Relying on a single case decided under the law of Illinois, defendants argue that because the Postponement of Mortgage executed by plaintiff was unconditional on its face, defendants owe no duty to plaintiff as second mortgagee, and thus the complaint fails to state a claim for which relief may be granted: "In the ordinary course, a first mortgagee not in possession has no duty to protect and conserve the equity and position of a second mortgage holder." Def. Br. at 6.
The quoted statement accurately reflects New Jersey law. Only if a mortgagee is one in possession will the mortgagee owe a duty to a second mortgagee to account in a foreclosure action. See Shadow Lawn Sav. & Loan Assoc. v. Palmarozza, 190 N.J. Super. 314, 319, 463 A.2d 384 (App.Div. 1983) (citing South Amboy Trust Co. v. McMichael Holdings, Inc., 141 N.J. Eq. 12, 14, 56 A.2d 437 (Ch. 1947)); McCorristin v. Salmon Signs, 244 N.J. Super. 503, 509, 582 A.2d 1271 (App.Div. 1990) ("Once a mortgagee gains possession the mortgagee assumes the responsibility for the management and preservation of the property.") (citing Essex Cleaning v. Amato, 127 N.J. Super. 364, 366, 317 A.2d 411 (App.Div.), certif. denied, 65 N.J. 575 (1974)).
It is not the case, then, that there is no set of facts which would support plaintiff's claim. As defendants' brief acknowledges, defendant Carteret could be held liable to plaintiff if it were deemed a mortgagee in possession. Plaintiff urges the court not to dismiss his complaint before he is given an opportunity to discover facts in support of such a theory, and cites the court to evidence already in his possession showing that defendant Carteret had keys to the premises and had certain repair work performed after the Azzis abandoned the property. Although defendants dispute that they were mortgagees in possession by including a sentence in their "Statement of Undisputed Material Facts" that they were never in possession of the property, this statement is actually contested by plaintiff and is not properly considered on a motion to dismiss.
The complaint will not be dismissed at this stage; plaintiff was not required to "plead evidence," and there exists a set of facts which could support the claim subject to attack on the present motion. If discovery yields evidence that defendant Carteret was not a mortgagee in possession, it would then be appropriate for defendants to move for summary judgment on such grounds.
We are not yet appropriately at the summary judgment stage, however, and defendants' motion to dismiss based upon the lack of a duty of cautious loan administration will be denied.
B. RTC's Motion to Dismiss Under D'Oench, Duhme Doctrine
The only other ground for dismissal articulated in defendants' moving brief is defendant RTC's argument that the D'Oench, Duhme doctrine and 12 U.S.C. § 1823(e) bar the claims asserted against it in Count 4 of the amended complaint.
D'Oench, Duhme & Co., Inc. v. Federal Deposit Ins. Corp., 315 U.S. 447, 86 L. Ed. 956, 62 S. Ct. 676, reh'g denied, 315 U.S. 830, 86 L. Ed. 1224, 62 S. Ct. 910 (1942), established the federal common law doctrine "preventing borrowers from raising 'secret agreements' in defense to actions to enforce ostensibly unconditional obligations they owe to a bank that the Federal Deposit Insurance Corporation (FDIC) has taken over." Adams v. Madison Realty & Dev., Inc., 937 F.2d 845, 851 (3d Cir. 1991). D'Oench, Duhme was a securities brokerage house that executed promissory notes payable to a bank so that the bank would not have to show a loss on its books arising from the default of some bonds the bank had purchased. The bank gave D'Oench, Duhme a receipt for the promissory notes constituting a side agreement that the bank would not demand payment upon the notes. When the bank failed, the FDIC acquired the notes and brought a collection action against D'Oench Duhme, which asserted as a defense the side agreement under which the bank had agreed not to enforce the notes. The Supreme Court found that federal law protected the FDIC against undisclosed and fraudulent agreements not plainly appearing on the face of the obligation. D'Oench, Duhme, 315 U.S. at 461. Such a side agreement assisted the bank in misleading bank-examining authorities, and D'Oench Duhme was therefore estopped from asserting such a defense against the FDIC. The Third Circuit in Adams has summarized the D'Oench, Duhme rule as stating that "no agreement between a borrower and a bank which does not plainly appear on the face of an obligation or in the bank's official records is enforceable against the FDIC [or the RTC]." Adams, 937 F.2d at 852.
In 1950, Congress built upon D'Oench, Duhme and its progeny when it enacted an amendment to the Federal Deposit Insurance Act, 64 Stat. 889, at 12 U.S.C. § 1823(e), which provided:
No agreement which tends to diminish or defeat the right, title or interest of the Corporation [FDIC] in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank.