Bank One, Texas, N.A. v. F.D.I.C.

• Decision Date: 10 August 1998
• Docket Number: No. CIV. A. 3:92-CV-0535-D.,CIV. A. 3:92-CV-0535-D.
• Citation: 16 F.Supp.2d 698
• Parties: BANK ONE, TEXAS, N.A., Plaintiff-Counterdefendant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Counterplaintiff.
• Court: U.S. District Court — Northern District of Texas

16 F.Supp.2d 698

BANK ONE, TEXAS, N.A., Plaintiff-Counterdefendant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Counterplaintiff.

No. CIV. A. 3:92-CV-0535-D.

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

August 10, 1998.

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Michael P. Lynn (argued), Steven H. Stodghill, Eric N. Whitney, Lynn Stodghill Melsheimer & Tillotson, L.L.P., Dallas, TX, for Plaintiff-Counterdefendant.

Dennis S. Klein (argued), Robert B. Funkhouser, M. Kathleen O'Connor, Roberta Koss, Hughes Hubbard & Reed LLP, Washington, DC, Frederic A. Ortiz, F.D.I.C.-Legal Div., Dallas, TX, for Defendant-Counter-plaintiff.

FITZWATER, District Judge.

The principal question presented by the parties' motions for summary judgment is who owns — as between plaintiff-counterdefendant Bank One, Texas, N.A. ("Bank One") and defendant-counterplaintiff Federal Deposit Insurance Corporation ("FDIC") — the furniture, fixtures, and equipment ("FF & E") at issue in this litigation.

I

The background facts of this lawsuit are set out at length in Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F.Supp. 943 (N.D.Tex.1995) ("Bank One I"), and Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 939 F.Supp. 533 (N.D.Tex.1996) ("Bank One II").¹ The court assumes familiarity with these decisions and adds to the factual discussions the facts and procedural history necessary to understand today's opinion.

A

The focus of the court's decision in Bank One I was on the right to recover liquidated damages from several million dollars of certificates and proceeds (the "MCar Assets") that were pledged to secure the performance of MBank Dallas, N.A. ("MBank") under the First Amendment to the Lease ("Lease"). Pursuant to the Lease, MBank leased the FF & E from Capital Associates International, Inc. ("Capital") as part of a sale-leaseback transaction in which MBank sold the FF & E to Capital, who simultaneously leased the FF & E back to MBank and its parent corporation. Capital largely financed its part of the transaction by borrowing from The Prudential Insurance Company of America ("Prudential"), who took a security interest in the FF & E, MCar Assets, and relevant transactional documents. In concluding that Capital and Prudential obtained the right to recover liquidated damages from the MCar Assets, the court held:

The transaction was structured so that MBank and, in turn, the FDIC-Receiver and any successor bank obtained complete and unfettered ownership and use of the FF & E. In other words, but for the loss of the MCar Assets — a circumstance to which the court will turn below — the FF & E Lease was drafted so that when the FDIC took over as receiver, it obtained all the FF & E located on the failed bank's premises as if there had been no sale-leaseback transaction, and was able to convey it to the bridge bank.

Bank One I, 878 F.Supp. at 965 (emphasis in original).

Bank One later argued that this holding was dicta, and challenged the FDIC's ownership of the FF & E. In Bank One II the court rejected Bank One's position and held that "MBank, and, in turn, the FDIC, obtained complete and unfettered ownership of the FF & E upon MBank's insolvency." Bank One II, 939 F.Supp. at 539. The court also concluded that "the FDIC obtained ownership of the FF & E when it became MBank's receiver." Id. at 541. The court granted the FDIC's summary judgment motion dismissing count two of Bank One's amended complaint, and "declar[ed] that when the FDIC was appointed as MBank's receiver, it obtained complete and unfettered ownership of the FF & E[.]" Id. Therefore, the court held that the FDIC was entitled to recover from Bank One, as a tenant at will, the reasonable rental value of the FF & E, in an amount to be determined at trial. Id. at 535, 543.

Following the court's decision in Bank One II, Bank One moved to reinstate its declaratory judgment action (count two of its amended complaint), which the court had dismissed. Id. at 541. This request followed a dispute that arose between the parties concerning whether Bank One was precluded by the court's rulings from challenging the FDIC's assertion of ownership of the FF & E as a component of its counterclaims for unpaid rent and conversion. The court denied Bank One's motion to reinstate because "Bank One did not fairly raise the argument now presented as part of the declaratory judgment action that the court dismissed on September 26, 1996." Apr. 28, 1997 Order at 2. The court also concluded that "[a]s a defense to the FDIC's claims for unpaid rent and conversion, however, the argument is not foreclosed procedurally. Because Bank One's position is not in the nature of an affirmative defense, it need not have been pleaded as such." Id.

