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FDIC v. MODULAR HOMES

July 30, 1994

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Community Guardian Bank, in Receivership, Plaintiff,
v.
MODULAR HOMES, INC., et al., Defendants.



The opinion of the court was delivered by: ALFRED M. WOLIN

 WOLIN, District Judge

 Before the Court is the motion of plaintiff, Federal Deposit Insurance Corporation ("FDIC"). A plethora of issues arises out of what seems to be a simple motion by the FDIC to dismiss affirmative defenses raised by the defendants, Modular Homes, Inc., t/a Excel Homes, William & Rosalind Higgins, and Hugh and Margaret Walsh (collectively "Modular"), in response to the FDIC's foreclosure action. The FDIC argues that based on the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 12 U.S.C. section 1821 (d), the Court lacks subject matter jurisdiction over Modular's defenses. In response, defendants assert that the FDIC has not complied with the notice provisions of FIRREA. Further, they seek dismissal of FDIC's foreclosure action, per Rule 37 of the Federal Rules of Civil Procedure, for the FDIC's alleged failure to comply with discovery. For the reasons that follow, the Court will grant in part and deny in part the FDIC's motion. Additionally, the Court will deny the defendant's cross-motion to dismiss pursuant to Rule 37.

 In 1986, Modular Homes, Inc. borrowed $ 200,000 from Community Guardian Bank ("CGB" or "Bank"). The loan was secured by a lien on property located in Glen Rock, New Jersey, as well as the personal guarantees of defendants William and Rosalind Higgins and Hugh and Margaret Walsh. See Higgins Affidavit P 3. After some business deals fell through, Modular experienced financial difficulty and therefore, in 1990, they entered into negotiations with CGB concerning the outstanding loans. Id. at P 6.

 Modular allegedly came to an agreement with CGB whereby Modular would give the Bank the deed to the Glen Rock property in lieu of foreclosure. Id. According to Modular, all was settled; the Bank, however, made additional demands of Modular regarding the deeds of the properties in question. Id. at P 13. In October 1990, after extensive efforts to comply with the Bank's demands, Modular received a general release from liability covering some property in Vernon, New Jersey. Id. at P 18. The Bank, however, refused to release the defendants with respect to the Glen Rock property until defendants could perfect the subdivision of the property. Id.

 After extensive negotiations with the adjacent property owners in Glen Rock, in January 1991, Modular succeeded in completing an agreement with a neighboring land owner that would allow Modular to perfect the subdivision. Id. at P 20. In May of 1991 Modular notified CGB that as soon as the adjacent property owner was given a release from his bank, Modular was prepared to close on the property, thereby assuring CGB that the subdivision plan was virtually completed. Id. at P 21.

 In July 1991, the Commissioner of Banking of the State of New Jersey took possession of CGB thereby assuming its assets. Id. at P 22. On July 19, 1991, the plaintiff, the FDIC pursuant to their appointment as receiver for CGB, acquired all rights, titles, powers, and privileges of the bank. Plaintiff's Memorandum of Law in Support of Motion to Dismiss Defendant's Affirmative Defenses at pg. 2. In a letter sent in October of 1991, the FDIC notified the defendant of the receivership, and instructed the defendant to present all claims against the Bank within thirty days of receipt. Id. at pg. 3; see also Higgins Affidavit at P 23.

 On November 1, 1991, Modular presented claims to the FDIC explaining that the defendants were personal guarantors on a Note secured by real property. The proof of claim went on to state that the CGB had agreed to accept the deed to land in Glen Rock in lieu of pursuing foreclosure actions. Higgins Affidavit at P 24. Subsequently, on November 12, 1991, the defendants received a form letter from the FDIC notifying Modular that its claim was disallowed. Id. at P 25. In response to the FDIC's November 12th letter, defendants explained that because they received the FDIC's original letter concerning bringing proof of claims on October 28, 1991, "it was virtually impossible to file a Proof of Claim by the original deadline of October 25, 1991." Defendant's Memorandum of Law, Exhibit A at pg. 14. Modular's letter concluded by asking the FDIC to advise them accordingly. Id.

 In July 1992, plaintiff filed two actions against Modular: a foreclosure action based on a mortgage from September 1989, and an action to recover on a floating rate note which was dated September 1989 as well. Modular was served in August, and in September, Modular made the FDIC an offer of settlement which paralleled the arrangement Modular had made with CGB to avoid foreclosure and personal liability. Higgins Affidavit at PP 29-30.

 In September 1992, over ten months after having received the notice of disallowance from the FDIC, Modular filed its answer and separate affirmative defenses, which it subsequently amended to include a counterclaim and jury demand. Plaintiff's Memorandum of Law at p. 3. On October 30, 1992 the plaintiff removed the note action to this court pursuant to 12 U.S.C. section 1819 (b)(2)(B). The foreclosure action was subsequently removed on December 30, 1992, and the actions were consolidated sua sponte on April 26, 1993.

 DISCUSSION

 Additionally, pursuant to Rule 37 of the Federal Rules of Civil Procedure, Modular has made a cross-motion against the FDIC claiming that the FDIC's actions against Modular should be dismissed due to the FDIC's failure to comply with discovery orders.

 I. Defenses

 This Court will take a two-tier approach to dealing with Modular's defenses. First the court will examine the legal sufficiency of the defenses. Next, the court will analyze the effect FIRREA ...


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