
USCA1 Opinion

	













                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 95-1505

                            HOPE FURNACE ASSOCIATES, INC.,
                                Plaintiff - Appellant,

                                          v.

                        FEDERAL DEPOSIT INSURANCE CORPORATION,
                as Receiver of Eastland Bank & Eastland Savings Bank,
                                Defendant - Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                [Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________

                                 ____________________

                                        Before

                               Torruella, Chief Judge,
                                          ___________
                                Lynch, Circuit Judge,
                                       _____________
                            and Stearns,* District Judge.
                                          ______________

                                _____________________

               Karen A. Pelczarski,  with whom  John H. Blish  and Blish  &
               ___________________              _____________      ________
          Cavanagh were on brief for appellant.
          ________
               Kathleen V.  Gunning, Appellate Litigation  Section, Federal
               ____________________
          Deposit Insurance Corporation, with whom Ann S. DuRoss, Assistant
                                                   _____________
          General Counsel,  Colleen B. Bombardier, Senior  Counsel, John P.
                            _____________________                   _______
          Parker, Senior  Attorney, Federal Deposit  Insurance Corporation,
          ______
          Christopher  M. Neronha,  Hinckley, Allen  &  Snyder and  John P.
          _______________________   __________________________      _______
          Parker were on brief for appellee.
          ______



                                 ____________________

                                   December 6, 1995
                                 ____________________

                              
          ____________________

          *  Of the District of Massachusetts, sitting by designation.














                    STEARNS, District Judge.  The plaintiff-appellant, Hope
                    STEARNS, District Judge.
                             ______________

          Furnace  Associates, Inc.  ("Hope"),  appeals from  the entry  of

          summary judgment against it,  claiming that Eastland Savings Bank

          ("Eastland"), the  FDIC's predecessor  in interest, reneged  on a

          binding commitment to finance a Hope real estate development.  We

          disagree and  affirm the judgment of the district court, although

          on a different ground than the one articulated by that court.

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                    Hope originally  brought suit in Rhode  Island Superior

          Court.   Eastland was afterwards declared insolvent  by the Rhode

          Island Director of  Business Regulation.  The  FDIC, appointed as

          Eastland's  receiver, removed  the case  to the  federal district

          court in  Rhode Island  where, in  due course, cross-motions  for

          summary judgment were heard.

                    Hope accused Eastland of  defaulting on its obligations

          under  a loan  commitment letter  by pretextually  demanding that

          Hope obtain  an unobtainable  state environmental approval.   The

          FDIC  argued that because Hope was not designated as the borrower

          in the  commitment letter,  it  was barred  from maintaining  the

          action  by the D'Oench, Duhme  doctrine and 12  U.S.C.   1823(e).
                         _______  _____

          The FDIC  also  contended  that  Hope had  defaulted  on  several

          conditions precedent of the agreement, thus relieving Eastland of

          any duty to perform.

                    The district court adopted the  D'Oench, Duhme argument
                                                    _______  _____

          proffered  by  the FDIC  and granted  it  summary judgment.   The

          district  judge  reasoned  that  the  loan  commitment  had  been


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          expressly  extended  to  ENDA  Associates,  Inc.,  a  partnership

          affiliated  with, but  juridically independent  from Hope.   Hope

          pointed unavailingly to bank records and to written admissions by

          bank officials that should have alerted the FDIC to the fact that

          the insertion  of ENDA's name in  the letter was the  result of a

          clerical blunder.  The  district court did not find  it necessary

          to  address  the  contract  issue,  although it  had  been  fully

          briefed.

                    In  light   of  the  contemporaneous   verification  in

          Eastland's  records of Hope as  the actual borrower,  the FDIC no

          longer relies on the D'Oench, Duhme argument.   In its brief, the
                               _______  _____

          FDIC candidly and commendably makes the following concession.

                    The  FDIC  does not  contend  on appeal  that
                    section 1823(e) [or  D'Oench, Duhme]  applies
                                         _______  _____
                    to  bar  Hope  Furnace's  assertion  that it,
                    rather than ENDA, was the true borrower under
                    [the] Commitment  Letter, or  that it  is the
                    proper   party  to  contend   that  the  Bank
                    breached its obligations  thereunder.   Here,
                    the record appears to reveal the clear intent
                    of the parties that Hope Furnace, rather than
                    ENDA, was the  intended borrower despite  the
                    Commitment Letter's express provisions to the
                    contrary.

