Marina de Ponce Inc., v. Federal Deposit Insurance Corporation et al
Filing
126
OPINION AND ORDER granting 81 Second MOTION for Summary Judgment. Case is DISMISSED WITH PREJUDICE. Judgment shall be entered accordingly. Signed by US Magistrate Judge Camille L. Velez-Rive on 2/23/2018. (ari). Modified on 2/23/2018 to edit docket entry text (ram).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
MARINA DE PONCE, INC.,
Plaintiff,
CIVIL NO. 15-1664 (CVR)
v.
FEDERAL DEPOSIT INSURANCE
CORPORATION, AS RECEIVER OF
DORAL BANK,
Defendant.
OPINION AND ORDER
INTRODUCTION
This case aptly demonstrates the importance of consigning important agreements
to writing. Plaintiff Marina de Ponce, Inc. (“Plaintiff” or “Marina”) brings forth the
present case against the now defunct Doral Bank, Doral Financial, members of its Board
of Directors and others. The complaint avers that in 2001, Marina obtained a loan from
Doral to help finance the development and construction of the “Marina de Ponce” project,
a combined residential and commercial marina project to be built in Ponce, Puerto Rico.
Said loan was memorialized in writing through a credit approval, loan agreement, and
promissory note, which Marina repaid in full.
Plaintiff posits, however, that said loan was only a partial disbursement of a larger
loan that Doral orally agreed to make and later failed to disburse, thereby causing the
project’s ultimate failure. Thus, Marina brings forth causes of action under Puerto Rico
law for breach of contract, breach of the principle of good faith, fraudulent inducement,
tortious interference with a contract and culpa in contrahendo, all stemming from Doral’s
alleged failure to disburse the additional loan for the construction of the project.
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Although this case was originally filed in state court in 2006 against the
aforementioned parties with different causes of action, Defendant herein Federal Deposit
Insurance Corporation, as receiver of Doral Bank (“Defendant” or “FDIC-R”) removed the
case to this Court pursuant to Title 12, United States Code, § 1819(b)(2)(B) and/or Title
28, United States Code, § 1442, after Doral was closed by the Office of the Puerto Rico
Commissioner of Financial Institutions in February, 2015 and the FDIC was appointed
Doral’s receiver. By operation of federal law, the FDIC as receiver acquired all of Doral’s
rights, titles, powers, privileges, assets, and liabilities, including Doral’s interests and
status as a party in this pending action. Title 12, United States Code, §§ 1821(d)(2)(A)
and 1821(d)(2)(B).
Before the Court now is Defendant FDIC-R’s “Second Motion for Summary
Judgment” (Docket No. 81), Plaintiff’s Opposition thereto (Docket No. 90), Defendant’s
Reply to Plaintiff’s opposition (Docket No. 102), and Plaintiff’s Sur-reply to Defendant’s
Reply. (Docket No. 115).
For the reasons explained below, the Court GRANTS the FDIC-R’s Motion for
Summary Judgment, and DISMISSES WITH PREJUDICE this case.
STANDARD
Summary judgment is appropriate when “the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56 (c). Pursuant to the language of the rule,
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the moving party bears the two-fold burden of showing that there is “no genuine issue as
to any material facts,” and that he is “entitled to judgment as a matter of law.” VegaRodríguez v. Puerto Rico Tel. Co., 110 F.3d 174, 178 (1st Cir. 1997).
After the moving party has satisfied this burden, the onus shifts to the resisting
party to show that there still exists “a trial worthy issue as to some material fact.” CortésIrizarry v. Corporación Insular, 111 F.3d 184, 187 (1st Cir. 1997).
A fact is deemed
“material” if it potentially could affect the outcome of the suit. Id. Moreover, there will
only be a “genuine” or “trial worthy” issue as to such a “material fact,” “if a reasonable
fact-finder, examining the evidence and drawing all reasonable inferences helpful to the
party resisting summary judgment, could resolve the dispute in that party’s favor.” Id.
At all times during the consideration of a motion for summary judgment, the Court must
examine the entire record “in the light most flattering to the non-movant and indulge all
reasonable inferences in the party’s favor.” Maldonado-Denis v. Castillo-Rodríguez, 23
F.3d 576, 581 (1st Cir. 1994).
The First Circuit Court of Appeals has “emphasized the importance of local rules
similar to Local Rule 56 [of the District of Puerto Rico].” Hernández v. Philip Morris
USA, Inc., 486 F.3d 1, 7 (1st Cir. 2007); see also Colón v. Infotech Aerospace Servs., Inc.,
869 F.Supp.2d 220, 225-226 (D.P.R. 2012). Rules such as Local Rule 56 “are designed
to function as a means of ‘focusing a district court's attention on what is -and what is notgenuinely controverted.’ ” Calvi v. Knox County, 470 F.3d 422, 427 (1st Cir. 2006)).
Local Rule 56 imposes guidelines for both the movant and the party opposing summary
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judgment. A party moving for summary judgment must submit factual assertions in “a
separate, short, and concise statement of material facts, set forth in numbered
paragraphs.” Loc. Rule 56(b). A party opposing a motion for summary judgment must
“admit, deny, or qualify the facts supporting the motion for summary judgment by
reference to each numbered paragraph of the moving party’s statement of facts.” Loc. Rule
56 (c).
