The Wall Guy, Inc. v. Federal Deposit Insurance Corporation (FDIC)

IN THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF WEST VIRGINIA

HUNTINGTON DIVISION

THE WALL GUY, INC.,

JEFFREY FRYE, and

JR CONTRACTORS,

Plaintiffs,

v. CIVIL ACTION NO. 3:20-0304

(consolidated with 3:20-0305)

FEDERAL DEPOSIT INSURANCE

CORPORATION (FDIC) as Receiver for

The First State Bank,

Defendant.

MEMORANDUM OPINION AND ORDER

This action and the consolidated companion case, FDIC v. Frye, Civ. Act. No. 3:20-

305, pose complicated legal issues against a unique procedural backdrop. Plaintiffs The Wall Guy,

Inc., Jeffrey Frye, and JR Contractors (collectively referred to as “Borrowers”) and Defendant

Federal Deposit Insurance Corporation, as Receiver (FDIC-Receiver) for The First State Bank,

have filed competing motions pursuant to Rule 59 of the Federal Rules of Civil Procedure,

challenging a judgment and remittitur entered by a state trial court that this Court adopted as its

own following removal. See Wall Guy, Inc. v. FDIC, 3:20-304, 2021 WL 838889 (S.D. W. Va.

2021) (adopting and entering at its own the Cabell County Circuit Court’s Order Denying

Defendant’s Renewed Motion for Judgment as a Matter of Law, Granting, in part, Defendant’s

Motion for Remittitur or New Trial, and Denying Plaintiffs’ Motion to Award Interest on Judgment

Pursuant to W. Va. Code 56-6-31). For the following reasons, the Court finds the remittitur was

improper, the jury’s verdict was excessive, Borrowers’ claim against the FDIC-Receiver is barred,

and judgment must be entered in favor of the FDIC-Receiver in case 3:20-0304.

I.

FACTUAL AND

PROCEDURAL BACKROUND

Essential to the resolution of the current motions is the backdrop upon which these

consolidated actions rest. Mr. Frye is a businessman who operates JR Contractors, a West Virginia

sole proprietorship, and The Wall Guy, Inc., a West Virginia Corporation. Most of Mr. Frye and

his companies’ ventures involve building large-scale retaining walls. The First State Bank, Inc.

(First State) also was a West Virginia corporation that had a long-standing banking relationship

with Mr. Frye and his companies. However, when the relationship between Borrowers and First

State fell apart, these actions ensued.

On January 15, 2016, The Wall Guy, Inc. filed an action against First State,

alleging, inter alia, that Jackie Cantley, a bank executive, illegally added amounts to loan accounts

that were never disbursed to it. The Wall Guy, Inc. v. The First State Bank, Civ. Act. No. 16-C-

027, sub nom. The Wall Guy, Inc. v. FDIC, Civ. Act. No. 3:20-0304 (referred to hereinafter as

“Case One”), Compl. ¶¶16, 24, ECF No. 6, at 5-6.1 After Mr. Cantley and First State parted ways,

Plaintiff Frye asserts he met with P. Andrew Vallandingham, another bank officer, who “pressured

[him] into signing over nearly $500,000 of construction equipment” and pledging certain property

1Mr. Cantley’s criminal banking activities are well-known. In 2014, he pled guilty before

this Court to Misallocation of Bank Funds, in violation of 18 U.S.C. § 656. See United States v.

Cantley, 3:13-cr-00245 (S.D. W. Va. 2013). Mr. Cantley was sentenced on September 15, 2014,

to sixty months of incarceration. Since that time, there have been several actions filed alleging that

Mr. Cantley’s criminal conduct caused various plaintiffs personal and business losses. This Court

also recognizes that his actions were a contributing factor to bank’s ultimate failure.

referred to as “Booten Creek” to secure a Business Loan Agreement in the amount of $280,000,

often referred to as the “Consolidation Loan.” Id. ¶¶17-20; see Business Loan Agreement (Dec.

13, 2012), ECF No. 6-1, at 52-56; Errors and Admissions Agreement (Dec. 13, 2012), ECF No. 6-

1, at 57-58; Promissory Note (Dec. 13, 2012), ECF No. 6-1, at 50-51; Deed of Trust (Dec. 13,

2012), ECF No. 6, at 11-17;2 Agricultural Security Agreement (describing equipment used as

collateral) (Dec. 13, 2012), ECF No. 6-1, at 59-63. The Deed of Trust for Booten Creek was made

amongst Mr. Frye for The Wall Guy, Inc. and Mr. Frye as Guarantor and First State, as Lender,

and P. Andrew Vallandingham and Samuel Vallandingham, as “Trustee,” and recorded at that

Cabell County courthouse on January 22, 2013. Deed of Trust, at 1. The Business Loan Agreement

for $280,000, the Errors and Omissions Agreement, and the Promissory Note were all made

between Mr. Frye and First State. The Agricultural Security Agreement provides it was made

between the Wall Guy, Inc. and First State. The $280,000 Business Loan Agreement, the Errors

and Omissions Agreement, the Promissory Note, the Deed of Trust, and the Agricultural Security

Agreement all bear Jeffrey Frye’s name,3 but none were signed by the bank.

