Federal Deposit Ins. Corp. v. Abraham, Civ. A. No. 77-2248.

Citation439 F. Supp. 1150
Decision Date04 November 1977
Docket NumberCiv. A. No. 77-2248.
PartiesFEDERAL DEPOSIT INSURANCE CORPORATION, etc. v. Wilson P. ABRAHAM, Felix L. Aucoin, Henry E. Braden, III, Otto B. Candies, Clifton S. Carl, Clarence C. Clifton, Jr., Joseph W. Dirosa, Alonzo G. Ensenat, Murray C. Fincher, Frank J. Friedler, Sr., Jack W. Grissom, Jr., Remus A. Hebert, E. Stewart Maunsell, II, A. Brown Moore, Sam P. Paciera, Eads Poitevent, Jr., Clarence Scheps, John R. Sitton, Jr., T. G. Solomon, Sr., Edward F. Wegmann and H. D. West.
CourtU.S. District Court — Eastern District of Louisiana

Hollis C. Thompson, Jr. and W. Joel Blass, Gulfport, Miss., for plaintiff.

Henry O'Connor, Jr., Moise S. Steeg, Jr., Harry McCall, Jr., Louie J. Roussel, III, Richard B. Montgomery, Jr., Robert Redfearn, Benjamin Slater, New Orleans, La., for defendants.



This matter came on for hearing on motions to dismiss pursuant to Rule 12(b) Federal Rules of Civil Procedure, filed by Alonzo G. Ensenat, Otto B. Candies, and Wilson P. Abraham.

There appears to be no factual dispute insofar as concerns these motions to dismiss for lack of subject matter jurisdiction as hereinafter set out. The International City Bank and Trust Company (ICB) a state chartered bank, was closed by the Louisiana Commission of Financial Institutions on December 3, 1976 pursuant to Louisiana R.S. 6:383, et seq. Thereafter, pursuant to said statute and the Louisiana procedure for ordinary liquidations the ICB was put into involuntary liquidation in proceedings entitled "In the Matter of the Liquidation of International City Bank & Trust Company" No. 76-18490 of the Docket of the Civil District Court for the Parish of Orleans. Pursuant to R.S. 6:454, the Federal Deposit Insurance Corporation (FDIC) was appointed the receiver of the ICB. As receiver, the FDIC obtained an order, in the State Court liquidation proceeding, authorizing it inter alia to sell certain assets to and permit the assumption of the deposits and certain other liabilities by the Bank of New Orleans and Trust Company, and, in order to "facilitate" this sale and assumption, to sell to the FDIC in its corporate capacity certain other assets of the ICB including "rights, claims, demands, choses of action . . ." The complaint herein was filed by the FDIC in its corporate capacity against certain (but not all) of the former directors of the ICB alleging a failure "to exercise reasonable care and due diligence in the management of the affairs" of the ICB during the period July 1, 1973 through December 3, 1976, resulting in losses or anticipated losses of $13,747,000.00.

The FDIC invokes the jurisdiction of this Court pursuant to 12 U.S.C. Section 1819 and 28 U.S.C. Section 1345. The issue before the Court is simply whether the Federal Deposit Insurance Corporation in its corporate capacity may bring suit in Federal Court against the former directors of the ICB on a chose in action purchased by the FDIC in its corporate capacity from the FDIC in its receivership capacity.

In situations such as the instant one, the FDIC operates in two entirely separate and distinct capacities. As a receiver of the insolvent bank the FDIC becomes a representative of that bank and is required to marshal the assets of that bank for its shareholders and creditors. In its corporate capacity the FDIC functions separately as a federal insurer of bank deposits, each capacity designed to service a different purpose and each is governed by an express statute. Pursuant to 12 U.S.C. Section 1823(d) the FDIC as receiver of a closed state bank is given authority to offer that bank's assets to the FDIC as a corporation as insurer of that state bank: "Receivers or liquidators of insured banks closed on account of inability to meet the demands of their depositors shall be entitled to offer the assets of such banks for sale to the Corporation . . . upon receiving permission from the appropriate State authority . . .." Additionally, such purchase of assets may be effected pursuant to 12 U.S.C Section 1823(e), as was the case here. Such dual capacity has been approved in FDIC v. Godshall, 558 F.2d 220 (4th Cir. 1977); FDIC v. Glickman, 450 F.2d 416 (9th Cir. 1971); Freeling v. Sebring, 296 F.2d 244 (10th Cir. 1961). There apparently being no claim that the assignment to the FDIC in its corporate capacity was without consideration or a sham, it was a permissible and appropriate course of action under the circumstances. Moreover, the Civil District Court for the Parish of Orleans in the aforesaid entitled state proceedings, pursuant to an order dated December 5, 1976, authorized the FDIC as receiver of ICB to sell and transfer assets to the FDIC in its corporate capacity.1 Therefore, since the FDIC had the right to purchase an asset which amounted to a chose in action, it likewise has the right to sue upon it and reduce it to judgment, 12 U.S.C. § 1823(d); Federal Deposit Insurance Corp. v. Rectenwall, D.C., 97 F.Supp. 273; cf. F.S.L.I.C. v. Fielding, 309 F.Supp. 1146 (D.Nev.1969).

Although movers do not apparently contest the right of the FDIC as receiver to transfer the assets to the FDIC in its corporate capacity, they do not recognize the dual function of the FDIC. Moreover, they specifically invoke those portions of 12 U.S.C. § 1819 which provide that the District Courts of the United States shall not have original jurisdiction over suits brought by the FDIC when the following two criteria exist: (1) The FDIC is a party in its capacity as receiver of a state bank; and (2) the action involves only the rights or obligations of depositors, creditors, stockholders of such bank under state law. In support of their argument defendants rely in large part upon the recent decision of FDIC v. Ashley, 408 F.Supp. 591 (E.D.Mich.1976). This Court declines to follow Ashley for the reasons and authorities hereinafter cited. Movers are in effect saying that to permit the FDIC as a corporation to proceed with this suit is to give credence to form over substance, as in reality the receiver having obtained possession of all of the assets not sold to the Bank of New Orleans is for all intents and purposes proceeding as a liquidator. In support of this contention they direct the Court's attention to the fact that any funds which are received by the FDIC in its corporate capacity in excess of the amount for which the assignment was sold are to be returned to the receivership. However, this does not demonstrate that the FDIC is proceeding in its capacity as liquidator but rather indicates that it is not. If no excess funds are received then the FDIC as a corporation is merely protecting its assignment and its indebtedness. If on the other hand excess funds are received it will be returned to the state's receivership proceedings to be administered in accordance with state law. The state receivership is a viable and ongoing receivership which has not been terminated.2 Moreover Paragraph 1.4 of the sale to the corporation provides that in lieu of liquidating assets sold to it and paying over excess recoveries to the receiver, the corporation may reconvey unliquidated excess assets to the receiver. Thus, the mere fact that the corporation's activities may in some respects be similar to those of the receiver, does not serve as grounds to deny this Court jurisdiction of those statutorily mandated actions involving the FDIC as a corporation. This Court thus believes that despite Ashley it should follow the decisions and reasonings expressed in FDIC v. Godshall, supra; FDIC v. Louisiana National Bank, (M.D.La., C.A. No. 77-165); Harvey A. Braun, et al. v. Federal Deposit Insurance Company, et al., 430 F.Supp. 367 (N.D.Ohio, East.); FDIC v. First Bank of Oak Park, (N.D.Ill., East.Div., C.A. # 76 C-3925).3

Further, this Court has jurisdiction pursuant to 28 U.S.C. § 1345 which provides as follows:

"Except as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress."

Movers argue that 12 U.S.C. § 1819 is a specific FDIC jurisdictional ground which falls within the definition "otherwise provided by Act of Congress." However, the FDIC is an agency of the United States. FDIC v. Glickman, supra; cf. Acron Investments, Inc. v. FSLIC, 363 F.2d 236 (9th Cir. 1966). 12 U.S.C. § 1813(q) defines the term "appropriate Federal banking agency" to include the Federal Deposit Insurance Corporation. Having determined that the FDIC as a corporation is not suing as a receiver, and is not limited by 12 U.S.C. § 1819, this Court has independent federal jurisdiction under 28 U.S.C. § 1345. See F.S.L.I.C. v. Fielding, supra.

In accordance with the foregoing, the individual motions to dismiss for lack of subject matter jurisdiction, filed in behalf of Alonzo G. Ensenat, Otto B. Candies, and Wilson P. Abraham are hereby DENIED.

New Orleans, Louisiana, this 20th day of October, 1977.

1 On December 10, 1976, the petition of International City Bank and Trust Company, ICB Corporation, and Robert Beukenkamp, Felix Aucoin, Joseph DiRosa, Louis H. Marrero IV, Daniel McKay, Jack Grissom, R. A. Hebert, Clarence Scheps, Edward F. Wegmann, and H. D. West was filed, praying for permission to appoint a liquidator pursuant to the provisions of LSA-R.S. 6:384, and alternatively for injunctive relief. Specifically, petitioners sought to enjoin the FDIC and the Commission of Financial Institutions for the State of Louisiana from disposing of, alienating or encumbering the assets of International City Bank and Trust Company in the possession or control of either the FDIC or the Commissioner and from proceeding further in liquidating those assets. The matter was heard on December 17, 1976 and judgment was rendered on December 20, 1976, which inter alia sustained an...

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