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Lowe v. Federal Deposit Insurance Corp.

United States District Court, D. Maryland

July 2, 2019

DONALD J. LOWE, et al., Plaintiffs,



         Plaintiffs Donald J. Lowe (“Mr. Lowe”), Joyce J. Lowe (“Ms. Lowe”), and Lowe Services, Inc. (“Lowe Services”) (collectively, the “Lowes”) lodged a civil action against defendant Federal Deposit Insurance Corporation (the “FDIC”) as Receiver for NBRS Financial (“NBRS”). ECF 1 (the “Complaint”). They incorporated by reference the Affidavit of Mr. Lowe. ECF 1-1. Plaintiffs subsequently filed an Amended Complaint (ECF 12), again incorporating ECF 1-1, and naming the FDIC as two defendants: the FDIC in its capacity as Receiver (“FDIC-Receiver”) and also in its corporate capacity (“FDIC-Corporate”).[1] Plaintiffs seek the release of a lien previously held by NBRS on Mr. and Ms. Lowe's residential property. Id. ¶ 5. They also seek damages pursuant to 12 U.S.C. § 1819(a). ECF 12, ¶¶ 3, 6.

         The FDIC-Receiver “in its corporate capacity as attorney-in-fact” for the FDIC, and “as receiver for NBRS, ” has moved to dismiss. ECF 29. It asserts lack of jurisdiction under Fed.R.Civ.P. 12(b)(1) and (2) and failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). The motion is supported by a memorandum (ECF 29-1) (collectively, the “Receiver Motion”) as well as several exhibits. ECF 29-3; ECF 29-5 to ECF 29-11. FDIC-Corporate also moved to dismiss (ECF 30) (the “Corporate Motion”), asserting lack of subject matter jurisdiction under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6). Plaintiffs oppose the Receiver Motion (ECF 34) and the Corporate Motion. ECF 37. Defendants have replied. ECF 36 (“Receiver Reply”); ECF 38 (“Corporate Reply”).

         The motions are fully briefed and no hearing is necessary to resolve them. See Local Rule 105.6. For the reasons that follow, I shall grant the motions.

         I. Factual and Procedural Background[2]

         Mr. Lowe is the president and secretary of Lowe Services. ECF 12, ¶ 1. Lowe Services does business as Pioneer Outdoor Equipment, and as Pioneer Maintenance and Repair Service, which contracts for home improvements, small engine repairs, and maintenance for commercial and residential customers. ECF 1-1, ¶¶ 3-5. Lowe Services operated in a commercial building located at 1226 South Philadelphia Boulevard in Aberdeen, Maryland (the “Commercial Property”). Id. ¶ 6. Mr. and Ms. Lowe owned the property from November 1999 until 2013, when the property went into foreclosure. Id. ¶ 8.

         In 2004, Lowe Services allegedly entered a business relationship with NBRS, a bank with branches in Cecil County and Harford County, Maryland. Id. ¶ 10. NBRS agreed to refinance an outstanding mortgage on the Commercial Property; the amount of the mortgage was $400, 000. Id. ¶ 12. It also provided Mr. Lowe with a $150, 000 line of credit, which it increased to $350, 000 in June 2005. Id. ¶¶ 12-13.

         In 2009, Lowe Services began to struggle financially. Id. ¶ 15. To stay afloat, it allegedly employed fewer people and liquidated certain inventory, including equipment. Id. ¶ 16. It also accepted additional jobs in home improvement and commercial maintenance. ECF 1-1, ¶ 16. Lowe Services also sought financial assistance from NBRS. Id. ¶ 17. In response, NBRS offered to extend the maturity of the credit line. Id. In 2011, it also offered to roll the credit line into the mortgage on the Commercial Property, increasing Lowe Services' total debt to $755, 000. Id. NBRS also further secured the mortgage by recording a lien on Mr. and Ms. Lowe's personal residence in Churchville, Maryland. Id. ¶ 17.

         In that same year, Mr. Lowe entered a contract to sell the Commercial Property. Id. ¶ 18. However, the buyer withdrew from the sale in October 2012, just two months before closing. Id. As a result, plaintiffs were unable to make rental payments on a biodiesel system that it leased from Balboa Capital Corporation. Id. ¶¶ 14, 20. Moreover, plaintiffs were unable to make their mortgage payments on the Commercial Property. Id. ¶ 20.

         As a result, on August 26, 2013, NBRS initiated foreclosure proceedings. Id. ¶ 22. NBRS also blocked Mr. Lowe's access to the Commercial Property. Id. ¶¶ 23, 27. In addition, NBRS seized the Lowes' business records, equipment, and tools. Id. ¶ 24; see also Id. ¶¶ 25-26 (listing the seized tools and the seized physical and digital business records). In 2013, after Mr. Lowe unsuccessfully attempted to negotiate a refinancing with NBRS, he filed for Chapter 13 bankruptcy relief, thereby staying the foreclosure. Id. ¶ 32.

