Leroy M. Gill v. Moco Thermal Industries, Incorporated Ronald L. Konczalski

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LeRoy M. GILL, Plaintiff-Appellant, v. MOCO THERMAL INDUSTRIES, INCORPORATED; Ronald L. Konczalski, Defendants-Appellees.

No. 92-1261

United States Court of Appeals, Sixth Circuit.

Oct. 14, 1992.

Order on Denial of Rehearing Dec. 15, 1992.

981 F.2d 858

as if Commonwealth‘s alterations increased the amount or terms of repayment. Appellees appear to be clinging to a technicality in the hope of extinguishing their otherwise lawfully incurred debt.

Furthermore, even if Commonwealth‘s actions did constitute “material alteration” as that term is commonly understood, numerous courts, including this court, have addressed the question of whether D‘Oench or § 1823(e) is operative when a failed financial institution materially altered, or wrongly augmented, the terms of a partially completed instrument or document. See, e.g.,

FDIC v. Caporale, 931 F.2d 1 (1st Cir. 1991);

FSLIC v. Murray, 853 F.2d 1251 (5th Cir. 1988);

FDIC v. Morrison, 816 F.2d 679 (6th Cir. 1987);

FDIC v. McClanahan, 795 F.2d 512 (5th Cir. 1986);

FDIC v. Hatmaker, 756 F.2d 34 (6th Cir. 1985). Such cases have relied on a well-recognized component of the larger D‘Oench doctrine—that when a party “lent himself” to a scheme that could mislead federal bank examiners, whether or not done unwittingly, he cannot circumvent D‘Oench by arguing that the failed bank wrongly altered or augmented an incomplete instrument which he signed. See

D‘Oench, 315 U.S. at 460, 62 S.Ct. at 680;

Caporale, 931 F.2d at 2 (“By signing blank notes, the Caporales ‘lent themselves’ to a scheme that could mislead bank examiners.“);

McClanahan, 795 F.2d at 515 (same). In the instant case, the buyers—all sophisticated attorneys—should have foreseen the consequences of signing a blank promissory note.¹⁴

III.

Accordingly, we REVERSE not only the district court‘s entry of a take-nothing judgment on the FDIC‘s claim, but also the court‘s order that the FDIC must return to Vanderkam the $134,419 that he had previously paid on the note and return to Plato his 50,000 shares of stock given as collateral. We AFFIRM the district court‘s judgment on the FDIC‘s claim only insofar as it refused to award quantum meruit damages. We REMAND for the entry of judgment (including, if and to the extent allowed under law, interest, costs, and attorneys fees). Costs of this appeal shall be borne by the appellees.

Gregory H. Kinney (briefed), Troy, MI, for plaintiff-appellant.

Stephen I. Greenhalgh, Mark K. Wilson, Hill, Lewis, Adams, Goodrich & Tait, Detroit, MI, Timothy W. Hefferon (briefed), Hill, Lewis, Adams, Goodrich & Tait, Birmingham, MI, for defendants-appellees.

Before: GUY and BATCHELDER, Circuit Judges; and CELEBREZZE, Senior Circuit Judge.

ORDER

LeRoy M. Gill appeals the judgment for defendants following a bench trial in this ERISA action in which he sought continued retiree health insurance benefits. Both parties to this appeal have waived oral argument. This case has been referred to a panel of the court pursuant to Rule 9(a), Rules of the Sixth Circuit. Upon examination, this panel unanimously agrees that oral argument is not needed. Fed. R. App. P. 34(a).

* This order was originally issued as an “unpublished order” filed on October 14, 1992. On December 10, 1992, the court designated the order as one recommended for full-text publication.

Plaintiff filed his complaint in the district court alleging that his former employer, defendant Moco Thermal Industries (MOCO) intended to discontinue health insurance benefits for himself and other MOCO retirees in violation of its fiduciary duties under ERISA. The district court issued a preliminary injunction, which this court affirmed on appeal.

Gill v. Konczalski, 951 F.2d 349 (6th Cir. 1991). Thereafter, the action proceeded to a bench trial, after which the district court made oral findings of fact and conclusions of law and entered judgment for defendants. A panel of this court denied plaintiff‘s motion for injunctive relief pending this appeal.

Gill v. Moco Thermal Indus., No. 92-1261 (6th Cir. March 23, 1992) (order).

