Court Opinion

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Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

2-10-1995

Lesal v Echotree
Precedential or Non-Precedential:

Docket 93-5707

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Recommended Citation
"Lesal v Echotree" (1995). 1995 Decisions. Paper 40.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/40

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               UNITED STATES COURT OF APPEALS
                   FOR THE THIRD CIRCUIT
                        ____________

                        No. 93-5707
                        ____________

                   LESAL INTERIORS, INC.
                         Appellant

                             v.

            ECHOTREE ASSOCIATES, L.P., a New Jersey
           Limited Partnership; HLM/ECHOTREE, INC.;
                ECHELON GLEN COOPERATIVE, INC.;
        H. L. MICHAELS, INC.; M. J. RAYES INCORPORATED,
   a/k/a M. J. RAYNES, INC.; RESOLUTION TRUST CORPORATION,
    Receiver of CorEast Savings Bank F.S.B., whose address
  is 808 Moorefield Park Drive, Richmond, Virginia, 23236;
    FEDERAL DEPOSIT INSURANCE COMMISSION, as Receiver for
   American Savings Bank, F.S.B.; GENERAL ELECTRIC CAPITAL
    CORPORATION; DLG FINANCIAL SERVICES CORPORATION, a/k/a
       DLG FINANCIAL SERVICES, INC.; COLONIAL EQUITY OF
   NEW YORK, INC.; JAMES D. DEMETRAKIS; VINCENT TRAVALINO;
     DEL MASTRO'S, INC., t/a DEL'S ENTERPRISE; DEL MASTRO
ENTERPRISES, INC.; HORIZON I CORPORATION; COLONIAL DPC CORP.,
                      ____________________

       ON APPEAL FROM THE UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF NEW JERSEY
                    (D.C. Civil 91-02595)
                         ____________

                        No. 94-5047
                        ____________

                    LESAL INTERIORS, INC.
                          Appellant

                             v.

            ECHOTREE ASSOCIATES, L.P., a New Jersey
           Limited Partnership; HLM/ECHOTREE, INC.;
                ECHELON GLEN COOPERATIVE, INC.;
       H. L. MICHAELS, INC.; M. J. RAYES INCORPORATED,
   a/k/a M. J. RAYNES, INC.; RESOLUTION TRUST CORPORATION,
    Receiver of CorEast Savings Bank F.S.B., whose address
  is 808 Moorefield Park Drive, Richmond, Virginia, 23236;
    FEDERAL DEPOSIT INSURANCE COMMISSION, as Receiver for
   American Savings Bank, F.S.B.; GENERAL ELECTRIC CAPITAL
    CORPORATION; DLG FINANCIAL SERVICES CORPORATION, a/k/a
       DLG FINANCIAL SERVICES, INC.; COLONIAL EQUITY OF
   NEW YORK, INC.; JAMES D. DEMETRAKIS; VINCENT TRAVALINO;
     DEL MASTRO'S, INC., t/a DEL'S ENTERPRISE; DEL MASTRO
ENTERPRISES, INC.; HORIZON I CORPORATION; COLONIAL DPC CORP.,I

       (Camden New Jersey District Civil No. 91-02595)

                      LESAL INTERIORS, INC.

                               v.

        RESOLUTION TRUST CORPORATION, as Receiver for
        COREAST SAVINGS BANK; COLONIAL DPC CORP. I, a
     New Jersey Corporation; THE ECHELON GLEN RESIDENTS
    AND OWNERS ASSOCIATION; THE POLIS HOUSING FOUNDATION
      CORPORATION VI, and certain John Doe defendants,
    financing institutions involved in the "refinancing"
    of the Echelon Glen Project, and Certain John Doe II
       defendants, transferees of assets fraudulently
              conveyed by Colonial DPC Corp. I;
                      HOWARD L. MICHAELS

       (Camden New Jersey District Civil No. 93-05152)

                     Lesal Interiors, Inc.,
                            Appellant
                      ____________________

