Opinion ID: 429832
Heading Depth: 1
Heading Rank: 1

Heading: introduction

Text: 1 By 12 U.S.C. Sec. 1823(e) (1976) Congress gave to assets acquired by the Federal Deposit Insurance Corporation special protections that are not available to ordinary holders of commercial paper and are not dependent on whether FDIC would qualify as a holder in due course under state law. This case concerns application of Sec. 1823(e) to an asset acquired by FDIC from a failed bank. Section 1823(e) provides: 2 No agreement which tends to diminish or defeat the right, title or interest of the Corporation in any asset acquired by it under this section, either as security for a loan or by purchase, shall be valid against the Corporation unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank. 3 Merchants National Bank (MNB) held 80% of a $3.9 million loan to Ball-Co Contractors, Inc. Wilcox County Bank (WCB), along with other banks, participated in the remaining 20% of the loan. WCB's share was $84,000. The $3.9 million Ball-Co loan carried an 80% guarantee from the Farmers Home Administration. WCB says that it participated ratably in the guaranteed portion. MNB says that WCB participated in only the unguaranteed portion. 4 The certificate of participation issued by MNB to WCB says: To: WILCOX COUNTY BANK 5 This is to certify that you have a participation of $84,000.00 EIGHTY FOUR THOUSAND & NO/100 DOLLARS in the following described loan held by the undersigned: 6 BORROWER: BALL-CO CONTRACTORS, INC. ADDRESS: P.O. Box 880 Bay Minette, AL AMOUNT OF NOTE: $3,900,000.00 7 DATED: August 31, 1977 DUE: --- 8 INTEREST RATE: 3% over Prime INTEREST TO YOU: Same 9 COLLATERAL: All accounts receivable and contract rights of Debtor, all of Debtor's inventory, including all raw materials, work in process, finished goods and other tangible property owned and held for sale or lease or furnished under contracts of service or used or consumed in Debtor's business, all equipment used in the conduct of the business of Debtor; and all motor vehicles and automotive equipment used in the conduct of the business of Debtor now owned or hereafter existing or acquired. 10