Deerborne Cottages, L.L.C. et al v. First Bank et al
Filing
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MEMORANDUM OF DECISION AND ORDER granting 38 Motion for Judgment on the Pleadings, dismissing with prejudice Pltfs' remaining claims against the FDIC pursuant to Rule 12(c) of FRCvP. (SEE ORDER FOR DETAILS) Signed by District Judge Martin Reidinger on 9/22/12. (ejb)
THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:11cv178
DEERBORNE COTTAGES, LLC,
a North Carolina Limited Liability
Corporation, et al.,
Plaintiffs,
vs.
FIRST BANK, Successor to THE
BANK OF ASHEVILLE, et al.,
Defendants.
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MEMORANDUM OF
DECISION AND ORDER
THIS MATTER is before the Court on the Defendant Federal Deposit
Insurance Corporation’s Motion for Judgment on the Pleadings [Doc. 38].
I.
PROCEDURAL BACKGROUND
The Plaintiffs brought this action on June 15, 2011 in the Buncombe
County General Court of Justice, Superior Court Division, against the
Defendants First Bank, as successor to The Bank of Asheville (“First Bank”);
the Federal Deposit Insurance Corporation, as receiver for the Bank of
Asheville (“FDIC-R”); G. Gordon Greenwood (“Greenwood”); and Raynia J.
White (“White”), asserting a breach of contract claim arising out of alleged oral
agreements that The Bank of Asheville would provide future funding for the
development of vacation rental cottages on a parcel of property that the
Plaintiff Deerborne Cottages, LLC (“Deerborne Cottages”) purchased in
2009.1 [Complaint, Doc. 1-3]. Additionally, the Plaintiffs asserted claims for
fraud, negligent misrepresentation, and unfair and deceptive trade practices
arising out of the alleged misrepresentations made by Greenwood and White
related to the future funding for the development. [Id.]. The action was
removed to this Court on July 18, 2011. [Doc. 1].
On August 15, 2011, FDIC-R filed a motion to dismiss the claims
asserted against it pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. [Doc. 13]. FDIC-R did not raise any arguments regarding the
applicability of 12 U.S.C. § 1823(e) in its motion, as it had not obtained the
intra-corporate approvals necessary for FDIC-R to assert § 1823(e) as of the
date of filing.
On August 10, 2011, Defendant First Bank requested an extension of
time to respond to the Complaint on the ground that “First Bank is waiting for
permission from the FDIC to assert the FDIC’s special defenses in this
matter.” [Doc. 9]. The Court granted this motion on August 12, 2011. [Doc.
10]. On September 13, 2011, First Bank then filed a motion to dismiss,
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Weststar Financial Services Corporation (“Weststar”) was also named as a
defendant to this action. The Plaintiffs voluntarily dismissed their claims against
Weststar on December 19, 2011. [Doc. 35].
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arguing inter alia that § 1823(e) barred the Plaintiff’s assertion of an oral
agreement, as well as causes of action related to the alleged oral agreement.
[Docs. 21, 22]. On September 28, 2011, FDIC-R filed a motion to join First
Bank’s motion to dismiss pursuant to § 1823(e). [Doc. 26]. The Court granted
FDIC-R’s motion on October 3, 2011. [Doc. 30].
On April 9, 2012, the Honorable Dennis L. Howell, United States
Magistrate Judge, entered a Memorandum and Recommendation with respect
to the Defendants’ Motion to Dismiss. [Doc. 36]. Judge Howell recommended
that the Plaintiffs’ claim for breach of contract be dismissed with respect to all
of the Defendants, on the ground that such claim was barred by the statute of
frauds. [Id. at 11-12, 20-23]. The Magistrate Judge recommended that the
Plaintiffs’ remaining claims for fraud, negligent misrepresentation, and unfair
and deceptive trade practices be dismissed as to First Bank, as the Complaint
failed to allege that First Bank made any misrepresentations to the
Defendants and further failed to allege any basis for holding First Bank liable
for the misrepresentations made by the other Defendants. [Id. at 21-22].
