Branch v. Tifton Banking Company
Filing
23
ORDER granting 22 Motion to Dismiss for Failure to State a Claim. Ordered by Judge Hugh Lawson on 11/26/2012. (nbp)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
VALDOSTA DIVISION
TIMOTHY V. BRANCH,
Plaintiff,
v.
Civil Action No. 7:11-CV-45 (HL)
FEDERAL DEPOSIT INSURANCE
CORPORATION, as receiver for
Tifton Banking Company,
Defendant.
ORDER
This case is before the Court on Defendant Federal Deposit Insurance
Corporation, as receiver for Tifton Banking Company’s (“FDIC-R”) Rule 12(b)(6)
Motion to Dismiss (Doc. 22). For the reasons discussed below, the Motion to
Dismiss is granted.
I.
FACTS
According to Plaintiff’s complaint, in 2005, Pat Hall, then-president of Tifton
Banking Company (“the Bank”), on behalf of the Bank, entered into a verbal
agreement with Plaintiff to participate in a real estate investment venture with a
real estate investor/speculator named Ray Goodman, who was not affiliated with
the Bank. Under the alleged agreement, Goodman would find residential rental
property suitable for investment, and Hall, on behalf of the Bank, would finance
the acquisition by making a loan to Plaintiff, as borrower. “There was no
partnership or other entity formed between Goodman, Plaintiff and Hall but just a
verbal agreement to operate as described heretofore.” (Compl., ¶ 8).
Pursuant to this verbal agreement, Plaintiff obtained several loans from the
Bank to purchase residential properties. He also executed additional notes in
substantial amounts for other property purchases. However, Goodman ceased
participation in the venture, and Plaintiff eventually became delinquent in his debt
service obligations to the Bank. Plaintiff contends that at that time Hall made
various promises and agreements that modified the written terms of the Bank’s
loans to Plaintiff. But these alleged modifications were never put in writing or
agreed to by the Bank’s loan committee or board of directors. In the summer of
2010, the Bank began foreclosing on the various properties and liquidating
certain assets Plaintiff put up as collateral for the loans.
On November 12, 2010, Tifton Banking Company was closed by the
Georgia Department of Banking and Finance. The FDIC was named receiver.
On January 18, 2011, Plaintiff filed a complaint against Tifton Banking
Company in the Superior Court of Tift County alleging breach of contract. Plaintiff
seeks damages, attorney’s fees, and litigation costs.
The FDIC-R, in its capacity as receiver of Tifton Banking Company,
removed the case to this Court on April 13, 2011. Plaintiff filed a motion to
remand the case to the Superior Court of Tift County. That motion was granted
on July 19, 2011. The FDIC-R appealed the remand order to the Eleventh Circuit
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Court of Appeals. In light of a July 2012 decision, the Eleventh Circuit vacated
the remand order.
Once the mandate from the appellate court issued, the FDIC-R was
directed to file an answer or other responsive pleading.1 On September 26, 2012,
it filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),
arguing that Plaintiff has failed to state a claim for relief. Plaintiff did not file a
response to the motion.
II.
ANALYSIS
A.
Standard of Review
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure
12(b)(6) tests the facial sufficiency of a complaint. When considering a Rule
12(b)(6) motion to dismiss, the Court must accept as true all facts set forth in the
plaintiff’s complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th
Cir. 2009). However, a plaintiff must provide “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955 (2007) (internal
quotations, citations, and alterations omitted). To avoid dismissal, a complaint
must contain sufficient factual matter, accepted as true, to “state a claim to relief
that is plausible on its face.” Id. at 570.
1
Under the Eleventh Circuit’s order, the FDIC-R was substituted as the party-defendant
at the time it filed its motion to substitute in the state court action. Thus, the FDIC-R is
the proper defendant in this case.
3
In Ashcroft v. Iqbal, the Supreme Court held that “the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable
to legal conclusions.” 556 U.S. 662, 678, 129 S.Ct. 1937 (2009). “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. In considering a motion to dismiss, the court
should “(1) eliminate any allegations in the complaint that are merely legal
conclusions; and (2) where there are well-pleaded factual allegations, ‘assume
their veracity and then determine whether they plausibly give rise to an
entitlement to relief.’” Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290
(11th Cir. 2010) (quoting Iqbal, 566 U.S. at 679). The court may also “infer from
the factual allegations in the complaint ‘obvious alternative explanation[s],’ which
suggest lawful conduct rather than the unlawful conduct the plaintiff would ask
the court to infer.’” Id. (quoting Iqbal, 556 U.S. at 682).
