Grubb v. Federal Deposit Ins. Corp.

• Decision Date: 10 November 1987
• Docket Number: 86-1728,Nos. 86-1687,s. 86-1687
• Citation: 833 F.2d 222
• Parties: , 5 UCC Rep.Serv.2d 735 Ron GRUBB and Weatherford Interstate Financial Corporation, Plaintiffs- Appellees, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 222

833 F.2d 222

9 Fed.R.Serv.3d 759, 5 UCC Rep.Serv.2d 735

Ron GRUBB and Weatherford Interstate Financial Corporation Plaintiffs- Appellees, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellant.

Nos. 86-1687, 86-1728.

United States Court of Appeals Tenth Circuit.

Nov. 10, 1987.

Opinion on Denial of Rehearing and Rehearing En Banc Feb. 16, 1988.

Michael Paul Kirschner (Jackie L. Hill, Jr., with him on the briefs) of Hastie and Kirschner, Oklahoma City, Okl., for defendant-appellant.

Terry W. Tippens (Eric S. Eissenstat with him on the briefs) of Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, Okl., for plaintiffs-appellees.

Before SEYMOUR, McWILLIAMS and MOORE, Circuit Judges.

SEYMOUR, Circuit Judge.

Federal Deposit Insurance Corporation (FDIC) has moved this court to exonerate supersedeas bonds posted to secure a stay of execution of the judgments below pending this appeal. FDIC contends that, as an entity of the United States government, it is entitled by 28 U.S.C. Sec. 2408 (1982) to be relieved of the obligation to furnish and maintain security. We disagree with this contention and deny the motion to exonerate.

Plaintiffs Ron Grubb and Weatherford Interstate Financial Corporation (Grubb) instituted this suit for damages against First National Bank & Trust Company of Oklahoma City ^B, alleging that FNB violated federal and Oklahoma securities laws. Judgment was entered in favor of Grubb and FNB appealed. In accordance with Fed.R.Civ.P. 62(d), FNB posted a supersedeas bond to secure a stay of execution of the judgment pending its appeal. The bond provides as follows:

"Pursuant to the Order of the United States District Court ... The First National Bank and Trust Company of Oklahoma City hereby acknowledges its obligation to deposit Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000.00) in lawful money or negotiable bonds of the United States with the Clerk....

"The instrument is filed as security for a stay of execution of judgment pending appeal in the above-named action pursuant to Rule 62(D) [62(d) ], Fed.R.Civ.P.

"This obligation arises by virtue of the judgment entered herein on October 31, 1985, in favor of Ronald Grubb against The First National Bank and Trust Company of Oklahoma City in the amount of Two Million Seven Hundred Twenty-Two Thousand Six Hundred Twenty-Nine and 88/100 Dollars ($2,722,629.88)....

"Pursuant to Rule 25(D) [25(d) ] of the Rules of the United States District Court for the Western District of Oklahoma, in lieu of corporate surety, The First National Bank and Trust Company of Oklahoma City hereby deposits a fully secured and negotiable Certificate of Deposit with the Clerk.... Evidence of the fact that the Certificate of Deposit is fully secured will be provided to the Clerk of this Court by the Federal Reserve Bank. Copies of the certificate of deposit and the pledge receipt are attached hereto and made a part hereof.

"The condition of this obligation and deposit is such that if The First National Bank and Trust Company of Oklahoma City shall fully perform and comply with said judgment and the further orders or judgment of this Court in the event the same shall be affirmed in whole or in part, and if The First National Bank and Trust Company of Oklahoma City shall further pay costs, interest and damages for delay if the appeal is dismissed or the judgment is affirmed, or such judgment as the appellate court may award if the judgment is modified, then this obligation is void, and all obligations under this bond are discharged, otherwise this bond shall remain in full force and effect and the said Certificate of Deposit, or proceeds thereof, and accrued interest thereon shall be used immediately to satisfy all judgments, orders and accruals thereon owned [sic] by The First National Bank and Trust Company of Oklahoma City to Ronald Grubb."

(Emphasis added). Pursuant to the terms of the bond, FNB deposited both the bond and an FNB certificate of deposit (CD) with the district court clerk. The CD was secured by Treasury obligations of the United States owned by FNB. A similar bond and CD were executed and deposited with the clerk to secure a stay of execution pending FNB's appeal of a second judgment awarding Grubb attorneys' fees and post-judgment interest.