                      Argued: July 26, 1994
          Before:    BECKER and ALITO, Circuit Judges
                    and BRODY, District Judge*

              (Opinion Filed: February 10, 1995)
                     ____________________
*The Honorable Anita B. Brody, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
                     H. THOMAS HUNT, ESQ. (Argued)
                     Hunt & Scaramella, P.C.
                     220 Lake Drive East - Suite 105
                     Cherry Hill, New Jersey 08002

                     Attorneys for Appellant

                     ANN F. KIERNAN, ESQ. (Argued)
                     Jamieson, Moore, Peskin & Spicer
                     300 Alexander Park
                     CN-5276
                     Princeton, New Jersey 08543-5276

                     Attorneys for Appellees
                     Resolution Trust Corporation
                     as Receiver for CorEast Savings Bank
                     and Colonial DPC Corp. I

                        ____________________

                        OPINION OF THE COURT
                        ____________________

ALITO, Circuit Judge:

           Lesal Interiors, Inc. ("Lesal") has appealed a district

court order entering judgment against it on claims that it

originally asserted against Colonial DPC Corporation I

("Colonial") and CorEast Savings Bank ("CorEast").     Colonial was

formerly the wholly owned nonbanking subsidiary of CorEast, which

is now under the receivership of the Resolution Trust Corporation

("RTC").   The district court held that Lesal could not recover

from Colonial on these claims due to the federal common law

D'Oench Duhme doctrine1 and its statutory counterpart, 12 U.S.C.

1
.   See D'Oench Duhme & Co. v. FDIC, 315 U.S. 447 (1942).
§ 1823(e).    In addition, the court held that the failure of

Lesal's claims against Colonial doomed its attempt to recover

from CorEast based on the theory that Colonial was CorEast's

alter ego.     On appeal, the RTC defends the district court's

decision based on 12 U.S.C. § 1823(e) and does not contend that

the federal common law D'Oench Duhme doctrine provides broader

protection.     Looking to the plain language of 12 U.S.C. §

1823(e), we hold that this provision does not apply to claims

against a depository institution's subsidiary, and we therefore

reverse the order entering judgment against Lesal.

          Lesal has also appealed a subsequent district court

order denying its motion for garnishment under N.J.S.A. 2A:17-63

of a debt allegedly owed by Colonial to Lesal's judgment debtor.

Because Colonial disputed this debt, we agree with the district

court that the summary procedure provided by N.J.S.A. 2A:17-63

was inapplicable here, and we therefore affirm this order of the

district court.

                                  I.

             In 1987, Echotree Associates, L.P. ("Echotree), a New

Jersey limited partnership, acquired in fee simple an apartment

complex in Voorhees, New Jersey, known as the Echelon Glen

Apartments.     Echotree undertook to renovate the apartments and to

convert them into cooperatives, and CorEast, a federally
chartered savings bank, provided secured financing for this

project.

            In December 1988, in order to carry out the renovation,

Echotree entered into a contract with Lesal Interiors, Inc.,

which specializes in projects of this type.    Under this contract,

Echotree was obligated to pay Lesal $1,536,000.    In addition,

Lesal performed further work under change orders for a price of

$390,000.    Echotree failed to pay Lesal for $778,000 of the

amount that it owed.

            In February 1989, Echotree conveyed its fee simple

interest to Echelon Glen Cooperative, Inc., a New Jersey

nonprofit corporation.    After this conveyance, Echotree held

shares in Echelon Glen Cooperative, Inc., as well as proprietary

leases for many of the cooperative units.