W ith respect to Plaintiff’s claims for negligent misrepresentation and
unfair and deceptive trade practices 2 against FDIC-R, Judge Howell
recommended denying FDIC-R’s motion to dismiss, reasoning that “[n]either
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The Plaintiffs did not assert a fraud claim against FDIC-R.
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the statute of fraud nor the parol evidence rule bars Plaintiffs’ tort claims as
a matter of law.” [Id. at 14]. The Memorandum and Recommendation did not
address FDIC-R’s adoption of First Bank’s § 1823(e) argument or the
applicability of that statute to the claims remaining against FDIC-R.
No objections were filed to the Memorandum and Recommendation,
and the Court adopted the Magistrate Judge’s Recommendation on May 21,
2012. [Doc. 41].
Following the entry of the Memorandum and Recommendation, FDIC-R
filed an Answer to the Plaintiffs’ Complaint. [Doc. 37]. Then, on May 9, 2012,
FDIC-R filed the present motion, seeking a judgment on the pleadings
pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, arguing that
the Plaintiffs’ remaining claims are barred under 12 U.S.C. § 1823(e). [Doc.
38]. The Plaintiffs oppose FDIC-R’s motion, arguing that “FDIC-R should not
be allowed to reassert an argument that it has previously made and which
was rejected by this Court on the prior Rule 12(b)(6) motion.” [Doc. 42 at 2].
II.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings
are closed -- but early enough not to delay trial -- a party may move for
judgment on the pleadings.” Fed. R. Civ. P. 12(c). The failure to state a claim
upon which relief may be granted can be raised by a motion for judgment on
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the pleadings. See Fed. R. Civ. P. 12(h)(2)(B). Such a motion is decided
using the same standard as that applied to a Rule 12(b)(6) motion to dismiss
for failure to state a claim upon which relief may be granted. McBurney v.
Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010).
Thus, in order to survive a Rule 12(c) motion, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 1678, 29 S.Ct. 1937,
173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To be “plausible on its face,”
a plaintiff must demonstrate more than “a sheer possibility that a defendant
has acted unlawfully.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
In reviewing the complaint, the Court must accept the truthfulness of all
factual allegations but is not required to assume the truth of “bare legal
conclusions.” Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir. 2011). “The
mere recital of elements of a cause of action, supported only by conclusory
statements, is not sufficient ....” Walters v. McMahen, 684 F.3d 435, 439 (4th
Cir. 2012). Determining whether a complaint states a plausible claim for relief
is “a context-specific task,” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.
2009), which requires the Court to assess whether the factual allegations of
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the complaint are sufficient “to raise a right to relief above the speculative
level,” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
III.
DISCUSSION
At the outset, the Court will address the Plaintiffs’ argument that FDIC-
R’s Rule 12(c) motion is procedurally barred.
FDIC-R belatedly asserted § 1823(e) as a basis for its Rule 12(b)(6)
motion by adopting First Bank’s brief on the issue. Because the Magistrate
Judge recommended granting First Bank’s 12(b)(6) motion on other grounds,
the § 1823(e) argument was not specifically addressed in the Memorandum
and Recommendation with respect to any party. After filing its Answer, FDICR reasserted its § 1823(e) argument in a Rule 12(c) motion. The Plaintiffs
now argue that FDIC-R cannot reassert this ground as a basis for dismissal.
The Plaintiffs, however, are incorrect. While a party is generally prohibited
from making successive Rule 12 motions, see Fed. R. Civ. P. 12(g)(2), such
prohibition does not apply to a motion for judgment on the pleadings based
upon a failure to state a claim upon which relief can be granted.