          Appellee's Brief, at 13-14.

                    The  sole issue  on appeal,  therefore, is  whether the

          alternative  ground for summary judgment urged by the FDIC before

          the district court  is valid.   See Mesnick  v. General  Electric
                                              _______     _________________

          Co., 950 F.2d 816, 822 (1st Cir. 1991).
          ___

                                        FACTS
                                        FACTS
                                        _____

                    The  commitment letter  was  signed on  April 4,  1989.

          Eastland  promised  to lend  $1.5  million to  finance  a planned

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          development  in  Scituate, Rhode  Island,  if  Hope succeeded  in

          fulfilling certain conditions by June 5, 1989.  On July 26, 1989,

          Eastland  extended the compliance date to August 31, 1989.  Ender

          Ozsezen and David Verardo, the joint principals of Hope and ENDA,

          agreed to personally guarantee the  loan.  The commitment  letter

          required   that  the  loan  be  cross-collateralized  and  cross-

          defaulted with an outstanding loan to an ENDA condominium project

          (the Tamarac loan) on which a balance was then owing of $572,195.

                    Hope  planned  to  subdivide   a  125  acre  parcel  of

          undeveloped  land into  fifty-six single family  lots.   At least

          sixteen of the lots were to have  municipal water.  The remaining

          lots   would   require    more   expensive   groundwater   wells.

          Approximately  $300,000 of the loan  proceeds were to  be used to

          install the  municipal water  connections.  This  entailed laying

          two pipelines,  each extending some  3,000 feet from  the parcel.

          At  the time  the commitment  letter was  signed, it  was unclear

          whether construction  of the connectors would  impact an adjacent

          wetlands, a matter of no small concern to Eastland.1

                    The commitment letter imposed two pertinent conditions.

          First, that Hope obtain a letter from the Rhode Island Department

          of Environmental  Management ("DEM")  "indicating that a  Request

          for  Applicability   Determination  has  been  filed   with  said
                              
          ____________________

          1  Eastland made clear  this concern in the opening  paragraph of
          the loan commitment letter by including municipal water access in
          its definition of the  subject parcel.  "It is  our understanding
          that the property securing this loan consists of a parcel of land
          containing approximately 125 acres and that it will  be developed
          into 16 buildable lots ranging in size  from 1 1/2 to 2 1/2 acres
          each with adequate road frontage and municipal water service."

                                         -4-














          department and that the subject parcel of land does not require a

          Permit to Alter  Wetlands."   (Paragraph 37).   And second,  that

          Hope provide Eastland with a certificate of a registered engineer

          verifying the  availability  of utility  service, storm  drainage

          facilities, sewerage  connections and "such  other facilities  as

          may be deemed necessary by the bank."  (Paragraph 27).2

                    The  commitment letter  also contained  several clauses

          giving  Eastland discretion  to  determine whether  or not  these

          conditions had been met.  Paragraph 39 provided that:

                    [t]he Bank shall reserve the  right to cancel
                    and to  terminate its obligations  under this
                    commitment if any of the following occur:

                    a.   Failure of  the borrowers to  comply, or
                    cause   to  be   complied  within   the  time
                    specified  with  any  of  the  provisions  or
                    conditions applicable to this commitment.

                                        . . .

                    f.  Any change subsequent to this  commitment
                    deemed  by   the  Bank  to  be   material  or
                    substantial  in  the  assets,  net  worth  or
                    credit  standing  of  any  borrower  or other
                    person who shall become obligated to the Bank
                    under this  commitment,  or the  taking of  a
                    judgment against   any said person  which, in
                    the sole discretion  of the Bank,  materially
                    affect his credit standing . . . .

          Finally,  the letter  stated  that "[t]his  commitment cannot  be

          changed,  discharged,  or  terminated   orally  but  only  by  an

                              
          ____________________

          2   The FDIC also claims  that Hope breached Paragraph  38 of the
          letter which  required that Hope  maintain any property  in which
          Eastland  had a  security  interest (including  Tamarac) free  of
          liens over the life of  the loan.  Hope argues, not  implausibly,
          that it was never in breach  of Paragraph 38 because the loan was
          never made.  Moreover, Hope alleges that it had filed releases on
          all liens on the Tamarac property on or before July 28, 1989.

