Federal Deposit Insurance Corporation, in Its Corporate Capacity v. Scott Manatt

MANATT, Appellant. Scott GIBSON, Circuit R. Before JOHN R. GIBSON Judge, and FLOYD No. 89-2290EA. HENLEY, Judges. Senior Circuit Appeals, Court States United Eighth Circuit. GIBSON, R. Senior Circuit FLOYD Judge. 11, 1990. April Submitted stockhold- lawyer for and Jan. 1991. Decided Arkansas, Corning, Corning Bank of er of $387,266.02 the bank be-

borrowed and October December 1980 tween wife, 5, 1984, his January On into an Corning Bank entered purported to Bank under which and Ma- Manatt’s indebtedness extinguish return, property to the natt, in transferred FDIC, among other acquired, notes, and subse- things, seven collect on them. attempted quently appeal is whether in this issue 4g7 ment absolves Manatt from liability to the and ordered it closed. The FDIC FDIC on the notes. We appointment conclude that it as receiver of the bank under does not and affirm the district 1821(e) 12 (1988). court.1 U.S.C. As § authorized by 12 1823(c)(2)(A)(1988),2 U.S.C. the § I. BACKGROUND FDIC, acting in corporate its capacity, pur- assets, chased some of the bank’s Scott a including Manatt was stockholder of Corn- promissory seven ing Bank and also notes from Scott attorney served as its Ma- time, natt. At that from time to notes were time. While Scott still Manatt possession and, bank’s despite claims is not by he related blood to the Mu- Agreement, tual family had operated that owned and not been cancelled. Corning Bank, family did him raise The FDIC sold the collateral that Manatt and he shares the family name. given had pursuant the bank to the Mutual

