USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

_________________________

No. 96-1230

KENNETH V. HACHIKIAN,

Plaintiff, Appellant,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,

Defendant, Appellee.

_________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

___________________

_________________________

Before

Selya, Circuit Judge,

_____________

Torres* and Saris,** District Judges.

_______________

_________________________

W. Paul Needham,
________________

with

whom Kevin Hensley

______________

and Needham &

__________

Warren were on brief, for appellant.

______
Karen A. Caplan,
_________________

with

whom

Ann S. Duross,
______________

Richard J.
___________

Osterman, Jr., Clark Van Der Velde, and Thomas R. Paxman were on
_____________ ____________________
________________
brief, for appellee.

_________________________

September 11, 1996

_________________________

_______________
*Of the District of Rhode Island, sitting by designation.
**Of the District of Massachusetts, sitting by designation.

SELYA, Circuit Judge.

SELYA, Circuit Judge.
_____________

Plaintiff-appellant Kenneth

V.

Hachikian

damages

made

seeks to

enforce,

for the breach of,

with

the FDIC's

reasoned

that, even if a

motion

the statute of frauds.

alternative to

Federal

The district

granting

the

an oral agreement

defendant-appellee

Corporation (FDIC).

I.
I.

or in

for summary

that he allegedly

Deposit

court

Insurance

dashed his

judgment.

contract had been

obtain

hopes

The

by

court

formed, it violated

We affirm, albeit on a different ground.

BACKGROUND
BACKGROUND

Adhering

pertinent

facts in

to

the

familiar

the light

praxis,

most favorable

we

recite

to the

the

party who

unsuccessfully resisted summary judgment.

In

from two

his halcyon

days the appellant

Massachusetts-based

borrowed liberally

financial institutions:

Olympic

Bank and Bank Five for Savings.

At the times relevant hereto the

Olympic debt consisted of (i) a

$200,000 promissory note secured

by a third mortgage on the appellant's residence, (ii) a $115,000

promissory

Bank

of

note secured by a

pledge of shares

in Chestnut Hill

& Trust Co. (the CHBT stock), and (iii) personal guarantees

two business loans which

Five debt consisted

mortgage

on

guarantee of

approximately

foundered.

the

totaled over $3,100,000.

of (i) a $168,750

appellant's

business loan

$500,000.

In

loan secured by

residence, and

having

As luck

each instance

the

The Bank

(ii)

a deficiency

would

FDIC

have

it,

a fourth

personal

balance

of

both banks

(a government

agency

operating under federal statutory authority, see, e.g., 12 U.S.C.

___ ____

1814-1883

administered

Massachusetts

(1994))

the

was

Olympic

consolidated

appointed

as

receivership

office

(WCO)

the

from

and

receiver.

its

the

It

Westborough,

Bank

Five

receivership from its Franklin, Massachusetts consolidated office

(FCO).

With

the specter

of personal bankruptcy

looming, the

appellant commenced negotiations for the settlement of his debts.

His attorney, Michael McLaughlin,

Callen, a WCO

account officer.

wrote several letters to Kathy

After months

of haggling

possible settlement models, McLaughlin received

from Callen

had

a telephone call

on June 3, 1993, in which she stated that her agency

approved the

McLaughlin

over

appellant's

latest proposal.

wrote to Callen outlining

The

next day,

the details of the bargain

that he believed had just been struck:

in exchange for a release

of the appellant's indebtedness to both Olympic and Bank Five and

the discharge of the

third and fourth mortgages

his residence, the appellant

in cash, (ii)

the net

excess of $100,000).

The

McLaughlin's

agreed to (i) pay the

transfer to it the CHBT stock,

residence and remit

communique,

that encumbered

FDIC $17,500

and (iii) sell his

sale proceeds (estimated

FDIC did not

but

it

later

to be

in

respond immediately

to

asserted

(before

any

performance took place)

paradigm,

it

had

that, while it had approved a settlement

never

assented

to,

and

Callen

had

never

acquiesced in, the settlement described by McLaughlin.1

____________________

1Although
appellant
had

the FDIC

did not

contemporaneously provide

with a written description

been approved

on

June 3,

1993,

of the terms
it told

the

the

that in fact

appellant's

By

October of

refused to

abide by the

the agreed

settlement.

