FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: IMPERIAL CREDIT INDUSTRIES, 

INC., a California corporation,

Debtor.

EDWARD M. WOLKOWITZ, as

Trustee for Imperial Credit No. 05-56073

Industries, Inc.,  D.C. No.

Plaintiff-Appellant, CV-03-08627-JVS

v.

FEDERAL DEPOSIT INSURANCE

CORPORATION, in its corporate

capacity,

Defendant-Appellee. 

6293
In the Matter of: IMPERIAL CREDIT 

INDUSTRIES, INC., a California

corporation,

Debtor.

IMPERIAL CREDIT INDUSTRIES, INC.,

Plaintiff,

and

EDWARD M. WOLKOWITZ, as No. 06-56763 Trustee for Imperial Credit

D.C. No. Industries, Inc., 

Plaintiff-counter-defendant- CV-03-08627-JVS

Appellant, OPINION

v.

FDIC, in its capacity as receiver

for Southern Pacific Bank,

Defendant-Appellee.

FEDERAL DEPOSIT INSURANCE

CORPORATION, in its corporate

capacity,

Defendant-counter-claimantAppellee. 

Appeal from the United States District Court

for the Central District of California

James V. Selna, District Judge, Presiding

Argued and Submitted

February 6, 2008—Pasadena, California

Filed June 4, 2008

Before: Cynthia Holcomb Hall, Susan P. Graber, and

Marsha S. Berzon, Circuit Judges.

6294 IN RE IMPERIAL CREDIT INDUSTRIES
Opinion by Judge Hall

IN RE IMPERIAL CREDIT INDUSTRIES 6295
COUNSEL

Michael H. Strub, Jr., Irell & Manella, Los Angeles, California, for the plaintiff-appellant. 

Jaclyn C. Taner, Jennifer M. Barozie, and J. Scott Watson,

Federal Deposit Insurance Corporation, Legal Division,

Arlington, Virginia, for the defendant-appellee.

OPINION

HALL, Circuit Judge: 

These companion cases concern the undercapitalization and

eventual insolvency of a federally insured bank, Southern

Pacific Bank (SPB), and its holding company, Imperial Credit

Industries (Imperial). In February 2002, the Federal Deposit

Insurance Corporation (FDIC) notified SPB that it was undercapitalized and required it to submit a capital restoration plan.

SPB submitted a capital plan as well as a guaranty from Imperial that SPB would perform under the plan. SPB failed to

implement its capital plan, and the FDIC demanded that

6298 IN RE IMPERIAL CREDIT INDUSTRIES
Imperial pay its $18,375,800 obligation under the guaranty.

Imperial, by that point in Chapter 11, asserted a number of

defenses to its obligation under the performance guaranty.

The district court rejected all of these defenses and granted

partial summary judgment in favor of the FDIC, ruling that

section 365(o) of the Bankruptcy Code required Imperial to

cure its deficit to the FDIC as a condition of remaining in

Chapter 11. On appeal from that order, Imperial’s Trustee,

Edward M. Wolkowitz (Wolkowitz or the Trustee), challenges not only whether the performance guaranty binds

Imperial with respect to SPB’s capital plan, but also whether

Imperial’s liability under the guaranty was properly calculated

and whether the performance guaranty may be avoided as a

fraudulent conveyance. We affirm the district court’s conclusion that Imperial is bound by the performance guaranty and

its calculation of Imperial’s liability, but reverse and remand

the fraudulent conveyance claim for further proceedings. 

While the above appeal was pending, Imperial converted to

Chapter 7 to avoid the district court’s order that it immediately cure its deficit pursuant to 11 U.S.C. § 365(o). The

FDIC filed a counterclaim for declaratory relief in the district

court, seeking a determination of the priority of Imperial’s

obligation under the performance guaranty. The district court

granted summary judgment in favor of the FDIC, holding that

the FDIC’s claim was entitled to administrative priority status

under 11 U.S.C. § 507(a)(2). The Trustee appeals that decision as well, arguing that the FDIC’s claim is entitled only to

ninth priority under 11 U.S.C. § 507(a)(9). We agree and,

therefore, reverse the district court’s grant of summary judgment in favor of the FDIC on this issue. 

I. FACTS AND PROCEDURAL HISTORY

In February 2002, the FDIC issued a Prompt Corrective

Action notice informing SPB that it was undercapitalized and

requiring SPB to submit a capital restoration plan by March

IN RE IMPERIAL CREDIT INDUSTRIES 6299
1, 2002, to avoid further restrictions on its activities.1

 On

March 1, 2002, SPB filed a capital restoration plan (the March

1 capital plan or March 1 plan), which called for it to raise

approximately $55 million in new capital through the sale of

common equity by June 30, 2002. Pursuant to federal law, on

February 27, 2002, SPB’s holding company, Imperial, executed a corresponding guaranty that SPB would perform

under the plan.2 The performance guaranty was attached as an

exhibit to SPB’s March 1 capital restoration plan. 

The text of the performance guaranty begins with several

recitals, including the following: 

On February 1, 2002, [SPB]’s Board of Directors

received a Prompt Corrective Action notification letter from the [FDIC] which, among other things,

requires [SPB] to file a written capital restoration

plan (the ‘Capital Plan’) with the regional office of

the [FDIC] by March 1, 2002 . . . . 

The Guaranty set forth below has been duly adopted

at the regular meeting of the Board of Directors of

[Imperial] held on February 27, 2002 and is intended

to comply fully with Section 38 of the Federal

Deposit Insurance Act and the implementing regulations thereto. 

After these recitals, the document sets forth the substantive

terms of the performance guaranty, by which Imperial commits itself to:

1A federally insured bank must submit an acceptable capital restoration

plan in response to a Prompt Corrective Action notice. Otherwise, the

bank becomes subject to significant restrictions on its activities. 12 U.S.C.

§ 1831o(e)(2) & (f)(1)(B)-(2). 

2Any company controlling an undercapitalized bank must guarantee the

performance of the bank’s capital plan. 12 U.S.C. § 1831o(e)(2)(C)(ii). 

