Federal Deposit Ins. Corp. v. Lattimore Land Corp., No. 80-7635

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtBefore TUTTLE, HILL and THOMAS A. CLARK; TUTTLE; THOMAS A. CLARK
Citation656 F.2d 139
Decision Date14 September 1981
Docket NumberNo. 80-7635
PartiesFEDERAL DEPOSIT INSURANCE CORPORATION, as Liquidator for the Hamilton National Bank of Chattanooga, Plaintiff-Appellee, v. LATTIMORE LAND CORPORATION, et al., Defendants-Appellants. . Unit B

Page 139

656 F.2d 139
FEDERAL DEPOSIT INSURANCE CORPORATION, as Liquidator for the
Hamilton National Bank of Chattanooga, Plaintiff-Appellee,
v.
LATTIMORE LAND CORPORATION, et al., Defendants-Appellants.
No. 80-7635.
United States Court of Appeals,
Fifth Circuit.
Unit B
Sept. 14, 1981.

Page 140

Ronald E. Ginsberg, Erwin A. Friedman, Savannah, Ga., for defendants-appellants.

Leamon R. Holliday, Savannah, Ga., Frank L. Skillern, Jr., Gen. Counsel, Fed. Deposit Ins. Corp., Albert J. Tumpson, Myers N. Fisher, Asst. Gen. Counsel, Washington, D. C., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before TUTTLE, HILL and THOMAS A. CLARK, Circuit Judges.

TUTTLE, Circuit Judge:

Collecting on the notes it holds appears to be an occasionally difficult task for the Federal Deposit Insurance Corporation (FDIC). In this action on a note, the FDIC is faced with familiar claims and defenses by obligors who have long been delinquent in their payments on the note. The district court disallowed most of those claims and defenses and granted the FDIC's motion for summary judgment on the liability on the note. The resulting appeal by the obligors draws our affirmance of the district court.

FACTS

On May 24, 1974, Lattimore Land Corporation made a real estate note for $1,450,000 payable to Hamilton Mortgage Corporation. William Lattimore and J. Robert Ratchford, respectively president and secretary of Lattimore Land, signed the note for the Corporation. These two individuals, joined by Helen C. Lattimore and Barbara H. Ratchford also signed the note under the Guaranty of Payment section. The note provided for principal payments of $217,500 and $435,000 respectively on the first and second anniversaries of the note's making. The outstanding principal plus accrued interest was due on April 24, 1977.

Lattimore Land entered this initial loan agreement apparently desirous of securing future loans from Hamilton Mortgage. Subsequent loans allegedly would have funded the outstanding indebtedness and additional advances would have provided capital needed to develop the real estate

Page 141

that secured the initial note. These purported expectations were not met. Although the appellants claim that Hamilton Mortgage represented that it could and would provide the necessary development financing, Hamilton Mortgage, less than ninety days after the making of the note, according to appellants, informed William Lattimore that it lacked the financial resources to make the development financing that had been contemplated. The obligors allege that these broken promises and misrepresentations led to their inability to pay the sums due under the note, which remains largely unpaid to the present.

At this time, Hamilton Mortgage and the Hamilton National Bank of Chattanooga had begun encountering severe financial difficulties. On October 25, 1975, Hamilton Mortgage assigned a 91.48% interest in the note to the Hamilton National Bank. On February 16, 1976, the Comptroller of the Currency declared the Bank to be insolvent. That same day a United States District Court authorized the FDIC in its corporate capacity to purchase under 12 U.S.C. § 1823 certain of the Bank's assets. One of the assets purchased was the 91.48% interest in the present note. Hamilton Mortgage encountered similar misfortunes. On February 20, 1976, it filed a petition in bankruptcy.

This bankruptcy action led to the FDIC's acquisition of the remaining interest in the note. The trustee in bankruptcy challenged the FDIC's right to assets which had been acquired by Hamilton National Bank from Hamilton Mortgage just prior to the filing of the bankruptcy petition. This dispute was resolved by a settlement agreement which in part resulted in the FDIC's acquisition of all interest in the note and its assumption of the status of holder of the note.