If they so wish, they may submit a separate statement of facts which they believe
are in controversy.
Facts which are properly supported “shall be deemed admitted
unless properly controverted.” Loc. Rule 56(e); P.R. Am. Ins. Co. v. Rivera-Vázquez, 603
F.3d 125, 130 (1st Cir. 2010) and Colón, 869 F.Supp.2d at 226. Due to the importance of
this function to the summary judgment process, “litigants ignore [those rules] at their
peril.” Hernández, 486 F.3d at 7.
At the outset, the Court must mention that Plaintiff’s Opposition to Defendant’s
statement of uncontested material facts was procedurally non-compliant with the Local
Rules.
The denials presented by Plaintiff Marina do not oppose the truth of the
statement offered and are either irrelevant to the matter at hand, provide additional
evidence not related to the fact in question and/or failed to contradict it, or consisted of
mere “speculation, generalities, conclusory assertions, improbable inferences, and, for
lack of a better phrase, a lot of ‘hot air.’ ” Domínguez v. Eli Lilly and Co., 958 F.Supp. 721,
728 (D.P.R. 1997).
As a result thereof, the Court deemed admitted all of Defendant’s
proffered facts.
In addition, and even more problematic, is the evidence used by Marina to support
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both its Opposition to the FDIC-R’s Motion, and its Reply statement of additional facts,
to wit, an unsworn statement under penalty of perjury of Adrián Mercado (“Mercado”).
The Court is cognizant that Federal Rule of Civil Procedure 56 allows for, among other
things, affidavits to be used in supporting a party’s claims and defenses. See Fed. R. Civ.
P. 56 (c)(1)(A). In this case, however, the unsworn statement by Mercado appended to
Plaintiff’s Opposition, and which also forms the basis of Plaintiff’s Reply statement of
additional facts, is a close duplicate of the facts as alleged in the Third Amended
Complaint (Docket No. 23), and happens to also be an almost exact duplicate of the
Unsworn Statement under Penalty of Perjury of Federico Tomás Rodríguez (“Rodríguez”)
submitted with Plaintiff’s Opposition to the FDIC-R’s previous Motion for Summary
Judgment, which the Court at that time did not entertain. (Docket No. 48). Thus, not
only did Marina use Mercado’s statement (which is almost identical to Rodríguez’
statement, but changed in certain instances to give Mercado personal knowledge of the
facts) in support of its Opposition to the FDIC-R’s motions, but Mercado’s statement also
forms the basis of Marina’s reply statement of additional facts. In turn, these same facts
are the ones which the Third Amended Complaint is based upon, almost verbatim. This
is fairly obvious, as Marina failed to even change Mercado’s first person statements to
third person when it converted the contents of his unsworn statement into Marina’s
statement of additional facts. See Plaintiff’s “Statement of Additional Facts”, Docket No.
116, p. 4, “That my name and personal circumstances are as stated above”; “That I have
been the President of Marina de Ponce, Inc. since before the year 2000”.
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At this stage, more is needed than a simple “copy and paste” of the allegations in
the complaint.
As has been well established, “mere allegations are not ‘evidence’”
Zilberstein v. Kendall College, 286 Fed. Appx. 938, 940 (7th Cir. 2008); see also Borges
ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 3 (1st Cir. 2010) (“mere allegations are not
entitled to weight in the summary judgment calculus”); Tibbs v. City of Chicago, 469 F.3d
661, 663 fn. 2 (7th Cir. 2006) (“the entire ‘Statement of Facts’ section of Tibbs’s appellate
brief cites only to his amended complaint; mere allegations of a complaint are not
evidence”); Fantini v. Salem State College, 557 F.3d 22, 26 (1st Cir. 2009) (“the Court shall
not accept ... bald assertions, periphrastic circumlocutions, unsubstantiated conclusions,
or outright vituperation, or subjective characterizations, optimistic predictions, or
problematic suppositions”; Geshke v. Crocs, Inc., 740 F.3d 74, 78 (1st Cir. 2014);
(“unverified allegations in a complaint are not evidence”).
While Mercado might have personal knowledge of the facts of the case, his
statement carries little weight for summary judgment purposes, insofar as it simply
restates, almost word for word, the facts of the Third Amended Complaint, which are not
evidence. Even worse, it is almost the exact same statement as that of another witness,
Rodríguez. Therefore, the Court will not consider Mercado’s statement in its analysis of
the motion before it, or any of the documents that Mercado’s statement references to.
UNCONTESTED FACTS
1. On July 3, 2001, Doral and Marina executed a loan agreement for
$6,600,000.00 (the “Loan Agreement”) which was to be applied to “finance
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the expenses related to the development and construction of the real estate
of the project to be known as Marina de Ponce . . . and for other legitimate
uses of the Debtor . . .” Docket No. 40-1 at 1. This loan had a due date of
January 3, 2002. Id., p. 2.