6300 IN RE IMPERIAL CREDIT INDUSTRIES
absolutely, unconditionally and irrevocably guarantee[ ] the performance of [SPB] under the terms of

the Capital Plan and . . . pay the sum demanded to

[SPB] or as directed by the [FDIC] in immediately

available funds promptly after receipt by [Imperial]

of such demand; provided, that the aggregate liability of [Imperial] under this Guaranty shall be the

lesser of an amount equal to five percent (5%) of

[SPB]’s total assets as of December 31, 2001 or the

amount which is necessary or would have been necessary to restore the relevant capital measures of

[SPB] to the levels required to be ‘adequately’ capitalized, as those measures and levels are defined at

the time that [SPB] initially fails to comply with its

approved Capital Plan . . . . 

The FDIC did not approve the March 1 plan. SPB submitted revised capital restoration plans on April 12, 2002, and

May 9, 2002, which the FDIC rejected as well. On May 24,

SPB submitted an amendment to the May 9 plan (the May 24

capital plan or May 24 plan), which proposed a capital infusion of approximately $55 million by July 22, 2002, this time

through private placement and/or the sale of assets. Unlike the

March 1 plan, the plans submitted on April 12, May 9, and

May 24 did not include as an attachment any performance

guaranty by Imperial. Nonetheless, the FDIC approved the

May 24 plan. 

SPB failed to implement its capital restoration plan by the

July 22, 2002, deadline. On July 25, 2002, the FDIC issued

a second Prompt Corrective Action notice, informing SPB

that it would be subject to the restrictions imposed on a “significantly undercapitalized institution” under 12 U.S.C.

§ 1831o(f). Both Imperial and SPB attempted to achieve a

recapitalization of SPB — with Imperial transferring $5 million in cash to SPB on March 31, 2002, and July 31, 2002 —

but on February 7, 2003, the California Department of Financial Institutions declared SPB insolvent and appointed the

IN RE IMPERIAL CREDIT INDUSTRIES 6301
FDIC as receiver. On July 17, 2003, Imperial filed a voluntary

petition under Chapter 11 of the Bankruptcy Code, seeking to

liquidate its assets. 

On September 4, 2003, the FDIC notified Imperial that it

had failed to comply with its performance guaranty and

demanded $18,375,800 under the contract. On November 6,

2003, Imperial filed an adversary action against the FDIC in

the Bankruptcy Court for the Central District of California,

seeking to avoid the alleged obligation. The case was transferred to the District Court for the Central District of California, and on March 25, 2004, Imperial filed its Second

Amended Complaint, asserting eight causes of action against

the FDIC. The FDIC moved to dismiss all the claims except

the claims for declaratory relief and judgment. The district

court denied the FDIC’s motion with respect to Imperial’s

equitable subordination claim and allowed Imperial to replead

its fraudulent inducement and conveyance claims, but otherwise granted the FDIC’s motion.3

 Imperial amended its complaint and repled its fraudulent conveyance claim on

November 12, 2004, but the district court once again granted

the FDIC’s motion to dismiss that claim, ruling that Imperial

had failed to plead actual fraud. 

On December 13, 2004, the FDIC moved for an order

requiring Imperial to pay its obligation under the performance

guaranty pursuant to 11 U.S.C. § 365(o), which provides that

Chapter 11 debtors must “immediately cure” any deficit owed

to a Federal depository institutions regulatory agency under a

capital maintenance commitment. The court ruled on the

FDIC’s motion on February 15, 2005. It held that if Imperial

had guaranteed SPB’s capital restoration plan, it was required

to cure any capital deficit of SPB as a condition of remaining

3The court held that Imperial’s fraudulent conveyance claim was barred

by 12 U.S.C. § 1828(u) unless Imperial could plead actual fraud pursuant

to § 1828(u)(2). It allowed Imperial leave to replead those claims and

establish actual fraud. 

6302 IN RE IMPERIAL CREDIT INDUSTRIES
in Chapter 11. However, the court delayed a final ruling on

the FDIC’s motion because Imperial was entitled to present

“obligor” defenses to the contractual obligation, which had

not been fully briefed. The court found that five of Imperial’s

claims from its Second Amended Complaint were “obligor”

defenses, and granted it leave to present those. Two of Imperial’s claims — its equitable subordination and fraudulent conveyance claims — were “trustee” defenses; the court held that

Imperial could not bring those claims until it obtained Chapter

11 trustee status by curing its deficit. Imperial’s fraudulent

conveyance claim was moot regardless of its status as a

“trustee defense,” though, because that claim had been dismissed on separate grounds. 

On April 4, 2004, the FDIC moved for partial summary

judgment to enforce Imperial’s deficit. On June 15, 2005, the

district court granted the motion, rejecting all five of Imperial’s “obligor” defenses. The court then entered an appealable

final partial judgment for the FDIC pursuant to Federal Rule

of Civil Procedure 54(b) on July 6, 2005, ordering Imperial to

pay the sum of $18,375,800 to the FDIC within 30 days. The

court stated that if Imperial converted to Chapter 7, Imperial

would be relieved of its obligation to immediately pay

$18,375,800 to the FDIC, and that its “unsatisfied immediate

cure obligation shall have the status and priority in the Chapter 7 case which it is accorded under applicable bankruptcy

law.” 

Imperial filed a notice of appeal from the district court’s

summary judgment on July 15, 2005, and unsuccessfully

sought a stay from the district court and this court. Less than

a month later, Imperial converted its case to Chapter 7,

thereby avoiding its obligation to pay the $18,375,800 immediately. 

In the Chapter 7 case, the FDIC moved for a declaration

that Imperial’s cure obligation was entitled to priority administrative expense status under 11 U.S.C. § 507(a)(2). The disIN RE IMPERIAL CREDIT INDUSTRIES 6303
trict court granted partial summary judgment in favor of the

FDIC on this issue on October 6, 2006. The parties stipulated

to the dismissal of all remaining claims in the action, and

judgment was entered in favor of the FDIC on November 28,

2006. Imperial’s timely appeal followed. 

II. DISCUSSION

The district court’s grants of summary judgment in favor of

the FDIC are reviewed de novo, under the same standards

applied by the district court. “We must determine whether,

viewing the evidence in the light most favorable to the nonmoving party, any genuine issues of material fact exist, and

whether the district court correctly applied the relevant substantive law.” Fazio v. City and County of San Francisco, 125

F.3d 1328, 1331 (9th Cir. 1997). 

