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MCGLOTHLIN v. RESOLUTION TRUST CORP.

January 19, 1996

EDWARD M. and THELMA MCGLOTHLIN, Plaintiffs,
v.
RESOLUTION TRUST CORPORATION, as Receiver for Vista Federal Savings Bank, et al., Defendants.



The opinion of the court was delivered by: HARRIS

 Before the Court are defendant Resolution Trust Corporation's ("RTC's") motion to dismiss or, in the alternative, for summary judgment, plaintiffs' opposition, and defendant's reply. Also before the Court is defendant Mary Lenser's unopposed motion to dismiss. Upon consideration, defendant RTC's motion for summary judgment is granted. In addition, defendant Lenser's motion to dismiss is granted. Although findings of fact and conclusions of law are unnecessary in ruling on a motion to dismiss or for summary judgment, see Fed. R. Civ. P. 52(a), the Court briefly sets forth its reasoning.

 Background

 Plaintiffs Edward and Thelma McGlothlin are the parents of Jeffery S. McGlothlin, a principal in McGlothlin/Mingione Homes ("MM Homes"), which is a Virginia general partnership engaged in the land development and home construction business. In 1989, MM Homes contacted institutional lenders for purchase and construction monies to acquire and develop property in Fairfax County, Virginia. Plaintiffs contributed $ 209,000 toward the $ 1,850,000 purchase price of property in Fairfax County known as Berrywood Estates, and plaintiffs were named as co-owners of the property on the deed of trust.

 Vista Federal Savings Bank ("Vista") issued a Commitment Letter on July 7, 1989, agreeing to provide a loan to MM Homes for the acquisition of Berrywood Estates, for the construction of homes on the property, and for additional expenses, to a maximum of $ 2,500,000, under a revolving line of credit. On July 28, 1989, MM Homes and Vista executed a construction Loan Agreement. (Plaintiffs were not mentioned as obligors on the MM Homes loan in the Commitment Letter or the Loan Agreement.) Plaintiffs allege in their complaint that at the loan closing, Vista, through its attorney, David Hannah, represented to an unnamed representative of MM Homes that plaintiffs were obligated by law to sign the promissory note evidencing the loan, and that Vista would not close the loan unless plaintiffs executed the promissory note. *fn1" Plaintiffs thereafter signed the promissory note on the loan; they contend that they would not have done so absent Hannah's representations.

 Plaintiffs further allege that after they had executed the note and after the closing had been completed, Hannah stated to an unnamed representative of MM Homes that it was not in fact necessary for plaintiffs to sign the promissory note on the MM Homes loan, and that Hannah had just "[thrown] out the representation to see [if he] could get additional obligors on the promissory note . . . ." Complaint at 7. Thereafter, plaintiffs refused to sign any other loan documents and did not sign any later amendments, loan extensions, or other modifications to the loan agreement for the term of the loan.

 Plaintiffs allege that Vista imposed demands on MM Homes for additional security because it was functionally insolvent as a lending institution; that Vista demanded that its obligation to set aside money to fulfill a Fairfax County bond requirement be extinguished; and that Vista, through various actions, hindered MM Homes from obtaining construction permits from Fairfax County, which eventually caused the failure of the Berrywood Estates construction project. Vista foreclosed upon the MM Homes loan and, according to plaintiffs, wrongfully "compelled ... confession of ... judgment against the M/M Homes guarantors...." *fn2"

 Plaintiffs filed their three-count complaint against defendants the RTC, Mary Lenser, and Gerald Chapman on March 17, 1994. Plaintiffs allege that defendants fraudulently induced them into signing the promissory note on the MM Homes loan (Count I); that defendants breached their contract with MM Homes by a series of acts and omissions that plaintiffs allege eventually caused the failure of the Berrywood Estates project (Count II); and that defendants were negligent because defendants, inter alia, failed to properly review the MM Homes loan application and failed to maintain federally mandated solvency levels (Count III). Plaintiffs request $ 3,000,000 in "actual damages" and $ 350,000 against each defendant in punitive damages. Defendant RTC filed a motion to dismiss or for summary judgment; defendant Lenser filed a motion to dismiss.

 Discussion

 The RTC's Summary Judgment Motion

 A court may grant summary judgment when the pleadings and supplemental materials present no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). In considering a summary judgment motion, all evidence and the inferences to be drawn from it must be considered in a light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). Summary judgment cannot be granted "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The Court finds that defendant is entitled to summary judgment on all counts of plaintiff's complaint.

 I. Fraudulent Inducement and § 1823(e)

 Plaintiffs' claim against the RTC for fraudulent inducement is barred as a matter of law by 12 U.S.C. § 1823(e) (1989 & Supp. 1995). 12 U.S.C. 1823(e) codified the common-law proposition, commonly known as the D'Oench, Duhme doctrine, that oral side agreements between a borrower party and a failed bank are not enforceable against the Federal Deposit Insurance Corporation (FDIC) or the RTC as receiver for the failed bank. D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 460, 86 L. Ed. 956, 62 S. Ct. 676 (1942); Washington Properties, L.P. v. RTC, 796 F. Supp. 542, 545 (D.D.C. 1992). *fn3" 12 U.S.C. § 1823(e) provides that a party may not assert a claim or defense against the FDIC or RTC based on an agreement or condition not recorded in the records of the financial ...


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