Federal Deposit Ins. Corp. v. De Jesus Velez

• Decision Date: 20 April 1981
• Docket Number: Civ. No. 80-0074.
• Citation: 514 F. Supp. 829
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff, v. Manuel DE JESUS VELEZ, Defendant.
• Court: U.S. District Court — District of Puerto Rico

514 F. Supp. 829

FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff, v. Manuel DE JESUS VELEZ, Defendant.

Civ. No. 80-0074.

United States District Court, D. Puerto Rico.

April 20, 1981.

COPYRIGHT MATERIAL OMITTED

Gustavo A. Gelpí, San Juan, P. R., for plaintiff.

Celestino Morales, Jr., San Juan, P. R., for defendant.

OPINION AND ORDER

GIERBOLINI, District Judge.

Plaintiff is trying to collect on a promissory note in the principal amount of $25,000 which it acquired from the receiver of Banco de Ahorro de Puerto Rico (the Bank), pursuant to the provisions of the Federal Deposit Insurance Act (the Act), particularly 12 U.S.C. Section 1823(e). Jurisdiction, which according to the complaint is invoked under 12 U.S.C. § 1819 and 28 U.S.C. § 1345, is in dispute. We will resolve this issue in the course of this Opinion.

Defendant counterclaimed alleging the existence of an agreement to the effect that the note would not be collected until redemption by the Bank of $25,000 in debentures owned by him which had been pledged as collateral security for the aforesaid loan. Answering the counterclaim, plaintiff attacked the validity and enforceability of the alleged agreement and denied that the debentures were due and payable as a set-off. Plaintiff also asserted the illegality of the agreement relied upon by defendant.

The principal issues presented in this action concern the jurisdiction of this Court to entertain the claim and counterclaim and the validity and enforceability of the alleged agreement.

The facts, circumstances and documents pertinent to said issues have been stipulated by the parties and the case was submitted without a hearing on the basis of said stipulation; the transcript of defendant's deposition and briefs in support of the respective contentions of the parties. From the evidence submitted the Court makes the following findings:

The Bank was organized in 1966 under the provisions of the Savings Bank Act of Puerto Rico, 7 LPRA Sections 1001-1046. Defendant was the owner of the Bank debentures with a face value of $25,000.00,¹ and was also a director of the Bank until his resignation in April, 1976. About the time of his resignation he requested the then president of the Bank, Héctor Ceinós, to redeem his debentures which were about to mature or had already matured on April 15, 1975. The terms and conditions of the debenture notes held by defendant provided that payment of the principal amount "is subject to the approval of the Federal Deposit Insurance Corporation and of the Secretary of the Treasury of the Commonwealth of Puerto Rico" (the Secretary). They also provided that in case of receivership or liquidation of the Bank, payment of the debentures was subordinated to prior payment of depositors and other creditors of the Bank entitled to priority. There is no evidence that the required approval had been obtained. On the contrary, the minutes of the April 26, 1976 meeting of the Board of Directors of the Bank reflect the critical financial condition of the Bank and the Secretary's opinion that the maturity of the debentures be extended to April 15, 1981.

Due to the foregoing, the president of the Bank informed defendant that the only thing that could be done was to arrange for a loan at another bank, Banco Obrero, and after a year arrange for the Bank to lend defendant the funds to repay that loan. Defendant accepted the arrangement because he wanted his money and would have sued the Bank if the loan arrangement had not been made. Although the funds were to be received as a loan, he never intended its repayment except upon redemption of the debentures. The letter dated July 9, 1976 on which defendant relies provided that "under no circumstances will the Bank collect the loans granted until the Bank has repaid the debentures." The alleged agreement was never discussed, approved or ratified by the Board of Directors or the Bank's loan committee.

It should be noted that the letter itself never formed part of the Bank's official records. A copy of it was retained by the president, in his personal safe together with a similar letter to another director. Both letters were discovered during the course of the Bank's examination, at which time the president admitted to the examiners that the real purpose of the agreement was to "in effect prepay indirectly the debentures".