At some point, it appears that Mr. Frye began having financial difficulty, which

resulted in him filing Chapter 13 bankruptcy in 2014. In Re: Jeffrey Allen Frye, 3:14-bk-30113

(S.D. W. Va. 2014). Thereafter, in or about December of 2015, The Wall Guy, Inc., which was not

in bankruptcy, received a Notice of Trustee Sale of the Booten Creek property scheduled for

2The Deed of Trust was attached as Exhibit 1 to the Complaint.

3Mr. Frye reportedly told his banking expert that “[t]here were loan amounts and

documents that [he] did not recall. Further, Mr. Frye questioned some of the signatures that were

supposed to be his signature.” Affid. of Jason D. Koontz ¶8, ECF No. 6, at 19.

January 19, 2016. Aff. of Jason D. Koontz ¶¶2, 3,4 ECF No. 6, at 18. To stop the sale, The Wall

Guy, Inc. filed Case One against First State, seeking both a temporary restraining order and

injunctive relief. Additionally, the Complaint alleged claims for Breach of Fiduciary Duty,

Negligence, and Breach of Contract against First State. Compl. ¶¶23-38.5 Neither Mr. Frye nor JR

Contactors were named as Plaintiffs in Case One when it was filed. It is not clear from the record

whether the state court ever took up the injunction request, but First State proceeded with the

foreclosure and obtained title to Booten Creek on March 24, 2016. See Mem. of Law in Supp. of

Mot. of FDIC to Reconsider and Amend J., at 3, ECF No. 20. Nevertheless, the remainder of The

Wall Guy, Inc.’s action continued against First State.

In the meantime, the bankruptcy court dismissed Mr. Frye’s bankruptcy case on

April 15, 2016, on a motion by the bankruptcy court Trustee for “fail[ing] to respond to or

otherwise cure the matters raised in the Trustee’s motion to dismiss.” In re: Jeffrey Allen Frye,

3:14-bk-30113, Order Dismissing Pet. (Apr. 15, 2016), ECF 6-1, 28. Soon thereafter, on May 13,

2016, First State filed its own action against Mr. Frye, The Wall Guy, Inc., and the Wall Guy, Inc.

d/b/a JR Contractors to collect on $385,169.35 in loans that were included in the dismissed

bankruptcy case. See Compl., The First State Bank v. Frye, Civ. Act. No. 16-C-341, sub nom FDIC

v. Frye, 3:20-305, ECF No. 6-1, at 23-27 (referred to hereinafter as “Case Two”). First State

alleged Mr. Frye and his companies were in default, but they refused to assist in the peaceful

4Mr. Koontz’s affidavit was attached as Exhibit 2 to the Complaint.

5The Wall Guy, Inc. moved to amend its Complaint in Civ. Act. No. 16-C-027 on

December 11, 2017 to state claims for (1) Breach of Express Warranty and (2) Fraud and Breach

of Fiduciary Duty. Mot. to Amend (Dec. 11, 2017), ECF No. 6, at 105-09. The state court denied

the motion as untimely. See Order, Civ. Act. No. 16-C-27 (Jan. 23, 2018), ECF No. 6, at 122-23.

repossession of the collateral used to secure the loans. Id. Therefore, First State sought an

injunction to execute the orderly repossession of the collateral. Id. ¶9.

Shortly thereafter, the state court entered an Order in Case Two finding Mr. Frye,

The Wall Guy, Inc., and JR Contractors had defaulted on various loans in the amount of

$385,169.35. Order, Civ. Act. No. 16-C-341 (May 27, 2016), ECF No. 6-1, at 41-44. The state

court also found that Mr. Frye, The Wall Guy, Inc., and JR Contractors had no equity in the

collateral securing those loans and that they had refused a peaceful repossession of the same. Id.

Therefore, the state court directed that the collateral be peacefully surrendered to First State. Id.

There was no further substantive activity in Case Two. However, on August 4,

2018, The Wall Guy, Inc., Jeffrey Frye, and The Wall Guy, Inc. d/b/a/ JR Contractors as

“Plaintiff/Counterclaim Defendants”6 filed a motion in Case One to set aside the Order in Case

Two under Rule 60(b) of the West Virginia Rules of Civil Procedure.7 The state court in Case One

denied the motion, finding (1) it was untimely because the May 2016 Order had remained

unchallenged for over two years, (2) the allegation First State did not fund or credit loan proceeds

in the amount of $151,718.96 was not “newly discovered evidence” but, rather, based on records

admittedly produced over a year earlier, and (3) no exceptional circumstances existed warranting

setting the Order aside. Order, Civ. Act. No. 16-C-27 (Aug. 22, 2018); 3:20-304, ECF No. 6-5, at

6Although Mr. Frye and JR Contractors frequently appear in the style of Case One, the

style was not officially changed to include them as “Plaintiffs” until August 20, 2018. See Agreed

Order Substituting Plaintiffs (Aug. 20, 2018), ECF No. 6-5, at 24-26.

7Mot. to Set Aside the Order from May 27th, 2016 Pursuant to Rule 60(b) of the R. of Civ.

Proc., Civ. Act. No. 16-C-027 (Aug. 6, 2018), ECF No. 6-3, at 1-6. It does not appear from the

state court’s docket sheet that this motion was ever filed in Case Two.

9-13. As a result, the state court also granted First State’s Motion in Limine in Case One

collaterally estopping any challenge to the earlier finding that the loans in Case Two were in default

and/or suggesting that First State wrongfully repossessed the collateral at issue in Case Two.

