First Financial Sav. Bank v. American Bankers Ins.

• Decision Date: 30 October 1991
• Docket Number: 88-502-CIV-5-H,88-150-CIV-5-H,88-501-CIV-5-H,88-146-CIV-5-H,88-534-CIV-5-H to 88-536-CIV-5-H.,No. 88-33-CIV-5-H,88-33-CIV-5-H
• Citation: 783 F. Supp. 963
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: FIRST FINANCIAL SAVINGS BANK, INC., et al., Plaintiffs, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants. DREXEL BURNHAM LAMBERT, INC., Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants. NORTH CAROLINA FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants. CHASE FEDERAL BANK, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants. CHASE FEDERAL BANK, Plaintiff, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, as Receiver for Cardinal Savings Bank, Inc., Defendant. FULTON FEDERAL SAVINGS & LOAN ASSOCIATION, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants. The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, et al., Plaintiffs, v. AMERICAN BANKERS INSURANCE COMPANY, et al., Defendants. CHELTENHAM BANK, et al., Plaintiffs, v. FOREMOST INSURANCE COMPANY, INC., et al., Defendants.

783 F. Supp. 963

FIRST FINANCIAL SAVINGS BANK, INC., et al., Plaintiffs, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants.

DREXEL BURNHAM LAMBERT, INC., Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants.

NORTH CAROLINA FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants.

CHASE FEDERAL BANK, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants.

CHASE FEDERAL BANK, Plaintiff, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, as Receiver for Cardinal Savings Bank, Inc., Defendant.

FULTON FEDERAL SAVINGS & LOAN ASSOCIATION, Plaintiff, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, INC., et al., Defendants.

The EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, et al., Plaintiffs, v. AMERICAN BANKERS INSURANCE COMPANY, et al., Defendants.

CHELTENHAM BANK, et al., Plaintiffs, v. FOREMOST INSURANCE COMPANY, INC., et al., Defendants.

Nos. 88-33-CIV-5-H, 88-146-CIV-5-H, 88-150-CIV-5-H, 88-501-CIV-5-H, 88-502-CIV-5-H, 88-534-CIV-5-H to 88-536-CIV-5-H.

United States District Court, E.D. North Carolina, Raleigh Division.

October 30, 1991.

Howard E. Manning, Michael T. Medford, Samuel T. Oliver, Jr., Manning, Fulton & Skinner, Raleigh, N.C., for plaintiffs.

Richard Hutson, Mount, White, Hutson & Carden, Durham, N.C., for American Bankers Ins. Co. of Fla., Inc., American Bankers Financial Services, American Bankers Ins. Group, Inc., Roger L. Roode, Peter D. Lowrey, Samuel R. Crites and Dennis DiMaggio.

Jeffrey J. Davis, Moore & Van Allen, Charlotte, N.C., Sarah W. Fox, Moore & Van Allen, Raleigh, N.C., for Interstate Securities, Inc.

James D. Blount, Jr., Carl N. Patterson, Jr., Martha J. Mason, Donald H. Tucker, Jr., Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, Raleigh, N.C., for First Union Nat. Bank.

Carolin D. Bakewell, Mays & Valentine, Richmond, Va., for Wallace J. Conner.

Joseph W. Moss, Adams, Kleemeier, Hagan, Hannah & Fouts, Greensboro, N.C., for Larry M. Dinkins.

ORDER

MALCOLM J. HOWARD, District Judge.

This matter is before the court on the motion by the Federal Deposit Insurance Corporation as Receiver for Cardinal Savings Bank, Inc. ("FDIC") to strike pursuant to Fed.R.Civ.P. 12(f) the 5th, 10th, 15th through 23rd, 27th through 30th, and 32nd affirmative defenses raised in the Answer, Counterclaim and Cross-Claim of the American Bankers Companies¹ to the First Amended Cross-Claim of the FDIC against American Bankers. Since ABIC has responded to the FDIC's motion to strike, and the time for response has run, this matter is ripe for disposition. For the reasons stated below, the FDIC's motion to strike ABIC's 5th, 10th, 15th-23rd, and 27th-30th affirmative defenses is denied, and the FDIC's motion to strike ABIC's 32nd affirmative defense is granted.

STATEMENT OF THE CASE

Since the procedural and factual history of the present actions has been well documented in numerous prior orders, this court will forego a lengthy recitation of such history and will only outline those facts that are necessary for an understanding of the present motion. The FDIC in its capacity as receiver for Cardinal Savings Bank, Inc. ("Cardinal") has cross-claimed against ABIC, claiming damages caused to Cardinal arising from an alleged repudiation of credit insurance issued by ABIC.

The FDIC alleges that ABIC and the Conner Corporation ("Conner") entered into a commercial venture characterized by the FDIC as the "American Bankers credit insurance arrangement." In this particular arrangement, ABIC agreed to provide credit insurance for loans made to purchasers of mobile homes. These loans collateralized bonds that had been issued by subsidiaries of Conner to institutional investors. The loans to the purchasers of mobile homes were made by Cardinal.²

The FDIC's Cross-Claim against ABIC alleges liability for breach of contract, fraud, unfair and deceptive trade practices, assisting breach of fiduciary duty, conspiracy to breach fiduciary duty, and violations of the Racketeer Influenced Corrupt Organizations Act ("RICO"). Specifically, the FDIC, in its capacity as receiver for Cardinal, alleges that it incurred losses when First Union National Bank of North Carolina ("First Union"), as a purported secured creditor of Cardinal, sold at a discount loans that were owned by Cardinal. The FDIC alleges that these losses are covered by the credit insurance arrangement between Conner and ABIC. In addition to denying that the alleged losses are covered, ABIC has raised the Experience Adjustment Endorsement ("EAE") to the policy as a defense to the FDIC's Cross-Claim.