            In 1990, the conversion project failed.   As part of the

workout of the loan relationship between Echotree and CorEast,

CorEast formed a wholly owned subsidiary, Colonial DPC

Corporation I, a Virginia corporation.2   CorEast and Colonial

then entered into a settlement agreement with Echotree and its

managing general partner.    Under this agreement, Echotree
2
 . The district court found that Colonial used CorEast's
offices; that "[m]ost or all of Colonial's officers and directors
were also full-time CorEast employees and/or agents"; that
"Colonial conducted separate board minutes, but prior to January,
1991, apparently maintained no corporate minutes"; and that
Colonial, while a CorEast subsidiary "had no income or employees,
paid no rent, incurred no office expenses, and paid no taxes."
Lesal Interiors, Inc. v. Resolution Trust Corporation, 834
F. Supp. 721, 727 (D.N.J. 1993).
conveyed to Colonial both shares in Echelon Glen Cooperative,

Inc. and its proprietary leases, and CorEast released certain

debts and extended new loans.      The "Recital" to the settlement

agreement stated that "[Colonial] shall agree to . . . pay on

behalf of Echotree, or indemnify Echotree against, certain

expenses incurred by Echotree with respect to the [p]roperty."

App. 296.   Paragraph 6 of the agreement obligated Colonial to

"pay on behalf of Echotree, its partners and principals . . .

Construction Payables, in an amount not to exceed $1,180,000

dollars . . . ."     Paragraph 6 also appointed Colonial as

Echotree's "attorney-in-fact . . . to negotiate, litigate or

settle . . . with each of the specifically identified creditors

shown in Schedule[] C . . . as [Colonial] wishes, in its sole

discretion."     Id. at 311-12.   Schedule C listed construction

payables totalling $1,180,000.     Id. at 332.   The first item on

this list was:    "Lesal Interiors - Amount Completed $690,000 -

Total $690,000." Paragraph 28 of the agreement stated:
          This Agreement and the other Documents are
          solely for the benefit of the parties hereto,
          and may not be relied by [sic] any other
          persons or entities including, without
          limitation, any present or future creditors
          of [Colonial], Echotree, or Michaels
          [Echotree's managing general partner].

Id. at 330.    Lesal did not participate in and was not aware of

the negotiations leading to the settlement agreement.

            In July 1990, Lesal brought suit in New Jersey Superior

Court against Echotree, Echotree's general partner, Echelon Glen
Cooperative, Inc., CorEast, Colonial, and other parties.      Lesal

sought recovery from Echelon Glen Cooperative, Inc., Echotree,

and Echotree's general partner.    As against CorEast and Colonial,

Lesal sought only to establish the priority of its alleged

mechanic's lien.

            In early 1991, the Office of Thrift Supervision

declared CorEast insolvent and appointed the RTC as CorEast's

receiver.    In April 1991, the New Jersey Superior Court

substituted the RTC in the action in place of CorEast, and in May

the RTC removed the case to the United States District Court for

the District of Columbia.    That court, in turn, transferred the

case to the United States District Court for the District of New

Jersey.

            In May 1992, Lesal, with leave of court, filed an

amended complaint containing new counts that sought to recover

from CorEast and Colonial for the $778,000 due from Echotree.

Among these new counts were count VIII, which sought recovery

from Colonial on the ground that Lesal was a third-party

beneficiary of the settlement agreement, and count IX, which

sought to recover from CorEast on the theory that Colonial was

CorEast's alter ego and that CorEast was therefore liable to

Lesal for Colonial's debts, obligations and liabilities.      In

addition, count XI sought recovery from CorEast, Colonial, and

other defendants based on fraud.
           In August 1992, all of CorEast's shares in Colonial

were acquired by Polis Housing Foundation Corporation VI, a New

Jersey nonprofit corporation.   Colonial was converted into a New

Jersey nonprofit corporation.

           In November 1992, the district court entered a default

judgment in favor of Lesal and against Echotree and its general

partner, jointly and severally, in the amount of $778,000, plus

costs and interest.   In March 1993, the court entered an order

granting CorEast's and Colonial's motion for summary judgment

with respect to most of the new counts contained in the amended

complaint, but the court denied summary judgment with respect to

counts VIII (third-party beneficiary), IX (alter ego), and XI

(fraud).

