Gibson v. Resolution Trust Corp.
| Decision Date | 10 May 1995 |
| Docket Number | 91-5408,Nos. 91-5035,s. 91-5035 |
| Citation | 51 F.3d 1016 |
| Parties | 26 UCC Rep.Serv.2d 547 Thelma V.A. GIBSON, Catherine H. Fahringer, F. Lee Bailey, Richard E. Gerstein, Edward A. Carhart, Paul M. Rashkind, Ronald C. Dresnick, Bonnie Rippingille, d/b/a Bailey, Gerstein, Carhart, Rashkind, Dresnick & Rippingille, P.A., Plaintiffs-Counterdefendants, Crossclaim Defendants-Appellants, David L. Paul, Intervenor-Appellant, v. RESOLUTION TRUST CORPORATION, as Receiver, A United States Agent and Instrumentality, Defendant-Counterplaintiff, Crossclaim Plaintiff-Appellee, Centrust Bank, a Florida State Savings Bank, Citibank, N.A., a National Association, Centrust Federal Savings Bank, a Federal Savings Bank, Defendants. Thelma V.A. GIBSON, Catherine H. Fahringer, F. Lee Bailey, Richard E. Gerstein, Edward A. Carhart, Paul M. Rashkind, Ronald C. Dresnick, Bonnie Rippingille, d/b/a Bailey, Gerstein, Carhart, Rashkind, Dresnick & Rippingille, P.A., Plaintiffs-Counterdefendants, Crossclaim Defendants-Appellants, David L. Paul, Intervenor, v. RESOLUTION TRUST CORPORATION, as Receiver, A United States Agent and Instrumentality, Defendant-Counterplaintiff, Crossclaim Plaintiff-Appellee, Centrust Bank, a Florida State Savings Bank, Citibank, N.A., a National Association, Centrust Federal Savings Bank, a Federal Savings Bank, Defendants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Candace J. Fabri, Sachnoff & Weaver, Ltd., Chicago, IL, for Resolution Trust in both cases.
Jeanette E. Roach, F.D.I.C., Washington, DC, for Resolution Trust Corp. in No. 91-5035.
Jose I. Astigarraga, Steel, Hector & Davis, Miami, FL, for Citibank, N.A.
Alan G. Greer, Floyd, Pearson, Richman, Greer, Weil, Brumbaugh & Russomanno, P.A., Miami, FL, for Gibson.
David L. Paul, Bal Habour, FL, pro se in both cases.
Appeals from the United States District Court for the Southern District of Florida.
Before CARNES, Circuit Judge, and DYER and GUY *, Senior Circuit Judges.
On appeal, plaintiffs ask this court to reverse the district court's grant of summary judgment in favor of defendants Resolution Trust Corporation ("RTC"), CenTrust Bank ("CenTrust"), CenTrust Federal Savings Bank and Citibank. 1 In granting summary judgment, the court determined that RTC, as conservator of CenTrust, properly repudiated a contract in which CenTrust was a party. We determine that summary judgment was appropriately granted, and therefore we affirm.
On February 2, 1990, the RTC was appointed conservator of CenTrust. As part of his duties, Kurt Wierschem, RTC's managing agent for CenTrust, reviewed a contract between the law firm of Bailey Gerstein Carhart Rashkind Dresnick & Rippingille (the "Law Firm" or "Counsel") and CenTrust. Under the contract between the Law Firm and CenTrust (the Contract or Agreement), 2 entitled "CenTrust Savings Bank Directors and Officers Indemnity Agreement," CenTrust had deposited over $11 million in assets in an account to be used for indemnification purposes to fund legal fees and any damage awards resulting from claims made against its officers or directors (who are referred to in the Agreement as "Agents"). 3 Section 2(a) of the Agreement. The fund was held for the "sole benefit of the Bank [CenTrust] and the Agents." 4 CenTrust retained power over investment decisions of the assets comprising the fund. It was free to remove all monies in the fund unless it had been notified of a claim against its Agents; thereafter, withdrawals required a two-thirds approval by the Agents.
Under the Agreement, the Law Firm was authorized to provide legal representation to CenTrust's officers and directors if claims were made. The Law Firm was to bill CenTrust for the legal services on a monthly basis. If CenTrust failed to pay any statement within 75 days following receipt of the statement, the Law Firm could charge against the fund for the amount owed. The Law Firm also agreed to oversee the fund which was kept at Citibank in a trust account entitled "CenTrust Savings & Loan Association of Miami, Bailey, Gerstein, Carhart, Rashkind, Dresnick & Rippingille Tr. A/C for the Benefit of CenTrust Bk Tr Agents Under/Agree 4/07/89."