Order, Civ. Act. No. 16-C-27 (Aug. 21, 2018), ECF No. 6-4, at 101-05. Additionally, the state

court excluded in Case One any evidence that the foreclosure and repossession in Case Two

resulted in any damages. Id., at 103.

Prior to the trial in Case One, the state court granted First State’s Motion for

Summary Judgment on the Breach of Fiduciary Duty and Negligence claims. Order, Civ. Act. No.

16-C-27 (Aug. 22, 2018), ECF No. 6-5 at 14-19. Thus, the only remaining claim for trial was the

Breach of Contract claim. This claim focused on two separate loans: the Consolidation Loan for

$280,000 and a separate SBA loan in the amount of $230,000. At trial, Borrowers offered a copy

of the Note for the SBA loan, an Unconditional Guarantee for the loan, an Errors and Omissions

Agreement, a Commercial Security Agreement, and an Equal Credit Opportunity Notice.

However, as with the Consolidation Loan, First State did not sign any of these documents. ECF

No. 42-6, at 20-37. Following a three-day trial, the jury returned a verdict finding First State had

breached both loans and awarded The Wall Guy, Inc., Mr. Frye, and JR Contractors a lump-sum

of $1,500,000. Verdict Form, at 1-3 (Aug. 23, 2018), ECF No. 6-5, at 31-33.

On September 14, 2018, First State filed a Renewed Motion for Judgment

Notwithstanding the Verdict, Remittitur, or a New Trial. ECF No. 6-5, at 69-97. On March 14,

2019, the state court entered an Order rejecting First State’s argument that, under Jones v. Kessler,

126 S.E. 344 (W. Va. 1925), Borrowers could not recover monetary damages on either contract

because they breached the contracts by not making their loan payments. Order Den. Def.’s

Renewed Mot. for JNOV, Granting, in part, Def.’s Mot. for Remittitur or New Trial, and Den. Pls.’

Mot. to Award Interest on J. pursuant to W. Va. Code 56-6-31, ECF No. 7, at 50-64. Upon

consideration, the state court distinguished Jones by finding the plaintiff in Jones had breached

first. To the contrary, the state court found the evidence in Case One established that First State

breached first, causing Borrowers to suffer damages, resulting in Borrowers’ default. Id. ¶¶7-10.

In its Order, the state court also rejected First State’s argument that it fully funded

the $280,000 Consolidation Loan and any breach of contract it committed “occurred under an

earlier loan which was subject to the doctrine of novation.” Id. ¶11. First State argued the

Consolidation Loan was created to pay off and pay down earlier loans, pay a tax lien, and provide

working capital. Id. ¶14. However, the state court found First State failed to establish the elements

of novation. Id. ¶16.

On the other hand, First State effectively argued that the $1,500,000 verdict was

excessive by including compensation for amounts that were not legally recoverable. First,

Borrowers presented evidence to the jury that their attorney fees and costs totaled $102,500, and

the state court found it erred in refusing to instruct the jury that attorney fees and costs were not

recoverable as part of any award. Id. ¶¶32, 35, 36. Although the state court stated “[t]here is no

data by which the amount of fees and costs awarded by the jury can be definitely ascertained,” the

state court deducted that amount from the $1,500,000 verdict. Id. ¶¶35, 38.

Second, the state court found that Borrowers presented evidence of the value of the

repossessed collateral in violation of the court’s pretrial ruling precluding such evidence. Id. ¶48.

As Borrowers presented testimony that the value of the repossessed collateral was $873,477, the

court also deducted that amount from the verdict, leaving a balance of $524,023. Id. ¶¶49-53.8 The

state court then rejected the remainder of First State’s arguments and entered judgment in the

remittitur amount of $524,023. Id. ¶61.9 Thereafter, the state court gave Borrowers the option of

accepting the remittitur, requesting a new trial, or filing an appeal. Borrowers elected to appeal.

To secure the judgment while Case One was on appeal, First State and Borrowers

entered into a Pledge Agreement. Pledge Agreement, ECF No. 7, at 75-78. First State also filed a

motion to stay enforcement of the judgment. ECF No. 7, at 65-66. The lower court granted the

motion, staying the matter pending a ruling by the West Virginia Supreme Court. Order Granting

Def.’s Mot. for Stay of Proceedings to Enforce J. (June 3, 2019), ECF No. 7-2, at 81-83.

While the appeal was pending, however, the bank failed, and the FDIC was

appointed as Receiver on April 3, 2020, succeeding to the bank’s interests and liabilities. See 12

U.S.C. § 1821(d)(2)(A), in part (“The [FDIC] shall, as conservator or receiver, and by operation

of law, succeed to—(i) all rights, titles, powers, and privileges of the insured depository

institution”). The FDIC-Receiver substituted itself for First State in both Cases One and Two and

removed the actions to this Court on April 30, 2020. See 12 U.S.C. § 1819(b)(2) (providing for the

8In doing so, the state court repeated that “[t]here is no data by which the amount of fees

and costs awarded by the jury can be definitely ascertained[.]” Id. ¶50.

9The state court also rejected Borrowers’ motion for pre-judgment interest. Id. ¶67.

removal to federal court by the FDIC).10 The FDIC-Receiver then moved to consolidate the

actions and stay all judicial proceedings to allow Borrowers to complete the mandatory

administrative claims process set forth in 12 U.S.C. § 1821(d) of the Financial Institutions Reform,

Recovery, and Enforcement Act (FIRREA). This Court granted the motions. Order Granting Def.