2. On February 12, 2003, Marina and Doral agreed to amend the Loan
Agreement, extending its due date to March 1, 2004 and increased the
principal by $123,000.00 (the “First Amendment”). Docket No. No. 11-2, p.
at 27.
3. On March 31, 2004, Marina and Doral agreed to amend the Loan
Agreement a second time, extending the due date to March 1, 2005, and
increasing the principal by $1,589,000.00, for a total principal amount of
$7,652,000.00 (the “Second Amendment”). Docket No. 11-2, pp. 30-31.
4. On October 28, 2005, Marina paid off the $6,600,000.00 loan, as modified
and amended. Docket No. No. 34-2, p. 11.
5. Besides the Loan Agreement and Amendments described above, there are
no other written agreements between Marina and Doral pertaining to a
second loan.
6. Besides the Loan Agreement and Amendments described above, there are
no other written agreements signed by and between Marina and Doral
pertaining to any other loan.
7. Besides the Loan Agreement, First Amendment, and Second Amendment,
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the Minutes issued by Doral’s Board of Directors do not evidence the
existence of any other amendment or additional credit extension that was
approved for Marina. Docket No. 34-3, p. 2; Docket No. 34-4, p. 6; Docket
No. 34-5, p. 3.
8. The Minute dated October 23, 2001 of Doral’s Board of Directors states:
“[a]dditional funding was not approved by the Board; furthermore,
borrower shall be notified that the Bank does not intend to offer the interim
loan.” Docket No. 34-4, p. 6.
9. Antonio Pavía Bibiloni (“Pavía”), a financial consultant and representative
of Marina, stated that he never saw any communication in writing to
conclude that the bank approved any additional loan asides from the Loan
Agreement, First Amendment and Second Amendment. Docket No. 40-2,
p. 2, l. 3-12. Pavía knew that the bank did not necessarily have to approve
any additional or other loan. Id. at p. 2, l. 19-25; p. 3, l. 1-11.
10. Federico “Tommy” Rodríguez Binet (“Rodríguez Binet”), Marina’s project
manager, also admitted that there is no written document that states or
concludes that Doral approved the loan alleged in the Third Amended
Complaint. Docket No. 40-3, p. 2, l. 13-21. Rodríguez Binet admitted that
the loan alleged in the Third Amended Complaint was verbal, and not
confirmed in writing. Id. at p. 2, l. 13-32; p. 3, l. 1-18.
11. Ramón T. Balsa Rodríguez, Marina’s accountant who prepared financial
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statements for Marina and handled its accounting and tax matters, testified
that Marina’s December 31, 2000 financial statement (which he prepared)
informed of a liability of approximately $3,600,000.00 in the form of a loan
from Banco Santander. Docket No. 40-4, p. 2, l. 1-25; p. 3, l. 1-25. He
further stated that the November 30, 2001 financial statement reflects the
$6,600,000.00 loan with Doral Bank. Id. p. 5, l. 1-25. Other balance sheets
and/or financial statements reflect the increase in the $6,600,00.00 loan
up to approximately $7,652,000.00, which had a due date of March 1, 2005.
Id., p. 7, l. 10-22.
He did not have any written document evidencing
another loan from Doral, apart from the ones included in his prior reports.
Id., p. 9, l. 8-22. If he had had such information, he would have included
it in his reports. Id., p. 10, l. 1-5.
12. Marina’s allegations in its Third Amended Complaint describe a verbal
agreement between it and Doral Bank officials to provide a $13,000,000.00
to $15,000,000.00 loan. Docket No. 23, at ¶¶ 1-11; 19; 51; 57-60; 74-76; 85;
101; 113-116; 119; 122; 128; and 135.
13. Marina’s causes of action are all based in tort and breach of a verbal
agreement. Docket No. 23, at ¶¶ 59-142.
LEGAL ANALYSIS
Defendant’s “Second Motion for Summary Judgment” (Docket No. 81) is
straightforward. The issue presented by the FDIC-R here is whether Marina’s claims
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meet the requirements outlined in Title 12, United States Code, §§ 1821(d)(9)(A) and
1823(e)(1). The FDIC-R argues that Marina does not, and thus, the case cannot survive.
Plaintiff Marina responds by alleging that the statutes do not apply to this
particular case due to the so-called “no asset exception.” To this effect, Marina contends
that the FDIC-R does not currently own the loan (i.e., the asset no longer exists) that Doral
made to Plaintiff, because Marina paid off the loan before the FDIC-R became Doral’s
receiver. As a second defense, Plaintiff argues that the D’Oench doctrine is no longer
good law, having been invalidated under the Supreme Court decisions of O’Melveny &
Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048 (1994) and Atherton v. FDIC, 519 U.S. 213, 117
S.Ct. 666 (1997).
barred.
Thus, Plaintiff asserts that its claims against the FDIC-R are not
Finally, Marina posits that summary judgment is not warranted for an
independent reason, namely, outstanding discovery.
