FDIC v. Hinch, 94-C-728-K.

• Decision Date: 06 March 1995
• Docket Number: No. 94-C-728-K.,94-C-728-K.
• Citation: 879 F. Supp. 1099
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff, v. Paul HINCH, individually, et al., Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

879 F. Supp. 1099

FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff, v. Paul HINCH, individually, et al., Defendants.

No. 94-C-728-K.

United States District Court, N.D. Oklahoma.

March 6, 1995.

COPYRIGHT MATERIAL OMITTED

Pamela H. Goldberg, James M. Reed, R. Mark Petrich, Hall Estill Hardwick Gable Golden & Nelson, Tulsa, OK, for F.D.I.C.

W. Robert Dyer, Joseph W. Spence, Gardere & Wynne, Dallas, TX, Steven J. Adams, Gardere & Wynne, Tulsa, OK, Mary C. Coulson, Gooding Mulinix & Belanger, Oklahoma City, OK, for Paul D. Hinch.

Joel Wohlgemuth, Norman & Wohlgemuth, Tulsa, OK, Beth Ann Blackwood, Dallas, TX, for Mary C. Hinch.

Randall G. Vaughan, J. Warren Jackman, Pray Walker Jackman Williamson & Marlar, Tulsa, OK, Tom Thomas, Marc S. Culp, Thomas Sheehan & Culp, Dallas, TX, Joel Wohlgemuth, Norman & Wohlgemuth, Tulsa, OK, Beth Ann Blackwood, Dallas, TX, for Phillip D. Hinch, Grant Hinch, Oklahoma Columbia Property Co., Hinch Partners, Property Co. of America Realty, Inc., Property Co. of America Management, Inc., Property Company of America Services Corp.

ORDER

KERN, District Judge.

This is a suit by the FDIC as a judgment creditor to set aside certain "trusts" and partnerships as shams that were allegedly created by or for the benefit of judgment debtor Paul D. Hinch as part of a scheme to defraud creditors. The judgment debts at issue arose out of real estate related transactions entered into in 1984 and 1985 by Plaintiff's predecessors in interest and Paul Hinch, among others. The FDIC holds two judgments against Paul Hinch and has filed this suit against him, his wife, sons, and their companies, as well as three family trusts, attempting to collect the debt under 12 U.S.C. § 1821(d)(17)-(19), as well as fraudulent transfer and alter ego theories.

Now before the Court are a Motion to Dismiss and two motions for Summary Judgment. The Defendants who have filed the Motion to Dismiss and the first Motion for Summary Judgment are: Mary C. Hinch, individually; Phillip D. Hinch individually and as Trustee for the Hinch Life Insurance Trust, the Mary C. Hinch Management Trust, and the Hinch Family 1988 trust; Grant Hinch, individually and as Trustee for the Hinch Life Insurance Trust, the Mary C. Hinch Management Trust and the Hinch Family 1988 Trust Number Two; Oklahoma Columbia Property Limited Partnership ("Columbia Property Company"); Hinch Partners, a Texas Partnership; Property Company of America Realty, Inc. ("PCA Management"); and Property Company of America Services Corporation ("PCA Services"). For purposes of this Order, the "Defendants" refers to those individuals and entities listed above but excluding Paul Hinch.

In addition, Defendant Paul Hinch has filed a Motion for Summary Judgment. When Paul Hinch is referred to, the Court will state, "Defendant Hinch" or "Paul Hinch." In this Order, the Court considers a Motion by the Defendants to Dismiss, a Motion by Defendants for Summary Judgment, and a Motion by Defendant Hinch for Summary Judgment.

I. Facts

The judgment debts at issue arise out of commercial transactions entered into in 1984 and 1985, between Plaintiff's predecessors in interest and Paul Hinch, among others. Paul Hinch was for many years in the business of investing in and developing real estate in Oklahoma, Texas, and surrounding areas, and was a principal of Property Company of America, Inc. ("PCA"). The debts incurred by Paul Hinch, as evidenced by the judgments held by the FDIC, arose through execution by Paul Hinch of certain notes and/or guaranty agreements previously held by a financial institution then called First RepublicBank Dallas, N.A. ("FRB Dallas").

On July 29, 1988, the Comptroller of the Currency declared FRB-Dallas insolvent and appointed the FDIC as receiver for FRB-Dallas ("FDIC-Receiver"). FDIC-Receiver then assigned certain assets of FRB-Dallas by way of a purchase and assumption agreement to JRB Bank, N.A., on July 29, 1988. On that same day, JRB Bank, N.A. changed its name to NCNB Texas National Bank ("NCNB Texas"). Various assets were transferred to NCNB Texas, including the various loans and all claims and causes FRB-Dallas had against Paul Hinch. NCNB Texas initiated litigation against Paul Hinch and others to collect on these loans after the principal obligors defaulted on them. NCNB Texas obtained judgments against Paul Hinch in two cases that were pending in Dallas County, Texas.

