Opposition Brief — City of Arlington v. First Gibraltar Bank, F. S. B.

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NOV 12 1999

No. 92-653

DAPICE UF THE CLERM

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

CITY OF ARLINGTON, TEXAS,

Petitioner,

V.

FIRST GIBRALTAR BANK, F.S.B.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit

BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

Charles M. Moore

Counsel of Record

Elizabeth E. Mack

LOCKE PURNELL RAIN HARRELI

(A Professional Corporation)

2200 Ross Avenue

Suite 2200

Dallas, Texas 75201-6776

Telephone: (214) 740-8000

Telecopy: (214) 740-8800

ATTORNEYS FOR RESPONDENT,

FIRST GIBRALTAR BANK, F.S.B.

COUNTERSTATEMENT OF QUESTIONS PRESENTED

1. Whether the United States Court of Appeals for the

Fifth Circuit properly concluded that Petitioner was not a depos-

itor of First Texas whose liability First Gibraltar assumed when

deposit records were silent as to the existence of any deposit

from Petitioner and when the Acquisition Agreement between

First Gibraltar and the FSLIC only provided for the assumption

of specific liabilities, which did not include any claim of

Petitioner

2. Whether granting a Petition for Writ of Certiorari 1s

appropriate when the Opinion below turns on a case-specific set

of facts which was tied to a particular Acquisition Agreement

and a particular inventory list of assumed deposits.

3. Whether granting a Petition for Writ of Certiorari 1s

appropriate when federal authority regarding deposit insurance,

including this Court’s Opinion in FDIC v. Philadelphia Gear,

supports the Fifth Circuit Opinion.

4. Whether granting a Petition for Writ of Certiorari is

appropriate when this case falls squarely within the D’Oench,

Duhme doctrine because Petitioner seeks to rely on verbal

understandings which were not documented in the bank deposit

account records at the time the FSLIC placed First Texas into

receivership.

ee

TABLE OF CONTENTS

Page

COUNTERSTATEMENT OF QUESTIONS PRESENTED ... . i

Tame OF AITTSOORITIES . wo cs vss eee eee nan iil, IV

COUNTERSTATEMENT OF THE CASE .........--+:-> 2

SUMMARY OF REASONS FOR DENYING THE WRIT ... 6

REASONS FOR DENYING THE WRIT.........--++:: 7

l. THE OPINION BELOW RESOLVED A FACT

SPECIFIC CONTRACTUAL MATTER WHICH DOES

Not UNDERMINE THE ENTIRE DEPOSIT

Pesrmmane(n SCR . ...-k ks 6s 6 Ow eee res 7

Il. THE FIFTH CIRCUIT OPINION IS CONSISTENT

WITH FEDERAL AUTHORITY REGARDING

Heenerrom STATUS... «osc 56a ea eee es 10

A. Federal Case Law Confirms That Account

Records Are Conclusive ........5e2200- 12

B. Deposit Insurance Regulations Also Confirm

The Conclusiveness of Account Records ... 19

C. The Advisory Opinions Do Not Conflict

With The Decision Below.............-- 20

Ill. THE OPINION DOES NOT HAVE THE EFFECT OF

PERMITTING AN INSTITUTION TO DEPRIVE AN

INSURED DEPOSITOR OF ITS RIGHTS .......-..- 23

IV. THE D’OENCH DOCTRINE BARS PETITIONER'S

Team ocak dee 6008s See 24

years Ne nc in been oe ses 2 ee eee eee 26

CBERTIPICATE OF SERVICE .. ... 1 0 csc ease e wees ues 27

iil

TABLE OF AUTHORITIES

Page(s)

CASES:

Abdulla Fouad & Sons v. FDIC, 898 F.2d 482

a aa 10, 12, 15, 18, 23

Anheuser-Busch Employees Credit Union v.

FDIC, 651 F. Supp. 718 (W.D. Mo. 1986) . 18

Barton v. Johnson, 24 F. Supp. 987 (W.D.

Se dae one 6 on ek 8 8s 16

Baskes v. FSLIC, 649 F. Supp. 1358 (N.D. Il.

AS a 11, 18

Bowen v. FDIC, 915 F.2d 1013 (Sth Cir.

Be Se GI a 24

Buchanan v. FSLIC, 935 F.2d 83 (Sth Cir.

Rind s 4 ks ah oo 6-6-0 6 be 4 24, 26

City of Arlington, Texas v. FDIC, 963 F.2d 79

eR re 9, 14-17, 20

D’Oench, Duhme & Co. v. FDIC, 315 U.S.

0 a ara i, 24-26

Deaton v. FDIC, 24 F. Supp. 984 (W.D. Okla.

RE eC a rr 16

FA.I.C. Securities, Inc. v. United States, 595

F. Supp. 73 (D.D.C. 1984), aff'd, 753 F2d

es BOD 5 koe ee eee we es 17, 18

FDIC v. Barton, 106 F.2d 737 (10th Cir.

Tee ne he oy es be % 86 8 16

FDIC v. Deaton, 105 F.2d 677 (10th Cir.

eg I a 16

FDIC v. McKnight, 769 F.2d 658 (10th Cir

ES eee cig kg bce a ce eee s 19

FDIC v. Philadelphia Gear Corp., 476 U.S.

re oe ee i,13-15

Page(s)

FDIC vy. Records, 34 F. Supp. 600 (W.D. Mo.

