Federal Sav. and Loan Ins. Corp. v. Williams

Citation599 F. Supp. 1184
Decision Date05 December 1984
Docket NumberCiv. No. Y-83-1422.
PartiesFEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Plaintiff, v. Frank E. WILLIAMS, Jr., et al., Defendants.
CourtU.S. District Court — District of Maryland

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Henry R. Lord, Neil J. Dilloff, Jonathan D. Smith, and David H. Bamberger, Baltimore, Md., for plaintiff.

Richard K. Willard, Washington, D.C., J. Frederick Motz, Baltimore, Md., Jeffrey Axelrad, Washington, D.C., Nikki Calvano Maliha, Washington, D.C., for the United States of America, counterclaim defendant.

Benjamin R. Civiletti, Washington, D.C., John Henry Lewin, Jr., Paul F. Strain, Charles M. Kerr, and James L. Shea, Baltimore, Md., for defendants Frank E. Williams, Jr., Seymour S. Abensohn, E. Fulton Brylawski, W. Evans Buchanan, Glen J. Loepenick, Jr., John C. Kelly, Robert K. Maddox, and Henry H. Semmes, Jr.

Kevin J. McCarthy, Upper Marlboro, Md., for defendant Abe Pollin.

Robert L. Flanagan, Baltimore, Md., for defendant Leolla L.J. Fisher.

MEMORANDUM

JOSEPH H. YOUNG, District Judge.

I. BACKGROUND

This case concerns alleged misconduct on the part of certain directors, employees, and officers of County Federal Savings and Loan Association ("County"). County, a federally chartered savings and loan association insured by the Federal Savings and Loan Insurance Corporation ("FSLIC"), ceased to exist on August 10, 1981, when it was merged into Metropolitan Federal Savings and Loan Association with approximately $21 million in FSLIC assistance. The merger resulted from County's insolvency and its inability to meet the financial requirements to stay in operation. As part of the merger, Metropolitan succeeded to all claims County had against its former directors, officers, and others.

On April 21, 1983, the FSLIC received an assignment of all such claims from Metropolitan and seven days later, brought this suit against certain former directors, officers, and employees of County for, among other things, intentional and negligent breach of fiduciary duty, fraud, waste, violation of various federal statutes and regulations, and diversion of corporate opportunities. In May, 1984, several of the defendants filed counterclaims against the FSLIC, the United States of America, and "John Doe, one or more unknown agents of the Federal Savings and Loan Insurance Corporation and/or the Federal Home Loan Bank Board."

motions have been filed and The following/require resolution at this time:
(1) Defendant Fisher's motion for partial summary judgment;
(2) FSLIC's motion to dismiss counterclaims filed by defendants;
(3) FSLIC's motion for partial summary judgment against defendant Pollin; and
(4) Defendant directors' motion for summary judgment on primary punitive damages
II. DEFENDANT FISHER'S MOTION

Defendant Leolla Fisher has filed a motion for summary judgment and a supporting memorandum seeking the dismissal of claims involving two limited allegations made against her by the FSLIC in its amended complaint. The first allegation concerns Fisher's participation in a real estate appraisal and inspection business known as Real Property Associates ("RPA") while serving as an officer and employee of County.1 The defendant argues in her motion that the plaintiff's claim based on this allegation is barred by the statute of limitations. The defendant also seeks the dismissal of a second cause of action which arises from an allegation that defendant Fisher charged excessive, unauthorized, and unreasonable expenses to County.2 Arguing that this allegation is entirely without factual support and that the claim arising therefrom is also barred by the statute of limitations, defendant Fisher does not seek summary judgment on any of the other claims pending against her.