In 1988, NCNB Texas was chartered as a "bridge bank" under 12 U.S.C. § 1821(i) (re-codified at 12 U.S.C. § 1821(n)) to assume over $30 billion in deposits and substantially all of the assets of forty failed First RepublicBanks in Texas, including the judgments referenced above upon which this action is based. The FDIC, in its corporate capacity ("FDIC-Corporate"), in turn, entered into an assistance agreement with NCNB Texas pursuant to 12 U.S.C. § 1823(c). This assistance agreement included an option which allowed NCNB Texas, in its sole discretion, to "put" to FDIC-Corporate assets that NCNB Texas had acquired from First RepublicBanks. Subsequent to the initiation of this litigation, NCNB Texas exercised its option under the assistance agreement, and FDIC-Corporate acquired on November 30, 1991 over 60,000 assets, including NCNB Texas' judgments which form the basis for this lawsuit.

The FDIC alleges that Paul Hinch and the other Defendants have taken a series of actions designed to defraud their creditors. The FDIC asserts that Paul and Mary Hinch "orchestrated" a purported move to Texas in order to designate as their "homestead" property located in Kerrville, Texas. Similarly, the FDIC asserts that Paul and Mary Hinch wrongfully tried to partition community property into separate property. The FDIC challenges the creation of various trusts by Paul and Mary Hinch as illusory as well as the partition and transfer of assets to those trusts. The FDIC further contests Paul Hinch's supposed transfer of assets to the Columbia Property Company in light of the fact that he continues to enjoy the full use, benefit, and control of those assets. The FDIC urges that all the partnerships and corporate defendants named in the Complaint are alter egos of Paul Hinch and their assets should be made available to Plaintiff for satisfaction of its judgments.

II. Motion to Dismiss by Defendants

The Defendants have filed a Motion to Dismiss, arguing that: a) the FDIC may not rely on 12 U.S.C. § 1821(d)(17)-(19) for fraudulent conveyances occurring before the effective date of the statute; b) the FDIC lacks standing in its corporate capacity to bring its causes of action under 12 U.S.C. § 1821(d)(17)-(19); c) Phillip and Grant Hinch have no individual liability; d) the FDIC has no cause of action against these Defendants for allegedly failing to pay adequately for services rendered by Paul Hinch to them; and e) the FDIC's alter ego claims do not entitle them to recover the assets of the alleged alter ego entity.

A complaint should not be dismissed unless it appears that the Plaintiff cannot prove facts entitling him to relief. Curtis Ambulance of Fla., Inc. v. Board of County Comm'ners, 811 F.2d 1371, 1374 (10th Cir. 1987).

A. Retroactivity of 12 U.S.C. § 1821(d)(17)-(19)

The Defendants assert that the FDIC is unable to bring any action against the Defendants based on the Comprehensive Crime Control Act of 1990 which is codified at 12 U.S.C. § 1821(d)(17)-(19). The Defendants point out that this legislation did not become effective until May 28, 1991, and all allegations in this case involve acts taken before that date. However, the FDIC urges this Court to find that the Act should be applied retroactively.

The Supreme Court has long embraced a presumption against retroactivity, giving voice to principles articulated in the Constitution prohibiting ex post facto laws and legislation impairing "the Obligations of Contracts." See Landgraf v. USI Film Products, ___ U.S. ___, ___-___, 114 S.Ct. 1483, 1500-01, 128 L.Ed.2d 229 (1994). This presumption is strongest when there is no clear indication in the statute that Congress intended the Act to have retroactive effect. The relevant portions of the Crime Control Act for this case do not clearly state whether the courts should interpret them in a retroactive fashion. Thus, this Court must determine whether the general presumption against retroactivity has been overcome.

In the most recent analysis by the U.S. Supreme Court of the problem of retroactivity, Landgraf v. USI Film Products, ___ U.S. ___, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), the Supreme Court instructed courts to look at the issue of retroactive "operation" or "effect" rather than retroactive "application." Where a statute would have a retroactive effect, meaning that it would increase a party's liability for past conduct, the traditional presumption should govern.

The court must determine whether the new statute would have retroactive effect, i.e., whether it would impair the rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed. If the statute would operate retroactively, our traditional presumption teaches that it does not govern absent a clear congressional intent favoring such a result.

___ U.S. at ___, 114 S.Ct. at 1505. In Landgraf, the plaintiff brought suit under the Civil Rights Act and attempted to invoke certain provisions regarding recovery of compensatory and punitive damages and the right to a jury trial. The Supreme Court held that absent clear Congressional intent to the contrary, a federal statute enacted after the occurrence of the conduct at issue should not be applied if it would increase a party's liability for past conduct.

The provisions at issue allow the FDIC or RTC to avoid transfers of interests in property made by "institution-affiliated parties" or debtors of the financial institution within five years of the date...