Branch Banking and Trust Co. v. D.M.S.I., LLC
871 F.3d 751
9th Cir.2017Background
- Three related enforcement actions by Branch Banking & Trust Co. (BB&T) against debtors/guarantors (D.M.S.I., Regena Homes, Smoke Ranch) for unpaid promissory notes originally made by Colonial Bank, which failed in 2009 and whose assets were transferred by the FDIC to BB&T via a Purchase and Assumption Agreement (PAA) and related instruments.
- The loans were listed on the FDIC–BB&T loss-sharing Schedule 4.15b; the PAA schedules were blank but other transfer documents (Bulk Assignment, loss‑sharing schedule, allonges) and facts indicated BB&T’s acquisition.
- BB&T sued for breach of note/guaranty and deficiency judgments; district court granted summary judgment on liability in each case and entered judgments totaling millions; defendants appealed.
- Defendants asserted affirmative defenses based on an alleged oral “work‑out” agreement (promises to delay enforcement), and procedural challenges including standing, preemption of Nevada deficiency statute §40.459(1)(c), notice to trust beneficiaries, jury‑trial right on fair‑market‑value, and late amendment of pleadings.
- The Ninth Circuit affirmed: BB&T had standing via the PAA/Bulk Assignment and loss‑sharing schedule; Nevada’s amended deficiency limitation subsection (1)(c) is preempted as applied to FDIC transfers; the alleged oral work‑out agreement failed as a contract or equitable defense; no Seventh Amendment jury right required for court determination of fair market value; other procedural rulings (late amendment, notice, laches/mitigation defenses) were affirmed.
Issues
| Issue | Plaintiff's Argument (BB&T) | Defendant's Argument (Iny/Schwartz/D.M.S.I.) | Held |
|---|---|---|---|
| Standing to sue on loans transferred from Colonial/FDIC | PAA, Bulk Assignment, loss‑sharing schedule and allonges show assignment to BB&T | PAA/schedules are blank; prior Nevada rulings preclude reliance on PAA; Bulk Assignment defective | BB&T had standing: loss‑sharing schedule and Bulk Assignment transferred these loans; prior cases not preclusive here |
| Validity/applicability of Nevada deficiency cap §40.459(1)(c) | Statute should not limit BB&T’s deficiency recovery on FDIC‑transferred loans | Statute bars recovery absent proof of consideration paid; thus BB&T fails on element | Subsection (1)(c) preempted by federal law (FIRREA) as applied to FDIC transferees; BB&T may pursue deficiency |
| Alleged oral work‑out agreement (contract, estoppel, waiver, laches, mitigation) | BB&T reserved rights; no written modification; foreclosure timing lawful | Oral promises and conduct estop BB&T or modified/waived rights; laches/mitigation should limit recovery | Oral work‑out not a contract (no consideration/written modification), estoppel fails (defendants knew lender’s rights), waiver/ modification unenforceable, laches/mitigation not applicable |
| Right to jury trial on fair‑market‑value in deficiency proceedings | Fair‑market‑value is factual and jury‑trial demand should be honored | Defendants demanded jury on value | No Seventh Amendment right: remedy is equitable in nature; court may determine fair market value (and one action’s stipulation rendered issue moot) |
Key Cases Cited
- Kraus v. Presidio Tr. Facilities Div./Residential Mgt. Branch, 572 F.3d 1039 (9th Cir.) (standard of review for summary judgment)
- Munoz v. Branch Banking & Trust Co., 348 P.3d 689 (Nev. 2015) (FIRREA preempts Nevada limitation on deficiency for FDIC transfers)
- McClellan v. Chipman, 164 U.S. 347 (U.S. 1896) (state law preempted when it frustrates federal agency purposes)
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (U.S. 1989) (Seventh Amendment two‑step analysis)
- Tull v. United States, 481 U.S. 412 (U.S. 1987) (law/equity inquiry for jury‑trial right)
- Payne v. Norwest Corp., 185 F.3d 1068 (9th Cir.) (parties bound by stipulations)
- FDIC v. Coleman, 795 S.W.2d 706 (Tex. 1990) (no duty for secured creditor to time foreclosure to minimize debtor’s deficiency)