FDIC-Receiver’s Mot. for a Stay of all Judicial Proceedings (May 27, 2020), ECF No. 10.

Ultimately, Borrowers’ claims were administratively denied, and the Court lifted

the stay. Borrowers then filed a Motion for Summary Judgment (ECF No. 15) and a Motion to

Enforce Judgment in the amount of $1,500,000. ECF No. 23. The FDIC-Receiver also filed a

Motion to Reconsider and Amend Judgment. ECF No. 19.

Before addressing the underlying merits of the parties’ motions, the Court found it

necessary to address the unique procedural posture of this case. Pursuant to the Fourth Circuit’s

decision in Resolution Trust Corp. v. Allen, 16 F.3d 568 (4th Cir. 1994), the Court was required

first to “‘adopt the state court judgment as its own’” and then treat the judgment “the same as other

judgments entered by the district court, [with] . . . the parties . . . follow[ing] the ordinary rules

regarding post-judgment remedies.’” The Wall Guy, Inc., 2021 WL 838889, at *3 (quoting

Resolution Trust Corp., 16 F.3d at 573). Thus, after the Court adopted the state court’s judgment,

the parties may file post-trial motions or appeal to the Fourth Circuit. Id. If the parties elect to file

post-trial motions, the district court should address the motions on the merits, which allows the

10Although Case One was pending before the West Virginia Supreme Court, Case Two

remained stayed in the trial court pending the outcome of Case One on appeal. See Order, Civ.

Act. No. 16-C-341 (June 3, 2019), ECF No. 1-5, at 28-30.

district court to “‘consider any new federal questions injected into the case by the addition of RTC

[or in this case, the FDIC], and require whatever briefing, argument or hearings it deems

necessary to resolve these questions and prepare an adequate record for review on appeal.’” Id.

(quoting Resolution Trust Corp., 16 F.3d at 573). This procedure prevents the Fourth Circuit

“‘from assuming the role of a state appellate court.’” Id. (quoting Resolution Trust Corp., 16 F.3d

at 573). Therefore, the Court adopted and entered as its own the state court’s remittitur order in

Case One. Id.

Although the Court recognized that ordinarily the parties would then be given the

opportunity to file post-trial motions, this action presented yet another complication because the

state court already had ruled on the post-trial motions and the district court must “‘take[] the case

as it finds it . . . and treat[] everything that occurred in the state court as if it had taken place in

federal court.’” Id. (quoting Khouri v. Nat’l Gen. Ins. Mktg., Inc., No. 1:20-cv-580, 2020 WL

6749713, at *2 (M.D. N.C. Nov. 17, 2020) (internal quotation marks and citations omitted)). In

other words, by adopting the state court judgment, this Court also adopted the state court’s rulings

on the post-trial motions. Id.

By readopting the state court’s remittitur, the parties agreed that Borrowers then

“must be given the option of either accepting the reduction in the verdict or electing a new trial.’”

Id. at *4 (quoting Syl. Pt. 9, Perrine v. E.I. du Pont de Nemours & Co., 694 S.E.2d 815 (W. Va.

2010); also citing Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 305 (4th Cir. 1998)). Therefore,

the Court directed Borrowers to make its choice, and it denied the remainder of the parties’ pending

motions. Id.

On March 8, 2021, Borrowers accepted the remittitur, and the Court entered a

Judgment Order against the FDIC-Receiver in the amount of $524,023. ECF Nos. 37, 38. The

FDIC-Receiver then filed a Motion to Amend this Court’s Judgment Reflecting the State Court’s

Remittitur Order and Grant Judgment to the FDIC-Receiver or, Alternatively, to Order a New

Trial. ECF No. 42. On the same day, the FDIC also filed a Notice of Appeal to the Fourth Circuit.

Four days later, Borrowers filed their own Rule 59(e) motion, seeking an award of the entire

$1,500,000 jury verdict or, in the alternative $1,396,501, which reflects the remittitur amount of

$523,024 plus the value of the repossessed items in the amount of $873,477. ECF No. 47. On that

same day, Borrowers also filed a Notice of Appeal. ECF No. 49. Thereafter, the Fourth Circuit

entered a Jurisdictional Notice suspending any proceedings until this Court ruled on the pending

Rule 59 motions. ECF No. 53.

Following extensive briefing on the pending motions, the FDIC-Receiver filed an

Emergency Motion to Enforce the Parties’ Pledge Agreement. ECF No. 71. When First State

failed, three of the four properties used as collateral to secure the judgment were transferred to

MVB Bank (MVB). The Wall Guy, Inc. v. FDIC, Civ. Act. No. 3:20-304, 2022 WL 17072028, *1

(S.D. W. Va. Nov. 17, 2022). MVB then sold two of the properties. Id. As the Pledge Agreement

created a cloud of title on the properties, the FDIC-Receiver sought to substitute the property used

as collateral for a letter of credit in the amount of the remittitur. Id. Although Borrowers

vehemently objected and asserted First State agreed to collateralize $2,300,000 worth of claims,

the Court found the Pledge Agreement allowed for the property to be sold and for the FDIC-

Receiver to offer substitute collateral in the amount of the remittitur. Id. at *2. Therefore, the Court

granted the FDIC-Receiver’s motion. Id. Now, the only remaining issues for the Court to address

are the parties’ post-trial cross motions under Rule 59.

II.

