Oliver v. Resolution Trust Corp.

• Decision Date: 01 October 1990
• Docket Number: No. 89-1929C(1).,89-1929C(1).
• Citation: 747 F. Supp. 1351
• Parties: Luther E. OLIVER and Mary E. Oliver, Plaintiffs, v. RESOLUTION TRUST CORPORATION, Receiver of Sooner Federal Savings and Loan Association, and Tandem Financial Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

747 F. Supp. 1351

Luther E. OLIVER and Mary E. Oliver, Plaintiffs, v. RESOLUTION TRUST CORPORATION, Receiver of Sooner Federal Savings and Loan Association, and Tandem Financial Corporation, Defendants.

No. 89-1929C(1).

United States District Court, E.D. Missouri, E.D.

October 1, 1990.

Thomas Blumenthal, Susman, Schermer, Rimmel & Shifrin, Clayton, Mo., for plaintiffs.

F. Rebecca Sapp, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., for defendants.

MEMORANDUM

NANGLE, District Judge.

On October 16, 1989, plaintiffs brought this action against Sooner Federal Savings and Loan Association ("Sooner") and its wholly owned subsidiary, Tandem Financial Corporation ("Tandem"), making various claims concerning two financial agreements between the parties. Because on November 16, 1989, the Office of Thrift Supervision appointed Resolution Trust Corporation ("RTC") as the receiver of Sooner, RTC was substituted for Sooner as a party defendant by the Court's order of January 3, 1990. The matter is currently before the Court on the motion to dismiss of RTC and Tandem.

One of the two financial arrangements that are the subject of this action involved a refinancing of defaulted loans made by Sooner to a number of limited partnerships of which plaintiff Luther Oliver was general partner. In June, 1987, plaintiffs executed a $300,000.00 mortgage note secured by a deed of trust on plaintiffs' residence, payable to Sooner. The loan proceeds were applied toward the debts of the limited partnerships. Plaintiffs allege that this arrangement was proposed by Sooner and Tandem, and that plaintiffs agreed to it in reliance upon the representation that Sooner and Tandem would not seek repayment of the loan from plaintiffs personally but would look only to the partnerships for repayment.

The other arrangement involved O.R. Securities and O.R. Financial, two corporations of which Luther Oliver is the sole shareholder. In September, 1985, to enable O.R. Securities and O.R. Financial to purchase assets of certain other corporations, plaintiffs guaranteed loans of approximately $800,000.00, and put up matching funds of their own in the same amount, allegedly with the understanding that the loan would be converted into a 50% equity interest for Tandem in O.R. Securities and O.R. Financial, once Tandem secured the necessary federal approval for such investment. Plaintiffs allege that their personal guarantees were fraudulently induced by Sooner's and Tandem's representations that plaintiffs would not be held personally liable on their guarantees.

The complaint alleges that defendants have repeatedly threatened to foreclose on plaintiff's residence, which:

has caused Plaintiffs emotional distress and threatened the secured property by creating an incidence of default with the holder of the first and second deeds of trust on the Plaintiffs' residence, which in part precipitated the filing of Luther E. Oliver's bankruptcy proceeding.

The complaint further alleges that after Tandem failed to obtain the required federal approval for ownership in O.R. Securities and O.R. Financial, defendants began making demands upon plaintiffs for the repayment of the $800,000.00 advances, but have not returned the stock certificates they received as "a pledge for the `loans'."

Plaintiffs seek an injunction against any declaration of default by defendants and against foreclosure on their home, a declaratory judgment voiding the various instruments and agreements between the parties, an order directing the return of the O.R. Securities and O.R. Financial stock, $2 million damages for emotional distress, interest wrongfully paid and matching fund contributions, $2 million in punitive damages, and treble damages of $6 million under the RICO count.

Plaintiff's complaint contains six enumerated counts: Count I — Fraud, Count II — Promissory and Equitable Estoppel, Count III — Duress and Undue Influence, Count IV — Breach of Fiduciary Duty, Count VI¹ — Reformation of Contract, and Count VII — RICO.² Defendants have filed a motion to dismiss directed at all six counts. In their memorandum in opposition to the motion, plaintiffs seek leave to dismiss the RICO count without prejudice. The Court grants the request, and dismisses Count VII.

