Hartford Cas. Ins. Co. v. F.D.I.C.

United States Court of Appeals,
Fifth Circuit.
No. 93-2367.
HARTFORD CASUALTY INSURANCE COMPANY, Hartford Fire Insurance
Company, Hartford Accident and Indemnity Company, Hartford
Insurance Company of the Midwest, Hartford Underwriters Insurance
Company, and Twin City Fire Insurance Company, Petitioners,
v.
The FEDERAL DEPOSIT INSURANCE CORPORATION, in its Corporate
Capacity and in its Capacity As Receiver for Texas Investment Bank,
N.A. of Houston, Texas, Respondent.
June 1, 1994.
Petition for Review of an Order of the Federal Deposit Insurance
Corporation.
Before HIGGINBOTHAM and WIENER, Circuit Judges, KAUFMAN, District
Judge.*
KAUFMAN, District Judge.
Plaintiffs ("Hartford") are six corporate entities, each
affiliated with the ITT Hartford Insurance Group of Companies. In
February 1984, Hartford Accident & Indemnity Co., one of those six
entities, furnished a performance bond for Morchem Resources, Inc.
("Morchem") to secure a project undertaken by Morchem for Peoples
Gas System, Inc. ("Peoples"), the obligee under the bond. Morchem
contracted with Peoples to remove and to dispose of sludge from
three low pressure gas holding vessels located in North Miami
Beach, Florida. As collateral, Morchem gave Hartford a $492,000 CD
issued by Texas Investment Bank, N.A. of Houston, Texas ("TIB") in
Morchem's name. On November 15, 1985, Morchem's parent company,
*
District Judge of the District of Maryland, sitting by
designation.
1
Finultra, issued a promissory note to TIB, pledging the same
$492,000 CD as collateral for payment of the note. During oral
argument in this case, when asked by this Court about why that
November 1985 act took place, none of counsel for the parties was
able to provide any explanation.
On January 7, 1987, Hartford Accident & Indemnity Co. and
Morchem agreed to substitute six CDs in place of the single
$492,000 CD. Each of the six CDs was for $82,000, thus totaling
492,000, and each was issued separately to a different Hartford
subsidiary. Counsel for plaintiffs explained during oral argument
before us that Hartford desired the substitution because Hartford
became uneasy after Hartford was notified that Morchem was in
default on the performance bond. The insurance provided by the
Federal Deposit Insurance Company ("FDIC") for a single deposit is
limited to the amount of $100,000. Hartford apparently sought to
have provided to it total FDIC insurance coverage by causing the
substitution of the six CDs for one single CD and by having each
$82,000 CD considered separately.
On May 21, 1987, the Comptroller of the Currency declared TIB
insolvent and the FDIC on that date took over TIB in the FDIC's
capacity as receiver ("FDIC-R"). On or about May 22, 1987, River
Oaks Bank notified Plaintiffs that it was in receipt of the insured
deposits of TIB and welcomed Plaintiffs as new bank customers. On
June 24, 1987, the FDIC, in its corporate capacity ("FDIC-C"),1
1
"In its capacity as receiver, the FDIC is obligated to
marshall the assets of the failed bank for the benefit of the
bank's creditors and shareholders. In its corporate capacity,
2
informed Hartford of its determination that the six CDs issued in
Hartford's name were the property of Morchem and also that those
CDs had to be aggregated for deposit insurance purposes.
Accordingly, the FDIC concluded that $392,000 of the $492,000
represented by the CDs was uninsured and that only $100,000 was
insured. The FDIC-C paid that insured portion of the CDs, ie.,
$100,000, to River Oaks Bank, the institution which had acquired
the deposits of TIB from the FDIC-R. On July 24, 1987, the FDIC-R
retrieved the $100,000 from River Oaks Bank, and on July 29, 1987,
offset the entire $492,000 represented by the six CDs against the
debt Finultra owed TIB.2
On June 24, 1991, Plaintiffs filed suit in the district court
against the FDIC as defendant in both its receivership and
corporate capacities, seeking to recover $492,000 in deposit
insurance for the six CDs or in the amount of the value of the CDs.
On May 11, 1993, the district court severed all of plaintiffs'
the FDIC is obligated to insure the failed bank's deposits."
FDIC v. Hatmaker, 756 F.2d 34, 36 n. 2 (6th Cir.1985).
