Weichsel Farm, L.P. v. JP Morgan Chase Bank, N.A.
740 F.3d 972
5th Cir.2014Background
- Washington Mutual (WaMu) entered leases for undeveloped land for future branches; WaMu failed on Sept. 25, 2008.
- The FDIC, as receiver under FIRREA, assumed WaMu’s assets/liabilities and sold substantially all to JPMorgan Chase via a Purchase & Assumption (P&A) Agreement.
- The Agreement defined “Bank Premises” as WaMu facilities occupied as of closing; it defined “Other Real Estate” to include leasehold rights and assigned Other Real Estate outright to Chase.
- The contested leases were not occupied on the closing date and thus fall within Other Real Estate; Chase accepted the assignment and expressly agreed to assume WaMu’s liabilities in the Agreement.
- FDIC and Chase later treated the leases as Bank Premises (giving Chase a 90‑day option) and rejected them; FDIC repudiated the leases as receiver. Landlords sued Chase for breach; district courts granted summary judgment for landlords on liability and damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether landlords are intended third‑party (creditor) beneficiaries of the P&A Agreement | Landlords: Chase expressly assumed WaMu liabilities, so landlords are creditor beneficiaries with contractual enforcement rights | FDIC/Chase: Landlords aren’t parties or intended beneficiaries; a government‑contract no‑beneficiaries presumption precludes enforcement | Court: Although contracts principles would support creditor‑beneficiary status, courts of appeals uniformity compels holding landlords are not third‑party beneficiaries on these facts |
| Whether landlords may enforce leases against Chase via privity of estate (assignment) under Texas property law | Landlords: P&A Agreement unambiguously assigned Other Real Estate (including leases) to Chase, creating privity of estate and real‑covenant liability for rent/taxes | FDIC/Chase: Landlords lack standing to interpret/enforce the P&A Agreement; without contractual standing, no basis for privity‑based claim | Held for landlords: non‑party may prove content of assignment; plain text makes assignment complete; privity of estate exists and rent/tax covenants run with the land |
| Admissibility of extrinsic evidence (parol evidence) to show parties’ intent re: leases | Landlords: plain text controls; parol evidence cannot override the written assignment | FDIC/Chase: parties’ course of performance and mutual understanding show leases were meant to be Bank Premises (optionable); parol evidence should be considered | Court: Parol evidence rule bars reinterpreting the unambiguous written assignment; court refuses to entertain parties’ atextual later “understanding” |
| Whether allowing landlord claims would undermine FDIC receivership authority and floodgates of claims | FDIC/Chase: recognizing landlord rights would interfere with receivership administration and invite many third‑party claims | Landlords: rights are narrow and flow from an affirmative assignment plus an express assumption of liabilities | Court: Concern overstated; narrow factual circumstances (express assignment + express assumption) limit scope; administrative concerns do not outweigh legal rights here |
Key Cases Cited
- Interface Kanner, LLC v. JPMorgan Chase Bank, 704 F.3d 927 (11th Cir. 2013) (declined to recognize landlords as third‑party beneficiaries under the same P&A Agreement)
- GECCMC v. JPMorgan Chase Bank, 671 F.3d 1027 (9th Cir. 2012) (similarly refused third‑party beneficiary status for landlords under P&A Agreement)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requires injury‑in‑fact, causation, and redressability)
- Clem Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d 186 (5th Cir. 1984) (federal common law governs interpretation of government contracts)