A. The statute.
The federal statute at issue in this case codifies law that the Supreme Court initially
set forth over seventy (70) years ago in D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62
S.Ct. 676 (1942). D’Oench involved a bank (which subsequently failed) that tried to
collect on a debt that was evidenced by a writing. Defendant therein alleged that it had
made a secret side-agreement with the bank and the bank had promised not to collect the
basic debt. The Supreme Court held the defense invalid because the secret side-agreement
“was designed to deceive the creditors or the public authority, or would tend to have that
effect.” D’Oench, 315 U.S. at 460, 62 S.Ct. at 681. In this way, the Court created a
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special doctrine of estoppel, which precluded borrowers from asserting such defenses to
protect the FDIC from “misrepresentations and secret agreements which might result in
[the FDIC] incorrectly assessing the value of bank holdings for institutions which it
insures, makes loans, or acquires in its corporate capacity.” FDIC v. P.L.M. Int’l, Inc.,
834 F.2d 248, 252 (1st Cir. 1987).
The rationale behind the D’Oench doctrine has been colorfully explained by the
Fifth Circuit: “[t]he doctrine means that the government has no duty to compile oral
histories of the bank’s customers and loan officers. Nor must the FDIC retain linguists
and cryptologists to tease out the meaning of facially-unencumbered notes. Spreadsheet
experts need not be joined by historians, soothsayers, and spiritualists in a Lewis Carrolllike search for a bank’s unrecorded liabilities.” FDIC v. Hamilton, 939 F.2d 1225, 1230
(5th Cir. 1991) (quoting Bowen v. FDIC, 915 F.2d 1013, 1016 (5th Cir. 1990)).
Thus, the D’Oench doctrine prohibits bank borrowers and others from relying
upon secret pacts or unrecorded side agreements that would diminish the FDIC’s
interests by attempting to thwart its efforts to collect under promissory notes, guarantees,
and kindred instruments, among others, acquired from a failed bank if these agreements
are not confined to written form. Borrowers’ claims and affirmative defenses are treated
the same under the doctrine. Timberland Design Inc., v. First Serv. Bank for Savings,
Inc., 932 F.2d 46 (1st Cir. 1991).
Congress partially codified the holding in D’Oench eight (8) years later as Section
2(13)(e) of the Federal Deposit Insurance Act of 1950, 64 Stat. 873, 889, as amended,
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which provided that no agreement shall be valid against the FDIC unless it is (a) in
writing; (b) signed by the bank; (c) approved in the bank’s minutes; and (d) kept in the
bank’s official records. Title 12, United States Code, § 1823(e)(1).
In 1989, and in the wake a mounting crisis in the banking and thrift industry,
Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (“FIRREA”), Pub.L. No. 101-73, 103 Stat. 183, “to give the FDIC power to take all
actions necessary to resolve the problems posed by a financial institution in default.”
FDIC v. Wright, 942 F.2d 1089, 1096 (7th Cir. 1991). FIRREA substantially codified
several of the significant common law developments in the D’Oench doctrine, and added
a sweeping requirement – in now applied to “any agreement” which did not meet the four
(4) requirements set forth in § 1823(e). Title 12, United States Code, § 1821(d)(9)(A).
Because the statute and doctrine have intertwined to the degree that it is difficult
to determine where the statute ends and D’Oench begins, the cases discussed often refer
to both doctrines interchangeably.
While § 1823(e) is often referred to as the
“codification” of D’Oench, 1 the common law D’Oench doctrine and § 1823(e) do not
completely overlap. Courts have therefore applied the federal common law D’Oench
doctrine to protect certain entities not covered by the language of § 1823(e)(1). See In re
NBW Commercial Paper Litig., 826 F. Supp. 1448, 1466 (D.D.C. 1992) (stating that
“D’Oench can best be described as a safety net” which “remains to cover situations which
fall through the [statutory] cracks.”).
1
Thus, in tandem, § 1823(e) and D’Oench
See FDIC v. Wright, 942 F.2d 1089, 1094 (7th Cir. 1991); and RTC v. Feldman, 3 F.3d 5, 7 (1st Cir. 1993).
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encourage “banks and their customers [to] include the entire extent of their obligations
in the bank’s records, thus allowing bank examiners to assess accurately the financial
condition of the bank.” Baumann v. Savers Fed. Sav. & Loan Ass’n, 934 F.2d 1506, 1515
(11th Cir. 1991).
B. The no-asset exception.
Title 12, United States Code, § 1821(d)(9)(A) states that: “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 Corporation”. Title
12, United States Code, § 1821(d)(9)(A).
As stated before, Section 1823(e), in turn, states that:
“No agreement which tends to diminish or defeat the interest of the Corporation
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 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 or committee,
and,
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(D) has been, continuously, from the time of its execution, an official record of the
depository institution.” Title 12, United States Code, § 1823(e)(1).
It is fairly evident that these requirements are not met in the case at bar, insofar as
Marina admits that the agreement in question was not in writing, but rather, was oral.
Furthermore, the bank’s minutes fail to evidence such an agreement and rather, state
quite the opposite, to wit, that the bank would grant no further loans to Marina.
Plaintiff Marina counters stating that these requirements are inapplicable to this
case, and raises an issue of statutory construction, namely, the “no-asset” exception.