2
Although not alluded to by either party in their filings
before this Court, several documents filed in the district court
reveal that on or about September 25, 1984, the bond issued by
Hartford became the subject of one or more claims in Hartford's
bond claim department. Subsequently, Hartford and Morchem became
defendants in three lawsuits concerning the performance of
Morchem's contract with Peoples Gas Systems Inc. On September 9,
1991, after years of protracted litigation, Hartford entered into
a settlement agreement with Peoples Gas System, Inc. and others,
pursuant to which Hartford was released from all actions asserted
against it and all obligations under the performance bond issued
by it for Morchem. Hartford claimed in the court below that it
suffered financial losses in connection with the bond in excess
of $415,000. Interrogatories answered by Hartford and filed in
the court below state that Hartford paid out two claims under the
bond, totalling $139,000.
3
claims against the FDIC in its corporate capacity and transferred
them to this Court. The district court reasoned that 12 U.S.C. §
1821(f)(4), one of the sections of Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), which places
claims for deposit insurance within the exclusive jurisdiction of
the federal Courts of Appeals, applied retroactively to plaintiffs'
claims, ie., claims arising out of a receivership which commenced
before August 9, 1989, the effective date of FIRREA. Accordingly,
the district court denied the FDIC-C's motion for summary judgment
because that court held that it lacked jurisdiction as to the
insurance claim, but retained jurisdiction over non-insurance
claims alleged against the FDIC-R. During oral argument before
this Court, counsel for both sides confirmed that all claims
against the FDIC-R had been settled.
In this appeal, the issues arise whether this Court has
jurisdiction over Hartford's appeal, whether Hartford's claim
against the FDIC was timely filed, whether the FDIC-C acted
arbitrarily and capriciously in determining that the CDs belonged
to Hartford, and whether, under various equitable principles, the
FDIC's offset of the six CDs against the debt owed to TIB by
Finultra was wrongful.
I. SUBJECT MATTER JURISDICTION
In Nimon v. Resolution Trust Corp., 975 F.2d 240, 244 (5th
Cir.1992), this Court determined that 12 U.S.C. § 1821(f)(4) places
claims involving deposit insurance within the exclusive
jurisdiction of the federal Courts of Appeals. That FIRREA
4
provision provides:
Final determination made by the Corporation shall be
reviewable in accordance with the chapter 7 of Title 5 by the
United States Court of Appeals for the District of Columbia or
the court of appeals for the Federal judicial circuit where
the principal place of business of the depository institution
is located.
In the court below, Hartford argued that § 1821(f)(4), which
was enacted on August 9, 1989, did not apply retroactively to
receiverships created before that date, and thus, does not apply to
the FDIC's 1987 receivership of TIB. Rejecting that argument, the
district court transferred all of Hartford's claims against the
FDIC-C to this Court pursuant to 28 U.S.C. § 1631.3 Hartford has,
in its reply brief in this appeal, dropped its opposition to
retroactive application of § 1821(f)(4) to this case. However, in
order to clarify the basis for our subject matter jurisdiction, we
address the question of whether 12 U.S.C. § 1821(f)(4) applies
retroactively to this case and conclude that it does.
We have recently applied 12 U.S.C. § 1821(f)(4) to an
insurance coverage dispute, relating to the Federal Savings and
Loan Insurance Corporation, based on "deposits made prior to
enactment of [FIRREA]," although we did so without elaborating upon
3
That section provides as follows:
Whenever a civil action is filed in a court ... and
that court finds that there is a want of jurisdiction,
the court shall, if it is in the interest of justice,
transfer such action or appeal to any other such court
in which the action or appeal could have been brought
at the time it was filed or noticed, and the action or
appeal shall proceed as if it had been filed in or
noticed for the court to which it is transferred on the
date upon which it was actually filed in or noticed for
the court from which it is transferred.
5
the retroactivity issue. Pool v. RTC, 13 F.3d 880, 880-81 (5th
Cir.1994). The Supreme Court recently clarified the circumstances
in which a new statute which itself does not explicitly state
whether it applies to pending cases should be applied
retroactively. See Landgraf v. USI Film Products, et al., --- U.S.
