Cadle Co. II, Inc. v. Lewis

• Decision Date: 10 December 1993
• Docket Number: No. 68616,68616
• Citation: 254 Kan. 158,864 P.2d 718
• Parties: The CADLE COMPANY II, INC., Appellee/Cross-Appellant, v. Merwin P. LEWIS, Appellant/Cross-Appellee.
• Court: Kansas Supreme Court

Page 718

864 P.2d 718

254 Kan. 158

The CADLE COMPANY II, INC., Appellee/Cross-Appellant, v. Merwin P. LEWIS, Appellant/Cross-Appellee.

No. 68616.

Supreme Court of Kansas.

Dec. 10, 1993.

Syllabus by the Court

In an action by the plaintiff as the assignee of the Federal Deposit Insurance Corporation to recover upon a promissory note and to foreclose a real estate mortgage the record is examined and it is held: An action by an assignee of the Federal Deposit Insurance Corporation is controlled by the federal six-year statute of limitations, 12 U.S.C. § 1821(d)(14)(A) (Supp.IV 1992), rather than the state five-year statute of limitations.

Stuart R. Collier, of Arn, Mullins, Unruh, Kuhn & Wilson, Wichita, argued the cause and was on the brief for appellant.

David J. Wood, of Dresie, Jorgensen & Wood, P.A., Wichita, argued the cause and was on the brief for appellee.

HOLMES, Chief Justice:

This case involves an appeal and cross-appeal from judgments of the district court granted in an action on a promissory note secured by a real estate mortgage upon property in Sedgwick County. The plaintiff, The Cadle Company II, Inc., (Cadle) appeals from an order granting summary judgment to the defendant based upon a finding that Cadle's action was barred by the state statute of limitations. The defendant, Merwin P. Lewis (Lewis), cross-appeals from a judgment of the district court in favor of the plaintiff on the defendant's claim for statutory damages and attorney fees sought pursuant to K.S.A. 58-2309a. The Court of Appeals affirmed the district court judgments in an unpublished opinion decided March 26, 1993. We granted the petition for review filed by Cadle on the single issue of whether the state five-year statute of limitations or the federal six-year statute of limitations applies to this case. We denied the petition for review filed by Lewis on his claim for statutory damages and attorney fees.

The facts, as they pertain to the issue of summary judgment, are uncontroverted. On July 2, 1985, Lewis executed a promissory note to the Stillwater (Oklahoma) Community Bank (Stillwater) in the amount of $82,297.64, which was secured by a mortgage on Kansas property. The note became due on October 2, 1985, but was not paid.

Stillwater was taken over by the Federal Deposit Insurance Corporation (FDIC) on or about October 25, 1986. Between April 30, 1986, and November 13, 1986, the FDIC purchased Stillwater's assets. The July 2, 1985, note was overdue at the time it was acquired by the FDIC. Cadle purchased the July 2, 1985, note and mortgage from the FDIC on October 20, 1989. Cadle and the FDIC had notice that the note was overdue.

On June 21, 1991, Cadle instituted an action in the District Court of Sedgwick County to obtain judgment on the July 2, 1985, note and to foreclose the mortgage on the Kansas property.

On July 20, 1991, Lewis made a written demand on Cadle that it enter satisfaction of the July 2, 1985, mortgage pursuant to K.S.A. 58-2309a. Cadle did not enter a satisfaction of the mortgage, and Lewis then filed a counterclaim, asking for $500 statutory damages and $11,461.46 in attorney fees.

Thereafter, Lewis filed a motion for summary judgment, contending that the action by the plaintiff was barred by the Oklahoma five-year statute of limitations. On October 3, 1991, the district court granted Lewis' motion for summary judgment, concluding that Cadle's foreclosure action was barred by the five-year statute of limitations.

Lewis' claim for damages for Cadle's refusal to enter satisfaction of the July 2, 1985, note was tried to the court and the court concluded the July 2, 1985, note was not paid by a subsequent April 22, 1986, note which had been executed by Lewis. The court further concluded that the July 2, 1985, note was not paid by virtue of the running of the statute of limitations. Judgment was accordingly entered for the plaintiff on the defendant's amended counterclaim.

Lewis appealed from the judgment denying recovery on his counterclaim, and Cadle cross-appealed from the summary judgment rendered against it. The Court of Appeals affirmed the district court on both issues.

