National Enterprises, Inc. v. Barnes

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

NATIONAL ENTERPRISES,

INCORPORATED,

Plaintiff-Appellee,

No. 98-1786

v.

MARVIN J. BARNES; VICKY BARNES,

Defendants-Appellants.

Appeal from the United States District Court

for the District of South Carolina, at Columbia.

Dennis W. Shedd, District Judge.

(CA-97-534-3-19)

Argued: September 23, 1999

Decided: January 6, 2000

Before WIDENER and MICHAEL, Circuit Judges, and Frank

MAGILL, Senior Circuit Judge of the United States Court of

Appeals for the Eighth Circuit, sitting by designation.

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Affirmed by published opinion. Senior Judge Magill wrote the opin-

ion, in which Judge Widener and Judge Michael joined.

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COUNSEL

ARGUED: Mortimer Meyer Weinberg, III, WEINBERG &

BROWN, Sumter, South Carolina, for Appellants. Theodore Von

Keller, BERRY, QUACKENBUSH & STUART, Columbia, South

Carolina, for Appellee. ON BRIEF: Mortimer Meyer Weinberg, Jr.,

WEINBERG & BROWN, Sumter, South Carolina, for Appellants.

OPINION

MAGILL, Senior Circuit Judge:

This case arises out of a suit by National Enterprises, Inc.

(National) against Robert J. Barnes and Vicky Barnes (Barneses) on

a personal guaranty executed by the Barneses to secure a note issued

by Mid-Carolina Mobile Homes, Inc. (Mid-Carolina). The Barneses

appeal the district court's1 holding that the federal statute of limita-

tions found in the Financial Institutions Reform, Recovery and

Enforcement Act of 1989, 12 U.S.C. § 1821(d)(14),2 applies to

assignees of the Resolution Trust Corporation (RTC) and that the doc-

trine of D'Oench Duhme & Co., Inc. v. FDIC, 315 U.S. 447 (1942),3

and 12 U.S.C. § 1823(e),4 bars the Barneses' claims that a condition

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1 The Honorable Dennis W. Shedd, United States District Judge for the

District of South Carolina.

2 The relevant language in 12 U.S.C. § 1821(d)(14) states:

(14) Statute of limitations for actions brought by conservator or

receiver

(A) In general

Notwithstanding any provision of any contract, the applica-

ble statute of limitations with regard to any action brought

by the Corporation as conservator or receiver shall be--

(i) in the case of any contract claim, the longer of--

(I) the 6-year period beginning on the date the claim

accrues; or

(II) the period applicable under State law .. . .

FIRREA mentions "the Corporation," which is defined in the statute

as the FDIC. See 12 U.S.C. § 1811. The statute gives the RTC the same

rights and powers as the FDIC. See 12 U.S.C. § 1441a(b)(4)(A).

3 The D'Oench doctrine prohibits claims based upon agreements which

are not properly reflected in the official books or records of a failed bank

or thrift. See Resolution Trust Corp. v. Allen , 16 F.3d 568, 574 (4th Cir.

1994).

4 Section 1823(e) essentially codifies the common law D'Oench doc-

trine, but the two remain separate and independent grounds for decision.

See Young v. FDIC, 103 F.3d 1180, 1187 (4th Cir. 1997).

2

precedent to liability on the note and guaranty had not been per-

formed. The Barneses also appeal the district court's award, under the

provisions of the note, of attorneys' fees, costs, and accrued interest.

We affirm.

I.

On July 18, 1985, Standard Federal Savings and Loan of Colum-

bia, South Carolina (Standard Federal), loaned Mid-Carolina

$1,200,000.06. The note represented a line of credit extended by Stan-

dard Federal to Mid-Carolina designed to allow Mid-Carolina to pur-

chase new mobile homes and place the homes on its lot for sale.

Standard Federal was to be repaid, pro tanto, from each sale. As part

of the security for the loan, Standard Federal required that the

Barneses provide a personal guaranty of the debt to Standard Federal.

The appellants executed the guaranty on July 18, 1985.

On August 5, 1987, Mid-Carolina declared bankruptcy pursuant to

Chapter 7 of the United States Bankruptcy Code. Although Mid-

Carolina's bankruptcy triggered a provision in the note making it

immediately due and payable, Standard Federal took no steps to

enforce the guaranty against the Barneses. On August 2, 1991, the

RTC placed Standard Federal into conservatorship. On December 15,

1992, National purchased the Mid-Carolina note from the RTC,

together with all instruments and documents securing the note.

On March 3, 1997, National filed suit against the Barneses, con-

tending that they were liable under the guaranty contract for

$233,477.24, the balance due under the note. The appellants defended

on the grounds that the applicable statute of limitations had run and

that conditions precedent to liability under the note and guaranty had

not been performed. On November 25, 1997, the district court denied

the appellants' motion for summary judgment, holding that the appli-

cable statute of limitations is the six-year federal statute of limita-

tions, 12 U.S.C. § 1821(d)(14(A), and not a three-year South Carolina

statute of limitations, S.C. Code Ann. § 530(1) (Supp. 1997). On May

4, 1998, the district court granted National's motion for summary

judgment, holding that the D'Oench doctrine defeated appellants'

defenses to liability. On February 22, 1999, the district court granted

3

appellee attorneys' fees of $17,080.00, costs of $150.00, and

$200,736.85 in accrued interest under the provisions of the note.

II.

Appellants raise the issue of whether in South Carolina the statute

of limitations applicable to the RTC when it acts as receiver also

applies to its assignees. Once the RTC placed Standard Federal into

conservatorship on August 2, 1991, the federal six-year statute of lim-

itations found in 12 U.S.C. § 1821(d)(14)(A) applied to all claims by

the RTC arising from its position as conservator. For the RTC, the

statute of limitations on the Barneses' guaranty contract began to run

as of August 2, 1991. See 12 U.S.C. § 1821(d)(14)(B)(i).5 National,

as assignee of the RTC, brought suit against the Barneses on the guar-

anty contract on March 3, 1997. The appellants argue that Section

1821(d)(14) is personal to the RTC and that a three-year South Caro-

lina statute of limitations, S.C. Code Ann. § 530(1) (Supp. 1997),

applies to the assignees of the RTC and bars National's action.

To determine which statute of limitations applies, the court must

look to South Carolina law. See Federal Fin. Co. v. Hall, 108 F.3d

46, 50 (4th Cir. 1997). In Hall, because Section 1821(d)(14) is silent

with respect to its application to the RTC's assignees, the court was

faced with the issue of whether to apply federal common law or state

law to the issue. The court held that courts must look to state law to

determine the statute of limitations governing the rights of assignees

of the RTC because no federal policy presented a sufficient justifica-

tion for a federal common law rule of decision. Id. at 48-49.

South Carolina law is clear that the right to sue under the statute

of limitations in Section 1821(d)(14) is not personal to the RTC and

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5 12 U.S.C. § 1821(d)(14)(B) states:

For purposes of subparagraph (A), the date on which the stat-

ute of limitations begins to run on any claim described in such

subparagraph shall be the later of-

(i) the date of the appointment of the Corporation as conserva-

tor or receiver; or

(ii) the date on which the cause of action accrues.

4

is available to all assignees or transferees of the RTC. Twelfth RMA

Partners, L.P. v. National Safe Corp., 335 S.C. 635, 518 S.E.2d 44,

47 (Ct. App. 1999). Therefore, under South Carolina law, Section

1821(d)(14) applies to National's action against the Barneses and

National's suit is not time barred.6

III.

The appellants argue that Standard Federal7 failed to comply with

certain conditions precedent to liability under the note and guaranty.

