The Federal Deposit Insurance Corporation v. Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A. et al

Filing 59

ORDER: The FDIC's Motion in Limine to Bar All Evidence of an Alleged, Unrecorded Side Agreement Pertaining to First Priority Bank, Bradenton Florida's Written February 16, 2006 Loan Approval to River Meadows Development, LLC as a Defense 33 is DENIED. Signed by Judge Virginia M. Hernandez Covington on 5/3/2013. (KAK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
THE FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for
First Priority Bank, Bradenton,
Florida,
Plaintiff,
v.

Case No. 8:11-cv-2831-T-33MAP

ICARD, MERRILL, CULLIS, TIMM,
FUREN & GINSBURG, P.A., and
ROBERT MESSICK, ESQ.,
Defendants.
______________________________/
ORDER
This matter comes before the Court pursuant to the FDIC’s
Motion in Limine to Bar All Evidence of an Alleged, Unrecorded
Side Agreement Pertaining to First Priority Bank, Bradenton
Florida’s Written February 16, 2006 Loan Approval to River
Meadows Development, LLC as a Defense (Doc. # 33), filed on
April 8, 2013.

Defendants filed a Response in Opposition to

the Motion on April 24, 2013.

For the reasons that follow,

the Motion is denied.
I.

Background
After

River

Meadows

Development,

LLC

submitted

a

commercial loan application to First Priority Bank seeking
$6.3 million, the Bank’s Director’s Committee held a meeting
to review the application. (7/9/2012 Putnam Dep. Doc. # 22-2

at 165). On February 16, 2006, that Committee, comprised of
seven members, approved a $5.3 million loan to River Meadows
Development, LLC with certain conditions enumerated in the
Bank’s Credit Approval Request form (CAR). (Id.; Doc. # 33-2).
One of the conditions stated in the CAR was the “assignment of
the option contract to purchase an additional 25-acre parcel
(Parcel 4) located just north of Parcels 1-3.” (Doc. # 33-2).
The minutes from the meeting also reflect that the loan
collateral included “the assignment of the option contract to
purchase an additional 25-acre parcel (Parcel 4) located just
north of Parcels 1-3 and assignment of all plans, permits, and
contracts.” (Doc. # 33-1 at 5).
On February 17, 2006, the Bank requested that Robert
Messick, Esq. of the Icard Merrill firm represent the Bank in
closing the River Meadows Development, LLC loan, and

Messick

agreed. (7/9/2012 Putnam Dep. Doc. # 22-2 at 116, 118).
Messick omitted from the loan commitment letter the condition
that the Bank receive the 25-acre option contract as a part of
the loan collateral. (Doc. # 23-7).

Messick closed the loan

on behalf of the Bank without obtaining the 25-acre option
contract. Not long thereafter, the Bank failed, and the FDIC
was appointed as the Receiver.
The FDIC sues Messick and the Icard Merrill firm for
2

legal malpractice and breach of fiduciary duty. In defense of
these tort claims, Defendants assert that the 25-acre option
contract was not actually part of the collateral for the loan,
and that the Bank was aware that there was not an option to
purchase the property. (Doc. # 8 at 8).

Defendants have

tendered to the Court numerous items of evidence in support of
the

proposition

that

the

members

of

the

Bank’s

lending

committee did not consider the option to be an item of
collateral.1

In addition, Defendants indicate that Messick

orally advised Putnam that the option contract did not exist,
and Putnam agreed that it was not an item of collateral.
(6/19/2012 Messick Dep. Doc. # 22-5 at 75-76).
At

this

juncture,

the

FDIC

seeks

an

Order

barring

Defendants from introducing “any documentary or testimonial
evidence or mak[ing] any statement or comment at any time
during the trial regarding the purported existence of the
alleged unrecorded side agreement or scheme by which the

1

For instance, George Najmy testified during his
deposition that the loan was not underwritten based upon an
option contract or a purported option contract to acquire 25
acres of land. (Najmy Dep. Doc. # 22-1 at 46, 58).
Alan
Zirkelbach similarly testified that he placed no weight on the
existence of Parcel 4 in approving the loan. (Zirkelbach Dep.
Doc. # 22-4 at 20). Putnam testified that he did not ascribe
any value to the 25-acre Parcel. (7/9/2012 Putnam Dep. Doc. #
22-2 at 145-146).
3

condition that the Borrower pledge in its interest in the 25acre

option

contract

as

collateral

for

the

Loan

was

purportedly waived, or alternatively, by which Messick was
allegedly authorized to ignore this express written Loan
condition in documenting and closing the Loan.” (Doc. # 33 at
11-12).

