officers had orally agreed to  defer payment of the extension fee          until the  closing  of the  refinancing of  the $1,500,000  loan,          summary   judgment  was   inappropriate.     This   argument   is          disingenuous and has no merit whatsoever.                      The Executive Committee records reveal an approval of a          request for a  one year extension of the loan subject to a number          of conditions.   Among the conditions for the  extension were the          requirements that an extension  fee be paid and that  the loan be          kept current.                      Understandably, the Executive  Committee did not  spell          out  the mechanics and  language of the  extension agreement, for          such administrative details ordinarily are left to bank officers.          In this  instance, the  officers unequivocally  provided for  the          payment of the  extension fee of $2,430 "upon  acceptance of this          commitment."  Carr made no  objection to the terms and conditions          of the commitment and  signed his acceptance  of it a week  after          the  Executive Committee  had approved  the extension.   He  then          tendered his  check  in payment  of  the fee.   Thus,  even  Carr                                         -7-                                          7          recognized by his execution of  the letter of commitment that it,          and not  the minutes,  constituted his  agreement with  the Bank.          His check, however,  was returned for  insufficient funds and  he          never paid this fee.  The commitment also required, in accordance          with the  recommendation to  the Executive  Committee, that  Carr          bring his  loan  current  and supply  the  Bank  with  additional          updated  financial  information.   Additionally,  the  commitment          letter  stated other  details with  respect to closing  costs and          expenses and  title examination.   Carr agreed  to its  terms but          never fulfilled any of the extension requirements after accepting          them,  including  the  execution  of  the  required  modification          agreement.                    Carr reaches for a straw  when he attempts to carve out          a contract  from the corporation minutes.   The minute book  of a          corporation is only  a brief record of the corporate proceedings.          5A William M. Fletcher, Fletcher Cyclopedia of the Law of Private                                  _________________________________________          Corporations    2190 (Perm.  ed. rev.  vol. 1987).   Here,  it is          ____________          merely an  internal record  which memorializes  authority to  the          Bank's  officers to  grant  an  extension of  Carr's  loan.   The          minutes, which  of course were  never "executed" by Carr,  see 12                                                                     ___          U.S.C.    1823  (e)(2) (1989),  infra,  do not  purport to  be an                                          _____          agreement with him.  They in no way reflect any intention  on the                                         -8-                                          8          part of the Executive Committee to defer payment of the extension          fee until the refinancing of the $1,500,000 loan.                    Similarly,   Carr's   reliance  on   an   alleged  oral          supplemental  agreement with  a bank  officer is  misplaced.   In          D'Oench, Duhme  and Co. v. FDIC, 315 U.S. 447 (1942), the Supreme          _______________________________          Court first enunciated  the common law doctrine that  the FDIC is          protected  from  unrecorded  or  oral  agreements  that  are  not          reflected in one of its insured bank's records.  Id. at 461.  The                                                           ___          D'Oench  doctrine bars  defenses as  well  as affirmative  claims          _______          against the FDIC.   Timberland Design Inc. v.  First Service Bank                              _____________________________________________          For Sav., 932 F.2d 46, 50 (1st Cir. 1991).  Pursuant to 12 U.S.C.          ________             1441a(b),   which  establishes  the  RTC,  and   12  U.S.C.             1441a(b)(4), the RTC possesses the  same rights and powers as are          available to the FDIC.  Moreover, 12 U.S.C.   1823(e), as amended          by the  Financial Institutions Recovery,  Reform, and Enforcement          Act of 1989 (FIRREA), which  codifies the D'Oench doctrine,  also                                                    _______          requires all agreements to be reflected in a bank's records.                      The section provides that:                    [N]o  agreement which  tends  to diminish  or                    defeat  the interest of the [Receiver] in any                    asset acquired by it under  this section 1821                    . . .  shall be valid against  the [Receiver]                    unless such agreement --                    (1)  is in writing,                    (2)     was   executed   by  the   depository                    institution  and   any  person   claiming  an                                         -9-                                          9                    adverse  interest  thereunder,  including the                    obligor,    contemporaneously    with     the                    acquisition of  the asset  by the  depository                    institution,                    (3) was approved by the board of directors of                    the  depository   institution  or   its  loan                    committee, which approval  shall be reflected                    in the  minutes of  said board  or committee,                    and                    (4) has  been, continuously, from the time of                    its  execution,  an  official record  of  the                    depository institution.          