As previously stated, we granted Cadle's petition for review on the single issue of whether the state five-year statute of limitations or the federal six-year statute applied to this action.

The parties agree that the state statute of limitations would bar a claim five years from October 2, 1985, the date of default, and, if it applies, plaintiff's action is barred. However, if the six-year federal statute is applicable, then plaintiff's action was timely filed.

The general statute of limitations for actions on contract commenced by the United States, 28 U.S.C. § 2415(a) (1988), states:

"Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues...." (Emphasis added.)

The statute of limitations for actions commenced by the FDIC as a conservator or receiver, 12 U.S.C. § 1821(d)(14)(A) (Supp. IV 1992), states:

"Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be--(i) in the case of any contract claim, the longer of--(I) the 6-year period beginning on the date the claim accrues; or (II) the period applicable under State law."

It is the contention of Cadle that the district court erred in applying the five-year Oklahoma statute of limitations in this case. Cadle maintains that the appropriate limitations statute is the six-year federal statute. Cadle relies upon both the general contract statute, 28 U.S.C. § 2415(a), and the specific statute applicable to the FDIC, 12 U.S.C. § 1821(d)(14)(A). Cadle reasons that because it was assigned the note by the FDIC, it succeeded to all the rights and remedies available to the FDIC, including the six-year limitations period. Cadle contends that its position is supported by federal common law, public policy, and state and federal case law.

Lewis disagrees, pointing out that the plain language of the federal statutes clearly limits their application to the United States and the officers and agencies thereof. It is his position that the statutes are clear and unambiguous and apply only to the parties specified in the statutes and that any extension of the statutes to cover others is unwarranted.

Much of Cadle's argument is based upon what it contends is a logical extension of the D'Oench, Duhme doctrine first enunciated in D'Oench, Duhme & Co. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and is supported by recent case law.

In D'Oench, Duhme, the Court held that the FDIC was immune from any defenses which were based upon secret or unrecorded agreements. The Court reasoned that the FDIC must be able to rely upon the records and books of failed financial institutions in its effort to protect the integrity of the United States banking industry. As such, the Court provided the FDIC with a broad estoppel defense to protect against fraud and misrepresentation by borrowers. D'Oench, Duhme, 315 U.S. at 458-60, 62 S.Ct. at 679-681.

Eight years following the D'Oench, Duhme decision, Congress enacted 12 U.S.C. § 1823(e) (Supp. IV 1992), which codified D'Oench, Duhme and broadened the already emerging doctrine. The act is broader than D'Oench, Duhme in its enforcement scope in that it applies to any agreement which is not in writing, not just agreements which are meant to mislead bank regulators. In addition to the writing requirement, the act requires that the agreement be executed contemporaneously with the underlying transaction, have approval by the bank's loan committee, and be documented in the bank's records. Today, both 12 U.S.C. § 1823(e) and the D'Oench, Duhme decision serve as a bar to most defenses or claims which diminish or defeat the FDIC's right in an acquired asset. See Langley v. FDIC, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987). Through case law, the doctrine has been extended in various factual situations to assignees of the FDIC and other federal agencies.

While one of Cadle's arguments for application of the federal statutes of limitations is based upon extension of the D'Oench, Duhme doctrine, the Court of Appeals was not impressed. It stated:

"Neither the D'Oench, Duhme doctrine nor its codification speak to the statute of limitations.

"So far, the only other court to rule on this issue has been the Oklahoma federal district court in Agrawal. Although that court felt that the D'Oench, Duhme doctrine applied in this type of case, the holding is very questionable in light of the stated purpose of that doctrine and the fact that nothing in the federal statutes indicates that the six-year statute of limitations is available in any case other than an action by the federal government."

In addition to relying on the reasoning posited by the Court of Appeals decision, Lewis also maintains that statutes of limitation are procedural and as such are not assignable. In his brief, Lewis states the right to raise the applicable statute of limitations is a defense and belongs to the person against whom the claim is made--not to the person making the claim. However, this argument lacks merit and is simply misplaced. Cadle's argument is not grounded on the question of which party has the right to assert the applicable statute of limitations; instead, Cadle argues present case law establishes that the federal limitations period applies to an assignee of the FDIC. Here, the facts are not controverted on the particular issue before us, and the determination of which statute of limitations applies to the uncontroverted facts is purely a...