In re Collins Securities Corp.

• Decision Date: 26 June 1992
• Docket Number: No. LR-C-92-267,Bankruptcy No. 85-448 S.,LR-C-92-267
• Citation: 145 BR 277
• Parties: In re COLLINS SECURITIES CORPORATION. Harvey L. BELL, Trustee for the Liquidation of the Business of Collins Securities Corporation, Appellant/Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION as Successor to Federal Savings and Loan Insurance Corporation as Receiver for FirstSouth Federal Savings and Loan Association; Federal Deposit Insurance Corporation as Successor to Federal Savings and Loan Insurance Corporation; Insurance Division, Appellees/Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

145 B.R. 277 (1992)

In re COLLINS SECURITIES CORPORATION.

Harvey L. BELL, Trustee for the Liquidation of the Business of Collins Securities Corporation, Appellant/Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION as Successor to Federal Savings and Loan Insurance Corporation as Receiver for FirstSouth Federal Savings and Loan Association; Federal Deposit Insurance Corporation as Successor to Federal Savings and Loan Insurance Corporation; Insurance Division, Appellees/Defendants.

No. LR-C-92-267, Bankruptcy No. 85-448 S.

United States District Court, E.D. Arkansas, W.D.

June 26, 1992.

Harvey Bell, trustee.

William Owen, Little Rock, Ark., for trustee.

Barbara Webb, Charles Cope, Z. Scott Birdwell, Washington, D.C., for appellees/defendants.

ORDER

STEPHEN M. REASONER, Chief Judge.

The Court has received proposed Report and Recommendation for entry of Summary Judgment pursuant to 28 U.S.C. § 157(c)(1) from United States Bankruptcy Judge Mary Davies Scott. After careful review of that Report and Recommendation, and the timely objections received thereto, the Court concludes that the Report and Recommendation should be, and hereby is, approved and adopted in its entirety as this Court's findings in all respects. Therefore, the Motion to Dismiss and/or for Summary Judgment, filed on May 7, 1991, by the Federal Deposit Insurance Corporation (Receiver) is hereby granted and the cause dismissed as to the FDIC/Receiver; the Motion for Summary Judgment as to defendant FDIC/Corporate, filed by the trustee on May 7, 1991, is hereby denied; Federal Deposit Insurance Corporation's (Corporate) Motion to Dismiss or, in the Alternative, for Summary Judgment, filed on May 7, 1991 is granted and the cause dismissed as to Count I, and Summary Judgment is entered in favor of FDIC/Corporate as to Count II. Judgment will be entered accordingly.

IT IS SO ORDERED.

REPORT TO THE U.S. DISTRICT COURT AND RECOMMENDATION FOR ENTRY OF SUMMARY JUDGMENT PURSUANT TO 28 U.S.C. § 157(c)(1)

Filed March 4, 1992.

MARY DAVIES SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon three motions for summary judgment and alternative motions to dismiss filed by the parties. On April 29, 1991, the defendant Federal Deposit Insurance Corporation in its corporate capacity¹ filed a motion in district court for withdrawal of reference of this adversary proceeding. On January 23, 1992, the United States District Court for the Eastern District of Arkansas denied the motion as untimely. The following motions are now before the Bankruptcy Court:

1. Motion to Dismiss and/or for Summary Judgment, filed on May 7, 1991, by the Federal Deposit Insurance Corporation (Receiver).

2. Motion for Summary Judgment as to Defendant FDIC/Corporate, filed by the trustee on May 7, 1991.

3. Federal Deposit Insurance Corporation's (Corporate) Motion to Dismiss or, in the Alternative, for Summary Judgment, filed on May 7, 1991.

I. BACKGROUND AND STIPULATIONS

The complaint seeks recovery on two grounds. First, the trustee seeks to hold either the FDIC/Corporate or FDIC/Receiver liable for the purported tortious acts by FirstSouth. Secondly, in Count II, the trustee seeks to hold either defendant liable on a federal deposit insurance claim. The complaint alleges that employees of FirstSouth wrongfully paid the account to an improper party. On the basis of these allegations, the trustee asserts that the FDIC should be responsible for reimbursing the trustee for the insured value of $100,000.

At the outset, it is important to distinguish between the causes of action asserted by the trustee and in which capacity the Federal Deposit Insurance Corporation may be sued. The trustee asserts liability on both counts against the FDIC in both capacities. These assertions are not supported by the law. The FDIC exists by statute in two capacities: as an insurer and as receiver for defunct financial institutions. See generally part II(C), infra. As an insurer, the FDIC is liable on insurance claims for deposits which meet the statutory and regulatory criteria. Accordingly, FDIC/Corporate is the only proper party under Count II of the complaint. See generally part II(D)(3), infra. As receiver, the FDIC liquidates the assets of defunct institutions and pays claims against the institution from those assets. Count I which has as its basis, a claim of tort against the insolvent institution, can only be asserted against the FDIC in its receivership capacity. See generally part II(D)(2), infra. The refusal of the trustee to make these well-settled distinctions causes confusion in his argument, and thereby error in his analysis.