12 U.S.C.    1823(e) (1989).   This section  requires categorical          compliance.  Beighley v. FDIC, 868 F.2d 776, 783 (5th Cir. 1989).                       ________________                    Carr's claim that the officers  of the Bank had  orally          agreed  not  to  require payment  of  the  extension  upon Carr's          acceptance of the extension commitment, but to defer it until the          refinancing of  his large loan,  constitutes the very kind  of an          assertion  that the  D'Oench  doctrine and  12  U.S.C.    1823(e)                               _______          proscribe.  See Langley v. FDIC, 484 U.S. 86, 95 (1987).                        ___ _______________                    Inasmuch as  the record  fails to  establish that  Carr          entered  into any  agreement,  except the  unfulfilled  extension          commitment,  which in any way  complied with federal statutory or          common law, his claims are barred.                                         IV.                    The  second  arrow in  Carr's  quiver is  aimed  at the          Bank's conduct  in connection  with the foreclosure  sale of  the                                         -10-                                          10          Marshfield  property.   Carr  claims  that  the  gap between  the          appraised value  of this property  and the price obtained  at the          foreclosure sale raises serious questions of material fact as  to          whether  the  sale   was  conducted  in  good  faith   and  in  a          commercially reasonable  manner.  Under such  circumstances, Carr          asserts  that the district court  should not have granted summary          judgment.   The district court  found that "Carr cannot,  and has          not, complained that there  were procedural or notice defects  in          the foreclosure."   Carr's sole  complaint on appeal is  that the          price obtained was inadequate.   He therefore argues in a general          way  that a  genuine issue  of material  fact exists  as  to "the          commercial  reasonableness   and  good  faith  employed   in  the          foreclosure sale."                      Carr neither alleges nor has  he proven that he did not          receive  adequate  notice   of  the  sale   or  that  there   was          insufficient public notice of the  forthcoming sale in the  press          or that  the Bank acted  collusively, or did anything  to depress          the price prior to  or at the sale.  In short,  he does not claim          that the  foreclosure  sale was  conducted  in violation  of  any          applicable law.  Rather, he relies entirely on the affidavit of a          real estate  appraiser whom he commissioned, who  placed the fair          market value  of the  property at $350,000  on January  11, 1990,          approximately  four months before the sale.   Carr's counsel sent                                         -11-                                          11          the appraisal to the Bank.  Carr also points to the  Bank minutes          of  September 6,  1989,  which reflected  an  appraisal value  of          $325,000  for the  property.    However, on  March  29, 1990,  an          appraisal  conducted  for   the  Bank  a  few   days  before  the          foreclosure showed a value of $195,000.                    The threshold question is what law governs this issue -          - state  or federal  law.   Neither  the D'Oench  doctrine nor                                                      _______          1823(e) bars the  assertion of a claim  or defense that  does not          depend on  an agreement; they  protect federal banks and  the RTC          from  alleged oral  agreements  that  are not  part  of the  loan          record.  Texas  Refrigeration Supply Inc. v. FDIC,  953 F.2d 975,                   ________________________________________          981  (5th Cir. 1992).   This  second issue  only pertains  to the          propriety of the foreclosure sale in the state court.                    We  believe that state  law governs this  issue because          the Bank foreclosed  the property under state  court proceedings.          The  property  was   not  involved  in  any   federal  bankruptcy          proceedings.   See  id. at  982 (applying  state law  to wrongful                         ___  ___          foreclosure claim).   The district court relied on  state law, as          does Carr, and so do we.         Under  Massachusetts  state  law,          Carr  has  the  burden  of proving  commercial  unreasonableness,          Chartrand v. Newton Trust Co., 296 Mass. 317, 320, 5 N.E.2d  421,          _____________________________          423  (1936), which is a question of  fact, John Deere Leasing Co.                                                     ______________________          v. Fraker, 395 N.W.2d 885,  887 (Iowa 1986).  