RAPE fr er tr we ee a eee He oe 16

FSLIC v. Locke, 718 F. Supp. 573 (W.D. Tex.

a ee ree ee aor tt hate 10

Gulley v. Sunbelt Savings, F-S.B., 902 F.2d 348

(Sth Cir. 1990), cert. denied, 111 S. Ct. 673

be} Ree re ee 10

Jones v. FDIC, 24 F. Supp. 985 (W.D. Okla.

SOU ek eee O84 9 ee ess en ees 16

Jones v. FDIC, 748 F.2d 1400 (10th Cir.

| a ee ee ae 17

Lambert v. FDIC, 847 F.2d 604 (9th Cir.

(_) re areas ae a ee ea 18

Nimon v. Resolution Trust Corporation, 1992

WL 252780 (Sth Cir. Oct. 21, 1992) ...-. fe Oe

Philadelphia Gear Corp. v. FDIC, 751 F.2d

1131 (10th Cir. 1984), rev'd, 476 U.S. 426

SUUOOR a hea eee ew enn ks eRe woe 18

Spawn v. Western Bank-Westheimer, 925 F.2d

885 (Sth Cir. 1991)... 2.2... ee ee eee 42, 13, 19

STATUTES:

12 U.S.C. §1822(c) (1989) .....-.---- eee 12

12 U.S.C. §1823(c)(4)(A) (1989) 2... eee: 1]

REGULATIONS:

12 C.ER. §330.1 (1987) ......---- ee eee 12

12 C.ER. §564.1(b) (1988) ......------- 19

12 CER. §564.2 (1988) ......----++--> 12, 19

MISCELLANEOUS:

Advisory Opinion 90-44 .......--5+5+>5: 20, 22, 23

Advisory Opinion 91-70 .......-++++55 20-22

No. 92-653

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

CITY OF ARLINGTON, TEXAS,

- Petitioner,

FIRST GIBRALTAR BANK, F.S.B.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit

BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

Respondent First Gibraltar Bank, F.S.B.' (“First Gibral-

tar”) respectfully requests that the Court deny the petition for

writ of certiorari seeking review of the judgment of the United

States Court of Appeals for the Fifth Circuit entered on June 17,

1992. The Opinion below is reported at 963 F.2d 79.

' Pursuant to Supreme Court Rule 29.1, First Gibraltar Bank, FS.B.

advises the Court that First Gibraltar is a federal savings bank organized

under the laws of the United States. Its parent company, First Gibraltar

Holdings, Inc., is a closely held corporation, which is not publicly traded.

First Gibraltar Bank, F.S.B. has over one hundred wholly-owned subsidiar-

ies, not one of which is publicly traded. Respondent will provide additional

details if needed or required by the Court.

2

COUNTERSTATEMENT OF THE CASE

On May 16, -1985, First Texas Savings Association (‘First

Texas”) loaned Shady Valley West Joint Venture (“Shady Val-

ley”) $29,620,000.00 to acquire and develop property located in

Arlington, Texas (the “Property”). [ROA V 4, P 882]. As partial

security for the loan, Shady Valley agreed to provide a $4.1 mil-

lion letter of credit to First Texas. [ROA V 4, P 883]. The letter of

credit agreement provided in part as follows:

First Texas has required that Shady Valley procure, for

the benefit of First Texas, an irrevocable standby letter of

credit in the amount of Four Million One Hundred

Thousand and No/100 Dollars ($4,100,000.00) (the

“Letter of Credit”), which is to be procured for the

purpose of assuring First Texas that funds are and will

be available for the construction of the said proposed

Green Oaks Boulevard through the Property.

[ROA V 4, P 884] (emphasis supplied). On May 16, 1985, Shady

Valley obtained letter of credit 856 at First City National Bank of

Arlington for the benefit of First Texas. [ROA V 4, P 883].

On June 3, 1986, Shady Valley and First Texas entered into

a letter agreement (the “June 3 Letter Agreement”) which pro-

vided in pertinent part as follows:

Reference is hereby made to the Loan issued by

Lender to Borrower and payable at the interest rate, in

accordance with, and subject to the terms, provisions

and conditions contained therein, including without

limitation, the retention by Lender of that one certain

Letter of Credit No. 856 issued by First City National

Bank of Arlington in the original face amount of

$4,100,000.00 (“Letter of Credit”) .... Notwithstand-

ing anything contained in the Note or in any of the

other loan documents executed in connection with the

Loan, or in any amendments or modifications thereto,

this letter shall serve as an acknowledgment and agree-

ment by and between the undersigned parties as to the

3

following modifications, effective as of the date shown

above:

. * *

(3) Upon full execution hereof, Lender will submit a

draw in accordance with the terms of the Letter of Credit in

the sum of $2,697,993.70. Said sum to be applied and/or

disbursed by Lender in the following manner:

(a) an amount equal to $297,993.70 shall be immedi-

ately applied by Lender for payment of the May accrued

and unpaid interest on the Note;

(b) an amount equal to $100,000.00 shall be held by

Lender to be disbursed to Ronald C. Finley, W. James

Conrad, J. Charles Powell and William J. Shepherd,

Jr.,... upon... payment by Borrower... of the prop-

erty taxes relating to the Property; and

(c) An amount equal to $2,300,000.00 shall be held by

Lender for the construction costs relating to Green Oaks

Boulevard, said funds to be disbursed to Borrower in

accordance with the terms and conditions provided in the

Loan....

+ a” a

(6) This agreement shall incorporate all other terms

and conditions of the Loan and the loan documents exe-

cuted in connection therewith by and between Borrower

and Lender.