----, 114 S. Ct. 1483, --- L.Ed.2d ---- (1994) (deciding whether
certain provisions of the Civil Rights Act of 1991, Pub.L. No. 102-
166, 105 Stat. 1071 (1991), should be applied retroactively to
pending cases).4 In so doing, the Supreme Court endorsed "the
traditional presumption against applying statutes affecting
substantive rights, liabilities, or duties to conduct arising
before their enactment." Id. at ----, 114 S.Ct. at 1504. That
presumption is based on "the unfairness of imposing new burdens on
persons after the fact." Id. at ----, 114 S.Ct. at 1506. However,
the Supreme Court stated that regardless of the general presumption
against statutory retroactivity, "in many situations, a court
should "apply the law in effect at the time it renders its
decision.' " Id. (citing Bradley, 416 U.S. at 711, 94 S. Ct. at
2016). Such situations generally involve procedural changes to
4
Prior to the Supreme Court's ruling in Landgraf, there were
two seemingly different presumptions concerning statutory
retroactivity. Compare Bowen v. Georgetown University Hospital,
488 U.S. 204, 208, 109 S. Ct. 468, 471-72, 102 L. Ed. 2d 493 (1988)
("[C]ongressional enactments ... will not be construed to have
retroactive effect unless their language requires this result.")
with Bradley v. School Board, 416 U.S. 696, 711, 94 S. Ct. 2006,
2016, 40 L. Ed. 2d 476 (1974) ("[A] court is to apply the law in
effect at the time it renders its decision, unless doing so would
result in manifest injustice or there is statutory direction or
legislative history to the contrary."). The opinion in Landgraf
was issued after oral argument was heard in the instant case.
6
existing law, including statutes which merely alter jurisdiction.
"We have regularly applied intervening statutes conferring or
ousting jurisdiction, whether or not jurisdiction lay when the
underlying conduct occurred or when the suit was filed." Id. ---
U.S. at ----, 114 S. Ct. at 1501. In such a circumstance,
"[a]pplication of a new jurisdictional rule usually "takes away no
substantive right but simply changes the tribunal that is to hear
the case.' " Id. (quoting Hallowell v. Commons, 239 U.S. 506, 508,
36 S. Ct. 202, 202, 60 L. Ed. 409 (1916)).
This Court has previously recognized that principle, holding
that amendments to statutes which affect procedural or remedial
rights generally apply to pending cases, where such change does not
deprive a party of its " "day in court.' " NCNB Texas Nat'l Bank
v. P & R Invs. No. 6, 962 F.2d 518, 519 (5th Cir.1992) (quoting
FDIC v. 232, Inc., 920 F.2d 815, 818-19 (11th Cir.1991)). "When
Congress adopts statutory changes while a suit is pending, the
effect of which is not to eliminate a substantive right but rather
to "change the tribunal which will hear the case,' those
changes—barring specifically expressed intent to the contrary—will
have immediate effect." Turboff v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 867 F.2d 1518, 1521 (5th Cir.1989) (quoting
Hallowell, 239 U.S. at 508, 36 S.Ct. at 202). Thus, we have
retroactively applied 12 U.S.C. § 1819(b)(2),5 permitting the FDIC
5
That section currently provides in pertinent part:
(A) In general
Except as provided in subparagraph (D), all suits of a
7
to remove cases in which it is a party to federal court, to pending
cases. See, e.g., NCNB Texas Nat'l Bank, 962 F.2d at 519; In re
Meyerland Co., 960 F.2d 512, 514 n. 2 (5th Cir.1992), cert. denied,
--- U.S. ----, 113 S. Ct. 967, 122 L. Ed. 2d 123 (1993); Walker v.
FDIC, 970 F.2d 114, 120 (5th Cir.1992); FSLIC v. Griffin, 935 F.2d
691, 695-96 (5th Cir.1991), cert. denied, --- U.S. ----, 112 S. Ct.
1163, 117 L. Ed. 2d 410 (1992); Triland Holdings & Co. v. Sunbelt
Service Corp., 884 F.2d 205 (5th Cir.1989); see also FDIC v.
Belli, 981 F.2d 838, 842-43 (5th Cir.1993) (applying 12 U.S.C. §
1821(d)(14),6 extending the statute of limitations for contractual
civil nature at common law or in equity to which the
Corporation, in any capacity, is a party shall be
deemed to arise under the laws of the United States.