Two days after RTC became conservator, Wierschem notified the Law Firm that the RTC had determined the contract was burdensome and the RTC was repudiating the Contract pursuant to RTC's authority under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). He further requested that the Law Firm return the assets contained in the fund. 5
Plaintiffs brought this action seeking declaratory and injunctive relief under the Agreement. Defendant RTC filed a counterclaim against plaintiffs and a cross-claim against Citibank. In count 1 of that counterclaim and cross-claim, RTC sought a declaration that it had properly repudiated the Contract. RTC further requested the court to direct the counter-defendants and Citibank to return the fund assets to the RTC. The parties filed cross-motions for summary judgment on plaintiffs' claims and on count 1 of RTC's counterclaim and cross-claim. The district court found against plaintiffs on their claims and in favor of the RTC on count 1 of its counterclaim and cross-claim. See Gibson v. RTC, 750 F.Supp. 1565 (S.D.Fla.1990). The court declared that the RTC's repudiation was proper, that the assets contained in the Citibank account belonged to the RTC, and directed Citibank to follow the RTC's instructions as to disposition of the assets in the account. Plaintiffs now appeal.
We review a district court's grant of summary judgment under a de novo standard of review. E.g., Zipperer v. City of Fort Myers, 41 F.3d 619, 622 (11th Cir.1995). Pursuant to Fed.R.Civ.P. 56(c), summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). In this case, plaintiffs and RTC have both moved for summary judgment, claiming that no material facts are disputed.
Congress enacted FIRREA in 1989 in response to the growing crisis in the nation's banking and savings and loan industries. The statute authorizes appointment of a federally-created entity, in this case, the RTC, as conservator or receiver of a failing or failed insured institution. The law provides the RTC with broad powers in its roles as conservator and receiver. Among those powers is the power to take over assets and operate the insured depositary institution, collect obligations and money due the institution, perform the functions of the institution consistent with its appointment as receiver or conservator, and preserve and conserve assets and property of the institution. See 12 U.S.C. Sec. 1821(d)(2)(B). Once an institution has been placed in receivership, the RTC has the power to "place the insured depository institution in liquidation and proceed to realize upon the assets of the institution." See 12 U.S.C. Sec. 1821(d)(2)(E); see also In re Landmark Land Co. of Oklahoma, Inc., 973 F.2d 283, 288 (4th Cir.1992) ().
Under FIRREA, to help RTC achieve its mandate of maximizing recovery on thrift assets, Congress has empowered the RTC to "disaffirm or repudiate any contract" the performance of which is "burdensome" and which disaffirmance or repudiation promotes the "orderly administration of the institution's affairs." 12 U.S.C. Sec. 1821(e)(1). Upon repudiation of an agreement, a claimant is entitled to actual direct compensatory damages. 12 U.S.C. Sec. 1821(e)(3)(A). Damages for lost profits or opportunity are not recoverable. See id. at Sec. 1821(d)(3)(B)(ii).
In this case, the managing agent determined that CenTrust's obligation to pay future legal expenses that might be incurred in defending its officers and directors would be burdensome for CenTrust now that it was in receivership. The determination of the burdensomeness of a contract is committed to the discretion of the RTC. 12 U.S.C. Sec. 1821(e). See, e.g., 1185 Ave. of the Americas Assocs. v. RTC, 22 F.3d 494, 498 (2d Cir.1994) (). Plaintiffs argue that, because the officers and directors have performed their services to CenTrust, CenTrust remains obligated under the Agreement.
Continuing to argue that the RTC's repudiation of the contract was improper, plaintiffs raise six issues on appeal: (1) the Fund is not the property of CenTrust but rather that of the officers and directors as the Agreement constituted an escrow or guaranty agreement; (2) the RTC is barred under FIRREA from recovering the assets in the fund because the officers and directors have a perfected security interest in the fund; (3) the Agreement is not an executory contract, and therefore FIRREA's repudiation provision does not apply; (4) the RTC is barred under the doctrine of promissory estoppel from repudiation; (5) the Takings and Due Process Clauses of the Fifth Amendment prohibit repudiation since plaintiffs have a vested right in the fund; and (6) the RTC could not act because it was named conservator by an unconstitutionally appointed director. We address these arguments in turn.
Plaintiffs claim that the fund was the property of the officers and directors as the Agreement constituted an escrow or guaranty agreement. 6 Under Florida law, an escrow is established by "an instrument embodying conditions mutually beneficial to both parties ... and it must be communicated to and deposited with a third party." Aberbach v. Wekiva Assocs., 735 F.Supp. 1032, 1035 (S.D.Fla.1990) (quoting Smith v. Macbeth, 119 Fla. 796, 161 So. 721, 724 (1935)). The third party must not itself be...
To continue reading
Request your trial