                                         -5-














          instrument  in   writing  signed   by  the  party   against  whom

          endorsement of  any change, discharge or  termination is sought."

          (Paragraph 46).

                    Eastland's  attorney, Robert Branca, provided Hope with

          a  draft of an engineer's certificate that Eastland would deem to

          satisfy Paragraph  27 (and by  implication, Paragraph 37)  of the

          commitment letter, namely

                    [t]hat  construction  and  operation  of  the
                    Improvements  will not involve the filling or
                    alteration of any stream, brook or other body
                    of   water  or  any  wetlands  area  nor  the
                    discharge of any fill or  other material into
                    the ground water . . . .

          Hope's  engineer meanwhile  determined that  installation of  the

          municipal water connectors would in fact have a disruptive impact

          on  the neighboring wetlands.  Consequently, he refused to sign a

          certificate in  the form dictated by Eastland.   On May 31, 1989,

          Branca,  having  been  made  aware  of  the  engineer's  refusal,

          provided  Hope with  a second,  more flexibly  worded draft.   It

          stated, in pertinent part, 

                    [t]hat  construction  and  operation  of  the
                    Improvements  will not involve the filling or
                    alteration of any . . . wetlands area nor the
                    discharge  of any fill or other material into
                    the ground water,  except as hereinafter  set
                    forth.   The construction  of the portion  of
                    the  Improvements  involving construction  of
                    the water  line along Hope Furnace  Road from
                    Route 116 to the Premises will require stream
                    crossings,  and  as  such,  come   under  the
                    jurisdiction   of  the   [DEM].      In   our
                    professional opinion, we and the Borrower can
                    work with DEM  incorporating any  suggestions
                    it may make  (without unusual measures  being
                    taken  or unusual  costs  being incurred)  in
                    order for  DEM to make  a determination  that
                    such  construction involves  an insignificant

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                    alteration  of freshwater wetlands.  There is
                    presently pending with DEM an application for
                    a  determination of the  impact on freshwater
                    wetlands  of such  construction  and  in  our
                    experience, the same should be  granted in 90
                    days . . . . 

          While  the  language  of  an  acceptable  certificate  was  being

          negotiated, Hope's  engineer declared bankruptcy.   Before Hope's

          new  engineer  (Gerhard Graf)  could complete  his investigation,

          Eastland  resolved  to  reject  any  engineer's certificate  that

          contemplated even an  "insignificant" wetlands alteration  unless

          Hope obtained prior DEM approval.

                    On  August  17,  1989,  Eastland  warned  Verardo  that

          payments on  the cross-collateralized Tamarac loan  were past due

          and reaffirmed the  August 31, 1984 deadline for  compliance with

          the conditions of the commitment  letter.  Eastland also demanded

          that Verardo  "respond by August 25,  1989 as to how  you plan to

          resolve  these issues."  On August 19, 1989, DEM notified Verardo

          that  "[b]ased  upon  our  observations  and  review,  it is  our

          conclusion that Fresh  Water Wetlands, as described by Section 2-

          1-20 of the Fresh  Water Wetlands Act, are present on or adjacent

          to  the subject  property.   These  wetlands  do fall  under  the

          protection  of  the  Department. . . .    The  approval  of  this

          Department  is required  for any  alteration proposed  within the

          above described wetland(s)."

                    The  parties were unable to close on the loan by August

          31, 1989,  the date on  which the  loan agreement, by  its terms,

          expired.  Four months  later, on December 15, 1989,  DEM reversed

          itself.  In  a letter to Graf, DEM  announced that  "[i]t  is the

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          determination  of  this Department  that  this  [project] can  be

          approved as  an INSIGNIFICANT ALTERATION of  a freshwater wetland

          . . . ."   Hope was  unable to secure  alternative financing  and

          lost the Scituate property to foreclosure.

                                  STANDARD OF REVIEW
                                  STANDARD OF REVIEW
                                  __________________

                    As  with all questions of law, this court conducts a de

          novo review of a district court's entry of summary judgment.  Inn
                                                                        ___

          Foods, Inc. v. Equitable Co-operative Bank, 45 F.3d 594, 596 (1st
          ___________    ___________________________

          Cir. 1995).  Accordingly, an appellate court is not restricted by

          the district court's  rulings of law, but is "free, on appeal, to

          affirm  [the] judgment on  any independently  sufficient ground."

          Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st
          __________________    ________________

          Cir.  1987).   See  also Massachusetts  Mutual  Life Ins.  Co. v.
                         _________ _____________________________________

          Ludwig, 426 U.S. 479, 480-81 (1976).
          ______

                    Summary judgment  is appropriate  when, based  upon the

          pleadings,  affidavits, and  depositions,  "there  is no  genuine

          issue as  to any material  fact, and [where] the  moving party is

          entitled to judgment as a matter of law."  Fed. R. Civ. P. 56(c);

          Gaskell  v. Harvard  Co-op Society,  3 F.3d  495, 497  (1st. Cir.
          _______     ______________________

          1993).   To succeed, "the moving party must show that there is an

          absence of  evidence to support the  nonmoving party's position."

          Rogers v. Fair, 902 F.2d 140, 143 (1st. Cir. 1990).  "An issue is
          ______    ____

          only  'genuine'  if  there  is sufficient  evidence  to  permit a

          reasonable  jury to  resolve the  point in the  nonmoving party's

          favor."  NASCO, Inc. v. Public Storage, Inc., 29 F.3d 28, 32 (1st
                   ___________    ____________________

          Cir. 1994).


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                                      DISCUSSION
                                      DISCUSSION
                                      __________

                    The  FDIC's  main argument  on  appeal  is that  Hope's

          failure to fulfill the wetlands conditions of the  loan agreement

          discharged  Eastland  from any  duty  to perform.    "A condition

          precedent  is an act which  must occur before  performance by the

          other party is due." Wood v. Roy Lapidus, Inc.  10 Mass. App. Ct.
                               ____    _________________

          761, 763 n.5 (1980).  As Professor Corbin explains, "[c]onditions

          precedent   .  .  .   are  those  facts   and  events,  occurring

          subsequently to the making  of a valid contract, that  must exist
          ____________

          or occur before there is a right to immediate performance, before

          there is a breach of contract, before the usual judicial remedies

          are available."  3 A. L. Corbin, Corbin on Contracts   628 (1960)
                                           ___________________

          (emphasis added).   Because  of the  confusion engendered by  the

          often  subtle  distinctions  between  conditions  subsequent  and

          conditions precedent,  the American  Law Institute  (ALI) prefers

          the more catholic term "conditions."  See Restatement (Second) of
                                                ___

          Contracts,  Ch. 9, Topic 5, Conditions and Similar Events, at 159

          (1981).  The ALI defines a condition as "an event, not certain to

          occur, which  must occur,  unless its non-occurrence  is excused,

          before performance under a contract becomes due."  Id.    224, at
                                                             __

          160. 

                    Although the FDIC claims that Hope failed to fulfill at

          least  three  conditions  of  the  agreement,  its  focus  is  on

          Paragraph 37.  Hope  argues that Paragraph 37 did not obligate it

          to  obtain prior DEM approval  of any wetlands  alteration.  Hope
                     _____

          points out that  it fulfilled the first requirement  of Paragraph


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          37 when it provided  Eastland with the  DEM letter of August  19,

          1989,   confirming   Hope's   petition   for   an   Applicability

          Determination.    Hope  gamely  contends that  this  same  letter

          fulfilled the second  requirement of Paragraph 37, namely that it

          obtain  a determination by DEM  that "the subject  parcel of land

          does not  require a Permit  to Alter Wetlands."   The  essence of

          Hope's  argument is  that the  clause cannot  mean what  it says.

          Hope  argues   that  it   was  "inartfully  drafted,"   and  that

          "technically,  there  is  no  DEM regulation  or  applicable  law

          pursuant  to  which one may obtain  a letter from the DEM  that a

          parcel of land does not require a permit to alter wetlands."

