Bufman Organization v. F.D.I.C., No. 93-5137

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtBefore COX, Circuit Judge, DYER; PER CURIAM
Citation82 F.3d 1020
Docket NumberNo. 93-5137
Decision Date13 May 1996
Parties29 UCC Rep.Serv.2d 905 BUFMAN ORGANIZATION, a Florida corporation, Zev Bufman, Vilma Bufman, individually and as guarantor, Zev Bufman Sports Entertainment & Facility Development Corporation, Plaintiffs-Counter-Defendants-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity and as Receiver, Bank M, a commercial bank chartered pursuant to the laws of the State of Florida, Defendants-Counter-Claimants-Appellees.

Page 1020

82 F.3d 1020
29 UCC Rep.Serv.2d 905
BUFMAN ORGANIZATION, a Florida corporation, Zev Bufman,
Vilma Bufman, individually and as guarantor, Zev Bufman
Sports Entertainment & Facility Development Corporation,
Plaintiffs-Counter-Defendants-Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate
capacity and as Receiver, Bank M, a commercial bank
chartered pursuant to the laws of the State of Florida,
Defendants-Counter-Claimants-Appellees.
No. 93-5137.
United States Court of Appeals,
Eleventh Circuit.
May 13, 1996.

Page 1021

Leonard H. Bloom, Mark R. Dern, Nortman & Bloom, P.A., Miami, FL, Martin D. Minsker, David S. Cohen, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for appellants.

Patricia Halvorson Thompson, Popham, Haik, Schnobrich & Kaufman, Ltd., Miami, FL, for Bank M.

J. Scott Watson, Washington, D.C., for appellees.

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

Before COX, Circuit Judge, DYER, Senior Circuit Judge, and GOETTEL *, Senior District Judge.

Page 1022

PER CURIAM:

Zev Bufman and others appeal following a grant of summary judgment for the Federal Deposit Insurance Corporation ("FDIC") as Receiver on Bufman's claims for relief, and a grant of summary judgment for the FDIC in its corporate capacity on the FDIC's counterclaim on a note. This appeal involves the question of whether Bufman's claims and defenses are barred by the D'Oench doctrine or its statutory counterpart. We hold that Bufman's claim for the failed bank's failure to give notice of dishonor is not barred. We also hold that summary judgment on Bufman's civil theft claim was error, and remand these two claims to the district court. We affirm the district court with respect to the remainder of Bufman's claims and his defense.

I. BACKGROUND

In June of 1986, the Bufman Organization obtained a $750,000 line of credit from Bank M, a federally-insured bank operating in Miami, Florida. The loan was evidenced by a promissory note ("the Bufman note"), which was personally guaranteed by Zev and Vilma Bufman and secured by the assignment of an insurance policy on the life of Zev Bufman. 1 Zev Bufman used the line of credit to finance his business activities, which included civic amphitheater management and live theater production. Almost three years later, in February 1989, the remaining principal due on the note was around $400,000.

In late 1988, Bank M began soliciting subscriptions for a private offering of stock in an effort to increase the bank's capital to a level that would satisfy an agreement with state and federal regulators. Raul Masvidal, a principal shareholder in Bank M and an advisor to the board of directors, assisted Bank M in its efforts to raise capital. Masvidal and a group of investors wanted to purchase Bank M stock, but were awaiting financing from another Miami bank.

On February 14, 1989, Zev Bufman signed an agreement to loan Masvidal $400,000 "to facilitate the purchase of ... common stock of Bank M." (R. 1-1, Masvidal loan agreement at 1.) Masvidal executed a note ("Masvidal note") promising to pay the loan principal plus twelve per cent interest on March 1, 1989, two weeks after the execution of the note and loan agreement. When the agreement and note were executed, Masvidal gave Zev Bufman one check for the $400,000 principal and another check for $1,972.65 in interest. The checks were post-dated March 1, and were drawn on Masvidal's personal account at Bank M. In late February, Masvidal asked Zev Bufman to extend the time for repayment of the Masvidal loan by one week, and Zev Bufman agreed. Masvidal provided Zev Bufman with a third check, dated March 7, 1989, for the additional interest.