The FDIC asserts that such evidence is barred by the

application of the D’Oench doctrine and the parol evidence
rule.
II.

The D’Oench Doctrine
In D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942), a

securities dealer who executed a demand note with a bank tried
to prevent the FDIC, which had acquired the note, from
enforcing it because of the securities dealer’s side agreement
with the bank that the note would not be called for payment.
The Supreme Court rejected the securities dealers’ defense and
held secret agreements outside the documents contained in a
bank’s records would not operate as a defense against suit by
the FDIC on a note acquired from a failed bank. Id. at 459.
The Court’s reasoning, which has evolved into what is
known as the D’Oench doctrine, was intended “to protect [the
FDIC], and the public funds which it administers, against
misrepresentations as to the securities and other assets in
the portfolios of the banks which [the FDIC] insures.” Id. at
4

457.
12 U.S.C. § 1823(e) is the statutory counterpart to the
D’Oench doctrine and provides:
Agreements against interests of Corporation.
(1) In general.
No agreement which tends to
diminish or defeat the interest of the Corporation
in any asset acquired by it under this section or
section 12 U.S.C. § 1821, either as security for a
loan or by purchase or as receiver of any insured
depository institution, shall be valid against the
Corporation unless such agreement–
(A) is in writing,
(B) was executed by the depository institution and
any person claiming an adverse interest thereunder,
including the obligor, contemporaneously with the
acquisition of the asset by the depository
institution,
(C) was approved by the board of directors of the
depository institution or its loan committee, which
approval shall be reflected in the minutes of said
board committee, and
(D) has been, continuously, from the time of its
execution, an official record of the depository
institution.
As described in Baumann v. Savers Fed. Sav. & Loan
Assoc., 934 F.2d 1506, 1515 (11th Cir. 1991), the “rule that
has emanated” from D’Oench and § 1823(e) is: “In a suit over
the enforcement of an agreement originally executed between an
insured depository institution and a private party, a private
party may not enforce against a federal deposit insurer any
obligation not specifically memorialized in a written document
such that the agency would be aware of the obligation when
conducting an examination of the institution’s records.”
5

The Defendants correctly point out that the present
action is not a suit over the enforcement of an agreement
against the FDIC.

Rather, the FDIC has asserted tort claims

against former counsel of the failed bank.

Defendants also

bring to the Court’s attention several decisions in support of
the proposition that “The FDIC is not entitled to special
protection when it brings a tort claim against a third party
on behalf of a defunct financial entity.” Resolution Trust
Corp. v. Holland & Knight, 832 F. Supp. 1532, 1539 (S.D. Fla.
1993)(citing FDIC v. Ernst & Young, 967 F.2d 166, 170 (5th
Cir. 1992)).

Among other arguments, Defendants persuasively

contend that it would not be fair for the FDIC to accuse
counsel of negligently closing the loan and then preclude
counsel from describing the facts and circumstances of the
representation.

The Court agrees with Defendants.

The Eleventh Circuit has held that the D’Oench doctrine
“applies in virtually all cases where a federal depository
institution regulatory agency is confronted with an agreement
not documented in the institution’s records.” Murphy v. FDIC,
208 F.3d 959, 963 (11th Cir. 2000)(citing OPS Shopping Ctr.,
Inc.

v.

FDIC,

992

F.2d

306,

308

(11th

Cir.

1993)).

Nevertheless, the Court finds that the doctrine does not apply
here

because

this

suit

is

not
6

even

remotely

about

the

enforcement of a side agreement against the interest of the
FDIC.

