Bateman v. F.D.I.C.

• Court: U.S. Court of Appeals — First Circuit
• Writing for the Court: Before BREYER, Chief Judge, BOWNES, Senior Circuit Judge, and SELYA; BREYER
• Citation: Bateman v. F.D.I.C., 970 F.2d 924 (1st Cir. 1992)
• Decision Date: 06 January 1992
• Docket Number: No. 91-1832,91-1832
• Parties: David BATEMAN, Plaintiff, Appellee, v. FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants, Appellees. Everett N. Dobson & Sons, Inc., Party-in-Interest, Appellant. . Heard

Page 924

970 F.2d 924

David BATEMAN, Plaintiff, Appellee, v. FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants Appellees Everett N. Dobson & Sons, Inc., Party-in-Interest, Appellant.

No. 91-1832.

United States Court of Appeals First Circuit.

Heard Jan. 6, 1992.

Decided June 30, 1992.

George F. Burns with whom A. Robert Ruesch, Lorna J. Harmuth, and Amerling & Burns, Portland, Me., were on brief for appellant.

Christopher J. Bellotto, Counsel, with whom Ann S. DuRoss, Assistant Gen. Counsel, and Colleen B. Bombardier, Senior Counsel, Washington, D.C., were on brief for defendant, appellee, F.D.I.C.

Before BREYER, Chief Judge, BOWNES, Senior Circuit Judge, and SELYA, Circuit Judge.

BREYER, Chief Judge.

State laws normally give a contractor who works on a piece of property a lien against the property (called a "mechanic's lien") to guarantee payment for its work. Such a lien may have priority over even a pre-existing mortgage, i.e., a mortgage created some time before (perhaps years before) the contractor performed the work. Under Maine state law a contractor may obtain a mechanic's lien if (among other things) the contractor carries out the work either (1) "by virtue of a contract" with the owner, say, a bank that holds a pre-existing mortgage, or (2) with the "consent" of the owner. Me.Rev.Stat.Ann. tit. 10, § 3251 (emphasis added).

The issue before us on this appeal involves the relation between a mechanic's lien and a pre-existing mortgage, in a special context--the context of a federal takeover of a state bank. A bank, holding such a mortgage, failed. The Federal Deposit Insurance Corporation (FDIC) became the bank's receiver. We must decide whether this federal takeover makes a difference to the priority (over a pre-existing mortgage) that a mechanic's lien (obtained with the bank's "consent") might otherwise enjoy. The FDIC believes that a federal statute (which we shall call the "D'Oench, Duhme statute") requires an affirmative answer to this question. That statute makes invalid any "agreement which tends to diminish or defeat the interest" of the FDIC unless the "agreement" is in writing (and satisfies certain other requirements). 12 U.S.C. § 1823(e) (emphasis added) (codifying common law doctrine of D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942)); see also 12 U.S.C. § 1821(n)(4)(I). Thus, if what state mechanic's lien law calls "consent" is what federal FDIC law calls an "agreement," then a contractor could not use an unwritten "consent" to obtain a mechanic's lien that defeats the FDIC's pre-existing mortgage-based interest. That is to say, the contractor, in effect, would lose the priority that state law otherwise would have given him.

We conclude, however, that the federal statute does not make the difference for which the FDIC argues. We believe that state law "consent" does not amount to federal law "agreement." Hence, the federal D'Oench, Duhme statute does not deprive the contractor of whatever priority state law would otherwise award him.

I Background

A Prior Proceedings

In 1986, several owners of a piece of property in Falmouth, Maine, borrowed money from the Maine National Bank. They gave the Bank a mortgage on the property. Later, Everett N. Dobson & Sons, Inc., the appellant here, performed construction work on that property. Apparently, no one paid Dobson for its work. Consequently, in November 1990, Dobson filed and recorded a mechanic's lien certificate in the county's registry of deeds, thereby perfecting its mechanic's lien, and in December 1990 Dobson brought a lawsuit in state court to enforce that lien.

In the meantime the property's owners brought a different state court suit against the Bank (over matters that do not directly concern us now). The Bank counterclaimed in that action, seeking to foreclose on its mortgage. Dobson (who, by then, was a party in this second state court lawsuit as well) said that its mechanic's lien had priority over the Bank's pre-existing mortgage.

