Jones v. Federal Deposit Ins. Corp., 84-1947

• Decision Date: 23 November 1984
• Docket Number: No. 84-1947,84-1947
• Citation: 748 F.2d 1400
• Parties: Eli B. JONES, Executor of the Estate of Jesse L. Bobo, Deceased, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1400

748 F.2d 1400

Eli B. JONES, Executor of the Estate of Jesse L. Bobo Deceased, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Defendant-Appellee.

No. 84-1947.

United States Court of Appeals Tenth Circuit.

Nov. 23, 1984.

Hugh D. Rice of Rainey, Ross, Rice & Binns, Oklahoma City, Okl., for plaintiff-appellant.

John E. Green, First Asst. U.S. Atty., Oklahoma City, Okl., and Robert E. Feldman, Federal Deposit Ins. Corp., Washington, D.C. (Douglas H. Jones, Deputy Gen. Counsel, Roger A. Hood, Asst. Gen. Counsel, F. Douglas Birdzell, Counsel, Federal Deposit Ins. Corp., Washington, D.C. and William S. Price, U.S. Atty., Oklahoma City, Okl., with them on brief), for defendant-appellee.

Before SETH, BARRETT and McKAY, Circuit Judges.

BARRETT, Circuit Judge.

The issue presented in this appeal is whether the district court erred in granting Federal Deposit Insurance Corporation's (FDIC) motion for Summary Judgment against the claim of Eli B. Jones, Executor of the Estate of Jesse L. Bobo, Deceased (Estate), for a balance allegedly due on behalf of legatees and devisees of the Estate under the Last Will and Testament in amount of $458,631.50. On appeal, Estate contends that the district court erred in ruling that death benefits derived from insurance proceeds on the life of the decedent paid to Estate and deposited in Penn Square Bank, N.A. of Oklahoma City, Oklahoma (Bank), in total amount of $645,000.00 were "funds of a decedent" pursuant to FDIC regulation 12 C.F.R. Sec. 330.4, ¹ thereby limiting total insurance coverage to $100,000.00. The pertinent undisputed facts follow.

On October 15, 1981, Jesse L. Bobo died testate, a resident of the State of Oklahoma survived by his wife and three minor children. Under Bobo's Last Will and Testament, plaintiff-appellant Eli B. Jones was named Executor of the Estate. After qualifying as Executor, Jones applied for insurance proceeds of term life insurance policies issued on the life of the decedent. These funds were paid to "Eli B. Jones, Executor of the Estate of Jesse L. Bobo, Deceased." In addition to specific bequests, the Will created two testamentary trusts wherein Eli B. Jones was appointed trustee. In other words, Jones, as Executor, was directed to set over and distribute property to Jones, as Trustee, subject to last illness, funeral expenses, debts, taxes and costs of administration.

Following Jones' qualification as Executor of Bobo's Estate, he submitted certified copies of his authority to so serve to the insurance carrier or carriers, and, as Executor, he received and deposited with Bank proceeds in total amount of $673,289.38 payable to "Eli B. Jones, Executor of the Estate of Jesse L. Bobo, Deceased." ²

On July 5, 1982, the Comptroller of the Currency declared Bank insolvent and FDIC was appointed to serve as Receiver in its corporate capacity. Jones made demand on FDIC, as Receiver, for insurance coverage for the funds on deposit in total sum of $673,289.38. The FDIC paid the Executor $100,000.00 as the insurance payment it determined Estate was entitled to. Subsequently, FDIC paid the Executor a liquidation dividend of $114,657.88. The Executor filed this suit against FDIC to collect the balance claimed due and owing in amount of $458,631.50.

The statutory authorization for FDIC is set forth under 12 U.S.C. Sec. 1811, et seq. In effect, the FDIC serves as a mutual insurance company created by Congress, supported by assessments levied upon insured banks, to promote stability and soundness in the nation's banking system. 12 U.S.C. Secs. 1821(a, c, e), 1823(e); Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.1982), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982); First State Bank v. United States, 599 F.2d 558 (3rd Cir.1979). In keeping with this goal, FDIC insures bank deposits up to $100,000.00. 12 U.S.C. Sec. 1821(a). As such, one of its principal duties, as Receiver in its corporate capacity (as here), is to pay the depositors of a failed bank. All accounts are "frozen" when the FDIC assumes its obligations as Receiver, and there is complete disruption of the day-to-day banking activities. When the FDIC is appointed Receiver of a failed bank, as here, pursuant to 12 U.S.C. Sec. 1821(c), (e), it acts in two capacities: (1) as a corporate insuror of deposits, and (2) as a corporate receiver. The intent of the statutory and regulatory schemes is that the FDIC move with dispatch in order to maintain the going concern value of a failed bank and to avoid significant disruptions in its banking services.

