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Philemon Tam, Kathy T-M Tam, Titus Tambunan, Christine Tam, and Victor Tam v. Federal Deposit Insurance Corporation

November 14, 2011

PHILEMON TAM, KATHY T-M TAM, TITUS TAMBUNAN, CHRISTINE TAM, AND VICTOR TAM, PLAINTIFF,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, IN ITS OWN NAME AND AS RECEIVER FOR INDYMAC BANK, F.S.B.; DOES 1 THROUGH 10, DEFENDANTS.



The opinion of the court was delivered by: Margaret M. Morrow United States District Judge

E-FILED 11.14.11

FINDINGS OF FACT AND CONCLUSIONS OF LAW

On July 11, 2008, the Office of Thrift Supervision ("OTS") closed IndyMac Bank, F.S.B. ("IndyMac") and appointed the Federal Deposit Insurance Corporation ("FDIC") as the bank's receiver pursuant to 12 U.S.C. § 1821(c)(2)(A). That same day, the FDIC formed IndyMac Federal Bank, a newly chartered depository institution, and transferred IndyMac's insured deposits to it. The FDIC made deposit insurance determinations for accounts held at IndyMac and notified depositors of the determinations via letter. Some depositors, including plaintiffs, later filed actions challenging the FDIC's deposit insurance determinations and/or alleging wrongful acts by IndyMac or its former employees prior to commencement of the receivership.

The parties filed opening briefs on September 14, 2009;*fn1 the FDIC filed a responsive brief on September 28, 2009.*fn2 On July 31, 2009, the court granted plaintiffs' request for oral argument and set a hearing for October 19, 2009.

I. FINDINGS OF FACT

A. The Accounts

1. Plaintiffs Philemon Tam, Kathy T-M Tam, Titus Tambunan, Christine Tam, and Victor Tam opened nine accounts with IndyMac prior to July 11, 2008.*fn3

2. Prior to July 11, 2008, account XXXXXX7443 had a balance of $8.243.43 and was held in the name of Kathy T-M Tam. Account XXXXXX1808 had a balance of $14,088.64 and was also held in the name of Kathy T-M Tam. Account XXXXXX7442 had a balance of $18,313.30 and in the name Philemon Tam. Account XXXXXX8867 had a balance of $4,039.54 and was held in the name of Victor C. Tam, while account XXXXXX7347 had a balance of $561,762.46 and was held by Kathy T-M Tam in trust for ("ITF") Christine Tam, Philemon Tam, Victor Tam, and Daphne Malatesta. Account XXXXXX0218 had a balance of $742,638.17 and was held by Philemon Tam and Kathy T-M Tam ITF Christine Tam, Victor Tam, and Daphne Malatesta. Account XXXXXX1399 had a balance of $10,063.23 and was held by Titus Tambunan ITF Christine and Victor Tam. Account XXXXXX8317 had a balance of $202,468.12 and was held by Titus Tambunan ITF Christine and Victor Tam, while account XXXXXX2173 had a balance of $540,729.07 and was held by Titus Tambunan ITF Christine and Victor Tam.*fn4 The funds deposited in the nine accounts belonging to plaintiffs totaled $2,102,345.96.*fn5

3. Accounts XXXXXX7347, XXXXXX0218, XXXXXX1399, XXXXXX8317, and XXXXXX2173 were informal revocable trust accounts.*fn6 Accounts XXXXXX7443, XXXXXX1808, XXXXXX7442, and XXXXXX7442 were single ownership accounts.*fn7

4. Account XXXXXX7347 was held by Kathy T-M Tam. The beneficiaries for this account were Philemon Tam, her husband, Christine and Victor Tam, her children, and Daphne Malatesta, her granddaughter. Account XXXXXX0218 was held by Philemon Tam and Kathy T-M Tam. The beneficiaries for this account were Christine and Victor Tam, the depositors' children, and Daphne Malatesta, their granddaughter. Accounts XXXXXX1399, XXXXXX8317, and XXXXXX2173 were held by Titus Tambunan. The beneficiaries for these accounts were Christine and Victor Tam, his niece and nephew respectively.*fn8

B. The FDIC's Insurance Determination

5. The FDIC as receiver for IndyMac assigned Michael Norton to review deposit insurance coverage and claims arising out of IndyMac's failure. Norton reviewed the nine accounts at issue in this case.*fn9

6. On July 12, 2008, Norton interviewed Philemon Tam and explained his preliminary determination regarding the amount of insured and uninsured funds in the accounts. Tam indicated that he would fill out and fax to Norton "Declarations of Testamentary Deposit" for each informal trust account. Tam requested that Norton provide a preliminary determination of insurance coverage, and Norton informed him that approximately $1,250,000.00 of the funds appeared to be uninsured.*fn10 The declarations that Tam subsequently provided listed owners and beneficiaries for each of the revocable trust accounts that were not reflected in IndyMac's records at the time it closed on July 11, 2008.*fn11 As a result, the FDIC relied on the bank's records in making its deposit insurance determination.*fn12

7. Norton concluded that accounts XXXXXX7443, XXXXXX1808, XXXXXX7442, and XXXXXX7442 were single ownership accounts. Single ownership accounts owned by Kathy T-M Tam (XXXXXX7443 and XXXXXX1808) had a balance of $22,332.07. The single ownership account owned by Philemon Tam (XXXXXX7442) had a balance of $18,313.30. The single ownership account owned by Victor Tam (XXXXXX8867) had a balance of $4,039.54. Each of these single ownership accounts was fully insured, as each had a balance less than $100,000.*fn13

8. Norton concluded that account XXXXXX7347 was held by Kathy T-M Tam. Norton concluded that XXXXXX0218 was held by Philemon and Kathy T-M Tam. The beneficiaries for both accounts were Christine and Victor Tam, the depositors' children, and Daphne Malatesta, their granddaughter. In addition, Philemon Tam was a beneficiary on account XXXXXX7347. Norton concluded that under the deposit insurance rules then in effect, the two accounts had seven "beneficial relationships," defined as a relationship between one trustee and one beneficiary.*fn14 He found that all seven beneficial relationships involved qualifying beneficiaries (spouse, children, and grandchild).*fn15

9. Norton determined that because account XXXXXX7347 had four beneficial relationships, each beneficial relationship was entitled to a one-quarter share of $140,440.62.*fn16 Because account XXXXXX0218 had six beneficial relationships, he found that each beneficial relationship was entitled to a one-sixth share equal to $123,773.03.*fn17 Three beneficial relationships -- Kathy T-M Tam ITF Christine Tam, Kathy T-M Tam ITF Victor Tam, and Kathy T-M Tam ITF Daphne Malatesta -- had an interest in both accounts; consequently, Norton aggregated the shares for a total of $264,213.64.*fn18

10. Norton concluded that Philemon Tam ITF Christine Tam; Philemon Tam ITF Victor Tam; and Philemon Tam ITF Daphne Malatesta each held $123,773.03 in the two accounts. He concluded that Kathy T-M Tam ITF Christine Tam, Kathy T-M Tam ITF Victor Tam, and Kathy T-M Tam ITF Daphne Malatesta each held $264,213.64 in the two accounts.

Finally, he concluded that Kathy T-M Tam ITF Philemon Tam held a $140,440.62 interest in the accounts.*fn19

11. Because each trust relationship was insured for $100,000, each of Philemon Tam ITF Christine Tam; Philemon Tam ITF Victor Tam; and Philemon Tam ITF Daphne Malatesta was $23,733.03 over the deposit insurance limit. Kathy T-M Tam ITF Christine Tam; Kathy T-M Tam ITF Victor Tam; and Kathy T-M Tam ITF Daphne Malatesta were each $164,213.64 over the deposit insurance limit, while Kathy T-M Tam ITF Philemon Tam was $40,440.62 over the deposit insurance limit.*fn20

12. Norton concluded that the Titus Tambunan's two accounts were held in trust for his niece and nephew. Because neither a niece nor a nephew is a qualifying beneficiary, Norton treated these funds as if they had reverted to the single ownership of Tambunan. As a single owner, Tambunan was insured for $100,000. Consequently, Tambunan's accounts were $653,260.42 over the deposit insurance limit.*fn21

13. Howard calculated the total combined account balance for the five revocable trust accounts as $2,057,661.05. As the accounts were insured only to $800,000, they were $1,257,661.05 over the deposit insurance limits.*fn22

14. On August 5, 2009, the FDIC sent plaintiffs a Notice of Allowance of Claim ("Notice") and a Receivership Certificate in the amount of $1,257,661.05.*fn23

15. Based on the FDIC's calculation that the ultimate resolution of IndyMac's assets would result in a recovery of approximately 50% of the uninsured deposits of IndyMac, FDIC sent the Tams a 50% advance dividend in the amount of $628,830.53.*fn24

16. On September 23, 2009, the FDIC notified the court that it had reviewed the accounts held by Tambunan and determined that Tambunan was entitled to an additional $100,000 in insurance, bringing the total insurance for all of plaintiffs' accounts to $900,000. The ...


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