FDIC v. Modular Homes, Inc.

• Citation: 859 F. Supp. 117
• Decision Date: 01 August 1994
• Docket Number: Civ. A. No. 92-5492.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Community Guardian Bank, in Receivership, Plaintiff, v. MODULAR HOMES, INC., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

859 F. Supp. 117

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Community Guardian Bank, in Receivership, Plaintiff, v. MODULAR HOMES, INC., et al., Defendants.

Civ. A. No. 92-5492.

United States District Court, D. New Jersey.

August 1, 1994.

Gerald A. Liloia, Glenn D. Curving, Conrad G. Cyriax, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, for plaintiff.

Michael Walker, Higgins & Walker, Ringwood, NJ, for defendants.

OPINION

WOLIN, District Judge.

Before the Court is the motion of plaintiff, Federal Deposit Insurance Corporation ("FDIC"). A plethora of issues arises out of what seems to be a simple motion by the FDIC to dismiss affirmative defenses raised by the defendants, Modular Homes, Inc., t/a Excel Homes, William & Rosalind Higgins, and Hugh and Margaret Walsh (collectively "Modular"), in response to the FDIC's foreclosure action. The FDIC argues that based on the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 12 U.S.C. section 1821(d), the Court lacks subject matter jurisdiction over Modular's defenses. In response, defendants assert that the FDIC has not complied with the notice provisions of FIRREA. Further, they seek dismissal of FDIC's foreclosure action, per Rule 37 of the Federal Rules of Civil Procedure, for the FDIC's alleged failure to comply with discovery. For the reasons that follow, the Court will grant in part and deny in part the FDIC's motion. Additionally, the Court will deny the defendant's cross-motion to dismiss pursuant to Rule 37.

BACKGROUND

In 1986, Modular Homes, Inc. borrowed $200,000 from Community Guardian Bank ("CGB" or "Bank"). The loan was secured by a lien on property located in Glen Rock, New Jersey, as well as the personal guarantees of defendants William and Rosalind Higgins and Hugh and Margaret Walsh. See Higgins Affidavit ¶ 3. After some business deals fell through, Modular experienced financial difficulty and therefore, in 1990, they entered into negotiations with CGB concerning the outstanding loans. Id. at ¶ 6.

Modular allegedly came to an agreement with CGB whereby Modular would give the Bank the deed to the Glen Rock property in lieu of foreclosure. Id. According to Modular, all was settled; the Bank, however, made additional demands of Modular regarding the deeds of the properties in question. Id. at ¶ 13. In October 1990, after extensive efforts to comply with the Bank's demands, Modular received a general release from liability covering some property in Vernon, New Jersey. Id. at ¶ 18. The Bank, however, refused to release the defendants with respect to the Glen Rock property until defendants could perfect the subdivision of the property. Id.

After extensive negotiations with the adjacent property owners in Glen Rock, in January 1991, Modular succeeded in completing an agreement with a neighboring land owner that would allow Modular to perfect the subdivision. Id. at ¶ 20. In May of 1991 Modular notified CGB that as soon as the adjacent property owner was given a release from his bank, Modular was prepared to close on the property, thereby assuring CGB that the subdivision plan was virtually completed. Id. at ¶ 21.

In July 1991, the Commissioner of Banking of the State of New Jersey took possession of CGB thereby assuming its assets. Id. at ¶ 22. On July 19, 1991, the plaintiff, the FDIC pursuant to their appointment as receiver for CGB, acquired all rights, titles, powers, and privileges of the bank. Plaintiff's Memorandum of Law in Support of Motion to Dismiss Defendant's Affirmative Defenses at pg. 2. In a letter sent in October of 1991, the FDIC notified the defendant of the receivership, and instructed the defendant to present all claims against the Bank within thirty days of receipt. Id. at pg. 3; see also Higgins Affidavit at ¶ 23.

On November 1, 1991, Modular presented claims to the FDIC explaining that the defendants were personal guarantors on a Note secured by real property. The proof of claim went on to state that the CGB had agreed to accept the deed to land in Glen Rock in lieu of pursuing foreclosure actions. Higgins Affidavit at ¶ 24. Subsequently, on November 12, 1991, the defendants received a form letter from the FDIC notifying Modular that its claim was disallowed. Id. at ¶ 25. In response to the FDIC's November 12th letter, defendants explained that because they received the FDIC's original letter concerning bringing proof of claims on October 28, 1991, "it was virtually impossible to file a Proof of Claim by the original deadline of October 25, 1991." Defendant's Memorandum of Law, Exhibit A at pg. 14. Modular's letter concluded by asking the FDIC to advise them accordingly. Id.