We also review de novo the district court’s dismissal of the

fraudulent conveyance claim. Adams v. Johnson, 355 F.3d

1179, 1183 (9th Cir. 2004). Dismissal is proper only “if it

appears beyond doubt that the non-movant can prove no set

of facts to support its claims.” Id. 

A. Imperial guaranteed SPB’s May 24 Capital Plan 

In its partial summary judgment ruling in favor of the

FDIC, the district court held that the performance guaranty

signed by Imperial on February 27, 2002, applied to the May

24 capital plan approved by the FDIC. On appeal, the Trustee

reiterates its argument that Imperial guaranteed only the

March 1 capital plan. 

[1] The parties agree that the ordinary rules of contract

interpretation apply to the performance guaranty under California law. See Cent. Bldg., LLC v. Cooper, 26 Cal. Rptr. 3d

212, 216 (Ct. App. 2005); Cal. Civ. Code § 2837. As with any

contract, our goal is to give effect to the mutual intent of the

parties. County of San Diego v. Ace Prop. & Cas. Ins. Co.,

6304 IN RE IMPERIAL CREDIT INDUSTRIES
118 P.3d 607, 612 (Cal. 2005) (citing Bank of the W. v. Superior Court, 833 P.2d 545, 552 (Cal. 1992). Mutual intent is

determined by “the words used in the agreement, as well as

extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or

entered into the contract; the object, nature and subject matter

of the contract; and the subsequent conduct of the parties.”

Wolf v. Superior Court, 8 Cal. Rptr. 3d 649, 660 (Ct. App.

2004) (internal quotation mark omitted) (citing Cal. Civ. Code

§§ 1635-1656; Cal. Civ. Proc. Code §§ 1859-1861, 1864); see

also Bank of Am. Nat’l Trust & Sav. Ass’n v. Waters, 26 Cal.

Rptr. 9, 11 (Ct. App. 1962). 

Based on our examination of the language of the contract,

the circumstances surrounding its negotiation and execution,

and the subsequent conduct of the parties, we hold that the

performance guaranty is valid and enforceable with respect to

SPB’s May 24 capital plan. The guaranty must be read in conjunction with the statute and regulations that required its execution in the first place, and such a reading necessarily leads

to the conclusion that the parties intended it to apply to the

capital plan ultimately approved by the FDIC. 

[2] The statutes governing the undercapitalization of federally insured depository institutions directed the course of

events in this case. SPB received a Prompt Corrective Action

notice from the FDIC, and was required under 12 U.S.C.

§ 1831o(e)(2) to submit a capital restoration plan to the FDIC

in order to avoid restrictions on its activities. 12 U.S.C.

§ 1831o(e)(2) & (f). Section 1831o(e)(2)(C)(ii) required

Imperial, as SPB’s holding company, to guaranty SPB’s performance under the capital plan. Imperial submitted a performance guaranty with SPB’s March 1 capital plan to comply

with the statute. The guaranty explicitly recognized its role in

SPB’s recapitalization process, stating that section 38 of the

Federal Deposit Insurance Act and the Act’s implementing

regulations require a “company that controls an undercapitalized bank [to] issue a performance guaranty with respect to

IN RE IMPERIAL CREDIT INDUSTRIES 6305
the company’s capital restoration plan.” See 12 U.S.C.

1831o(e)(2)(C)(ii); 12 C.F.R. § 325.104. The performance

guaranty also stated that it “intended to comply fully with

Section 38 of the Federal Deposit Insurance Act and the

implementing regulations thereto.” 

After the FDIC failed to accept SPB’s March 1 capital plan,

SPB submitted three other versions of capital restoration plans

to the FDIC over the course of a few months in an effort to

regain adequately capitalized status and avoid restrictions on

its activities. According to Imperial, during this time it

“worked diligently with SPB to comply with all FDIC directives in an effort to achieve recapitalization.”

4

 The FDIC

finally approved the fourth version of SPB’s capital plan,

which was submitted on May 24, with no objection from SPB

or Imperial. 

The Trustee now contends that Imperial never intended its

previously offered guaranty to apply to the May 24 version of

the capital plan. This argument not only belies the guaranty’s

promise to comply with the statutes and regulations directing

the treatment of undercapitalized banks, but also is inconsistent with Imperial’s subsequent efforts to achieve SPB’s

recapitalization. The language of the performance guaranty

clearly demonstrates that Imperial intended to comply with

the statutory framework governing undercapitalized institutions. Imperial was fully aware that an enforceable performance guarantee was required in order for the FDIC to

approve SPB’s capital plan, and it worked with the FDIC and

SPB in an effort to achieve SPB’s recapitalization. 

[3] Moreover, Imperial implicitly recognized that its guaranty would extend to a later version of SPB’s capital plan.

The performance guaranty defined Imperial’s liability with

4This quote is from Imperial’s Second Amended Complaint against the

FDIC. Imperial now seems to deny any efforts to obtain the FDIC’s

approval of the May 24 capital plan, but the complaint suggests otherwise.

6306 IN RE IMPERIAL CREDIT INDUSTRIES
reference to the “approved” capital plan, rather than the

March 1 capital plan, and it fixed a maximum amount of liability at 5% of SPB’s assets on December 31, 2001, regardless

of the form the approved plan ultimately took. Thus, the

Trustee cannot successfully argue that Imperial never

intended to guaranty the May 24 plan. 

The Trustee’s arguments to the contrary fail to persuade us.

For example, Wolkowitz argues that a “plain reading” of the

performance guaranty demands the result that the guaranty

only applied to the March 1 plan because the words “March

1, 2002” appear after the term “Capital Plan” in the guaranty.

However, the words “March 1, 2002” are part of an earlier

descriptive sentence, and not part of the substantive terms of

the guaranty itself. The substantive terms of the guaranty

apply to the “approved capital plan” without limitation. 

Wolkowitz also contends that the guaranty never became

an operative contract because it was submitted to the FDIC

only as part of the March 1 capital plan, which the FDIC did

not accept. This argument also fails. The rejection of the

March 1 capital plan by the FDIC did not apply to the performance guaranty, which explicitly extended to the “approved

Capital Plan” and not the March 1 plan specifically. Moreover, absolute guaranties are binding without notice of acceptance in California.5

See Cal. Civ. Code § 2795; Kierulff &

Ravenscroft v. Koping, 94 Cal. App. 473, 475 (Dist. Ct. App.