(B) Removal
Except as provided in subparagraph (D), the Corporation
may, without bond or security, remove any such action,
suit, or proceeding from a state court to the
appropriate United States district court before the end
of the 90-day period beginning on the date the action,
suit, or proceeding is filed against the Corporation or
the Corporation is substituted as a party.
6
That section provides in pertinent part:
(14) Statute of limitations for actions brought by
conservator or receiver
(A) In general
Notwithstanding any provision of any contract, the
applicable statute of limitations with regard to any
action brought by the Corporation as conservator or
receiver shall be—
(i) in the case of any contract claim, the longer of—
(I) the 6-year period beginning on the date the claim
accrues; or
8
claims held by the FDIC, retroactively to pending cases, except
where so to do would revive an expired claim). Section 1821(f)(4)
changes the forum which hears deposit insurance disputes; it does
not alter any substantive rights of the parties nor does it deprive
any party of its day in court. Thus, we hold that 28 U.S.C. §
1821(f)(4) applies retroactively to govern this case and that this
Court has jurisdiction in this appeal.
II. LIMITATIONS
The FDIC argues that Hartford did not timely petition for
review of the FDIC's deposit insurance determination. In so doing,
the FDIC relies on 12 U.S.C. § 1821(f)(5), which states: "Any
request for review of a final determination by the Corporation
shall be filed with the appropriate circuit court of appeals not
later than 60 days after such determination is ordered." The FDIC
argues that the 60-day time limit began to run in this case on the
effective date of FIRREA, August 9, 1989. Because Hartford did not
file this suit until June 24, 1991, the FDIC contends that such
filing is untimely. Further, the FDIC asserts that applying §
(II) the period applicable under State law
....
(B) Determination of the date on which a claim accrues
For purposes of subparagraph (A), the date on which the
statute of limitation begins to run on any claim
described in such subparagraph shall be the later of—
(i) the date of the appointment of the Corporation as
conservator or receiver; or
(ii) the date on which the cause of action accrues.
9
1821(f)(5) to Hartford retroactively is mandated under the
aforementioned Fifth Circuit caselaw which generally permits
procedural statutory amendments to be applied to pending cases. We
do not agree with either of those two positions.7
The FDIC's assertion that retroactive application of §
1821(f)(5) is in accord with this Court's prior caselaw fails to
7
In the court below, the FDIC-C argued that 12 U.S.C. §
1822(e) (1982) served as a statute of limitations barring
plaintiff's suit. That provision states:
Unclaimed Deposits
If, after the Corporation shall have given at least
three months' notice to the depositor by mailing a copy
thereof to his last-known address appearing on the
records of the closed bank, any depositor in the closed
bank shall fail to claim his insured deposit from the
Corporation within eighteen months after the
appointment of the receiver for the closed bank, or
shall fail within such period to claim or arrange to
continue the transferred deposit with the new bank or
with the other insured bank which assumes liability
therefor, all rights of the depositor against the
Corporation with respect to the insured deposit, and
against the new bank and such other insured bank with
respect to the transferred deposit, shall be barred,
and all rights of the depositor against the closed bank
and its shareholders, or the receivership estate to
which the Corporation may have become subrogated, shall
thereupon revert to the depositor. The amount of any
transferred deposits not claimed within such eighteen
months' period, shall be refunded to the Corporation.
The FDIC-C abandoned that argument before this Court. That
abandonment would appear correct. A revised, but similar
section, still governs disposition of unclaimed deposits.
12 U.S.C.A. § 1822(e) (West Supp.1994). The co-existence of
§ 1822(e) and § 1821(f)(5) under current law indicates that
§ 1822(e) was not meant to govern the within situation, ie.,
a dispute over insurance coverage where the FDIC-C is
asserting that Hartford is not the actual depositor and
where the FDIC-C did not inform Hartford that it must claim
its deposits, but rather informed Hartford that it owned no
insured deposits at all.
10
recognize that in the cases cited above, we approved retroactive
application of procedural statutory changes where those changes did
not deprive a litigant of its day in court, but rather changed the
forum in which the claim was to be heard or extended a statute of
limitations. In such instances, the substantive rights of the
parties were not affected.8 In contrast, retroactive application
of § 1821(f)(5) in this case would extinguish claims which were
valid before the statute's effective date and deprive Hartford of
a forum, even though it acted properly under law existing at the
time its claims arose. "[T]he mere fact that a new rule is
procedural does not mean that it applies to every pending case."
