Jackson v. Thweatt

• Citation: 883 S.W.2d 171
• Decision Date: 09 March 1994
• Docket Number: Nos. D-3057,D-3437,s. D-3057
• Parties: Cordus JACKSON, Jr., Petitioner, v. Gary THWEATT, Respondent. FEDERAL DEBT MANAGEMENT, INC., Petitioner, v. Lee WEATHERLY, Respondent.
• Court: Texas Supreme Court

Page 171

883 S.W.2d 171

62 USLW 2595

Cordus JACKSON, Jr., Petitioner, v. Gary THWEATT, Respondent.

FEDERAL DEBT MANAGEMENT, INC., Petitioner, v. Lee WEATHERLY, Respondent.

Nos. D-3057, D-3437.

Supreme Court of Texas.

March 9, 1994.

Rehearing Overruled April 20, 1994.

John Gregory Hale, Houston, Don Busby, Temple, Steven T. Polino and James Masek, Dallas, for petitioners.

Jon H. Burrows, Jack R. Crews, Temple and Robert H. Renneker, Dallas, for respondents.

Chief Justice PHILLIPS delivered the opinion of the Court in which all Justices join. Justice ENOCH not sitting.

Under 12 U.S.C. § 1821(d)(14), the FDIC has six years to bring suit on delinquent notes acquired from a failed bank. The issue presented in these consolidated cases is whether purchasers of such notes from the FDIC obtain the benefit of this federal limitations period. Because we conclude that they do, we affirm the judgment of the court of appeals in Jackson v. Thweatt, 838 S.W.2d 725, and reverse the judgment of the court of appeals in Federal Debt Management, Inc. v. Weatherly, 842 S.W.2d 774. Both causes are remanded to the trial court for further proceedings.

I Jackson v. Thweatt

Cordus Jackson Jr. executed a promissory note to the People's National Bank of Lampasas in January 1984, which he failed to pay when it became due on May 3, 1984. The Federal Deposit Insurance Corporation ("FDIC") became the owner and holder of the note on April 18, 1985, when it was appointed receiver for the bank. On December 28, 1988, the FDIC sold the note to Gary Thweatt.

Thweatt sued Jackson on the note on April 15, 1991. The trial court granted Jackson's subsequent motion for summary judgment based on the four-year limitations period set forth in Tex.Civ.Prac. & Rem.Code § 16.004. The court of appeals reversed, concluding that, because Thweatt acquired the note from the FDIC, the suit was governed by the six-year limitation period set forth in 12 U.S.C. § 1821(d)(14). 838 S.W.2d at 728. As this limitation period did not begin running until April 18, 1985, when the FDIC was appointed receiver, Thweatt's suit was held to be timely.

Federal Debt Management, Inc. v. Weatherly

Lee Weatherly defaulted on three promissory notes payable to Heritage National Bank maturing between September and November, 1986. The FDIC acquired the Weatherly notes on September 25, 1986, when it was appointed receiver for the bank. On October 27, 1989, it sold the notes to Federal Debt Management, Inc. ¹ Federal Debt Management sued Weatherly on the notes on April 15, 1991. As in Thweatt, the trial court granted summary judgment for the defendant based on the Texas four-year statute of limitations. The court of appeals affirmed, concluding that the six-year limitations period under 12 U.S.C. § 1821(d)(14) did not apply to actions filed by assignees of the FDIC. 842 S.W.2d at 779.

The courts of appeals in Thweatt and Weatherly thus reached opposite conclusions on this important issue. We granted both applications for writ of error to resolve this conflict.

II

12 U.S.C. § 1821(d)(14) provides as follows:

(A) In General

Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation ² as conservator or receiver shall be--

(i) in the case of any contract claim, the longer of--

(I) the 6-year period beginning on the date the claim accrues; or

(II) the period applicable under State law....

(B) Determination of the date on which a claim accrues

For purposes of subparagraph (A), the date on which the statute of limitation begins to run on any claim described in such subparagraph shall be the later of--

(i) the date of appointment of the Corporation as conservator or receiver; or

(ii) the date on which the cause of action accrues.

This provision was enacted in 1989 as part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub.L. No. 101-73, § 212(d)(14), 103 Stat. 183, 232-33 (1989). ³

Jackson and Weatherly do not dispute that the collection suits against them would be timely if governed by section 1821(d)(14). They argue, however, that this provision applies only to actions brought by the FDIC, not to actions brought by the FDIC's successors in interest. Additionally, Jackson argues that section 1821(d)(14) does not apply retroactively to claims arising before FIRREA's enactment.

A

Section 1821(d)(14) expressly refers only to actions "brought by the [FDIC]." ⁴ The court of appeals in Weatherly, as well as the dissent in Thweatt, concluded that the language of this statute is plain and, regardless of policy considerations, could not be construed as applying to actions brought by assignees of the FDIC. We conclude, however, that the FDIC's successors in interest are entitled to the benefits of section 1821(d)(14) pursuant to the common law maxim that "[a]n assignee stands in the shoes of his assignor." FDIC v. Bledsoe, 989 F.2d 805, 810 (5th Cir.1993); see also 6A C.J.S. Assignments, §§ 76-77 (1975).