Marina argues that section 1823(e) is inapplicable because that section applies only to
agreements which “tend to diminish or defeat the interest” of the FDIC in any asset
acquired by it. Marina avers this section is inapplicable to the FDIC-R’s defense because
this exception has been applied where the asset, in this case the loan, has been discharged
by the payment and cancellation of the underlying debt before the FDIC was appointed
as the bank’s receiver. The Court is unconvinced, and finds Defendant’s well-reasoned
arguments more in line with the applicable caselaw.
The Court first addresses the issue of statutory construction. Plaintiff avers that,
since there is no asset involved, or if the asset does not diminish or defeat the FDIC’s
interests, then the claims are not barred. In so doing, Marina puts the cart before the
horse in reading Section 1823(e) before Section 1821(d)(9)(A), whereby the “asset”
requirement overrides the “any agreement” requirement.
First, the fact alone that the “any agreement” language precedes the “asset”
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language should be an indicator that the “any agreement” requirement necessarily
supersedes the “asset” requirement.
Furthermore, a plain reading of the statute
evidences that § 1821(d)(9)(A) states that “any agreement” which “does not meet the
requirements set forth in section 1823(e)” cannot support a claim against the FDIC. Title
12, United States Code, § 1821(d)(9)(A).
“Any agreement” means just that - ANY
agreement. The requirements of the next section, in turn, are clearly enumerated and
spelled out: in writing, executed by the bank, approved by the board, and kept in the
bank’s official records. The “asset” requirement that Marina seeks to include cannot be
considered a fifth requirement, as Plaintiff would have the Court do. The requirements
are four, and only four. No more. As the First Circuit Court of Appeals has made clear,
in performing statutory interpretation, when the words of a statute are clear, the plain
meaning of the statute will be enforced. See Campbell v. Washington County Technical
Coll., 219 F.3d 3, 6 (1st Cir. 2000).
Defendant contends that if §1821(d)(9)’s applicability were also limited only to
agreements which diminish the FDIC’s interest in an asset acquired by the FDIC, it would
add absolutely nothing to the protection already afforded to the FDIC in §1823(e), which
applies to all agreements in general and is not limited to those that involve an asset. The
Court agrees, because, as the FDIC correctly states, courts always avoid interpreting a
statute in a manner that renders any section of a statute superfluous, insignificant, or
void. United States v. Ramírez-Ferrer, 82 F.3d 1131, 1137-38 (1st Cir. 1996) (quoting
United States v. Campos-Serrano, 404 U.S. 293, 301 n. 14, 92 S.Ct. 471, 476 n. 14 (1971).
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The more logical reading of these two (2) statutes is that §1823(e) bars the
enforcement of oral agreements that relate to assets held by the FDIC, and §1821(d)(9),
which applies to “any agreement”, and was later added to the federal statute, bars claims
based on agreements that do not relate to assets acquired or held by the FDIC. This
combined reading of the two statutes, in turn, is more in line with this district’s previous
holdings, where it has held §1821(d)(9)(A) bars all claims regardless of the existence of an
asset, and furthermore, is consistent with the intent of FIRREA and D’Oench.
In 2011, this district dealt with §1821(d)(9)(A) in Ortíz-Hernández v. Westernbank
of Puerto Rico, Civ. No. 10-1581, 2011 WL 1238907 (D.P.R. Mar. 25, 2011), a case
involving a former Westernbank employee who sued when certain orally agreed-upon
extra compensation was not awarded to him following his resignation. Westernbank
then failed as a bank, and like here, the FDIC was appointed as receiver. The Court held
that §1821(d)(9)(A) was clear in its application to “any agreement” that did not meet the
requirements of Title 12, United States Code, § 1823(e) could form the basis of a claim
against FDIC-R, emphasizing the “any agreement” language.
Marina argues that this district’s decision in FDIC v. Bracero & Rivera, 895 F.2d
824 (1st Cir. 1990), which predates Hernández by a number of years is controlling, and
where this Court previously held that Title 12, United States Code, § 1823(e) was
inapplicable because, like here, the debt which formed the basis of the asset claimed by
FDIC was satisfied before FDIC acquired the bank’s assets.
Yet, that case never
mentioned the “any agreement” language because the lawsuit was filed in 1985, four years
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before §1821(d)(9)(A) was enacted, and thus the Court never had an opportunity to
analyze that particular issue. Bracero is therefore inapposite. The other cases cited by
Plaintiff for this proposition also precede the “any agreement” amendment to the statute,
and are therefore also inapposite.
Furthermore, Plaintiff’s argument that no assets exist because it was paid off
simply does not fall into line with federal intent, namely, to protect the bank examiners
who rely on bank’s records to assess the bank’s condition, to protect the FDIC’s ability to
insure deposits, and make sure borrowers reduce the terms of their loan agreements to
writing. See also In re NBW Commercial Paper Litig., 826 F. Supp. at 1461 (stating that
one of the principal purposes behind FIRREA’s amendment of § 1823(e) and creation of
§ 1821(d)(9)(A) was “to extend further protection to the federal government when
stepping in for failed financial institutions”). Thus, the focal point of the inquiry is not
the type of transaction involved, but “whether it contradicts what the bank has stated to
the FDIC or is part of any effort to mislead the FDIC as to the financial status of any
banking institution”. Castleglen, Inc. v. Resolution Tr. Corp., 984 F.2d 1571, 1581 (10th
Cir. 1993). Were the Court to accept Marina’s no-asset argument here, the protection
that Congress and the Supreme Court established would be thwarted.