In order to resolve the numerous motions, particularly the Motions for Summary Judgment the Court looks primarily to the stipulated facts filed by the parties. These have been signed by the parties and constitute uncontested facts. The stipulations are set forth in full:

"1. Harvey L. Bell is the duly appointed Trustee for the liquidation of the business of Collins Securities Corporation ("Estate"). Collins Securities Corporation ("CSC") was at all times relevant to this cause of action a corporation organized and existing under the laws of the State of Arkansas with its principal place of business located in Little Rock, Pulaski County, Arkansas.

"2. Collins Investment Corporation ("CIC") was at all times relevant to this cause of action, the parent corporation of CSC and was organized under the laws of the State of Arkansas with its principal place of business located in Little Rock, Pulaski County, Arkansas. CIC is a defunct corporation.

"3. FirstSouth Federal Savings and Loan Association ("FirstSouth") is and was at all time relevant to this cause of action a corporation organized and existing under the laws of the United States of America as a savings and loan institution with its principal office located in Pine Bluff, Jefferson County, Arkansas, and a branch office located in Little Rock, Pulaski County, Arkansas. FirstSouth was closed by the Federal Home Loan Bank Board on December 4, 1986, and the Federal Savings and Loan Insurance Corporation ("FSLIC") was appointed Receiver for FirstSouth. FSLIC was abolished by the Financial Institution Reform, Recovery and Enforcement Act of 1989. Publ.L. No. 101-73, 103 Stat. 183, 1485 (1989) ("FIRREA"). FIRREA further provided for FDIC to assume all rights, duties and obligations of FSLIC as they existed on the day prior to the abolishment of FSLIC.

"4. On September 2, 1987, the Estate filed claims with FSLIC as Receiver for FirstSouth and FSLIC as Insurer of the accounts of FirstSouth. The Estate filed claims as a general creditor, secured creditor and holder of an insured account.

"5. On January 29, 1985, Kar-Mal Venture Capital ("Kar-Mal") opened a Certificate of Deposit Account (the "Account") with FirstSouth, Account No. X-XX-XXXXXXXX in the amount of $100,000.00, as evidenced by FirstSouth's Certificate of Deposit Number 3727.

"6. On February 29, 1985, the Account maturity date was extended, as evidenced by FirstSouth's Certificate of Deposit number 2836.

"7. On April 8, 1985, FirstSouth wired the proceeds of the Account to the personal account of Tom Karham in Las Vegas, Nevada.

"8. FirstSouth was closed by the Federal Home Loan Bank Board on December 4, 1986, and the Federal Savings and Loan Insurance Corporation was appointed Receiver for FirstSouth (the "Receiver.")

"9.²

"10. In November of 1986, Harvey L. Bell, Trustee filed AP 86-605 in this proceeding 85-448S (SIPA), asserting a claim for money damages against FirstSouth for breach of contract and negligence.

"11. FSLIC as Receiver for FirstSouth, F.A., filed a Motion to Dismiss for failure to exhaust administrative remedy and for other jurisdictional reasons.

"12. On April 21, 1987, AP 86-605 was dismissed without prejudice.

"13. On March 23, 1989, the Insurance Division of FSLIC denied the aforesaid claim by the Plaintiff as the holder of an insured account.

"14. On June 29, 1989, FSLIC as Receiver for FirstSouth, F.A. denied the aforesaid secured creditor claim and admitted the general creditor claim. The Plaintiff is not seeking an appeal or judicial review of the denial of a secured claim by the Receiver.

"15. On September 28, 1989, the Federal Deposit Insurance Corporation, Division of FSLIC Operations ("FDIC") denied the Trustee's request for reconsideration of the FSLIC's (Insurance Division) determination that the Estate was not the holder of an insured account.

"16. On July 28, 1989, defendant, FDIC as Receiver for First South, F.A., delivered check number 13077 in the amount of $2,822.20, and on December 8, 1989, the FDIC as Receiver for First South F.A., delivered check number 16167 in the amount of $4,685.50 to Trustee in partial satisfaction of the allowed unsecured claim.

"17. FSLIC (FDIC), Insurer, did insure the accounts of depositors with FirstSouth in place on the date of shutdown as defined in the applicable statutes and regulations to the extent of $100,000.00.

"18. 12 C.F.R. § 564.1(a) and (b) states:

(a) General. In the event of a default by an insured institution, the Corporation will promptly determine, from the account contracts and the books and records of the institution, or otherwise, the insured members thereof and the amount of the insured account or accounts of each such member . . .

(b) Amount of the insured account. The amount of an insured account is the amount which the insured member would have been entitled to withdraw as of the date of default . . . (Emphasis added). sic

"19. The books and records of FirstSouth reflect that the funds in Account No. X-XX-XXXXXXXX were withdrawn on April 8, 1985."

II. THE DISPOSITIVE MOTIONS

Three dispositive motions are before the court. Each party, the trustee, the FDIC/Receiver, and the FDIC/Corporate have filed motions for summary judgment. The motions by the FDIC entities are framed as alternate motions to dismiss.

The trustee has not...