1928) (“Section 2795 of the Civil Code, changes the rule

announced in many cases, and provides that an absolute guaranty is binding upon the guarantor without notice of acceptance.”).6

 The Trustee’s remaining arguments, which focus on

5

Imperial promised to “absolutely, unconditionally, and irrevocably

guarantee[ ] the performance of [SPB].” 

6Although California Civil Code section 2795 refers to sureties rather

than guarantors, California law equates the two. See Cal. Civ. Code § 2787

(“The distinction between sureties and guarantors is hereby abolished. . . .

A surety or guarantor is one who promises to answer for the debt, default,

or miscarriage of another . . . .”). 

IN RE IMPERIAL CREDIT INDUSTRIES 6307
two pieces of extrinsic evidence in the record, also fail to convince us that the parties did not intend the guaranty to apply

to the May 24 capital plan.7

[4] In sum, we hold that the performance guaranty applies

to the May 24 capital plan and affirm the district court’s grant

of summary judgment on this issue. 

B. The district court properly calculated the amount of the

performance guaranty 

The district court adopted the FDIC’s calculation of Imperial’s deficit under the performance guaranty at $18,375,800.

The Trustee argues 1) that the district court erred in relying

on SPB’s June 30, 2002 Call report data, because the guaranty

required any liability be calculated as of July 22, 2002; and

2) that a $5 million payment it made to SPB on July 30, 2002,

should reduce any liability under the guaranty. 

7For example, the Trustee cites a Material Loss Review describing

SPB’s bankruptcy, which was prepared by the FDIC Office of Inspector

General. The document includes a chronology of events, and the entry for

May 24, 2002, states that “[the] FDIC accepts SPB’s revised [May 24]

capital plan . . . [Imperial] is to sign a performance guaranty for ensuring

the capital plan is pursued and realized.” This one line in a report on

SPB’s financial failure does not, as the Trustee argues, prove that the

FDIC believed that the performance guaranty did not apply to the May 24

plan, especially when viewed in light of the FDIC’s continuous negotiations with SPB in an effort to come to an agreement on an appropriate capital restoration plan. 

The Trustee also cites a letter from the FDIC to SPB in February of

2003, in which the FDIC notified SPB that it had rejected a November

2002 capital plan that SPB had submitted. In the letter, the FDIC informed

SPB that it should submit a revised capital plan, and include a performance guaranty from Imperial. This evidence does not bear on Imperial’s

guaranty of the May 24 plan, because the November 2002 plan was in

response to a new Prompt Corrective Action notice issued after SPB failed

to comply with the May 24 capital plan, not the same February 2002

Prompt Corrective Action notice that led to the development of the March

1 and May 24 capital plans. 

6308 IN RE IMPERIAL CREDIT INDUSTRIES
1. Use of June 30, 2002 Call Report Data

The Trustee contests the district court’s calculation as

improperly relying on SPB’s June 30 Call report data. He

argues that the plain language of the guaranty required the

FDIC to calculate the amount of the obligation as of July 22,

2002. The FDIC counters that neither the performance guaranty nor the regulation it recites dictates the source from

which the FDIC must draw its data, and therefore the district

court properly held that the FDIC’s use of the June 30, 2002

data was entitled to administrative deference. 

The performance guaranty, in language nearly identical to

the FDIC regulation, 12 C.F.R. § 325.104(h)(1)(i)(B), limited

Imperial’s liability to the lesser of 5% of SPB’s assets as of

December 31, 2001, or the amount necessary to restore SPB’s

relevant capital measures to the levels required for SPB to be

adequately capitalized, “as those capital measures and levels

are defined at the time that [SPB] initially fails to comply

with its approved Capital Plan.” It is undisputed that SPB initially failed to comply with the May 24 plan on July 22, 2002,

the deadline by which it was to have raised $55 million.

Accordingly, Wolkowitz argues that any liability on Imperial’s part should have been calculated as of July 22, 2002.8

[5] As the FDIC argues, the Trustee conflates the words

“defined” and “calculated.” The performance guaranty and

the regulation in question simply state that the definitions of

the capital measures and levels based upon which the FDIC

measures a bank’s liability must be those in place at the time

of the bank’s failure. Neither the performance guaranty nor

the regulation says anything about how Imperial’s liability

should be calculated, nor states that the calculation must occur

as of the date SPB fails to comply with the plan. 

8The parties agree that 5% of SPB’s assets as of December 31, 2001,

would be more than the amount necessary to adequately capitalize SPB

when it failed to comply with its capital plan. 

IN RE IMPERIAL CREDIT INDUSTRIES 6309
[6] As a result, the district court correctly held that the performance guaranty and the corresponding regulation failed to

clearly define how Imperial’s obligation should be calculated.

Finding the contract and the identical regulation ambiguous,

the district court granted deference to the FDIC’s reasonable

interpretation of its own regulation as authorizing it to calculate Imperial’s obligation based on SPB’s June 30, 2002 call

report — the latest data in its possession. See Chevron U.S.A.,

Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43

(1984). 

[7] The Trustee attacks the district court’s deference to the

FDIC’s interpretation on a number of fronts, but we find his

arguments unpersuasive. For example, the Trustee argues that

because the performance guaranty was a contract, and not a

regulation, agency deference was inappropriate. Though we

have held that deference is not appropriate solely because “the

contract signed by the parties contains the same language as

[a statute],” Clay Tower Apts v. Kemp, 978 F.2d 478, 480 (9th

Cir. 1992), we agree with the district court that deference is

proper here, because the agreement in question “stemmed

from and was designed to resolve an ongoing proceeding” and

included “intrinsically regulatory” terms of a type that the

agency “frequently employs its expertise in reviewing,” MCI

Telecomms. Corp. v. F.C.C., 822 F.2d 80, 84-85 (D.C. Cir.

1987).9

Wolkowitz next contends that deference is inappropriate

because the FDIC stands to benefit from its own interpretation. See Chikaloon-Moose Creek Native Ass’n v. Norton, 360

F.3d 972, 980 (9th Cir. 2004). However, the FDIC does not

necessarily stand to gain if deficits are calculated by reference

to banks’ call reports, even if it did so here. In fact, it is

9This case law also forecloses the Trustee’s argument that deference to

any agency interpretation is appropriate only when the subject matter of

the statute or regulation is technical, complex, or outside the realm of judicial expertise. 