After the bonds were deposited with the district court and during FNB's appeal, the Comptroller of the Currency declared FNB insolvent and appointed FDIC as the bank's receiver. Pursuant to the plan for receivership, FDIC transferred the assets of FNB to First Interstate Bank of Oklahoma City (FIB). FIB CDs were substituted for the FNB CDs as collateral for the bonds. The FIB CDs were also secured by United States Treasury obligations. This court granted FDIC's motion to be substituted for FNB as appellant. FDIC then moved us to exonerate the bonds.

FDIC argues that the bonds should be exonerated because of the provisions of 28 U.S.C. Sec. 2408, which provide as follows:

"Security for damages or costs shall not be required of the United States, any department or agency thereof or any party acting under the direction of any such department or agency on the issuance of process or the institution or prosecution of any proceeding."

FDIC claims that it qualifies as an agency of the United States, and that the plain language of section 2408 requires that we exonerate the bonds. For the reasons set out below, we are not persuaded and therefore deny FDIC's motion.

We first address, as a preliminary matter, Grubb's argument that we should not consider the motion to exonerate because FDIC did not first attempt to secure relief in the district court and thus failed to comply with Rule 8(a) of the Federal Rules of Appellate Procedure. The rule provides in part as follows:

"Application for a stay of the judgment or order of a district court pending appeal, or for approval of a supersedeas bond, or for an order suspending, modifying, restoring or granting an injunction during the pendency of an appeal must ordinarily be made in the first instance in the district court. A motion for such relief may be made to the court of appeals or to a judge thereof, but the motion shall show that application to the district court for the relief sought is not practicable, or that the district court has denied an application, or has failed to afford the relief which the applicant requested, with the reasons given by the district court for its action."

Fed.R.App.P. 8(a) (emphasis added). Although we agree that as a general rule matters pertaining to supersedeas bonds should be initially presented to the district court, see Fed.R.App.P. 8(a) advisory committee notes, that general rule applies principally to factual questions, such as the amount or conditions of a bond, because the trial judge who is familiar with the record and the parties is best able to make those judgments. See Cumberland Tel. & Tel. Co. v. Louisiana Pub. Serv. Comm'n, 260 U.S. 212, 219, 43 S.Ct. 75, 77, 67 L.Ed. 217 (1922). Whether the bonds in this case should be exonerated is a question of law, however. In the exercise of our discretion, we elect to decide the exoneration issue without requiring the FDIC to first present it to the trial court.

Grubb claims that the bonds and their collateral, once they were deposited as security with the district court, ceased to be property of FNB and therefore are not now assets of the receivorship that are available to FDIC for distribution to creditors. Thus, Grubb argues, FDIC has no authority to assert that the security should be released.

Grubb cites as authority for this proposition Mid-Jersey Nat'l Bank v. Fidelity-Mortgage Investors, 518 F.2d 640 (3d Cir.1975), a case arising in the analogous private bankruptcy context. In Mid-Jersey, the plaintiff bank was granted summary judgment for the amount owing on an overdue promissory note. The judgment was stayed pending appeal when the defendant made a deposit in court in lieu of a supersedeas bond. The deposit was in the form of a negotiable certificate of deposit. While the appeal was pending, the defendant filed for reorganization under Chapter XI and claimed that the appeal was automatically stayed by Bankruptcy Rule 11-44(a).

The court in Mid-Jersey held that the stay required by Rule 11-44(a) extends only to proceedings that could divest the debtor of property over which the bankruptcy court has jurisdiction. Id. at 643. The court then stated as follows:

"The question we must resolve, therefore, is whether the certificate deposited in the district court is the property of the debtor over which the Chapter XI court has exclusive jurisdiction. We hold that, in the context of this case, such a deposit in court is not the property of the debtor and is not subject to the after-arising jurisdiction of the Chapter XI court.

....

"Although the legal status of a deposit in court pending an appeal is not entirely pellucid, we are of the opinion that such a deposit in custodia legis may be considered the res of a trust. The court acts as trustee and is charged with the duty of determining the beneficiaries pursuant to the appeal."

Id. (emphasis added). After reviewing some analogous cases, the court further held that

"FMI parted with its ownership of the certificate of deposit when the certificate was entrusted to the court. Since then, the only property interest FMI has had in the certificate is a contingent reversionary interest as a potential beneficiary of the trust. Once we have determined that FMI does have an interest in the trust funds, the Chapter XI court would, of course, have jurisdiction over any funds to which the debtor has a rightful claim. At present, however, the Court is able to proceed with determining which party is entitled to receive the trust res and its accumulated interest.

"Employment of this analysis preserves the function of the deposit as protection for the party prevailing at the trial level from...