Federal Deposit Ins. Corp. v. Ashley, Civ. A. No. 75-71600.

• Decision Date: 08 March 1976
• Docket Number: Civ. A. No. 75-71600.
• Citation: 408 F. Supp. 591
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. W. Jerome ASHLEY et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

408 F. Supp. 591

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. W. Jerome ASHLEY et al., Defendants.

Civ. A. No. 75-71600.

United States District Court, E. D. Michigan, S. D.

March 8, 1976.

Kenneth E. Scherer, Daner, Freeman, McKenzie & Matthews, Larry E. Powe, Mt. Clemens, Mich., for plaintiff.

Walter J. Murray, Detroit, Mich., for defendant Ashley.

Robert G. Russell, Detroit, Mich., for defendants Buhai & Jones.

James M. Wienner, Detroit, Mich., for defendant Cooley.

Leonard A. Wilcox, Detroit, Mich., for defendant Kristufak.

Richard D. Rohr and George G. Kemsley, Detroit, Mich., for defendants Robert and William Verhelle.

OPINION AND ORDER DISMISSING ACTION FOR LACK OF JURISDICTION

KENNEDY, District Judge.

The Court on its own motion issued an order to show cause why this action should not be dismissed for lack of jurisdiction. The parties responded and have briefed and orally argued the issue. Plaintiff asserts that the Court has jurisdiction of this action by the Federal Deposit Insurance Corporation (FDIC) against former officers and directors of the Tri-City Bank of Warren.

The relevant jurisdictional provision is 12 U.S.C. § 1819, which provides:

The FDIC shall have power —

. . . . .

Fourth. To sue and be sued . .. 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, . . . remove any such action . . . from a State court to the United States district court for the district or division embracing the place where the same is pending . . ., 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 added.

Plaintiff does not contend that the claims it makes in this case are other than those involving only the rights or obligations of depositors, creditors, stockholders and the State bank under state law.

The facts are essentially as follows: On September 27, 1974, the Macomb County Circuit Court appointed the FDIC receiver of the Tri-City Bank of Warren (hereinafter referred to as Tri-City), pursuant to MSA § 23.710(151); the following day a series of agreements were entered into; the Michigan National Bank of Macomb assumed all of the deposit liabilities of Tri-City, in return for which it received from the FDIC as receiver of Tri-City that bank's cash and government securities plus certain "acceptable assets."

The acceptable assets were to consist of "cash deposits in other banks, and such other assets of sound banking quality which are being assigned and conveyed to Assuming Bank at agreed values under the terms of a contract between the Selling Bank and Assuming Bank." While this definition would appear to include assets such as loans, the only "acceptable assets" transferred to the Assuming Bank were cash, amounts due from other banks, United States Government Securities, and furniture, fixtures, equipment and leasehold improvements of the Tri-City Bank. All of Tri-City Bank's loan assets were included in the category of "unacceptable assets" and transferred to the FDIC.

The agreement between the Banks and the FDIC was that the acceptable assets were transferred on the understanding that these assets were to equal $1.158 Million less than the deposit liabilities assumed by the Macomb bank.¹ The various "unacceptable assets" were assigned to the FDIC in return for which the FDIC paid to the assuming bank the amount necessary to bring the total assets transferred to the assuming bank to exactly $1.158 million less than deposit liabilities assumed. The parties agreed that if any of the calculations either of the deposit liabilities or of the value of the acceptable assets turned out to have been inaccurate, a cash adjustment would be made to maintain this $1.158 million differential.² The amount that the FDIC was to pay was originally calculated to be $10,631,248.02. This total has been adjusted pursuant to the agreements to $10,456,172.47. Affidavit of Larry E. Powe in Support of Plaintiff's Response to Order to Show Cause.

As noted above, the "unacceptable assets" were transferred to the FDIC. Among the assets so transferred were:

Rights, claims or causes of action against the Bank's directors, officers or employees or their sureties arising out of any act of any such persons in respect to the bank or its property or arising out of the nonperformance or manner of performance of their duties.

Assignment, ¶ 5(b) (Exhibit II to Plaintiff's Response to Order to Show Cause).

This action alleges such a claim against officers and directors of Tri-City Bank.

