Triad Bank v. First-Citizens Bank & Trust Co.

• Decision Date: 30 March 2015
• Docket Number: Civil Action No. 11–cv–01220–RM–BNB
• Citation: 85 F.Supp.3d 1258
• Parties: Triad Bank, a Missouri chartered bank, Plaintiff, v. First–Citizens Bank & Trust Company, a North Carolina chartered commercial bank, Defendants.
• Court: U.S. District Court — District of Colorado

85 F.Supp.3d 1258

Triad Bank, a Missouri chartered bank, Plaintiff

v.First–Citizens Bank & Trust Company, a North Carolina chartered commercial bank, Defendants.

Civil Action No. 11–cv–01220–RM–BNB

United States District Court, D. Colorado.

Signed March 30, 2015

Geraldine A. Brimmer, Holland & Hart, LLP, Boulder, CO, Joseph Ernest Martineau, Lewis Rice & Fingersh, L.C. St. Louis, MO for Plaintiff.

Aaron David Goldhamer, Stuart N. Bennett, Jones & Keller, PC, Denver, CO, for Defendant.

ORDER

RAYMOND P. MOORE, United States District Judge

This diversity matter involves a contract dispute between two banks regarding the interpretation of several loan participation agreements. Defendant First–Citizens Bank & Trust Company (“First–Citizens”) has moved to dismiss Plaintiff Triad Bank's (“Triad”) Second Amended Complaint (ECF No. 57, the “Complaint”) pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). This matter is before the Court on U.S. Magistrate Judge Boyd N. Boland's recommendation (ECF No. 73, the “Recommendation”) that this Court grant First–Citizens' motion and dismiss the case for lack of federal subject matter jurisdiction based on the jurisdictional bar contained in the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”), 12 U.S.C. § 1821(d)(13)(D). Each party has filed timely objections (ECF Nos. 74, 75, 76, 77) to the Recommendation (together the “Objections”). For the reasons stated below, the Court (1) ADOPTS the Recommendation; (2) GRANTS First–Citizens' motion to dismiss; and (3) OVERRULES the parties' Objections.

I. LEGAL STANDARD

A. Review of the Magistrate Judge's Recommendation

When a magistrate judge issues a recommendation on a dispositive matter, Federal Rule of Civil Procedure 72(b)(3) requires that the district court judge “determine de novo any part of the magistrate judge's [recommendation] that has been properly objected to.” In conducting his review, “[t]he district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3). An objection to a recommendation is proper if it is filed timely in accordance with the Federal Rules of Civil Procedure and specific enough to enable the “district judge to focus attention on those issues—factual and legal—that are at the heart of the parties' dispute.” United States v. 2121 E. 30th St., 73 F.3d 1057, 1059 (10th Cir.1996) (quoting Thomas v. Arn, 474 U.S. 140, 147, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985) ). In the absence of a timely and specific objection, “the district court may review a magistrate's report under any standard it deems appropriate.” Summers v. Utah, 927 F.2d 1165, 1167 (10th Cir.1991) (citations omitted); see also Fed.R.Civ.P. 72 Advisory Committee's Note (“When no timely objection is filed, the court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.”).

B. Rule 12(b)(1) Motion

On a motion to dismiss pursuant to Rule 12(b)(1), the Court tests whether it has subject matter jurisdiction to properly hear the case before it. The party invoking the court's jurisdiction bears the burden to establish that federal jurisdiction exists, and “since the courts of the United States are courts of limited jurisdiction, there is a presumption against its existence.” Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir.1974). As articulated by the Tenth Circuit, Rule 12(b)(1) motions generally take two forms:

First, a facial attack on the complaint's allegations as to subject matter jurisdiction questions the sufficiency of the complaint. Ohio Nat'l Life Ins. Co. v. U.S., 922 F.2d 320, 325 (6th Cir.1990).... Second, a party may go beyond allegations contained in the complaint and challenge the facts upon which subject matter jurisdiction depends. Id. When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint's factual allegations. Id. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). Id.

Holt v. U.S., 46 F.3d 1000, 1002–03 (10th Cir.1995). “When reviewing a factual attack on a complaint supported by affidavits and other documents ... the Court makes its own factual findings and need not convert the motion to one brought pursuant to Fed.R.Civ.P. 56.” Amazing Technologies, LLC v. Blacklodge Studios, LLC, No. 10–cv–03077–WJM–KLM, 2012 WL 683512, at *1 (D.Colo. Mar. 2, 2012) ; Michelson v. Enrich Int'l Inc., 6 Fed.Appx. 712, 716 (10th Cir.2001) (“Where the resolution of the jurisdictional question is not intertwined with the merits of plaintiff's case, a district court may consider evidence outside the pleadings and resolve factual disputes without converting a Rule 12(b)(1) motion into a Rule 56 motion.”); Holt, 46 F.3d at 1003.

