Court: New Mexico Court of Appeals; December 8, 1995; New Mexico; State Appellate Court
Glenborough Corporation and associated entities (Plaintiffs) appeal a summary judgment favoring Sherman Howard (Defendants) regarding legal malpractice claims. The malpractice case stems from a federal court's dismissal of Plaintiffs’ claims against banks and the Resolution Trust Corporation (RTC) due to Defendants' failure to file required administrative claims, which led to a lack of subject matter jurisdiction. The court determined that Plaintiffs could not have succeeded on the merits of their claims in federal court, affirming the summary judgment for Defendants and rendering the collateral estoppel issue unnecessary.
The background reveals that in 1987, Plaintiffs entered into agreements with ABQ Bank and its subsidiary to develop a business park, receiving a $1.5 million loan and expecting an additional $6 million in funding from ABQD. After ABQD failed to provide the promised funds, ABQ was declared insolvent in 1990, leading to RTC's involvement. Defendants began representing Plaintiffs in February 1990 in relation to the loans and potential RTC litigation. During this time, the RTC published a notice requiring creditors to file claims by July 16, 1990, under FIRREA, but Defendants did not file these claims due to not receiving personal notice.
In February 1991, Plaintiffs initiated a federal lawsuit against ABQ and ABQD, asserting that ABQD's failure to fund hindered their ability to repay loans. The federal court dismissed the claims against ABQ and RTC for lack of jurisdiction, citing the failure to file administrative claims as mandated by FIRREA. Claims against ABQD were dismissed as unenforceable under relevant statutes. Following the federal court's decision, Plaintiffs settled with ABQ, ABQD, and RTC, subsequently filing this malpractice suit based on Defendants' failure to file the necessary administrative claims.
In September 1993, Defendants filed a motion for summary judgment citing lack of proximate cause and collateral estoppel. Plaintiffs sought to amend their complaint in October, and during a subsequent hearing in December, Defendants withdrew their objection to the amendment. Plaintiffs' counsel confirmed that the amended complaint would not change the claims presented. At the December 8 summary judgment hearing, no new claims were discussed. On December 10, the judge indicated his intention to grant summary judgment for Defendants, and the first amended complaint was filed on December 15. A judgment favoring Defendants was entered on February 7, 1994, and Plaintiffs' motion to reconsider was denied on March 15, 1994.
To establish a legal malpractice claim based on negligence, Plaintiffs must prove that the attorneys represented them, failed to exercise reasonable care, and that such negligence caused them loss. It is undisputed that Defendants were employed by Plaintiffs and failed to timely file necessary administrative claims under FIRREA. Plaintiffs argue this failure prejudiced their claims, while Defendants maintain it had no effect and assert that Plaintiffs could not have succeeded on the merits of their claims.
Summary judgment is appropriate when there are no genuine issues of material fact, and the party opposing it must provide evidence that they could have won on their claims but for the alleged negligence. The court found no evidence supporting the notion that Plaintiffs could have prevailed against ABQ and the RTC under the D’Oench doctrine or 12 U.S.C. 1823(e), which protect the FDIC (in this case, the RTC) as a holder-in-due-course against claims lacking written, signed, and authorized agreements continuously maintained in bank records. Thus, summary judgment was deemed appropriate.
The federal court determined that the D’Oench doctrine applies to ABQD, a wholly-owned subsidiary of ABQ, for which the RTC has become receiver. The court noted that FIRREA's administrative filing procedures do not extend to wholly-owned subsidiaries, allowing it to evaluate the merits of the Plaintiffs’ claims against ABQD. Plaintiffs failed to provide written documentation of fraudulent acts by ABQD that met the strict requirements of 12 U.S.C. 1823(e), leading to the dismissal of certain tort claims.
Defendants contended that the absence of administrative claims did not prejudice Plaintiffs, as claims against ABQ and the RTC were based on the same side agreements as those against ABQD, which they argued could not satisfy D’Oench or the statutory requirements. Plaintiffs countered that documentation could be construed collectively to satisfy these requirements. However, even if this were accepted, the combined documents still did not meet the statutory standards, as any alleged fraudulent agreements must be explicitly documented rather than inferred.
Throughout the litigation, Plaintiffs failed to produce sufficient documentation under 12 U.S.C. 1823(e), referencing various corporate minutes but not showing any loans contingent on other transactions. The court highlighted that mere inference from corporate records is inadequate. An expert’s affidavit claiming that the documents satisfied the D’Oench doctrine lacked satisfactory explanation and was not sufficient to overcome the objections raised by the Defendants. Ultimately, the court concluded that Plaintiffs could not substantiate their claims against ABQ or the RTC, resulting in a summary judgment in favor of the Defendants, indicating that Plaintiffs suffered no damages from failing to file administrative claims.
On October 12, 1993, Plaintiffs sought to amend their complaint to add counts of misrepresentation and violations of New Mexico’s Unfair Trade Practices Act. Defendants agreed to the amendment during a December 7, 1993, hearing, and the court granted the motion on December 15. Plaintiffs’ counsel indicated that the amendment would not affect the pending summary judgment motion as it involved the same claims. Subsequently, summary judgment was granted in favor of Defendants.
Plaintiffs argue that the trial court erred in granting summary judgment on the newly added claims. However, the court noted that Plaintiffs cannot benefit from an error they contributed to by asserting that no new claims were involved in the summary judgment hearing. Additionally, Plaintiffs did not request a continuance, further indicating no significant new claims were presented. As a result, the summary judgment was deemed appropriate.
Furthermore, it was determined that Plaintiffs could not have succeeded in federal court on their claims against ABQ and the RTC due to the D’Oench doctrine and 12 U.S.C. 1823(e). Throughout the litigation, Plaintiffs failed to provide documentation sufficient to counter the summary judgment. Any alleged negligence by Defendants regarding the timely filing of administrative claims did not cause harm to Plaintiffs and did not constitute malpractice. The court affirmed the summary judgment decision.