A. Fisher's Involvement with County

Defendant was employed by County and served in its loan department from February, 1971 through December, 1979.3 She served as Vice-President and manager of County's construction loan department from 1977 until her resignation of September 20, 1979 became effective on or before January 31, 1980.4 Plaintiff alleges that "Fisher's department was plagued with problems during her stewardship"5 and that both the Federal Home Loan Bank Board ("FHLBB") and County's outside auditing firm of Hoye, Graves, Bailey, and Associates ("HGB") discovered and reported several improper practices in County's construction loan department. These alleged improprieties include: making disbursements to borrowers without completing adequate inspection reports to show that the disbursements were warranted, violations of FHLBB regulations, the underreporting of problem loans and other substantial assets to FHLBB, deducting interest and fees from undispursed loan funds rather than requiring the borrowers to pay those charges, taking charges into income when they had not been paid by the borrower, the lack of inspection reports to verify disbursements,6 authorizing disbursements from borrowers for work that had not been done,7 conflicts of interest because of Fisher's involvement with RPA,8 accepting gifts from County borrowers and later making favorable recommendations on loan requests from those borrowers,9 making false journal entries in County's loan records,10 and receiving payments from County that are unsupported by the association's records or do not appear to be directly business related.11 Finally, Fisher's resignation as Vice-President and Construction Loan Department Manager of County purportedly was submitted in response to an ultimatum from the board of directors that she either divest herself of any interest in RPA or resign from County Federal.

B. Discussion

In her memorandum in support of the motion for partial summary judgment ("Defendant's Memorandum"), Fisher argues that any cause of action against her on account of her participation in RPA is barred by the statute of limitations because County knew that it had such a cause of action before April 28, 1980. In support of this contention, defendant cites the Maryland statute of limitations contained in ? 5-101 of the Maryland Courts and Judicial Proceedings Article which provides that a "civil action at law shall be filed within three years from the date it accrues..." Defendant argues that under both Maryland and federal law, the cause of action accrues at the time the claimant knows or should reasonably know of the existence of its claim. Defendant then asserts that County knew about its alleged cause of action against her relating to her participation in RPA before April 20, 1980, and could have filed an action against her but elected not to do so; instead, County chose to use its alleged cause of action against Fisher and others as a shield against their instituting litigation against the association. Defendant concludes that there is no basis for suspending the statute of limitations for any period because the members of County's Board of Directors had no interest in RPA nor was Fisher a member of the board of directors; thus, defendant insists that tolling the statute of limitations for the period in which the defendant directors controlled County's board is inappropriate as a matter of law.

Defendant Fisher also contends that there is no evidence in the record to establish a cause of action against her based on allegations of excessive, unauthorized, and unnecessary travel or other expenses. Moreover, defendant suggests that assuming arguendo that the plaintiff has shown some articulable basis for asserting such a claim, there is no basis in fact for the Court to conclude that County could not have filed suit against Fisher for the allegedly unreasonable expenditures in July, 1979, when the FHLBB Annual Report was submitted to County, and therefore, any such claim is barred by the statute of limitations for the same reasons the claims arising out of the defendant's involvement with RPA are time barred.

1. Plaintiff's Claims Involving Real Property Associates and Excessive Expenditures are not barred by the Statute of Limitations

The Court ruled on the limitations issue in this case when it denied defendant Pollin's motion for summary judgment, a motion very similar to the instant one. FSLIC v. Williams, Y-83-1422 (D.Md. May 1, 1984) (marginal order denying defendant Pollin's motion for summary judgment). Defendant Fisher's motion for summary judgment must also be denied as neither of the plaintiff's claims contested here are barred by the statute of limitations.

Since this action is one brought by an agency of the United States, see Acron Investments, Inc. v. FSLIC, 363 F.2d 236 (9th Cir.), cert. denied, 385 U.S. 970, 87 S.Ct. 506, 17 L.Ed.2d 434 (1966); 28 U.S.C. ? 451; 12 U.S.C. ? 1730(k)(1)(A), through assignment, the Court must analyze the limitations issue using a two step inquiry. First, the applicable state statute of limitations must be considered to determine whether it expired before the assignment. If the state statute did not expire by the date of the assignment it must then be determined whether the federal statute of limitations applicable to claims made by federal agencies expired by the date the instant suit was filed. See Guaranty Trust Co. v. United States, 304 U.S. 126, 141, 58 S.Ct. 785, 793, 82 L.Ed. 1224 (1938); FDIC v. Bird, 516 F.Supp. 647, 650 (D.P.R. 1981); United States v. Cardinal, 452 F.Supp. 542 (D.Vt.1978).

The pertinent Maryland statute of limitations requires that "a civil action at law be filed within three years from the date it accrues..." Md.Ann.Code Maryland Courts and Judicial Proceedings ? 5-101 (1984). Under both Maryland and federal law, no cause of action accrues for the purposes of invoking the statute of limitations until a claimant (in this case County) knows or reasonably should know of the existence of its claim. See Poffenberger v. Risser, 290 Md. 631, 431 A.2d 677 (1981); 28...

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