26 F.3d 370 (2nd Cir. 1994), 1252, IBJ Schroder Bank & Trust Co. v. Resolution Trust Corp.
|Docket Nº:||1252, Docket 93-7858.|
|Citation:||26 F.3d 370|
|Party Name:||IBJ SCHRODER BANK & TRUST COMPANY, as Trustee, Plaintiff-Appellee, Employees' Retirement System of Alabama, Plaintiff-Intervenor-Appellee, v. RESOLUTION TRUST CORPORATION, as Conservator for Franklin Savings Association, Defendant-Appellant.|
|Case Date:||June 15, 1994|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Feb. 22, 1994.
Michael A. Cooper, New York City (Theodore Edelman, Diane D'Arcangelo, Scott L. Lessing, Sullivan & Cromwell, Elinor R. Hoffmann, Carolyn T. Ellis, Coudert Brothers, of counsel), for plaintiff-appellee.
Mitchell A. Karlan, New York City (Robert F. Serio, Colleen D. Duffy, W. James Hall, Gibson, Dunn & Crutcher, of counsel), for plaintiff-intervenor-appellee.
Glen H. Kanwit, Chicago, IL (David B. Goroff, John P. Ratnaswamy, Claudette P. Miller, Hopkins & Sutter, Chicago, IL, Jonathan W. Miller, Robin D. Adelstein, Jennifer L. Jones, Dewey Ballantine, New York City, of counsel), for defendant-appellant.
Before: NEWMAN, Chief Judge, VAN GRAAFEILAND, Circuit Judge, and LASKER, District Judge. [*]
VAN GRAAFEILAND, Circuit Judge:
Resolution Trust Corporation ("RTC"), as conservator for Franklin Savings Association, appeals from a judgment of the United States District Court for the Southern District of New York (Leval, J.) holding RTC's purported repudiation of an indenture and the bonds issued thereunder to be unauthorized, void and of no effect. See 803 F.Supp. 878. RTC also appeals from the district court's order denying post-judgment relief pursuant to Rules 60(b)(6), 52(b), and 59 of the Federal Rules of Civil Procedure. Because we conclude that RTC's repudiation was effective, we reverse the district court's judgment and remand for further proceedings.
On December 12, 1984, Franklin, a federally-insured stock savings and loan association, issued a series of zero coupon bonds with an aggregate face value of $2.9 billion, pursuant to an Indenture between Franklin and IBJ Schroder Bank & Trust Company as Trustee for the bondholders. The bonds were issued in three tranches with terms respectively of 30, 35 and 40 years. As provided in the Indenture, Franklin furnished the Trustee with collateral to secure payment of the bonds at maturity. The collateral, termed "Eligible Collateral," consisted of cash and certificates issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Government National Mortgage Association. The Indenture provided that, in an "Event of Default," the Trustee was to liquidate the Eligible Collateral and purchase U.S. Treasury securities and other similar government obligations, i.e., Eligible Zero Coupon Securities, in an amount sufficient to pay the principal amount of the outstanding bonds at their respective maturities. The Indenture provided further that the appointment of a conservator for Franklin would be an "Event of Default."
RTC, a wholly-owned government corporation, was created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183, 369, "to manage and dispose of the assets acquired from failed thrifts." H.R.Rep. No. 54(I), 101st Cong., 1st Sess. 308 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 104. A primary function of RTC is to act as the conservator or receiver for failed thrift institutions, operating "in a manner which ... maximizes the net present value return from the sale or other disposition" of assets under its control. 12 U.S.C. Sec. 1441a(b)(3)(C)(i). To assist RTC in its role, Congress has conferred on it certain extraordinary powers, including the right to repudiate contracts of the controlled institution that it determines to be burdensome, and whose repudiation would promote the institution's orderly administration. See 12 U.S.C. Secs. 1441a(b)(4)(A), 1821(e)(1).
On February 16, 1990, the Office of Thrift Supervision ("OTS") appointed RTC as conservator for Franklin. Acting pursuant to authority granted it by the Indenture, section 1102(c), and by statute, 12 U.S.C. Sec. 1821(e)(12), RTC instructed the Trustee not to pursue the Event-of-Default remedies available to it under the Indenture, and the Trustee refrained from so doing.
In the weeks that followed, representatives of RTC and the Trustee attempted to resolve some of the issues involving their respective rights, and on March 6, 1990...
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