1993 the appellant

terms that McLaughlin

In

November, the

new, more circumscribed agreement.

the FDIC

knew that

would discharge the two

the FDIC

said constituted

appellant proposed

This proposal envisioned that

mortgages that it held

on the

appellant's residence in return for the net proceeds derived from

sale

proposal

of

that property.

The

appellant characterized

this

as being in mitigation of the damages stemming from the

FDIC's "breach" of the earlier "settlement agreement."

Peter Frazier, Callen's replacement as

officer

responded

responsible

for

supervising

to the new proposal

December 21, respectively.

while the FDIC agreed

the

the WCO account

appellant's

by letters dated

debts,

November 30 and

The letters stated in substance that

to release the third and

fourth mortgages

on

the appellant's residence in

anticipated sale, the

appellant's

account

"open and payable

the

FDIC

appellant

exchange for the

proceeds would merely

and the

in full."

discharged both

excess

avails of the

be credited to

indebtedness

Against

the

would remain

this contentious backdrop,

mortgages

in December

of

1993; the

sold his home; and the FDIC received net sale proceeds

of approximately $103,000.

In

wrote

to

January of

the

FDIC,

transaction was

1994,

the

reiterating

appellant's attorney

his

view that

the

again

December

accomplished merely as a means of mitigating the

____________________

counsel

that the

sanctioned

settlement called

solely for

the

discharge of the indebtedness administered through the WCO, i.e.,

the appellant's obligations to Olympic.

damages

1993)

caused by

pact.

appellant's

global

the FDIC's repudiation

He

also demanded

notes and guarantees.

release.

In short

that

of the

the FDIC

earlier (June

cancel

all the

The agency refused to grant a

order, the appellant

sued in federal

district court seeking money damages, specific performance, and a

declaratory judgment upholding the supposed June 1993 agreement.

The

FDIC

denied

the

material

allegations

of

the

complaint and

moved for

brevis disposition.
______

It argued,

among

other things, that the district court lacked jurisdiction because

the appellant had failed to comply with the administrative claims

review process; that no agreement came into being in June of 1993

because

of

what

there had been no meeting of the minds; that, regardless

Callen

may have

stated,

it

never

settlement terms chronicled by McLaughlin;

oral

contract had

statute

of

frauds.

been formed,

The

violated the

statute of

and that, even if

it was unenforceable

district

jurisdictional argument2 but

court

Mass. Gen.

(1996), and granted judgment accordingly.

914 F. Supp. 14, 17 (D. Mass. 1996).

the oral

L.

the

an

under the

rejected the

determined that

frauds,

had approved

FDIC's

contract

ch. 259,

See Hachikian v. FDIC,

___ _________
____

This appeal ensued.

II.
II.

ANALYSIS
ANALYSIS

The

Civil

Rules

provide that

summary

judgment

flourish when "there is no genuine issue as to any material

and

may

fact

. . . the moving party is entitled to a judgment as a matter

____________________

2The

FDIC has not pursued this issue on appeal, and we take

no view of it.

of

law."

Fed. R.

Civ. P. 56(c).

On appeal from

the entry of

summary judgment we review the district court's decision de novo,

construing

the

record

in

the

light

most

congenial

to

the

nonmovant and resolving all reasonable inferences in that party's

favor.

581

See Maldonado-Denis v. Castillo-Rodriguez,

___ _______________
__________________

(1st Cir.

rationale,

1994).

We

are

but may affirm the

alternate ground made

Osco Drug,
Inc.,
__________________

not wed

Polyplastics, Inc., v.
___________________

F.2d

the lower

entry of summary

manifest by

895

to

46,

23 F.3d 576,

court's

judgment on any

the record.

See Garside
___ _______

48-49

Cir.

Transconex, Inc.,
________________

(1st

827 F.2d

v.

1990);

859, 860-61

(1st Cir. 1987).

The statute

of frauds question is

freighted with com-

plexity, see generally Restatement (Second) of Contracts

___ _________

(1979) (explaining that when the duty to

in a contract which

147(2)

perform those "promises

subject it to the [statute of frauds]

has been discharged,"

the statute

of frauds

"does not

. . .

prevent

enforcement of the remaining promises"), and we need not reach it

here.

the

The short

answer to the appellant's importunings

purported agreement

never came into being.

settlement

on

June

on which the

3,

1993

but

demonstrate

involved only

that portion of the

(and,

the aegis of

indeed, does

his suit

To be sure, the FDIC approved a potential

conclusively

came under

appellant bases

is that

that

the WCO.

not aver)

the

the

agency's

contemplated

records

settlement

appellant's indebtedness that

The appellant has

that the

FDIC duly

not shown

authorized a

global

settlement

of

his

aggregate

(i.e.,

WCO

plus

FCO)

indebtedness.