[ROA V 4, P 884-85].

On June 6, 1986, First Texas drew against the letter of credit

in the amount of $2,697,993.70, and First City National Bank of

Arlington wired that amount to First Texas. [ROA V 4, P 886].

The $2,697,993.70 was then deposited in First Texas Money

Maker Plus Account No. 30-891-665-3 (the “Account’’).

[ROA V 4, P 886]. The Account, including the signature card,

was styled “FTSA Tr for Shady Valley J.V.” First Texas was the

4

account holder, acting as trustee for Shady Valley, the benefici-

ary. [ROA V 4, P 886].

On September 26, 1986, First Texas and Shady Valley

entered into an agreement modifying certain terms and provi-

sions of the loan. [ROA V 4, P 887, 1000]. The modification

agreement expressly provided that Account No. 308916653 was

“currently held by Lender . . . as security in respect for [sic] the

Loan.” [ROA V 4, P 887, 1000].

On September 29, 1986, Joe Melton, a First Texas officer,

signed the letter agreement upon which Petitioner has based its

claims in this case (the “Escrow Letter Agreement”). [ROA V 4,

P 887]. The Escrow Letter Agreement provided that First Texas

would set up an account designated “Escrow Account-Arling-

ton” and that the monies in such account would be used to build

the road. The Escrow Letter Agreement also provided that Peti-

tioner may hire, but shall never be required to hire, a contractor

to complete the work if Shady Valley failed to commence con-

struction timely. [ROA V 4, P 887]. The Escrow Letter Agreement

was maintained by First Texas in its real estate loan credit files and

was not part of the First Texas deposit account records. {ROA V 4,

P 887; ROA V 4, P 879].

First Texas did not set up or establish an account des “nated

“Escrow Account-Arlington” naming Petitioner as a de sitor.

[ROA V 3, P 836-43]. The Account, previously establishe 4 on or

about June 6, 1986, was not restyled or redesignated anu pursu-

ant to the applicable loan documents between First Texas and

Shady Valley, remained security for the loan. [ROA V 4,

P 887-88]. Petitioner never deposited any money in any account

at First Texas. [ROA V 4, P 887; ROA V 3, P 879]. At or about

the time that Petitioner executed the Escrow Letter Agreement,

Jay Doegey, the Petitioner’s attorney, called a First Texas loan

officer and was told that the account contemplated by the

Escrow Letter Agreement had, in fact, been established and

funded. [ROA V 3, P 663].

5

Thereafter, Shady Valley defaulted on its loan repayment

obligations to First Texas. In addition, by failing to commence

construction of the road, Shady Valley breached the Escrow

Letter Agreement within one month after its execution.

[ROA V 4, P 888]. Petitioner never commenced construction of

the road, nor did it notify First Texas of its desire to do so.

[ROA V 4, P 888].

On April 13, 1987, First Texas notified Shady Valley that the

loan was in default. [ROA V 4, P 888]. On April 16, 1987, the

Account was offset, closed by First Texas and all amounts therein

(at that time $2,537,956.60) were applied to Shady Valley’s

indebtedness under the loan as an offset. [ROA V 4, P 888].

After April 16, 1987, the Account no longer existed, and there-

fore, there was no money on deposit in the Account at First

Texas. [ROA V 4, P 889].

On or about May 7, 1987, Jay Doegey, attorney for Peti-

tioner, sent a demand letter to First Texas which stated as

follows:

[First Texas is] in breach of its escrow agreement. . . by

which First Texas ... is to act as escrow agent in accor-

dance with the agreement .... You are hereby notified

that First Texas Savings Association is in breach of such

agreement, that such breach constitutes a breach of

contract, breach of fiduciary duty, interferes with the

business relationship of the City of Arlington and

Shady Valley West Joint Venture and may constitute a

conversion ....

[ROA V 4, P 889-90]. On May 27, 1987, Petitioner sued First

Texas in state court asserting tort and breach of contract claims.

[ROA V 4, P 889-90]. Conspicuously absent from Petitioner’s

demand letter and from the original state court petition was any

claim that Petitioner was a “depositor” of First Texas.

On December 27, 1988, First Texas was declared insolvent

and the Federal Savings & Loan Insurance Corporation (the

“FSLIC’’) was appointed as receiver. [ROA V 1, P 209]. The next

6

day, First Gibraltar and the FSLIC entered into an Acquisition

Agreement whereby First Gibraltar purchased substantially all

of the assets and certain limited liabilities of First Texas and

other insolvent thrifts. [ROA V 1, P 209]. In appointing the

FSLIC as receiver of First Texas, the Federal Home Loan Bank

Board determined that the assets of First Texas were insufficient

to satisfy its liabilities and that no money was available to pay

general unsecured claims against the defunct thrift. [ROA V 1,

P 104-11).

Only after First Texas was declared insolvent and after Peti-

tioner realized its general unsecured claims could only be

asserted against the FSLIC as receiver of First Texas did Peti-

tioner allege that it had been a “depositor” and that First Gibral-

tar assumed a “deposit liability” to Petitioner. Because the

Account had been offset and ciosed in April 1987, it was not

listed as a deposit liability on the books and records of First Texas

on the date of insolvency. [ROA V 4, P 890; ROA V 6, P 1421].

