Prior to May 4, 1992 (the date Financial Center was declared insolvent), an Award ("Award") was rendered that awarded Franklin $ 477,434.98 in damages. The Award also stated that "upon payment of the Award, Franklin Bank shall restore to Financial Center Bank the Bloyer loan . . . ." (Stipulated Facts, Ex. 2, P 4.)
On May 4, 1992, after the Award was rendered but before Financial Center had complied with the terms of the Award, the Office of the Comptroller of the Currency declared Financial Center insolvent and appointed the FDIC as its receiver. The FDIC notified all creditors of Financial Center to file proofs of claim with it in order to have their claims considered. On June 23, 1992, Franklin submitted a Proof of Claim to the FDIC for the full amount of the Award. The FDIC approved this claim in a letter dated December 18, 1992, and provided Franklin with a Certificate of Proof of Claim in the amount of $ 441,876.87.
(Id., Ex. 6, Receiver's Certificate #142.)
The FDIC made ratable distributions to Franklin of $ 304,934.81; $ 136,942.06 of the approved claim remains to be paid.
After Financial Center went into receivership, the house on the Bloyer property was substantially destroyed by fire. Franklin received and still holds $ 90,000 in casualty insurance proceeds. This action involves a dispute as to who has a legal right to the fire insurance proceeds.
The cross-motions for summary judgment involve the second cause of action in which Franklin seeks a declaration by the Court that it may retain the $ 90,000 in insurance proceeds rather than pay it to the FDIC.
Franklin moves for summary judgment on two alternative grounds: (1) that Franklin does not owe the FDIC $ 90,000 in casualty insurance proceeds because Financial Center's receivership estate has not paid the Award in full, which is a condition precedent to payment of the insurance proceeds; or (2) Franklin is entitled to set off the casualty insurance proceeds against the amounts still owing on its approved claim.
Franklin argues that the Award states that payment to it of the insurance proceeds is a condition precedent to the restoration of the Bloyer loan: "Upon payment of the award, Franklin Bank shall restore to Financial Center Bank the [Bloyer] loan . . . ." (Id., Ex. 2.) Franklin argues that the condition precedent has not been met because the full amount of the Award has not been paid and, thus, the fire insurance proceeds from the Bloyer property need not be turned over to the FDIC.
The FDIC does not contest the fact that payment of the Award is a condition precedent for receipt of the fire insurance proceeds. Instead, the FDIC argues that its tender, and Franklin's acceptance of Receiver's Certificate #142, constituted full payment and satisfaction of the Award.
The FDIC states that there is both statutory and case authority for its position.
As statutory authority, the FDIC relies upon the provisions of FIRREA. FIRREA established a comprehensive procedure for presentation and adjudication of nondepositor creditor claims against failed institutions. FIRREA limits recovery on an unsecured general creditor claim to a pro rata share of the proceeds of the liquidation of the failed institution. 12 U.S.C. § 1821(i)(2).
Specifically, the FDIC relies on § 1821(d)(10)(A), which provides:
The receiver may, in the receiver's discretion and to the extent funds are available, pay creditor claims which are allowed by the receiver, approved by the Corporation pursuant to a final determination pursuant to paragraph (7) or (8), or determined by the final judgment of any court of competent jurisdiction in such manner and amounts as are authorized under this chapter.