Bank One, Tex., NA v. Prudential Ins. Co. of Am., Civil Action No. 3:92-CV-0535-D.

• Decision Date: 26 September 1996
• Docket Number: Civil Action No. 3:92-CV-0535-D.
• Parties: BANK ONE, TEXAS, N.A., Plaintiff-Counterdefendant, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA and Texas Commerce Bank, N.A., Defendants-Counter-plaintiffs-Third-Party Plaintiffs-Third-Party Counterdefendants, and Federal Deposit Insurance Corporation and Capital Associates International, Inc., Third-Party Defendants-Third-Party Counterplaintiffs.
• Court: U.S. District Court — Northern District of Texas

939 F. Supp. 533

BANK ONE, TEXAS, N.A., Plaintiff-Counterdefendant, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA and Texas Commerce Bank, N.A., Defendants-Counter-plaintiffs-Third-Party Plaintiffs-Third-Party Counterdefendants, and Federal Deposit Insurance Corporation and Capital Associates International, Inc., Third-Party Defendants-Third-Party Counterplaintiffs.

Civil Action No. 3:92-CV-0535-D.

United States District Court, N.D. Texas, Dallas Division.

September 26, 1996.

COPYRIGHT MATERIAL OMITTED

Michael P. Lynn (argued), Steven H. Stodghill, and Eve L. Pouliot of Lynn, Stodghill, Melsheimer & Tillotson L.L.P., Dallas, TX, for plaintiff-counterdefendant Bank One, Texas, N.A.

Dennis S. Klein (argued), Robert B. Funkhouser, and M. Kathleen O'Connor of Hughes Hubbard & Reed, Washington, DC, and Paul C. Wolf and Frederic A. Ortiz, Federal Deposit Insurance Corp., Dallas, TX, for third-party defendant-third-party counterplaintiff Federal Deposit Insurance Corporation.

FITZWATER, District Judge:

In this corollary opinion to Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F.Supp. 943 (N.D.Tex.1995), the court addresses claims between plaintiff-counterdefendant Bank One, Texas, N.A. ("Bank One") and third-party-defendant-third-party counterplaintiff Federal Deposit Insurance Corporation ("FDIC") concerning ownership of, and rent obligations pertaining to, the furniture, fixtures, and equipment ("FF & E") at issue. The court holds that Bank One is liable as a tenant at will, beginning March 29, 1989, for the reasonable rental value of the FF & E, in an amount to be determined at trial.

I

The background facts and procedural history of this case are set out in Bank One, id. at 947-50. The court repeats them only to the extent necessary to understand today's decision, adding relevant subsequent events that bear upon the questions the court now decides.

MBank-Dallas, N.A. ("MBank") entered into a sale-leaseback transaction with Capital Associates International, Inc. ("Capital"). MBank sold the FF & E to Capital. Capital simultaneously leased the FF & E back to MBank and its parent, MCorp, pursuant to a collateralized equipment lease. The parties secured MBank's performance of the payment of rent and other obligations by means of a Security, Collateral Maintenance and Pledge Agreement. This agreement obligated MBank to pledge certain collateral (the "MCar Proceeds") (the "MCar Assets"). Id. at 947.

In order to finance its purchase of the FF & E, Capital obtained a loan from The Prudential Insurance Company of America ("Prudential"). Texas Commerce Bank, N.A. ("TCB") also participated in the transaction as an indenture trustee. As part of the financing transaction, MBank and Capital entered into a First Amendment to the equipment lease (the "Lease"). Id. at 948.

Section 17(h) of the Lease provided that an act or declaration of insolvency constituted an event of default. Section 18 of the Lease afforded Capital various remedies in the event of default. Id. Section 18(e) contained a clause (the "Ipso Facto Clause") that provided that upon an act or declaration of insolvency, (1) the Lease automatically terminated; (2) MBank immediately and unconditionally became obligated to pay all unpaid rent due and payable for all periods up to and including the rent payment due following the event of default; and (3) MBank immediately and unconditionally became obligated to pay forthwith a sum as liquidated damages — the Casualty Value of the Leased Equipment ("Casualty Value") — determined by a formula prescribed by § 18(e) and attachments to the Lease. Id. at 948-49. The remedy automatically took effect without option, notice, or any other action by Capital. Section 18(e) also obligated Capital, immediately upon receipt of MBank's payment, to execute and deliver to MBank a bill of sale for the FF & E. Id. at 948 n. 7.

On March 29, 1989 the Office of the Comptroller of the Currency ("OCC") declared MBank insolvent, placed MBank in receivership, and appointed the FDIC as its receiver. Id. The FDIC, as receiver, immediately implemented a Purchase and Assumption ("P & A") Agreement, by which it transferred all of MBank's deposits and certain of its assets and liabilities from the MBank receivership estate to the newly-created Deposit Insurance Bridge Bank ("DIBB"). Id. at 950. In July 1989 DIBB entered into an interim management agreement, and its name was changed to Bank One, Texas, N.A., the plaintiff in this case. A subsidiary of Banc One Corporation ("BOC") managed the bank, but the stock of the institution was owned by the FDIC. Through a wholly-owned subsidiary, BOC purchased a percentage of Bank One's equity in 1990 and, as of October 1991, owned 100% of Bank One. Id. at 950 & n. 12.