Two important events then occurred. First, in January 1991, the federal Comptroller of the Currency declared the Bank insolvent and appointed the FDIC as receiver. 12 U.S.C. §§ 191, 1821(c). Second, the FDIC (actually, a "bridge bank" to which the FDIC had transferred the Bank's assets, 12 U.S.C. § 1821(n)) removed this latter state court case to federal court. 12 U.S.C. § 1819(b)(2)(B). The district court eventually dismissed all claims except the Dobson/Bank claims involving the relative priority of Dobson's mechanic's lien and the Bank's pre-existing mortgage.

Eventually, the district court held that the Bank's pre-existing mortgage had priority over Dobson's mechanic's lien. It noted that the validity of Dobson's mechanic's lien depended upon its having obtained the Bank's "consent." It reasoned that, for purposes of federal law, the state law mechanic's lien "consent" in the Maine statute, Me.Rev.Stat.Ann. tit. 10, § 3251, amounts to an "agreement" in the D'Oench, Duhme statute, 12 U.S.C. § 1823(e). Hence, a contractor cannot enforce against the FDIC the priority that state law otherwise would give to its mechanic's lien unless the "consent" required by state law is in writing and meets several other federal, D'Oench, Duhme statutory requirements. Since both Dobson and the FDIC (which rejoined the lawsuit after the "bridge bank" failed) conceded that the "consent" that the Bank had given Dobson was not in writing, the district court concluded that Dobson could not have priority. And, the court granted summary judgment for the Bank. 766 F.Supp. 1194 (D.Me.1991). Dobson now appeals.

B The Federal Statute

The federal statute at issue codifies law that the Supreme Court set forth in D'Oench, Duhme, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). In that case, a bank (which subsequently failed) tried to collect a debt that was evidenced by a writing. The defendant asserted that it had made a secret side-agreement with the bank, in which the bank promised not to collect the basic debt. The Supreme Court held that 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, Duhme, 315 U.S. at 460, 62 S.Ct. at 681. The Court estopped borrowers from asserting such defenses, in order 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. International, Inc., 834 F.2d 248, 252 (1st Cir.1987).

Congress has embodied the D'Oench, Duhme estoppel doctrine in a statute and its subsequent amendments. As amended in 1989, the statute reads 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--

(1) is in writing,

(2) 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,

(3) 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

(4) has been, continuously, from the time of its execution, an official record of the depository institution.

12 U.S.C. § 1823(e) (amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, Pub.L. No. 101-73, 103 Stat. 183 (1989) (codified at 12 U.S.C. §§ 1811-1833e)) (emphasis added); 12 U.S.C. § 1821(n)(4)(I) (identical requirements in relation to assets held by bridge banks). This case concerns the amended statute. (Although we read that statute as informed by the purposes of D'Oench, Duhme, we recognize that the statute and the D'Oench, Duhme federal common law doctrine are not necessarily coextensive, and we do not mean to imply any particular limitation upon the reach of D'Oench, Duhme "common law." See, e.g., In re 604 Columbus Avenue Realty Trust, 968 F.2d 1332, 1344-1348 (1st Cir.1992)).

C The State Mechanic's Lien Statute

Maine's law, as we have said, grants a lien upon property "to secure payment ... with costs" for whoever "performs labor or furnishes labor or materials" for work on that property, "by virtue of a contract with or by consent of the owner." Me.Rev.Stat.Ann. tit. 10, § 3251 (emphasis added). For purposes of this statute, "owner" includes a mortgagee (which typically holds legal, but not equitable, title to mortgaged property). See Carey v. Boulette, 158 Me. 204, 182 A.2d 473, 474 (1962).

The Maine courts have not defined "consent" precisely. They have said that an owner's knowledge that the work is being done, combined with the owner's failure to object, establishes "consent," but they have added the apparently qualifying statement that, "[w]hether more than such knowledge is necessary depends upon the circumstances of the case." Id. 182 A.2d at 475; see Bangor Roofing & Sheet Metal Co. v. Robbins Plumbing Co., 151 Me. 145, 116 A.2d 664, 667 (1955) ("Consent may be inferred from circumstances."); see also, Parker-Danner Co. v. Nickerson, 554 A.2d 1193 (Me.1989); Fischbach & Moore, Inc. v. Presteel Corp., 398 A.2d 397 (Me.1979). The state code, while not defining "consent" explicitly, does say what precludes consent: if a mortgagee files a written objection to the work, no lien can arise. Me.Rev.Stat.Ann. tit 10, § 3252. Having read the statute and cases, we believe that, under Maine law, a lienholder can show a mortgagee bank's consent by showing (1) the bank's knowledge that the work was going on, (2) the bank's failure to object, and (3) (perhaps) the absence of...