Federal Deposit Ins. Corp. v. Ashley

• Decision Date: 04 October 1978
• Docket Number: No. 76-2416,76-2416
• Citation: 585 F.2d 157
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, a corporation organized and existing under the laws of the United States of America, Plaintiff-Appellant, v. W. Jerome ASHLEY, James P. Buhai, John Cooley, Richard Jones, Joseph Kristufek, Robert Verhelle and William Verhelle, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 157

585 F.2d 157

FEDERAL DEPOSIT INSURANCE CORPORATION, a corporation organized and existing under the laws of the United States of America, Plaintiff-Appellant, v. W. Jerome ASHLEY, James P. Buhai, John Cooley, Richard Jones, Joseph Kristufek, Robert Verhelle and William Verhelle, Defendants-Appellees.

No. 76-2416.

United States Court of Appeals Sixth Circuit.

Argued April 11, 1978.

Decided Oct. 4, 1978.

Larry E. Powe, Daner, Freeman, McKenzie & Matthews, P. C., Kenneth E. Scherer, Mount Clemens, Mich., for plaintiff-appellant.

Robert G. Russell, Kerr, Wattles & Russell, Detroit, Mich., for Buhai & Jones.

Leonard A. Wilcox, Jr., Eames, Petrillo & Wilcox, Henry J. Mittelstaedt, III, Detroit, Mich., for Kristufek.

Walter J. Murray, Murray & Murray, Southfield, Mich., for Ashley & Cooley.

Richard D. Rohr, George G. Kemsley, Bodman, Longley, Bogle & Dahling, Detroit, Mich., for both Verhelles.

Albert E. Phillips, Phillips, Hartland & Mozley, Atlanta, Ga., James E. Clark, London, Yancey, Clark & Allen, Birmingham, Ala., for amicus Fidelity Deposit Co. of Md.

Before EDWARDS and MERRITT, Circuit Judges, and PECK, Senior Circuit Judge.

JOHN W. PECK, Senior Circuit Judge.

Plaintiff-appellant Federal Deposit Insurance Corporation (FDIC), which had been appointed receiver of Tri-City Bank of Warren, Michigan, filed a complaint in the federal district court against defendants-appellees, who were directors of Tri-City Bank, seeking damages for corporate mismanagement and waste. Appellant FDIC alleged that the district court had jurisdiction pursuant to 12 U.S.C. § 1819. The district court, however, issued an order to show cause why the case should not be dismissed for lack of jurisdiction. After appellant FDIC and appellee Kristufek filed responses to the order and a hearing was held, the district judge entered an opinion and order dismissing the action for lack of jurisdiction. Appellant FDIC has perfected this appeal. We reverse.

I

The Tri-City Bank of Warren was a Michigan banking corporation that experienced financial problems. Upon petition of the Commissioner of the Michigan Financial Institutions Bureau, the Macomb County, Michigan Circuit Court, on September 27, 1974, appointed appellant FDIC as receiver of the Tri-City Bank. As receiver, appellant FDIC took title to the bank's assets, business, and property.

The following day, September 28, 1974, the Michigan National Bank of Macomb and appellant FDIC entered into, with the approval of the Macomb County Circuit Court, an agreement. Under this "assignment agreement," the Michigan National Bank of Macomb assumed all the deposit liabilities and purchased the "acceptable assets" of the Tri-City Bank. "Acceptable assets" were defined in the agreement as cash, amounts due from other banks, United States Government securities, and the furniture, fixtures, equipment, and leasehold improvements formerly owned by the Tri-City Bank. It was stipulated in the agreement that the "acceptable assets" were to equal $1,158,000 less than the deposit liabilities assumed by the Michigan National Bank of Macomb; the difference was the purchase price for the "acceptable assets." The "unacceptable assets" were defined to include all loans and causes of action against Tri-City directors for breaches of their fiduciary duties, and the FDIC as receiver assigned to the FDIC in its corporate capacity those "unacceptable assets" for $10,456,172.47. ¹ In addition, the FDIC agreed that if it recovered more monies for the "unacceptable assets" than it paid, the FDIC as corporate assignee would not retain the excess but would return that excess to the FDIC as receiver.

Appellant FDIC subsequently brought in the federal district court this claim of corporate mismanagement and waste against appellee directors. The only basis for federal court jurisdiction, which appellant FDIC did invoke, was a special statute governing the FDIC, 12 U.S.C. § 1819. That statute provides in pertinent part:

(The FDIC) shall have power

Fourth. To sue and be sued, complain and defend, in any court of law or equity, State or Federal. All suits of a civil nature at common law or in equity to which the Corporation shall be a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction thereof, without regard to the amount in controversy; and the Corporation may, without bond or security, remove any such action, suit, or proceeding from a State court to the United States district court for the district or division embracing the place where the same is pending by following any procedure for removal now or hereafter in effect, Except that any such suit to which the Corporation is a party in its capacity as receiver of a State bank and which involves only the rights or obligations of depositors, creditors, stockholders, and such State bank under State law shall not be deemed to arise under the laws of the United States. . . . (emphasis supplied)

As the district court recognized, this statute framed the basic issue in the present case. If the FDIC was, first, acting as a receiver of a State Bank and, secondly, asserting claims involving only the rights of the State Bank's depositors, creditors, and stockholders and of the State Bank, there would be no federal court jurisdiction. If, on the other hand, the FDIC was acting as an assignee of certain assets of Tri-City Bank and thus asserting rights of its own, then there would be federal jurisdiction.

The district judge held that there was no federal court jurisdiction because the FDIC was acting as a receiver, asserting the rights of depositors, creditors, and stockholders of Tri-City Bank and of Tri-City Bank, despite what appeared to be a Bona fide assignment of assets to the FDIC in its corporate capacity. The district judge stated that the substance and not the form of the assignment transaction, viewing the real function of the FDIC in bringing suit against appellees, should dictate whether the statute, 12 U.S.C. § 1819, conferred jurisdiction in the present case. According to the district judge, the assignment from the FDIC as receiver to the FDIC as corporation was made to facilitate the collection of assets, a function traditionally a part of the receiver's role. The district judge also noted that the assignment of Tri-City Bank's "unacceptable assets" to the FDIC was not unconditional because the assignment agreement provided that any amounts received in excess of the payment for the "unacceptable assets" would be turned over to the FDIC as receiver.

On appeal to this Court, appellant FDIC contends (1) that the assignment for value of the "unacceptable assets" (which included causes of action against the Bank's directors) to the FDIC in its corporate capacity was a Bona fide transfer, (2) that the FDIC, when suing the appellee directors, therefore was acting not as a receiver asserting the rights of Tri-City Bank and the rights of Tri-City's depositors, creditors, and shareholders but was acting in its own corporate capacity asserting its own rights, obtained in the assignment to it of the "unacceptable assets," ² and (3) that because the FDIC was acting in its own corporate capacity asserting its rights there was federal court jurisdiction under 12 U.S.C. § 1819. We agree.

II

The district judge stated in her opinion that the transfer of the "unacceptable assets" to the FDIC in its corporate capacity was Not a sham. We are in complete agreement with that finding. In fact, we conclude, after examining the record, that the price paid by the FDIC $10,456,172.47 to obtain the "unacceptable assets" from the FDIC in its receivership capacity was about what parties negotiating at arm's-length would have agreed upon as fair consideration for the value of the "unacceptable assets." Consequently, there were but two objections that the district judge could and did have to the assignment for good value of the "unacceptable assets" to the FDIC in its corporate capacity such as to justify her conclusion that there was no federal court jurisdiction under 12 U.S.C. § 1819 because the FDIC was acting only as a receiver of a State Bank and not as an assignee of assets asserting its own rights obtained in the assignment. Those objections are, (1) that the FDIC acted as both the seller and a purchaser in the assignment agreement, and (2) that under the assignment agreement the FDIC would not retain amounts obtained in excess of the value it paid for the "unacceptable assets." Our analysis of these objections, however, leads us to conclude that neither objection can serve to justify the district judge's conclusion that there was not federal court jurisdiction in this case.

With respect to the district judge's first objection, that the FDIC acted as both the seller and a purchaser, we conclude that under the statutory scheme of the Federal Deposit Insurance Act, 12 U.S.C. § 1811 Et seq., that "FDIC's capacity as purchaser does not change merely because FDIC, as receiver for (the State) Bank, also acted as seller." Federal Deposit Insurance Corp. v. Godshall, 558 F.2d 220, 223 (4th Cir. 1976). Under the Federal Deposit Insurance Act, the "FDIC may often act in two capacities simultaneously: as receiver of a bank and as an insurance corporation." Federal Deposit Insurance Corp. v. Godshall, supra, 558 F.2d at 223. See Federal Deposit Insurance Corp. v. Boone, 361 F.Supp. 133 (W.D.Okl.1972). A review of the relevant provisions of the Federal Deposit Insurance Act supports this conclusion.

The FDIC was authorized by 12 U.S.C. § 1821(e) to accept the appointment as receiver of Tri-City Bank with the power to sell the assets of the State Bank. ³ 12 U.S.C. § 1821(e) provides:

Whenever any insured State bank (except a District bank) shall have been closed by action of its board of directors or by the authority having supervision of such bank, as the case may be, on account of inability to...