Moreover, the deposit account records of First Texas conclu-

sively establish that Petitioner never deposited any money in the

Account. [ROA V 3, P 836-843]. First Gibraltar did not assume

or agree to pay the claims that are being asserted by Petitioner in

this case. [ROA V 1, P 209].

The Fifth Circuit fully considered all of the facts and issues

before it and correctly decided that Petitioner was not a deposi-

tor of First Texas whose liability First Gibraltar agreed to

assume.

SUMMARY OF REASONS FOR DENYING THE WRIT

The decision of the Fifth Circuit is correct. The issues in

this case do not present any reasons which justify review by this

Court. Indeed, the Fifth Circuit Opinion is fact specific and turns

on the particular Acquisition Agreement and inventory list of

assumed liabilities at issue in the case. Additionally, the decision

of the Fifth Circuit is in accordance with banking regulations and

7

with long standing federal authority interpreting those regula-

tions. Finally, there is no genuine conflict among the United

States Courts of Appeals over the alleged “questions” raised by

the petition.

REASONS FOR DENYING THE WRIT

I.

THE OPINION BELOW RESOLVED A FACT

SPECIFIC CONTRACTUAL MATTER WHICH

DOES NOT UNDERMINE THE ENTIRE

DEPOSIT INSURANCE SCHEME

The decision below resolved a fact specific contractual mat-

ter which, contrary to the melodramatic entreaties of Petitioner,

does not undermine this Nation’s deposit insurance scheme. A

claim for deposit insurance is not at issue in this appeal and was

certainly not a basis for the Fifth Circuit Opinion. This is not a

case against the FDIC, the FSLIC or any other deposit insurer;?

rather, this case involves nothing more than determining

whether First Gibraltar, as the acquiring institution, assumed a

specific liability not listed on the FSLIC inventory list of assumed

liabilities. After analyzing the Acquisition Agreement governing

First Gibraltar’s assumption of liabilities, the Fifth Circuit prop-

erly concluded that First Gibraltar did not assume liability for

Petitioner’s claims.

Not surprisingly, in its petition for writ of certiorari, Peti-

tioner has wholly failed to address the Acquisition Agreement

between First Gibraltar and the FSLIC. This is because the

Acquisition Agreement is clear and unambiguous that First

Gibraltar assumed only limited liabilities. For example, the

Acquisition Agreement states that First Gibraltar agreed only to

? The district court dismissed Petitioner’s claims against the FDIC-

receiver and the FDIC-corporate with prejudice and that ruling was not

appealed.

Ty

8

assume liabilities to “Depositors with respect to their Depos-

its... "’ and only those deposits in existence on December 27,

1988, the date of the receivership. [ROA V 1, P 231]. The Acqui-

sition Agreement specifically defines “Deposit” as follows:

The term “Deposit” means a withdrawable or repur-

chasable share, investment certificate on deposit in the

Closed Association [First Texas] of a type that is (or

would be, but for the $100,000.00 limitation) insurable

under Section 405(a) of the National Housing Act

(12 U.S.C. §1728(a) (1982)) including, without limita-

tion, all uncollected items included in the depositors’

balances and credited on the books of the Closed Associ-

ation ....

[ROA V 1, P 226] (emphasis supplied). The use of the present

tense (i.e., a “withdrawable”’ deposit that “is” insurable) and the

use of references to ‘depositors’ balances” that are “credited on

the books” clearly establish that First Gibraltar assumed only

deposits on the books and records of First Texas as of Decem-

ber 27, 1988. This conclusion is buttressed by Section 5 of the

Acquisition Agreement, which provides in part that:

The receiver shall furnish to the acquiring Association

upon its completion a copy of the inventory and a

record of the Closed Association's secured, deposit, and

tax claim liabilities that were assumed pursuant to this

Agreement.

[ROA V 1, P 489] (emphasis supplied). The fact that the Acquisi-

tion Agreement calls for a “record” of “deposit . . . liabilities

that were assumed” necessarily presupposes the existence of a

fixed, ascertainable, and limited number and amount of assumed

deposit liabilities.

The Shady Valley Account, the Account upon which Peti-

tioner makes its claims, was not a deposit credited on the books

of First Texas on December 27, 1988, at the time of the First

Texas insolvency. The Account was not listed as an assumed

deposit liability on the inventory of deposit liabilities received by

9

First Gibraltar pursuant to Section 5 of the Acquisition Agree-

ment. [ROA V 6, P 1421]. At the time of the First Texas insol-

vency, Petitioner was simply an unsecured creditor seeking to

collect damages for alleged breach of contract and tort claims

from First Texas in a state court action. Petitioner had no judg-

ment or other security and did not even claim to be a depositor of

First Texas.

Moreover, the inventory of assets and liabilities consisted of

a list contained in an Ernst & Young December 27, 1988 State-

ment of Financial Condition of First Texas and supported by

detailed records such as the First Texas DDA (demand deposit

accounts) trial balance and general ledger. [ROA V 6, P 1421].

The DDA trial balance contained a listing of deposit accounts

which were assumed by First Gibraltar pursuant to Section 3 of

the Acquisition Agreement, and such accounts were listed in

numerical order. [ROA V 6, P 1421]. The Account at issue in this

case is not listed as one of the deposit liabilities assumed by First

Gibraltar, [ROA V 6, P 1421, 1432], and Petitioner never chal-

lenged the inventory list. City of Arlington, Texas v. FDIC, 963

F.2d 79, 84 (Sth Cir. 1992). Because the Account was not listed

on the inventory of assumed deposit liabilities on the date of

insolvency, First Gibraltar did not receive any payments from the

FSLIC representing any money related to the disputed Account.