STANDARD OF REVIEW

The FDIC-Receiver and Borrowers both filed their motions to alter or amend the

judgment under Rule 59(e) of the Federal Rules of Civil Procedure. Although Rule 59(e) does not

contain its own standard, the Fourth Circuit has held there are three grounds upon which a Rule

59(e) motion may be granted. These are “(1) to accommodate an intervening change in controlling

law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or

prevent manifest injustice.” Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir.

1998) (citations omitted). Rule 59(e), however, “may not be used to relitigate old matters, or to

raise arguments or present evidence that could have been raised prior to the entry of judgment.”

Exxon Shipping Co. v. Baker, 554 U.S. 471, 486 n.5 (2008) (internal quotation marks and citation

omitted). Additionally, a Rule 59(e) motion “is an extraordinary remedy that should be applied

sparingly.” Mayfield v. Nat’l Ass’n for Stock Car Auto Racing, Inc., 674 F.3d 369, 378 (4th Cir.

2012) (citation omitted).

Alternatively, the FDIC-Receiver also seeks a new trial under federal Rule 59(b).

With respect to this argument, the Court looks to Rule 59(a)(1)(A), which provides the criteria for

granting a new trial following a jury trial. Rule 59(a)(1)(A) provides “the court may, on motion,

grant a new trial on all or some of the issues—and to any party—as follows: (A) after a jury trial,

for any reason for which a new trial has heretofore been granted in an action at law in federal

court[.]” Fed. R. Civ. P. 59(a)(1)(A). The Fourth Circuit has explained that, under the Rule, the

district court must “set aside the verdict and grant a new trial, if he is of the opinion that [1] the

verdict is against the clear weight of the evidence, or [2] is based upon evidence which is false, or

[3] will result in a miscarriage of justice, even though there may be substantial evidence which

would prevent the direction of a verdict.” Atlas Food Sys. & Servs., Inc. v. Crane Nat’l Vendors,

Inc., 99 F.3d 587, 594 (4th Cir. 1996) (internal quotation marks and citations omitted).

Additionally, when considering whether to grant a new trial under Rule 59, “a trial judge may

weigh the evidence and consider the credibility of the witnesses[.]” Poynter by Poynter v. Ratcliff,

874 F.2d 219, 223 (4th Cir. 1989) (citations omitted). It is in light of these principles that the Court

now considers the parties’ arguments.

III.

DISUSSION

A.

Authority of the Court to

Rule on the Parties’ Motions

Before addressing the merits of the Rule 59 motions, however, the Court first must

determine its authority to do so under the circumstances of this case. On one hand, as this Court

stated in its March 2021 Memorandum Opinion and Order, the Court already ostensibly has ruled

on post-trial motions by adopting as its own the state court’s remittitur order and treating

everything that took place in state court as if it had occurred before this Court. The Wall Guy, Inc.,

2021 WL 838889, at *2-3. On the other hand, the Judgment Order entered by this Court is

distinguishable from the Judgment Order entered by the state court in one important, critical way.

The Judgment Order entered by this Court is no longer against First State. Rather, it is against the

FDIC-Receiver. As such, the FDIC-Receiver has unique arguments and statutory defenses

available to it under federal law that were not available to First State. Additionally, it is clear from

the Fourth Circuit’s decision in Resolution Trust Corp. that it is this Court’s obligation to consider

and address the merits of any new federal questions raised by the FDIC-Receiver so there is an

adequate record for review. See Resolution Trust Corp., 16 F.3d at 573. Therefore, the Court finds

it has the authority and, indeed, the obligation to rule on the parties’ motions.

B.

Challenges to the Remittitur

and the Jury Verdict

In their motions, both parties argue that the Court should reconsider the remittitur

to prevent a clear error of law and to prevent a manifest injustice under Rule 59(e). The FDIC-

Receiver also asserts the jury’s verdict was excessive, against the clear weight of the evidence, and

based upon false evidence. Specifically, the FDIC-Receiver asserts the only evidence of damages

at trial was Mr. Frye’s testimony that: (1) First State failed to fund $125,000 in loan proceeds;11

(2) he lost $43,000 annually when First State repossessed the equipment; (3) he spent $105,000 in

legal fees and costs; and (4) the value of the collateral seized was $873,477.12 Not only does the

FDIC-Receiver contend much of this evidence is demonstrably false, it also argues the value of

the collateral seized or foreclosed upon, together with any damages Borrowers suffered as a result

of the seizure, was inadmissible under the state court’s pretrial ruling collaterally estopping them

from challenging the earlier ruling in Case Two. See Order, Civ. Act. No. 16-C-27, ECF No. 6-4

at 101-05. Moreover, the FDIC-Receiver agrees with the state court that the jury should have been

instructed that it could not award attorney fees and costs. For their part, Borrowers generally insist

the remittitur was unjustified and the jury’s calculation of damages should be reinstated.13

11Of the $125,000 Borrowers claimed was missing, the FDIC-Receiver asserts the

evidence at trial proved that all but $5,125 actually was disbursed to Borrowers or used to payoff

other loans.

12The FDIC-Receiver argues this figure is unsupported in the record. Borrowers claim it

represents both the collateral listed in the bankruptcy proceedings and the collateral possessed by

the Wall Guy, Inc., which was not part of the bankruptcy proceedings.