See
Alexander v. City of Greensboro, 801 F.Supp.2d 429, 434 (M.D.N.C. 2011)
(“Rule 12(c) motions for judgment on the pleadings based upon failure to state
a claim are explicitly exempted from the prohibition in Rule 12(g)(2).”). Here,
FDIC-R asserts that the Plaintiffs have failed to state a claim upon which relief
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can be granted as their claims are barred under § 1823(e). FDIC-R is not
precluded from raising this argument in a Rule 12(c) motion, and thus, the
Court will proceed to address the motion on its merits.
In seeking the dismissal of the Plaintiffs’ claims, FDIC-R relies upon 12
U.S.C. § 1823(e), which provides, in pertinent part, as follows:
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,
(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). These statutory requirements are derived from what
is known as the D’Oench doctrine, which “prohibits claims based upon
agreements which are not properly reflected in the official books or records of
a failed bank or thrift.” Resolution Trust Corp. v. Allen, 16 F.3d 568, 574 (4th
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Cir. 1994) (citing D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676,
86 L.Ed. 956 (1942)). Generally stated, “[t]he purpose of the doctrine and the
statute which codifies it is to permit the FDIC to rely on bank records and to
protect the FDIC from secret agreements.” FDIC v. Hadid, 947 F.2d 1153,
1157 (4th Cir. 1991). The doctrine is applicable regardless of whether the
borrower characterizes his claim based upon the agreement as one for breach
of contract or one for fraud. See Langley v. FDIC, 484 U.S. 86, 91-93, 108
S.Ct. 396, 98 L.Ed.2d 340 (1987) (noting that misrepresentations, even those
amounting to fraud, constitute § 1823(e) “agreements”). A party must satisfy
all four requirements of § 1823(e)(1) in order to enforce an “agreement”
against FDIC. Young v. FDIC, 103 F.3d 1180, 1187 (4th Cir. 1997).
In the present case, thee Plaintiffs’ remaining claims against FDIC-R for
negligent misrepresentation and for unfair and deceptive trade practices
revolve around (1) The Bank of Asheville’s alleged oral commitment to provide
financing “for a period of four years up to the amount of $2,800,000 to allow
completion of at least 20 cottage rental units on the subject property”
[Complaint, Doc. 1-3 at ¶ 43(a)]; (2) The Bank of Asheville’s alleged failure to
disclose that it could not or did not intend to accomplish the financing [Id. at
¶ 51]; and (3) the Plaintiffs’ alleged reliance on The Bank of Asheville’s oral
representations that the “financing would be continuing” [Id. at ¶¶ 51, 53]. The
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Plaintiffs
are
precluded
from
asserting
its
claims
for
negligent
misrepresentation and unfair and deceptive trade practices by virtue of §
1823(e). See Langley, supra; FDIC v. State Bank of Virden, 893 F.2d 139,
144 (7th Cir. 1990) (debtor’s claim based on fraudulent omission precluded
under § 1823(e); “[i]f the debtor can’t use the bank’s lies to block repayment,
it can’t use material omissions either -- for the half-truth is one form of lie”);
FDIC v. Bell, 892 F.2d 64, 66 (10th Cir. 1989) (“If fraudulent warranties fall
within the reach of [§ 1823(e)], it is irrelevant whether the fraud was caused
by overt misrepresentation or deceitful omission.”); Fairfield Six/Hidden Valley
P’ship v. Resolution Trust Corp., 860 F.Supp. 1085, 1088 (D. Md. 1994)
(holding plaintiff’s claims for fraud and negligent misrepresentation based on
oral promises to provide financing were barred under § 1823(e)). Accordingly,
FDIC-R’s motion for judgment on the pleadings is granted.
IT IS, THEREFORE, ORDERED that the Defendant Federal Deposit
Insurance Corporation’s Motion for Judgment on the Pleadings [Doc. 38] is
GRANTED, and the Plaintiffs’ remaining claims against the FDIC are hereby
DISMISSED WITH PREJUDICE pursuant to Rule 12(c) of the Federal Rules
of Civil Procedure.
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IT IS SO ORDERED.
Signed: September 22, 2012
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