Id. at 82.

The Acquisition Agreement governed the entire transac-

tion between the FSLIC and First Gibraltar. The Agreement is

clear that First Gibraltar did not assume any liability to Peti-

tioner. Petitioner’s claim that First Gibraltar is obligated to

assume its general unsecured claim against First Texas is con-

trary to the plain terms of the Agreement. First Gibraltar is not

First Texas. First Gibraltar is a separate and independent entity

that entered into a contract with the FSLIC as receiver of First

Texas to acquire certain assets and limited liabilities. Petitioner’s

general unsecured claim against First Texas was not among the

limited liabilities assumed by First Gibraltar. Despite Peti-

tioner’s wishful thinking, it is well-established that claims for

a

10

unassumed liabilities cannot be asserted against an acquiring

bank. Gulley v. Sunbelt Savings, FS.B., 902 F.2d 348, 350-51 (Sth

Cir. 1990), cert. denied, 111 S. Ct. 673 (1991); FSLIC v. Locke,

718 F. Supp. 573, 580 (W.D. Tex. 1989) (neither the FSLIC Cor-

porate nor the acquiror can be held liable for obligations they

have not assumed). The Fifth Circuit properly resolved this dis-

pute by analyzing the plain terms of the Acquisition Agreement

entered into between the FSLIC and First Gibraltar and by

concluding therefrom that First Gibraltar never agreed to

assume Petitioner’s claims. The Fifth Circuit Opinion clearly

turns on a case-specific set of facts, does not undermine the

federal deposit insurance system and does not require interven-

tion from the highest court in the country.

Il.

THE FIFTH CIRCUIT OPINION IS

CONSISTENT WITH FEDERAL AUTHORITY

REGARDING DEPOSITOR STATUS

For more than fifty years, courts have uniformly concluded

that deposit account records are conclusive of the existence of a

deposit. The deposit account records of First Texas conclusively

establish that Petitioner was never a depositor of First Texas.

[ROA V 3, P 836-43]. The record on appeal demonstrates that

Petitioner never had a deposit account at First Texas and was

certainly not a depositor of First Texas on the date of its insol-

vency. [ROA V 3, P 836-43].

Sound policy justifications underlie the requirement of the

conclusiveness of deposit account records. Deposit insurance

coverage determinations are necessarily and literally made over-

night in order to conclude purchase and assumption transactions

with minimal disruption to the insolvent institution’s customers.

Abdulla Fouad & Sons v. FDIC, 898 F.2d 482, 485 (Sth Cir. 1990).

The conclusiveness of account records facilitates the speedy

transition of deposits, which is essential to make the public’s

insured savings available as soon as possible and which insures

Hcammamoeaiemaudiiaaiesatamiialiasiiaaaaiaaiaiil

11

that accounts are not frozen indefinitely while detailed investiga-

tions as to the actual ownership of each account are carried out.

Id. Account records also must be conclusive to prevent “crea-

tion” of trust accounts and agency relationships subsequent to an

institution’s insolvency that might fraudulently increase insur-

ance coverage. Id.; accord Baskes v. FSLIC, 649 F. Supp. 1358,

1360 (N.D. Ill. 1986) (policy reasons dictate that account records

must be conclusive). Furthermore, federal banking regulatory

agencies are required by statute to compare the cost of liquidat-

ing failed institutions with the cost of entering into purchase and

assumption transactions. 12 U.S.C. §1823(c)(4)(A) (1989). If

alleged wrongful offsets or undisclosed relationships could cre-

ate insurable deposits or if they could be transferred to an

acquiring institution in a purchase and assumption transaction,

liquidation costs would be uncertain and the statutory objective

of identifying the least costly disposition of failed financial insti-

tutions would be frustrated. See Nimon v. Resolution Trust Corpo-

ration, 1992 WL 252780 *7 (Sth Cir. Oct. 21, 1992) (“[t}he

deposit insurance agencies have a recognized need to rely upon

the ownership rights and capacities reflected by an institution’s

deposit account records when an institution is placed into receiv-

ership .... [t]o require [them] to rely on extrinsic evidence

would undermine the ability to rely on those records.”). Contrary

to Petitioner’s emotional claims that the decision below departs

from policy and precedent, the Fifth Circuit Opinion is entirely

consistent with the policy justifications for the conclusiveness of

account records, as well as with legal precedent.

No court has authorized an exception to the well-estab-

lished rule regarding the conclusiveness of account records in a

case such as the one before the Court. Petitioner’s request for a

writ of certiorari on an issue which has been clearly and plainly

resolved and about which courts have no dispute should be

denied.

12

A. Federal Case Law Confirms That

Account Records Are Conclusive

Federal authority has established that deposit records are

conclusive of depositor status. For example, the Fifth Circuit’s

ruling in Abdulla Fouad, 898 F.2d at 483, confirms this principle

and supports the decision of the lower court. In Abdulla Fouad,

the alleged “depositor.” like Petitioner, claimed an interest in

certain deposited funds despite the fact that the account signa-

ture card did not reflect the beneficial interest asserted. Also like

Petitioner in this case, Fouad claimed that the FDIC and the

courts should look beyond the deposit account records to docu-

ments in the credit file and to the knowledge of an officer of the

failed bank. Jd. at 484.

In affirming summary judgment for the FDIC, the court

rejected Fouad’s attempt to go beyond the clear and unambigu-

ous signature card and held:

Fouad seeks to go beyond the bank’s deposit account

records and require FDIC to research the bank’s credit

files and perhaps other records before it may deny a

claim. This position contradicts, rather than supple-

ments, both 12 U.S.C. §1822(c) and 12 C.FR. §330.1.

Id. at 485. The FDIC regulation construed in Abdulla Fouad is

virtually identical to the FSLIC regulation that was in existence

at the time First Texas failed. Compare 12 C.F.R. §330.1 (1987)

with 12 C.F.R. §564.2 (1988).

The Fifth Circuit’s decision in Spawn v. Western Bank-West-

heimer, 925 F.2d 885 (Sth Cir. 1991), also confirms the conclusive-

ness of account records and supports the decision below. In

Spawn, the Fifth Circuit recognized the general rule that account

records are dispositive:

If the agency relationship does not appear in the deposit

records, the claimant goes away empty handed. See

Abdulla Fouad & Sons v. FDIC, 898 F.2d 482 (Sth Cir.

1990). Or, a claimant may assert that the named depos-

itor was acting as trustee for the claimant. Again, if no

13

trust relationship is mentioned in the deposit records,

the claimant receives no coverage.

925 F.2d at 888 (emphasis supplied). The principle articulated in

Spawn is no less valid in this case.

The Fifth Circuit has recently reaffirmed this principle in

Nimon, 1992 WL 252780. In Nimon, Mr. and Mrs. Nimon urged

that they were each entitled to separate deposit insurance

because the funds in question were actually owned by them in a

joint tenant capacity, despite the fact that the joint tenancy was

not reflected on the deposit account records. The Fifth Circuit

rejected Petitioners’ claim for the additional insurance “because

[where, as here,] the account records are clear and unambiguous,

their statement of the capacity in which funds are owned is

conclusive.” Nimon, 1992 WL 252780 *4. In explaining its hold-

ing, the court stated, inter alia, that the “RTC cannot be bound

either by [the bank’s] alleged failure to inform all employees of

the Nimon’s standing instructions, nor by Mr. Nimon’s mistaken

assumptions.” /d. The same reasoning holds true here; a deposit

liability cannot be deemed into existence by either the alleged

wrongful acts of a First Texas employee or by Petitioner’s mis-

taken assumptions.

Petitioner’s efforts to persuade this Court that the Fifth

Circuit Opinion is at odds with FDIC v. Philadelphia Gear Corp.,

476 U.S. 426 (1986), are belied by the facts and the holdings of

both cases. In the first instance, Philadelphia Gear is factually

distinguishable from the case before this Court because Philadel-

phia Gear is a case against the FDIC for the collection of deposit

insurance. This case, on the other hand, is not a case against the

insurer; rather, it is a contract case against the acquiring institu-

tion, First Gibraltar.

Even if, however, Philadelphia Gear and the Opinion below

are construed to be factually similar, the Fifth Circuit has not

undermined or created conflict with the holding in Philadelphia

Gear because both cases reached the same result. In Philadelphia

Gear, this Court concluded that Philadelphia Gear was not a

14

“depositor” and could not obtain deposit insurance because it

“surrendered absolutely nothing to the bank.” 476 U.S. at 435.

Similarly, here, the Fifth Circuit concluded that Petitioner was

not a “depositor” of First Texas whose liability First Gibraltar

(the acquiring institution) assumed because Petitioner surren-

dered absolutely nothing to a bank, having made no “actual

deposit of money... to an account.” City of Arlington, 963 F.2d

at 82 & n.7. Indeed, Petitioner has even conceded that it never

deposited money with First Texas. [ROA V 3, P 750]. In short,

the Fifth Circuit correctly held, in accordance with this Court's

teachings in Philadelphia Gear, that Petitioner did not have a

deposit with First Texas and was not a depositor of First Texas.

See Philadelphia Gear, 476 U.S. at 435.

Petitioner’s attempt to create the illusion of a conflict

between the Fifth Circuit and Philadelphia Gear is inaccurate

and misleading. Petitioner argues that the “suggested” outcome

of a potential fact scenario “alluded to” (but not found) in

Philadelphia Gear makes the Fifth Circuit Opinion insupporta-

ble. Petition at 13. To that end, Petitioner would have this Court

“read into” Philadelphia Gear the unprecedented proposition

that if “hard assets” were entrusted to the bank at anytime by

anyone, a deposit exists, whether vel non that “deposit” is evi-

denced by account records. Jd. Not only is this argument an

untenable departure from the true holding in Philadelphia Gear,

but it is also illogical in the face of the Nation’s entire deposit

insurance scheme. When addressing a similar argument made by

Petitioner, the Fifth Circuit appropriately rejected this expansive

reading of the nature of “deposit liability,” stating:

Taken to its logical conclusion, Arlington’s theory

would have Gibraltar assume liability for every deposi-

tor account transaction made by First Texas, including

those which resulted in the closure and deactivation of

3 Importantly, the “hard assets” analysis is not the only or even the

primary rationale for the decision of the Fifth Circuit. As stated supra, the

Fifth Circuit carefully and properly analyzed the Acquisition Agreement to

determine whether Petitioner was a depositor.

15

deposit accounts .... Apparently Arlington considers

the FSLIC inventory of deposit accounts provided to

Gibraltar under the purchase and assumption agree-

ment to be merely the baseline depositor liability that

Gibraltar assumed; other “depositor” liabilities, such

as Arlington’s, would become exigible seriatim upon

discovery.

