Federal Deposit Ins. Corp. v. Gulf Life Ins. Co.

• Decision Date: 01 August 1984
• Docket Number: No. 82-7173,82-7173
• Citation: 737 F.2d 1513
• Parties: FEDERAL DEPOSIT INSURANCE CORP., Plaintiff-Appellee, v. GULF LIFE INSURANCE COMPANY, a Corporation, Defendant and Third-Party Plaintiff-Appellant, Cross-Appellee, Vonna Jo Gregory, Third-Party Defendant, Cross-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1513

737 F.2d 1513

FEDERAL DEPOSIT INSURANCE CORP., Plaintiff-Appellee, v. GULF LIFE INSURANCE COMPANY, a Corporation, Defendant and Third-Party Plaintiff-Appellant, Cross-Appellee, Vonna Jo Gregory, Third-Party Defendant, Cross-Appellant.

No. 82-7173.

United States Court of Appeals, Eleventh Circuit.

Aug. 1, 1984.

Albert P. Brewer, Decatur, Ala., for Gulf Life.

Richard A. Lawrence, Montgomery, Ala., for Gregory, third-party defendant, cross-appellant.

Charles M. Crook, Montgomery, Ala., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Alabama.

Before TJOFLAT and VANCE, Circuit Judges, and MORGAN, Senior Circuit Judge.

VANCE, Circuit Judge:

Gulf Life Insurance Company (Gulf Life), the defendant below, appeals a judgment in favor of the Federal Deposit Insurance Corporation (FDIC) for $81,289.89 plus costs. Vonna Jo Gregory, the third party defendant below, appeals a judgment in favor of Gulf Life for $36,349.64 plus costs. Finding no reversible error, we affirm the judgment of the district court on both claims.

In 1975 Gulf Life issued two group creditor life insurance policies, one to First Bank of Macon County (Macon) and one to Bank of Camden, which later became Wilcox County Bank (Wilcox). In all pertinent respects the two policies are identical. Under the policies Gulf Life agreed to insure the lives and health of certain installment loan debtors of the banks, with the lending bank named as the primary beneficiary. The banks paid Gulf Life the premiums for the eligible debtors electing to purchase the insurance, using funds collected from the insured debtors. In practice Gulf Life received only 35% of the collected premiums, with the remaining 65% distributed initially among several bank officers and employees involved in selling insurance to the banks' debtors and, after 1976, among the banks' stockholders.

Each group creditor policy, together with riders, contains two provisions for refunding premiums to any debtor in the event his debt is terminated before all premiums paid are exhausted. These unearned premium refund clauses read as follows:

REFUND PROVISION--If all or any part of the indebtedness is terminated prior to the end of the period for which the insured debtor has contributed premium, the Company [Gulf Life] shall promptly refund or credit an amount equal to the amount computed by the "sum of digits" formula (Rule of 78). Such refund will be promptly credited or paid by the Creditor to the person entitled thereto.

DEBTOR'S CONTRIBUTION ....

If all or any part of the indebtedness is terminated prior to its originally scheduled maturity date, the Company [Gulf Life] shall promptly refund to the debtor an amount equal to the amount, if any, computed by the "sum of digits" formula, commonly known as the "Rule of 78" for decreasing insurance ....

Wilcox and Macon eventually fell on hard times, and in early 1978 FDIC was appointed receiver of the two banks. FDIC as receiver entered purchase and assumption agreements with Town-Country National Bank and First Alabama Bank (FAB). Town-Country and FAB agreed therein to reopen Wilcox and Macon, respectively, after purchasing their acceptable assets and assuming their deposit liabilities. To facilitate the consummation of the purchase and assumption agreements, FDIC in its corporate capacity purchased from FDIC as receiver certain assets of the failed banks that were unacceptable to the assuming banks. 12 U.S.C. Sec. 1823(e) (current version codified at 12 U.S.C. Sec. 1823(c)). By arranging the purchase and assumption agreements FDIC was able to avoid the interruption of banking services and potential loss to depositors that liquidation would have entailed. See generally FDIC v. Merchants National Bank, 725 F.2d 634, 637-39 (11th Cir.1984); Gunter v. Hutcheson, 674 F.2d 862, 865-66 (11th Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982) (detailing the procedures involved in a purchase and assumption transaction). Among the assets sold to FDIC in its corporate capacity were the two group creditor policies issued by Gulf Life.