Since those events, the FDIC has pursued its rights on the note. The FDIC, through its legal counsel, on March 31, 1978, demanded payment of the note from the present defendants who include Lattimore Land and the individual signers of the note. Not receiving satisfaction, the FDIC on September 15, 1978, filed a complaint in the present action. In the proceedings in the district court, the obligors raised several defenses and claims for damages. Finding the obligors' arguments unpersuasive, the district court granted the FDIC's motion for summary judgment on the issue of the defendants' liability on the note, reserving issues of usury, amounts of interest, and the extent of the married women-defendants' liability. Subsequently, the district court struck the usury defense and then granted judgment to the FDIC in amounts of $1,366,922.01 principal plus $18,978.02 additional principal, $830,348.95 interest, and $219,974.33 attorneys' fees. That judgment was limited to the extent that the FDIC could not use it to levy upon the tangible personal property of defendant-Barbara Ratchford.

From that judgment the obligors appeal, alleging three basic errors by the district court.

ISSUES ON APPEAL

1. Applicability of FDIC's Statutory Protection

The obligors first claim that for numerous reasons the FDIC's statutory protection under 12 U.S.C. § 1823(e) does not apply. The statute provides that:

No agreement which tends to diminish or defeat the right, title or interest of the Corporation in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (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.

Page 142

12 U.S.C.A. § 1823(e) (West 1980). This statute might impair the obligors' case, because they sought to hold the FDIC, as assignee of the note, liable for Hamilton Mortgage's failure to fund the development under the terms of the alleged oral agreement, which would not meet the statutory requirements of a valid agreement assertable against the FDIC.

The obligors first contend that, with respect to the note in question, the FDIC may not assert the statutory protection because the note was not acquired from an insured bank as is required by 12 U.S.C. § 1823 1. This argument, which ignores the FDIC's acquisition of an asset from the receiver of an insured bank prior to the physical acquisition of the note from another source, has been specifically rejected by this Court. Chatham Ventures, Inc. v. FDIC, 651 F.2d 355 (5th Cir. 1981). Under that case, this Court must treat the entire interest in the note as protected under the statute.

The obligors also contend that 12 U.S.C. § 1823 does not apply where the obligors are free of any wrongdoing and are not customers of an insured bank. These arguments, as well, were fully rejected by the Court in Chatham Ventures, Inc. v. FDIC, 651 F.2d 355 (5th Cir. 1981), and further discussion of those arguments would not be useful.

The district court correctly concluded that 12 U.S.C. § 1823 applies in this case to make irrelevant the assertion against the corporate FDIC of any unwritten side agreements such as the agreement to make future loans 2.

2. Fraudulent Inducement

a. Scope of Claims

Even if FDIC's statutory protection is applicable to this case, there remains the question of whether it protects the FDIC against all assertions by the obligors. In addition to the contention that the unwritten agreements are valid, which we have decided is not viable against the FDIC, the present obligors assert that the entire agreement including the written note should be unenforceable because Hamilton Mortgage materially misrepresented its ability and willingness to fund the development. The obligors argue that they could have successfully proved at trial constructive fraud in the inducement of the execution of the note before us and that 12 U.S.C. § 1823(e) does not shield the FDIC from such a defense because the obligors are seeking to avoid the agreement not enforce an unwritten agreement against the FDIC.

b. Sovereign Immunity

Before reaching the question of whether section 1823 protects it against this claim, the FDIC raises a defense of sovereign immunity. To the extent that the fraud alleged is a tort, the FDIC argues that it may not be sued because the sovereign immunity of the United States with respect to a suit directly against a United States agency has not been waived by the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671 et seq. Litigants generally may not sue the FDIC for money damages

Page 143

under that Act. See Gregory v. Mitchell, 634 F.2d 199, 203-05 (5th Cir. 1981). The law is somewhat different, however, if the FDIC first seeks to assert claims against its adversary. Courts have recognized that a federal agency 3 in bringing suit, although not subject to suit on unrelated claims, see FDIC v. Citizens Bank & Trust Co., 592 F.2d 364, 368-73 (7th Cir. 1979), is exposed to claims of recoupment. See Frederick v. United States, 386 F.2d 481, 488 (5th Cir. 1967) 4. Such claims must arise out of the same transaction or occurrence that is the subject of the agency's suit and may not exceed the claims made by the agency. The present litigants on appeal characterize the obligors' claim as concerning their right to "set off" their claims against those of the FDIC. Despite the label attached by the parties, this Court believes that a more felicitous characterization of the claims would be "recoupment," as defined by the Frederick Court, because the claims arise out of the same transaction that engendered...

