IberiaBank v. Beneva 41–I, LLC

• Decision Date: 30 November 2012
• Docket Number: No. 11–11195.,11–11195.
• Citation: 701 F.3d 916
• Parties: IBERIABANK, a Louisiana banking corporation and authorized to do business in the State of Florida, Plaintiff–Appellee, v. BENEVA 41–I, LLC, a Florida limited liability company, Beneva 41–II, LLC, a Florida limited liability company, Beneva 41–III, LLC, a Florida limited liability company, Defendants–Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

701 F.3d 916

IBERIABANK, a Louisiana banking corporation and authorized to do business in the State of Florida, Plaintiff–Appellee,

v.BENEVA 41–I, LLC, a Florida limited liability company, Beneva 41–II, LLC, a Florida limited liability company, Beneva 41–III, LLC, a Florida limited liability company, Defendants–Appellants.

No. 11–11195.

United States Court of Appeals,Eleventh Circuit.

Nov. 30, 2012.

David A. Wallace, Williams, Parker, Harrison, Dietz & Getzen, Kevin Richard Bruning, Bentley & Bruning, PA, Sarasota, FL, for Plaintiff–Appellee.

Edward Vogler, II, Vogler Ashton, PLLC, Bradenton, FL, for Defendants–Appellants.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT, MARTIN and HILL, Circuit Judges.

TJOFLAT, Circuit Judge:

In this case, we are called upon to determine whether a sublease transferred by the Federal Deposit Insurance Corporation (“FDIC”) to Iberiabank after it took over the assets of a failed bank is enforceable despite a clause purporting to terminate the sublease on sale or transfer of the failed bank. The District Court granted summary judgment in favor of Iberiabank, holding that the termination clause was unenforceable against Iberiabank under 12 U.S.C. § 1821(e)(13)(A) (2006),¹ which grants the receiver authority to enforce contracts entered into by the failed bank notwithstanding clauses that purport to terminate the contracts on insolvency or receivership. Beneva appeals that decision, contending that Iberiabank has no authority to enforce the sublease and that, even if it does, the termination clause is enforceable because it does not fall within § 1821(e)(13)(A)'s prohibition on such clauses. Because we find that the FDIC acted within its power to enforce contracts under § 1821(e)(13)(A) and that the termination clause is unenforceable against Iberiabank as the FDIC's transferee, we affirm.

In Part I, we recount the facts of the case and the proceedings in the District Court. In Part II, we explain the statutory framework that governs the FDIC's powers when it acts as receiver of a failed bank. We then interpret § 1821(e)(13)(A) as it applies to the disputed sublease.

I.

A.

Beneva and Iberiabank became parties to the sublease at issue through a series of assignments. The sublease, which covers premises on which Iberiabank operates a bank branch, was executed on January 3, 1979, by Casto Developers as sublessor and National Bank Gulf Gate as sublessee. The term of the sublease was twenty years, with an option to renew for ten successive periods of five years each. The rent for each renewal period was set at 110% of the rent paid during the preceding term. The sublease provided that on termination of the agreement, the sublessee would surrender the premises to the sublessor.

Sometime between 1979 and 2002, National Bank Gulf Gate was merged into or acquired by SunTrust Bank. On April 26, 2002, SunTrust assigned its interests in the sublease to Orion Bank. Orion paid SunTrust $1,051,000 for the improvements on the property. Casto Investments Company, Ltd., successor-in-interest to Casto Developers, signed a Memorandum of Lease with Orion. At that time, the original term of twenty years had run and the current term of the lease was for five years commencing June 3, 1999. An option to renew for nine additional five-year periods remained.

On January 8, 2009, Orion was notified that Casto had sold the subleased property to Beneva. On August 31, 2009, Beneva and Orion entered into an amendment to the sublease. The amendment provided that the sublease term would be extended to June 3, 2049, the expiration date of the final five-year extension in the original sublease. Orion agreed to pay Beneva $1.75 million as a “lease extension incentive.”² The amendment also contained a termination clause, which is at issue in this case. It provides: “3. Termination. Sublessor shall have the right to terminate the Sub-lease if (i) Orion is sold and/or transferred to another banking institution, or (ii) Orion sells and/or transfers all or substantially all of its assets.”

On November 13, 2009, the Florida Office of Financial Regulation closed Orion and appointed the FDIC receiver, with authorization to take charge and possession of all assets of Orion.³ That same day, the FDIC and Iberiabank entered into a Purchase and Assumption Agreement under which Iberiabank agreed to purchase Orion's assets and assume certain of its liabilities, duties, and obligations. On June 29, 2010, Beneva notified Iberiabank that, pursuant to the termination clause contained in the amendment entered into by Iberiabank's predecessor, Orion, Beneva was exercising its right to terminate the sublease. The notice stated, “This provision was specifically negotiated to allow Sublessor the right to terminate the Sublease in events such as when Orion was closed by the FDIC and its assets were transferred to Iberiabank.” Beneva gave Iberiabank one year to vacate the premises, as provided by the sublease.