The FF & E remained in MBank's former facilities, and DIBB/Bank One had access to and possession of most of the FF & E in order to continue banking operations without interruption. The P & A Agreement did not transfer the Lease to DIBB, but it afforded DIBB an option period (initially 120 days, and later extended) in which to assume the Lease. Id. at 950. Section 4.5(d) of the P & A Agreement obligated Bank One to comply with all relevant terms of "the applicable lease agreement(s) entered into by MBank." On September 12, 1989 Bank One informed the FDIC that it would not accept assignment of the Lease. The FDIC then determined that the Lease would be burdensome, and on September 13, 1989 informed Capital that it was disaffirming the Lease.

In early 1990, due to a deteriorating financial condition, Capital contacted Bank One regarding its possible interest in acquiring the FF & E. On December 30, 1991 Capital and Bank One entered into an agreement (the "Purchase Agreement") whereby Bank One purported to purchase the FF & E from Capital. The Purchase Agreement provided, in relevant part, that if a tribunal determined that Capital did not have good and marketable title to the FF & E, or that another party involved had legal or equitable title in the FF & E, the agreement would terminate.

Within a few weeks of entering into the Purchase Agreement, Bank One initiated this suit in state court against Prudential and TCB. Bank One sought inter alia a declaratory judgment that the debts in question had been satisfied; that any liens held by Prudential and TCB had been extinguished by full payment; and that Prudential and TCB had no legal or equitable right, title, estate, lien, or interest in the FF & E. Id. at 950-51. The other parties brought various counterclaims, cross-claims, and third-party actions. In response to several summary judgment motions, the court ruled, in relevant part, that the Ipso Facto Clause was valid and enforceable; that the Lease terminated as of the OCC's declaration that MBank was insolvent; and that the FDIC lacked the authority and power under the circumstances to disaffirm the Lease. Id. at 968 (summarizing rulings). The court also held that the FDIC obtained the FF & E at the time of MBank's insolvency, id. at 965, and that Capital and Prudential were entitled to recover the MCar Assets. Id. at 968.

In August 1995, subsequent to the court's ruling, the FDIC, Capital, Prudential, and TCB entered into a settlement. They agreed that the FDIC would pay the remaining Casualty Value, and that Capital would deliver to the court, for ultimate delivery to the FDIC, a confirmatory bill of sale. On August 15, 1995 the FDIC paid Capital the remaining Casualty Value, interest, and attorney's fees by way of distributions from the MCar Assets. Capital then tendered payment to Bank One for liquidated damages, as prescribed by the Purchase Agreement, based on its contention that it could not deliver to Bank One good and marketable title to the FF & E, free and clear of all liens. Bank One returned the payment, stating that it did not believe there had been a default under the Purchase Agreement.

Bank One also amended its complaint. It asserts that the FDIC repudiated any rights to the FF & E that survived termination of the Lease. Bank One alleges that this occurred when the FDIC wrote Capital on September 13, 1989 to disaffirm the Lease. As a result, Capital was under no obligation to transfer title to the FF & E, and Bank One properly purchased the FF & E from Capital.

Bank One also asks the court to enter a declaratory judgment against Prudential and TCB, holding that the lien has been extinguished by full payment, that the Indenture terminated by its own terms, and that defendants have no right, title, lien, or interest in the FF & E. Bank One seeks a judgment declaring and ordering defendants to execute and deliver statements, releases of liens, and/or any other documents that Bank One may reasonably request for the purpose of evidencing the termination of liens or interests in the FF & E. Bank One also requests judgment declaring that under the circumstances of this case, the FDIC has no right to claim title to the FF & E, and that Capital has the obligation to convey title to the FF & E to Bank One. Bank One alleges against Prudential claims for tortious interference with prospective contractual relations, and tortious interference with existing contractual relations. Bank One seeks a permanent injunction to prohibit Capital from transferring title to the FF & E to the FDIC; punitive damages from Prudential; and attorney's fees from Prudential, TCB, and the FDIC.

The FDIC has filed a counterclaim¹ for compensatory damages and attorney's fees, contending that Bank One is liable on theories of breach of contract, tenancy at will, conversion, unjust enrichment, and quantum meruit. Bank One seeks to recover unpaid rent for (or, alternatively, the book value of) the FF & E.

The FDIC and Bank One each move for summary judgment. The FDIC seeks summary judgment dismissing Bank One's declaratory judgment action against the FDIC, as receiver for MBank and in its corporate capacity, and declaring that when the...