In light of this analysis, the Court finds that the no-asset exception is inapplicable
to this case, and finds Plaintiff’s claims to be barred, insofar as there is no written
agreement in compliance with the statute.
In a similar vein, the Court finds that the D’Oench doctrine separately would also
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bar Marina’s claims.
As previously stated, courts, including the First Circuit, have
applied the D’Oench doctrine and §1823(e) in tandem to maximize the protection
afforded to the FDIC. Specifically, courts have often applied §1823(e) to agreements that
are related to assets, and the D’Oench doctrine to agreements that did not. Thus, were
the Court to apply Marina’s no-asset exception here, D’Oench would still bar its claims.
See OPS Shopping Center, Inc. v. Federal Deposit Insurance Corp., 992 F.2d 306, 309
(11th Cir. 1993) (holding that D’Oench applied to agreement related to general liability of
the bank, as opposed to a specific asset of the bank, and stating that D’Oench “now applies
in virtually all cases where a federal depository institution regulatory agency is confronted
with an agreement not documented in the institution’s records”); Hill v. Samuel Cabot,
Inc., Civ. No. 92-11926-Z, 1993 WL 343673, at *3 (D. Mass. Aug. 26, 1993) (applying
D’Oench to an escrow arrangement); Timberland Design, Inc., 932 F.2d at 50 (D’Oench
protects the FDIC from affirmative claims based upon an oral agreement to lend money
in the future); Hall, 920 F.2d at 339 (citing instances where FDIC no longer has an
interest in an asset, but where the logic of D’Oench would still apply to protect FDIC); Inn
at Saratoga Assocs. v. F.D.I.C., 60 F.3d 78, 82 (2d Cir. 1995) (D’Oench is not limited to
circumstances where the agreement alleged relates to a traditional bank “asset” acquired
by the FDIC); In re: NBW Commercial Paper Litig., 826 F. Supp. at 1465 (stating that the
majority of courts who have considered the matter have determined that D’Oench may be
applied outside the lender-borrower context and needs no asset to apply); First State
Bank v. City & County Bank, 872 F.2d 707 (6th Cir. 1989) (applying D’Oench to oral
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contracts to repurchase loans); Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587,
594-95, 597 (11th Cir. 1995) (D’Oench applies to claims or defenses that relate to ordinary
banking transactions regardless of whether a specific asset is involved); Brookside Assocs.
v. Rifkin, 49 F.3d 490, 496 (9th Cir. 1995) (D’Oench applies to bar suit even when there
is no specific asset involved); Jackson v. FDIC, 981 F.2d at 734-35 (claims that do not
diminish or defeat the FDIC’s interest in any specific asset are nevertheless barred by
D’Oench); FDIC v. Texarkana Nat. Bank, 874 F.2d 264 (5th Cir. 1989) (D’Oench applied
to fraudulent inducement of another bank into a loan participation agreement); Fair v.
NCNB Texas Nat. Bank, 733 F.Supp. 1099 (N.D.Tex. 1990) (D’Oench applied to
fraudulent misrepresentations regarding property or securities sold by the lending bank);
and Carico v. First Nat. Bank of Bogata, 734 F.Supp. 768 (E.D.Tex. 1990) (applying
D’Oench to oral representations regarding dishonored checks).
As some courts have rationalized when declining to apply the no-asset exception
espoused by Marina here, any obligor, anticipating a suit by FDIC might quickly pay off
its note in an attempt to block FDIC’s future intent to raise the D’Oench doctrine. Under
these circumstances, “the fact that the obligor paid off the debt so that FDIC did not have
an interest in an asset should not prohibit FDIC from invoking D’Oench”. Hall, 920 F.2d
at 339 (further holding that D’Oench has broader application than § 1823 and may be
invoked even where FDIC does not have “an interest in an asset”).
It is evident that D’Oench’s reach is broad, and even if an asset was not involved,
D’Oench would also separately bar Marina’s claims in the instant case.
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In conclusion, the Court finds that Marina’s claims are precluded by federal law,
insofar as the agreement fails to comply with the requirements of Title 12, United States
Code, § 1823(e) and the D’Oench doctrine.
C. D’Oench’s continued validity.
Marina’s second line of defense from the FDIC-R’s arguments is that D’Oench may
not be good law any more in light of two Supreme Court rulings,2 where the Supreme
Court questioned the need to apply federal common law to state claims, and, Marina
states, invalidated the federal common law outlined in D’Oench. Plaintiff argues that
here, as in the cases of O’Melveny and Atherton, the FDIC-R is simply acting as Doral’s
receiver, and is not pursuing the interest of the federal government as a bank insurer.
Because of this, no unique federal interest exists, and the Court should thus disregard
D’Oench, apply state law to its state claims, and allow claims under Puerto Rico law to
proceed.
