E.I. du Pont de Nemours and Co. v. F.D.I.C.
Decision Date | 26 August 1994 |
Docket Number | No. 92-5384,92-5384 |
Citation | 32 F.3d 592 |
Parties | , 63 USLW 2166 E.I. DU PONT DE NEMOURS AND COMPANY, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver for United National Bank of Washington, Appellee. |
Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from the United States District Court for the District of Columbia (Civil Action No. 89cv00942).
Raymond Michael Ripple argued the cause for appellant. With him on the briefs was David W. O'Brien. Dale A. Cooter and Cyrus J. Gardner entered an appearance.
J. Scott Watson, Sr. Atty., F.D.I.C., argued the cause for appellee. With him on the brief were Ann S. DuRoss, Asst. Gen. Counsel, and Richard J. Osterman, Jr., Sr. Counsel, F.D.I.C., Dennis S. Klein and Steven T. Corliss.
Before EDWARDS, BUCKLEY, and GINSBURG, Circuit Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
E.I. du Pont de Nemours and Co. sued the Federal Deposit Insurance Corporation, in its capacity as receiver of the United National Bank, for the bank's breach of its responsibilities under an escrow agreement. The district court granted summary judgment for the FDIC on the ground that, under the teaching of D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), the FDIC may not be sued on an escrow agreement that by its terms has expired. Because we find D'Oench and its statutory counterparts inapplicable, we remand the case for further proceedings in the district court.
For the purpose of this appeal we accept as true the following facts alleged in du Pont's complaint. See Kowal v. MCI Communications Corp., 16 F.3d 1271, 1273 (D.C.Cir.1994). In November 1982 Kimberly Industries Co. was awarded a contract to supply the District of Columbia with ferric chloride. On December 20, 1982 Kimberly contracted to buy from du Pont all of its requirements for "delivery to the District of Columbia of liquid ferric chloride during 1983," and du Pont agreed to make ferric chloride available to Kimberly for 1983 and thereafter under any extension or renewal of its contract with the District of Columbia. Kimberly was not "obligated to continue to obtain ferric chloride from [du Pont] for any period beyond December 31, 1983," but Kimberly did agree to give du Pont the opportunity to match any better offer it received. The contract also provided that du Pont and Kimberly would enter into an escrow agreement with Kimberly's bank, the United National Bank of Washington, "to provide for automatic payment to [du Pont] of all amounts due to it" under the contract with Kimberly. The escrow agreement provided that Kimberly would arrange for the District of Columbia to pay into the escrow account all "amounts payable to [Kimberly] ... for delivery of liquid Ferric Chloride during 1983." UNB would pay du Pont's invoices "within ten (10) days of receipt of payment by the District of Columbia."
Throughout 1983 UNB made payments to du Pont in keeping with the terms of the escrow agreement. Kimberly's contract with the District of Columbia was renewed several times, and from all appearances so too was the escrow arrangement, for du Pont "generally received payments from UNB on time from 1983 through 1985." Unbeknownst to du Pont, however, from March 1985 to March 1988 the District sent checks directly to Kimberly rather than to UNB. Kimberly deposited at least some of those funds into the escrow account and UNB continued to receive and to make payments upon du Pont's invoices when Kimberly directed it to do so. In 1986, when du Pont's accounts receivable began to mount and Kimberly told du Pont that the District was late in making payments to the bank, UNB assured du Pont that the mechanics of the escrow agreement remained in effect. By March 1988, du Pont had invoiced UNB for more than $1 million worth of ferric chloride that Kimberly had not authorized the bank to pay.
Du Pont sued UNB in April 1989, alleging negligence, breach of the escrow agreement, and breach of fiduciary duty. In March 1991, the district court denied UNB's motion for summary judgment, in which the bank claimed that the escrow agreement had expired in 1983. The district court held that du Pont could try to prove that the parties had extended the escrow agreement by their conduct. In April of that year UNB merged with Madison National Bank, which was declared insolvent in May. The FDIC was then appointed receiver and substituted as the defendant in this case.
The FDIC moved anew for summary judgment, arguing that in a suit against the FDIC as receiver du Pont is barred by federal law from asserting liability under an agreement not reflected in the records of the bank in receivership. The district court granted that motion, noting that the substitution of the FDIC as receiver "fundamentally alter[ed] the posture of the case," because "the FDIC's legal rights are significantly different than those of the banks for whom it is a receiver." Whereas in a suit against UNB du Pont might be able to prove that the parties "perpetuated by conduct the escrow relationship," the court held that, under D'Oench Duhme & Co. v. Federal Deposit Insurance Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), and its statutory counterparts such a showing may not be made in a suit against the FDIC. Du Pont appeals.