When the Banco Obrero loan became due, defendant requested the Bank to honor its commitment. According to the minutes his request was reported at the Board meeting of August 7, 1977 and it was resolved that a loan could be granted under the terms and conditions to be established by the Board. There is no evidence that such terms and conditions were ever established. However, on December 16, 1977 the Bank disbursed $25,000 for payment of the Banco Obrero loan and defendant delivered the debentures to the Bank as security for the loan. According to the then president of the Bank, Roberto López Alvarez, the loan was granted to avert defendant's threat of litigation, but neither the promissory note nor the other loan documents incorporated or made reference to the July 9, 1976 letter. The note provided for payment of monthly interest with an acceleration clause in the event of default. Defendant paid interest on his obligation even after the Bank closed, or until November 15, 1979 when he informed plaintiff that since the Bank had not paid interest on the debentures since April 1978, he would make no further interest payments. The note was then declared in default and this action commenced.

In the meantime the Bank had been closed on September 5, 1978 after the Secretary determined it was insolvent. Since the Federal Deposit Insurance Corporation was the insurer of the Bank's deposit liabilities, it was tendered appointment as receiver of the Bank under 7 LPRA Section 1031(a). Said appointment provided for specific authority and power to arrange for the purchase of some of the assets and assumption of deposit liabilities by another bank (the Assuming Bank). In order to effectuate that transaction, the Corporation has the power to sell to itself in its corporate capacity² the unacceptable assets of the Bank. As required by law, the FDIC, in its capacity as receiver, accepted the appointment tendered. 12 U.S.C. Section 1821(e).³ As Receiver it then entered into the transactions with the FDIC and with the assuming bank, Banco Comercial de Mayaguez, as authorized by the Secretary and approved by the order of the Superior Court of Puerto Rico dated September 5, 1978. Said order, approving the statutory procedure and transactions undertaken, is now final.⁴ Defendant's note was among the assets purchased by the FDIC from the Receiver of the Bank.

The Court specifically finds and concludes that the arrangement and agreement evidenced by the letter of July 9, 1976 was a subterfuge to circumvent legal and contractual impediments to redemption of the debentures. 7 LPRA Section 1017(b) and 12 U.S.C. Section 1828(i)(1). On the basis of the foregoing, the Court makes the following conclusions of law:

Federal jurisdiction to entertain the FDIC's claim is challenged on the basis that the suit is prosecuted by the Corporation in its capacity as receiver of a state bank and that it involves only the rights or obligations of depositors, creditors, stockholders and the state bank under state law. If so, the claim would be excluded from the jurisdictional grant of 12 U.S.C. Section 1819. However, the pleadings and evidence on record establish that the FDIC acquired the note from the Receiver pursuant to 12 U.S.C. Section 1821(e). The procedure followed has been recognized and sanctioned by federal courts in numerous decisions. Brown v. New York Life Insurance, 152 F.2d 246 (9th Cir. 1945); Lamberton v. FDIC, 141 F.2d 95 (3rd Cir. 1944); FDIC v. Rectenwall, 97 F.Supp. 273 (N.D.Ind.1951); FDIC v. Abraham, 439 F.Supp. 1150 (E.D. La.1977). Federal jurisdiction over suits to reduce to judgment assets and claims purchased by the corporation from the receiver of a bank under 12 U.S.C. Section 1823(e) has been repeatedly upheld. FDIC v. Ashley, 585 F.2d 157 (6th Cir. 1978); FDIC v. Godshall, 558 F.2d 220 (4th Cir. 1977); FDIC v. Abraham, supra, at 1153; FDIC v. López, 448 F.Supp. 843 (D.P.R.1978), affirmed, sub nom, FDIC v. Otero, 598 F.2d 627 (1st Cir. 1979). Jurisdiction to entertain plaintiff's claim based on the note so acquired is clear under the Act.

We find that the FDIC has a valid and enforceable interest in the note executed by defendant, that said obligation is presently in default and that defendant is liable for payment of principal, accrued interest thereon and penalties.

Defendant's counterclaim requesting a declaration that the debentures are due and payable by virtue of the alleged agreement and that a set-off be permitted, fails to state a claim upon which relief may be granted. The validity and enforceability of an agreement to defeat a claim by the FDIC on a note acquired under 12 U.S.C. Section 1823(e) is a federal question to be determined by reference to federal law. D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). The D'Oench case stands for the proposition that the Federal Deposit Insurance Act, 12 U.S.C. Sec. 1811 et seq., reveals a federal policy of protecting the FDIC and the public funds which it administers against misrepresentations as to assets in the portfolios of the banks which it insures. Id. at 457, 62 S.Ct. at 679. This policy is also reflected in 12 U.S.C. § 1823(e), second paragraph, which 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

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