13Borrowers also claim the Court should award them an additional $2,300,000 to

Upon consideration, the Court has no difficulty finding, as did the state court, that

the jury verdict was excessive. Borrowers submitted evidence that First State failed to fund

$125,000 in loan proceeds. Thus, the $1,500,000 verdict almost certainly included damages that

were presented to the jury, but that were not recoverable, i.e., the value of the repossessed collateral

and attorney fees and costs.14 Clearly, the state court believed these items were improperly

considered and deducted them from the verdict, leaving a remittitur balance of $524,023. However,

even if this Court assumes these deductions were appropriate, there remains a difference of

$399,023 between the amount of the remittitur and the $125,000 claim of missing funds. Each side

attempts to explain what they believe the jury considered in calculating the verdict, but both sides’

assumptions encompass a hefty dose of speculation. Even the state court acknowledged twice in

deciding the amount of the remittitur that “[t]here is no data by which the amount of fees and costs

awarded by the jury can be definitely ascertained[.]” Order Den. Def.’s Renewed Mot. for JNOV,

Granting, in part, Def.’s Mot. for Remittitur or New Trial, and Den. Pls.’ Mot. to Award Interest

on J. pursuant to W. Va. Code 56-6-31 ¶¶36, 50, ECF No. 7, at 57, 59. Given the uncertainty of

how to reduce the verdict, this Court finds that any recalculation would amount to mere guesswork.

Quite simply, there is no way for this Court to justly reduce the excessive verdict in fairness to

either party. Thus, in addition to finding the jury’s original verdict was excessive and against the

weight of the evidence, the Court also finds it must reverse the entry of the remittitur to prevent a

manifest injustice. See Miller v. WesBanco Bank, Inc., 859 S.E.2d 306, 336 (W. Va. 2021) (holding

that, to the extent a lump-sum jury award may contain unrecoverable damages and apportionment

compensate them for the value of the collateral listed in the Pledge Agreement. However, this

Court ruled in its November 2022 Memorandum Opinion and Order that the sale of the collateral

was consistent with the terms of the Agreement. The Wall Guy, Inc., 2022 WL 17072028, at *2.

14Mr. Frye also offered evidence of loss of income caused by the repossession.

of damages is subject to speculation, the award is found to be against the clear weight of the

evidence and will be reversed and remanded for a new trial on damages).

C.

The FDIC-Receiver’s Protection

under FIRREA

Ordinarily, the next step would be for this Court to direct a retrial.15 However, the

FDIC-Receiver further argues that Borrowers cannot maintain an action against it because

Congress has bestowed upon it special protections under FIRREA that extinguish Borrowers’

breach of contract claim. Specifically, the FDIC-Receiver cites 12 U.S.C. §§ 1823(e) and

1821(d)(9)(A) as barring Borrowers’ claim.16 Section 1823(e)(1) provides:

No agreement which tends to diminish or defeat the interest of the

[FDIC] 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—

(A) is in writing,

(B) 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,

(C) 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

15For the reasons stated infra, the Court need not decide whether a retrial would be on

liability or just damages.

16The FDIC-Receiver also cites 12 U.S.C. § 1825(b), barring punitive damages against it.

The FDIC-Receiver argues that the jury verdict likely contained punitive damages. However, as

the Court already ruled the damages awarded by the jury cannot stand, the issue of whether the

verdict contained punitive damages is moot.

(D) has been, continuously, from the time of its

execution, an official record of the depository

institution.

12 U.S.C. § 1823(e)(1)(A)-(D). In Resolution Trust Corp., the Fourth Circuit held that “[a]ll four

of these requirements must be satisfied for an agreement to be enforceable against [the FDIC-

Receiver].” 16 F.3d at 574. Additionally, § 1821(d)(9)(A) states that, “[e]xcept 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 [FDIC-

Receiver].” 12 U.S.C. § 1821(d)(9)(A).17 Moreover, “[e]nforcement of agreements which must be

inferred from written recorded agreements is forbidden . . . ; explicit written documentation is

required[.]” Resolution Trust Corp., 16 F.3d at 575.

Here, the FDIC-Receiver points out that Borrowers never identified any agreement

executed by First State that is enforceable against the FDIC-Receiver under § 1823(e)(1). As to

the $280,000 Business Loan Agreement and the related Errors and Omissions Agreement,

Promissory Note, Deed of Trust, and Agricultural Security Agreement, none of the documents

offered were signed by an official at the bank. Likewise, there is no signature by a First State

representative on the $230,000 SBA Note or the related Unconditional Guarantee, Errors and

Omissions Agreement, Commercial Security Agreement, and Equal Credit Opportunity Notice.

Moreover, in any event, the FDIC-Receiver argues that Borrowers have not identified a single

provision in any of these documents that creates an enforceable obligation by which First State

was required to advance to Borrowers any sums impermissibly added to the loan balances.18 If

17Subsection (B) involves an exception that is not relevant to this case.

18The FDIC-Receiver asserts the only document submitted into evidence at trial that

such sums were added to loans, but not actually disbursed to Borrowers, the FDIC-Receiver insists

the remedy is for Borrowers not to repay the non-disbursed amount. If, as here, the non-disbursed

amount is awarded as damages without any obligation to repay, the FDIC-Receiver contends it

results in an improper windfall to Borrowers. Additionally, to the extent it is even arguable there

was an implied obligation under any of the loan agreements to advance the “missing” funds, the

FDIC-Receiver maintains Congress prohibits consideration of it under FIRREA as all terms must

be expressly reflected in a signed written agreement between the bank and the Borrowers and made

part of the bank’s records.