The events of March 7, 1989, while important to the resolution of some of the issues in this case, are not entirely clear from the record. The magistrate judge, whose report and recommendation was adopted by the district court, found that on March 7, Zev Bufman endorsed the three checks from Masvidal and "sent them to Bank M for deposit." (R. 3-120 at 3.) The magistrate judge also found that the deposit was accompanied by a transmittal letter instructing the bank to deposit the checks in Bufman's account at Bank M, and to charge Bufman's account for the remaining balance on the Bufman note. Zev Bufman testified at his deposition that on March 7, he instructed someone in his office to give the checks and transmittal letter to Masvidal's driver, who would deliver them to Bank M. Jennifer Sardina, Masvidal's administrative assistant, testified that she telephoned Bank M on March 7 and spoke to a "female on the platform" who told her that Bufman's checks had arrived. Sardina defined the "platform" as the lobby of the bank, and agreed with the statement that this was the site to which checks for deposit would generally be delivered.

Page 1023

The district court found that the three checks were not deposited but were returned to Masvidal, who had an office at Bank M. The court made no finding as to whether the checks were properly presented to Bank M under Florida law. See Fla.Stat.Ann. § 673.5011 (1993) (defining presentment). The checks were not paid by the bank, and Bufman claims that the bank did not return the unpaid checks to him or give him notice of dishonor. Bufman claims that he did not know that the checks were unpaid until he learned in April of 1989 that Bank M regarded the Bufman note as unsatisfied.

Masvidal deposited the $400,000 that he borrowed from Zev Bufman into an escrow account with Bank M to reserve subscriptions for Bank M stock for himself and other investors. On March 24, 1989, Bank M broke escrow on the account, and the money that Zev Bufman loaned Masvidal was used to purchase Bank M stock. Masvidal had been unable to find other financing for the stock purchase before the closing. In March 1989, Zev Bufman also purchased $80,000 of Bank M stock following the private offering. Bufman claims that at the time of the closing, he did not know that the three checks had been dishonored or that Bank M regarded his obligation on the Bufman note as unsatisfied. Masvidal has not repaid the loan from Zev Bufman, and Bufman has not paid the $400,000 principal balance on his note to Bank M.

In February of 1990, Bufman filed suit against Bank M in Florida state court, making claims of (1) state law securities fraud, (2) failure to give notice of dishonor, (3) breach of duty, (4) unjust enrichment, and (5) civil theft. By June of the same year, state and federal regulators had declared Bank M insolvent. The Federal Deposit Insurance Corporation was appointed receiver for the bank ("FDIC/Receiver"), and purchased the Bufman note in its corporate capacity ("FDIC/Corporate"). The FDIC in both capacities was substituted for Bank M in Bufman's suit. Bufman amended his complaint to request monetary relief against the FDIC/Receiver; he sought declaratory relief against the FDIC/Corporate, seeking a declaration that he had no liability on the Bufman note. The FDIC removed the action to federal court. The FDIC/Corporate counterclaimed to collect the Bufman note and to foreclose on its security interest, the life insurance policy on Zev Bufman.

On the FDIC's motion for summary judgment, the district court accepted the report and recommendation of a magistrate judge that the motion be granted. The magistrate judge found that all of Bufman's claims were related to his contention that the Bufman loan had in fact been paid. The magistrate judge concluded that, because there was no evidence in the bank's records of payment or unsatisfied conditions to repayment, Bufman's claims were barred by D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and 12 U.S.C. § 1823(e)(1) (1994). The district court entered judgment against Bufman on the note for $400,000 and interest. Bufman appeals.

II. ISSUE ON APPEAL AND STANDARD OF REVIEW

In this appeal, we decide whether the district court erred in holding that, as a matter of law, Bufman's claims and defenses are barred by D'Oench and 12 U.S.C. § 1823(e)(1). We review the grant of summary judgment de novo, applying the same standards used by the district court. Fed.R.Civ.P. 56(c). Summary judgment is appropriate if, after examining all the evidence in the light most favorable to the non-moving party, no genuine issue of material fact remains. Id.; Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir.1995). A genuine issue of material fact exists if a reasonable jury could render a verdict for the nonmoving party. Id. at 594.

III. DISCUSSION

A. The D'Oench Doctrine

The D'Oench decision is the origin of the rule that, in a suit against the maker of a note by a federal deposit insurer, the maker is not allowed to raise a secret agreement between the maker and the payee bank as a defense. 315 U.S. 447, 62 S.Ct. 676. In D'Oench, the maker of the note had sold bonds to the bank, and the bonds had defaulted.

Page 1024

Id. at 454, 62 S.Ct. at 678. So that the bank would not have to show the past due bonds among its assets, the note was executed to the bank with the secret understanding that it would not be called for payment. Id. The FDIC acquired the note as collateral for a loan to the bank, and sued the maker on the note. Id.