Absent evidence  of          _________                                         -12-                                          12          bad faith  or improper conduct,  a mortgagee is permitted  to buy          the  collateral at  a foreclosure  sale as  "cheaply" as  it can,          Cambridge Sav. Bank v. Cronin, 289  Mass. 379, 383, 194 N.E. 289,          _____________________________          290 (1936), and "[m]ere inadequacy of price will not invalidate a          sale unless it  is so gross as  to indicate bad faith  or lack of                             __ _____          reasonable  diligence," Chartrand, 296 Mass.  at 320, 5 N.E.2d at                                  _________          423 (emphasis added).   Carr alleges  that the Bank paid  only 56          percent  of  the  property's fair  market  value  ($350,000), but          produced no other evidence of bad faith or improper conduct.                    To  warrant  summary  judgment for  RTC,  therefore, it          would have to  be shown that no  reasonable factfinder, crediting          Carr's appraisal of $350,000, could find the $195,000 sales price          "grossly" inadequate.   In canvassing Massachusetts case  law, we          find ample  suggestion that a price  deficiency of as much  as 39          percent  of fair  market  value  can support  the  granting of  a          dispositive  motion.   See Sher  v. South  Shore Nat'l  Bank, 360                                 ___ _________________________________          Mass.  400, 402  (1971) (disparity  between price of  $35,500 and          alleged fair market value of $52,500, i.e. a 67 percent sale, was                                                ____          "not  so gross"  as  to  withstand a  motion  to dismiss);  Atlas                                                                      _____          Mortgage Co.  v. Tebaldi,  304 Mass.  554, 558  (1939) (disparity          ________________________          between  price  of  $13,000  and  alleged  fair  market  value of          $18,000, i.e.  72 percent  sale, not  "so great"  as to defeat  a                   ____          directed  verdict for mortgagee);  DesLauries v. Shea,  300 Mass.                                             __________________                                         -13-                                          13          30, 34-35  (1938) (disparity  between price of  $16,815 and  fair          market value of $25,500, i.e. 65 percent sale, permitted directed                                   ____          verdict for  Bank); Cambridge  Sav. Bank, 289  Mass. at  383, 194                              ____________________          N.E. at 291 (disparity between  price of $20,000 and alleged fair          market value of $51,000, i.e. 39 percent sale,  warrants directed                                   ____          verdict).  Thus,  whatever the hypothetical boundaries  of "gross          inadequacy"   under   Massachusetts   law,  Carr's   56   percent          differential,  standing   alone,  could  not   ward  off  summary          judgment.                    As  to Carr's  contention of  lack  of good  faith, the          record shows no evidence of  it on the part of the Bank  and Carr          points to none.   Carr knew for many months before  the sale that          foreclosure was imminent.  Payment  of his note was due September          1, 1989.  On August 22, 1989,  he wrote to the Bank requesting an          extension  of one  year.   The  Bank obliged  subject to  certain          conditions  which   were  acceptable   to   Carr.     Thereafter,          negotiations  between the parties ensued for several months which          were inconclusive, and  the conditions of the  proposed extension          were  never  fulfilled  by  Carr.   The  Bank  did  not  commence          foreclosure until  November 30,  1989, and  it was  not concluded          until  the sale  on April 5,  1990.   Carr had  all this  time to          either pay  the note,  refinance elsewhere,  or especially  as an                                         -14-                                          14          experienced  businessman and  real  estate developer,  produce  a          buyer who would pay the price he aspired to achieve.                    On the  other hand,  the Bank  had non-performing  real          estate  on  hand which  required  disposition.   As  a  pragmatic          matter,  a bank  with  non-performing assets  may  not hold  them          indefinitely until  it canvasses  an amorphous  public market  in          search  of potential purchasers  who will pay  a theoretical fair          market  value, lest  they  too succumb  to  claims of  creditors.          Here, the Bank gave Carr every reasonable opportunity to meet his          obligation or produce a buyer.  He did neither of these.                      It  is common  knowledge  in the  real  world that  the          potential  price to  be realized  from the  sale of  real estate,          particularly in a  recessionary period,  usually is  considerably          lower when sold "under the hammer" than the price obtainable when          it is sold by an owner not under distress and who is able to sell          at  his convenience  and to  wait until  a purchaser  reaches his          price.   Carr has  not met  his burden  of proof  of showing  bad          faith.  Under Massachusetts law, inadequacy  of the selling price          "without more,  would not show  bad faith or lack  of diligence."          West Roxbury Co-op Bank v. Bowser, 324  Mass. 489, 493, 87 N.E.2d          _________________________________          113, 115 (1949).                                           -15-                                          15                    The  district court  also rejected  Carr's  claim of  a          fiduciary duty owed to him, finding that "[t]he relationship here          is clearly creditor and borrower."  We agree.                    Carr also turns to two  cases decided under the Federal          Bankruptcy Code  (Code), 11 U.S.C.    548 (1988), to  support his          contention that the sale was commercially unreasonable and in bad          faith.   He  argues  that  under the  Code  the foreclosure  sale          constituted a fraudulent transfer because the price obtained fell          below the fair market value.  He  cites In re General Industries,                                                  _________________________          Inc., 79 B.R. 124, 134 (Bankr. D. Mass. 1987), and In re Ruebeck,          ____                                               _____________          55 B.R. 163,  171 (Bankr. D. Mass.  1985).  These cases  arise in          the context of federal bankruptcy proceedings where the debtor is          in bankruptcy and the official  creditors committee sought to set          aside  the foreclosure sales contending that they were fraudulent          transfers under   548(a) of the Code because the  sales were made          for less than reasonably equivalent  value within the meaning  of          the statute.  The bankruptcy courts held that legal notice of the          foreclosure  sale without  other substantial  advertising of  the          proposed  sale in the general press was insufficient to withstand          the  fraudulent conveyance  strictures  of  the  Code.    General                                                                    _______          Industries,  79  B.R. at  134;  Ruebeck,  55  B.R. at  168.    In          __________                      _______          addition,  the courts  held that  sales  at 53  percent and  57.7          percent of fair market value were not reasonably equivalent value                                         -16-                                          16          within the meaning of   548.  General Industries, 79 B.R. at 134;                                        __________________          Ruebeck, 55 B.R. at 171.          _______                    Carr, however, is  not a debtor  within the meaning  of          the Code and the cases he cites are therefore inapplicable in the          context of this case.   Moreover, under the facts and conflicting          evidence  of this  case, we  cannot say  that Carr  has proven  a          fraudulent transfer of property merely because the price obtained          at a fairly  conducted, non-collusive public foreclosure  sale in          accordance  with   applicable  state   law  did   not  meet   his          expectations of the value  fixed by his  appraiser.  We need  not          decide whether advertising  of a foreclosure sale  in the general          press is essential for a good faith sale in Massachusetts because          notice of the sale is not an issue before us.  We also believe it          significant that the decisions of the Bankruptcy Court in General                                                                    _______          Industries  and   Ruebeck  were  ignored   by  the  Massachusetts          __________        _______          legislature when  it amended  the  State's fraudulent  conveyance          statute in 1989.  The statute now provides that                     [F]air consideration is given for property or                    obligation --                     (c) When property  is received pursuant  to a                    regularly conducted, noncollusive foreclosure                    sale or execution of a power of  sale for the                    acquisition or  disposition of  such property                    upon default under a  mortgage, deed or trust                    or security agreement.          Mass. Gen. Laws Ann. ch. 109A,   3 (West 1992).                                         -17-                                          17                    Thus, the  Massachusetts legislature did  not adopt the          principles set forth in General Industries or in Ruebeck.  We see                                  __________________       _______          no error in the application  of Massachusetts law by the district          court and in entering judgment in the RTC's favor.                                          V.                    In summary,  we  hold  that the  minutes  of  a  bank's          executive committee, which merely record the authorization of the          Board  to  the  bank's  officers  to extend  a  loan  on  certain          conditions, do not  constitute a contract between a  bank and the          borrower.    Furthermore,  alleged oral  assurances  of federally          chartered bank officers  to defer compliance with  the conditions          attached  to a proposed  extension of a  bank loan  are barred by          federal common  law under  D'Oench, Duhme,  and by  Congressional                                     ______________          statute, 12 U.S.C.   1823(e).  Finally, under  Massachusetts law,          mere inadequacy  of the sale  price of real estate  received at a          non-collusive  foreclosure sale conducted in full compliance with          state law  does not constitute a  breach of the covenant  of good          faith and fair dealing and is not an indication that the sale was          commercially unreasonable.                      The judgment of the district court is                    Affirmed.  Costs taxed in favor of appellee.                    _________                                         -18-                                          18