In Response, Borrowers argue they introduced a number of documents regarding

the loans at trial, the parties stipulated at trial that the contracts existed, and the FDIC-Receiver is

bound by that stipulation because it stepped into the shoes of First State when it was named

Receiver. However, the FDIC-Receiver’s arguments are more nuanced than simply whether the

contracts exist. Rather, it is that, even if contracts existed between First State and Borrowers, those

contracts are not enforceable against it because they do not comply with FIRREA’s requirements.

Specifically, the purported contracts were not signed by First State, as required by FIRREA, and,

at best, any breach must be implied from the existing documents, which also is prohibited under

FIRREA. Upon review, the Court agrees with the FDIC-Receiver that Congress has foreclosed

Borrowers’ breach of contract claim.

addressed First State’s duties was the Business Loan Agreement related but, in addition to being

unsigned, it does not contain a provision obliging the bank to advance the loan in full.

Although the Fourth Circuit has not extensively addressed § 1823(e) in many years,

the Court finds the Eleventh Circuit’s recent discussion in Landcastle Acquisition Corp. v.

Renasant Bank, No. 20-13735, 2023 WL 174277 (11th Cir. 2023), and its predecessors, helpful.

In Landcastle Acquisition Corp., the Eleventh Circuit explained that § 1823(e) broadened the

protections afforded the FDIC following the United States Supreme Court’s decision in D’Oench,

Duhme & Co. v. FDIC, 315 U.S. 447 (1942). 2023 WL 174277, at *1, 6. Section 1823(e) and

D’Oench, collectively referred to as the “D’Oench doctrine,” allow the FDIC-Receiver to “rely

upon the failed bank’s official records when it quickly estimates and sells a failed bank’s assets—

loans and collaterals—to a successor bank that takes over the failed bank’s deposit liabilities.” Id.

at *1, 2 (italics original).19 This process permits the successor bank to reopen immediately without

interruption to customers. Id. at *2 (citing Langley v. FDIC, 484 U.S. 86, 91–92 (1987); Fed. Sav.

& Loan Ins. Corp. v. Gordy, 928 F.2d 1558, 1564 (11th Cir. 1991)). To accomplish its goals,

“D'Oench affords the FDIC a super-charged, holder-in-due-course protection.” Id. Additionally,

any “agreement—that ‘tends to diminish or defeat’ the FDIC’s interest in an asset—is only valid

against the FDIC if it [satisfies all the requirements of § 1823(e)].” Id. at *6 (citation omitted). To

be clear, “the equities that the D’Oench doctrine regards as predominant are those protecting the

FDIC.” Id. *19 (citing Langley, 484 U.S. at 94-95).

19In Young v. FDIC., 103 F.3d 1180 (4th Cir. 1997), the Fourth Circuit explained the

relationship between D’Oench and § 1823(e) slightly differently. The Fourth Circuit stated that

the statute “essentially encompasses the principles of the common-law D'Oench doctrine[, but it]

. . . does not . . . preempt the D'Oench doctrine.” 103 F.3d at 1187. Thus, although the statute and

D’Oench are often construed together, “the common-law doctrine and the statute remain separate

and independent grounds for decision.” Id. (citations omitted).

In explaining the reach of the D’Oench doctrine, the Eleventh Circuit cited one of

its earlier decision in Twin Construction, Inc. v. Boca Raton, Inc., 925 F.2d 378 (11th Cir. 1991).

As relevant here, the Eleventh Circuit held in Twin Construction that “a document in the failed

bank’s records is not enough to bring a party’s claim outside of D’Oench protection unless the

document was executed by the failed bank.” Id. at *10 (italics added to the word “executed”) (citing

Twin Constr., 925 F.2d at 382-84). The Eleventh Circuit defined the term “executed” in the context

of § 1823(e) as meaning that the bank “signed” the agreement at issue. Twin Constr., 925 F.2d at

384. “Where only a single party has signed a document, that document itself does not establish

that the non-signatory is required to perform any obligations contained in the document.” Id.

Moreover, while it may be permissible in a typical contract case to assess whether a non-

signatory’s words or actions bound it to an agreement, such an assessment is not permitted under

D’Oench and § 1823(e) as the agreement must be signed to be enforceable against the FDIC-

Receiver. Id. Additionally, the “‘doctrine applies even where the customer is completely innocent

of any bad faith, recklessness, or negligence.’” Landcastle Acquisition Corp., at *11 (quoting

Baumann v. Savers Fed. Sav. & Loan Ass’n, 934 F.2d 150, 1515 (11th Cir. 1991)). Lastly, as stated

by the district court in the Southern District of Georgia, “[t]he burden of establishing that an

agreement satisfies § 1823(e)(1)’s requirements lays with the party claiming the adverse interest.”

Lindley v. FDIC, No. 4:11-cv-147, 2012 WL 27576, at *3 (S.D. Ga. Jan. 4, 2012) (citations

omitted).

Applying these principles to this case, Borrowers find themselves in an untenable

position. Despite a sizable jury award, First State collapsed while the case was on appeal.

Unfortunately for Borrowers, the bank’s collapse ushered in a new set of federal rules, affording

the FDIC-Receiver protections under § 1823(e) that First State did not have when the case was

tried. Specifically, as Borrowers’ only claim is for a breach of contract, they have the burden to

establish that an authorized representative of First State signed the contracts they assert were

breached. Therefore, regardless of the parties’ additional disputes over the merits of the underlying

breach of contact claim against First State itself,20 Borrowers now are statutorily required to

produce an executed contract by First State.