The FDIC and Bank One moved anew for summary judgment, presenting once more the issue of ownership of the FF & E. The focus of the case now became certain sections of the Purchase and Assumption Agreement ("P & A Agreement"), by which the FDIC had transferred all deposits and certain liabilities and assets from the MBank receivership estate to the newly-created Deposit Insurance Bridge Bank ("DIBB"), which was later renamed Bank One.² In § 3.1(l) the FDIC transferred "Fixtures owned by [MBank] associated with Owned Bank Premises or Leased Bank Premises," and in § 3.1(m) it conveyed "Furniture and Equipment owned by [MBank] associated with Owned Bank Premises or Leased Bank Premises."

The FDIC argued that Bank One was precluded by the doctrine of the law of the case from asserting that it owned the FF & E pursuant to the P & A Agreement, after having taken the position earlier in the litigation that it did not. In rejecting this argument, the court noted that it "ha[d] yet to decide explicitly whether the FDIC sold the FF & E to Bank One pursuant to § 3.1 of the P & A Agreement." July 30, 1997 Mem. Op. at 3. The court also explained the scope of its prior opinions in the case.

Bank One II primarily involved the parties' disputes concerning how the court's decision in Bank One I should be interpreted and applied; the effect of legal positions that the FDIC had asserted prior to entry of that ruling; and the effect of transactions and acts concerning the FF & E and the equipment lease ("Lease") that had occurred after March 29, 1989, particularly the FDIC's attempt to repudiate the Lease on September 13, 1989 and Bank One's agreement to purchase the FF & E from Capital Associates International, Inc. ("Capital"). See, e.g., Bank One II, 939 F.Supp. at 537-38, 541. The FDIC presented the § 3.1 issue as an alternative claim for relief in count three of its counterclaim, contending that Bank One was liable for the book value of the FF & E. The court did not reach this cause of action, however, and assumed it was moot. See id. at 543. Although the court reiterated the holding of Bank One I that the FDIC "obtained complete and unfettered ownership and use of the FF & E," id. at 541, and relied on that holding as a predicate for concluding that Bank One owed unpaid rent as a tenant at will, id. at 542-43, "the court's substantive rulings are necessarily the product of the issues and arguments presented, [and] the holdings of prior opinions — regardless of their breadth — must be [understood] in their proper context." Apr. 28, 1997 Order at 2 (footnote omitted). The court did not explicitly address the § 3.1 question in deciding the rent issue.

Id. at 3-4. The court also rejected the assertion that it had "decide[d] by necessary implication that the FDIC had not sold Bank One the FF & E." Id. at 4.

The holding in Bank One II that the FDIC had complete and unfettered ownership and use of the FF & E followed inexorably from Bank One I. See Bank One II, 939 F.Supp. at 539. The ownership decision in Bank One I was based on the assumption that the Lease terminated as of the time the Office of the Comptroller of the Currency ("OCC") declared MBank insolvent. See Bank One I, 878 F.Supp. at 967 (stating that the court is "deciding these motions on the basis of the OCC's declaration of MBank's insolvency"). This assumption was sufficient to support the court's rulings on the motions then before it. See id. at 949 n. 10 (noting that court had no reason to resolve "whether the declaration of insolvency occurred during the late hours of March 28 or the early hours of March 29"). In Bank One II the court held that the FDIC became the owner of the FF & E at the time of its appointment as receiver. Bank One II, 939 F.Supp. at 543. This was an adequate basis on which to award the FDIC rent from Bank One as a tenant at will. In the absence of a § 3.1 defense in Bank One II, the court had no reason to decide, and thus did not implicitly resolve, whether MBank owned the FF & E when it closed for business on March 28, 1989.

Id. at 4-5.

The court approved Bank One's efforts to establish ownership of the FF & E, so long as they were advanced as a defense and not as an affirmative claim for declaratory judgment. Id. at 5 n. 4 & 5-6. The court explained:

This lawsuit has been on file since 1992, but it reached a watershed on March 16, 1995 when the court decided Bank One I. Until that juncture the FDIC's primary interest was in recovering the MCar Assets for the receivership estate and upholding its asserted right to disaffirm the Lease. The FDIC and Bank One had common litigation interests and were parties to a Joint Litigation Agreement. The court has recognized that "[p]rior to that opinion Bank One and the FDIC were sufficiently aligned that the FDIC had no incentive to develop discovery on matters that now remain to be litigated." May 13, 1997 Order at 1-2. After Bank One I was decided the FDIC altered its approach to the case, seeking to recover from Bank One for its use and alleged conversion of the FF & E. The court recognized the disparate nature of the first and second phases of the case in analyzing the effect of the FDIC's pleadings...