Matter of Charter Executive Center Ltd.
| Decision Date | 14 June 1983 |
| Docket Number | Bankruptcy No. 82-2395,Adv. No. 82-920. |
| Citation | 34 BR 131 |
| Parties | In the Matter of CHARTER EXECUTIVE CENTER LTD., Debtor. CHARTER EXECUTIVE CENTER LTD., Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORP., Defendant and Counter-Plaintiff, v. CHARTER EXECUTIVE CENTER LTD., Counter-Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
John Olson, Tampa, Fla., for F.D.I.C.
Albert I. Gordon, Tampa, Fla., for debtor.
ORDER ON MOTION FOR SUMMARY JUDGMENT
THIS IS a Chapter 11 reorganization case and the matter under consideration is the validity, vel non, of a mortgage held by the Federal Deposit Insurance Corp. (FDIC) encumbering a property owned by Charter Executive Center Ltd. (Charter), the Debtor involved in this reorganization case. The matter is presented for this Court's consideration by a Motion for Summary Judgment, filed by the FDIC which contends that there are no genuine issues of material facts and that FDIC is entitled to a judgment as a matter of law. The procedural background and the facts relevant and germane to the resolution of this controversy as they appear from the undisputed record can be summarized as follows:
The adversary proceeding was commenced by a complaint filed by Charter against FDIC in which Charter sets forth two distinct claims in two Counts. In Count I it is the contention of Charter that it is the owner of certain real property located in Hillsborough County, Florida and that FDIC claims a lien on the subject property as an assignee of a mortgage and a note from the Metropolitan Bank and Trust Company (Metropolitan), its predecessor in interest. It is the contention of Charter that Metropolitan knowingly and wrongfully demanded and received from Charter an interest rate on the loan secured by the mortgage at a rate in excess of 25% per annum in violation of Chap. 687.071 of the Florida Statutes; accordingly, the loan is usurious and, therefore, the debt secured by the mortgage is unenforceable and should be forfeited.
The claim set forth in Count II of the complaint by Charter alleges that the mortgage was not properly recorded in compliance with the requirement of Chap. 695.03 of the Florida Statutes, therefore, the recordation is a legal nullity and ineffective. Furthermore, Charter, armed with the special voiding powers of a trustee in bankruptcy granted by § 544(a) of the Bankruptcy Code, contends that its judgment creditor status defeats the unperfected interest of Metropolitan and in turn, its successor in interest, the FDIC. Charter seeks a declaration by this Court that the mortgage lien is invalid and unenforceable; that the debt is unenforceable; and that the amount of $2,698,731.88, which represents the principal amount outstanding and all accrued interest, shall be forfeited.
FDIC filed its answer in due course and asserted as an affirmative defense that FDIC as an instrumentality of the United States of America is not subject to penalty, forfeiture or any defenses based on the claim of usury charged against its predecessor in interest, the Metropolitan Bank. In addition, FDIC also filed a counterclaim in which it sought relief from the automatic stay and a declaratory judgment on the issues raised by the complaint. In the counterclaim FDIC named as an additional party counter-defendant the corporate general partner of Charter in its capacity as a general partner. This entity appeared and adopted all the pleadings of Charter. Charter thereafter filed a Motion for Summary Judgment in which it contends that it is not subject to the penalties of forfeiture arising from Florida usury laws; and that the mortgage is properly acknowledged as a matter of law and, therefore, the strong-arm section of the Bankruptcy Code cannot be utilized by the Debtor-in-Possession to avoid the interest of the FDIC.
Based upon the evidence presented and the stipulation of the parties as to the stay issue, the Court determined that, unless the mortgage is invalid for one or both of the reasons urged by Charter, the FDIC is entitled to relief from the automatic stay. Accordingly, the stay was continued pending resolution of the validity of the mortgage. The Court will first consider the usury issue inasmuch as the validity of FDIC's contention that it is not subject to penalties imposed by state usury laws is a threshold question, resolution of which may have a decisive effect on the outcome of this adversary proceeding.
