Motorcity of Jacksonville, Ltd. By and Through Motorcity of Jacksonville, Inc. v. Southeast Bank N.A.

• Decision Date: 05 December 1994
• Docket Number: No. 93-4634,93-4634
• Citation: 39 F.3d 292
• Parties: MOTORCITY OF JACKSONVILLE, LTD., a limited partnership, By and Through its general partner MOTORCITY OF JACKSONVILLE, INC., a Florida Corporation, David Hess, Plaintiffs-Appellants, v. SOUTHEAST BANK N.A., David Feigenbaum, Defendants, Federal Deposit Insurance Corporation, as receiver for Southeast Bank, N.A., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 292

39 F.3d 292

63 USLW 2373

MOTORCITY OF JACKSONVILLE, LTD., a limited partnership, By

and Through its general partner MOTORCITY OF

JACKSONVILLE, INC., a Florida

Corporation, David Hess, Plaintiffs-Appellants, v. SOUTHEAST BANK N.A., David Feigenbaum, Defendants,

Federal Deposit Insurance Corporation, as receiver for

Southeast Bank, N.A., Defendant-Appellee.

No. 93-4634.

United States Court of Appeals,

Eleventh Circuit.

Dec. 5, 1994.

Lawrence R. Heller, Dyanne E. Feinberg, Miami, FL, Kipp A. Coddington, Christopher D. Cerf, Daniel E. Troy, Stephen Goldman, Washington, DC, for appellants.

Julie Feigeles, S. Alyssa Roberts, Washington, DC, for appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before KRAVITCH and BIRCH, Circuit Judges, and HOEVELER ^*, Senior District Judge.

BIRCH, Circuit Judge:

This appeal tests the limits of the free standing tort exception to the common law D'Oench doctrine, developed in D'Oench Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942) and codified in 12 U.S.C. Sec. 1823(e). Because we find that the alleged tortious conduct does not fall within the scope of regular banking transactions, we conclude that the D'Oench doctrine does not bar the tort claims at issue. We VACATE and REMAND for proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1986, plaintiffs-appellants Motorcity of Jacksonville, Ltd., Motorcity of Jacksonville, Inc., and David S. Hess (collectively "Motorcity") negotiated with Southeast Bank, N.A. ("Southeast") a floor plan financing agreement, under which Southeast would lend Motorcity funds to purchase inventory for its used car dealership (the "Agreement"). In the course of the negotiations, Motorcity informed Southeast that its principal investors, who lacked any experience in running a car dealership, planned to operate the dealership as absentee owners. Southeast assured Motorcity that its personnel were experienced with floor plan financing and that "the bank 'knew what it was doing.' " R2-58 Ex. 1 p 14. Motorcity and Southeast executed the Agreement in June, 1987.

Pursuant to the Agreement, Southeast retained the right to audit Motorcity's records. ¹ Of particular concern to both Southeast and Motorcity were "out-of-trust" sales, which result whenever a dealership fails to use the proceeds from a sale to repay the loan designated for that vehicle; continued unchecked, such out-of-trust sales can threaten a dealership's financial viability. Southeast hired an independent contractor to audit Motorcity on a monthly basis. Through these audits, the bank discovered a pattern of out-of-trust sales occurring at the dealership. Although Southeast sent summary audit reports to Motorcity, the bank allegedly failed to disclose these out-of-trust sales to Motorcity. Because of these unrecorded sales, the dealership failed in 1989, and Motorcity suffered damages in excess of $50,000.

Alleging breach of fiduciary duty, breach of oral contract, and negligence (the "Original Complaint"), Motorcity brought suit in Florida state court against Southeast and one of its employees. Less than a year later, Southeast was declared insolvent, and defendant-appellee Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver for the failed bank. The FDIC was substituted for Southeast as defendant, whereupon the FDIC removed the case to federal court pursuant to 12 U.S.C. Sec. 1819.

Motorcity amended its complaint to state a claim for breach of written contract (the "First Amended Complaint"). The district court dismissed this First Amended Complaint for failure to state a claim upon which relief could be granted. The court found that the Agreement gave Southeast the right, but not the duty, to audit Motorcity; thus Southeast was under no obligation to inform Motorcity of the out-of-trust sales. The court further ruled that the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) required any agreement between a failed financial institution and its customer to be in writing; consequently, any claims for breach of oral contract were barred. ² Finally, the court held that the D'Oench doctrine also foreclosed Motorcity's tort claims. The court reasoned that "[t]he genesis of this action is the Southeast floor plan financing agreement, whose written provisions do not support a breach of contract claim against the FDIC. No amount of artful pleading, including further amendments to the complaint, can alter this result." R2-52-8.

