Fed. Deposit Ins. Corp. v. Cashion

• Decision Date: 19 June 2013
• Docket Number: No. 12–1588.,12–1588.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for the Bank of Asheville, Plaintiff–Appellee, v. Avery T. CASHION, III, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

720 F.3d 169

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for the Bank of Asheville, Plaintiff–Appellee,

v.Avery T. CASHION, III, Defendant–Appellant.

No. 12–1588.

United States Court of Appeals,Fourth Circuit.

Argued: March 19, 2013.

Decided: June 19, 2013.

ARGUED:Edward Louis Bleynat, Jr., Ferikes & Bleynat, PLLC, Asheville, North Carolina, for Appellant. Esther Elizabeth Manheimer, Van Winkle, Buck, Wall, Starnes & Davis, PA, Asheville, North Carolina, for Appellee. ON BRIEF:Lynn D. Moffa, Van Winkle, Buck, Wall, Starnes & Davis, PA, Asheville, North Carolina, for Appellee.

Before MOTZ, KING, and AGEE, Circuit Judges.

Affirmed by published opinion. Judge AGEE wrote the majority opinion, in which Judge MOTZ joined. Judge KING wrote a dissenting opinion.

AGEE, Circuit Judge:

Avery T. Cashion, III, appeals from the district court's judgment in favor of the Federal Deposit Insurance Corporation (“FDIC”), acting as receiver for The Bank of Asheville (“the Bank”), in this action by the FDIC to recover the deficiency owed on a promissory note executed by Cashion and payable to the Bank. Cashion contends that the district court erred in granting summary judgment to the FDIC because genuine issues of material fact exist as to whether the FDIC was the holder of the note and whether the note had been cancelled or assigned. He also asserts the district court abused its discretion in striking his surreply brief opposing summary judgment and an affidavit attached to it. For the reasons set forth below, we affirm the judgment of the district court.

I.

In August 2006, Cashion signed a promissory note (“Note”) payable to the Bank in the original principal amount of $2,000,000.00. Through March 2010, the Bank and Cashion entered into a number of modifications and renewals of the Note. The Note was originally secured by three other promissory notes, and a fourth promissory note was added as additional collateral in 2010.

In September 2010, the Bank filed an action in North Carolina state court alleging that it was the holder of the Note, that Cashion had defaulted by failing to make the payments due on the Note, and that it was entitled to full payment plus interest pursuant to the Note's terms. Cashion's Answer admitted “a copy of a document, which speaks for itself, is attached to [the Bank's] Complaint,” and that the signature on that document “appears to be the signature of Mr. Cashion,” but “demand[ed] that the [Bank] produce the original document that is described as [the Note].” (J.A. 17–19.)

Before the case proceeded further, the Bank closed and the FDIC was named receiver and liquidating agent. After the FDIC was substituted as the real party in interest in the state court, it removed the case to the United States District Court for the Western District of North Carolina.¹ The FDIC then moved for summary judgment, asserting that it had set forth a prima facie case to recover proceeds on the Note and that no genuine issues of material fact precluded judgment as a matter of law. It attached to the motion an affidavit from Sherry M. Martin, a “Resolutions and Receiverships Specialist” for the FDIC who was “familiar with the books and records of” the FDIC and the Bank. Martin stated in the affidavit that the information alleged in the Complaint came from records and employees of the Bank, and was correct and true. (J.A. 31.)

Cashion opposed the motion, asserting that two genuine issues of material fact existed: first, whether the FDIC satisfied its burden of proving that it was the holder of the Note in light of its failure to produce the original Note, and second, whether the Note had been cancelled or assigned. To support the latter argument, Cashion included an affidavit asserting the Note had been cancelled and attaching a copy of the Internal Revenue Service (“IRS”) Form 1099–C that he alleged he received from the Bank in early 2010 (“the 1099–C Form”) as the sole basis for his affidavit.² The 1099–C Form, labeled “Cancellation of Debt” in pre-printed text, had been filled out by hand and lists the Bank of Asheville as the creditor and Cashion as the debtor, references the Note's account number, reflects the “Date canceled” as “6/23/2010” and the “Amount of debt canceled” as $1,993,222.20. The “Debt description” box states: “Assignment of Promissory Notes.” (J.A. 42.)

The FDIC attached a supplemental affidavit from Martin to its response in support of summary judgment in which she reiterated her

familiar[ity] with the books and records acquired by the [FDIC] when it was appointed Receiver for [the Bank].... The books and records in question were made at or near the time of the matters therein recorded and were kept in the course of [the Bank's] regularly conducted business activity, the regular practice of which was to keep such books and records.