B.
The D’Oench doctrine and 12 U.S.C. § 1823(e)
The FDIC-R argues that Plaintiff’s breach of contract claim fails as a matter
of law under the doctrine established by the Supreme Court in D’Oench, Duhme
& Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676 (1942) (the “D’Oench doctrine”). The
Court in D’Oench held that when the FDIC takes over a failed bank and its
assets, the FDIC is not bound by agreements which are not in writing and are not
contained in the bank’s records. Id.; see also Murphy v. FDIC, 208 F.3d 959, 963
(11th Cir. 2000) (holding that as insurer of a bank’s deposits, the FDIC is not
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liable for “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”) (quotation and internal quotation marks
omitted); First Union Nat. Bank of Fla. v. Hall, 123 F.3d 1374, 1379 (11th Cir.
1997) (In D’Oench, “the Supreme Court held that the FDIC’s interest in an asset
it acquired from a failed bank could not be diminished by alleged ‘agreements’
not disclosed in the failed bank’s records.”) The purpose of “D’Oench and its
progeny [is to] enable the FDIC, and the banks that acquire insolvent banks’
assets from the FDIC, to make quick and accurate appraisals of the value of
insolvent banks’ assets by protecting the FDIC and its transferees against
undisclosed agreements that would unexpectedly diminish the value of those
assets.” Hall, 123 F.3d at 1378-79.
The D’Oench doctrine has been codified at 12 U.S.C. § 1823(e), which
provides:
No agreement which tends to diminish or defeat the
interest of the [FDIC] in any asset acquired by it under
this section or section 1821 of this title, either as
security for a loan or by purchase or as receiver of any
insured depository institution, shall be valid against the
[FDIC] 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,
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(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 or committee, and
(D)
has been, continuously, from the time of its
execution, an official record of the depository
institution.
12 U.S.C. § 1823(e)(1).
“Any agreement which does not meet the requirements set forth in section
1823(e) of this title shall not form the basis of, or substantially comprise, a claim
against the receiver or the [FDIC].” 12 U.S.C. § 1821(d)(9)(A). The party claiming
the adverse interest bears the burden of establishing that an agreement satisfies
§ 1823(e)(1)’s requirements. See FDIC v. Oldenburg, 34 F.3d 1529, 1551 (10th
Cir. 1994); FDIC v. Singh, 977 F.2d 18, 26 (1st Cir. 1992).
“[C]ourts have found the aims of section 1823(e) and D’Oench identical
and thus have construed defenses premised upon section 1823(e) and D’Oench
in tandem.” Twin Const., Inc. v. Boca Raton, Inc., 925 F.2d 378, 382 (11th Cir.
1991). Applying both § 1823(e) and D’Oench, it is clear that Plaintiff cannot
pursue his claim against the FDIC-R. It is Plaintiff’s burden to show that the §
1823(e) requirements are met, which he has not done. There are no allegations
contained in the complaint reflecting the existence of any written and executed
documentation as to the alleged loan modifications, and Plaintiff has not
submitted any such writings in response to the motion to dismiss. Further, there
are no allegations or evidence that the alleged modifications were approved by
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the board of directors or the loan committee. Finally, there are no allegations
suggesting that any properly executed loan modification agreement was
contained in the official records of Tifton Banking Company.
III.
CONCLUSION
Based on the foregoing, the FDIC-R’s Motion to Dismiss (Doc. 22) is
granted. Plaintiff’s complaint against the FDIC-R is dismissed in its entirety. 2
SO ORDERED, this the 26th day of November, 2012.
s/ Hugh Lawson
HUGH LAWSON, SENIOR JUDGE
mbh
2
Plaintiff’s claim as stated in his complaint is a breach of contract claim. However, if
Plaintiff’s claim could be read to include a tort claim, it still fails because the D’Oench
doctrine also applies to tort claims. See OPS Shopping Ctr. v. FDIC, 992 F.2d 306, 310
(11th Cir. 1993).
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