Opposition Brief — Griffin v. First Gibraltar Bank, FSB

Supreme Court, U.S.

FILED

( ra

eS JAN 16 1999

No. 91-809

7 OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1991

¢

JACK GRIFFIN,

Petitioner,

FIRST GIBRALTAR BANK, FSB,

Respondent.

+

Petition For Writ Of Certiorari To The

United States Court Of Appeals

For The Fifth Circuit

¢

RESPONDENT'S BRIEF IN OPPOSITION

+

CAROL STEPHENSON

(Counsel of Record)

Mary L. O’CONNOR

AKIN, Gump, Hauer & Fe vp, L.L.P.

CarROL STEPHENSON, P.C.

4100 First City Center

1700 Pacific Avenue

Dallas, Texas 75201

(214) 969-2863

(214) 969-4343 (FAX)

Counsel for Respondent

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

Page

STATEMENT OF THE CASE............2..2.00.08. 1

REASONS FOR DENYING THE PETITION......... 4

I. THIS CASE WAS PROPERLY REMOVED TO

FEDERAL DISTRICT COURT .................. 5

II. SECTION 1823(e) HAS NOT PREEMPTED

ECs wines v pened e dnks tan ne Cee ss9 9

TABLE OF CONTENTS

Ore e re eet ee ee ere eee eee

il

TABLE OF AUTHORITIES

Page

Cases

Boyle v. United Technologies Corp., 487 U.S. 500,

PON DA Be CD oe as och b eee he reve deen tcdses 8, 10

Bradley v. School Bd. of Richmond, 416 U.S. 696,

OS TAs Be OT i heen wae hes tease eee apavesces a 6

Coit Independence Joint Venture v. FSLIC, 489

US. 565, TGP GAR, 101 MURR) <p ncncccnicccdeseces. 7

Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 480

SE PP rt pees fm nen rl. he ae 7

Demars v. First Serv. Bank for Sav., 907 F.2d 1237

or ge Me Sperry ey eee Pere fy hr er eee 6

D’Oench Duhme & Co. v. FDIC, 315 U.S. 447, 62

eae kt | er eee ree rr » #,% 9,

FDIC v. Kasal, 913 F.2d 487 (8th Cir. 1990), cert.

Genied, US. _., TE0 BAA. Tre Clete) os cseces. 6

FDIC v. 232, Inc., 920 F.2d 815 (11th Cir. 1991)....... 6

Kirkbride v. Continental Casualty Co., 933 F.2d

Fee i Naa 08 Fabs hiwes whee leaner iy <ss 6

Triland Holdings & Co. v. Sunbelt Serv. Corp., 884

ee ee Ge Gy BO oo 05.c FC UN Ges sseeneenes 5, 6

STATUTES

MS we} nr iy eee >, 6, 8, 9

ae eae RR re eR re pee rp er ee ee 5

ss ae 9, 10

— 7 _— a

—,

———————————————

ili

TABLE OF AUTHORITIES - Continued

Page

§ 209 of the Financial Institutions Reform, Recov-

ery and Enforcement Act of 1989, Pub. L. No.

ee 5

§ 407 of the Financial Institutions Reform, Recov-

ery and Enforcement Act of 1989, Pub. L. No.

ee ee er 5

®

y

No. 91-809

a

In The

Supreme Court of the United States

October Term, 1991

*

- JACK GRIFFIN,

Petitioner,

FIRST GIBRALTAR BANK, FSB,

Respondent.

¢

Petition For Writ Of Certiorari To The

United States Court Of Appeals

For The Fifth Circuit

r

RESPONDENT'S BRIEF IN OPPOSITION

’

First Gibraltar Bank, FSB (“First Gibraltar”),’ respect-

fully requests that this Court deny the petition for writ of

certiorari of petitioner, Jack Griffin (“Griffin”).

¢

STATEMENT OF THE CASE

On or about July 11, 1985, First Texas Savings Asso-

ciation (“First Texas”) made a loan to The Village at

Spring Park Joint Venture (the “Joint Venture”) evidenced

| First Gibraltar’s parent company is First Gibraltar Hold-

ings, Inc. There are no nonwholly owned subsidiaries.

by a promissory note in the face amount of $5,690,000.00

(the “Note”). (R. 248). The Note was secured by a Deed of

Trust and Security Agreement covering certain real prop-

erty in Dallas County, Texas. (R. 248). Concurrently with

execution of the Note, Appellant Jack Griffin (“Griffin”)

and Worth Williams (“Williams”) executed and delivered

a Guaranty in favor of First Texas, by which they uncon-

ditionally guaranteed the prompt payment of the Note in

an amount limited as set forth in the Guaranty. (R. 248).