They claim that the failure to comply with the conditions precedent

either voided the guaranty entirely or greatly reduced the amount of

appellants' liability pursuant to the guaranty. Appellants claim that

language on the face of the note indicating that repayment terms

would be governed by, among other things, "other repayment terms

as shown in manufacturer's repurchase agreements," created a duty

for Standard Federal that was a condition precedent to Mid-Carolina's

liability under the note. The appellants claim that Standard Federal's

duty, in the event that Mid-Carolina declared bankruptcy, would be

to use the repurchase agreements to call on the manufacturers of the

mobile homes in question to repurchase the mobile homes at invoice

price and then apply the proceeds to the note.

Appellants can only prevail if they establish the following: (1) that

their claims about the character and meaning of the repurchase agree-

ment clause are correct, and (2) that the D'Oench doctrine, as delin-

eated by the Supreme Court in D'Oench, Duhme & Co, Inc. v. FDIC,

315 U.S. 447 (1942), and its statutory equivalent, 12 U.S.C. § 1823(e),8

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6 Appellants also argue that even if section 1821(d)(14) applies, the

note in question was a demand note and, consequently, the statute of lim-

itations began to accrue on July 18, 1985, the date of the note. Appel-

lants' characterization of the note as a demand note was introduced for

the first time on appeal and the argument is, therefore, deemed waived.

See Skipper v. French, 130 F.3d 603, 610 (4th Cir. 1997) (stating the rule

that "[o]rdinarily, for very good reasons, we do not decide issues on the

basis of theories first raised on appeal").

7 Because appellants' defenses are meritless, we need not decide appel-

lants' contention that National is not a holder in due course of the guar-

anty.

8 Congress has substantially codified the elements of the common-law

D'Oench doctrine in 12 U.S.C. § 1823(e), providing in pertinent part:

5

do not bar the action. Because the appellants cannot show that the

first prong of the analysis has been satisfied, we need not decide

whether the D'Oench doctrine would bar appellants' claims.9

The appellants are unable to produce any evidence indicating that

the repurchase agreements in question create the obligations that they

claim. Even if the vague reference in the note that"[o]ther repayment

terms as shown in manufacturers repurchase agreements" is sufficient

to satisfy the D'Oench doctrine's requirement that agreements be

properly reflected in the bank's records, the appellants have not pro-

duced the repurchase agreements in question. Marvin J. Barnes' self-

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No agreement which tends to diminish or defeat the interest of

the Corporation in any asset acquired by it...as receiver of any

insured depository institution [ ] shall be valid against the Corpo-

ration 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

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

official record of the depository institution.

9 There is also a serious question of whether, assuming that appellants'

representations about the repurchase agreements are valid, the guaranty

contract incorporates the repurchase agreements as a condition precedent

to liability. South Carolina courts have said that the rights and duties of

guarantors are distinct from the rights and duties of makers of notes and

a guaranty of payment is a contract separate and distinct from the origi-

nal note. See Citizens and Southern Nat'l Bank v. Lanford, 313 S.C. 540,

443 S.E.2d 549, 551 (1994) (holding that the guarantor was not a party

to the note and could not avail himself of defenses based on impairment

of collateral). Here, however, appellants have failed to produce sufficient

evidence indicating the existence of a condition precedent, and we need

not decide whether the condition precedent would apply to the guaranty

contract.

6

serving affidavit describing the content of the repurchase agreements

is not enough to defeat National's motion for summary judgment. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) (holding

that to withstand a motion for summary judgment, the non-moving

party must proffer sufficient evidence on which a reasonable jury

could find in its favor).

IV.

The appellants appeal the district court's award of attorneys' fees,

costs, and accrued interest under the provisions of the note10 on the

basis that National's failure to utilize the repurchase agreements voids

any obligations of appellants under the note and guaranty. Because

appellants' repurchase agreement defense is without merit, the district

court's award is affirmed.

CONCLUSION

For the foregoing reasons, the judgment of the district court is

affirmed.

AFFIRMED

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10 The note provided, in pertinent part, that "[u]npaid principal and

interest due at maturity, or upon demand, shall bear interest at the rate

set forth above until paid in full. In the event that this Note is not paid

at maturity . . . the undersigned agrees to pay all costs and expenses of

the Holder in the collection of this Note, including reasonable attorneys'

fees."

7