The language of the complaint is somewhat ambiguous regarding the status of the FDIC in bring the action. The complaint begins: "Now Comes FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff Liquidator of TRI-CITY BANK, Warren, Michigan . . .." However, paragraph 4 recites the appointment of the FDIC as receiver by the Circuit Court and then states that "In order to facilitate the assumption of the Bank's deposit liabilities by another Bank and the liquidation of the Bank's remaining assets, certain assets including the claims asserted to herein, were transferred to the Plaintiff by the Receiver for valuable consideration . . .."

The language of the "Agreement (Selling Bank — FDIC)" is similarly ambiguous regarding the FDIC's status. The agreement provides that the "unacceptable assets" become the property of the FDIC.³ However, other provisions suggest that the FDIC's role remains that of a receiver. For example, in the event that in its efforts to collect the unacceptable assets the FDIC recovers more than it paid for those assets (plus certain items of expenses), it will not retain the excess. Rather, the Agreement (Selling Bank — FDIC) obligates it to return the excess to the Selling Bank (that is, to the FDIC as receiver of the Tri-City Bank), presumably for the benefit of unsecured general creditors, and, ultimately, stockholders.⁴ Thus, the assignment from the FDIC (as Receiver) to the FDIC appears to have been made to facilitate the collection of debts and liquidation of assets, traditionally a part of a receiver's role.

The legislative scheme governing the FDIC's role in the liquidation of banks contemplates such assignments. Section 1823(e) of Title 12, United States Code, states, in part:

Whenever in the judgment of the FDIC Board of Directors such action will reduce the risk or avert a threatened loss to the Corporation and will facilitate the sale of the assets of an open or closed insured bank to and assumption of its liabilities by another insured bank, the Corporation may . . . make loans secured in whole or in part by assets of an open or closed insured bank . . . or the Corporation may purchase any such assets . . . . Any insured national bank or District bank, or the Corporation as receiver thereof, is authorized to contract for such sales or loans . . ..

The Agreement (Selling Bank — FDIC) recites a number of circumstances that suggest that this arrangement is pursuant to Section 1823(e).⁵ See "Whereas" paragraphs.

FDIC regulations indicate that upon the taking of an assignment of such assets the FDIC proceeds in the same fashion as it does when it is a receiver of a national bank:

Assets acquired by the Corporation pursuant to contracts of loan or purchase or deposits with insured banks or receivers of closed insured banks, in accordance with the provisions of the Federal Deposit Insurance Act, are liquidated by the Corporation through a liquidator appointed in the same manner as in the case of a national bank receivership . . ..

12 C.F.R. § 306.1. The procedures for conduct of liquidation in the case of a national bank receivership are found in 12 C.F.R. § 306.2.

It does not appear that any reported decisions have addressed the specific question before the Court — whether the FDIC should be regarded as acting as receiver after it has taken an assignment where it is the assignor in its capacity as state-appointed receiver of a state bank.

It is clear that the FDIC routinely accepts such assignments under section 1823(e), both with regard to National Banks, see e. g., F.D.I.C. v. Marine National Bank, 431 F.2d 341 (5th Cir. 1970), and state banks. See, e. g., F.D.I.C. v. Lott, 460 F.2d 82 (5th Cir. 1972); F.D. I.C. v. Vineyard, 346 F.Supp. 489 (D.Tex. 1972). However, the Court has been unable to locate any cases of an assignment in which the FDIC had been appointed receiver of the bank. Typically, in the case of a national bank, the FDIC takes the assignment of the assets from the bank directly before the bank is closed or a receiver appointed. In the reported cases in which the FDIC had taken an assignment of the assets of a closed state bank, it appears that the state courts had appointed receivers other than the FDIC.

None of these cases deal with the jurisdiction issue or interpretation of 12 U.S.C. § 1823(e).

Defendant Joseph Kristufak, the only defendant to file a response to the order to show cause, argues that the instant circumstances are analogous to those before the Court in Federal Deposit Insurance Corporation v. National Surety Co., 345 F.Supp. 885 (S.D.Iowa 1972). In that case, the FDIC, as receiver of a state bank, sued the surety of the bank president in a state court. The surety removed the case to federal court. The district court granted the FDIC's motion to remand. The surety had argued that since the benefits of a successful suit by the FDIC as receiver would accrue largely to the FDIC in its capacity of insurer of the bank's deposits (since it was subrogated to the rights of...