Although Griffin alleges in his Complaint the existence of

agreements by First Texas to provide further financing for

construction on the property and First Gibraltar did not

contest the existence of such agreements for purposes of

its summary judgment motion, it is clear that such agree-

ments, if any, were not in writing.

On or about July 25, 1986, the Joint Venture executed

a Loan Renewal and Extension Agreement extending the

term of the Note, and Williams and Griffin executed a

Guarantor Ratification, ratifying and confirming the

Guaranty they had executed in July 1985. (R. 249).

On March 17, 1987, after default on the note and

commencement of voluntary bankruptcy proceedings,

First Texas filed suit in the 116th District Court of Dallas

County, Texas, against Williams and Griffin on their

Guaranty. The bankruptcy court subsequently modified

the automatic stay to permit foreclosure, and on May 5,

1987, the property was sold at a Substitute Trustee’s Sale

for $3,888,500.00.2 After allowing all credits and offsets, a

2 Although Griffin also alleged in his Complaint that First

Texas agreed to bid in the property at a specified price at the

(Continued on following page)

”

deficiency of $2,178,082.82 remained due and owing on

the Note following foreclosure. (R. 250). First Texas con-

tinued to pursue its state court action against Williams?

and Griffin on the Guaranty.

On December 27, 1988, the Federal Home Loan Bank

Board (“FHLBB”) appointed the Federal Savings and

Loan Insurance Corporation (“FSLIC”) to serve as

receiver for First Texas. (R. 247). On January 26, 1989, the

FSLIC removed the First Texas proceeding to district

court. Pursuant to a December 27, 1988, Acquisition

Agreement, certain assets of First Texas were transferred

by FSLIC, as receiver for First Texas, to First Texas Bank,

FSB, a newly chartered institution. (R. 247). First Texas

Bank, FSB changed its name to First Gibraltar Bank, FSB

on January 20, 1989. (R. 247).

Among the assets transferred to First Gibraltar on

December 27, 1988, were the Note and the Guaranty, and

First Gibraltar has remained the owner of the Note and

the Guaranty since acquiring it from the FSLIC. (R. 247).

On or about May 23, 1989, First Gibraltar filed a Plea

in Intervention in the district court which was granted on

July 3, 1989.

(Continued from previous page)

foreclosure sale and First Gibraltar did not contest the exis-

tence of such agreement for purposes of its summary judgment

motion, it is clear that such agreement, if any, was not in

writing.

3 Williams also subsequently filed voluntary bankruptcy

and was dismissed as a party in this action.

On August 30, 1989, Griffin filed a motion to remand

this action to the state court for lack of subject matter

jurisdiction. On September 6, 1989, First Gibraltar filed its

motion for summary judgment on its claim to collect on

Griffin’s Guaranty and on Griffin’s affirmative defenses

and counterclaims. On November 21, 1989, the district

court granted Griffin’s motion to dismiss his counter-

claims against the Federal Deposit Insurance Corporation

(“FDIC”), which had succeeded FSLIC as receiver for

First Texas. On January 17, T1990, the district court issued

its memorandum opinion and order denying Griffin’s

motion to remand and granting First Gibraltar’s motion

for summary judgment. Final summary judgment was

entered on February 7, 1990, awarding First Gibraltar

$1,442,500.00, together with prejudgment interest of

$684,673.76 and attorneys’ fees of $9,900. (R. 1050-51). On

July 15, 1991, the Fifth Circuit affirmed the district court

judgment, and Griffin filed his petition for writ of cer-

tiorari on or about November 19, 1991.

¢

REASONS FOR DENYING THE PETITION

Contrary to Griffin’s argument, this case does not

present issues of exceptional importance; it is, therefore,

not worthy of review by this Court. This case is no

different from the hundreds of claims and defenses filed

every day by borrowers and guarantors of failed institu-

tions to avoid repaying loan funds which were admit-

tedly received and used to their own benefit. In his quest

for a writ of certiorari, Griffin has not suggested that

there is a split in the applicable decisions of the courts of

appeals. Indeed, in good faith he could not make such a

suggestion, since the courts of appeals have uniformly

applied the D’Oench Duhme doctrine to deny precisely the

claims and defenses which he asserts here. Furthermore,

Griffin’s primary arguments on jurisdiction and choice of

law have already been decided against him by long-

standing decisions of this Court.4

I. THIS CASE WAS PROPERLY REMOVED TO FED-

ERAL DISTRICT COURT.