Between proceeds December 1980 and The October from these sales 1983, Corning Bank loaned fell far Scott Manatt short of the amount Manatt owed wife, $387,266.02 Sharon, and his Corning in ex- Bank. Although the real estate change for seven promissory secured $75,000, notes. The a loan of after deducting mortgage Manatts executed a fees, on real es- commissions and the FDIC received security tate $22,848.96 as for one of the only notes and when it sold property. granted security aircraft, a The Piper which secured a note Piper 1966 aircraft as collateral for $11,009, another $7,000. for sold for was The Ea- note. gans $5,371.90 payments made totalling on note, their promissory bank, at first to the 5, 1984, January Manatt, On Shar- and later to the FDIC. On October Corning on Manatt and Bank entered into a 1984, however, Eagans stopped making Agreement Mutual Liquidation for of Col- payments. later They filed for bankruptcy, Manatt, lateral. James D. president of and the bankruptcy discharged court Bank, Corning signed Agree- the Mutual promissory note that the Manatts had as- ment on of the bank. behalf signed to Corning. ment, conveyed Scott and Sharon Manatt (1) three items the bank: the real estate When the FDIC demanded that Scott Ma- (2) previously mortgaged security; as natt repay notes, of the seven balance aircraft; Piper (3) note, a promissory refused, he claiming that the Mutual principal $50,000, with a amount of from Agreement extinguished had his debt to Betty Eagan. Leon Corning Bank. The brought FDIC then this against action Manatt. At the began end of examining Corning Bank to determine granted The district partial sum- financial began condition. When the FDIC mary judgment in favor of the FDIC. 7, 1984, May its final on examination Ma- F.Supp. FDIC 688 $362,000 natt the bank owed seven (E.D.Ark.1988). Relying upon Langley v. $362,000, notes. Of bank had FDIC, U.S. $242,000 charged off and the FDIC examin- (1987), L.Ed.2d 340 the district court first $120,000 remaining ers classified the as held precluded by was substandard. 1823(e)(2), U.S.C. relying upon § 15, 1984, approximately On June Mutual against six as a defense months after the Mutual was because signed, the Bank Arkansas Commissioner was not contemporaneously executed concluded that Bank was acquisition insolvent the bank’s of the promissory Elsijane (1989 West). Roy, 1. The Honorable Trimble Senior found at 12 U.S.C.A. 1823 Judge United States District (e) Dis- Eastern only amendments to subsection were trict of Arkansas. changes style and format and did not alter Throughout the substance of the statute. this 9, 1989, August 2. Section was amended on opinion we refer 1988 version of the 101-73, 201(a)(1), by Title §§ Pub.L. II statute. Stat. 254. The current version can be Manatt, No. J-C-87-53 595.33. FDIC v. F.Supp. at 1329-30. notes. (E.D.Ark. July Judgment and Order suggested that section court also 1989). appeal This followed. vague 1823(e)(3) not satisfied Agreement con- references II. DISCUSSION Corning Bank's board minutes. tained held that court further The Id. at 1330. that the Mutual claims a did not constitute Agreement the Mutual 12 requirements of the Agreement satisfied under Arkan- and 1823(e). accord de valid Much of his brief is U.S.C. § only partial for provided it in sas law because court’s challenging the district to voted liquidated claim. Id. contemporaneousness of a payment terpretation of 1823(e)(2). Section requirement of section that Alternatively, court held Ma- 1823(e) that: provides against the was ineffective natt’s defense to diminish agreement which tends No holder in was a because the FDIC interest right, title or of defeat the or holding, the so court course. Id. due by it any acquired under asset [FDIC] the notes purchased the FDIC that found section, security for a loan as this either notice of the faith and without good against the by purchase, shall be valid or at 1331-32. We Id. Mutual (1) agreement shall unless such [FDIC] light of our issue need not decide this (2) exe- have been writing, shall be holding today. person or by the bank and cuted argu- Manatt’s rejected also The court claiming an adverse persons estoppel by of under the doctrines ments thereunder, obligor, con- including the col- deed, estoppel, judicata, res equitable acquisition of with the temporaneously Id. at 1332- estoppel, and waiver. lateral bank, (3) have by the shall been the asset summary judgment did not partial 33. The of directors of approved by the board question of whether resolve the committee, ap- which loan or its bank price. a the collateral for reasonable sold minutes in the proval shall be reflected at 1333. Id. (4) committee, and or shall of said board hearing, the court After a conducting been, continuously, from time have give additional credit required the FDIC to execution, an official record of its of which the collateral to Manatt for the Manatt, No. J-C-87- v. FDIC sold. FDIC 1823(e). tries to use 12 U.S.C. § 16, 1989). (E.D.Ark. 53, June slip op. at 7-8 defeat Agreement to claim that rejected also Manatt’s The court ac- on the notes it right to collect FDIC’s legal money for work owed him bank Corning Bank. To have such quired from Id. the bank closed. performed he before must effect, court, According the district at 8. “[t]he requirements of section all failed to raise point on this proof presented 1823(e).3 fails to meet If the attorney’s fees above the Manatt’s claim therein, requirements four any one of the Id. speculation.” level of agreement. bound the FDIC is not it, only suggested Though the court interest, district adding After 1330, expressly we $504,- Manatt, F.Supp. at 688 against Manatt judgment entered 554, (accord court, (1914) and satisfaction 555-56 think S.W. Contrary we to the district accepted in lieu and cotton between Manatt existed where Mutual landlord rent). conceivably an accord could have been undisputed of Mutual amount of Though law. variety Arkansas and satisfaction under ordinarily Agreement may this latter been of have liquidated debt cannot be sub- satisfaction; however, was nev- of accord ject satisfaction as district of an accord and never can- completed. seven notes were er concluded, F.Supp. at 1330 688 accord, if thus the celled or returned Industries, Waldrop, 16 (citing Dyke Inc. v. Ark. all, executory. Air See General one at remained 125, (1985)), we read Ar- App. 936 697 S.W.2d Fullerton, 278, Conditioning Corp. 227 Ark. v. and satis- permit an accord case law to kansas omitted). (citation (Ark.1957) 298 S.W.2d However, different consideration new and faction where Krause, 904 F.2d as in FDIC debt, though liqui- of is in fulfillment (avoiding interpret (8th Cir.1990) need to Conditioning Corp., Air dated. Jewell v. General satisfaction), we need of Iowa law accord (1956); S.W.2d 226 Ark. this be- law in matter ascertain Arkansas not 505-06, Harris, Ark. Lamberton v. and that Manatt the Mutual Manatt’s collateral should of law that as a matter hold legal a credit for the value of insufficiently recorded have received Di performed Board of he of the bank’s services that for the bank. the minutes (3) satisfy specific clause of findings rectors to The district court made 1823(e). minutes did not recite The board contrary to Manatt’s contentions. that are attached, or set agreement was argued, let alone dem- Manatt has even terms, refer to specifically or even onstrated, out findings were court’s Kasal, 913 Manatt. See FDIC clearly City erroneous. Anderson v. See Cir.1990) (loan agree F.2d 564, 573-76, 470 U.S. City, Bessemer by the approved ments were “never ... 1511-12, 84 L.Ed.2d 518 loan commit of directors or Bank’s board (1985). Therefore, these contentions are tee, part as never were maintained untenable. Krause, records”); v. the Bank’s FDIC indicated, judgment As we affirm the of Cir.1990) (“the 463, (8th agree F.2d the district court. least one of failed to meet at ment by the approval board requirements —that GIBSON, Judge, R. JOHN Circuit reflected committee be of directors or loan concurring specially. committee”); the board or in the minutes of I the result the court reaches concur with Gardner, F.Supp. v. FDIC only express today separately and write to (“acknowledgement of the (S.D.Miss.1985) not err my view that the district court did specifically re must be agreement side holding contemporaneous in that re- or com in the minutes of board flected 1823(e)(2) quirement of 12 was U.S.C. § Hence, con- mittee”). not reach the we do met, that Manatt has not established by the issue resolved temporaneousness an affirmative accord and satisfaction as and, fact, court, in have serious district defense. interpretation of that misgivings about clause.4 contemporaneous re- ruling In that the met, several other