City of Arlington, 963 F.2d at 83. Philadelphia Gear does not

purport to change the fundamental premise of the Nation’s

banking insurance scheme, which requires demonstrable evi-

dence of depositor status through account records. See, e.g.,

Abdulla Fouad, 898 F.2d at 485; Spawn, 925 F.2d at 889; Nimon,

1992 WL 252780 *4.

The Fifth Circuit appropriately concluded that Petitioner

was not a depositor of First Texas whose liability First Gibraltar

subsequently assumed because, inter alia, Petitioner’s ““owner-

ship of the funds in the Account was never noted upon the

deposit records of First Texas[.]’’ City of Arlington, 963 F.2d at 82.

Petitioner would have this Court interpret Philadelphia Gear to

abolish more than fifty years of evolving case law and regula-

tions, all of which confirm the conclusiveness of deposit account

records. Philadelphia Gear does not address, much less permit, a

third party to look beyond the bank deposit account records.

This Court should not disregard a well-established body of law

regarding the conclusiveness of deposit account records based

upon Petitioner’s wishful, but erroneous interpretation of Phila-

delphia Gear.

In a further attempt to persuade this Court that some con-

flict of authority may exist, Petitioner resorts to reliance upon a

series of depression-era cases that are so factually distinguisha-

ble as to cut against Petitioner’s argument. As the Fifth Circuit

correctly concluded, the depression-era cases are inapposite

because “[e]ach involves a suit against the FDIC for insurance

payments and turn [sic] on factual circumstances in which an

actual deposit of money was made to an account and both the

deposit and the account were clearly documented in the bank

16

records.” City of Arlington, 963 F.2d at 82. Indeed, in each of

these cases, deposits were found to exist only when the claims

were supported by deposit account records; the court in each case

required proof that the claimant had “done all that he could do” to

confirm that he was a depositor in good standing. See FDIC v.

Records, 34 F. Supp. 600 (W.D. Mo. 1940) (entry of deposit in

passbook by bank teller proved deposit); see also FDIC v. Barton,

106 F.2d 737, 738 (10th Cir. 1939), affg, Barton v. Johnson, 24 F.

Supp. 987, 988 (W.D. Okla. 1938) (plaintiff's “deposit was actu-

ally entered upon books of the bank....”); FDIC v. Deaton,

105 F.2d 677, 679 (10th Cir. 1939), aff'g, Deaton v. FDIC, 24 F.

Supp. 984 (W.D. Okla. 1938) (plaintiff possessed certificate of

deposit issued by bank that proved ownership of deposit);

Jones v. FDIC, 24 F. Supp. 985, 986 (W.D. Okla. 1938) (records of

the bank (ledgers) showed that plaintiff's deposit was made).

Contrary to the facts of each of the depression-era cases on

which it relies, Petitioner cannot produce any evidence from the

First Texas deposit account records to demonstrate that it was a

depositor. In fact, unlike the depositors in each of the depres-

sion-era cases, Petitioner by its own admission never tendered any

funds to First Texas. [ROA V 3, P 750]. To group Petitioner in the

same category as the individuals in the depression-era cases who

stood in teller lines, gave money to the teller at the window and

received a credit in an account book is entirely unwarranted.

Each of the plaintiffs in these cases sought to ensure that he

or she had a protectable deposit interest at the bank. Petitioner,

to the contrary, negligently and recklessly failed to attempt to

protect its interest. Indeed, it signed an Escrow Letter Agree-

ment that did not specify any particular First Texas account. It

relied on oral understandings and unrecorded agreements that

its account was set up at the bank. It never requested any account

documentation from the bank. It never signed a signature card.

It never received account statements and never even inquired

about them. This is totally at odds with Petitioner’s claim that it is

a “depositor.”

17

Petitioner is a large municipal entity with sophisticated and

professional management, familiar with banking customs and

practices. Petitioner seeks to avoid the consequences of its own

negligence by saddling First Gibraltar with a liability it did not

assume and for which it received no money. As the Fifth Circuit

correctly concluded, Petitioner’s arguments turn equity on its

head, “occasioning the very result which equity abhors — one

person (Gibraltar) ... paying the debts of another (First Texas)

without having received any value whatever.” City of Arlington,

963 F.2d at 82. The law simply does not permit such a shifting of

liability; no court has ever held so, and thus, the petition for writ

of certiorari should be denied.

Petitioner inaccurately attempts to manufacture a conflict

in the circuits by citing Jones v. FDIC, 748 F.2d 1400 (10th Cir

1984). Contrary to Petitioner’s arguments, the Jones opinion is

not in conflict with, and in fact supports, the decision of the Fifth

Circuit. In Jones, the Tenth Circuit affirmed the summary judg-

ment granted in favor of the FDIC, which limited deposit insur-

ance where, as here, the records of the bank did not reveal the

executor’s dual interest as trustee. See Jones, 748 F.2d at 1405S.

Simply stated, the Jones court determined that account records

were conclusive in precisely the same fashion as the Fifth Circuit.

The Jones case is entirely consistent with other authority regard-

ing the conclusiveness of account records.

Petitioner also erroneously cites FA.I.C. Secunties, Inc. v.

United States, 595 F. Supp. 73, 77 (D.D.C. 1984), aff'd, 753 F.2d

166 (D.C. Cir. 1985), for the proposition that Petitioner was a

“beneficial owner” of the Account despite the fact that such

interest does not appear in the First Texas dccount records.