           In May 1993, the district court held a bench trial on

these latter counts and subsequently found for CorEast and

Colonial on all of them based on the D'Oench Duhme doctrine and

its statutory counterpart, 12 U.S.C. § 1823(e).   See Lesal

Interiors, Inc. v. RTC, 834 F. Supp. 721 (D.N.J. 1993).   After

observing that Colonial was entitled to D'Oench Duhme protection

because it was a wholly owned subsidiary of CorEast (834 F.Supp.

at 730-31), the court applied the requirements of section 1823(e)

to each of Lesal's outstanding claims (Id. at 731-33).
           Turning to Lesal's third-party beneficiary claim

against Colonial, the court first held that Lesal could not

recover under the settlement agreement because that agreement did
not satisfy section 1823(e)(1), which requires that a covered

agreement be "in writing."   Id. at 731-32.   The court concluded

that this provision demanded explicit documentation evidencing

Colonial's obligation to make payments to Lesal.    Id.     Observing

that the settlement agreement was "ambiguous both as to whether

Lesal was an intended third-party beneficiary and as to whether

Colonial specifically agreed to pay the $690,000 owed to Lesal,"

the court held that the agreement was "an insufficient writing

for purposes of section 1823(e)."   Id. at 732.    The court also

held that Lesal's third-party beneficiary claim foundered on

section 1823(e)(2), which requires that a covered agreement be

"executed by . . . any person claiming an adverse interest

thereunder."   Because "Lesal did not participate in the execution

of the Settlement Agreement," the court reasoned, this provision

"preclude[d] it from enforcing the agreement against defendants."

Id.   Finally, the court considered whether Lesal's third-party

beneficiary claim satisfied section 1823(e)(3), which requires

that a covered agreement be approved by "the depository

institution or its loan committee."   Id. at 732-33.      CorEast and

Colonial argued that this requirement was not met because the

settlement agreement was never approved by Colonial's board of

directors, but Lesal contended that this provision was

"inapplicable to transactions involving a bank's wholly-owned

subsidiary rather than the bank itself."   Id. at 732.     The court

expressed skepticism about Lesal's argument, stating:
          Inasmuch as section 1823(e) has been extended
          to transactions involving wholly-owned
          subsidiaries . . . , it is logical to
          conclude that "wholly-owned subsidiary"
          should be read into the statute -- in place
          of "depository institution" -- where the
          agreement in question was entered into by the
          subsidiary and not the depository
          institution.

Id.   The court, however, "refrain[ed] from definitively holding

that section 1823(e)(3) independently bar[red] Lesal's claim."

Id. at 733.

          Turning to Lesal's fraud claim, the court concluded

that "[a]s this claim necessarily relies upon a non-written

representation, it too falls within the scope of D'Oench and
section 1823(e)."    Id.   Finally, with respect to count IX of the

amended complaint, which sought to recover from CorEast on an

alter ego theory, the court concluded that it was unnecessary "to

determine whether CorEast would be derivatively liable on an

alter ego theory" because "Colonial had not been found liable on

any count."   Id.   Lesal filed a timely notice of appeal from the

district court's order disposing of all of these claims.

          The district court subsequently ruled on the motion

under which Lesal, relying on N.J.S.A. 2A:17-63, had sought an

order compelling Colonial to satisfy the default judgment that

Lesal had obtained against Echotree.     The court concluded that

this statutory remedy was unavailable because Colonial had not

admitted that it owed a debt to Echotree and because Echotree had
not obtained a judgment against Colonial.     Lesal then filed a

second notice of appeal from this order.

                                 II.

          A.   We first consider Lesal's contention that the

district court erred in rejecting its third-party beneficiary and

alter ego claims based on the D'Oench Duhme doctrine and 12

U.S.C. § 1823(e).3    The D'Oench Duhme doctrine originated with

the Supreme Court's decision in D'Oench Duhme & Co. v. FDIC, 315
U.S. 447 (1942).     In that case, a securities firm, D'Oench Duhme

& Co., sold bonds to a state bank.     After the bonds defaulted,

D'Oench Duhme & Co. executed notes payable to the bank and made

interest payments on them so that the bank could avoid showing

the past due bonds on its books, but the parties entered into a

side agreement that the notes would not be called for payment and

that the interest payments would be repaid.     Without learning of

the side agreement, the Federal Deposit Insurance Corporation

("FDIC") subsequently insured the bank and, as part of a purchase

and assumption agreement, acquired a note executed by D'Oench

Duhme & Co.'s as a renewal of the original notes.    Id. at 453-54.
The FDIC then sued to collect on the note, and the bank alleged

in its answer that the note had been given without consideration

and with the understanding that it would not be sued upon.     Id.

3
 . Lesal does not seek reversal of the district court order with
respect to its fraud claim. See Appellant's Br. at 19, 26.
at 456.   The Supreme Court held, however, that D'Oench Duhme &

Co. was liable as a matter of federal law based on "a federal

policy to protect [the FDIC] and the public funds which it

administers against misrepresentations as to the securities or

other assets in the portfolios of the banks which [it] insures or

to which it makes loans."   Id. at 457.   The Court's decision in

this case is often described as resting on federal common law.

See, e.g., Boyle v. United Technologies, 487 U.S. 500, 504

(1988); Illinois v. City of Milwaukee, 406 U.S. 91, 105 n.6

(1992).

           In 1950, Congress effectively codified the holding of

D'Oench Duhme by enacting Section 13(e) of the Federal Deposit

Insurance Act, 12 U.S.C. § 1823(e), and in 1989, as part of the

Financial Institutions Reform, Recovery, and Enforcement Act

(FIRREA), 12 U.S.C. § 1441a(b)(4), Congress extended the

application of 12 U.S.C. § 1823(e) to the RTC.4   There is

4
 . 12 U.S.C. § 1441a(b)(4) provides, with certain exceptions not
pertinent here, that:

           [T]he [RTC] shall have the same powers and rights to
           carry out its duties with respect to institutions
           described in paragraph (3)(A) as the Federal Deposit
           Insurance Corporation has under sections 11, 12 and 13
           of the Federal Deposit Insurance Act [12 U.S.C.A. §§
           1821, 1822 and 1823] with respect to insured depository
           institutions (as defined in section 3 of the Federal
           Deposit Insurance Act) [12 U.S.C.A. § 1813].

Paragraph (3)(A) [12 U.S.C. § 1441a(b)(3)(A)] provides:

           The duties of the Corporation shall be to carry out a
           program under the general oversight of the Thrift
           Depositor Protection Oversight Board including:
authority for the proposition that the federal common law rule

recognized in D'Oench is not coextensive with the terms of 12

U.S.C. § 1823(e).     See, e.g., E.I. du Pont de Nemours & Co. v.

FDIC, 32 F.3d 592, 596-97 (D.C. Cir. 1994); FSLIC v. Griffin, 935
F.2d 691, 698 (5th Cir. 1991), cert. denied, 112 S. Ct. 1163

(1992); Hall v. FDIC, 920 F.2d 334, 339 (6th Cir. 1990), cert.

denied, 501 U.S. 1231 (1991).    Here, however, the appellees have

not argued that the federal common law doctrine provides broader

protection for them than does section 1823(e),5 and we therefore

limit our consideration to that statutory provision.

(..continued)

           (A) To manage and resolve all cases involving
               depository institutions --

                (i) the accounts of which were insured by the
                                                         Federal
Savings and Loan Insurance

                      Corporation before the enactment of
                      the Financial Institutions Reform, Recovery,
                      and Enforcement Act of 1989; and

                (ii) for which a conservator or receiver is
                     appointed after December 31, 1988, and
                     before such date as is determined by the
                     Chairperson of the Thrift Depositor
                     Protection Oversight Board, but not earlier
                     than January 1, 1995, and not later than
                     July 1, 1995 (including any institution
                     described in paragraph (6)).

5
 . See Appellee's Br. at 17-21. When asked at oral argument
whether the federal common law doctrine and its statutory
counterpart differed, appellee's counsel stated that the two were
"very close." While she added that there were "some subtle
differences," she did not, either at argument or in her written
submissions, identify any such differences, much less any that
             B.   Lesal argues that section 1823(e) does not protect

Colonial.6     Section 1823(e) states (emphasis added):
             No agreement which tends to diminish or defeat the
             interest of the Corporation in any asset acquired by it
             under this section or section 1821 of this title,
             either as security for a loan or by purchase or as
             receiver of any insured depository institution, shall
             be valid against the Corporation unless such agreement
             --

             (1) is in writing,

             (2) was executed by the depository institution and

                   any person claiming an adverse interest
                   thereunder, including the obligor,
                   contemporaneously with the acquisition of the
                   asset by the depository institution,

              (3) was approved by the board of directors of the
                  depository institution or its loan committee,
                  which approval shall be reflected in the minutes
                  of said board or committee, and

              (4) has been, continuously, from the time of its
                  execution, an official record of the depository
                  institution.

The term "insured depository institution" in section 1823(e) is

defined to mean a "bank or savings association" insured by the

FDIC.   12 U.S.C. § 1813(c)(2).     When 12 U.S.C. § 1823(e) is

(..continued)
would be helpful to her clients. See E.I. du Pont de Nemours &
Co., 32 F.2d at 596-97 (common law doctrine is narrower than §
1823 in that non-fault may be asserted as a defense); FDIC v.
Meo, 505 F.2d 790, 792-93 (9th Cir. 1974) (same).
6
 . Lesal also argues that Colonial and the RTC cannot invoke the
D'Oench Duhme doctrine because the RTC accepted benefits under
the settlement agreement. In light of our holding regarding the
applicability of 12 U.S.C. § 1823(e) to Colonial, we need not and
do not reach this agreement.
applied to the RTC pursuant to 12 U.S.C. § 1441a(b)(4), the term

"insured depository institution" must be understood to mean a

depository institution whose accounts were formerly insured by

the Federal Savings and Loan Insurance Corporation and for which

a conservator or receiver was appointed during the period

specified by statute.   See 12 U.S.C. §§ 1441a(b)(3)(A) and

1441a(b)(4).

          The statutory language that we have highlighted above

leaves little doubt that 12 U.S.C. § 1823(e) does not apply to a

claim against a subsidiary of an "insured depository

institution."   Under subsection (2), a claim based on a covered

agreement is valid only if the agreement was "executed by the

depository institution."   Under subsection (3), such an agreement

must be "approved by the board of directors of the depository

institution or its loan committee" and must be "reflected in the

minutes of said board or committee."   And under subsection (4),

the agreement must have been "continuously, from the time of its

execution, an official record of the depository institution."

Few agreements between subsidiaries of depository institutions

and third parties are likely to satisfy these requirements.      Such

agreements will generally be executed by the subsidiaries'

officers or directors and maintained as records of the

subsidiaries.   Therefore, if the language of subsections (2),

(3), and (4) is taken literally, it would appear to make most

agreements of such subsidiaries, even if executed in the
generally accepted manner, unenforceable in the event that the

subsidiaries' parent becomes insolvent.7    Furthermore,

"[r]equiring bank boards . . . to consider, approve, and record

every transaction entered into . . . by entities held by the bank

as investments or subsidiaries . . . would make virtually

impossible the performance by officers and directors of their

upper level management and policymaking functions."     Alexandria

Associates, Ltd. v. Mitchell Co., 2 F.3d 598, 603 (5th Cir.

1993).     It is most unlikely that Congress intended such a

result.8

            In order to give these provisions an arguably sensible

meaning as applied to a subsidiary, they must be read to require

that an agreement be executed by the subsidiary, that it be

approved by the subsidiary's board of directors, and that it be

7
 . Literal compliance with subsection (3) may raise the
likelihood that a depository institution could be classified as
the alter ego of its subsidiary, thus exposing the institution to
significant risk. See, e.g., FDIC Rules, 12 C.F.R. §§
337.4(a)(2), 362.2(d)(requiring, inter alia, that "bona fide
subsidiaries" have an independent board of directors and conduct
business pursuant to independent policies and procedures designed
to inform customers that the subsidiary is a separate
organization because such factors are among "the minimum
necessary to assure the likelihood, in all circumstances, that
the corporate separateness between a parent bank and its
subsidiary will be respected." 58 Fed. Reg. 64462, 64469 (FDIC
1993)).
8
 . In addition, section 1823(e) governs the validity of a claim
"against the Corporation," i.e., the FDIC or the RTC, and it is
questionable whether a claim against a subsidiary of a depository
institution taken over by the FDIC or RTC constitutes a claim
against the FDIC or RTC as such.
maintained as an official record of the subsidiary.   This is the

approach advocated by the appellees,9 but this approach requires

major statutory surgery.   It requires that the phrase "depository

institution" be excised from subsections (2), (3), and (4) and

that the phrase "wholly owned subsidiary" or some equivalent

language be put in its place.    We are most reluctant to treat the

language of section 1823(e) in such a fashion, particularly

because we have found no legislative history showing that

Congress specifically intended for section 1823(e) to apply to

claims against subsidiaries.10

          We are aware that several other courts of appeals have

held that the common law D'Oench Duhme doctrine and its statutory

counterpart apply to claims against subsidiaries.   See Robinowitz

v. Gibraltar Savings, 23 F.3d 951, 956 (5th Cir. 1994), petition

for cert. filed, 63 U.S.L.W. 3326 (Sept. 26, 1994); Sweeney v.

9
 . The district court likewise suggested that, when § 1823(e) is
applied to a subsidiary, the phrase "`wholly-owned subsidiary'
should be read into the statute -- in place of `depository
institution.'" 834 F. Supp. at 732.
10
 . See Conf. Rep. No. 101-222, 101st Cong. 1st Sess. (1989),
reprinted in 1989 U.S.C.C.A.N. 432; H.R. Rep. No. 101-54(I),
101st Cong., 1st Sess. 357 (1989), reprinted in 1989 U.S.C.C.A.N.
86, 131-32, 153; Sen. Rep. No. 101-19, 101st Cong. 1st Sess.
(1989); Conf. Rep. No. 3049, 81st. Cong., 2d Sess. (1950),
reprinted in 1950 U.S.C.C.A.N. 3776-79; H.R. Rep. No. 2564, 81st
Cong., 2d Sess. (1950), reprinted in 1950 U.S.C.C.A.N. 3765,
3774; Sen. Rep. No. 1269, 81st Cong., 2d Sess. (1950). See also
96 Cong. Rec. 10,731 (1950)("[U]nder section [1823(e)] . . .
certain conditions for the first time are imposed upon a bank in
the event agreements are entered into between customers of the
bank and the bank.").
RTC, 16 F.3d 1, 4 (1st Cir. 1994), cert. denied, 115 S. Ct. 291

(1994); Oliver v. RTC, 955 F.2d 583, 585-86 (8th Cir. 1992);

Victor Hotel Corp. v. FCA Mortgage Corp., 928 F.2d 1077, 1083

(11th Cir. 1991).    But none of those decisions relied exclusively

on section 1823(e), as opposed to the common law D'Oench Duhme

doctrine, and they are therefore distinguishable on that ground.

Insofar as those decisions dealt with section 1823(e), however,

we find them unpersuasive and decline to follow them.     None of

those decisions addressed the language of section 1823(e), and

thus none of them confronted the difficulty of applying the

language of that provision to claims against a subsidiary.