Finally, quirement Manatt advances was not only brief discussion. of the Su- arguments that merit discussed the recent decision precluded that the FDIC is preme Langley, He contends Court United States avoiding the effect of from 98 L.Ed.2d 340 108 S.Ct. 484 U.S. equitable by the doctrines of (1987), appeal. parties as do both deed, waiver, judi- res estoppel by estoppel, are different than those Langley facts in Manatt, how- cata, estoppel. and collateral pur- appellants In Langley, us. before in the dis- ever, identify any flaw fails to exchange from a bank chased real estate of these consideration trict court’s careful appellants claimed that a note. The F.Supp. at doctrines. See by buy property induced to they were per- are not Accordingly, we 1332-33. misrepresentations about verbal bank’s challenges. by Manatt’s suaded land of the amount and characteristics at 108 S.Ct. conveying. 484 U.S. it was did the FDIC argues that Manatt also at 399. price when it sold a reasonable not obtain incurring the debt— documents agreement with the initial between the bank cause whatever and Manatt completed, they sim- might be so executed is have been if idea that would require- practice recordation to contrary general with the ply failed to to business 1823(e)(3). Once of section Surely Congress ment stepped mean did not sense. common in, prior proper of recordation something getting of preclude to banks necessary. agreement was by rather than accord and satisfaction value an FDIC, Langley nothing 484 U.S. But see at all. require- held that the While the district court (1987); FDICv. L.Ed.2d 340 108 S.Ct. met, 1823(e)(2) we are was not ment in section Partnership, Crossing 909 F.2d Virginia willing We doubt embrace that view. not so event, Cir.1990). any leave the reach we In 1823(e)(2)’s Congress that section that contemporaneousness intended day, 1823(e)(2) scope to another of section requirement de- would is not neces- interpretation clause of that as an into entered accord and satisfaction feat a valid by sary in this case. to a decision Valid accord and satisfaction a bank. contemporaneously executed are never ments holding is and is rele-

Langley’s interpretation may narrow This make accord and only respect contempora- vant inapplicable satisfaction when the FDIC discussing requirement. section neous assets, purchases parties a bank’s since can 1823(e), Langley referred to the word never reach an accord and that meaning “agreement” the statute as an compromises they at the debt same time is executed and becomes a original obligation.5 create an By debt en- contemporaneously bank record with “the 1823(e), acting Congress ad- making at at note.” Id. dressing particular problem posed by closely 401. The district court looked at purchasing FDIC assets of failed determining that Langley when the con- agreements bank and might be used to requirement temporaneous was not met. diminish or defeat the interest of interpretation differ their in the assets. While an accord and satis- “any phrase of the asset” in section faction in which a bank assets 1823(e). phrase would limit this $136,000 extinguish worth a debt of he and wife the collateral his surrendered $387,266 may be of concern to substantial argues board directors and stockholders of a he, signed and the his wife continuing vitality, bank with when the agreement contemporaneously with the bank fails and must be taken over title in the collateral to the transfer of government depos- as insurer of the bank’s bank, 1823(e)(2). thereby satisfying section itors, public I concerns then arise. believe argues “any The FDIC asset” refers that the correctly applied district court attempting to the notes that it is to collect. statute, holding and I would affirm its question, If the notes are the “assets” in this basis. The wisdom of the Act of Con- contemporaneousness requirement is gress is an issue we do not consider. not met because

the notes were transferred to the bank

long before the entered the Mutual

Agreement.

The district concluded that statute, interpretation FDIC’s of the CENTRAL STATES RESOURCES CORP. 1823(e)(2)applies “any asset ac- Depos- Successor Interest to Federal it,” quired by was the correct view. Ma- Corporation, Appellant, it Insurance natt tries to use the Mutual defeat the FDIC’s interest notes that the First National Bank of Tekamah purchased Corning Bank. In setting, the this factual assets at issue—(cid:127) FARMS, INC., Appellee. LEO TOBIN the assets that the FDIC is interested in and the assets that Manatt wants to No. 89-2251. promissory the seven avoid—are notes Appeals, United States Court of vault. found the bank’s Since the Mutu- Eighth Circuit. al would diminish the FDIC’s acquired, assets and the May Submitted 1990. at the executed same Decided Jan. signed any origi- time of the Bank, nal notes over to ment does not with section 1823(e)(2)and is not valid. particular application Eagans discharge bankruptcy 5. This has where a debtor received a attempts $50,000 note, to reach an accord and but fully for the never has fully satisfy the terms of the accord fails before the FDIC obligations satisfied his under the terms of the failing takes control of a Collateral I would also affirm the This was the situation in Manatt’s case. Manatt ruling district court’s on accord and satisfac- Corning, did not retrieve the notes from Corning nor did tion. fact, "paid.” mark the notes because

Case Details

Case Name: Federal Deposit Insurance Corporation, in Its Corporate Capacity v. Scott Manatt

Court Name: Court of Appeals for the Eighth Circuit

Date Published: Jan 3, 1991

Citation: 922 F.2d 486

Docket Number: 89-2290EA

Court Abbreviation: 8th Cir.