Landgraf, --- U.S. at ----, 114 S. Ct. at 1502 n. 29.
The FDIC recognizes that applying the 60-day limitations
period from the date of the final determination is patently unfair
because there is simply no way Hartford could have foreseen, on
June 24, 1987, that a 60-day limitation would someday come into
effect. Thus, the FDIC proposes that we begin running the
limitations period from the date of FIRREA's enactment. While such
an approach may not be unconstitutional, see Fust v. Arnar-Stone
8
In Belli, we stated that we would not revive a stale claim
even where a statute of limitations had been extended. The
situation presented by this case is the flip side of that
principle, ie., we will not "kill" a viable claim where the
applicable statute of limitations is shortened. Contrary to the
government's assertion, there is a difference between applying an
extended statute of limitations where no substantive rights are
affected and applying a shortened statute of limitations where so
to do wipes out a substantive right.
11
Laboratories, Inc., 736 F.2d 1098 (5th Cir.1984),9 it would be
manifestly unjust, and therefore in contravention of Bradley v.
School Board, 416 U.S. 696, 94 S. Ct. 2006, 40 L. Ed. 2d 476 (1974),
because it would "infringe upon or deprive a person of a right that
had matured," and would impose "unanticipated obligations ... upon
a party without notice or an opportunity to be heard." Id. at 720,
94 S.Ct. at 2021. See also Landgraf, --- U.S. at ----, 114 S. Ct.
at 1497 ("Elementary considerations of fairness dictate that
individuals should have an opportunity to know what the law is and
to conform their conduct accordingly; settled expectations should
not be lightly disrupted."). In this case, the FDIC's proposed
limitations period would deprive Hartford of a forum without giving
Hartford adequate notice to protect its otherwise valid rights. In
hindsight, it may appear that Hartford should have moved quickly
upon enactment of FIRREA and the inclusion in it of the 60-day
limitations period. However, such hindsight fails to take into
account the situation which reigned in retroactivity law prior to
the Supreme Court's ruling in Landgraf. Further, given this
Court's approval of retroactively applying procedural, as opposed
to substantive, statutory changes, and the substantive aspect of
the statutory change in this case, Hartford could reasonably have
believed that the 60-day limitations period did not apply to it.
9
" "[A] newly-created statute of limitation or one which
shortens existing periods of limitation will not violate the
constitutional prohibition against divesting a vested right
provided it allows a reasonable time for those affected by the
act to assert their rights.' " Id. at 1100 (quoting Lott v.
Haley, 370 So. 2d 521, 524 (La.1979)).
12
Finally, we note that the date of the "final determination" in this
case is in dispute. The FDIC states that its final determination
was made in the June 24, 1987, letter to Hartford.10 However,
Hartford correctly notes that final determinations may occur after
the FDIC's initial determination and after several written
exchanges between the FDIC and the alleged depositor concerning
ownership of the deposit. See Kershaw, 987 F.2d at 1208; Nimon,
975 F.2d at 244. In this case, the FDIC never responded to
Hartford's inquiries and requests for further information, despite
the FDIC's direction to Hartford to submit any questions to the
FDIC. The FDIC seemingly desires to convert a determination into
a "final" determination simply by ignoring the inquiries of alleged
depositors. Hartford concedes that prior to its institution of the
within case, there has been a "de facto" final determination by the
FDIC, and we agree. Nonetheless, even if the 60-day limitation
period had been in effect in 1987, it is not clear, under the facts
of this case, whether the limitations period would have begun
10
That letter stated, "In examining the bank records it has
been determined that the [six] certificates belong to Morchem
Resources" After listing the six CD numbers and each CD's value
at $82,000, the FDIC stated:
In February 1987, the six (6) referenced documents were
transferred into the name of six different Hartford
companies. However, the six certificates continue to
secure a loan in the name of Finultra, A.G. which is
associated with Morchem Resources, Inc. Therefore,
determination has been made to aggregate these deposits
and an uninsured excess deposit exists for $392,000.
Should there be any questions, please contact the
undersigned.
(Emphasis added.)
13
running on June 24, 1987, the date of the letter from the FDIC to
Hartford or on a later date. In any event, for the reasons set
forth supra, we decline to apply the 60-day limitations period
retroactively to govern Hartford's claims.