6310 IN RE IMPERIAL CREDIT INDUSTRIES
unclear whether Imperial’s obligation would increase or

decrease if the calculation date were changed to July 22. 

[8] The Trustee’s last argument is that even if the FDIC had

nothing to gain from its interpretation of the regulation, its

position in litigation is still not entitled to deference because

it is unsupported by a regulation, ruling, or established administrative practice. However, Smiley v. Citibank, N.A., 517 U.S.

735 (1996), only forbids deference to “agency litigating positions that are wholly unsupported by regulations, rulings, or

administrative practice.” Id. at 741 (internal quotation marks

omitted). The FDIC is certainly not litigating a wholly unsupported position here. The FDIC’s reliance on quarterly bank

Call reports is established in its regulations and its administrative practice. Several federal regulations require federally

insured banks to file quarterly Call reports to the federal banking agencies, see, e.g., 12 U.S.C. §§ 161, 248(a), 1817(a), and

those agencies, including the FDIC, consistently rely on that

data for a variety of regulatory purposes, see, e.g., 12 C.F.R.

§§ 1.4, 3.2, 8.2, 362.3(a)(2)(iii)(C), 303.14(c). For example,

the FDIC relies on Call reports in determining the capital

level of a bank, 12 C.F.R. § 6.2(j) (bank’s total assets defined

by information in Call report), in determining the date of a

bank’s effective capital category, 12 C.F.R. §§ 325.102, 6.3,

and in approving or disapproving capital restoration plans, 12

C.F.R. § 208.44(b) (capital restoration plans must be prepared

in accordance with instructions on the Call report). Thus, the

FDIC’s calculation of Imperial’s liability as of SPB’s latest

Call report data is supported by its general practice of relying

on Call reports for regulatory purposes.10

10The Trustee also argues that the FDIC’s practice of using Call reports

is contradicted by an internal memo which states that a deficit calculation

“cannot and is not made until the bank initially fails to comply with the

capital restoration plan.” But the memo, like 12 C.F.R.

§ 325.104(h)(1)(B), merely addresses when the limit of liability is to be

measured, not what data are to be used in the calculation. 

IN RE IMPERIAL CREDIT INDUSTRIES 6311
[9] In light of the above, we affirm the district court’s calculation of Imperial’s liability under performance guaranty

using SPB’s June 30, 2002 Call report data. 

2. Credit for $5 million post-guaranty payment

The district court held that a $5 million transfer Imperial

made to SPB on July 31, 2002, could not reduce Imperial’s

liability under the performance guaranty because the contract

stated that Imperial’s liability could not be “released, discharged, or in any way affected by any circumstance, condition, or matter . . . including (v) any counterclaim, set-off,

deduction or defense [Imperial] may have against [SPB].”

The Trustee contends that the $5 million payment was not a

“set-off or deduction” but a partial payment towards its liability. He also argues that if the $5 million payment to SPB is

a barred “deduction,” then no payment could ever reduce its

liability under the guaranty. 

[10] We disagree. The $5 million payment to SPB clearly

meets the definition of a deduction, which the Trustee himself

defines as “an act of taking away” or “something that can be

subtracted.” WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY

589 (2002). Moreover, just because this $5 million transfer to

SPB does not reduce Imperial’s liability does not mean that

no payment could reduce its liability. Had Imperial made a

payment to SPB upon “demand” by the FDIC or “as directed”

by the agency, as required by the language of the guaranty,

the payment should have been properly credited toward its liability.11 However, it is entirely implausible that Imperial

intended a $5 million payment made to SPB in July of 2002

to reduce its obligation to the FDIC when the FDIC did not

demand payment until September 2003, and Imperial was

allegedly unaware of any obligation until the FDIC’s demand.

11The guaranty stated that “[Imperial] will pay the sum demanded to the

Company or as directed by the [FDIC] in immediately available funds

promptly after receipt . . . of such demand.” 

6312 IN RE IMPERIAL CREDIT INDUSTRIES
Therefore, we affirm the district court’s calculation of Imperial’s deficit at $18,375,800. 

C. The district court erred in dismissing the fraudulent

conveyance claim 

In the district court, Imperial sought to avoid any obligation

created by the performance guaranty as a constructive fraudulent conveyance under 11 U.S.C. § 548. The district court dismissed this claim as barred by 12 U.S.C. § 1828(u)(1) unless

Imperial could plead actual fraud, which it was unable to do.

Imperial argues that this decision was based on an erroneous

interpretation of § 1828(u) and asks the panel to reinstate its

fraudulent conveyance claim. The FDIC requests the panel

affirm the district court because the fraudulent conveyance

claim was a “trustee defense,” and so was barred by 11 U.S.C.

§ 365(o). In the alternative, the FDIC argues that the district

court properly interpreted 12 U.S.C. § 1828(u).12

1. The fraudulent conveyance claim’s status as a trustee

defense 

In its February 15, 2005, order, the district court held that

Imperial could not exercise its powers as a trustee without

first curing its deficit to the FDIC under § 365(o). The district

court held that Imperial’s fraudulent conveyance claim was a

“trustee defense” made on behalf of its creditors, and that

Imperial, therefore, could not litigate that defense until it

cured its obligation to the FDIC. However, the court did not

dismiss the fraudulent conveyance claim for that reason, as it

12We have jurisdiction to hear this claim even though the Trustee’s

fraudulent conveyance claim is an appeal from the district court’s August

4, 2004 and February 14, 2005 orders, which were not appealable in their

own right when the briefs were filed. “[O]rders adjudicating only some of

the claims may be treated as final orders if the remaining claims have subsequently been finalized,” Anderson v. Allstate Ins.Co., 630 F.2d 677, 680

(9th Cir. 1980). In this case, a final judgment was ordered on November

28, 2006, disposing of all the claims between the parties. 

IN RE IMPERIAL CREDIT INDUSTRIES 6313
had already dismissed the claim as barred by § 1828(u). The

FDIC urges the panel to affirm the district court’s dismissal

of the fraudulent conveyance claim because Imperial was

barred from bringing it in the first place as a “trustee

defense.” 