In its pending motion to strike, the FDIC argues that sixteen of ABIC's thirty-three affirmative defenses, which were raised in ABIC's Answer to the FDIC's Cross-Claim, should be stricken as legally insufficient. The FDIC seeks to bar certain of ABIC's affirmative defenses upon the basis of the D'Oench doctrine, title 12 U.S.C. Sec. 1823(e), and federal and state common law.

COURT'S DISCUSSION

At the outset, this court must consider the standard for reviewing a motion to strike pursuant to Fed.R.Civ.P. 12(f). According to Fed.R.Civ.P. 12(f), "the Court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent or scandalous matter." One of the purposes of a motion to strike is to gain an early adjudication by the court of the legal sufficiency of defenses set forth in a defendant's answer. United States v. Southerly Portion of Bodie Island, 114 F.Supp. 427 (E.D.N.C. 1953).

This court notes, however, that "a Rule 12(f) motion to strike defenses is a drastic remedy which is disfavored by the courts and is infrequently granted." H.J. Inc. v. Northwestern Bell Telephone Co., 648 F.Supp. 419, 422 (D.Minn.1986), aff'd, 829 F.2d 648 (8th Cir.1987), rev'd on other grounds, 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). Motions to strike are viewed with such disfavor "because it is difficult to establish that a defense is clearly insufficient." Spell v. McDaniel, 591 F.Supp. 1090, 1112 (E.D.N.C.1984). When a court considers a motion to strike pursuant to Fed.R.Civ.P. 12(f), matters outside the pleading are not to be considered, and well-pleaded facts are to be accepted as true. 5A C. Wright and A. Miller, Federal Practice and Procedure, Sec. 1380 (1990). The pleadings are treated so as to afford the defendant every opportunity to support its contentions at trial. Bennett v. Spoor Behrins Campbell & Young, Inc., 124 F.R.D. 562 (S.D.N.Y.1989).

With the above-stated principles in mind, the court will consider each of the grounds set forth by the FDIC in support of its motion to strike ABIC's affirmative defenses.

(A) Application of the D'Oench Doctrine and 12 U.S.C. Sec. 1823(e) to Bar ABIC's Affirmative Defenses

Initially, the FDIC argues that ABIC's 15th through 23rd affirmative defenses must be stricken in light of the provisions of 12 U.S.C. Sec. 1823(e) and the D'Oench doctrine. In its Cross-Claim against ABIC, the FDIC seeks compensation for damages arising out of ABIC's credit insurance arrangement with Conner. The FDIC argues that insurance arrangements are "agreements" as that term is applied under the D'Oench doctrine and 12 U.S.C. Sec. 1823(e). The FDIC argues that ABIC's 15th through 23rd affirmative defenses should be stricken because they are based on agreements, such as the insurance agreement between Conner and ABIC, which do not comply with 12 U.S.C. Sec. 1823(e) and the D'Oench doctrine.

Based on the reasoning contained in its October 17, 1991, Order filed in the instant litigation,³ this court finds that the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) are inapplicable in the present case to bar ABIC's affirmative defenses. In pertinent part, all of the cases that have relied upon the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) to bar claims and defenses against the FDIC alleging violations of the securities laws, RICO, state securities and racketeering acts, and common law fraud and misrepresentation involve attempts by a borrower, debtor, or other obligee of a failed financial institution to avoid or diminish liability on a note or other monetary obligation reflected in the records of the failed financial institution. Vernon v. Resolution Trust Corp., 907 F.2d 1101, 1107 (11th Cir.1990). As explained by the Vernon court, in every case, except one,⁴ in which the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) have been applied

the FDIC, the FSLIC, or some successor in interest asserted or defended the validity and enforceability of a particular debt or monetary obligation owed to the failed bank, be it a promissory note, a mortgage, a letter of credit or personal guaranty or collateral pledge agreement securing a loan, rental payments under a lease, or refund provision in an insurance contract.

Id. at 1107.

In Vernon, the court refused to extend the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) to bar all claims or defenses against federal receivers of failed financial institutions. The court refused to adopt the view that the D'Oench doctrine

preserved all assets, whether actually possessed or receivable, acquired by a federal insurer or its successor in interest from all claims tending to diminish those assets, save those claims clearly supported by the records of the insolvent bank.

Id. at 1108.

The Vernon court held that the D'Oench doctrine and 12 U.S.C. Sec. 1823(e) do not preclude a party from obtaining compensation from the general assets of a failed financial institution controlled by the FDIC as receiver, but instead, only bar defenses and claims which would diminish the value of a particular record asset held by the FDIC, such as a note or mortgage. Id. at 1107-1108. As this court previously found in its October 17, 1991, Order, the Vernon court's interpretation of the D'Oench doctrine and 12 U.S.C. Sec. 1823(e)...