Motorcity moved for a rehearing and for leave to amend its complaint to add state tort claims for negligence and for breach of fiduciary duty to notify (the proposed "Second Amended Complaint"). The district court denied both motions. In its omnibus order, the court reiterated that the D'Oench doctrine barred all oral contract claims, including those claims recast as tort actions by " 'artful pleading.' " R2-67-1-2. On appeal, Motorcity contends that the district court erred in denying Motorcity's motion to amend its complaint.

II. DISCUSSION

A. Jurisdiction

As a threshold matter, we must decide whether this court has jurisdiction over the present appeal. We review questions of subject matter jurisdiction de novo. Tamiami Partners, Ltd. v. Miccosukee Tribe of Indians, 999 F.2d 503, 506 (11th Cir.1993). The FDIC asserts that the federal courts lack jurisdiction under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (codified as amended in scattered sections of 12 U.S.C.), because Motorcity has not yet exhausted its administrative remedies before the FDIC as required by 12 U.S.C. Sec. 1821(d). Significantly, the FDIC has previously argued this issue in this case. Before the district court, the FDIC contended that FIRREA required Motorcity to submit its grievances to the FDIC's administrative claim review process before pursuing the matter in court. Motorcity responded by providing to the FDIC a Statement of Claim, in which Motorcity restated the factual and legal allegations of its Original Complaint. The FDIC disallowed Motorcity's claim, whereupon the district court denied the FDIC's motion to dismiss as moot.

Before this court, the FDIC makes essentially the same argument with respect to the proposed Second Amended Complaint. The FDIC maintains that the Statement of Claim previously submitted by Motorcity did not contain "a claim based on torts 'wholly independent' from the written agreement." Appellee's Brief at 29. The FDIC contends that the tort claims asserted in Motorcity's proposed Second Amended Complaint are materially different from the claims previously reviewed by the FDIC, and thus "no court has jurisdiction to hear Motorcity's separate tort claims." Id.

Whether FIRREA creates a statutory exhaustion requirement is a question of first impression for this court. Section 1821(d)(13)(D) grants the FDIC primary jurisdiction over claims brought against banks for which the FDIC has been appointed receiver:

Except as otherwise provided in this subsection, no court shall have jurisdiction over--

(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such institution or the Corporation as receiver.

12 U.S.C. Sec. 1821(d)(13)(D). If claimants fail to submit their grievances to the FDIC, section 1821(d)(6)(B) divests them of their rights and remedies with respect to these claims:

If any claimant fails to-- (i) request administrative review of any claim ... or

(ii) file suit on such claim (or continue an action commenced before the appointment of the receiver), before the end of the 60-day period [following the FDIC's disallowance or failure to review a submitted claim], the claim shall be deemed to be disallowed ... as of the end of such period, such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim.

12 U.S.C. Sec. 1821(d)(6)(B). ³ Reading these two provisions together, we conclude that FIRREA makes exhaustion of the FDIC's administrative complaint review process mandatory when the FDIC has been appointed receiver for a financial institution. ⁴ If the claimant has initiated its suit in a court prior to the FDIC's appointment as receiver, as has Motorcity, the claimant must exhaust its administrative remedies before continuing its action in state or federal court. Cf. 12 U.S.C. Sec. 1821(d)(5)(F)(ii) ("Subject to paragraph (12) [requiring courts to suspend legal actions upon the receiver's request], the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver.").

Having concluded that FIRREA creates a statutory exhaustion requirement, we next decide whether Motorcity met that requirement. The FDIC argues that Motorcity's Statement of Claim did not adequately present the tort claims in the Second Proposed Complaint, and it cites a federal district court's decision in Coleman v. FDIC, 826 F.Supp. 31, 32 (D.Mass.1993), in support of its contention that appellees failed to exhaust their administrative remedies. In Coleman, the court considered an amended complaint that contained "entirely new causes of action based on entirely new facts," not previously submitted to the FDIC's administrative claims process. See id. at 32, 33. Citing FIRREA's exhaustion requirement, the court dismissed the new claims "to the extent that they [made] factual allegations not asserted in the original Complaint." Id. at 33.

Motorcity's Statement of Claim, while interwoven with references to the written agreement between Motorcity and Southeast, nonetheless...