Griffin attacks the trial court’s exercise of jurisdiction

on two grounds: (1) the case does not arise under federal

law because the proviso of former 12 U.S.C. § 1730(k)(1)

applies, and (2) the court of appeals incorrectly applied

12 U.S.C. § 1819 retroactively to cure any defect in the

original removal of the case.>

With regard first to § 1819, First Gibraltar has been

unable to find a circuit court which has declined to apply

4 Griffin also raises miscellaneous constitutional chal-

lenges to the application of D’Oench Duhme to his claims and

defenses. However, he never raised these issues in the trial

court. See Memorandum Opinion and order entered Jan. 7,

1990 (Pet. App. C at 27a-32a). Griffin gives no valid argument

why this Court should find the application of D’Oench Duhme

unconstitutional, and his case presents no circumstances which

have not already been encountered by the federal courts in 50

years of interpreting D’Oench Duhme.

5 Section 407 of the Financial Institutions Reform, Recov-

ery and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat.

183 (“FIRREA”) repealed 12 U.S.C. § 1730(k)(1), and Section

209 of FIRREA amended 12 U.S.C. § 1819, which is now the

relevant jurisdictional provision. Triland Holdings & Co. v. Sun-

belt Serv. Corp., 884 F.2d 205, 207 (5th Cir. 1989).

the provision retroactively. See, e.g., Kirkbride v. Continen-

tal Casualty Co., 933 F.2d 729, 731-32 (9th Cir. 1991); FDIC

v. 232, Inc., 920 F.2d 815, 818-19 (11th Cir. 1991); FDIC v.

Kasal, 913 F.2d 487, 493 (8th Cir. 1990), cert. denied, U.S.,

111 S. Ct. 1072 (1991); Demars v. First Serv. Bank for Sav.,

907 F.2d 1237, 1238-40 (1st Cir. 1990); Triland Holdings &

Co. v. Sunbelt Serv. Corp., 884 F.2d 205, 207 (5th Cir. 1989).

As can be seen from these cases, application of § 1819 to

this case is consistent with the controlling standards set

by this Court for determining whether a new statute

should be retroactively applied in cases where, as here,

standards of conduct have not been altered by the statute.

See Bradley v. School Bd. of Richmond, 416 U.S. 696, 716, 94

S. Ct. 2006, 2019 (1974) (courts are to apply law in effect

at time of decision unless doing so would result in mani-

fest injustice). However, this Court does not even need to

reach this question to deny Griffin’s petition, because the

district court had jurisdiction under § 1730(k)(1).

With regard to § 1730(k)(1), it is important to note

that, while he complains loudly that the court below

incorrectly held that the proviso does not apply in this

instance, Griffin never explains how this case fits within

both the requirements of the proviso to deny federal

jurisdiction. He faults the court of appeals’ holding that

First Gibraltar, as a newly chartered federal institution, is

a non-proviso party, but he ignores the emphasis which

the court below places on the conjunction “and” in listing

the elements of the proviso. See Pet. App. A at 5a. Thus,

for the proviso to apply, a case must concern only proviso

parties and only questions of state law can be involved.

His sole argument for the application of state law (which

appears in another section of the petition at page 22)

depends on a tortured reading of this Court’s opinion in

Coit Independence Joint Venture v. FSLIC, 489 U.S. 561, 109

S. Ct. 1361 (1989), a reading which is in direct conflict

with controlling decisions of this Court predating even

D’Oench Duhme.

As early as 1940, this Court recognized that “[t]he

National Bank Act (12 U.S.C.A. § 21 et seq.) constitutes

‘by itself a complete system for the establishment and

government of national banks.’ ” Deitrick v. Greaney, 309

U.S. 190, 194, 60 S. Ct. 480, 482 (1940) (citations omitted).

The Court concluded:

A point much discussed in brief and argu-

ment, upon the assumption that local law will

guide our decision is whether, by Massachusetts

law respondent is precluded from setting up the

illegality of the transaction as a defense to his

note. But it is the federal statute which con-

demns as unlawful respondent’s acts. The extent

and nature of the legal consequences of this

condemnation though left by the statute to judi-

cial determination, are nevertheless to be

derived from it and the federal policy which it

has adopted. We have recently held that the

judicial determination of the legal consequences

which flow from acts condemned as unlawful by

the National Bank Act involves decision of a

federal, not a state question.

309 U.S. at 200-01, 60 S. Ct. at 485 (citations omitted).

Two years later, in the leading case of D’Oench Duhme

& Co. v. FDIC, 315 U.S. 447, 62 S. Ct. 676 (1942), this Court

reaffirmed that federal law applied:

© See Pet. App. A at 6a n.2 for the discussion by the court

of appeals on the actual holdings in Coit.