[11] We decline to affirm on that basis. Section 365(o)

requires immediate cure of a deficit to a federal depository

institution under a performance guaranty only when the

debtor is in Chapter 11. A Chapter 7 debtor is under no obligation to immediately cure such a deficit. Accordingly, the

district court’s holding that Imperial could not bring “trustee

defenses” until it cured its deficit under § 365(o) necessarily

applies only to debtors in Chapter 11, not debtors in Chapter

7 like Imperial. Although the district court need not have

reached the question whether the fraudulent conveyance claim

survived dismissal in the Chapter 11 proceeding, it did in fact

dismiss the claim as barred by § 1828(u). Now that Imperial

is in Chapter 7, we cannot affirm its dismissal of the fraudulent conveyance claim on the separate ground that it was a

barred “trustee defense” in Chapter 11. That question is moot,

and Imperial’s fraudulent conveyance defense is viable now,

unless precluded by § 1828(u). 

2. Section 1828(u) and the Fraudulent Conveyance Claim

Because we cannot affirm the dismissal of the fraudulent

conveyance claim as a barred “trustee defense,” we address

the Trustee’s argument that the district court erroneously dismissed its fraudulent conveyance claim as barred by 12

U.S.C. § 1828(u). Wolkowitz argues that the statute prohibits

persons from bringing only fraudulent conveyance claims

regarding a transfer of assets and thus does not bar Imperial’s

claim requesting the voiding of an obligation under a performance guaranty. The district court rejected this argument

below, holding that Imperial’s argument was based on an “unsupported distinction between assets and obligations.” 

6314 IN RE IMPERIAL CREDIT INDUSTRIES
[12] To the contrary, we find that the distinction between

assets and obligations is supported by the plain language of

the statute and the legislative history. On its face, § 1828(u)13

prohibits persons from bringing fraudulent conveyance claims

against federal banking agencies only for “the return of assets

. . . transferred to” a federally insured bank or “for monetary

damages or other legal or equitable relief in connection with

such transfer,” if the transfer was made when the insured bank

was undercapitalized. The statute makes no mention of obligations, which is what Imperial is attempting to avoid as a

fraudulent conveyance.14

Moreover, the House Conference Report reveals that the

purpose of § 1828(u) is to protect the federal deposit insurance funds from claims brought by the bankruptcy trustee of

a depository institution holding company “for the return of

capital infusions,” not for the avoidance of obligations. H.R.

Rep. No. 106-434, at 183 (1999) (Conf. Rep.), reprinted in

1999 U.S.C.C.A.N. 245, 276. And related statutes addressing

fraudulent conveyances recognize the distinction between

avoiding an obligation and recovering a transfer, suggesting

that Congress intentionally omitted obligations from

13The statute provides that: 

No person may bring a claim against any Federal banking agency

. . . for the return of assets of . . . [a] controlling shareholder of

the insured depository institution transferred to, or for the benefit

of, an insured depository institution by such . . . controlling

shareholder of the insured depository institution, or a claim

against such Federal banking agency for monetary damages or

other legal or equitable relief in connection with such transfer, if

at the time of the transfer [the insured institution was undercapitalized]. 

12 U.S.C. § 1828(u)(1); see also id. § 1828(u)(2)(A) (for purposes of

§ 1828(u)(1), the term “claim” includes a cause of action providing for

avoidance of fraudulent conveyances). 

14Note that any payments under the guaranty would clearly constitute a

“transfer of assets” and therefore § 1828(u) would bar the Trustee from

arguing that they were fraudulent conveyances. 

IN RE IMPERIAL CREDIT INDUSTRIES 6315
§ 1828(u). Compare 12 U.S.C. § 1821(d)(17)(A) (“The Corporation . . . may avoid a transfer of any interest of an

institution-affiliated party . . . or any obligation incurred by

such party or person . . . .”) with 12 U.S.C. § 1828(u) (only

barring claims based on transfers of assets); see Barnhart v.

Sigmon Coal Co., 534 U.S. 438, 452 (2002) (“[W]hen ‘Congress includes particular language in one section of a statute

but omits it in another section of the same Act, it is generally

presumed that Congress acts intentionally and purposely in

the disparate inclusion or exclusion.’ ” (quotation source

omitted)). Academic articles also have clarified that a guaranty is not equivalent to a transfer. See Phillip I. Blumberg,

Intragroup Guaranties Under the Uniform Fraudulent Transfer Act, 9 CARDOZO L. REV. 685, 703 (1987) (“With the issuance of a guaranty, the guarantor incurs an obligation, but no

transfer takes place. A transfer takes place only when the

guarantor or some other party makes a payment in reduction

of the indebtedness that has been guaranteed. Thus, it is clear

that the issuance of a guaranty is not included in [a statute

barring transfers] although payments pursuant to the guaranty

are, of course, included.” (footnote omitted)). 

[13] The FDIC is unable to effectively rebut our reading of

§ 1828(u) as barring only claims based on transfers of assets.

It attempts to argue that the term “asset” in § 1828(u) should

be defined broadly as “something of value,” but fails to support its interpretation with any statutory text, legislative history or case law. The FDIC also puts forth a policy argument,

contending that if § 1828(u) is limited to transfers of assets,

then it will render performance guaranties effectively unenforceable against insolvent parent companies of federally

insured banks. This argument is flawed, though, because it

assumes that if the Trustee’s fraudulent conveyance claim survived dismissal, it would necessarily prevail on the merits,

when the next step would be for a court to determine whether

the performance guaranty represented a fraudulent conveyance that could be avoided under 11 U.S.C. § 548. 

6316 IN RE IMPERIAL CREDIT INDUSTRIES
[14] In light of the above, we reverse the district court’s

dismissal of the fraudulent conveyance claim as barred by

§ 1828(u), and remand for further proceedings. 

D. The FDIC’s claim is entitled to only ninth priority in the

Chapter 7 proceeding 

[15] The district court held that Imperial owed the FDIC

$18,375,800 based on its obligation under the performance

guaranty. Per 11 U.S.C. § 365(o), which mandates immediate

payment of deficits to federal depository institutions, the court

ordered Imperial to cure its deficit as a condition of remaining

in Chapter 11. Alternatively, the court noted that Imperial

could convert to Chapter 7, in which case its “unsatisfied cure

obligation [would] have the status and priority in the Chapter

7 case which it is accorded under applicable bankruptcy law.”

Imperial converted to Chapter 7, and litigation over the status

of the FDIC’s claim ensued. The district court determined that

the FDIC’s claim was entitled to administrative priority in the

Chapter 7 case under 11 U.S.C. § 507(a)(2). The Trustee

argues that §§ 365(o) and 507 of the Bankruptcy Code relegate the FDIC’s claim to ninth priority. The FDIC argues that

the district court correctly accorded its claim administrative

priority. The priority of a claim arising from an uncured deficit under § 365(o) is an issue of first impression. 

[16] Section 365(o) was enacted as part of the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990, which constitutes Title XXV of the Crime

Control Act of 1990, Pub. L. No. 101-647, § 2522, 104 Stat.

4859, 4866. As part of its response to the savings and loan crisis, Congress sought to prevent parties affiliated with federal

depository institutions from “using bankruptcy to evade commitments to maintain capital reserve requirements of a Federally insured depository institution.” H.R. Rep. No. 681(I), at

179 (1990), reprinted in 1990 U.S.C.C.A.N. 6472, 6585; Resolution Trust Corp. v. Firstcorp., Inc. (In re Firstcorp, Inc.),

973 F.2d 243, 246 (4th Cir. 1992). Section 365(o) accomIN RE IMPERIAL CREDIT INDUSTRIES 6317
plished this goal by taking away a trustee’s ordinary power to

avoid a debtor’s executory contracts under § 365(a).15 Id. at

180, reprinted in 1990 U.S.C.C.A.N. 6472, 6586. The statute

provides that “[i]n a case under chapter 11 of this title, the

trustee shall be deemed to have assumed (consistent with the

debtor’s other obligations under section 507), and shall immediately cure any deficit under, any commitment by the debtor

to a Federal depository institutions regulatory agency.” 11

U.S.C. § 365(o). This “assumption and cure” mechanism has

been interpreted to require a trustee to immediately pay any

deficit to a federal depository institution as a condition of

remaining in Chapter 11. Firstcorp, 973 F.2d at 247. “If a

debtor cannot ‘immediately’ cure a deficit under a capital

maintenance commitment that exists at the time of a bankruptcy filing, then § 365(o) requires that debtor to proceed not

under Chapter 11 but under Chapter 7, to which § 365(o) does

not apply.” Id. 

[17] In addition to its assumption and immediate cure

requirement, § 365(o) addresses the priority of a claim arising

from an obligation under a capital maintenance commitment.

The second portion of the statute provides that any claim for

a “subsequent breach of . . . obligations [under a commitment

to maintain the capital of a federally insured depository institution] shall be entitled to priority under section 507.” The

reference to § 507 in § 365(o) directs the reader to

§ 507(a)(9). That provision, also enacted as part of the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer

Recovery Act of 1990, places “unsecured claims based on any

commitment by the debtor to a Federal depository institutions

regulatory agency . . . to maintain the capital of an insured

depository institution” in ninth priority in a bankruptcy case.16

15Section 365(a) provides that, with certain exceptions, “the trustee,

subject to the court’s approval, may assume or reject any executory contract . . . of the debtor.” 11 U.S.C. § 365(a). 

16The current § 507(a)(9) was enacted as § 507(a)(8). It was redesignated § 507(a)(9) in the Bankruptcy Reform Act of 1994, Pub. L. No.

103-394, § 304, 108 Stat. 4186, 4132. 

6318 IN RE IMPERIAL CREDIT INDUSTRIES
The plain language of § 365(o) and § 507(a)(9) suggests that

the FDIC’s claim under the performance guaranty — the

result of a subsequent breach of an obligation under a capital

maintenance commitment — is entitled to ninth priority. 

The district court instead held that the FDIC’s claim was

entitled to administrative priority under § 507(a)(2), which

allows second priority to “administrative expenses” including

the “actual, necessary costs and expenses of preserving the

estate.” 11 U.S.C. §§ 507(a)(2), 503(b)(1).17 It found that

Imperial’s failure to cure its deficit to the FDIC was equivalent to an obligation arising from an executory contract,

defined in the bankruptcy context as a contract in which “the

obligations of both the bankrupt and the other party to the

contract are so far unperformed that the failure of either to

complete performance would constitute a material breach.”

Felix Cattle Co. v. Silver (In re Select-A-Seat Corp.), 625

F.2d 290, 292 (9th Cir. 1980) (per curiam) (internal quotation

mark omitted). Reasoning that obligations arising from executory contracts are generally accorded administrative priority

in the bankruptcy context, Collingwood Grain, Inc. v. Coast

Trading Co. (In re Coast Trading Co.), 744 F.2d 686, 692

(9th Cir. 1984), and retain that status in Chapter 7 cases, 11

U.S.C. § 726, the district court held that the FDIC’s claim was

entitled to administrative status in its Chapter 7 case. 

While initially plausible, this reasoning is ultimately unpersuasive. First, we note that to the extent there is any ambiguity in the meaning of §§ 507(a)(9) and 507(a)(2),

§ 507(a)(9)’s specific reference to debtors’ commitments to

federal depository institutions “to maintain the capital of an

insured depository institution” should govern over

§ 507(a)(2)’s more general provision which arguably could

cover the same subject matter. See Fourco Glass Co. v.

17Only domestic support obligations and certain administrative expenses

of the trustee are paid before § 507(a)(2) expenses. See 11 U.S.C.

507(a)(1). 

IN RE IMPERIAL CREDIT INDUSTRIES 6319
Transmirra Prods. Corp., 353 U.S. 222, 228-29 (1957)

(“Specific terms prevail over the general in the same or

another statute which otherwise might be controlling.” (internal quotation marks omitted)). 

[18] More importantly, we simply fail to see how Imperial’s obligation to the FDIC constitutes an administrative

expense. Administrative expenses are defined in the Bankruptcy Code as “the actual, necessary costs and expenses of

preserving the estate.” 11 U.S.C. § 503(b)(1).18 We recognize

that, generally, an executory contract that the trustee assumes

post-petition under § 365(a) is accorded administrative priority for the purpose of “encourag[ing] third parties to contract

with the bankruptcy estate for the benefit of the estate as a

whole.” Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424

F.3d 1018, 1026 (9th Cir. 2005). However, the Trustee’s

assumption of Imperial’s executory contract with the FDIC

when it filed for Chapter 11 cannot be equated with a trustee’s

assumption of an ordinary executory contract. Under § 365(a),

a trustee can choose to assume or a reject an executory contract. Section 365(o) creates an exception to the trustee’s

assume or reject power, Firstcorp, 973 F.3d at 247, because

when the contract at issue is a capital maintenance agreement

with a federal depository institution, the trustee automatically

assumes the contract when it files for Chapter 11 under

§ 365(o). Because of the required assumption, the stated rationale for according claims arising from assumed executory

contracts administrative status — encouraging debtors to

transact with the estate — is not implicated. Accordingly, the

FDIC’s claim is not an administrative expense as it is not an

“actual, necessary” cost of preserving Imperial’s Chapter 7

estate. It must instead be granted ninth priority per the specific language in § 507(a)(9). 

18Administrative expenses also include various other expenses such as

certain taxes, fines, compensation and reimbursement, see 11 U.S.C.

§ 503(b)(1)(C)-(D), (b)(2)-(4), but the general definition in § 503(b)(1)(A)

is the only applicable provision here. 

6320 IN RE IMPERIAL CREDIT INDUSTRIES
A holding to the contrary would lead to nonsensical results.

The parties agree that had Imperial initially filed under Chapter 7, the FDIC’s claim would be in ninth priority. Section

365(o) never comes into play in Chapter 7 cases, so the

FDIC’s claim would necessarily be categorized as an “allowed unsecured claim[ ] based upon any commitment by the

debtor to a Federal depository institutions regulatory agency

(or predecessor to such agency) to maintain the capital of an

insured depository institution” under § 507(a)(9). In contrast,

based on the district court’s analysis, the FDIC’s claim is entitled to administrative priority in this case simply because

Imperial initially filed for Chapter 11. We see no principled

reason why a Chapter 7 debtor should be treated differently

based on whether it initially filed in Chapter 11 or Chapter 7,

when in either case the debtor ends up in Chapter 7 without

benefitting from Chapter 11 reorganization possibilities. See

United State v. Middleton, 231 F.3d 1207, 1210 (9th Cir.

2000) (“We are instructed to avoid, if possible, an interpretation that would produce ‘an absurd and unjust result . . . .’ ”)

(quoting Clinton v. City of New York, 524 U.S. 417, 429

(1998)). 

Granting the FDIC’s claim administrative status would also

erroneously read language into § 365(o) that does not appear

in the statute. A debtor with an uncured capital maintenance

obligation to a federal depository institution cannot reorganize

under Chapter 11 unless it first cures its deficit, and it can

avoid the immediate cure obligation only by liquidating under

Chapter 7. Indeed, while the district court held that the

FDIC’s claim was entitled to administrative priority in Chapter 11 and retained that status in Chapter 7, in actuality Imperial was unable to even enter Chapter 11 due to its failure to

cure its deficit under 11 U.S.C. § 365(o). We believe that preclusion of reorganization under Chapter 11 is the only consequence Congress prescribed for a debtor who fails to cure its

obligation under § 365(o), and that we would be adding to the

statute if we instead held that debtors faced the additional

consequence of administrative priority post-conversion. See

IN RE IMPERIAL CREDIT INDUSTRIES 6321
Franklin Sav. Corp. v. Office of Thrift Supervision, 303 B.R.

488, 502 (D. Kan. 2004) (“The remedy for a debtor’s inability

to cure the capital deficiency is that the debtor may be prohibited from proceeding under Chapter 11,” not that the FDIC be

entitled to a superpriority claim.); see also Firstcorp, 973 F.2d

at 248 (Section 365(o) was intended to prevent bank holding

companies from “us[ing] a Chapter 11 reorganization to jettison the subsidiary in an effort to enhance [their] own financial

position and that of its creditors . . . . If the holding company

is not financially able to satisfy its capital maintenance obligations, then § 365(o) denies it the opportunity to reorganize

under Chapter 11, leaving liquidation under Chapter 7 as its

only option.”). 

Last, our result is not undermined by the Fourth Circuit’s

decision in Firstcorp, as the FDIC suggests. Firstcorp held

that a debtor was required to immediately cure any deficits in

capital maintenance obligations owed to federal depository

institutions upon filing for Chapter 11 under § 365(o). 973

F.3d at 247-48. In reaching that holding, the Fourth Circuit

addressed the reference to § 507 in § 365(o), which the debtor

argued relegated the FDIC’s claim to ninth priority, rather

than immediate cure status. Id. In an effort to explain the reference to § 507, the court drew a distinction between obligations arising from a pre-petition breach of a capital

maintenance commitment and obligations arising from a postpetition or “subsequent breach” of a capital maintenance commitment. It held that pre-petition breaches had to be cured

immediately upon filing for Chapter 11, while post-petition

breaches in Chapter 11 cases were entitled only to ninth priority. See id. at 248 (the reference to § 507 “merely indicates

that breaches in capital maintenance obligations that arise

after the bankruptcy filing are subject to the priority scheme

of § 507”). 

The Firstcorp court interpreted the scope of the immediate

cure obligation under § 365(o) in a Chapter 11 case only, and

never purported to address the priority of any claims. Id. at

6322 IN RE IMPERIAL CREDIT INDUSTRIES
247-48. The court explicitly declined to address the priority

of claims arising from post-petition breaches in Chapter 11

cases, id. at 248 n.4, and the issue confronting us here — the

priority of a claim arising from a pre-petition breach postconversion to Chapter 7 — was never even raised before the

Firstcorp court, id. at 247-48. Thus, although Firstcorp held

that the reference to § 507 in § 365(o) suggested that postpetition or “subsequent” breaches of capital maintenance obligations would be entitled to ninth priority in Chapter 11 cases,

it does not foreclose our conclusion that a debtor’s failure to

cure a pre-petition capital maintenance obligation is also subject to the § 507 priority scheme post-conversion to Chapter

7. 

[19] Accordingly, we hold that a failure to cure a § 365(o)

deficit in a Chapter 11 case does not give rise to an administrative priority in a Chapter 7 case. Rather, the FDIC’s claim

attributable to Imperial’s failure to cure its debt is entitled

only to ninth priority under §§ 365(o) and 507(a)(9). We thus

remand to the district court for further proceedings consistent

with this opinion. 

III. CONCLUSION

We affirm in part, and reverse and remand in part. Each

party shall bear its own costs on appeal. 

IN RE IMPERIAL CREDIT INDUSTRIES 6323