Refinancing Agreement is worth something less than what NLC paid for it over that two-and-a-half year period. Defendant is incorrect on its first point, and, as will be discussed in Section C infra, it likewise fails to prove the second.
As mentioned above, NRC ('83) apparently no longer exists. When NLC assumed liability for the payments on the Loan and Refinancing Agreement, it stepped into the shoes of NRC ('83) with respect to the entirety of the Loan and Refinancing Agreement. See Williston on Contracts § 404 ("The assignee acquires rights similar to those of the assignor, and is put in the same position with reference to those rights as that in which the assignor stood at the time of the assignment"). This includes the right to sue for damages for defendant's repudiation of the Refinancing Agreement, dating from the execution of the Agreement.
Defendant contends that NLC will be privy to a windfall if it is required to pay NLC more in damages than that entity actually paid under the Refinancing Agreement. Defendant ignores the equally obvious fact that, if the Court were to hold that NLC was only entitled to damages dating from April 24, 1989, defendant would enjoy a windfall: namely, it would avoid paying as damages several years' worth of refinancing fees incurred prior to April 1989, simply because the entity that first paid them no longer exists. As between windfalls, and under the law of contracts, the former is far preferred. Cf. Williston on Contracts § 431 (under an assignment, assignee gains right to all payments becoming due in the future, even for work done prior to the assignment). When NLC and NRC ('83) bargained for the transfer of interest under the Loan, it can be assumed that NLC gave to NRC ('83) a certain amount of consideration to succeed NRC ('83)'s interest in the property securing the Loan -- in fact, that consideration took the form of assuming the obligation under the Loan and Refinancing Agreement. Part of that consideration represents NLC's assumption not only of NRC ('83)'s obligations under the Loan and Refinancing Agreement, but also of the possibility of breach by defendant such that NLC would be in a position to collect damages both from its contributions and from those of the now-defunct NRC ('83).
Accordingly, the Court holds that NLC is entitled to claim as damages all payments made under the Refinancing Agreement, both by it and by its predecessor entity.
C. Value of the Refinancing Agreement
In its Opinion remanding this case to this Court for a damages determination, the Court of Appeals held that, with respect to the amount of damages claimed by Nashville, "the burden is on RTC as repudiator to show that the value of the right Nashville bought was worth less than what it had paid as of October 1991." 59 F.3d at 245 (citing Charles T. McCormick, Handbook on the Law of Damages § 142 at 584 and n. 8 (1935)).
Despite this pronouncement, the FDIC argues in its opposition to plaintiffs' motion for summary judgment that "NLC has yet to articulate any benefit to it of the refinancing commitment.'" Def.'s Opp. to Pls.' Mot. for Summ. J., at 10. Plaintiffs need not show anything at all under the rubric set out by the Court of Appeals; rather, it is up to the FDIC to show that the value of the right to refinancing was worth less than the refinancing fees it had paid as of the time the RTC was appointed Receiver. This it has not done.
The FDIC argues in its opposition that the Refinancing Agreement was merely a sham, an "artifice" amounting only to an "illusory promise" to refinance the Loan. Defendant argues that various bond attorneys, bank officials, and the like had contrived to make an end-run around the requirement that the interest rate on the Loan be lower than a certain percentage, in order for the bank to continue to treat certain industrial revenue bonds (the proceeds of which had been deposited with Savers and essentially had financed the Loan) as tax-exempt. Def.'s Opp. at 7-11. The contrivance, according to defendant, took the form of the Refinancing Agreement, which increased Savers' "profit" without increasing the interest rate of the Loan and jeopardizing the bonds' tax-exempt status. This argument, it must be noted, has never before been raised, either in this Court or in the Court of Appeals.
Defendant's best efforts to expose the "real purpose" of the Refinancing Agreement and to debunk its value amount, at best, to well-crafted speculation. Defendant's assertions that the Refinancing Agreement conferred "no benefit" to NLC ignore the benefit apparent from the face of the document: the Refinancing Agreement provides that "Savers agrees to refinance, or cause to be refinanced[,] the Loan at its maturity . . . ." App. to [Appellate] Br. of Plaintiffs-Appellants (submitted to this Court June 7, 1996), Ex. X. The "benefit" conferred on NLC, of course, is certainty: by procuring an assurance that Savers "agreed to refinance, or cause to be refinanced" the Loan, NLC locked in a refinancing commitment. Even defendant concedes that NLC's success at obtaining a similar refinancing commitment in the absence of an agreement would be contingent on various occurrences, Def.'s Opp. at 7; locking in a refinancing commitment removed some of those contingencies, which undoubtedly benefits NLC. Defendant ignores this obvious benefit, instead putting forth a new conspiracy theory utterly lacking in evidentiary support.
