Federal Deposit Ins. Corp. v. Binion

• Decision Date: 16 August 1991
• Docket Number: No. 90-5762,90-5762
• Citation: 953 F.2d 1013
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellee, v. Gayle W. BINION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1013

953 F.2d 1013

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellee, v. Gayle W. BINION, Defendant-Appellant.

No. 90-5762.

United States Court of Appeals Sixth Circuit.

Argued May 2, 1991.

Decided Aug. 16, 1991. ^*

D. Craig Dance, Cors, Bassett, Kohlhepp, Halloran & Moran, Cincinnati, Ohio, for plaintiff-appellee.

Garis L. Pruitt, Pruitt & Mussetter, Catlettsburg, Ky., for defendant-appellant.

Before KEITH and MILBURN, Circuit Judges, and HILLMAN, Senior District Judge. ^**

PER CURIAM.

Gayle T. Binion (also referred to in the record as Gayle Wood) ("defendant") appeals from the district court's April 26, 1990, order granting summary judgment for the Federal Deposit Insurance Corporation ("FDIC" or "plaintiff") and the May 30, 1990, order granting plaintiff attorney's fees. Plaintiff brought this action to recover from defendant money due on promissory notes executed by defendant and her husband, Clayton Binion. ¹ For the reasons set forth below, we AFFIRM.

I.

A.

The FDIC brought this action in its corporate capacity as assignee of the receiver of the People's Bank (the "Bank") of Olive Hill, Kentucky, pursuant to a purchase and assumption transaction. The action was originally filed in the Boyd Circuit Court by the original promisee, the Bank, to enforce payment of three promissory notes signed by defendant and Clayton Binion. The FDIC seeks collection of these notes from various real and personal properties given as collateral for the loans. Defendant claims that a defense of material and fraudulent alteration of the notes with regard to the property given as collateral discharges her obligation to pay.

Note I, dated June 24, 1983, in the amount of $13,051.69, was secured by a real estate mortgage on property located in the City of Ashland, Boyd County, Kentucky (the "Kentucky property").

Note II, dated September 6, 1983, was secured by the mortgage on the Kentucky property under its additional advance clause and by a new mortgage executed simultaneously on real estate located in the City of Ironton, Lawrence County, Ohio (the "Ohio property").

Note III, dated October 21, 1983, in the amount of $20,611, was secured by the mortgage on the Ohio property under its additional advance clause and some personalty of no consequence to this action.

Defendant contends that Note II was materially and fraudulently altered by Bank officials and that the alteration discharged her obligation to pay under the note. Defendant asserts that the Ohio property was not originally part of the security offered for Note II.

Note II was in part the renewal of Note I in the amount of $13,051.31 and in part the loan of additional money in the amount of $36,948.31. A comparison of the bank's original note and defendant's copy reveals that some language was added to the original note after it was signed. The additional notations pertain to the loan number, the loan amount and the identification of real estate collateral for the note. The loan number was filled in on the bank's copy after its execution. The loan amount on the bank's copy was originally shown as $52,280.40, the principal amount of the loan. It was crossed out after execution and changed to read $61,421.65, an amount equal to the total of payments (including interest) due at maturity. Paragraph 4 of Note II relates to real estate collateral for the loan under a separate mortgage. Note II as originally executed referred to a real estate mortgage, but left the date blank. After execution, the bank filled in the date of the mortgage and the recording data for the Ohio property described in the mortgage which defendant executed simultaneously with Note II. Another reference to the Kentucky and Ohio properties was inserted after execution in that portion of Note II pertaining to fixture filings. On the same day Note II was executed, defendant signed five other documents as part of the same loan transaction: (1) a mortgage; (2) a loan application; (3) truth in lending disclosures; (4) a loan disbursement sheet; (5) an insurance agreement.