FDIC, in its corporate capacity, ¹ brought suit against Gulf Life seeking 100% of the amount of unearned premiums due the failed banks' debtors on approximately three hundred prematurely terminated loans. Gulf Life countered that it is responsible for only the 35% of the refunds it has already returned, since it received only 35% of the premiums initially. The insurer disclaimed liability for the remaining 65% of the premiums paid by the banks to the banks' own agents. The trial court held Gulf Life liable for 100% of the refunds and, after disallowing FDIC's claims concerning some of the individual refunds, entered judgment for FDIC.

I. SECTION 1823(e)

Gulf Life's defense is crafted in the form of a syllogism: FDIC is entitled to the remaining 65% of the unearned premium refunds only if the failed banks would have been so entitled; the failed banks would not have been so entitled; therefore, FDIC is not so entitled. Gulf Life devotes most of its argument to demonstrating that the failed banks could not have recovered the disputed amounts under Alabama law, relying on theories of account stated, account settled, accord and satisfaction, estoppel, waiver, and unjust enrichment. We need not decide the merits of Gulf Life's minor premise, however, because the error of its major premise requires that we reject the syllogism's conclusion.

The assets that the FDIC receives through its participation in a purchase and assumption transaction are protected from certain challenges by 12 U.S.C. Sec. 1823(e):

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.

Gulf Life presented no documents meeting the strict requirements of section 1823(e) to show that its refund obligation extends only to 35% of the unearned premiums. This deficiency in the evidence disposes of Gulf Life's arguments grounded in account stated, account settled, and accord and satisfaction. The two quoted provisions of the policies clearly place on Gulf Life the ultimate responsibility for paying all unearned premium refunds. In the absence of any evidence of a contrary agreement permissible under section 1823(e), FDIC was entitled to rely on the unequivocal language of the policies, notwithstanding any stated or settled account existing as a matter of circumstance or oral accord and satisfaction that may have existed between Gulf Life and the failed banks. FDIC v. Hoover-Morris Enterprises, 642 F.2d 785, 787 (5th Cir. Unit B 1981); see also Merchants National Bank, supra; FDIC v. Lattimore Land Corp., 656 F.2d 139 (5th Cir. Unit B 1981); Chatham Ventures, Inc. v. FDIC, 651 F.2d 355 (5th Cir. Unit B 1981), cert. denied, 456 U.S. 972, 102 S.Ct. 2234, 72 L.Ed.2d 845 (1982).

II. FEDERAL COMMON LAW

Section 1823(e) by its terms protects the FDIC only from "agreement[s]" not satisfying the section's requirements. Because Gulf Life's theories of waiver, estoppel, and unjust enrichment are not doctrines based on the parties' mutual assent, section 1823(e) is inapplicable to these defenses.

This court recently faced a similar situation in Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982). The plaintiffs in Gunter took out a loan with a bank and executed a promissory note. They used the funds to purchase a controlling interest in a second bank, which failed. The lending bank in the interim also failed, and the FDIC in its corporate capacity became the holder of the note in the course of a purchase and assumption transaction. The plaintiffs sued the FDIC for rescission, claiming that their purchase of the stock and consequent execution of the note were induced by the lending bank's fraudulent misrepresentations concerning the note and the financial health of the second bank. The FDIC counterclaimed for payment on the note.

The Gunter court, relying on United States v. Kimbell Foods, Inc., 440 U.S. 715, 726-27, 99 S.Ct. 1448, 1457-1458, 59 L.Ed.2d 711 (1979), and D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), first concluded that federal law governed the plaintiffs' fraud claim because the controversy implicated the rights and obligations of the FDIC. 674 F.2d at 868-69. The court next analyzed and weighed the factors elucidated in Kimbell Foods to determine whether state law should be employed to give content to the federal law or whether a nationally uniform federal rule was appropriate. See id. at 869-72. Concluding that application of the Kimbell Foods factors dictated a uniform federal rule governing the FDIC's exposure to fraud claims, the court fashioned a complete defense to such claims for the FDIC when it acquires a note pursuant to a purchase and assumption agreement for value, in good faith, and without actual knowledge of the fraud. Id. at 872-73. We follow the analytical path travelled by the Gunter court and arrive at the conclusion that a uniform federal rule paralleling that forged in Gunter governs Gulf Life's contentions concerning estoppel, waiver, and unjust enrichment.

Gunter dictates that federal law govern this case because the rights and obligations of the FDIC are at stake. The considerations...