The issue that was the focus of the D'Oench litigation before it reached the Supreme Court was whether Missouri or Illinois law applied to determine whether the maker could assert the secret agreement as a defense. Id. The Court agreed with neither party, holding that federal law governed the liability of the maker on the note. The Court reached this conclusion because the FDIC brought suit under authority granted by the Federal Reserve Act, which evidenced a "federal policy to protect [the FDIC] and the public funds which it administers...." Id. at 457, 62 S.Ct. at 679. The Court held that, under federal law, the test for whether the maker...

To continue reading

Request your trial
27 practice notes
  • Goldstein v. Fed. Deposit Ins. Corp., Civil Action No. ELH-11-1604
    • United States
    • U.S. District Court — District of Maryland
    • May 16, 2012
    ...it is not barred from pleading these theories in the alternative . . . ."). 6. In a subsequent decision, Bufman Organization v. FDIC, 82 F.3d 1020 (11th Cir. 1996), decided under Florida law, the Eleventh Circuit rejected an unjust enrichment claim on the basis of D'Oench, Duhme. But, it di......
  • Charles R. Goldstein, Chapter 7 Tr. for K Capital Corp. v. Fed. Deposit Ins. Corp., Civil Action No. ELH-11-1604
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • May 16, 2012
    ...it is not barred from pleading these theories in the alternative . . . ."). 6. In a subsequent decision, Bufman Organization v. FDIC, 82 F.3d 1020 (11th Cir. 1996), decided under Florida law, the Eleventh Circuit rejected an unjust enrichment claim on the basis of D'Oench, Duhme. But, it di......
  • SJ Props. Suites v. Specialty Fin. Grp., LLC, Case No. 10–CV–00198.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
    • March 30, 2012
    ...decisions of several federal appellate circuits that have rejected that contention. (Def.'s Reply Dismiss 4 (citing Bufman Org. v. FDIC, 82 F.3d 1020, 1025 (11th Cir.1996))). In Bufman, the Court of Appeals for the Eleventh Circuit acknowledged that, subsequent to Vernon, the decisions of t......
  • Jones v. Fed. Deposit Ins. Corp., CIVIL ACTION NO. 5:12-CV-176 (MTT)
    • United States
    • U.S. District Court — Middle District of Georgia
    • December 10, 2012
    ...because [the Plaintiff's] claim is not based on any agreement that is not part of the banks records." Bufman Organization v. F.D.I.C., 82 F.3d 1020, 1027 (11th Cir. 1996). See also Garrett v. Commonwealth Mortgage Corp. of America, 938 F.2d 591, 595 (5th Cir. 1991) ("neither section 1823(e)......
  • Request a trial to view additional results
27 cases
  • Goldstein v. Fed. Deposit Ins. Corp., Civil Action No. ELH-11-1604
    • United States
    • U.S. District Court — District of Maryland
    • May 16, 2012
    ...it is not barred from pleading these theories in the alternative . . . ."). 6. In a subsequent decision, Bufman Organization v. FDIC, 82 F.3d 1020 (11th Cir. 1996), decided under Florida law, the Eleventh Circuit rejected an unjust enrichment claim on the basis of D'Oench, Duhme. But, it di......
  • Charles R. Goldstein, Chapter 7 Tr. for K Capital Corp. v. Fed. Deposit Ins. Corp., Civil Action No. ELH-11-1604
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • May 16, 2012
    ...it is not barred from pleading these theories in the alternative . . . ."). 6. In a subsequent decision, Bufman Organization v. FDIC, 82 F.3d 1020 (11th Cir. 1996), decided under Florida law, the Eleventh Circuit rejected an unjust enrichment claim on the basis of D'Oench, Duhme. But, it di......
  • SJ Props. Suites v. Specialty Fin. Grp., LLC, Case No. 10–CV–00198.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
    • March 30, 2012
    ...decisions of several federal appellate circuits that have rejected that contention. (Def.'s Reply Dismiss 4 (citing Bufman Org. v. FDIC, 82 F.3d 1020, 1025 (11th Cir.1996))). In Bufman, the Court of Appeals for the Eleventh Circuit acknowledged that, subsequent to Vernon, the decisions of t......
  • Jones v. Fed. Deposit Ins. Corp., CIVIL ACTION NO. 5:12-CV-176 (MTT)
    • United States
    • U.S. District Court — Middle District of Georgia
    • December 10, 2012
    ...because [the Plaintiff's] claim is not based on any agreement that is not part of the banks records." Bufman Organization v. F.D.I.C., 82 F.3d 1020, 1027 (11th Cir. 1996). See also Garrett v. Commonwealth Mortgage Corp. of America, 938 F.2d 591, 595 (5th Cir. 1991) ("neither section 1823(e)......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT