OPINION

HUGH W. BRENNEMAN, Jr., Magistrate Judge.

Plaintiff, WM Capital Partners, LLC ("WM Capital") filed the present diversity action against defendants Michael C. Coon ("Mr. Coon") and Shea Coon ("Mrs. Coon") (collectively referred to as "Borrowers") for failure to pay amounts owed on two promissory notes. This matter is now before the court on WM Capital's motion for summary judgment (docket no. 20).

I. The complaint

A. WM Capital's allegations

WM Capital set forth the following allegations in its complaint. On or about March 1, 2007, Borrowers executed and delivered a promissory note (the "First Note") to Tennessee Commerce Bank ("TCB") in which they jointly and severally promised to repay TCB the principal amount of $67,000.00 plus accrued interest. Compl. at ¶ 6; First Note (docket no. 1-1). On or about October 3, 2007, Borrowers increased the total amount of their indebtedness when they executed and delivered another promissory note (the "Second Note") to TCB in which they jointly and severally promised to repay TCB the increased principal amount of $121,513.52 plus accrued interest. Compl. at ¶ 7; Second Note (docket no. 1-2). WM Capital refers to the amount owed on the Second Note as the "Indebtedness" at issue. Compl. at ¶ 7.

On or about March 30, 2010, Borrowers entered into a forbearance agreement (the "Forbearance Agreement") with TCB in which they acknowledged that defaults existed under the Second Note and agreed to pay all interest due as well as monthly interest only payments through the end of the forbearance period. Compl. at ¶ 8; Forbearance Agreement (docket no. 1-3). Under the terms of the Forbearance Agreement, the forbearance period commenced on March 30, 2010 and terminated on March 30, 2011. Forbearance Agreement at p. 1 and ¶ D.

On or about June 30, 2011, Borrowers entered into a forbearance extension agreement (the "Forbearance Extension Agreement") with TCB in which they acknowledged that continuing defaults existed under the Second Note, agreed to pay all interest due as well as monthly interest only payments through the end of the forbearance period, and extended the forbearance period by five months, with Borrowers to resume making payments on the Second Note on August 31, 2011. Compl. at ¶ 9; Forbearance Extension Agreement (docket no. 1-4). Collectively, the First Note, Second Note, Forbearance Agreement and Forbearance Extension Agreement comprise the "Loan Documents" at issue in this lawsuit.

On Friday, January 27, 2012, approximately five months after the August 31, 2011 termination of the Forbearance Extension Agreement, the Tennessee Department of Financial Institutions closed TCB, and the Federal Deposit Insurance Corporation ("FDIC") was named Receiver. Compl. at ¶ 11. WM Capital purchased TCB's loan to Borrowers from the FDIC. Id. at ¶ 12. On August 9, 2012, the FDIC, in its capacity as Receiver for TCB, assigned all of TCB's rights and remedies against Borrowers to WM Capital. Compl. at ¶ 13; Assignment and Assumption of Interests and Obligations (the "Assignment and Assumption Agreement") (docket no. 1-5). According to the Assignment and Assumption Agreement, WM Capital and the FDIC entered into a loan sale agreement ("LSA") dated August 9, 2012, which included Borrowers' loan (identified on Exhibit A attached to the assigment). See Assignment and Assumption Agreement. The Assignment and Assumption Agreement recites that under the LSA, the FDIC, as Assignor, "hereby transfers, grants, conveys and assigns to Assignee all of Assignor's right, title and interest in the Agreements to Pay, the Collateral Documents, the Real Estate Interests and the Miscellaneous Agreements." Id.

On October 3, 2012, the Second Note matured and all amounts due and owing to WM Capital under the Loan Documents became immediately due and owing. Compl. at ¶ 14. On February 20, 2013, WM Capital sent a demand letter to each of the Borrowers notifying them that they were in default and that the entire $109,489.87 balance of the Indebtedness under the Loan Documents was immediately due and owing (the "Demand Letters"). Id. at ¶ 15; Demand Letters (docket nos. 2-1 and 2-2).

B. WM Capital's claims for relief

In Count I, WM Capital alleged that Mr. Coon failed to make payments pursuant to the Loan Documents, which includes all principal and accrued interest not paid as of October 3, 2012, a late charge in the amount of 5% for each late payment, and all attorneys' fees and expenses incurred by TCB and WM Capital. Compl. at ¶¶ 17-23. This results in an amount due from Mr. Coon in excess of $109,489.87 plus interest, late charges and attorneys' fees and expenses, and "such other and further relief as this Court deems just and appropriate." Id. at p. 4. In Count II, WM Capital alleged the same claims against Mrs. Coon. Id. at ¶¶ 24-30 and p. 5.

C. Borrowers' Answer

In their answer, Borrowers admit that they executed the Loan Documents, that the Second Note matured on October 3, 2012, that they received the Demand Letters from WM Capital, that the Second Note imposed a late charge of 5%, and that they "have not made any payments on the Loan Documents subsequent to the Demand Letters." Answer at ¶¶ 4-9, 14-16, 18-20, and 25-27 (docket no. 9). Borrowers also admit that they are responsible for attorneys' fees and expenses that TCB and WM Capital incur to collect on the Indebtedness "to the extent that collection is appropriate." Id. at ¶ 21. However, Borrowers deny "that a balance was owed" on the Second Note and that they "failed to make payments." Id. at ¶¶ 14, 23 and 30.

Borrowers have raised four affirmative defenses: a right of offset; detrimental reliance; "equitable — unjust enrichment"; and promissory estoppel. Affirmative Defenses (docket no. 9-2). The gist of these defenses is set forth in their first affirmative defense for a right of offset, in which they state as follows:

Affirmative Defenses at ¶ 1. Mrs. Coon does not assert any affirmative defenses based on her actions, but rather relies on Mr. Coon's actions as inuring to her benefit.

II. Legal Standard

"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Rule 56 further provides that "[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by":

Fed. R. Civ. P. 56(c)(1).

In Copeland v. Machulis, 57 F.3d 476 (6th Cir. 1995), the court set forth the parties' burden of proof in deciding a motion for summary judgment:

Copeland, 57 F.3d at 478-79 (citations omitted). "In deciding a motion for summary judgment, the court views the factual evidence and draws all reasonable inferences in favor of the nonmoving party." McLean v. 988011 Ontario Ltd., 224 F.3d 797, 800 (6th Cir. 2000).

III. The parties' positions

In its motion for summary judgment, WM Capital points out that the existence of the Loan Documents is uncontested. The issue is whether it is bound by an alleged oral modification of the documents as claimed by Borrowers, i.e., that Mr. Coon offset the amount owed under the Loan Documents by performing brokerage services to TCB. WM Capital contends that it is entitled to summary judgment because Tennessee law applies in this matter, and the Tennessee statute of frauds prohibits the oral modification of contracts. In support of its position, WM Capital cites a portion of that statute, which states in relevant part:

Tennessee Code Annotated § 29-2-101(b)(1).

In their response, Borrowers contest the application of this statute on five grounds: first, defendants contend that Mr. Coon's credit for his commission was an accounting function, not a modification of the Loan Documents;1 second, that Tennessee law permits oral modification of a written contract, citing Lancaster v. Ferrell Paving, Inc., 397 S.W.2d 606, 611 (Tenn. Ct. App. 2011); third, that Borrowers can claim the right of offset under Tennessee law, citing Polk v. Torrence, 218 Tenn. 680, 405 S.W.2d 575 (1966); fourth, that Mr. Coon entered into either a contract implied in fact or a contract implied in law with TCB to perform brokerage services, citing ICG Link, Inc. v. Steen, 363 S.W.2d 533 (Tenn. Ct. App. 2011); and fifth, that TCB is barred by "detrimental reliance/promissory estoppel" from denying its agreement to pay Mr. Coon a commission of $57,591.44 for selling a pool of notes totaling over $10,000,000.00, and "to credit the commission against his note." In support of this defense, Borrowers cite Calabro v. Calabro, 15 S.W.3d 873 (Tenn. Ct. App. 1999).

At the close of the motion hearing, the Court requested the parties file supplemental briefs regarding whether WM Capital was a holder in due course of the Loan Documents and whether there was a specific provision of the statute of frauds under Tennessee's version of the Uniform Commercial Code that applied to the Loan Documents at issue in this case.

IV. Discussion

Despite the parties' initial presentation of this case as involving a question of state law, the Court views matter as involving a question of federal law involving the sale of assets by the FDIC.2 It is undisputed that the FDIC acquired the assets of TCB and subsequently sold and assigned some of those assets, including the Borrowers' indebtedness, to WM Capital. The Court concludes that Borrowers cannot assert their affirmative defenses to diminish the value of the indebtedness which WC Capital acquired from the FDIC under the D'Oench, Duhme doctrine and 12 U.S.C. § 1823(e)(1).

National Enterprises, Inc. v. Smith, 114 F.3d 561, 563-64 (6th Cir. 1997).

As the court explained in First Union National Bank of Florida v. Hall, 123 F.3d 1374 (11th Cir. 1997):

First Union National Bank of Florida, 123 F.3d at 1379 (footnotes omitted) (emphasis added). In this regard, the court in First Union National Bank of Florida stated, "[t]he D'Oench, Duhme doctrine has been expanded to protect entities to whom the FDIC, acting in its capacity as receiver of failed banks, has transferred assets formerly belonging to a failed bank." Id. at 1379, fn. 9.

The D'Oench, Duhme doctrine has been codified at 12 U.S.C. § 1823(e)(1), which provides as follows:

12 U.S.C. § 1823(e)(1).

In National Enterprises, Inc., the Sixth Circuit observed that several courts had extended the protections against "side agreements" provided by 12 U.S.C. § 1823(e)(1) to the FDIC's assignees who purchased the assets of a failed institution:

National Enterprises, Inc., 114 F.3d at 563-64.3

Other courts have agreed that the protections set forth in § 1823(e)(1) apply to FDIC assignees like WM Capital. See, e.g., Beal Bank, SSB v. Pittorino, 177 F.3d 65, 68 (1st Cir. 1999) ("[t]he D'Oench, Duhme doctrine prevents a party from asserting an oral agreement as the basis for either a claim or defense against the FDIC, or against any of its assignees") (internal citation omitted); UMLIC-Nine Corp. v. Lipan Springs Development Corporation, 168 F.3d 1173, 1179 (10th Cir. 1999) ("D'Oench, Duhme applies to actions brought by FDIC's assignees as well as by FDIC itself"); Federal Financial Company v. Hall, 108 F.3d 46, 49 (4th Cir. 1997) ("[w]e and several other Courts of Appeals have held that the D'Oench, Duhme rule protects the FDIC's assignees as well, even though § 1823(e) is silent with regard to assignees"); Community Bank of Ozarks v. F.D.I.C., 984 F.2d 254, 257 (8th Cir. 1993) ("[t]he D'Oench doctrine also applies to transferee banks for essentially the same reasons it applies to the FDIC"); Kuhlmann v. Sabal Financial Group LP, ___ F. Supp. 2d ___, 2014 WL 2765221 at *9 (W.D. Wash. 2014) ("[w]hile the language of section 1823(e) mentions only the FDIC, federal courts have consistently explained that `a private entity that purchases the assets of a failed institution from the FDIC is protected against side agreements between a debtor and original lender to the same extent as the FDIC, even though the literal language of section 1823(e) and D'Oench, Duhme does not so provide'") (citing National Enterprises, Inc., 114 F. 3d at 564) (internal brackets omitted); Caires v. JP Morgan Chase Bank, 745 F.Supp.2d 40, 53 (D. Conn. 2010) ("the Court finds that the Defendant is entitled to the protections of the D'Oench, Duhme doctrine and 12 U.S.C. § 1823(e) as an assignee of the FDIC"); AAI Recoveries, Inc. v. Pijuan, 13 F.Supp.2d 448, 451 (S.D.N.Y. 1998) ("[a]lthough Congress only codified the D'Oench, Duhme doctrine with regard to the FDIC, courts have extended the rule to include third party assignees and transferees").

The Court finds the reasoning of these courts persuasive, and concludes that § 1823(e)(1) is applicable to WM Capital as an assignee of the FDIC. Borrowers contend that § 1823(e)(1) does not apply, because it is possible that the LSA between WM Capital and the FDIC contained a paragraph which excluded the rights granted to the FDIC under § 1823(e). Defendants' Supplemental Brief at pp. 3-8. Borrowers rely on ¶ 5.18 "Use of FDIC's Name and Reservation of Statutory Powers" which appears in a sample LSA form, and which provides in pertinent part as follows:

Defendants' Supplemental Brief at pp. 3-4.

While the FDIC may have reserved some of its rights under § 1823(e)(1) by including ¶ 5.18, there is no evidence that this paragraph appeared in the LSA between the FDIC and WM Capital. In their brief, Borrowers have attached an unexecuted sample of an FDIC Loan Sale Agreement, identified as "Version 3 (AM) April 30, 2012" ("Version 3"). See Sample Loan Sale Agreement (docket no. 28 at pp. 23-76). While the Assignment and Assumption of Interest between the FDIC and WM Capital utilized the form identified as "Version 3," there is no evidence that the parties' LSA utilized Version 3, and even if they did utilize it, that ¶ 5.18 was incorporated into that form.4

Finally, to the extent that Borrowers contend that the FDIC Statement of Policy 5000 ("Statement of policy regarding federal common law and statutory provisions protecting FDIC, as receiver or corporate litigator, against unrecorded agreements or arrangements of a depository institution prior to receivership") (docket no. 28 at pp. 77-88) affects WM Capital's ability to rely on § 1823(e)(1), their contention is unpersuasive. Borrowers do not point out how that policy prohibits WM Capital from relying on the provisions of § 1823(e)(1).

In applying § 1823(e)(1), the Court concludes that Borrowers' affirmative defenses (all of which relate to an unwritten side agreement between Mr. Coon and TCB which predated the FDIC's acquisition of TCB's assets) are barred by that statute as an unwritten agreement "which tends to diminish or defeat the interest" of the FDIC's assignee, WM Capital. The terms of the purported agreement are set forth in an affidavit executed by Mr. Coon which states as follows. From about 2001 until September 2011, Michael Coon "worked with TCB and its officers on building the bank and managing portfolios as an independent company named Enterprise Funding Group." Michael Coon Aff. at ¶ 3 (docket no. 23-2). According to Mr. Coon, "TCB was very familiar with me and my experience level." Id.

Michael Coon's affidavit set forth his communications with TCB with respect to his alleged agreement to exchange brokerage services for a reduction in his outstanding loan balance as follows:

5. I had worked with Doug Rogers since about year 2005. I came to know Doug Rogers as the senior vice president of TCB and the second in command. I also worked with Tommy Crocker who I came to know as the vice president of special assets (i.e. nonperforming loan portfolios). Both were senior management and appeared to have authority to enter into the agreements for the sale of loans, payment of commissions, and the terms of my services.

6. Pursuant to my brokerage and services, on or about May 2011 TCB entered into an agreement with a third-party buyer for a total of about $10,518,000 closed through September 2011 by a series of transactions. After the transactions closed, TCB and I agreed on the following commission credit against the loan: $10,000 representing a 1.0% commission on the first $1,000,000 of loan sales plus $47,591.44 representing a 0.5% commission on the remaining loan sale amount.

Id. at ¶¶ 4-10.

While Mr. Coon's affidavit is evidence of some type of oral agreement to modify the amount of his outstanding indebtedness, he has not presented any writing to support the existence of his side agreement with TCB. Indeed, there is no written evidence of the $10,518,000.00 transaction or transactions with an unidentified third-party upon which Michael Coon bases his claim.

In an attempt to demonstrate that the Mr. Coon and TCB had a written agreement, Borrowers provided additional information attached to their supplemental brief. First, Borrowers presented an "Officer's Narrative" from TCB Loan Officer Tim Mortimer, dated June 1, 2011, regarding the status of their loan. See Officer's Narrative (docket no. 28 at pp. 89-90). This narrative notes that Mr. Coon "recently acquired a job that will increase his income to better meet his monthly debt payments" and that "[t]he specific source of repayment will by Mr. and Mrs. Coon's income from employment." Id. at p. 89. The narrative also includes new information in a "summary and recommendations" suggesting that Mr. Coon might use certain commissions to pay down his loan:

Id. at p. 89.5 While vague at best, this recommendation appears to have been in support of the June 30, 2011 forbearance extension agreement previously mentioned, which made no mention of using commissions to pay down debt.

Second, Borrowers submitted a copy of a document from loan officer Tim Mortimer, dated 1/30/12, entitled "LOAN APPROVAL/ASM/INTERIM ACTION REQUEST." See Loan Approval (docket no. 28 at p. 90). The new request is for interim action on the loan to "amortize $40,331.77 for 60 months at 5.% interest — Discount current balance by $57,591.44 due to comision [sic] on sale of loans. Past due interest will be paid at closing." Id. The summary of the "new commitments requested" is as follows:

Id.

A section of the loan approval form entitled "Request/Action and Officer Recommendation: (Include justification of any approval exceptions)" (emphasis in original), provides as follows:

Id. This Request included a section for "APPROVALS SIGNATURES" with a "Note" that "committee and Board approvals to be signed by the respective chairperson." Id. However, there is no evidence that this document was ever approved by TCB's officers or directors. While the Request was initialed by an "officer" on 1/30/2012, the three spaces for concurrences of other officers identified as RLM, NLM and CCO, are blank. Id. There was no approval by the "Loan Committee," or its three members SAM, COO and CRO. Id. Finally, there was no approval by the "Board of Directors." Id. Moreover, and perhaps of pivotal significance, is the fact that the Tennessee Department of Financial Institutions closed TCB (and the FDIC was named Receiver) three days before this request for interim action on the defendants' loan was submitted to anyone by the loan officer. By this time, the bank had lost its authority to act.

Given this record, there is no evidence that a written agreement existed between Mr. Coon and TCB which could be asserted under § 1823(e)(1) because: (A) it was not in writing; (B) it was not executed by the depository institution (TCB) and any person claiming an adverse interest thereunder contemporaneously with the acquisition of the asset by TCB; (C) it was not approved by the board of directors of TCB or its loan committee, as reflected in the minutes of said board or committee; and (D) it has not been, continuously, from the time of its execution, an official record of TCB.

Viewing the evidence in the light most favorable to the non-moving party (Borrowers), there is no genuine issue of material fact that the movant, WM Capital, is entitled to judgment as a matter of law. For these reasons, Borrowers' alleged agreement with the now defunct TCB is not valid against WM Capital, and WM Capital must prevail on its motion for summary judgment on the issue of liability.

While WM Capital seeks entry of a judgment against both Mr. and Mrs. Coon in the amount of $109,489.87, plus interest, late charges and attorneys' fees and expenses, it has not provided evidence to establish the specific amount owed. For that reason, WM Capital's motion for summary judgment will be denied without prejudice on the issue of damages. Accordingly, WM Capital may file a renewed motion for summary judgment to establish the dollar amount owed by Borrowers, within 14 days from entry of this opinion. If WM Capital chooses not to file such a motion, then this matter will proceed to trial on the issue of damages.

V. Conclusion

WM Capital's motion for summary judgment (docket no. 20) will be GRANTED on the issue of liability and DENIED without prejudice as to the issue of damages. An order consistent with this opinion shall be issued forthwith.