The D’Oench doctrine may be broad, but it is not

limitless.
To be sure, the protections of the D’Oench doctrine serve
an important function.

As explained in Langley v. FDIC, 484

U.S. 86 (1987), “one purpose of § 1823(e) is to allow federal
and state bank examiners to rely on a bank’s records in
evaluating the worth of the bank’s assets. . . . Neither the
FDIC nor state banking authorities would be able to make
reliable evaluations if bank records contained seemingly
unqualified notes that are in fact subject to undisclosed
conditions.” Id. at 92.

The reliability of the failed Bank’s

records, however, is not implicated here, where the FDIC is
suing counsel for malpractice and breach of fiduciary duty.
The issues for the jury to decide turn on whether counsel
acted reasonably and ethically in representing the Bank.
would not serve the purpose of the D’Oench

It

doctrine to

foreclose counsel’s opportunity to describe what actions
counsel

undertook

representation

of

during
the

the

Bank,

course

including

counsel had with Bank employees.

of

the

counsel’s

conversations

Such conversations are not

“unrecorded side agreements” and are thus not barred by the
application

of

the

D’Oench

doctrine.
7

Furthermore,

the

testimony of Bank employees regarding their recollections of
what transpired during the loan approval process does not fall
into the category of unrecorded side agreements.

Thus, the

Motion is denied to the extent it seeks the application of the
D’Oench doctrine to bar Defendants from offering evidence in
support of their defense at trial.
III. Parol Evidence Rule
The Court also rejects the FDIC’s argument that the
evidence in question is barred by the parol evidence rule.
That rule applies only to contracts. See Johnson Enters. of
Jacksonville v. FPL Group, Inc., 162 F.3d 1290, 1309 (11th
Cir. 1998)(The parol evidence “rule applies when the parties
intend that a written contract incorporate their final and
complete agreement.”); Brown v. Fin. Serv. Corp., Int’l, 489
F.2d 144, 149 (5th Cir. 1974)(“The parol evidence rule is a
rule of the substantive law of contract, and its purpose is to
preserve the sanctity of a written agreement once it is
determined that the writing fully states the agreement of the
parties.”).2

“If

no

contract

has

been

made,

the

parol

evidence rule has no application.” Coleman v. Brooks, 113 So.

2

In Bonner v. City of Prichard, 661 F.2d 1206, 1209
(11th Cir. 1981), the Eleventh Circuit adopted all cases
decided by the Fifth Circuit Court of Appeals prior to the
close of business on September 30, 1981, as binding precedent.
8

2d 590, 592 (Fla. 2d DCA 1959)(internal citation omitted).
Neither the CAR nor the unsigned minutes are a contract,
and this case is not one in which any party is seeking to
enforce the terms of the loan as reflected in the CAR or the
minutes. Furthermore, even assuming arguendo that one or both
of the documents was a contract, the parol evidence rule would
not apply to bar the admission of post-contract formation
evidence.

As explained in Pavolini v. Williams, 915 So. 2d

251, 254 (Fla. 5th DCA 2005), “The parol evidence rule applies
to verbal agreements between the parties to a written contract
which are made before or at the time of execution of the
contract. It does not apply to the admission of subsequent
oral agreements that alter, modify, or change the former
existing agreement between the parties.” See also The Race,
Inc. v. Lake & River Recreational Props., Inc., 573 So. 2d
409, 411 (Fla. 1st DCA 1991)(“And the parol evidence rule has
been specifically held to be inapplicable to oral agreements
made subsequent to the execution of a promissory note . . .”).
After finding that the D’Oench doctrine and the parol
evidence rule are inapplicable, the Court denies the Motion in
Limine.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
9

The FDIC’s Motion in Limine to Bar All Evidence of an
Alleged,

Unrecorded

Side

Agreement

Pertaining

to

First

Priority Bank, Bradenton Florida’s Written February 16, 2006
Loan Approval to River Meadows Development, LLC as a Defense
(Doc. # 33) is DENIED.
DONE and ORDERED in Chambers, in Tampa, Florida, this 3rd
day of May, 2013.

Copies: All Counsel and Parties of Record

10