The Court disagrees. The issue in O’Melveny circled around whether federal or
state law governed the tort liability of attorneys who provided services to the bank. Thus,
the issue before the Court was whether new federal common law should be created for
that standard, not that an existing federal common law rule was invalidated. The Court
held … “this is not one of those cases in which judicial creation of a special federal rule
would be justified. Such cases are, as we have said in the past, ‘few and restricted’,
O'Melveny & Myers v. F.D.I.C., 512 U.S. 79, 114 S. Ct. 2048 (1994) and Atherton v. F.D.I.C., 519 U.S. 213, 117 S. Ct.
666 (1997).
2
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(citations omitted), limited to situations where there is a ‘significant conflict between
some federal policy or interest and the use of state law.’ ” O’Melveny, 512 U.S. at 87, 114
S. Ct. at 2055. The Court declined to create new federal common law and held that state
law applied.
Atherton dealt with a similar issue, namely, whether federal common law or state
law should govern the standard of liability of directors and officers of federally insured
savings institutions. The Supreme Court highlighted the necessity of a significant conflict
or threat to a federal interest in order to apply federal common law.
Finding no such
substantial federal interest present there, the Court held that state law governed that
standard: “[i]n sum, we can find no significant conflict with, or threat to, a federal
interest”. Atherton, 519 U.S. at 225, 117 S. Ct. at 673.
Thus, it is clear that the main holding in these two cases was that no new federal
common law should be created, except in exceptional circumstances.
See In re
Consolidated Freightways Corp., 443 F.3d 1160, 1162 (9th Cir. 2006) (citing O’Melveny
for the proposition that the creation of federal common law “is disfavored except where
explicitly authorized by Congress”). Thus, contrary to Marina’s arguments, O’Melveny
and Atherton do not stand for the proposition that the D’Oench doctrine is no longer valid.
There is, however, a split in the circuits regarding the continued applicability of
D’Oench after Atherton and O’Melveny were decided.
Compare Inn at Saratoga
Associates, 60 F.3d at 82; Young v. FDIC, 103 F.3d 1180 (4th Cir. 1997); State St. Capital
Corp. v. Gibson Tile, Inc., Civ. No. 97-1329-P, 1998 WL 907027, at *5 (N.D. Tex. Dec. 16,
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1998)3 (all holding that D’Oench is still applicable post O’Melveny) to Ledo Financial
Corp. v. Summers, 122 F.3d 825 (9th Cir. 1997), DiVall Insured Income Fund Ltd.
Partnership v. Boatmen’s First Nat’l Bank of Kansas City, 69 F.3d 1398, 1402 (8th Cir.
1995), and Murphy v. FDIC, 61 F.3d 34, 38 (D.C.Cir. 1995) (finding D’Oench has been
preempted by the FIRREA after O’Melveny).
Although the First Circuit has not explicitly entertained this issue, its continued
use and application of the D’Oench doctrine, after O’Melveny and Atherton were decided,
tends to suggest that it still finds D’Oench to be good law. See e.g. F.D.I.C. v. EstradaRivera, 722 F.3d 50, 53 (1st Cir. 2013) (stating that D’Oench “prevents plaintiffs from
asserting as either a claim or defense against the FDIC oral agreements or
‘arrangements.’”) and F.D.I.C. v. Empresas Cerromonte Corp., Civ. No. 10-1623, 2013 WL
5346725, at *7 (D. P.R. Sept. 23, 2013) (stating that 12 U.S.C. § 1823(e) and D’Oench
prevent the assertion of unwritten agreements against the FDIC as receiver).
In view of the above, the Court finds that the D’Oench rule is still valid in the First
Circuit.
D. D’Oench and state law claims.
Marina’s also raises as a defense that D’Oench does not apply to its state law claims
for breach of contract, breach of the principle of good faith, fraudulent inducement,
tortious interference with a contract and culpa in contrahendo.
While the Court is
Holding that in the absence of any Fifth Circuit ruling on the matter, that district court found D’Oench was still
applicable.
3
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cognizant that Puerto Rico law allows for the claims alleged by Marina herein, the
applicability of the aforementioned federal law also precludes them from being brought
in this particular circumstance where the FDIC-R, who was not an original defendant in
state court, removed the case to this Court.
In the case of Timberland Design, Inc., 932 F.2d at 50, the First Circuit held that
the D’Oench doctrine “ ‘bars defenses and affirmative claims whether cloaked in terms of
contract or tort, as long as those claims arise out of an alleged secret agreement’ ” and
further, that section 1823(e) “ ‘bars defenses and affirmative claims’ ” arising out of an
agreement which fails to meet its requirements “ ‘whether cloaked in contract or tort’”.
Since then, many courts have abided by this holding. See McCullough v. F.D.I.C., 987
F.2d 870, 874 (1st Cir. 1993) (“the genesis of plaintiffs’ claim, whether the claim is framed
in contract or tort, is the alleged warranty….as such, the claim is barred” by D’Oench);
Vasapolli v. Rostoff, 39 F.3d 27, 33 (1st Cir. 1994) (stating that claims of
misrepresentation and fraudulent inducement were “within D’Oench’s ‘sphere of
influence’”); Ne. Cmty. Dev. Grp. v. F.D.I.C., 948 F. Supp. 1140, 1151 (D.N.H. 1995) (claims
“based on alleged misrepresentations relating to the formation of an agreement with [a]
bank” were within the purview of D’Oench); First Nat. Bank of Boston v. F.D.I.C., Civ. No.
