FDIC v. Brewer

• Decision Date: 20 April 1993
• Docket Number: No. Civ. A. No. J86-0300(W).,Civ. A. No. J86-0300(W).
• Citation: 823 F. Supp. 1341
• Parties: FEDERAL DEPOSIT INS. CORP., in its Corporate Capacity, Plaintiff, v. James P. BREWER, Defendant. James P. BREWER, Third-Party Plaintiff, v. FEDERAL DEPOSIT INS. CORP., in its Corporate Capacity, Plaintiff/Intervenor, v. John R. BRYAN, et al., Third-Party Defendants.
• Court: U.S. District Court — Southern District of Mississippi

823 F. Supp. 1341

FEDERAL DEPOSIT INS. CORP., in its Corporate Capacity, Plaintiff, v. James P. BREWER, Defendant.

James P. BREWER, Third-Party Plaintiff, v. FEDERAL DEPOSIT INS. CORP., in its Corporate Capacity, Plaintiff/Intervenor, v. John R. BRYAN, et al., Third-Party Defendants.

No. Civ. A. No. J86-0300(W).

United States District Court, S.D. Mississippi, Jackson Division.

April 20, 1993.

Douglas Gunter, Jackson, MS, for plaintiff.

Alan Perry, David W. Clark, Harry E. Neblett, Jr., Jackson, MS, James H. Herring, Canton, MS, Richard M. Edmondson, Matthew M. Moore, Earl Keyes, David M. McMullan, Jr., Edwin S. Williams, Harris B. Henley, Jr., Erwin C. Ward, Jackson, MS, for defendants.

MEMORANDUM OPINION AND ORDER

WINGATE, District Judge.

Before the court is the motion of the plaintiff, the Federal Deposit Insurance Corporation (hereinafter "FDIC"), for summary judgment pursuant to Rule 56,¹ Federal Rules of Civil Procedure, in the above styled and numbered cause against the defendant, James P. Brewer (hereinafter "Brewer"). The controversy between the parties centers upon two promissory notes executed by Brewer and whether FDIC should be able to collect upon them. This court's jurisdiction over the controversy is invoked pursuant to 12 U.S.C. § 1819² and 28 U.S.C. § 1345.³ In its summary judgment motion, FDIC states that on December 2, 1983, Brewer executed two renewal promissory notes in favor of The Mississippi Bank (hereinafter "TMB"), due on demand, but if no demand, then due on January 16, 1984. Asserting that Brewer has made only partial payment on these two notes, FDIC, as the receiver for the now failed TMB, contends that it is entitled to a judgment against Brewer for the unpaid balance of the notes because Brewer has no valid defenses at law to thwart FDIC's claim. Persuaded that FDIC's claim is meritorious and further persuaded that under the disputed facts Brewer has no colorable defenses to FDIC's claim, this court grants summary judgment to FDIC. The court's reasoning is set out below.

I. FACTS

In early December of 1982, Brewer met with W.P. McMullan, Jr., Chairman and Chief Executive Officer of TMB, and Joe Denson, Executive Vice President of TMB, to discuss the terms of a stock purchase. A letter dated December 6, 1982 and signed by Joe Denson (the "Denson Letter")⁴ acknowledges that Brewer, McMullan and Denson held a discussion regarding the purchase of 8% or 62,283 shares of First Mississippi National Corporation stock from the Employee Stock Option Plan (ESOP) of TMB. The letter confirms an agreement reached among the three of them for Brewer or his business entity, Capital Security Services, Inc., to purchase the stock and for TMB to finance 100% of the purchase. The letter also states that the investment would be for a period of 18 months, and that neither Brewer nor Capital Security would suffer any loss as a result of this investment.

In order to ensure Brewer's purchase of the ESOP stock, Denson and McMullan persuaded Brewer to execute two promissory notes in favor of TMB on December 7, 1982. Note No. 61386 in the amount of $1,183,377.00 was secured by the 62,283 shares of common stock in the First Mississippi National Corporation. Note No. 61385 in the amount of $124,566.00 was a 360-day demand note with no collateral. When these notes came due in December of 1983, Brewer paid the accrued interest and executed two renewal notes in the same principal amounts as the original notes. The first of these two renewal notes, No. 61385, continued to be due on demand; however, the note provided that if no demand was made within 360 days, the note would be due and payable on January 16, 1984. The second renewal note, No. 61386 and executed on the same date as the first, continued to be secured by the 62,283 shares of common stock in the First Mississippi National Corporation.⁵

On May 11, 1984, pursuant to Miss.Code Ann. § 81-9-5 (1972), the Mississippi Commissioner of Banking and Consumer Finance determined that TMB was insolvent and closed the bank. The Commissioner then obtained a judgment from the Chancery Court for the First Judicial District of Hinds County, Mississippi which declared that TMB indeed was insolvent. Upon a bank's failure, the courts usually appoint the FDIC as a receiver pursuant to 12 U.S.C. § 1821(c) and (e). Thereafter, the FDIC will determine whether the future course for the failed bank should proceed either to liquidation or to a "purchase and assumption transaction," where the FDIC arranges for the sale of the failed bank's assets and deposit liabilities to another solvent bank. See Federal Deposit Insurance Corporation v. Jenkins, 888 F.2d 1537 (11th Cir.1989).