The usury claim of Charter is based on the anti-usury statute of this state which in pertinent part provides as follows:
Section 687.071(2), (3) and (7), Florida Statutes (1981).
Charter contends that Metropolitan Bank charged a rate of interest in excess of 25% per annum, which rate is in excess of the allowable legal rate. In addition to the stated interest rate of 2% above the prevailing prime interest rate, Charter included a committment fee and a servicing fee totalling $270,000 in computing the interest rate on its $2,700,000 loan. Under applicable state law, however, a committment fee is not generally to be considered as interest when determining whether the percentage of interest charged was usurious. "A committment fee is `consideration for the lender's . . . funds which are committed to be loaned in the future' rather than additional interest." St. Petersburg Bank & Trust Co. v. Hamm, 414 So.2d 1071, 1074 (Fla.1982) (), cert. discharged, 336 So.2d 1145 (Fla.1976), cert. denied, 429 U.S. 1042, 97 S.Ct. 742, 50 L.Ed.2d 754 (1977).
The Defendant, FDIC, while recognizing that Charter's characterization of the committment and service fees as interest raises factual issues not amenable to resolution by summary judgment, does not challenge that characterization within the framework of its motion for summary judgment. Rather, the FDIC, for the limited purpose of its Motion for Summary Judgment, admits usury but contends that even if the interest rate which Metropolitan charged Charter was usurious, the FDIC, as an instrumentality of the federal government, is not subject to the forfeiture provision of the state usury law, Florida Statutes, § 687.071(7).
Whether or not the FDIC, as assignee of Metropolitan, is subject to the affirmative defense of usury must be determined by an indepth analysis of the nature of the FDIC as an instrumentality of the federal government. The FDIC was created by Congress in 1933 as an insurer of bank deposits to restore public confidence in the banking system. 12 U.S.C. § 1811 et seq, (The Federal Deposit Insurance Act). It is a corporation organized under an Act of Congress and all corporate stock is owned and held by the United States. By virtue of the Congressional mandate, once an FDIC member bank is closed by the appropriate state or national banking authority, the FDIC is required to accept the position of liquidator or receiver of the closed bank. 12 U.S.C. §§ 1821(c), (e). See, Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.1982), cert. den., ___ U.S. ___, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982).
Thus, the FDIC, by express design by Congress, was invested with a dual role. First, it was created as an insurer of federally issued bank deposits; second, it was created to function as the liquidator of banks which were closed down by agencies charged with regulatory banks, either state or federal. This second role was created, of course, to assume an orderly liquidation of the assets of failed banks, especially to assure the maximization of returns to depositors through a controlled operation in situations somewhat similar to the situation involved in this case. There is no doubt that this was the express aim of Congress and was a clear cut expression of the Congressional intent to stablize the banking industry after the dark days of bank failure during the Great Depression.
In the present case, Metropolitan was closed by the Comptroller of the State of Florida pursuant to state law. Fla.Stat. § 658.79 (1981). The FDIC was appointed as liquidator, and proceeded to consummate a purchase and assumption transaction pursuant to 12 U.S.C. § 1823(e), whereby the FDIC, in its corporate capacity, purchased the lesser quality loan portfolio of Metropolitan from itself as liquidator. This portfolio included the debt owed to Metropolitan by Charter, which the FDIC is attempting to collect.
As a general rule, when a party becomes a successor in interest through legal process, that party's interest is subject to whatever defense the obligor has against its predecessor in interest. British Columbia Investment Co. v. FDIC, 420 F.Supp. 1217, 1224 (S.D.Cal.1976); Fla.Stat. § 673.302(3)(a) (1981) (Uniform Commercial Code). However, recognizing that the FDIC operates as a public service and in furtherance of federal public policy protecting the institution of banking, Congress and the courts have afforded the FDIC...
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