At the time of the alleged final determination in this case,
there was no federal statute or regulation specifically governing
the limitations period for insurance coverage disputes. As to
general limitations provisions, Hartford's within filing was timely
under either the general federal six year statute of limitations
contained in 28 U.S.C. § 2401,11 or Texas' four year statute of
limitations contained in Tex.Civ.Prac. & Rem.Code §§ 16.004(c),
16.051.12 The FDIC does not dispute the applicability of one or
both of those limitations periods. Because Hartford filed timely
11
That section provides in pertinent part:
[E]very civil action commenced against the United
States shall be barred unless the complaint is filed
within six years after the right of action first
accrues.
12
Section 16.004(c) states:
A person must bring suit against his partner for a
settlement of partnership accounts, and must bring an
action on an open or stated account, or on a mutual and
current account concerning the trade of merchandise
between merchants or their agents or factors, not later
than four years after the day that the cause of action
accrues. For purposes of this subsection, the cause of
action accrues on the day that the dealings in which
the parties were interested together cease.
Section 16.051 states:
Every action for which there is no express limitations
period, except an action for the recovery of real
property, must be brought not later than four years
after the day the cause of action accrues.
14
under each and all of those provisions, and because we conclude
that § 1821(f)(5) does not bar Hartford's claims, we need not
determine which of the federal or state limitations periods applies
in pre-FIRREA insurance coverage dispute cases such as this one.
Rather, we simply hold that Hartford's challenge to the FDIC's
insurance determination is not time-barred.
III. INSURANCE COVERAGE DISPUTE
We review insurance coverage determinations by the FDIC-C
under the Administrative Procedure Act ("APA") and must affirm them
unless they are " "found to be arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with the law.' "
Kershaw v. RTC, 987 F.2d 1206, 1208 (5th Cir.1993) (quoting Nimon,
975 F.2d at 244). Hartford, as the appellant, bears the burden of
proving that the FDIC's determination was arbitrary and capricious.
Mississippi Hospital Ass'n v. Heckler, 701 F.2d 511, 516 (5th
Cir.1983). In performing our duties of review under the APA, we
accord deference to an administrative agency's interpretation of
its own regulations. Kershaw, 987 F.2d 1206.
At the time the FDIC-C made the determination at issue in
this case, the relevant pre-FIRREA statute defined "insured
deposit" as "the net amount due to any depositor ... for deposits
in an insured bank" up to $100,000. 12 U.S.C. § 1813(m)(1) (1982).
That statute further provides: "[I]n determining the amount due to
any depositor there shall be added together all deposits in the
bank maintained in the same capacity and the same right for his
15
benefit either in his own name or in the names of others."13 Id.
Under the regulations issued by the FDIC "[f]or the purpose of
clarifying and defining the insurance coverage under" the statute,
id., the FDIC determines the actual owner of a deposit account by
examining the deposit account records.
The deposit account records of the insured bank shall be
conclusive as to the existence of any relationship pursuant to
which the funds in the account are deposited and on which a
claim for insurance coverage is founded. Examples would be
trustee, agent, custodian or executor. No claim for insurance
based on such a relationship will be recognized in the absence
of such disclosure.
Funds owned by a principal and deposited in one or more
deposit accounts in the name or names of agents or nominees
shall be added to any individual deposit accounts of the
principal and insured up to $100,000 in the aggregate.
12 C.F.R. § 330.1(b); 330.2(b) (1987).
In this case, the FDIC-C determined that Morchem was the
actual owner of the funds despite the fact that each of the six CDs
bears the name of a different Hartford company. The FDIC
considered those Hartford companies as holding the funds
represented by the CDs in some form of custodial or agency
capacity.14 The FDIC relied primarily on the original Collateral
13
We review insurance coverage determinations under the law
in effect at the time the FDIC was appointed receiver. See
Kershaw, 987 F.2d at 1209 n. 1 (citing Spawn v. Western Bank-
Westheimer, 925 F.2d 885, 887 n. 1 (5th Cir.1991)). Accordingly,
we apply the pre-FIRREA statutes and regulations in this part of
the opinion.