B.

Iberiabank brought this declaratory judgment action in the District Court for the Middle District of Florida on July 26, 2010. It asked the court to rule that the termination clause was unenforceable under 12 U.S.C. § 1821(e)(13)(A) and thus the sublease was still in effect without the termination clause.⁴ Iberiabank also asked for attorney's fees and costs as provided in the sublease.

On January 25, 2011, before discovery had been completed, Iberiabank moved for summary judgment. The District Court entered judgment in favor of Iberiabank on February 11, 2011. It concluded that the FDIC had “the absolute right to assume the sublease and transfer it to the Plaintiff,” and that the termination clause operated as an ipso facto clause⁵ and was therefore unenforceable against the successor-in-interest to the FDIC under 12 U.S.C. § 1821(e)(13)(A). The court opined that the termination clause would render Orion's assets “worthless,” thus destroying the FDIC's ability to sell the failed bank's assets.

This appeal followed. Beneva argues, inter alia,⁶ that summary judgment in favor of Iberiabank should be reversed because Iberiabank has no right to enforce the sublease and, even if it does, the termination clause is not an ipso facto clause and is thus enforceable against Iberiabank.⁷

II.

We review a district court's grant of summary judgment de novo. Holloman v. Mail–Well Corporation, 443 F.3d 832, 836 (11th Cir.2006). We consider the evidence in the light most favorable to the nonmoving party. Id. Summary judgment is appropriate when there is no genuine issue of material fact and the evidence compels judgment as a matter of law in favor of the moving party. Id. at 836–37.

There appear to be no genuine issues of material fact in this case. Beneva and Iberiabank's dispute involves construction of § 1821(e)(13)(A) and application of the statute to the sublease and amendment at issue, which are matters of law appropriate for summary judgment. We first describe the statutory background on which the issues play out before turning to the merits of the case.

A.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), Pub.L. No. 101–73, 103 Stat. 183 (codified as amended in scattered sections of 12 U.S.C.), was enacted to strengthen regulation of the nation's financial system in the wake of the savings and loan crisis of the 1980s.⁸ The Act provides a mechanism for dealing with financially distressed banks in a way that preserves their going-concern value. McAndrews v. Fleet Bank of Massachusetts, N.A., 989 F.2d 13, 15 (1st Cir.1993). It grants the FDIC broad powers under 12 U.S.C. § 1821 to manage the affairs of insolvent banks as receiver or conservator.

When the FDIC is appointed conservator or receiver, it succeeds to “all rights, titles, powers, and privileges of the insured depository institution.” § 1821(d)(2)(A)(i). It may operate the institution, § 1821(d)(2)(B), or it may “transfer any asset or liability of the institution in default ... without any approval, assignment, or consent with respect to such transfer,” § 1821(d)(2)(G)(i)(II). The FDIC may also “exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this chapter and such incidental powers as shall be necessary to carry out such powers.” § 1821(d)(2)(J)(i).

The FDIC's powers with respect to contracts entered into before its appointment as conservator or receiver are provided in § 1821(e). The receiver has the authority to repudiate or disaffirm any contract or lease to which the depository institution is a party if the receiver determines that it would be burdensome and that repudiation would “promote the orderly administration of the institution's affairs.” § 1821(e)(1).⁹ Conversely, § 1821(e)(13)(A) provides that the FDIC may enforce contracts entered into by the depository institution:

The conservator or receiver may enforce any contract, other than a director's or officer's liability insurance contract or a depository institution bond, entered into by the depository institution notwithstanding any provision of the contract providing for termination, default, acceleration, or exercise of rights upon, or solely by reason of, insolvency or appointment of or the exercise of rights or powers by a conservator or receiver.

It is § 1821(e)(13)(A) that is at issue in this case. Beneva argues that Iberiabank has no power to enforce the sublease under § 1821(e)(13)(A) because the statute grants that power only to a conservator or receiver. ¹⁰ Beneva further argues that, even if Iberiabank does have the power to enforce the sublease, the termination clause bars enforcement of the sublease because the termination clause does not fall within the language of § 1821(e)(13)(A).

Although the District Court determined that Iberiabank, as the FDIC's successor-in-interest, could enforce the contract, we do not agree that Iberiabank is attempting to enforce...