The loan application identifies both the Kentucky and Ohio properties as the subject of first mortgage liens to be granted to the bank for the loan. The truth in lending disclosure indicates that the loan was secured by a security interest in real estate. The loan disbursement sheet allocates the disbursement of the loan proceeds and recites the total payments as $61,421.65. The figures on the note, loan disbursement sheet and the truth in lending disclosure are consistent with each other and call for a total payment of $61,421.65 at maturity. This figure appears in two separate locations in the body of Note II, in addition to the area of the alteration. The insurance agreement recites a loan and mortgage, requires defendant to keep the Ohio property insured, and grants the bank the right to be listed as mortgagee on the insurance policies covering the Ohio property to protect its interest in the event of damage. The insurance company shown on the agreement is Republic Insurance Company with an insured amount of $90,000. The policy referred to is the policy covering the Ohio property as evidenced by several renewal declarations issued by the insurance company on file with the bank in accordance with the insurance agreement.

The mortgage describes the Ohio property referred to in Note II, the loan application and the insurance agreement. It specifically refers to a note of $61,421.65 to mature on September 5, 1984, as the indebtedness for which it is security and includes additional indebtedness up to a maximum of $15,000.

B.

On August 17, 1984, the Bank commenced this action against Clayton and Gayle Binion in the Boyd Circuit Court. Clayton Binion filed an answer raising the defense that Note II was materially altered. Gayle Binion filed a separate answer and asserted a counterclaim alleging that Note II was forged by bank officials who added, after execution, the notation that it was secured by both the Kentucky and Ohio mortgages.

On December 3, 1987, the Commissioner of Banking for the Commonwealth of Kentucky closed the Bank. The FDIC became receiver of the Bank and in turn assigned all its assets and claims to the FDIC in its corporate capacity. On December 4, 1987, the Carter Circuit Court entered an order transferring by sale all loan assets of the liquidated bank to the FDIC in its corporate capacity. On December 11, 1987, the FDIC was substituted in this action as party plaintiff before the Boyd Circuit Court. On December 16, 1987, pursuant to 12 U.S.C. § 1819, the FDIC filed a petition for removal in the United States District Court for the Eastern District of Kentucky at Ashland.

On October 14, 1988, plaintiff moved for summary judgment. On June 12, 1989, the district court granted partial summary judgment in favor of plaintiff on the ground that the FDIC was the equivalent of a holder in due course and therefore not subject to the fraud defense asserted by defendant. Accordingly, the district court determined that the FDIC was entitled to a judgment against defendants for the remaining indebtedness in default on Notes II and III.

The case proceeded to trial on February 20, 1990, on the remaining issue of fact concerning whether there was an alteration to the agreement and, if so, the original tenor of Note II. At trial, subsequent to the FDIC's cross examination of Gayle Binion, the parties reached a tentative settlement after which the jury was discharged. ² The parties failed to consummate the agreement, however, because of a dispute over the value of the Ohio collateral. Thereafter, upon the district court's instructions, the FDIC moved for summary judgment on March 23, 1990. On April 26, 1990, the district court granted plaintiff's motion and directed the FDIC to make application for attorney's fees. Defendant was simultaneously directed to respond to plaintiff's application for attorney's fees within the time provided under Local Rule 6(b)(1)(A). Local Rule 6(b)(1)(A) states that "[f]ailure to file an opposing memorandum may be grounds for granting the motion." The FDIC filed its application for attorney's fees on May 25, 1990. Defendant did not respond to the FDIC's motion for attorney's fees as ordered by the district court. On May 30, 1990, the district court awarded the FDIC attorney's fees based upon the FDIC's motion and affidavit. Defendant Gayle Binion filed a timely notice of appeal on May 29, 1990.

II.

A.

We review the district court's grant of summary judgment de novo. See EEOC v. University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). Summary judgment is proper where there is no genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id.

On appeal, defendant argues that the district court erred in finding that the holder in due course doctrine was applicable to the FDIC where the counterclaim raising the defense of material and fraudulent alteration had been pled four years before the FDIC became the holder of the note. Defendant contends that the FDIC had actual knowledge of defendant's defense at the time the FDIC...