Thus, in keeping with the customary procedure, the Chancery Court entered a judgment which appointed FDIC as the receiver for the failed bank. FDIC accepted the appointment pursuant to 12 U.S.C. § 1821(e) and filed a bond as required by Miss.Code Ann. § 81-9-21 (1972). Then, in its capacity as receiver, FDIC took possession and control of TMB and entered into a court-approved sale of certain TMB assets and liabilities to the Grenada Bank. FDIC did not part with the two promissory notes in question, however, but retained them in hopes of collecting on them.

FDIC then began its efforts to collect on the two promissory notes. FDIC first took steps to liquidate the First Mississippi Corporation stock pledged as collateral for note No. 61386. Brewer retained counsel and persuaded FDIC to cancel the liquidation sale because Brewer represented that he would be able to obtain a price higher than that being sought by FDIC. On March 21, 1986, Brewer executed an option to purchase which granted Bancorp of Mississippi first option on Brewer's 62,283 shares for $16.46 per share ($1,025,178.10). Bancorp agreed to buy the stock at that price. Then, Brewer attempted to obtain a complete release of all claims against him from FDIC in exchange for the $1,025,178.10, the proceeds of the Bancorp purchase. FDIC would not agree to release Brewer from liability for any deficiency; so, in exchange for FDIC's release of the 62,283 shares of common stock serving as security for note No. 61386 and in an effort to reduce the amount in controversy,⁶ Brewer signed a Schedule 13D affidavit as required by the Securities Exchange Commission and paid FDIC the $1,025,178.10 on April 15, 1986. According to FDIC, $3,300.00 of the total amount was applied to the payment of attorney fees, $307,021.22 to accrued interest, and $714,856.88 was applied to principal, leaving an outstanding balance of $465,503.50.

Now, Brewer claims that he paid the $1,025,178.10 as full and final settlement of all FDIC claims against him. FDIC disagrees, asserting that it never agreed to release Brewer from his total obligation. When Brewer balked at paying any deficiency on the notes, FDIC filed this lawsuit to recover the deficiency amount still due and owing on renewal note No. 61386, plus the amount due on renewal note No. 61385, plus interest.

II. ARGUMENT

FDIC argues that this is a simple collection case against Brewer and that there are no remaining issues of material fact. Firstly, argues FDIC, Brewer admits that he signed the promissory notes in favor of TMB. Secondly, says FDIC, Brewer made no payment on these notes until April of 1986, and that payment was only a partial satisfaction. Thirdly, states FDIC, Brewer raises no objection to the authenticity of the notes.⁷ Therefore, concludes FDIC, Brewer is in default on the notes and the deficiency amounts plus accrued interest are due and payable.

In his first affirmative defense in response to the FDIC's complaint, Brewer contends that he entered into an agreement with Joe Denson, in Denson's capacity as an officer of TMB, that he, Brewer, would be held harmless from any loss on the stock purchase in question. The basis of Brewer's contention is the "Denson Letter" dated December 6, 1982 which, according to Brewer, constitutes an agreement to hold Brewer harmless from any loss related to this stock purchase. Brewer says that this agreement was reinforced by W.P. McMullan's oral assurances when the subsequent promissory notes were executed, and also by written agreements later entered into between Brewer and McMullan in his personal capacity.⁸

Brewer's second affirmative defense is accord and satisfaction. According to Brewer, the payment to FDIC of $1,025,178.10 in exchange for FDIC's release of the 62,283 shares of common stock serving as security for note No. 61386 relieved Brewer from liability for any further claims by FDIC under the promissory notes in question.

Brewer's third and fourth affirmative defenses allege tortious interference with a contractual relationship and fraud in the inducement. Brewer also asserts that FDIC did not take the promissory notes in question in good faith and that TMB's alleged fraud rendered any agreement between itself and Brewer void.

Initially, Brewer asserted that FDIC had ignored its statutory mandate under 12 U.S.C. § 1823 by entering into a "Purchase and Assumption Agreement" rather than liquidating TMB. Brewer has since abandoned this defense.

The court has reviewed Brewer's affirmative defenses and has determined that these raised defenses are without merit and do not establish a genuine issue of material fact so as to preclude a grant of summary judgment in this case.

III. THE "DENSON LETTER" AND BREWER'S ALLEGED "HOLD HARMLESS" AGREEMENT

Brewer claims that he had an agreement with TMB through Joe Denson that he would be held harmless in the event of any loss on the ESOP stock transaction. Exhibit 2 to Brewer's responsive pleading to FDIC's complaint is the "Denson letter." Brewer also relies upon the alleged oral assurances of W.P. McMullan. This court already has stated in a previous order that the "Denson letter" cannot be asserted as a defense against the claims of FDIC in this case because of the statutory prohibition contained in...