In July 1992, plaintiff filed two actions against Modular: a foreclosure action based on a mortgage from September 1989, and an action to recover on a floating rate note which was dated September 1989 as well. Modular was served in August, and in September, Modular made the FDIC an offer of settlement which paralleled the arrangement Modular had made with CGB to avoid foreclosure and personal liability. Higgins Affidavit at ¶¶ 29-30.

In September 1992, over ten months after having received the notice of disallowance from the FDIC, Modular filed its answer and separate affirmative defenses, which it subsequently amended to include a counterclaim and jury demand. Plaintiff's Memorandum of Law at p. 3. On October 30, 1992 the plaintiff removed the note action to this court pursuant to 12 U.S.C. section 1819(b)(2)(B). The foreclosure action was subsequently removed on December 30, 1992, and the actions were consolidated sua sponte on April 26, 1993.

DISCUSSION

The first question presented stems out of the plaintiff's motion to dismiss Modular's affirmative defenses. The FDIC argues that this Court lacks subject matter jurisdiction. Modular responds by questioning the validity of the notice the FDIC provided to them with respect to notification of the disallowance of Modular's claim.

Additionally, pursuant to Rule 37 of the Federal Rules of Civil Procedure, Modular has made a cross-motion against the FDIC claiming that the FDIC's actions against Modular should be dismissed due to the FDIC's failure to comply with discovery orders.

I. Defenses

This Court will take a two-tier approach to dealing with Modular's defenses. First the court will examine the legal sufficiency of the defenses. Next, the court will analyze the effect FIRREA has on the assertion of each remaining defenses.

A. Defenses That Will Be Dismissed By The Court

Rule 12(f) of the Federal Rules of Civil Procedure states: "upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense...." Fed.R.Civ.P. 12(f). If a defense cannot succeed under any set of circumstances alleged, the defense may be deemed insufficient as a matter of law. See In re Sunrise Securities Litigation, 818 F.Supp. 830, 840 (E.D.Pa.1993).

A Rule 12(f) motion is not meant to determine unclear or disputed questions of law. Id; United States v. Fairchild Industries, Inc., 766 F.Supp. 405, 408 (D.Md.1991) ("when there is any question of law, the court should refrain from acting until some later time when these issues can be more appropriately dealt with"). In fact, motions to strike are disfavored because of their "dilatory character." United States v. Kramer, 757 F.Supp. 397, 409-410 (D.N.J.1991). Nevertheless, courts have recognized that such motions may serve to hasten resolution of cases by eliminating the need for discovery, which in turn saves time and litigation expenses. See Van Schouwen v. Connaught Corp., 782 F.Supp. 1240 (N.D.Ill.1991) (explaining that "when the insufficiency of a defense is clearly apparent, a motion to strike can help the litigants clear away redundant clutter"); FDIC v. White, 828 F.Supp. 304, 307 (D.N.J. 1993); Glenside West Corp. v. Exxon Corp., 761 F.Supp. 1100, 1115 (D.N.J.1991). Motions to strike, however, will only be granted "when a defense is legally insufficient under any set of facts which may be inferred from the allegations of the pleading." Glenside, 761 F.Supp. at 1115 (citations omitted). By striking a defense sua sponte, the court can insure that its limited time will not be expended in litigating meritless defenses.

This Court finds no basis for Modular's collateral estoppel defense. Before collateral estoppel can be raised there must have been a prior adjudication of the merits of the issue by the party against whom collateral estoppel is being invoked. See Parklane Hosiery v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979). Since there has been no prior adjudication of this issue the defense of collateral estoppel is unavailable.

Similarly, Modular's defense of laches will be stricken. Modular could not successfully assert the defense of laches as it has been well established that laches cannot be maintained in suits brought by the federal government. See Bostwick Irrigation Dist. v. United States, 900 F.2d 1285, 1291 (8th Cir.1990) (citing Guaranty Trust Co. v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224 (1938); United States v. Brown, 835 F.2d 176 (8th Cir.1987)).

This Court will also dismiss Modular's assertions that "the claim of the plaintiff cannot be superior to that of his assignor and since the assignor's claim is barred, the plaintiff claim is also barred" (hereinafter "superior claim"), that the FDIC is guilty of "wrongful conduct," and that the FDIC committed "willful default." Affirmative defenses are pleadings; therefore, they are subject to Federal Rule of Civil Procedure 8(a), which calls for the pleader to "set forth a `short and plain statement,' Fed.R.Civ.Pro. 8(a), of the defense." Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir.1989) (citing Bobbitt v. Victorian House, Inc., 532 F.Supp. 734, 737 (N.D.Ill. 1982)); see also Baker v. City of Detroit, 483 F.Supp. 919 (E.D.Mich.1979) (ex...