The question presented by this appeal is whether du Pont is barred under the doctrine of D'Oench, or by 12 U.S.C. Secs. 1823(e) or 1821(d)(9)(A), from asserting claims against the FDIC for UNB's negligence and breach of fiduciary duty arising out of the 1983 escrow agreement as allegedly extended by the parties' conduct. We review such a question of law de novo.
The FDIC's "basic mission is to protect insured depositors." Villafane-Neriz v. FDIC, 20 F.3d 35, 39 (1st Cir.1994). When an insured bank fails, the FDIC plays two roles under the National Bank Act, 12 U.S.C. Sec. 21 et seq. In its corporate capacity, i.e. as insurer of deposits, the FDIC either pays depositors' claims in cash or "mak[es] available to each depositor a transferred deposit in another insured bank in an amount equal to the insured deposit." 12 U.S.C. Sec. 1821(f). In its capacity as court-appointed receiver, the FDIC steps into the shoes of the failed bank and takes possession of its assets and liabilities. Vernon v. FDIC, 981 F.2d 1230, 1234 (11th Cir.1993). As receiver the FDIC has a responsibility to marshal the assets of the bank and to distribute them to the bank's creditors and shareholders. Branch v. FDIC, 825 F.Supp. 384, 392 (D.Mass.1993). In performance of its duties, the FDIC may operate the institution, liquidate it, merge it with another insured bank, transfer some or all of its assets to another bank, create a new bank, or structure a transaction that combines two or more of those options. 12 U.S.C. Sec. 1821(d). In the vast majority of cases, however, the FDIC arranges a "purchase and assumption" of the failed bank's assets and liabilities respectively.
[T]he FDIC as receiver arranges to sell acceptable assets of the failed bank to an insured, financially sound bank, which assumes all of the corresponding deposit liabilities and reopens the failed bank without an interruption in operations or loss to depositors. The FDIC as receiver then sells to the FDIC in its corporate capacity the assets that the assuming bank declined to accept. The corporate entity of the FDIC in turn attempts to collect on the unacceptable assets to minimize the loss to the insurance fund.
Grubb v. FDIC, 868 F.2d 1151, 1155 (10th Cir.1989). A purchase and assumption "must be made with great speed, usually overnight, in order to preserve the going concern value of the failed bank and avoid an interruption in banking services." Langley v. FDIC, 484 U.S. 86, 91, 108 S.Ct. 396, 401, 98 L.Ed.2d 340 (1987) (internal quotation marks omitted).
Du Pont brings suit against the FDIC in its capacity as receiver. The FDIC claims immunity on the basis of a federal common law doctrine that originated with the D'Oench case. In that case a securities dealer had sold the Belleville Bank & Trust Company of Illinois bonds upon which the issuer subsequently defaulted. So that the bank could avoid carrying past due bonds on its books, the securities dealer executed unconditional notes in the face amount of the bonds and made certain interest payments upon them for the purpose of keeping them up "as live paper." Id. 315 U.S. at 454, 62 S.Ct. at 678. The receipt for the dealer's notes indicated that they would not be called for payment and that all interest payments would be repaid. When the bank failed the FDIC stepped in as receiver and demanded payment of the notes. The securities dealer asserted lack of consideration, as well as the side agreement, but the Supreme Court held that "an accommodation maker is not allowed th[e] defense [of no consideration] as against the receiver of the bank ... where his act contravenes a general policy to protect the institution of banking from such secret agreements." Id. at 458, 62 S.Ct. at 680. The Court said that although the arrangement was not an outright violation of the National Bank Act, to allow the defense would nonetheless violate the policy behind the Act, viz. "to protect [the FDIC] from misrepresentations made to induce or influence [it,] including misstatements as to the genuineness or integrity of securities in the portfolios of banks which it insures or to which it makes loans." Id. at 459, 62 S.Ct. at 680. The Court explained:
The test is whether the note was designed to deceive the creditors or the public authority or would tend to have that effect. It would be sufficient in this type of a case that the maker lent himself to a scheme or arrangement whereby the banking authority on which respondent relied in insuring the...
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