(J.A. 81.) Martin's supplemental affidavit also stated that the FDIC had possession of the original Note, that the copy attached to the Complaint was “true and correct,” that the Note had not been transferred or assigned to a third party, that the Note had not been paid by Cashion or a third party, and that the Note had not been cancelled or Cashion “otherwise absolved” of liability. Martin also stated that based on the Bank's records in the FDIC's possession, the 1099–C Form “appear[ed] to have been sent to Mr. Cashion by [the Bank] prior to the” receivership. (J.A. 82.) Martin also indicated that

[t]he most likely explanation for the debt cancellation referred to in hand-writing on the IRS 1099–C Form ... is that “Assignment of Promissory Notes” refers to the collateral securing the Note.... The fact that [the Bank] may have issued an IRS 1099–C Form concerning the collateral that secured the Note does not mean that [the Bank] cancelled [Cashion's] debt to [the Bank] reflected by the Note.

(J.A. 82.) Based on Martin's supplemental affidavit, the FDIC argued that it was the holder of the Note and was not required to produce the original Note in order to prove that status under North Carolina law because a true copy was sufficient. In addition, the FDIC contended that the 1099–C Form was inadmissible hearsay and that Cashion had not “properly authenticated” the form for admission into evidence under any of the exceptions to the rule against hearsay. The FDIC also posited that the 1099–C Form did not refer to the Note, but to the collateral for the Note. Alternatively, the FDIC asserted that “at most,” the 1099–C Form indicatedthe Bank's intent that the Note be cancelled, but was not competent evidence of actual cancellation.

Cashion did not move to strike Martin's supplemental affidavit, but instead filed an additional notice of filing in opposition to summary judgment (hereinafter “surreply”) countering the FDIC's arguments regarding the admissibility and import of the 1099–C Form. Cashion attached to the surreply an affidavit from his business partner, Raymond M. Chapman, in which Chapman described the 1099–C Form and then gave his viewpoint as to what Cashion's receipt of the 1099–C Form from the Bank likely meant (cancellation of the Note).

The FDIC moved to strike the surreply and Chapman affidavit, noting that “[n]othing in the [c]ourt's Pretrial Order and Case Management Plan authorize [d] the filing of a surreply,” and Cashion had not sought leave of court to authorize such a filing. (J.A. 127.) It further asserted that a surreply was not appropriate under the circumstances given that its reply had not raised any new issues. In addition, the FDIC argued that the Chapman affidavit contained opinion testimony from a person who was not an expert witness rather than information based on Chapman's personal knowledge. For that reason, the FDIC urged the district court to strike or disregard the affidavit.³

For reasons summarized in context below, the district court granted the FDIC's motion to strike the surreply and Chapman affidavit, denied Cashion's motion for leave to file those items, and then awarded summary judgment to the FDIC. The district court entered final judgment in favor of the FDIC in the amount of “$2,111,427.12, together with interest at the rate of $373.73 per day from and after September 2, 2010.” (J.A. 290.)

Cashion noted a timely appeal, and we have jurisdiction pursuant to 28 U.S.C. § 1291.

II.

Cashion raises three issues on appeal: (1) whether the district court erred in granting summary judgment to the FDIC because a genuine issue of material fact exists as to whether the FDIC is the holder of the Note; (2) whether the district court abused its discretion in granting the FDIC's motion to strike the surreply and Chapman's affidavit; and (3) whether the district court erred in granting summary judgment to the FDIC because a genuine issue of material fact exists as to whether the Note has been cancelled or assigned.

We review an award of summary judgment de novo. Adams v. Trs. of the Univ. of N.C.-Wilmington, 640 F.3d 550, 556 (4th Cir.2011). Summary judgment is appropriate if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(a). In considering the matter, we construe the evidence in the light most favorable to the non-moving party—here, Cashion—and draw all reasonable inferences in his favor. See Adams, 640 F.3d at 556.

We review the district court's evidentiary and scheduling decisions for abuse of discretion. See Noel v. Artson, 641 F.3d 580, 591 (4th Cir.2011) (stating that a district court's evidentiary decisions are reviewed for abuse of discretion); Cray Commc'ns, Inc. v. Novatel Computer Sys.,Inc., 33 F.3d 390, 396 (4th Cir.1994) (stating the district court's decisions regarding briefing and hearing on summary judgment motions are reviewed for abuse of discretion).

A.

Consistent with the Note's governing law provision, we look to North Carolina law to determine whether the FDIC established that it is the “holder” of the Note. The “holde...