Callen

He claims only that a representative of the FDIC

assured

his attorney

that such a

settlement had

approved by the appropriate plenipotentiaries

Even assuming,

version

of

as

we

Callen's

must, the

accuracy

statement,

this is

been

within the agency.

of

the

simply

appellant's

too

porous a

foundation

on

which

to

posit

liability

on

the

part

of

government agency.

Dealing with the sovereign brings to bear a special set

of rules

deals

that are more demanding than

with a private party.

See,
___

R.R. Co. v. United States, 254 U.S.

________
_____________

those that apply when one

e.g., Rock Island, Ark. & La.

____ _______________________

141, 143 (1920) (Holmes, J.)

(warning

that citizens "must turn square

with the

Government").

recover

the

example, parties seeking

to

against the United States in an action ex contractu have

__ _________

burden of

demonstrating

purported to bind the

See
___

Thus, for

corners when they deal

affirmatively that

government had actual authority to

H. Landau & Co. v. United States, 886 F.2d

________________
______________

Cir. 1989).

the agent

This rule is dispositive here.

who

do so.

322, 324 (Fed.

The FDIC's

board of directors is

to authorize agents and employees

to the agency by Congress.

concerning the

delegation of

assets (like the debts

were

inherited

resolution

by

the

to exercise the powers granted

See 12 U.S.C.
___

asserts without contradiction that

permitted by statute

1819(a).

authority to dispose

was in effect at

qua
___

receiver),

all relevant times.

FDIC

its board passed a resolution

of corporate

Hachikian owed to failed banks

FDIC

The

and

and which

that

this

By its terms,

the resolution

(CRC)

delegates authority to a

to approve

magnitude owed

cedes no

the

by the appellant.

authority

approve such

settlement

to

that

settlements.

Callen had

of

debts

In

contrast, the

account officers

on

(such

This description of

approving process is uncontradicted,

admits

Credit Review Committee

no

the

as

order

of

resolution

Callen)

to

the settlement-

and, in fact, the appellant

authority to

approve

a settlement

herself.

He also acknowledges that he understood all along that

only

CRC could

the

agency to it.

accept his

On a record

the CRC approved a

settlement

offer and

that is barren of any

___

bind the

evidence that

settlement embodying a global release

of the

appellant's obligations, no

that

the

reasonable factfinder could conclude

purported agreement

on

which

the appellant's

claim

depends ever materialized.

Perusing the record in the light most flattering to the

appellant, we are left with this scenario:

CRC

approved a

settlement applicable

managed by

the WCO for

and on the

same day Callen

the

on June

only to

3, 1993, the

the indebtedness

the consideration limned

by McLaughlin,

mistakenly informed McLaughlin

that

CRC had approved a global settlement that included the debts

administered through both

cannot support

hence,

the

appellant.

the WCO

and the FCO.

This

a breach-of-contract claim because

FDIC)

never

accepted

the

terms

scenario

the CRC (and,

offered

by

the

Nevertheless,

Callen, he says,

the appellant

has a

fallback position:

may have lacked actual authority

to compromise

debts

wishes

but

she had

to debtors.

thesis runs, by

actual

authority to

The government

her communication.

Callen's miscommunication

of the

is

communicate

the CRC's

therefore bound,

The thesis

will not

CRC's position could

this

wash.

not bind

the FDIC inasmuch as the federal

officials vested

government may only be bound by

with lawful authority

to do so.

As the Court

has held:

[C]ontracts,

express

or

implied,

may

be

judicially enforced against the Government of

the United States.
be

created

Government

only

But such a liability can

by

some

lawfully

officer

invested with

make such contracts or

of

the

power to

to perform acts

from

which they may be lawfully implied.