           The appellees argue that the application of section

1823(e) to claims against subsidiaries would represent sound

public policy.      They approvingly quote the following statement

of the Eleventh Circuit:
          [A] holding that D'Oench is inapplicable to
          [the subsidiary] in this case would seriously
          undermine FSLIC's policy consideration. The
          FSLIC has to rely on a financial
          institution's written records and its assets,
          such as wholly-owned subsidiaries, to
          determine solvency for regulatory purposes.

Appellees' Br. at 19, quoting Victor Hotel Corp. 928 F.2d at 1083
(brackets inserted in brief).    But whatever the validity of this

view, we cannot alter or ignore the plain meaning of section

1823(e).   Furthermore, we lack the information and expertise

needed to decide whether the extension of section 1823(e) to

claims against subsidiaries would on balance be beneficial as a
matter of policy.   Accordingly, we hold that section 1823(e) does

not apply to claims against a subsidiary such as Colonial, and

the order of the district court entering judgment in favor of

Colonial must therefore be reversed.

          The question remains whether, in light of this holding,

12 U.S.C. § 1823(e) nevertheless requires the dismissal of

Lesal's alter ego claim against CorEast.    The district court did

not address this question; instead the district court reasoned

that the alter ego claim failed because Lesal's claims against

Colonial were barred by the D'Oench Duhme doctrine and 12 U.S.C.

§ 1823(e).   When a district court decision cannot be affirmed on

the ground adopted by that court, we have the discretion to

consider whether that decision can be affirmed on alternative

grounds, but we need not do so.   Langer v. Monarch Life Insurance

Co., 966 F.2d 786, 807-08 (3d Cir. 1992).    Here, because the

parties have not briefed the specific question whether Lesal's

alter ego claim is independently barred by 12 U.S.C. § 1823(e) or

the common law D'Oench Duhme doctrine, we decline to consider if

the entry of judgment for the RTC as receiver for CorEast can be

affirmed on this ground.   The district court on remand can

consider that question in the first instance.

                               III.
          We thus turn to Lesal's argument that the district

court erred in denying its motion for garnishment of Echotree's

alleged right to indemnification for the default judgment

obtained by Lesal.   We affirm the district court's denial of this

motion.

          Lesal's motion was predicated solely on N.J.S.A. 2A:17-

63,11 which provides a summary turnover procedure that may be

used only when the garnishee "admits the debt."   If the garnishee

disputes the debt, a motion under this provision must be denied,

and the judgment creditor must look to the procedures authorized

by N.J.S.A. 2A:17-61 and 2A:17-62.   See, e.g., Skevofilax v.

Quigley, 810 F.2d 378, 383-85 (3d Cir. 1987) (in banc), cert.

denied, 481 U.S. 1029 (1987); id. at 388 (Becker, J.,

concurring); id. at 390-91 (Stapleton, J., dissenting); Beninati

v. Hinchcliffe, 126 N.J.L. 587, 20 A.2d 64 (Err & App. 1941).

          Here, Colonial disputed its obligation to indemnify

Echotree under the settlement agreement, and consequently the

11
 .   This provision states:

               After a levy upon a debt due or accruing
          to the judgment debtor from a third person,
          herein called the garnishee, the court may
          upon notice to the garnishee and the judgment
          debtor, and if the garnishee admits the debt,
          direct the debt, to an amount not exceeding
          the sum sufficient to satisfy the execution,
          to be paid to the officer holding the
          execution or to the receiver appointed by the
          court, either in 1 payment or in installments
          as the court may deem just.
summary turnover procedure provided in N.J.S.A. 2A:17-63 was

inapplicable.   We therefore affirm the denial of Lesal's motion

under that provision, but our decision is without prejudice to

Lesal's pursuit on remand of the other New Jersey statutory

procedures that may be employed by a judgment creditor to execute

on its judgment debtor's unliquidated indemnification rights.

See Skevofilax, 810 F.2d at 383-85.

                               IV.

          For these reasons, we reverse the order of the district

court entering judgment for Colonial and CorEast; we affirm the

order denying Lesal's summary turnover motion; and we remand this

case for further proceedings on Lesal's alter ego and third-party

beneficiary claims.