Unisys Finance Corp. v. Resolution Trust Corp., 91-3827

• Decision Date: 21 December 1992
• Docket Number: No. 91-3827,91-3827
• Citation: 979 F.2d 609
• Parties: UNISYS FINANCE CORPORATION, Plaintiff-Appellant, v. RESOLUTION TRUST CORPORATION, as Receiver for Concordia Federal Bank for Savings, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 609

979 F.2d 609

61 USLW 2318

UNISYS FINANCE CORPORATION, Plaintiff-Appellant, v. RESOLUTION TRUST CORPORATION, as Receiver for Concordia Federal Bank for Savings, Defendant-Appellee.

No. 91-3827.

United States Court of Appeals Seventh Circuit.

Argued Sept. 25, 1992.

Decided Nov. 12, 1992.

Rehearing and Rehearing En Banc

Denied Dec. 21, 1992.

J. Timothy Eaton (argued), Stephen O'Donnell, Theodore E. Harman and Michael D. McCormick, Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., for plaintiff-appellant.

Thomas R. Meites, Michael M. Mulder, Annette R. Appell, Roberta Levinson, Meites, Frackman, Mulder & Burger, Chicago, Ill., and Dennis S. Klein (argued), Hughes, Hubbard & Reed, Washington, D.C., for defendant-appellee.

Before BAUER, Chief Judge, and POSNER and EASTERBROOK, Circuit Judges.

POSNER, Circuit Judge.

This appeal presents a question of first impression and potentially broad significance concerning the powers of the Resolution Trust Corporation, the federal agency that administers failed savings and loan associations.

As amended by section 212(e) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (P.L. 101-73, 103 Stat. 183), section 1821(e)(11) of the Federal Deposit Insurance Act provides that "No provision of this subsection [i.e., subsection (e) of section 1821] shall be construed as permitting the avoidance of any legally enforceable or perfected security interest in any of the assets of any depository institution," provided the security interest was not obtained in contemplation of insolvency or with the intention of hindering, delaying, or defrauding creditors. 12 U.S.C. § 1821(e)(11). In 1987 Unisys Finance Corporation, the plaintiff, made a five-year, level-payments lease of computer equipment to Concordia Federal Bank for Savings. To secure its obligations under the lease, Concordia pledged certain securities; and there is no doubt that Unisys obtained a perfected security interest in them. Concordia went bust, and in 1990 the Resolution Trust Corporation was appointed receiver. Acting under the express and unquestioned power granted it by subsection (e)(4) of 12 U.S.C. § 1821, the RTC repudiated the lease. At the time, Concordia was current in its rental payments, but had the lease remained in effect until termination it would have owed Unisys another $303,000 in rent. In this court Unisys concedes that it cannot sue Concordia, or the RTC, or the bank that holds the pledged securities in escrow, for the rent it lost as a result of the premature termination of the lease, or for any other damages that it may have suffered as a consequence of that event. The statute is explicit in cutting off the lessor's right to obtain damages for the receiver's repudiation or disaffirmance of a lease. 12 U.S.C. § 1821(e)(4)(A). But Unisys contends that it has an entitlement to satisfy any such claim out of the pledged securities. The RTC concedes that Unisys has a perfected security interest in rent that had not yet come due at the time that the RTC repudiated the lease, but argues that the interest is unenforceable because Unisys has no claim to that rent. That claim is dead by operation of the statute and when it died the securities pledged to its satisfaction became the unencumbered assets of the receivered savings bank.

The district court, which has jurisdiction under 12 U.S.C. § 1821(d)(6) to review the denial of claims against assets under the RTC's control, agreed with the RTC and denied Unisys relief, precipitating this appeal.

Federally insured banks, savings and loan associations, credit unions, and similar financial institutions are not subject to bankruptcy law. 11 U.S.C. § 109(b)(2). But the receivership provisions of federal banking law, 12 U.S.C. §§ 1821(c)-(r), create a parallel regime for those institutions. Under bankruptcy law, a trustee in bankruptcy (or debtor in possession), the equivalent of the RTC as receiver in this case, can terminate the unexecuted portion of any contract or lease signed by the bankrupt. 11 U.S.C. § 365(a). If this happens, the promisee or lessor, to the extent that he sustains damages as a result of the termination, can claim them as a general creditor in the bankruptcy proceeding, except that the amount a lessor can claim is truncated. 11 U.S.C. § 502(b)(6). In the parallel provision for financial institutions, 12 U.S.C. § 1821(e)(4), the lessor's damages claim is completely extinguished except for back rent. With the claim gone, any basis for enforcing a security interest is gone with it.

The bankruptcy parallel is instructive. If a secured creditor is oversecured, in the sense that the value of the security pledged to repay the debt owed him exceeds any plausible estimate of the debt, the bankruptcy court can take away the excess security and give it to another creditor. In re James Wilson Associates, 965 F.2d 160, 171 (7th Cir.1992). This shows that the creditor doesn't "own" the security--has no rights over it save as necessary to protect a claim that he owns. If Unisys had a claim against Concordia worth $100--say for a few days' back rent (we mentioned that subsection (e)(4) doesn't extinguish back-rent claims)--it would be a secured creditor, entitled to assert its perfected security interest in the pledged...