Estate of Thies, Matter of
| Decision Date | 21 November 1990 |
| Docket Number | No. 89-1559,89-1559 |
| Citation | 463 N.W.2d 40 |
| Parties | In the Matter of the ESTATE OF Taldine THIES, Deceased. FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. Esther L. HAUPT, Executor of the Estate of Taldine Thies, Appellant. |
| Court | Iowa Supreme Court |
Jack A. Hall of Wilson, Hall & Craig, Eldora, for appellant.
Paul A. Zoss, Michael R. Nelson, and G. Mark Rice of Adams, Howe & Zoss, P.C., Des Moines, for appellee.
Considered by McGIVERIN, C.J., and SCHULTZ, LAVORATO, SNELL, and ANDREASEN, JJ.
Any agreement that would otherwise defeat the rights of the Federal Deposit Insurance Corporation (FDIC) in any asset it obtains from a failed bank is invalid unless certain requirements are met. See 12 U.S.C. § 1823(e) (1982). The district court sustained the FDIC's motion for summary judgment in an action on a guaranty of several notes the FDIC acquired from a failed bank. When the guaranty was signed, the bank orally agreed with the guarantor that the guaranty would last only until the maker secured financing to pay off the notes. When the bank failed, the purpose of the guaranty had long since passed. But the bank had failed to return the guaranty to the guarantor.
The district court held that section 1823(e) rendered the oral agreement between the bank and the guarantor invalid as against the FDIC. We agree and affirm.
In 1977 Franklin W. Thies owed Citizens State Bank at Iowa Falls (bank) money on several promissory notes. Franklin arranged for a loan from the Farmers Home Administration (FmHA) to repay the notes and several other obligations. The notes at that time totaled $90,000.
Franklin and Donald Ruigh, vice president of the bank and the person in charge of Franklin's account, executed affidavits supporting a resistance to the summary judgment motion. According to Franklin's affidavit, the bank requested that his mother, Taldine Thies, guarantee the notes until the FmHA loan came through. This process would take several months. Ruigh's affidavit corroborated this statement.
On August 27, 1977, Franklin and Taldine met with Ruigh at the bank. In his affidavit Ruigh states:
I explained to [Taldine] that our bank was requesting the guarantee of Franklin's debt just until FmHA proceeds were received. With that understanding, she signed the guaranty.
Franklin's affidavit states that Ruigh told his mother the guaranty would be destroyed or returned to her when the FmHA proceeds were received.
The guaranty, by its terms, allowed Franklin to "obtain credit, from time to time" and specified "(no limit)" as to dollar amounts. Franklin's affidavit, however, states that the words "(no limit)" had not been typed in the guaranty when Taldine signed it.
The FmHA proceeds were received in February 1978. According to Franklin's and Ruigh's affidavits, Franklin repaid the loans from those proceeds with the exception of $8600. This remainder was paid within ninety days. Apparently, the guaranty was never removed from the bank files. Ruigh's affidavit indicates this was an oversight.
In 1982 Taldine went into a nursing home and was put under a conservatorship. Taldine's capacity, however, is not raised as an issue in this case.
In 1984, 1985, and 1986, Franklin borrowed more money from the bank. The bank records reflect that Franklin pledged collateral at the time the money was borrowed. Ruigh's and Franklin's affidavits state the loans were not made on the strength of Taldine's guaranty. The affidavits further state that the bank did not notify Taldine of these new loans because the guaranty was satisfied in 1978.
Taldine died in April 1986. On July 17, 1986, the bank filed a claim in probate for $414,042.18 plus interest. The claim was based on Taldine's guaranty.
On July 31, 1986, the Iowa superintendent of banking determined that the bank was insolvent. The superintendent ordered the bank closed, took possession of its assets, and tendered to the FDIC an appointment as receiver of the bank. The FDIC accepted the appointment.
An official of the FDIC executed an affidavit in which he stated that the FDIC purchased certain assets of the bank. The affidavit further stated these assets included Franklin's promissory notes and Taldine's guaranty. According to this affidavit the guaranty was still in the active files of the bank when the FDIC took over its assets.