I agree with the Magistrate Judge's characterization of First–Citizens' motion to dismiss as a factual challenge. (ECF No. 73 at 7). Thus, it is proper for this Court to consider additional evidence offered by First–Citizens in support of their Rule 12(b)(1) motion, and also any additional evidence offered by Triad in opposition thereto. See Kosicki v. N ationstar Mortgage, LLC, 947 F.Supp.2d 546, 553 (W.D.Pa.2013) (finding defendants asserted a “factual attack under Rule 12(b)(1) by alleging that FIRREA bars this Court from adjudicating the claims asserted by Plaintiffs”); Holt, 46 F.3d at 1002–03 (same).

II. FACTUAL AND PROCEDURAL HISTORY

Triad filed its Second Amended Complaint (ECF No. 57, the “Complaint”) on November 4, 2013 seeking contract damages and a declaratory judgment against First–Citizens relating to three loan participation agreements (the “Loan Participation Agreements”). Triad was a participant in real estate loans in which Colorado Capital Bank (“CCB”) was the lead or agent bank. (ECF No. 57 at ¶¶ 1, 4, 10, 11, 15, 28, 29). CCB later failed, and the Federal Deposit Insurance Corporation (the “FDIC”) took over as receiver of CCB on July 8, 2011. (Id. at ¶ 4). Under a “Purchase and Assumption Agreement” entered into between First–Citizens and the FDIC “immediately” after the FDIC was appointed receiver, First–Citizens acquired most assets and assumed CCB's obligations, including the Loan Participation Agreements at issue in this proceeding and the real estate loans underlying those participation agreements. (Id. ).

In Count I of the Complaint, Triad seeks damages arising from First–Citizens' alleged breach of what Triad has labeled an “assumed agreement” to fund a subordinated real estate loan to a borrower. (ECF No. 68 at 2.) Triad and CCB originally entered into a Loan Participation Agreement relating to a real estate project financing valued at $2,700,000, for which Triad had agreed to purchase a $2,000,000 participation interest. (ECF No. 57 at ¶¶ 10–11.) The original borrower was unable to complete the project and the lending agreement was terminated at a point when only $1,855,000 of the loan had been funded. (Id. at ¶ 13.) After the original borrower defaulted or was in peril of defaulting, CCB arranged for a second borrower to take over and complete the underlying real estate project. (Id. at ¶¶ 13–14.) The second borrower required additional funds to complete the project and CCB agreed to provide an additional loan of $1,245,000 to the second borrower on a subordinated basis (the “Subordinated Loan Commitment”) for which Triad did not purchase a participation interest. (Id. ¶ 14.) Concurrently with the execution of the Subordinated Loan Agreement, CCB and Triad entered into a new Loan Participation Agreement (the “Maxwell Participation Agreement”) to cover the outstanding $1,855,000 loan that would become the obligation of the second borrower. (Id. at ¶¶ 14–15.) The Maxwell Participation Agreement made reference to the Subordinated Loan Commitment. (Id. ) Neither CCB nor First–Citizens ever funded the subordinated loan, the second borrower was unable to complete the underlying real estate project, and Triad alleges that it is still owed $1,150,000 on its participation interest under the Maxwell Participation Agreement. (Id. ¶¶ 2126.) Although Triad only has a participation interest (by virtue of the Maxwell Participation Agreement) in the initial loan and not the subordinate loan, Triad alleges that First–Citizens breached the Maxwell Participation Agreement by failing to fund the Subordinated Loan Commitment. (Id. ¶ 25.)

Triad filed its initial complaint in this action against CCB prior to CCB being placed into receivership with the FDIC (ECF No. 1) seeking a declaratory judgment of Triad's right to payments with regards to the Maxwell Participation Agreement from CCB. Count I of the Complaint seeks contract damages against First–Citizens relating to the same Maxwell Participation Agreement that was at issue in Triad's first complaint against CCB. Triad has not alleged that it attempted to pursue this claim through the administrative claims process outlined in FIRREA.

In Count II, Triad seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 relating to all of the Loan Participation Agreements between First–Citizens and Triad.¹ Triad alleges that under the Loan Participation Agreements, it is entitled to receive its pro rata share of funds received by First–Citizens through a “Shared–Loss Agreement” between First–Citizens and the FDIC.

The Shared–Loss Agreement was entered into between First–Citizens and the FDIC in conjunction with the Purchase and Assumption Agreement whereby First–Citizens acquired the CCB assets at issue, which in turn was executed on the same day that CCB was placed in receivership with the FDIC. (See ECF Nos. 65–2 at 1, 57 at ¶ 4.) Triad alleges that the Shared–Loss Agreement allows First–Citizens to recover from the FDIC 80% of any losses incurred on the assumed CCB loan portfolio, including losses...