Here, likely due to First State’s haphazard procedures, lack of controls, and overall

ineptness that ultimately led to its demise, no one from the bank ever signed the loan documents

at issue.21 However, this Court has no authority to waive the requirements Congress has

established in § 1823(e), and Congress has made it clear that “any agreement which does not meet

the requirements set forth in section 1823(e) . . . shall not form the basis of, or substantially

comprise, a claim against the receiver or the [FDIC].” 12 U.S.C. § 1821(d)(9)(A). Thus, as the

contracts alleged to have been breached were not signed by anyone at First State, § 1823(e)

unequivocally bars the claim against the FDIC-Receiver. Moreover, as argued by the FDIC-

20The FDIC-Receiver further argues there were several trial errors that warrant a JNOV.

Borrowers dispute those arguments and point to the fact that First State never objected at trial to

several of the alleged errors and, therefore, they were waived. The FDIC-Receiver also insists the

state court erred by ruling that First State breached the contracts before Borrowers breached. Thus,

the FDIC-Receiver asserts Borrowers’ claim cannot survive under West Virginia law. See Jones

v. Kessler, 126 S.E. at 350 (stating “a plaintiff has no right of action for damages for breach of

contract, where he himself has breached the contract” (citation omitted)). However, for the reasons

stated infra, this Court need not sift through all the alleged trial errors and the relative timing of

who breached first because Borrowers’ claim cannot survive under § 1823(e).

21Borrowers make a cursory statement that they do not believe First State provided them

with complete discovery. However, the time to address discovery issues was during the discovery

phase prior to trial, and this Court will not entertain reopening discovery at this point in the

proceedings.

Receiver, Borrowers have not pointed to any specific written provision within those documents

regarding an obligation by First State to advance any “missing” funds. As § 1823(e) requires the

agreement to be in writing, any words, actions, or implied agreements that may have bound First

State to such an obligation are not enforceable against the FDIC-Receiver.

In a last ditch effort, Borrowers argue they are exempt from § 1823(e)’s

requirements because the Pledge Agreement they entered into with First State in lieu of an

appellate bond is a “qualified financial contract” (QFC) and falls within an exception in

§ 1823(e)(2). See Pls.’ Reply to FDIC-Receiver’s Resp. in Opposition to Motion to Amend. J., at

5, ECF No. 58. However, the Pledge Agreement clearly does not meet the definition of a QFC

under the statute. See 12 U.S.C.A. § 1821(e)(8)(D)(i) (providing “[t]he term ‘qualified financial

contract’ means any securities contract, commodity contract, forward contract, repurchase

agreement, swap agreement, and any similar agreement that the Corporation determines by

regulation, resolution, or order to be a qualified financial contract for purposes of this paragraph”).

Moreover, even if the Pledge Agreement was a QFC, it is unclear to the Court how an obligation

in lieu of an appellate bond somehow saves the deficiencies in the underlying breach of contract

claim. Therefore, the Court denies Borrowers’ argument.

IV.

CONCLUSION

Accordingly, for the reasons stated above, the Court finds that the remittitur was

improper, the jury’s verdict was excessive, and The Wall Guy, Inc., Jeffrey Frye, and JR

Contractors’ breach of contract claim is not enforceable against the FDIC-Receiver. Therefore, the

Court DENIES Borrowers’ Motion to Alter and/or Amend the Court’s Judgment Reflecting the

Remittitur Order and Grant an Enhanced and Larger Judgment. ECF No. 47. On the other hand,

the Court GRANTS the FDIC-Receiver’s motion to the extent it moves to Amend this Court’s

Judgment Reflecting the State Court’s Remittitur Order and moves for judgment in its favor, but

DENIES the same to the extent the FDIC-Receiver alternatively moves for a new trial. ECF No.

42. To ensure the record is complete, the Court further GRANTS Borrowers’ pending Motion to

Supplement the Record. ECF No. 70.

Additionally, the Court recognizes that this Memorandum Opinion and Order

primarily resolves Case One (3:20-304), and it is unclear whether the FDIC-Receiver seeks any

further relief in Case Two (3:20-305). As these cases are consolidated, the Court DIRECTS the

FDIC-Receiver to file a report with the Court on or before February 13, 2023, addressing whether

it intends to proceed with Case Two and, if so, what issues it believes are left to be resolved.

Additionally, the FDIC-Receiver seems to concede in its briefing that the trial evidence shows

$5,125 was never advanced to Borrowers. Thus, the Court ORDERS the FDIC-Receiver to

address whether it intends to credit that amount to Borrowers’ loans or believes that amount also

is not recoverable. The Court DIRECTS Borrowers to file a Response, if any, on before February

17, 2023. Prior to any filings, the Court further encourages the parties to discuss the issues amongst

themselves and determine whether they can reach a mutual agreement. In the meantime, the Court

will HOLD IN ABEYANCE entry of a final judgment order in favor of the FDIC-Receiver in

Case One until the status of Case Two can be determined.

The Court DIRECTS the Clerk to send a copy of this Order to counsel of record

and any unrepresented parties.

ENTER: February 7, 2023

ROBERT C. CHAMBERS

UNITED STATES DISTRICT JUDGE

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