Defendant also contends that, even if the Refinancing Agreement could be viewed as conferring a future benefit on NLC, NLC received "substantial benefits" due to the RTC's breach: namely, NLC was relieved of its obligation to continue payments under the Refinancing Agreement, which, over the time remaining on the Agreement, would have amounted to approximately $ 510,000. Def.'s Opp. at 12. This argument, too, fails. Defendant's argument amounts to this: if a party performing an executory contract breaches exactly mid-performance, the aggrieved party has no right to sue for reliance damages, because after all, the breach has saved the aggrieved party exactly the amount it had already paid, and therefore the scales are even. Seen in this light, defendant's contention is exposed as illogical. Had NLC requested as damages the entire amount contemplated under the Refinancing Agreement, the amount of damages would certainly be offset by the amount of refinancing fees NLC had not yet paid. However, to offset against NLC's out-of-pocket payments the seeming "benefit" of release from further obligation undermines the concept of "reliance damages" to an unworkable degree. Accordingly, the Court finds that plaintiff is entitled to damages dating from the initial payment of refinancing fees under the Agreement, dating from the date of appointment of the RTC as Receiver, as discussed infra.7
D. The Refinancing Agreement and OFC's
Plaintiffs contend in their motion for summary judgment that the Refinancing Agreement is a Qualified Financial Contract, or "QFC." Under FIRREA, a QFC:
means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar agreement that the Corporation determines by regulation to be a qualified financial contract for the purposes of this paragraph.
12 U.S.C. § 1821(e)(8)(D)(i). See also 12 C.F.R. 360.5 (1995) (defining certain other agreements as "qualified financial contracts"). Under 12 U.S.C. § 1821(e)(3)(A)(ii)(II), the liability of the receiver for the repudiation of a QFC dates not from the date of the appointment of the receiver, but from the date of the repudiation of the QFC. In this case, if the Refinancing Agreement is found to be a QFC, plaintiffs would be entitled to include in their damage calculations their October 1991 payment of $ 6,686.47 in refinancing fees, since the RTC was appointed receiver for Savers Savings in September and did not repudiate the Refinancing Agreement until December.
Nashville's argument is as follows: the Refinancing Agreement is an option for NLC to sell a note to Savers, the amount of which would be sufficient to pay the Loan; a note is a security; an option to sell a security is a securities contract; therefore, since securities contracts are considered to be QFC's, the Refinancing Agreement is a QFC. Plaintiffs' argument falls on the first step. The Refinancing Agreement is not an option to sell a note; it is (or was) simply a commitment on the part of Savers to refinance the current Loan. See Heiko v. FDIC, 1995 U.S. Dist. LEXIS 3407, 1995 WL 117604 (S.D.N.Y. March 17, 1995) (refinancing agreement repudiated by FDIC was not a QFC, because the agreement "did not involve the purchase, sale or loan of a mortgage or a mortgage-related security . . . if a QFC were deemed to include mortgages, the exception would swallow the rule"). Plaintiffs' failure to cite to any case law to support their unique theory supports the Court's conclusion that the theory is not only unique, but without merit. Accordingly, this aspect of plaintiffs' motion for summary judgment is denied, and damages will be awarded dating from the date of appointment of the RTC as Receiver for Savers.
E. The Issue of Prejudgment Interest
Plaintiffs request that they be awarded the back fees paid to Savers under the Refinancing Agreement, plus accrued interest thereon at the rate of 9.5% per annum. Defendant argues in its opposition that under Tennessee law, plaintiff is not entitled to interest on its claim for fees. Defendant contends that prejudgment interest is discretionary, to be awarded only when the obligation is certain and is not disputed on reasonable grounds. See Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn. 1994). Finally, defendant argues that its obligation is not "certain" because it disputes whether certain payments were made, and that it was reasonable to dispute that the obligation existed in the first place.
Plaintiffs argue that defendant misapprehends the law: while an award of prejudgment interest is left to the discretion of the judge, it is "the usual means . . . familiar and almost commonplace" of compensating for the loss of funds resulting from the breaching party's failure to pay an obligation according to its terms. Pls.' Reply at 14 (quoting Mitchell, 876 S.W.2d at 832 [citing Deas v. Deas, 774 S.W.2d 167, 170 (Tenn. 1989)]). As to whether the amount in question is "certain," plaintiffs state (and the Court agrees, see note 6 supra) that NLC's claim for past fees is certain and easily calculable. As to whether defendant was reasonable in disputing its obligation, plaintiffs are correct in noting that defendant has employed shifting, inconsistent and ultimately untenable arguments to support its contention that it was free from liability (or, in the alternative, that the amount it owed to Nashville was far less than that which Nashville projected). Accordingly, in its discretion, the Court awards prejudgment interest at the 9.5% per annum loan rate to plaintiffs.
For the foregoing reasons, plaintiffs' motion for summary judgment is granted in part and denied in part. Defendant's motion for partial summary judgment is denied. An appropriate Order accompanies this Opinion.
Stanley S. Harris
United States District Judge
Date: JUL 30 1996
In accordance with the accompanying Opinion, it hereby is
ORDERED, that plaintiffs' motion for summary judgment is granted in part and denied in part. Plaintiff Nashville Lodging Company's claim pursuant to 12 U.S.C. § 1823(3)(3) is allowed against the Federal Deposit Insurance Corporation as Receiver for Savers Savings Association in the amount of $ 692,500.98 plus accrued interest at 9.5% per annum through the date of entry of judgment. It hereby further is
ORDERED, that defendant's motion for partial summary judgment is denied.
Stanley S. Harris
United States District Judge
Date: JUL 30 1996