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FEDERAL DEPOSIT INS. CORP. v. ENGEL

August 28, 1990

FEDERAL DEPOSIT INSURANCE CORP., PLAINTIFF,
v.
JORGE ENGEL, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Kram, District Judge.

AMENDED OPINION AND ORDER

The Court issued a Memorandum Opinion and Order on May 15, 1990, granting plaintiff's summary judgment motion in part and denying it in part. The denial was based on the Court's holding that an estoppel defense was available to defendant Engel as against the FDIC in its receivership capacity.

Plaintiff has since moved for reconsideration of that Opinion in light of a change in the applicable statute that occurred shortly after the filing of the original moving papers for partial summary judgment. As of August 9, 1989, 12 U.S.C. § 1823(e) as amended by the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") of 1989 now bars defendants from asserting an estoppel defense against the FDIC, both in its receivership as well as its corporate capacity.

Standard for Reargument

This Court will revisit a ruling when a motion for reargument raises new matters or controlling decisions which this Court has overlooked. Local Rule 3(j). It is clear that the Court should have taken account of the FIRREA amendment of § 1823(e) in its May 15, 1990 opinion. The Court should have then considered, and must now consider, whether to give the amended statute retroactive effect, i.e., whether it should apply to this situation which arose before the change in law.

Retroactive Application of Amended Statute

The Supreme Court has long held that courts should apply the law in effect at the time it renders its decision "unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary." Bradley v. Richmond School Bd., 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974). The Court has searched the amended text of the statute as well as the legislative history. Pub.L. 101-73, § 217 sub. (4). The Court finds no directive to apply the change only prospectively. See FDIC v. Dalba, 89-C-712-S, (W.D.Wis., Feb. 27, 1990), slip op. at 8, 1990 WL 43750; see also FDIC v. British American Corp., 744 F. Supp. 116, 117 (E.D.N.C. 1990); FDIC v. Carter, CIV-89-1338-A (W.D.Okla. June 1, 1990), slip op. at 4.

Defendant, proceeding pro se, has written the Court a letter citing the recent case of FDIC v. Cherry, Bekaert & Holland, 129 F.R.D. 188 (M.D.Fla. 1989), for the proposition that the FIRREA amendments "cannot be applied retroactively in this case." Letter of Jorge Engel, dated August 15, 1990. This case is inapposite, and in any event stands for the opposite conclusion. The citation is to a discovery order by a United States Magistrate, addressing that portion of the FIRREA amendments going to whether FDIC-Corporate could assert the attorney-client privilege of a failed bank. The court held that because there was a split in the circuits on this question before the amendments were passed, the amendments merely clarify rather than change existing law. 129 F.R.D. at 191-92. The court therefore concluded that the amendments could be applied retroactively.

Neither can the Court make a finding of "manifest injustice" in this case. Bradley recites three factors which the Court should weigh in making such a finding: (1) the nature and identity of the parties; (2) the nature of their rights; and (3) the nature of the impact of the change in law upon those rights. 416 U.S. at 717, 94 S.Ct. at 2019. These factors are aptly summarized by the Dalba court as follows: "Retroactive application of a new law results in manifest injustice when the disappointment of private expectations outweighs the public interest in enforcing a new rule." Id. (citing Allied Corp. v. Acme Solvents Reclaiming, Inc., 691 F. Supp. 1100, 1112 (N.D.Ill. 1988).

In the present case, the enforceability of debtors' obligations to the FDIC, as regulated by Congress, is clearly within the realm of the public concern. "The clear purpose of the statute is to protect the funds of the FDIC in the public interest of maintaining solvency for the regulated institutions and maintaining solvency of the government agency." Dalba, supra, slip op. at 9; see also FDIC v. Sullivan, 744 F. Supp. 239, 241 (D.Colo. 1990); British American Corp., supra, at 117.

There is no legitimate private expectation here that could outweigh this public concern. Engel's interest in asserting an estoppel defense against the FDIC is an equitable consideration; he neither asserts, nor could he plausibly assert, that had he known of the impending change to the FDIC receivership provisions he would have acted differently with respect to Jackie Finkielstein, the 99% shareholder of the now-failed Central National Bank. Accordingly, the Court finds no reason in this case to circumvent the presumption of retroactivity. See Dalba, supra (retroactively enforcing FIRREA amendment); Sullivan, supra (same); British American Corp, supra (same); Carter, supra (same).

Application of Revised Statute to this Case

Title 12, § 1823(e) of the United States Code now reads in relevant part:

  No agreement which tends to diminish or defeat the
  interest of the [FDIC] in any asset acquired by it
  under this section or section 11 . . . as receiver
  of any insured depository institution, shall be
  valid . . . 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 ...

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