Still v. WrightStill v. Wright
Thomas M. Wheeler, Abilene, Tex., for appellee.
Appeal from the United States District Court For the Northern District of Texas.
W. EUGENE DAVIS, Circuit Judge:
This case presents the narrow question of whether the FDIC-as-Receiver can use
I.
In June 1988 the First State Bank of Abilene (Bank) obtained a judgment against William H. Still to enforce a guaranty. A month later, the Bank obtained writs of garnishment against Still‘s obligors. In August 1988, Still filed for bankruptcy under Chapter 7. The Bank timely filed a Proof of Claim of $308,334 in Still‘s bankruptcy proceeding. Then, in February 1989, the Bank failed, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver.
Still‘s bankruptcy trustee (Trustee) avoided the writs of garnishment, now controlled by the FDIC, pursuant to
II.
The issue of whether the FDIC-as-Receiver merits the protection of
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
(1) a transferee that takes for value, ... in good faith, and without knowledge of the voidability of the transfer avoided; or
(2) any immediate or mediate good faith transferee of such transferee.
The Bankruptcy Code does not define “value.” It is undisputed that the FDIC did not pay any cash or other property to the Bank when it succeeded to the Bank‘s assets as receiver. The FDIC maintains, however, that it takes a failed bank‘s assets “for value” in two ways: by assuming a bank‘s liabilities, and by performing its statutory duties. We address these two arguments in turn.
The FDIC contends that it gives value by assuming a failed bank‘s liabilities. We agree that assumption of liabilities constitutes “value.” We disagree, however, that the FDIC-as-Receiver actually assumes any liabilities. Ordinarily, a receiver
stands in the place of the bank which he represents, and has only such rights as it had, so that the rights of third parties are not increased, diminished, or varied by his appointment. He takes charge of the banking affairs where the bank left them, and takes over its assets with its concomitant burdens. In other words, he takes only such title to the assets as the bank itself had, subject to all equities which existed against the assets in the hands of the bank.
W.M. Willson et al. eds., 3 Michie on Banks and Banking, Ch. 6, § 96 at 246-47 (Michie, 1974) (emphasis). The FDIC, like any receiver, stands in the shoes of the failed bank, marshals the assets, and administers a fund. See
The FDIC next suggests that it gives value as receiver by performing its statutory duties. The FDIC relies on Linen Warehouse, wherein the bankruptcy court held that the FDIC gives value by accepting the assets and liabilities and by continuing banking services without interruption. Linen Warehouse, 100 B.R. at 859. But such an interpretation reads the term “value” out of the statute. The banking system and the public receive the same benefit from the FDIC running a failed bank whether the FDIC gives “value” to the bank in exchange for the assets or simply receives the assets as a gift. Congress requires a subsequent transferee to “take[ ] for value” in order to merit protection under
The FDIC also contends that circuit precedent compels us to rule in its favor. The FDIC maintains that our holding in Campbell Leasing, Inc. v. FDIC, 901 F.2d 1244 (5th Cir. 1990), was based on the premise that the FDIC-as-Receiver takes for value. We disagree. We held in Campbell Leasing that the FDIC-as-Receiver is entitled to the rights of a holder in due course regardless of whether it satisfies “the technical requirements of state law.” Id. at 1249. Taking a negotiable instrument “for value” is one of the “technical requirements” that is not enforced. Sunbelt Savings, FSB Dallas, Tex. v. Montross, 923 F.2d 353, 355-56 (5th Cir. 1991), modified on other grounds, RTC v. Montross, 944 F.2d 227 (5th Cir. 1991) (en banc). Thus, far from holding that the FDIC is a holder in due course because it takes for value, Campbell Leasing was based on the irrelevancy of the value given. It is clear, then, that Campbell Leasing does not support the FDIC here.
Nor do the policy considerations underlying Campbell Leasing support the FDIC here. In Campbell Leasing and Montross, we declined to enforce such “technical requirements” as giving value because we recognized that the FDIC‘s vital role in the nation‘s banking system necessitated “some special protections to enable it to perform this function effectively.” Montross, 923 F.2d at 356. But the FDIC‘s special role is not all-empowering. The FDIC comes to us today as one of Still‘s many unsecured creditors. The instant dispute pits the FDIC-as-Receiver against the Trustee, who represents all of Still‘s unsecured creditors. The FDIC deserves no greater priority than these other creditors. Just as Congress has established the FDIC to protect the nation‘s banking system, so, too, has it established the Bankruptcy Code to allocate and adjust rights among a debtor‘s creditors. Congress certainly has the ability to grant the FDIC greater rights than other unsecured creditors. See Crime Control Act of 1990, Pub.L. No. 101-647, § 2528, 104 Stat. 4859, 4877-78, codified at
The FDIC has pointed us to no other statutory or judicial authority in support of its position, and we are unable to find any on our own. We hold, therefore, that the FDIC-as-Receiver has not satisfied the requirements of
III.
Because of our disposition of the
AFFIRMED.
Notes
Section 1821(d)(2)(B) provides that:
The [FDIC] may, as conservator or receiver--
(i) take over the assets of and operate the insured depository institution with all the powers of the members or shareholders, the directors, and the officers of the institution and conduct all business of the institution;
(ii) collect all obligations and money due the institution;
(iii) perform all functions of the institution in the name of the institution which is consistent with the appointment as conservator or receiver; and
(iv) preserve and conserve the assets and property of such institution.