Owen v. Bank of the Ozarks

SECOND DIVISION
ANDREWS, P. J.,
MCFADDEN and RAY, JJ.

NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/

October 20, 2014

In the Court of Appeals of Georgia
A14A1316. OWEN v. BANK OF THE OZARKS.

MCFADDEN, Judge.

This appeal is from a grant of summary judgment to a bank on two promissory

notes signed by appellant in favor of the bank’s predecessor. Appellant’s defenses are

barred by the D’Oench, Duhme doctrine, which generally renders oral agreements

between debtors and failed banks unenforceable against banking authorities and their

assignees. Consequently there are no genuine issues of material fact, and we affirm.

Summary judgment is proper when there is no genuine issue of material fact

and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). “A

de novo standard of review applies to an appeal from a grant of summary judgment,

and we view the evidence, and all reasonable conclusions and inferences drawn from
it, in the light most favorable to the nonmovant.” Wooden v. Synovus Bank, 325 Ga.

App. 876, 876-877 (756 SE2d 19) (2014) (citation omitted).

So viewed, the record shows that appellant Benjamin Carl Owen executed two

promissory notes in favor of First Choice Community Bank. On April 10, 2009, he

executed a note for $288,000 and on December 22, 2009, he executed a note for

$513,560.97. On April 29, 2011, First Choice failed, and the FDIC was appointed as

its receiver. The FDIC assigned Owen’s notes to appellee Bank of the Ozarks (“the

bank”), via allonges and a Purchase and Assumption Agreement.

Owen defaulted on the notes, and the bank demanded payment. After Owen

failed to pay, the bank filed the instant complaint. Finding that Owen did not dispute

the existence of the loans, his execution of the loan documents, and the bank’s

calculation of the balance due, the trial court determined that the bank had established

a prima facie case as a matter of law. See L. D. F. Family Farm, Inc. v. Charterbank,

326 Ga. App. 361, 363 (756 SE2d 593) (2014). The court then held that Owen had

not established a valid affirmative defense and granted summary judgment in favor

of the bank. Owen appeals.

Owen argues that whether the parties had modified the re-payment terms of the

notes was a question of fact. Specifically, he argues that First Choice had agreed that

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Owen would pay interest on the loans during their terms; that Owen would pay the

principal when the properties securing the loans were sold; and that First Choice

would continue to renew the loans until then. As evidence of this agreement, Owen

points to his own affidavit. Owen does not allege that this agreement was in writing,

nor does he point to any writing in the record reflecting the agreement. He also argues

that because of this oral agreement, the bank was estopped from enforcing the terms

of the notes and had a duty to mitigate its damages by foreclosing on the properties

securing the notes.

The trial court ruled that Owen’s defenses were barred by the doctrine

announced in D’Oench, Duhme & Co. v. Fed. Deposit Ins. Corp., 315 U.S. 447 (62

SCt 676, 86 LE 956) (1942) and by 12 USC § 1823 (e), a provision of the Financial

Institutions Reform, Recovery and Enforcement Act that codified the D’Oench,

Duhme doctrine. See First Union Natl. Bank v. Hall, 123 F3d 1374, 1379 n. 9 (III)

(B) (11th Cir. 1997). We agree.

Under D’Oench, Duhme, in general, “oral agreements between debtors and

failed banks will not be enforced against banking authorities” and their assignees.

Gravitt v. Bank of the Ozarks, 326 Ga. App. 461, 464 (1) (756 SE2d 695) (2014)

(citations omitted). “D’Oench, Duhme and its progeny enable the FDIC, and banks

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that acquire insolvent banks’ assets from the FDIC, to make quick and accurate

appraisals of the value of insolvent banks’ assets by protecting the FDIC and its

transferees against undisclosed agreements that would unexpectedly diminish the

value of those assets.” First Union, 123 F3d at 1379 (III) (B) (footnote omitted).

Owen argues that the D’Oench, Duhme doctrine does not apply because in its

agreement with the FDIC, the bank voluntarily accepted the modifications to the

terms of the loans. He points to paragraph 2.1 (n) in the Purchase and Assumption

Agreement between the FDIC and the bank. That paragraph, entitled Liabilities

Assumed by Assuming Institution, provides,

The Assuming Institution expressly assumes at Book Value (subject to
adjustment pursuant to Article VIII) and agrees to pay, perform and
discharge, all of the following liabilities of the Failed Bank as of the
Bank Closing Date, except as otherwise provided in this Agreement
(such liabilities referred to as “Liabilities Assumed”): all asset-related
offensive litigation liabilities and all asset-related defensive litigation
liabilities, but only to the extent such liabilities relate to assets subject
to a Shared-Loss Agreement, and provided that all other defensive
litigation and any class actions with respect to credit card business are
retained by the Receiver.

(Emphasis supplied.) A Commercial Shared-Loss Agreement is attached as an exhibit

to the Purchase and Assumption Agreement. But Owen does not point to any

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evidence (or even argue) that his loans were subject to the Shared-Loss Agreement.

In the absence of specific allegations or evidence that the loans are shared-loss loans,

the record provides no support for his claim that Paragraph 2.1 (n) applies to except

his obligation from the D’Oench, Duhme doctrine.

Even assuming that Owen’s loans are subject to the Shared-Loss Agreement,

he has not shown that he can avail himself of Paragraph 2.1 (n), because he has not

shown that he is an intended beneficiary of that provision in particular or of the

contracts between the FDIC and the bank in general. See Archer W. Contrs., Ltd. v.

Estate of Pitts, 292 Ga. 219, 226-227 (2) (735 SE2d 772) (2012) (third party

beneficiary can only enforce those promises made directly for his benefit). The

Shared-Loss Agreement expressly provides that it

is for the sole and exclusive benefit of the parties and their respective
permitted successors and permitted assigns and there shall be no other
third party beneficiaries. Nothing in this Agreement shall be construed
to grant to any other Person any right, remedy or claim under or in
respect of this Agreement or any provision hereof.

Owen cannot overcome the application of the longstanding D’Oench, Duhme doctrine

by relying on contractual language which the bank and the FDIC never intended to

benefit him. See Bank of the Ozarks v. Crockett, 2013 U.S. Dist. LEXIS 107035

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(Case No. 3:13-CV-23, M.D. Ga. decided July 31, 2013); Caires v. JPMorgan Chase

Bank, 880 FSupp2d 288, 301-302 (1) (b) (D. Conn. 2012). Given our holding that the

oral agreement is not enforceable, Owen’s remaining arguments have no merit.

Judgment affirmed. Andrews, P. J., and Ray, J., concur.