Defendants' motion relies chiefly on D'Oench, Duhme and Company, Inc. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), in which the Supreme Court quoted with approval a New York court's reasoning that:

"Public policy requires that a person who, for the accommodation of the bank executes an instrument which is in form a binding obligation, should be estopped from thereafter asserting that simultaneously the parties agreed that the instrument should not be enforced."

Id. at 459, 62 S.Ct. at 680, quoting Mount Vernon Trust Company v. Bergoff, 272 N.Y. 192, 5 N.E.2d 196, 197. Defendants also rely on 12 U.S.C. § 1821(d)(9)(A) and especially § 1823(e), which, as the Eighth Circuit has noted, "essentially codifies the D'Oench, Duhme doctrine." Firstsouth, F.A. v. Aqua Construction, Inc., 858 F.2d 441, 442 n. 2 (8th Cir.1988).

Referring to § 1823(e), 12 U.S.C. § 1821(d)(9)(A) provides:

Except as provided in subparagraph (B), any agreement which does not meet the requirements set forth in section 1823(e) of this title shall not form the basis of, or substantially comprise, a claim against the receiver or the Corporation.³

Section 1823(e) provides:

No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 1821 of this title, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation unless such agreement

(1) is in writing,

(2) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution,

(3) was approved by the board of directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and

(4) has been, continuously, from the time of its execution, an official record of the depository institution.

Three of the five remaining counts of plaintiffs' complaint, Count I for fraud, Count II for estoppel and Count VI for reformation of contract, arise entirely from Sooner's and Tandem's alleged misrepresentations and false promises concerning plaintiffs' personal liability on the mortgage and loan. The other two counts, Count III for duress and undue influence, and Count IV for breach of fiduciary duty, are based at least in part on Sooner's and Tandem's alleged agreement not to look to plaintiffs for repayment of the loans for which they signed. Such agreement falls within the scope of § 1823(e), i.e., it is an agreement that tends to diminish or defeat the interest of RTC in the mortgage and loan. By virtue of § 1821, then, this agreement cannot form the basis of or substantially comprise a claim against RTC, unless it meets the stringent criteria of § 1823(e).

Plaintiffs have not made any allegations meeting the § 1823(e) requirements concerning Sooner's and Tandem's alleged agreement to forego recourse to plaintiffs personally on the mortgage and loan. Plaintiffs' complaint refers to no writings memorializing this agreement. Instead, the complaint contains numerous references to misrepresentations, repeated promises and assurances — terms not generally associated with writings.

Plaintiffs admit that they have not indicated whether the agreement was made in writing or merely orally:

Yet in the case at bar there is no mention of whether the agreements between the parties were oral or written. The allegations are simply that there were agreements or representations ... The Plaintiffs are of the belief that there are written documents, including minutes of the Board and filings with the Security sic and Exchange Commission which evidenced the substance of the alleged agreements.

Memorandum in Opposition to Motion, p. 5. The documentation plaintiffs refer to, even were it found to exist, would not be sufficient. Section 1823(e)(2) plainly requires a writing executed by Sooner or Tandem and plaintiffs; had the necessary writing been executed, plaintiffs would obviously be aware of the fact and capable of alleging it specifically.

Plaintiffs, therefore, appear to be incapable of making an allegation necessary to the survival of their claims when pitted against defendants' affirmative defense. Contrary to plaintiffs' contentions, such an instance presents an appropriate basis for a Rule 12(b)(6) dismissal:

In a situation involving an affirmative defense, the claim is stated adequately, but in addition to the claim the complaint includes matters of avoidance that effectively vitiate the pleader's ability to recover on the claim ... The complaint is said to have a built-in defense and is essentially self-defeating ... Plaintiff's own allegations show that the defense exists ... A complaint showing that relief is barred by an affirmative defense can be dismissed under a Rule 12(b)(6) motion.

Wright & Miller, Federal Practice & Procedure: Civil 2d § 1357, pp. 350-51 (1990). The D'Oench, Duhme doctrine and § 1823(e) appear to bar much of the remainder of plaintiffs' complaint. Plaintiffs offer several arguments against the applicability of the doctrine and its codification.

First, plaintiffs argue that RTC's knowledge of plaintiff's claims at the time that RTC was appointed Sooner's receiver defeats RTC's use of the D'Oench, Duhme doctrine. In support of this argument, plaintiffs cite three cases,⁴ none of which stands for the proposition plaintiffs assert. In each of the three cases, the FDIC's or FSLIC's knowledge was relevant only because the court was analyzing the various parties' rights and obligations under federal common law principles, ...