To continue reading

Request your trial
72 practice notes
  • Akopyan v. Wells Fargo Home Mortg., Inc., B236455
    • United States
    • California Court of Appeals
    • June 26, 2013
    ...( Id. at pp. 1194–1195.) The most often cited case on this issue is Federal Deposit Ins. Corp. v. Lattimore Land Corp. (5th Cir.1981) 656 F.2d 139 ( Lattimore ). The Lattimore court held that section 85 of NBA did not apply to a loan made by a non-bank, then partially assigned to a national......
  • Glen Ridge I Condominiums, Ltd. v. Federal Sav. and Loan Ins. Corp., No. 05-85-00873-CV
    • United States
    • Court of Appeals of Texas
    • December 30, 1986
    ...a result less favorable to the FDIC that the result indicated here." Federal Deposit Insurance Corporation v. Lattimore Land Corporation, 656 F.2d 139 (5th Cir., 1981). See D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 457, 62 S.Ct. 676, 679, 86 L.Ed. 956 (1942); FDIC v. First National Compan......
  • Rent-Rite Superkegs W., Ltd. v. World Bus. Lenders, LLC (In re Rent-Rite Superkegs W.), Bankruptcy Case No. 16-10407 TBM
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado
    • May 17, 2019
    ...(ellipses in original); Krispin v. May Dep't Stores Co., 218 F.3d 919, 924 (8th Cir. 2000) (same); FDIC v. Lattimore Land Corp.,Page 22 656 F.2d 139 (5th Cir. 1981) ("The non-usurious character of a note should not change when the note changes hands."). Any contrary legal standard would int......
  • Akopyan v. Wells Fargo Home Mortg., Inc., B236455
    • United States
    • California Court of Appeals
    • April 4, 2013
    ...(Id. at pp. 1194-1195.) The most often cited case on this issue is Federal Deposit Ins. Corp. v. Lattimore Land Corp. (5th Cir. 1981) 656 F.2d 139 (Lattimore). The Lattimore court held that section 85 of NBA did not apply to a loan made by a non-bank, then partially assigned to a national b......
  • Request a trial to view additional results
71 cases
  • Akopyan v. Wells Fargo Home Mortg., Inc., B236455
    • United States
    • California Court of Appeals
    • June 26, 2013
    ...( Id. at pp. 1194–1195.) The most often cited case on this issue is Federal Deposit Ins. Corp. v. Lattimore Land Corp. (5th Cir.1981) 656 F.2d 139 ( Lattimore ). The Lattimore court held that section 85 of NBA did not apply to a loan made by a non-bank, then partially assigned to a national......
  • Glen Ridge I Condominiums, Ltd. v. Federal Sav. and Loan Ins. Corp., No. 05-85-00873-CV
    • United States
    • Court of Appeals of Texas
    • December 30, 1986
    ...a result less favorable to the FDIC that the result indicated here." Federal Deposit Insurance Corporation v. Lattimore Land Corporation, 656 F.2d 139 (5th Cir., 1981). See D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 457, 62 S.Ct. 676, 679, 86 L.Ed. 956 (1942); FDIC v. First National Compan......
  • Rent-Rite Superkegs W., Ltd. v. World Bus. Lenders, LLC (In re Rent-Rite Superkegs W.), Bankruptcy Case No. 16-10407 TBM
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado
    • May 17, 2019
    ...(ellipses in original); Krispin v. May Dep't Stores Co., 218 F.3d 919, 924 (8th Cir. 2000) (same); FDIC v. Lattimore Land Corp.,Page 22 656 F.2d 139 (5th Cir. 1981) ("The non-usurious character of a note should not change when the note changes hands."). Any contrary legal standard would int......
  • Akopyan v. Wells Fargo Home Mortg., Inc., B236455
    • United States
    • California Court of Appeals
    • April 4, 2013
    ...(Id. at pp. 1194-1195.) The most often cited case on this issue is Federal Deposit Ins. Corp. v. Lattimore Land Corp. (5th Cir. 1981) 656 F.2d 139 (Lattimore). The Lattimore court held that section 85 of NBA did not apply to a loan made by a non-bank, then partially assigned to a national b......
  • Request a trial to view additional results
1 books & journal articles
  • The New Fintech Federalism.
    • United States
    • Yale Journal of Law & Technology Nbr. 24, January 2022
    • January 1, 2022
    ...(citing the contrary decisions of Krispin v. The May Department Stores Co., 218 F3d 919 (8th Cir 2000) and FDIC v. Lattimore Land Corp., 656 F2d 139 (5th Cir 1981)); see also Horn & Hall, supra note 148, at 22 (describing the financial sector's reaction to (157) Smith, supra note 156, a......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT