Source: https://openjurist.org/983/f2d/644
Timestamp: 2019-04-18 22:48:40+00:00

Document:
Marc A. SPARKS, et al., Defendants.
James A. Pikl, Paul D. Schoonover, Vial, Hamilton, Koch & Knox, Dallas, TX, for appellant.
Guy Irvin Wade, III, Paul C. Watler, Pamela Ann Swank, Jenkins & Gilchrist, Dallas, TX, E. Whitney Drake, Sp. Counsel, F.D.I.C., Washington, DC, for F.D.I.C., as receiver for BancTexas Dallas, N.A.
Appellant Marc A. Sparks purchased a Texas trust company called The Dallas Empire Company (DEC) from BancTexas, Dallas, planning to sell it afterward. Both Sparks and Roy Thigpen, III, the prospective purchaser, required that DEC have a "continuous, uninterrupted corporate charter" as a condition to purchase. By letter dated May 8, 1986, the Chairman of the Board and CEO of the bank represented to Sparks, among other things, that DEC "has had a continuous and uninterrupted status of good standing through this present date." One week later, Sparks bought DEC for $45,000. The May 15 bill of sale warranted that DEC was in good corporate standing at that time.
Before the sale to Thigpen, for which Sparks was to receive $150,000, Sparks learned that DEC's charter had been forfeited briefly for non-payment of corporate franchise taxes in 1985. Despite the charter's reinstatement, Thigpen refused to purchase DEC and sued Sparks, BancTexas and another individual in state court for violation of the Texas Deceptive Trade Practices Act (DTPA). Counter-claims and cross-claims were filed. By autumn, 1987, the state court had granted summary judgment in favor of the bank on Thigpen's and Sparks's DTPA claims and dismissed Thigpen's original petition with prejudice. Only Sparks's breach of warranty claims against the bank remain. BancTexas was declared insolvent in January 1990, and FDIC was appointed its receiver. Substituted as a party defendant for the bank in state court, FDIC removed the case to federal court and some months later filed a motion for summary judgment on Sparks's claims.
"[A]ny agreement which does not meet the requirements set forth in § 13(e) [12 U.S.C. § 1823(e) ] shall not form the basis of, or substantially comprise, a claim against the receiver or the Corporation."
12 U.S.C. § 1821(d)(9)(A), effective in September, 1989. The requirements incorporated in that provision from 12 U.S.C. § 1823(e) include that the agreement be in writing, executed by both parties contemporaneously with the "acquisition of the asset" by the institution, and be continuously maintained among the institution's business records. FDIC offered an affidavit of Linda Bratton, one of its employees, to attest that no documents in BancTexas's files reflected whether the sale of DEC to Sparks, or the May 8 letter, had been approved by the bank's board of directors. The Court found this affidavit, unanswered by Sparks, conclusive against him for purposes of § 1821(d)(9)(A).
Sparks moved for reconsideration on several grounds. First, he contended that because the DEC transaction constituted a sale of an asset by the bank, it did not fall within the purview of D'Oench, § 1823(e) or § 1821(d)(9)(A) as a matter of law. If § 1821(d)(9)(A) was necessary to make the § 1823(e) requirements applicable to Sparks's "claim" against FDIC, he contended, then § 1821(d)(9)(A) was being improperly retroactively applied, for it became effective in September 1989, while the DEC transaction occurred in 1986. Finally, he moved for an opportunity to conduct discovery to counter the Bratton affidavit. Because the bank had defended Sparks's case on the merits, he was not forewarned by FDIC's substitution that he might have to produce evidence to show that the DEC sale had complied with 12 U.S.C. § 1823(e). The district court denied the motion for reconsideration and this appeal followed.
Sparks undertakes a four-fold attack on appeal. He disputes that § 1821(d)(9)(A) applies retroactively to his claims against FDIC. He contends that D'Oench and § 1823(e) do not apply to the DEC transaction. Even if those rules did apply, he maintains that FDIC did not carry its summary judgment burden. Finally, he asserts that if any of these avoiding doctrines are available to FDIC, the district court abused its discretion in not allowing further discovery. FDIC takes issue with each of these propositions.
None of the policies that favor the invocation of this statute are present in such cases because the terms of the agreement that tend to diminish the rights of the FDIC appear in writing on the face of the agreement that the FDIC seeks to enforce.
Riverside Park Realty Co. v. FDIC, 465 F.Supp. 305, 313 (M.D.Tenn.1978).
In Laguarta, however, there was no question whether the borrower's loan agreement and modification agreement were collateral to the promissory note; as the court observed, they were integral to the loan transaction. Here, that is not necessarily the case. Indeed, FDIC has assumed that the May 8 letter was collateral to the bill of sale for DEC. From this assumption proceed FDIC's arguments that the May 8 letter did not separately comply with D'Oench or § 1823(e).
As we view it, the threshold question is whether that letter was part of the parties' agreement of sale of DEC or whether it was subsumed by the parol evidence rule or a similar principle and did not become part of the parties' final agreement. Before FDIC entered this case, BancTexas and Sparks had begun to brief this question on summary judgment, but neither the state nor the federal court ever ruled on it. On remand, the court must answer this question. If the May 8 letter was not, under Texas law, part of the documents comprising the DEC sale contract, then Sparks cannot prevail because he has no right to rely on that letter's representations. If the May 8 letter was part of the contract, then FDIC prevails only if the DEC sale to Sparks had to be documented pursuant to 12 U.S.C. § 1823(e) or § 1821(d)(9)(A).
(4) has been, continuously, from the time of its execution, an official record of the depository institution. (Emphasis added).
The next question is, to what "agreements" does § 1821(d)(9)(A) apply the rigorous "recording"8 requirements of § 1823(e)? Put otherwise, is the type of agreement covered by § 1821(d)(9)(A) different from that defined by § 1823(e)? The logical result of FDIC's argument suggests that § 1821(d)(9)(A) is far broader than § 1823(e). FDIC contends, and the district court agreed, that the bank's alleged warranty of DEC's continuous uninterrupted corporate status was an "agreement" that, under § 1821(d)(9)(A), was unenforceable because of its noncompliance with the § 1823(e) criteria. We have already concluded that the transaction was not covered by § 1823(e) because it did not embody or was not made in connection with the bank's "acquisition" of an "asset." Ergo, FDIC's and the district court's notion of an agreement under § 1821(d)(9)(A) are unconstrained by the portions of § 1823(e) that refer to the "acquisition" of an "asset" by the institution and by FDIC.
FDIC urges that the Supreme Court's opinion in Langley compels its broad reading of an "agreement," but this is incorrect. Langley held that an agreement under § 1823(e) could include an oral understanding between borrower and lender that, if enforced, would have constituted a defense to the borrower's loan repayment obligation. The facts of the case precisely include an "asset" of the institution, i.e. the loan, "acquired" by FDIC when the bank failed. Langley did not define or deal with the nature of "assets" to which § 1823(e) agreements refer. While Langley broadly defines an "agreement" made under § 1823(e), it does not say that any "agreement" must be unhinged from the rest of the statutory language which contemplates that the "agreement" bear upon an "asset" "acquired by" the institution and later by FDIC. The question is not whether Langley's definition of an "agreement" applies to § 1821(d)(9)(A)--we assume it does--but instead is whether the modifiers expressly used in § 1823(e), referencing an agreement in connection with an "asset" "acquired" by the institution, are also expressed in § 1821(d)(9)(A). To state the question that way is to answer it. Those modifiers are clearly expressed: among the specific provisions of § 1823(e) adopted by § 1821(d)(9)(A) is the requirement that an enforceable agreement must have been "executed by the depository institution and any person claiming an adverse interest thereunder, contemporaneously with the acquisition of the asset by the depository institution." § 1823(e)(2) (emphasis added). Again, laying aside the questions of the intended scope of "acquisition" and "asset," there is still no doubt that these terms describe essential features of the transaction to which § 1823(e), and now § 1821(d)(9)(A), applies. These modifiers bind § 1823(e) to its origins in the D'Oench doctrine as a device to protect the federal regulators from side agreements that would have impeded the collection of obligations owed to the Bank. Such obligations are the bank's "assets" acquired in the course of its banking activities.
Moreover, if § 1821(d)(9)(A) were to apply to claims arising from any agreement entered into by a depository institution, absurd consequences would result. A claimant who furnished office supplies to the failed bank could not assert a claim unless his contract was (1) in writing, (2) executed by him and the bank contemporaneously with the sale of office supplies, (3) approved and recorded in the bank's board of directors' minutes and (4) continuously maintained as a bank record. Such requirements would render unenforceable the claims of nearly all bank trade creditors. Take another example: if an employee claimed to have been wrongfully denied reimbursement for travel expenses, the "agreement" would, under FDIC's reasoning, be unenforceable unless it had jumped through the § 1823(e) hoops. These results transform § 1821(d)(9)(A) from a provision protecting the failed bank's loan portfolio from D'Oench-like secret agreements into a meat-axe for avoiding debts incurred in the ordinary course of business. Far-reaching as some of FIRREA's provisions were, we doubt that this extravagant extension of § 1823(e) would have occurred, as it did, unremarked in the legislative history.
Because § 1821(d)(9)(A) applies to the same type agreements tied to "acquisitions" of "assets" as does § 1823(e), it cannot apply in this instance to the alleged breach of a warranty by the bank when it sold DEC to Sparks.
We note finally that this interpretation of § 1823(e) and § 1821(d)(9)(A) is not necessarily inconsistent with the Eighth Circuit's recent decision in North Arkansas Medical Center, supra, because, despite its broad dicta, that case revolved around loan-related transactions entered into by the bank in its unique capacity as a lending institution. As Justice Scalia noted in Langley the purpose of § 1823(e) relates to banks in that capacity; to the evaluation of "bank assets" and "mature consideration of unusual loan transactions." 484 U.S. at 92, 108 S.Ct. at 401. This factor also distinguishes similar cases cited by FDIC.
Sparks may or may not be able to persuade the district court that a warranty of "continuous, uninterrupted corporate existence" was an essential contractual feature of his purchase of DEC from BancTexas. If he fulfills this task, he may proceed with his claims against FDIC unhindered by D'Oench, § 1823(e) or § 1823(d)(9)(A), because these regulatory superpower rules do not apply to a bank's sale of an asset in a nonbanking-related transaction. FDIC's avoidance powers are awesome, but neither infinite nor unrestrained by the statutory language.
For the foregoing reasons, the judgment of the district court is REVERSED and REMANDED for further proceedings.
We have parsed the remainder of FIRREA unsuccessfully trying to find a consistent definition of "claim."

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