In D'Oench, Duhme & Co. v. F.D.I.C., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942), the Supreme Court squarely held that federal law controls the rights and obligations of the FDIC. 12 U.S.C. Sec. 1813(l) describes the term "deposit." 12 U.S.C. Sec. 1813(m)(1) provides that the term "insured deposit" means the net amount due any depositor, after deducting offsets, less any part thereof in excess of $100,000.00 as determined by such regulations as the Board of Directors of FDIC may prescribe for the "[p]urpose of clarifying and defining the insurance coverage" and to "[d]efine, with such classifications and exceptions as it may prescribe, terms used in those subsections" and "[t]he extent of the insurance coverage resulting therefrom."

The district court, in its Order Sustaining Defendant's Motion for Summary Judgment, succinctly set forth its reasons for holding, contrary to the claims of Estate, that (1) the funds on deposit were "funds of the decedent" held in the name of the Executor and entitled only to the aggregate insurance coverage of $100,000.00, and (2) there existed no clear indication that the FDIC arbitrarily discriminated between funds held in different rights and capacities when the regulation at issue was promulgated:

The FDIC has promulgated deposit insurance coverage regulations found at 12 C.F.R. Part 330 (1983). The regulations pertinent herein are section 330.1(a) and section 330.4.

12 C.F.R. (sic) Sec. 330.1(a) provides:

"(a) General. This Part 330 provides for determination by the Corporation of the insured depositors of an insured bank and the amount of their insured deposit accounts. The rules for determining the insurance coverage for deposit accounts maintained by depositors in the same or different rights and capacities in the same insured bank are set forth in the following provisions of this part. Insofar as rules of local law enter into such determinations, the law of the jurisdiction in which the insured bank's principal office is located shall govern."

12 C.F.R. Sec. 330.4 provides:

"Funds of a decedent held in the name of the decedent or in the name of the executor or administrator of his estate and deposited in one or more deposit accounts shall be insured up to $100,000 in the aggregate, separately from the individual deposit accounts of the beneficiaries of the estate or of the executor or administrator."

Plaintiff argues that the insurance proceeds deposited in the Bank were never "funds of a decedent" because under Oklahoma law the interests of heirs, legatees and beneficiaries vest on the decedent's death, subject only to the executor's administrative interest. ³ Plaintiff argues the decedent never possessed a property interest in the insurance proceeds prior to death at all, therefore Sec. 330.4 is inapplicable to the $673,289.38. ⁴ Plaintiff further argues that because title to the proceeds vested in the four beneficiaries upon Bobo's death, each of their interests is entitled to individual FDIC insurance coverage in the amount of $100,000.00.

Proceeds of a life insurance policy made payable to the estate of the decedent are subject to the payment of the decedent's debts. ⁵ It is stated in 31 Am.Jur.2d "Executors and Administrators," Sec. 200, p. 111:

"[T]he proceeds of a life insurance policy made payable to a named beneficiary are not assets of the estate of the insured but belong solely to the beneficiary.... But generally, where a policy is payable to the insured or to his executors, administrators, assigns, or 'legal representatives,' without designation of other beneficiaries, it is deemed payable to the estate, and the proceeds constitute general assets of the estate."

Here, the funds on deposit were not payable to a named beneficiary but were payable to the estate of decedent, thus constituting general assets of the estate. As general assets of the estate, it appears the funds were "funds of the decedent ... held in the name of the executor ... of his estate" under Sec. 330.4. As such, the funds were entitled in the aggregate to $100,000.00 insurance coverage payable by defendant.

Nor does Sec. 330.4 deprive the legatees of a will of equal protection of the laws guaranteed by the Fifth Amendment. Plaintiff bases this argument on a comparison of the treatment under the FDIC regulations of funds of an estate, funds held in trust, and funds held by an insured bank in a fiduciary capacity. Although funds of an estate are insured up to $100,000 in the aggregate, funds held in trust are insured up to $100,000 for each individual beneficiary's interest, ⁶ and funds held by an insured bank in a fiduciary capacity are insured up to $100,000 for each trust estate. ⁷ Plaintiff thus argues the regulatory scheme arbitrarily discriminates between the three similarly situated funds.

12 U.S. Sec. 1813(m)(1) gives to the FDIC the power to promulgate regulations governing the amount of insurance coverage applicable to funds deposited in FDIC-covered banks "maintained in the same capacity and the same right" by depositors. Pursuant to Sec. 1813(m)(1) the FDIC has promulgated the regulations set forth above. This Court is to afford great weight to the construction and interpretation of statutes promulgated by the agency charged with their implementation. See, e.g., Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 557 [100 S.Ct. 790, 792...