92-12222-Y, 1993 WL 443917, at *3 (D. Mass. Sept. 30, 1993) (an action concerning
priority of liens barred by D’Oench if there was fraud or bad faith in the inducement to
make the agreement); Winterbrook Realty, Inc. v. F.D.I.C., 820 F. Supp. 27, 32 (D.N.H.
1993) (state claims for misrepresentation, equitable relief, unjust enrichment and
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quantum meruit barred by D’Oench).
In the instant case, it is evident that all of Plaintiff’s claims of principle of good
faith, fraudulent inducement, tortious interference with contract and culpa in
contrahendo arise from Doral’s failure to abide by the unwritten, oral agreement Marina
claims was reached between them for the remainder of the project’s financing. These
actions by Doral, in turn, allegedly caused the project’s ultimate failure. Because the
state law claims all clearly arise from the oral agreement, Timberland Design and its
progeny control, and D’Oench estops Marina from bringing these claims.
To allow the state law claims to proceed would permit a party to solely assert state
claims against a failed bank in order to contravene D’Oench, thus defeating the rationale
of the statute and the doctrine, which is to “ensure that FDIC examiners can accurately
assess the condition of a bank based on its books”. Jackson, 981 F.2d at 735. To side
with Marina would defeat the purpose and principle of the protection which Congress and
the courts saw fit to bestow upon the FDIC.
The Court therefore finds that, because Marina’s state law claims are based on the
unwritten agreement, they are also precluded by D’Oench.
E. Discovery.
Plaintiff Marina’s last contention is that summary judgment should not be granted
because there are outstanding discovery requests. Specifically, Marina asserts that in
September, 2016, it requested from the FDIC-R certain insurance policies that were in
effect at the time the events in this case arose. Marina posits that, with this information
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of the failed bank’s insurance carriers, “… the insurance companies would be included as
additional defendants in the instant case to respond for the tortious acts of the bank
officers”. Docket No. 90, p. 25.
This case began in state court in 2006, twelve (12) years ago, and was removed to
this court by the FDIC-R in 2015. Thus, the case at bar has been before this Court for
over two (2) years after it was removed. Now, after discovery has already concluded, and
when Plaintiff sees itself literally between a rock and a hard place, it now alleges that it
intends to bring forth the insurance carriers in this case because the federal statutes and
D’Oench “are not extensive” to insurance carriers. Plaintiff also contends that it is “in
the best interests of the F.D.I.C. that such insurance carriers are included as additional
defendants in this lawsuit”.
Docket No. 115, at 16.
The Court is at a loss to understand precisely why the insurance carriers have not
been brought into the case in the twelve (12) years that this case has been going on.
What is worse, while Marina initially brought this issue before the Court in June, 2017,
the Court understood this matter had been resolved in July, 2017, at Docket No. 95.
Furthermore, the FDIC-R has demonstrated that, as part of the agreement reached at that
time between the parties, on September 1, 2017, it sent Plaintiff a draft ESI Protocol and
Protective Order in order to end this matter, and Plaintiff failed to respond to the same.
While the Court is cognizant of the damages Hurricane María effected in Puerto Rico, as
of November, 2017, Plaintiff has still failed to respond to this request, thus hampering its
own efforts at discovery. The fact that as of February, 2018, no request has been made
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by Plaintiff to amend the complaint to add said insurance companies is telling.
Plaintiff Marina is the party requesting the documents and, therefore, has a duty
to be diligent. Plaintiff Marina’s tardy request, at summary judgment stage, lacks merit
as it is being made after the conclusion of discovery and when no request to amend the
complaint to add additional claims and parties has been made. “Equity, after all, ministers
to the vigilant, not to those who slumber upon their rights”. Sandstrom v. ChemLawn
Corp., 904 F.2d 83, 87 (1st Cir. 1990).4 The Court denies Marina’s request.
CONCLUSION
For all the aforementioned reasons, the Court GRANTS the FDIC-R’s “Second
Motion for Summary Judgment” (Docket No. 81). This case is DISMISSED WITH
PREJUDICE.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
In San Juan, Puerto Rico, on this 23rd day of February, 2018.
S/CAMILLE L. VELEZ-RIVE
CAMILLE L. VELEZ RIVE
UNITED STATES MAGISTRATE JUDGE
The Court notes that the defense of laches might apply to this case, which bars a party from asserting a claim if it so
unreasonably delayed in bringing the claim that it caused some injury or prejudice to the defendant. See Costello v.
United States, 365 U.S. 265, 282, 81 S.Ct. 534 (1961); Puerto Rican-Americans Ins. Co. v. Benjamin Shipping Co., Ltd.,
829 F.2d 281, 283 (1st Cir. 1987). This defense has not been raised by the FDIC-R.
4
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