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Palmetto State Bank v. Riley

United States District Court, D. South Carolina, Aiken Division

September 19, 2017

Palmetto State Bank, Plaintiff,
v.
Marion F. Riley, Jr., M.F. Riley Funeral Home, Riley's Funeral Home Inc., Defendants,
v.
Federal Deposit Insurance Corporation, as Receiver for Allendale County Bank, Counter-Defendant. Marion F. Riley, Jr., Third-Party Plaintiff,
v.
Walker Harter, Jr., Walker Harter, Sr., Third-Party Defendants.

          ORDER AND OPINION

         This matter is before the court on Defendants Marion F. Riley, Jr., M.F. Riley Funeral Home, and Riley's Funeral Home, Inc.'s (“Defendants”) Motion to Dismiss Counter-Defendant and Remand. (ECF No. 13.) In accordance with 28 U.S.C. § 636(b) and Local Civil Rule 73.02, D.S.C., the matter was referred to United States Magistrate Judge Paige J. Gossett for a Report and Recommendation (“Report”). On July 18, 2017, the Magistrate Judge issued a Report recommending that the court deny Defendants' Motion. (ECF No. 37.) For the reasons stated herein, the court ADOPTS the Magistrate Judge's Report and Recommendation (ECF No. 37), thereby DENYING Defendants' Motion to Dismiss Counter-Defendant and Remand (ECF No. 13).

         I. FACTUAL AND PROCEDURAL BACKGROUND

         On April 25, 2014, the South Carolina Commissioner of Banking declared Allendale County Bank (“ACB”) insolvent and appointed the Federal Deposit Insurance Corporation (“FDIC-R”) as its receiver. (ECF No. 1 at 2.) The FDIC-R as receiver for ACB succeeded to all rights, titles, powers and privileges of ACB pursuant to 12 U.S.C. § 1821(d)(2)(A). (Id.) Also on April 25, 2014, pursuant to a Purchase and Assumption Agreement between the FDIC-R and Plaintiff, Plaintiff purchased certain assets of the failed ACB, including the subject loan, while the FDIC-R retained certain liabilities. (Id.)

         On March 15, 2016, Plaintiff filed a Complaint against Defendant Marion F. Riley, Jr. in the Allendale County Magistrate's Court for Defendant's failure to make payments on his loan. (Id.) On April 28, 2016, Defendant filed his Answer and raised defenses and counterclaims that were based on the actions of Allendale County Bank. (Id.) Thereafter, the matter was transferred to the Allendale County Court of Common Pleas because the amount in controversy exceeded the jurisdictional limit of the Magistrate's Court. (Id.)

         On June 29, 2016, the FDIC-R filed its Motion to Join, or Alternatively, to Intervene in the State Court Action based on the FDIC-R's agreement to indemnify Plaintiff for actions of ACB prior to its closing. (Id. at 3.) On September 6, 2016, Plaintiff filed an Amended Complaint that also sought judgment against Defendants M.F. Riley Funeral Home and Riley's Funeral Home, Inc. for loans that are purportedly in default. (Id.) On October 3, 2016, the parties, including Defendants, consented to the joinder of the FDIC-R to the action as to Defendants' counterclaims, and consequently, to the substitution of the FDIC-R for Plaintiff as the only proper counterclaim defendant. (Id.) On November 21, 2016, Defendants filed an Amended Answer that did not include any counterclaims, but still included defenses based on the actions of ACB and a request for a set-off. (Id. at 4.)

         On December 8, 2016, the FDIC-R removed the matter to this court, asserting jurisdiction pursuant to 12 U.S.C. § 1819 (b)(2)(A) & (B). (Id.) On January 6, 2017, Defendants filed a Motion to Dismiss Counter-Defendant and Remand, asserting the court lacks subject matter jurisdiction.[1](ECF No. 13 at 1.)

         On January 20, 2017, Plaintiff filed a response in opposition to Defendants' Motion, asserting (1) Defendants have waived their right to seek dismissal of the FDIC-R, (2) regardless of whether Defendants label their allegations as counterclaims or defenses, the FDIC-R is still a necessary and proper party, (3) even if the FDIC-R is dismissed as a party, this court retains subject matter jurisdiction over the action, and (4) strong public policy concerns require this court to deny Defendants' Motion. (ECF No. 17.)

         Also on January 20, 2017, the FDIC-R filed a response in opposition to Defendants' Motion, asserting (1) the FDIC-R is a real party in interest and must remain a party to the action, and (2) even if the court finds that the FDIC-R is no longer a proper party to the action, the court nevertheless retains jurisdiction over the entire action. (ECF No. 18.)

         On January 27, 2017, Defendants filed a Reply to Plaintiff and the FDIC-R, re-asserting their position in their Motion to Dismiss Counter-Defendant and Remand. (ECF Nos. 19, 20.)

         On July 18, 2017, the Magistrate Judge issued her Report recommending that the court deny Defendants' Motion because the FDIC-R is a proper and interested party in this matter, and thus the court should retain jurisdiction. (ECF No. 37 at 7.) Defendants were advised of their right to file objections to the Report. (Id. at 8.) On August 2, 2017, Defendants filed an Objection to the Report (“Objection”). (ECF No. 40.)

         II. JURISDICTION

         A defendant is permitted to remove a case to federal court if the court would have original jurisdiction over the matter. 28 U.S.C. § 1441(a) (2012). A federal district court has “original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Any civil suit in which the FDIC, in any capacity, is a party is “deemed to arise under the laws of the United States.” 12 U.S.C. § 1819(b)(2)(A); see also Bullion Servs, Inc., v. Valley State Bank, 50 F.3d 705, 707 (9th Cir. 1995). Additionally, when the FDIC is a party, the entire action is deemed to arise under the laws of the United States. See Fed. Deposit Ins. Corp., 58 F.3d 1041, 1045 (4th Cir. 1995).

         Further, the FDIC has a statutory right in each case in which it is a party to remove a case from state court to federal court pursuant to the Financial Institution Reform, Recovery and Enforcement Act of 1989, Pub. L. No. 101-73, § 209, 103 State. 1983 et seq. Specifically, the FDIC has 90 days from the date it is substituted as a party to remove the action from state court to the appropriate United States district court. 12 U.S.C. § 1819(b)(2)(B).

         III. LEGAL STANDARD

         The Magistrate Judge's Report is made in accordance with 28 U.S.C. § 636(b)(1) and Local Civil Rule 73.02 for the District of South Carolina. The Magistrate Judge makes only a recommendation to this court. The recommendation has no presumptive weight. The responsibility to make a final determination remains with this court. See Matthews v. Weber, 423 U.S. 261, 270-71 (1976). This court is charged with making a de novo determination of those portions of the Report to which specific objections are made, and the court may accept, reject, or modify, in whole or in part, the Magistrate Judge's recommendation, or recommit the matter with instructions. See 28 U.S.C. § 636(b)(1). Objections to a Report and Recommendation must specifically identify portions of the Report and the basis for those objections. Fed.R.Civ.P. 72(b). “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ...


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