The Uniform Commercial Code incorporates this rule with regard to promissory notes:

(a) Transfer of an instrument vests in the transferee such rights as the transferor has therein, except that a transferee who has himself been a party to any fraud or illegality affecting the instrument or who as a prior holder had notice of a defense or claim against it cannot improve his position by taking from a later holder in due course.

Tex.Bus. & Com.Code § 3.201(a) (Tex.UCC) (Vernon 1968). The policy underlying this rule "is to assure the holder in due course a free market for the paper." § 3.201 comment 3. This policy is particularly compelling with regard to notes acquired by the FDIC from an insolvent banking institution and sold to third parties pursuant to a purchase and assumption transaction. One of FIRREA's purposes was to "provide funds from public and private sources to deal expeditiously with failed depository institutions." Pub.L. No. 101-73, § 101(8). If the FDIC's statute of limitations did not enure to the benefit of its transferees, the market value of notes and other assets in the hands of the FDIC would be diminished, hindering this statutory purpose. As noted in Fall v. Keasler, 1991 WL 340182, at * 4 (N.D.Cal. Dec. 18, 1991):

To hold that assignees are relegated to the state statute of limitations would serve only to shrink the private market for the assets of failed banks. It would require the FDIC to hold onto and prosecute all notes for which the state statute of limitations has expired because such obligations would be worthless to anyone else. This runs contrary to the policy of allowing the FDIC to rid the federal system of failed bank assets. The FDIC can only make full use of the market in discharging its statutory responsibilities if the market purchasers have the same rights to pursue actions against recalcitrant debtors as does the FDIC.

See also Brian J. Woram, FIRREA's Statutes of Limitations: Their Availability to Purchasers From the FDIC, 110 Banking L.J. 292 (1993) (concluding that FIRREA limitations should be extended to subsequent purchasers); James J. Boteler, Comment, Protecting the American Taxpayers: Assigning the FDIC's Six Year Statute of Limitations to Third Party Purchasers, 24 Tex.Tech L.Rev. 1169, 1200 (1993) (same).

Because of this strong policy rationale, and in accordance with the principle that an assignee receives the full rights of the assignor, most courts have interpreted section 1821(d)(14), as well as the predecessor limitations provision in 28 U.S.C. § 2415(a), as extending to purchasers from the FDIC. See Jon Luce Builder, Inc. v. First Gibraltar Bank, F.S.B., 849 S.W.2d 451, 455 (Tex.App.--Austin 1993, writ denied); Pineda v. PMI Mortgage Ins. Co., 843 S.W.2d 660, 669 (Tex.App.--Corpus Christi 1992), writ denied, 851 S.W.2d 191 (Tex.1993); Bledsoe 989 F.2d at 810; Fall v. Keasler, 1991 WL 340182, at *2-3; Mountain States Financial Resources v. Agrawal, 777 F.Supp. 1550, 1552 (W.D.Okl.1991), White v. Moriarty, 15 Cal.App. 4th 1290, 19 Cal.Rptr.2d 200, 204 (1993); Martin v. Pioneer Title Co., 1993 WL 381101, at * 2-3 (Idaho 4th Dist.Ct.1993); Cadle Co. II, Inc. v. Lewis, 254 Kan. 158, 864 P.2d 718 (1993); Central States Resources Corp. v. First Nat. Bank in Morrill, 243 Neb. 538, 501 N.W.2d 271, 278 (1993). But see Tivoli Ventures, Inc. v. Tallman, 852 P.2d 1310, 1313 (Colo.App.1992).

This reading does not contravene the plain language of the statute. Although section 1821(d)(14) does not expressly create a special limitations rule for transferees, it unquestionably does so for the FDIC. The FDIC, as possessor of this right, may transfer it incident to the asset to which the limitations period relates. Thus, while the statute alone might not vest any rights in transferees, the statute combined with the common law of assignment does. As the Fifth Circuit noted in Bledsoe, "[a]s the statute at hand is silent as to the rights of assignees, we turn to the common law to fill the gap." 989 F.2d at 810.

An analogy may be drawn to the FDIC's special rights under 12 U.S.C. § 1823(e). This provision essentially codifies the holding of D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), in which the Supreme Court ruled that unrecorded agreements that tend to mislead banking examiners cannot be raised as a defense against the FDIC. See Kilpatrick v. Riddle, 907 F.2d 1523, 1526 (5th Cir.1990); FDIC v. Newhart, 892 F.2d 47, 49 (8th Cir.1989); see also Peter G. Weinstock and Christopher T. Klimko, Banking Law, 45 Sw.L.J. 1, 12 (1991). Although section 1823(e) also expressly applies only to the FDIC, its protection has generally been extended to purchasers of assets from the FDIC. See, e.g., Victor Hotel Corp. v. F.C.A. Mortgage Corp., 928 F.2d 1077, 1083 (11th Cir.1991); FDIC v. Newhart, 892 F.2d 47, 50 (8th Cir.1989); Fleet Bank of Maine v. Steeves, 785 F.Supp. 209, 213-15 (D.Me.1992); CMF Virginia Land, L.P....