California Bank & Trust v. Piedmont Operating Partnership
218 Cal. App. 4th 1322
Cal. Ct. App.2013Background
- Piedmont leased office space to Alliance Bank, secured by a $500,000 standby letter of credit issued by Union Bank and backed by Alliance Bank’s $500,000 deposit with Union Bank.
- In 2009, the California Department closed Alliance Bank and the FDIC, as receiver, transferred Alliance Bank’s assets to California Bank.
- The FDIC disaffirmed the lease and the letter of credit, demanding release of the collateral; Piedmont drew on the letter of credit, and Union Bank paid Piedmont from the collateral.
- California Bank sued Piedmont and Union Bank seeking to recover the $500,000 and asserting other claims; Piedmont prevailed at trial on damages, and California Bank appealed.
- The court held FIRREA 12 U.S.C. § 1821(e)(4) bars lessee damages for future rent and prevents recovery against pledged collateral, and concluded California Bank owned the LC proceeds via the FDIC’s transfer and assignment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of FIRREA on future rent and LC collateral | Piedmont argued it could recover future rent and seize LC proceeds. | California Bank contends FIRREA bars future rent and collateral claims after disaffirmance. | Piedmont has no future rent claim; LC proceeds belong to California Bank. |
| Standing and breach under UCC 5110(a)(2) | Piedmont argues California Bank cannot claim warranties because not an applicant. | California Bank contends it is proper as FDIC assignee; rights extend to 5110(a)(2). | California Bank, as assignee, has standing; Piedmont breached 5110(a)(2). |
| Effect of asset transfers under FIRREA and 3223/1821(e)(4) | Piedmont asserts transfer does not negate its rights to LC proceeds. | California Bank argues FIRREA controls; FDIC transfer to California Bank does not revive future rent rights. | FIRREA preempts state law; 1821(e)(4) governs damages, eliminating future rent claim and collateral right. |
| Priority of federal preemption vs state law on damages and fees | Piedmont relies on state law (3111) to claim damages and keep LC proceeds. | California Bank emphasizes FIRREA/3223 preemption over state statutes. | Federal law governs; 3111 is preempted; damages and LC proceeds follow FIRREA framework. |
Key Cases Cited
- Resolution Trust Corp. v. Ford Motor Credit Corp., 30 F.3d 1384 (11th Cir. 1994) (landlord cannot recover future rents from collateral after FDIC disaffirms lease)
- Qi v. FDIC, 755 F.Supp.2d 195 (D.D.C. 2010) (FIRREA disaffirms leases; limits landlord damages; independence principles)
- Unisys Finance Corp. v. Resolution Trust Corp., 979 F.2d 609 (7th Cir. 1992) (lessor cannot enforce security after lease repudiation; lien depends on claim)
- Bayshore Executive Plaza Partnership v. FDIC, 943 F.2d 1290 (11th Cir. 1991) (federal law governs FDIC liquidations; contracts clause concerns)
- Tsemetzin v. Coast Federal Savings & Loan Assn., 57 Cal.App.4th 1334 (Cal. Ct. App. 1997) (landlord rights post-Disaffirmance; Coast Federal remains liable under lease)