         On October 17, 2014, NBRS was closed by the Maryland Office of the Commissioner of Financial Regulation, and the FDIC was named as Receiver for NBRS. Id. ¶ 36. Plaintiffs allege that the FDIC-Receiver assumed NBRS's financial assets, including the Commercial Property and the lien on Mr. and Ms. Lowe's personal residence. Id. ¶ 37.

         Mr. Lowe filed an administrative claim with the FDIC-Receiver on November 27, 2014, seeking $30, 000, 000 for the financial losses suffered by his businesses. ECF 29-5; see also ECF 29-6. A month later, on December 29, 2014, the Lowes filed suit against the FDIC-Receiver in this District. Lowe v. FDIC, JKB-14-4024 (D. Md. Dec. 29, 2014); see ECF 29-8. In a letter dated January 23, 2015, the FDIC-Receiver requested additional documentation from Mr. Lowe to substantiate his claim against the receivership. ECF 29-6. That letter provided that if the requested documentation was not received by February 23, 2015, Mr. Lowe's claim would be disallowed. Id.

         Mr. Lowe failed to provide the required documentation. Therefore, the FDIC-Receiver disallowed his claim, by notice of July 20, 2015. ECF 29-7. The notice also advised Mr. Lowe that he could challenge the disallowance in a lawsuit. Id. And, the FDIC-Receiver advised Mr. Lowe that if, within 60 days of the notice, he did not file a lawsuit or continue any previously filed lawsuit, the disallowance of his claim would be final, pursuant to 12 U.S.C. § 1821(d)(6)(B)(ii). ECF 29-7 at 1.

         Because plaintiffs had already filed a lawsuit against the FDIC-Receiver, they were permitted to continue their suit, which was pending in this District before Judge James K. Bredar. See ECF 29-11. However, plaintiffs did not serve that suit on the FDIC-Receiver. As a result, by order of July 24, 2015, Judge Bredar directed plaintiffs to show cause as to why their suit should not be dismissed for failure to prosecute. Id. On August 10, 2014, plaintiffs moved for leave to amend their complaint. See Lowe, JKB-14-4024, ECF 15. Judge Bredar denied the motion on August 14, 2015, and dismissed the case, without prejudice, under Fed.R.Civ.P. 41(b) and Local Rule 103.8. ECF 29-9. From that time until plaintiffs filed the instant action on February 15, 2018, plaintiffs appear to have taken no further legal action in pursuit of their suit or the underlying administrative claim In June 2016, NBRS agreed to release its lien on Mr. and Ms. Lowe's personal residence, upon the sale of the Commercial Property. ECF 1-1, ¶ 33; see ECF 29-8, ¶¶ 139-40. This release was entered in the Bankruptcy Court by a consent order dated June 8, 2016. ECF 1-1, ¶ 33. On May 16, 2016, the FDIC-Receiver sold the Commercial Property at auction for $325, 000. ECF 1-1, ¶ 46. According to plaintiffs, the sale price was less than one-third of the Commercial Property's appraised value in 2011. Id. ¶¶ 19, 46.

         In August 2017, Mr. Lowe was notified that the auction sale of the Commercial Property did not satisfy his debt and that he owed $172, 396.31 on the debt to “Republic Credit One, L.P., Republic Credit Corporation, General Partner, ” which had allegedly purchased his debt from the FDIC-Receiver. Id. ¶ 43. Further, Mr. Lowe states that NBRS's lien on his home has not been removed and has impeded his ability to obtain refinancing. Id. ¶ 50.

         Plaintiffs allege that NBRS and later FDIC-Receiver failed to sell the Lowes' equipment and business tools. Id. ¶¶ 44, 49. Instead, they allegedly left the equipment and tools unattended for two years, resulting in their theft. Id. ¶ 44.

         Additionally, plaintiffs allege that on multiple occasions Mr. Lowe requested that NBRS and FDIC return the leased biodiesel system, which was located on the Commercial Property. Id. ¶¶ 27-28, 40, 45. Both entities refused to allow him to remove the biodiesel system. Id. Additionally, Scarpulla Enterprises Inc., which had purchased the Commercial Property at auction, also refused to allow Mr. Lowe to retrieve the system. Id. ¶¶ 47-48. As a result, he has been unable to retrieve it. Id. ¶ 51.

         Plaintiffs seek over $1.5 million dollars in damages from the FDIC. ECF 12, ¶ 3. They claim that the FDIC seized tools, equipment, and records, resulting in damages totaling $463, 250. Id. Further, plaintiffs allege that the FDIC is responsible for the “shortfall in sale price” of the Commercial Property, resulting in damages totaling $975, 000. Id. Moreover, plaintiffs seek $275, 000 in damages for FDIC's alleged failure to take “all efforts to return a biodiesel system to either Balboa Capital” or the Lowes. Id.

         II. Standard of Review

         As noted, both FDIC-Receiver and FDIC-Corporate have moved to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction and ...

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