Generally, ERISA distinguishes between employee pension plans and employee welfare plans.

Armistead v. Vernitron Corp., 944 F.2d 1287, 1297 (6th Cir. 1991). Health insurance plans are employee welfare plans, for which there is no vesting requirement under ERISA.

Armistead, 944 F.2d at 1297;

Musto v. Am. Gen. Corp., 861 F.2d 897, 912 (6th Cir. 1988), cert. denied,

490 U.S. 1020 (1989). However, the parties may agree to or contract for vesting of welfare plan rights.

International Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 301 (6th Cir. 1991), cert. denied,

504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 565 (1992);

In re White Farm Equip. Co., 788 F.2d 1186, 1193 (6th Cir. 1986). Essentially, the court must look to the intent of the parties and apply federal common law of contracts to determine whether welfare plan benefits have vested.

Armistead, 944 F.2d at 1297-98. Initially, the court must look to the language of the “written instrument” establishing the welfare benefit plan required by ERISA, which we agree is the health insurance policy itself in this case, to determine plaintiff‘s rights. See

Musto, 861 F.2d at 900-01.

Upon review, we conclude that the district court correctly noted that the insurance policy unambiguously provides that the plan may be terminated by MOCO upon 30 days written notice. Although plaintiff argues that he may invoke the doctrine of equitable estoppel to establish a right to continued insurance benefits, see

Armistead, 944 F.2d at 1298-1300, there is simply no factual basis for the application of estoppel in this case.

Moreover, we conclude that the district court did not abuse its discretion in declining to award statutory damages under 29 U.S.C. § 1132(c)(1)(B). See

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 116 (1989). MOCO is exempted from ERISA reporting requirements. See 29 C.F.R. § 2520.104-20(a) and (b). Therefore, plaintiff is not entitled to damages.

Nor did the district court abuse its discretion in declining to award attorney‘s fees to plaintiff merely because plaintiff successfully defended a grant of preliminary injunctive relief on an earlier appeal. See

Sweet v. Consolidated Aluminum Corp., 913 F.2d 268, 271-72 (6th Cir. 1990). Finally, plaintiff‘s contention that the district court erred in dismissing the individual defendant (now former) president of MOCO from the lawsuit during trial is without merit given our conclusion that plaintiff has shown no ERISA violation in the first instance. Thus, the district court‘s error, if any, was harmless.

Accordingly, the judgment of the district court is affirmed. Rule 9(b)(3), Rules of the Sixth Circuit.

ORDER ON REHEARING

Dec. 15, 1992.

Appellant petitions for a rehearing of this court‘s October 14, 1992, order which affirmed the judgment for appellees in this ERISA action.

After careful consideration, the panel concludes that it acted under no misapprehension of law or fact in issuing its order. Fed. R. App. P. 40(a). There is no factual basis for application of estoppel in this case. Moreover, the district court did not abuse its discretion in declining to award statutory damages for any technical failure to comport with ERISA‘s reporting requirements.

Accordingly, the petition for rehearing is denied.

Notes

14

We briefly note two other issues raised on appeal that are not disposed of by our application of the D‘Oench doctrine in this case. First, FDIC argues that the district court erred in refusing to award the FDIC quantum meruit damages in addition to its contract claim on the promissory note. The FDIC specifically argues that the buyers were unjustly enriched on account of the five-day extension of the expiration date. We agree with the district court that restitutionary damages were not appropriate. The buyers did not request that extension and, according to the evidence at trial, the buyers were not even aware of the extension until well after the altered letter of credit had expired. Commonwealth‘s officious actions are not a proper basis for this type of equitable relief. Additionally, we note that it appears that there was no enrichment of any type based on the alteration of the expiration date from June 24, 1985, to June 29, 1985, as Vetco, Inc. presented the letter of credit on June 24th—the last valid day under the original letter of credit. Another issue we must briefly address concerns Vanderkam and Plato‘s claim that the trial court failed to award them attorneys’ fees under the Equal Access to Justice Act, 28 U.S.C. § 2412(d). Because the Act only applies to a “prevailing party,” id. § 2412(d)(1)(A), our reversal renders this particular claim moot.

Case Details

Case Name: Leroy M. Gill v. Moco Thermal Industries, Incorporated Ronald L. Konczalski

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Dec 15, 1992

Citation: 981 F.2d 858

Docket Number: 92-1261

Court Abbreviation: 6th Cir.