14
Because the FDIC-C's June 24, 1987, determination letter
contained only a conclusory two-paragraph finding, we take the
FDIC-C's explanations for certain of its actions from the briefs
the FDIC has filed in this case. In Abrams v. FDIC, the Second
Circuit decided that a "cursory two-page letter" from the FDIC to
an alleged depositor concluding that deposit accounts would not
be insured was "wholly inadequate, and provides very little, if
16
Agreement, in which the single CD was pledged to secure the
performance bond provided by Hartford. That agreement states that
Morchem is the "Depositor," that Hartford, the "Surety," is only
entitled to the collateral to the extent there is a loss on the
bond, and that Hartford may foreclose on the bond to realize the
value of the security. The FDIC determined further that no change
in Morchem's status as the actual depositor occurred when the
single CD was replaced with six CDs. That substitution agreement
confirmed that the CDs were to be "held by the named Companies as
security for the performance of the undertakings in the ...
Collateral Agreement" and "shall be deemed the collateral
substituted for the" single $492,000 CD.15 Under a standard surety
any, basis upon which to conduct a meaningful review [of] the
agency's determination." 938 F.2d 22, 25 (2nd Cir.1991). The
Second Circuit remanded the case back to the FDIC for a fully
written explanation of its actions. This case also unfortunately
presents the problem of a "perfunctory analysis" by the FDIC.
Id. However, because any remand would likely only result in the
same explanation that the FDIC has proffered in the district
court and in this court, we will accept the FDIC's explanations
as presented in its brief.
15
The FDIC's determination is in accord with the general
common law principles governing ownership of collateral.
Ordinarily the general property or title in the
thing pledged remains in the pledgor, subject to a lien
in favor of the pledgee for the amount of the debt or
obligation for which the pledge is given. This rule
applies notwithstanding an apparent transfer of legal
title to the pledgee. This general property or title
in the pledgor continues until there has been a sale or
foreclosure under the contract of pledge.
Ordinarily, a pledgee of personal property does
not acquire the legal title thereto.... As a general
rule, sometimes affirmed by statute, the pledgee has
merely a special property or interest in the thing
pledged during the continuance of the pledge, which
17
agreement such as this one, a surety such as Hartford gains rights
to foreclose upon pledged collateral only if the obligor defaults
on the bond and the surety correspondingly suffers a loss. In such
a situation, the surety could have a claim to the FDIC's insurance
coverage of the CDs through its rights with respect to those CDs as
collateral. However, while the record does indicate that Hartford
has paid claims under the bond, Hartford, in this appeal, has not
relied on such loss.16 Rather, in this appeal, Hartford has
emphasized that it owns the CDs because its name is on them.17
vests in the pledgee the right to the property as far
as is necessary to secure payment of the debt. In any
event, the pledgee acquires only such interest as to
allow him security for his debt or obligation.
72 C.J.S. Pledges § 21 (footnotes omitted). See also
Congress Talcott Corp. v. Gruber, 993 F.2d 315, 319-20 (3rd
Cir.1993); Major Appliance Co. v. Gibson Refrigerator Sales
Corp., 254 F.2d 497, 502 (5th Cir.1958).
16
Even if Hartford desired to emphasize, in this appeal, the
payment of such claims, the latter would appear to relate to
issues involving the FDIC-R which are not before this Court and
have been settled in the district court, see infra, and not to
any issues concerning insurance coverage and the FDIC-C. The
record in this case is hardly a model of clarity. Accordingly,
there may be contentions which Hartford could make in this appeal
respecting insurance which would aid it. But Hartford had ample
opportunities to proffer facts to, and to make legal contentions
before, this Court. Thus, Hartford has been afforded its full
day in court, regardless of whether or not there was any lack of
appropriate procedure at the administrative level before the
FDIC-R.