Eastern Extension, Australasia & China Tel. Co. v. United States,

_______________________________________________
_____________

251 U.S. 355, 366 (1920).

Nor

authority to

tie

that

authority

can

the

appellant rewardingly

communicate the CRC's

binds the

FDIC to

was restricted to

the

rely

on Callen's

decisions to debtors

global settlement.

communicating what the

as the

Callen's

CRC in fact

decided.

to

Though her mistaken

be authorized

communication may well have seemed

at the time,

the upshot

of the

web of legal

rules requiring proof of a government actor's actual authority is

that

apparent authority cannot serve

federal sovereign to

a contract.

as a means

of holding the

The Supreme Court

succinctly

stated this principle of contract formation:

Whatever

the form

functions,
arrangement

in

anyone
with

the

which the

Government

entering

into

Government takes

an
the

risk of having accurately ascertained that he

who purports to act for the Government
within the bounds of his authority.

stays

Federal Crop Ins. Corp. v.

________________________

This

means

that if

Merrill, 332 U.S.

_______

the federal

actor

authority, the claimed contract fails.

v.

380, 384

(1947).

did not

possess actual

See, e.g.,
___ ____

United States
_____________

Beebe, 180 U.S. 343, 351-55 (1901); Urso v. United States, 72

_____
____
_____________

F.3d 59,

60 (7th Cir. 1995); Caci, Inc. v. Stone, 990 F.2d 1233,

__________
_____

1236 (Fed. Cir. 1993); Prater v. United States, 612 F.2d 157, 160
______
_____________

(5th Cir. 1980).

So it is here.

If more

rationales for

were needed

this rule

can be

and we doubt that it is

extrapolated from

related theory that equitable estoppel

policy

the closely

is generally inapplicable

to the federal

government when its employees

their unauthorized

actions.3

384-85.

Judicial enforcement

"expand

the

power

of

See,
___

induce reliance by

e.g., Merrill,
____ _______

of

332 U.S.

unauthorized contracts

federal

officials

beyond

at

would

specific

legislative limits," thereby raising serious separation of powers

concerns.

Falcone v. Pierce, 864

_______
______

F.2d 226, 229 (1st Cir. 1988).

Furthermore, enforcing such agreements would put the public purse

at undue risk.

See id. (explaining that "in order to protect the

___ ___

resources essential to maintain government for all people, it may

be

necessary

in

some

instances

to

deny

individuals harmed by government misconduct").

____________________

compensation

to

3In all events, estoppel is

In

the

first

place,

the appellant

reliance on an estoppel theory.

a

means

of

binding

not a viable alternative

the

expressly

disclaimed

here.

any

In the second place, estoppel as

federal

government

to

unauthorized

agreements has been almost universally rejected.

See, e.g., Utah

___ ____ ____

Power & Light Co. v. United States, 243 U.S. 389,

_________________
_____________

408-09 (1917);

FDIC v. Roldan Fonseca,

____
______________

795 F.2d 1102, 1107-08 (1st

Phelps v. FEMA, 785 F.2d 13, 17 (1st Cir. 1986).

______
____

10

III.
III.

CONCLUSION
CONCLUSION

Cir. 1986);

We

actual

that

need

go no

further.4

authority to bind the FDIC,

Not

Callen lack

but the appellant understood

reality throughout the negotiations.

significantly probative

only did

In the absence of any

evidence either that

the delegation

of

authority extended further than the documentary submissions show,

or that the CRC

approved a global settlement, the

"contract" on

which the appellant sues is nothing more than wishful thinking.

Affirmed.
Affirmed.
________

____________________

4The

FDIC

contests

jurisdiction over
e.g.,
U.S.C.

the

federal

the appellant's

specific performance.
1821(j),

a statute

Its

claims for

subject

matter

equitable relief,

objection is

that, with

relevant here, prohibits courts

courts'

premised on

12

certain exceptions

not

from "tak[ing] any action .

. .

to restrain or affect the exercise

of powers or functions of the

[FDIC] as a conservator or receiver."

Since "[i]t is a familiar

tenet that when an appeal presents a jurisdictional quandary, yet

the merits of the underlying issue, if reached, will in any event

be

resolved

jurisdiction,
riddle

in

favor

then

of

the

court

and simply dispose of

States v. Stoller, 78
______
_______

the

party

challenging

may forsake
the appeal on

F.3d 710, 715 (1st Cir.

the

the court's

jurisdictional

the merits," United

______

1996) (collecting

cases), petition for cert. filed, 64 U.S.L.W. 3823 (May 29, 1996)
________________________
(No. 95-1936),
another day.

we leave

the FDIC's jurisdictional

argument for

11