According to a stipulation of facts, Franklin defaulted on the notes in April 1987. Franklin and his wife filed a chapter 12 bankruptcy. The bankruptcy plan states that Franklin and his wife will pay the FDIC $184,824. Even with a credit for this amount, there still remains in excess of $200,000 left on Franklin's indebtedness. Taldine's estate is valued at about $185,000. If the FDIC's claim as to Taldine's guaranty stands up, this means the estate is wiped out. The beneficiaries of the estate are Taldine's children.
On January 11, 1988, the district court substituted the FDIC for the bank in the estate proceeding. The FDIC moved for summary judgment on July 13, 1988. The executor resisted with the supporting affidavits of Franklin and Ruigh. The executor asserted these affidavits generated the following fact question: whether Taldine's guaranty had been satisfied and was no longer an asset of the bank when the FDIC took over. The district court denied the motion. The court held that the affidavits had indeed generated a fact question on this issue.
The FDIC resubmitted its motion for summary judgment. It also filed an application for adjudication of law points. The district court granted the motion in September 1989. The court applied 12 U.S.C. section 1823(e), finding that the
executor's intention to offer evidence concerning an oral agreement, the terms of which provided that the guaranty signed by Taldine Thies was to last only so long as was needed for Franklin Thies to secure financing from the FmHA does not meet the requirements of section 1823(e).
The district court declined to rule on the FDIC's application for adjudication of law points as unnecessary in light of its ruling.
The executor appealed, raising one issue: whether 12 U.S.C. section 1823(e) precludes the defense that the guaranty had been satisfied and was not an asset the FDIC purchased from the bank.
Section 12 U.S.C. section 1823(e) provides:
(3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and
(4) shall have been, continuously, from the time of its execution, an official record of the bank.
The executor concedes there is no written agreement that the guaranty would only be in effect until the FmHA loan came through. The executor also concedes there is no approval of such an agreement reflected in the minutes of the bank's board of directors or its loan committee.
So we see the issue the bank raises as a legal one. The issue involves whether we strictly apply the requirements of section 1823(e) to the undisputed facts. In these circumstances, summary judgment is appropriate. See Junkins v. Branstad, 448 N.W.2d 480, 482 (Iowa 1989).
We agree with the executor that the issue is one of first impression for us. The executor concedes there is authority for the proposition that 12 U.S.C. section 1823(e) makes the oral understanding invalid as against the FDIC. But the executor points to opposing authority and asks us to side with that authority. The executor cites four cases in support of its position.
A. Nemecek. In the first case a bank sued to recover judgment against several makers on a note that was in default. FDIC v. Nemecek, 641 F.Supp. 740 (D.Kan.1986) (declined to follow in FDIC v. Cover, 714 F.Supp. 455 (D.Kan.1988)). The note was secured by a mortgage on certain land. The bank and the defendants, through their lawyers, agreed that the bank would accept quitclaim deeds for the mortgaged property in lieu of foreclosure. The defendants then delivered the deeds to the bank's lawyers. Before the bank's lawyers could deliver the deeds to the bank and before the bank could sign a formal release, the bank failed and was closed. Id. at 741.
The FDIC was appointed receiver and was substituted as plaintiff in the bank's lawsuit. The defendants moved to enforce the settlement agreement. The FDIC replied, arguing that the motion should be denied because of 12 U.S.C. section 1823(e). Id.
The district court granted the defendants' motion. The court focused on the words "any asset acquired by it" in section 1823(e). Simply put, the court reasoned that before section 1823(e) could apply, the FDIC must first have acquired an asset. The court concluded that the section does not apply when no asset exists. Id. at 742.
The court found that the parties had reached an accord and satisfaction before the FDIC acquired any asset of the bank. The court reasoned that in these circumstances the defendants' note was canceled and so was not an asset that the FDIC acquired. Id. In short, 12 U.S.C. section 1823(e) did not apply.
B. Langley. A year after Nemecek was decided, the Supreme Court considered section 1823(e) in the second of the four cases upon which the executor relies. Langley v. FDIC, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987). The defendants borrowed money from a bank to purchase land. In consideration for the loan, the defendants signed a note, mortgage, and...
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