                    A more  plausible reading of  Paragraph 37  is that  it

          reflected  Eastland's unwillingness  to extend the  Scituate loan

          without  the protection of a comfort letter from DEM.  Eastland's

          circumspection in  this regard was not  unreasonable.  Regulatory

          entanglement can be  the deathknell  of even  the most  carefully

          conceived development, particularly if its  backers (as evidenced

          by their irresolute  performance on  the Tamarac loan)  are in  a

          parlous financial  state.  Perhaps more  significant, the premise

          of  Hope's  argument, impossibility,  is  fatally compromised  by

          DEM's December 15,  1989 letter.   While Hope  argues that  DEM's

          ultimate  change of heart lends  credence to its supposition that

          Eastland  seized  on  DEM'S  August  demurrer  as a  pretext  for

          scuttling the  agreement, the December  DEM letter appears  to be

          precisely the type  of assurance that  Eastland was looking  for,




                                         -10-














          and  which  Hope  contradictorily  maintains  was  impossible  to

          obtain.

                    Hope  next  argues   that  the  engineer's  certificate

          contemplated  by Paragraph  27 sufficiently  addressed Eastland's

          concerns regarding  the water connections,  including any interim

          difficulties  with  DEM.   In  other  words,  Hope  contends that

          Paragraph  27  impliedly  waived  the requirement  of  prior  DEM

          approval of the  alterations, so  long as Hope  could produce  an

          engineer  who would  promise  that DEM  would ultimately  relent.

          Hope  also  pounces  on the  fact  that  Paragraph  37 speaks  of

          wetlands   alterations  "on"  the   subject  parcel,   while  the

          alterations  that Hope  was  to undertake  would affect  wetlands

          adjacent to  the site.   This  purported distinction is  somewhat

          beside the point.   The clear intent of the  disputed Paragraphs,

          when  they  are  read  as  a  contextual  whole  rather  than  as

          grammatical shards, was to  protect Eastland from the eventuality

          that disapproval  by  DEM would  force  the entire  project  into

          default.  That the  construction of the two 3,000  foot pipelines

          would occur in  wetlands adjacent  to rather than  "on" the  site

          does not alter  the fact  that DEM opposition  to the  connectors

          would impact directly on the project's viability.

                    The fact that Eastland's second draft of the engineer's

          certificate would have tolerated "an insignificant alteration" of

          the  wetlands on  the  assurance  that  it  would  be  ultimately

          acceptable to DEM  makes no  difference.  It  still remained  for

          Hope  to produce such a  certificate in a  timely fashion (it did


                                         -11-














          not).  Moreover, the draft did not commit Eastland to accept  the

          certificate of any engineer,  particularly one that was bankrupt.
                         ___

          Even to the extent that Eastland's second draft certificate could

          be seen as an offer to compromise the terms of  Paragraph 37, the

          offer was  never  effectively accepted  by Hope.   That  Eastland

          chose  to withdraw  the draft  and revert  to the  more stringent

          terms of Paragraph 37  is not under the  circumstances surprising

          or the least bit objectionable.3

                    As a  last resort, Hope cites  the deposition testimony

          of two Eastland officers,  Lenssen, and his supervisor, Fournier,

          both  of  whom participated  in the  decision  to allow  the loan

          commitment  to lapse.  Lenssen's testimony can be read to suggest

          that,  in his opinion, the lack of  DEM approval of the connector

          project  would not ordinarily have been a deal breaker.  Fournier

          testified more or less to the same effect.  Hope argues that this

          evidence is  sufficiently material to preclude  summary judgment.

          The  opinion of  a  loan officer  that a  breach of  a particular

          condition might not in  the ordinary course have caused  the bank

          to cancel a loan agreement does  not alter the fact that material

          conditions of  this agreement  were never fulfilled.   Eastland's
                         ____
                              
          ____________________

          3    So  too  with  regard   to  ENDA's  default  on  the  cross-
          collateralized Tamarac  loan.   Hope argued below  that "Eastland
          waived  any ability  to  rely on  any   default' of  the  Tamarac
          loan . . . [because  p]rior to  August 1, 1989,  Eastland entered
          into  negotiations with ENDA for an extension of the Tamarac loan
          . . .  and Eastland  previously had .  . .  not required ENDA  to
          repay [similar] loans  on the due date."  That  Eastland had been
          forced  to renegotiate  payment  with Verardo  and Ozsezen  after
          three  successive  defaults  supports   the  inference  that  the
          decision to  withdraw the  Hope loan was  primarily motivated  by
          prudential concerns.

                                         -12-














          motives in insisting on  the letter of the agreement  in refusing

          to perform are not a matter with which the law is concerned.

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                    For the foregoing reasons, the judgment of the district

          court is AFFIRMED.
                   ________












































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