17
Hartford claims that on the same day the Collateral
Agreement was signed, Morchem assigned the single $492,000 CD to
Hartford, making Hartford the owner of the CD. Hartford states
that the assignment document was in the bank records, while the
FDIC asserts the document was not in the records and that
therefore the doctrine enunciated in D'Oench Duhme & Co. v. FDIC,
315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942), precludes this
Court from considering the assignment. Hartford responds that
the D'Oench, Duhme doctrine is limited to agreements to which the
18
The FDIC-C, before making the determination of ownership,
apparently did not discover that there were in fact defaults by
Morchem; however, such failure by the FDIC-C does not add up to
arbitrary or capricious conduct on its part, given that nothing in
the bank records indicates that such loss had occurred. At the
time of the agency's determination of ownership, there was no
regulation defining "deposit account records." In Abdulla Fouad &
Sons v. FDIC, 898 F.2d 482, 486 (5th Cir.1990), we rejected
appellant's claim that the FDIC should have examined records other
than those contained in the deposit account records to determine
depositor status. We explained that the FDIC was not required to
undertake such examinations because the FDIC was empowered and
expected by Congress " "to make available to the public its insured
savings as speedily as possible.' " Id. at 485 (quoting Scott,
Some Answers to Account Insurance Problems, The Business Lawyer
493, 504 (Jan.1968)). Because the FDIC "must literally make
determinations of deposit insurance coverage overnight," the FDIC
is not called upon to use its limited resources to investigate
possible ownership rights outside of those indicated in the deposit
account records themselves. Id. Thus, the FDIC did not need to go
beyond the bank file concerning the CDs to determine who had
bank is a party, unlike the assignment at issue in this case, to
which the vice president of the bank was merely a witness. We
find it unnecessary to resolve the factual dispute, concerning
whether the assignment document was in the bank records, or to
reach the D'Oench, Duhme coverage issue, because we conclude that
all parts of the record in this case, including the assignment
document, support the FDIC's determination that the CDs were
posted as collateral.
19
ownership interests in the CDs.
Nor in this case did the FDIC look at too many records before
making its determination as to ownership. Hartford claims that the
only records relating to the "deposit account" are the CDs
themselves and TIB's computer listing of open customer accounts.
But, even if some of those documents related to matters other than
"deposit accounts," they clearly related to ownership of the CDs
since they pertain to the question of who had a right with respect
to those CDs and under what circumstances.18 Thus, the FDIC did not
act arbitrarily or capriciously in determining that Morchem owned
the CDs and that the CDs should be aggregated.
IV. OFFSET CLAIMS
Hartford argues that the FDIC's offset of the six CDs against
the debt owed TIB by Finultra was wrongful and asks this Court to
impose a constructive trust or to grant some similar type of
equitable relief. However, Hartford's equitable claims are based
on actions taken by the FDIC-R, not the FDIC-C.19 Since the FDIC-
18
Hartford's interpretation of deposit records would unduly
limit the FDIC to the most superficial evaluation in this type of
case. For instance, the computer records on which Hartford would
have the FDIC rely are printouts of the names of accountholders,
which list only "short names" and have no space to disclose trust
or surety arrangements. Similarly, the CDs themselves state that
interest is to be awarded to the Hartford companies, while the
other documents, as well as actual practice, reveal that Morchem
received all interest on the CDs.
19
Hartford concedes that its equitable claims all arise out
of the FDIC's admittedly wrongful offset and that the equitable
claims do not involve the insurance coverage dispute. However,
Hartford claims that it does not know which "hat" the FDIC was
wearing when it made the wrongful offset. But before the
district court, Hartford in its own proposed pre-trial order,
stated that "[o]n July 24, 1987, FDIC-R retrieved the $100,000
20
R has been dismissed in this case pursuant to a settlement
agreement in the district court, and because this appeal relates
only to Hartford's insurance claims, the offset claims are not
open. Under the dual capacities doctrine, the FDIC-C may not be
held liable for acts committed by the FDIC-R, ie., the FDIC acting
in one capacity is not subject to defenses or claims based on its
acts in other capacities. See Texas American Bancshares, Inc. v.
Clarke, 954 F.2d 329, 335 (5th Cir.1992).
For the reasons set forth in this opinion, Hartford's petition
for review is DENIED.
from River Oaks Bank, and on July 28, 1987, setoff the entire
$492,000 represented by the six CDs against debt owed by
Finultra, A.G." (Emphasis added.) From the inception of this
case, the parties have proceeded under the understanding that the
FDIC was being sued in both capacities, that the FDIC-C was
responsible for the insurance coverage, and that the FDIC-R was
responsible for other matters including offset. Hartford points
to no evidence that the FDIC-C had a hand in the offset. Rather,
exhibit documents from the FDIC's file concerning the offset are
from the FDIC's liquidation office, revealing that the FDIC was
acting in its receivership capacity, because only the FDIC-R has
the statutory authority to "place the insured depository
institution in liquidation." 12 U.S.C. § 1821(d)(2)(E).
21