The jurisdiction of the District Court in this

case, however, is not based on diversity of citi-

zenship. Respondent, a federal corporation,

brings this suit under an Act of Congress

authorizing it to sue or be sued “in any court of

law or equity, State or Federal.”? Whether the

rule of the Klaxon case applies where federal

jurisdiction is not based on diversity of citizen-

ship, we need not decide. For we are of the view

that the liability of petitioner on the note

involves decision of a federal not a state ques-

tion under the rule of Deitrick v. Greaney, 309

U.S. 190, 60 S. Ct. 480, 84 L. Ed. 694.

315 US. at 455-56, 62 S. Ct. at 679 (citations omitted;

footnote in original).

The footnote which appears in the middle of the

quotation from D’Oench Duhme, above, is particularly

relevant to this case. Footnote 2 quotes the remaining

portion of the Federal Reserve Act as it existed in 1942.

That language from the old statute is almost identical to

§ 1730(k)(1), first, in providing that suits to which the

corporation is a party “shall be deemed to arise under the

laws of the United States” and, second, in including a

proviso that suits which involve “only the rights or obli-

gations of depositors creditors, stockholders and such

State bank under State law shall not be deemed to arise

under the laws of the United States.” 315 U.S. at 455, 62 S.

Ct. at 678 n.2 (emphasis added). Furthermore, like First

Texas in this case, the bank involved in D’Oench Duhme

was a state-chartered institution. See 315 U.S. at 460, 62 S.

Ct. at 680. Thus, Griffin’s assertions in this case do not

differ significantly from those which the petitioner in

D’Oench Duhme argued to this Court 50 years ago. The

Court plainly held then that federal law applied, and

Griffin has presented this Court with no viable argument

that state law should apply in his particular case. See also

Boyle v. United Technologies Corp., 4 7 U.S. 500, 108 S. Ct.

2510, 2514-15 (1988) (citing D’Oer ch Duhme for proposi-

tion that some areas which involve “uniquely federal

interests” are “so committed by the Constitution and laws

of the United States to federal control that state law is

preempted and replaced, where necessary, by federal law

of a content prescribed (absent explicit statutory directive)

by the courts — so-called ‘federal common law.’ ”).

Since federal, not state, law applies in this case,

Griffin cannot meet the requirement of the proviso that

the case must involve only state law. Griffin cannot suc-

cessfully invoke the proviso to defeat removal jurisdic-

tion under § 1730(k)(1) regardless of whether the court of

appeals completely expressed its rationale for declining

to apply the proviso. There is thus no occasion for cer-

tiorari review here.

Il. SECTION 1823(e) HAS NOT PREEMPTED

D’OENCH DUHME.

For 50 years, the D’Oench Duhme doctrine has been

applied and expanded to effect the federal policy “to

protect [the FDIC] and the public funds which it adminis-

ters against misrepresentations as to the. .. . assets in the

portfolios of the banks which [it] insures or to which it

makes loans.” D’Oench Duhme, 315 U.S. at 457, 62 S. Ct. at

679. Griffin seeks to undermine this federal policy and

destroy the well-established principles articulated in

D’Oench Duhme and its progeny by urging this Court to

10

consider whether 12 U.S.C. § 1823(e) preempts that prece-

dent — something that Congress itself has not seen fit to

do in its many revisions to the banking laws since 1942.

Griffin cites no cases in support of his argument for

statutory preemption of common law which suggest in

any way that D’Oench Duhme has lost its viability since

ihe passage of § 1823(e). Furthermore, his argument that

the Fifth Circuit “recognized that the enactment of

§ 1823(e) was a codification of the D’Oench estoppel” is

based on a failure to read all the words which the court

below used. The court of appeals stated that the “D’Oench

Duhme requirement is now embodied in part in federal

statute.” Pet. App. A at 1la (emphasis added). The appli-

cation of D’Oench Duhme is nothing more than the natural

development of federal common law in this area of

“uniquely federal interest” - a development which this

Court has expressly recognized as appropriate. See Boyle

v. United Technologies Corp., 487 U.S. 500, 108 S. Ct. 2510,

2514 (1988). If Congress wished to overturn or limit any

of the decisions which interpret the principles of D’Oench

Duhme, it certainly knows how to do so. Since Griffin

makes no claim that the lower courts are not uniformly

and consistently applying D’Oench Duhme, there is no

reason for this Court to review this issue.

¢

11

CONCLUSION

Griffin’s petition raises no issue worthy of review.

Therefore, First Gibraltar requests that the petition for

writ of certiorari be denied.

Respectfully submitted,

CAROL STEPHENSON

(Counsel of Record)

Mary L. O’CoNNoR

AKIN, Gump, Hauer & Feb, L.L.P.

CAROL STEPHENSON, P.C.

4100 First City Center

1700 Pacific Avenue

Dallas, Texas 75201

(214) 969-2863

(214) 969-4343 (FAX)

Counsel for Respondent