However, F.A./.C. is distinguishable and inapplicable to the case

at bar. As the Fifth Circuit correctly concluded, FA./.C. involved

only a challenge to the validity of regulations specifically gov-

erning “brokered deposits,” and neither the district court nor the

appellate court reached any conclusions regarding account own-

ership. See City of Arlington, 963 F.2d at 82. Moreover, the

FA.J.C. opinion does not purport to address the facts of the

18

present case in which Petitioner claims that it owned the deposit,

despite the institution’s account records to the contrary.

Petitioner further claims that Anheuser-Busch Employees

Credit Union v. FDIC, 651 F. Supp. 718 (W.D. Mo. 1986), sup-

ports its position. However, in Anheuser-Busch, summary judg-

ment was granted for the FDIC, and the district court determined

that under the legislative history of the relevant banking statute,

it is not true “that ‘beneficial ownership,’ no matter what the

context, shall be the touchstone.” Anheuser-Busch, 651 F. Supp.

at 723, n.7. In fact, the result in Anheuser-Busch was that the

court refused to look behind the deposit account records to find

that credit union members were “depositors” of credit union

deposits. Jd. at 726. Neither FA.1.C. nor Anheuser-Busch is

inconsistent with the Fifth Circuit Opinion.

Contrary to Petitioner’s pleas, in each case that has been

decided since the FSLIC regulations were promulgated, includ-

ing Abdulla Fouad, courts have relied upon account signature

cards to determine whether any relationship supporting a claim

for insurance coverage is evidenced in the deposit account

records.’ In this case, the only relationship disclosed in the

deposit account records was that between First Texas and Shady

Valley. No relationship involving Petitioner was disclosed on the

deposit account records. Because the account records did not

disclose any relationship with Petitioner, they are conclusive in

precluding deposit insurance for Petitioner. See Philadelphia

Gear Corp. v. FDIC, 751 F.2d 1131, 1138 (10th Cir. 1984) (“the

records of the insolvent bank are conclusive as to the claimant’s

entitlement to deposit insurance’’), rev'd in favor of FDIC on

other grounds, 476 U.S. 426 (1986). The Fifth Circuit Opinion is

consistent with these well-established principles.

4 Accord Lambert v. FDIC, 847 F.2d 604, 608 (9th Cir. 1988) (FDIC

regulation “imposes an affirmative obligation to disclose one’s status...”

in the appropriate bank record. When no agency relationship is disclosed

on the account signature card, the purported beneficiary has no interest in

the deposit account); Baskes v. FSLIC, 649 F. Supp. 1358, 1361 (N.D.

Ill. 1986).

19

B. Deposit Insurance Regulations Also Confirm

The Conclusiveness of Account Records

The deposit insurance regulations also support the Fifth

Circuit Opinion. Petitioner would have this Court retreat from

the proper interpretation of the insurance regulations and hold

that whenever any trust or fiduciary relationship appears on

account records, those records are not conclusive and are subject

to challenge by any person or entity using mere intent or “under-

standings.” See Petition at 16. The regulations do not permit

such challenges. See, e.g., 12 C.ER. §564.2(b) (1988). Rather,

additional records (i.e., records of the association or account

holder) are used only to ascertain the details of a relationship

already disclosed on the deposit account records.

Where, as here, legal identities and capacities are not dis-

closed on account records, no claim for insurance is recognized.

The critical factor is the disclosure on account records of a

relationship that may be entitled to additional insurance. Only

then may details of the disclosed relationships — or the interests

of other parties who are beneficiaries of the disclosed relation-

ships — be ascertained using the association’s or the account

holder’s records. Petitioner’s claim fails this test.

Furthermore, the insurance regulations state that the

amount of an insured deposit is “the amount which the insured

member would have been entitled to withdraw as of the date of

the default... .”. 12 C.ER. §564.1(b) (1988). Petitioner was not

the insured member as reflected on the account records. More-

over, the Account was offset by First Texas against Shady Valley’s

indebtedness, and there was no insured deposit as of the date of

the default.5 It is well-settled that the FDIC (and the FSLIC)

may rely on the “date of default” records. Consequently, Peti-

tioner could not have withdrawn anything from the Account on

the date of default and does not have an insured deposit as

5 The relationship of debtors and creditors to the insolvent institution is

“cast in stone” at the time of closing. FDIC v. McKnight, 769 F.2d 658, 661

(10th Cir. 1985).

20

defined by the deposit insurance regulations. In sum, the deposit

insurance regulations establish that deposit account records are

the conclusive records for determination of account ownership.

There is no ambiguity in the account records that would justify

going beyond the account signature card. Petitioner’s interpreta-

tion would allow undisclosed third parties to collaterally attack

the conclusiveness of account records. Such a reading would

permit a “free-for-all” of self-proclaimed “depositors” attacking

the ownership of thousands of trust accounts which were trans-

ferred to acquiring institutions in purchase and assumption

transactions.

The Fifth Circuit correctly held that Petitioner’s theories,

when taken to their logical conclusion, produce an absurd result.

Petitioner would expose First Gibraltar and other acquiring

institutions to unlimited liability for closed and deactivated

deposit accounts even though the institution received nothing in

return. City of Arlington, 963 F.2d at 83. Such a result is contrary

to the plain terms of the Acquisition Agreement, federal case law

and the deposit insurance regulations.

C. The Advisory Opinions Do Not

Conflict With The Decision Below

Petitioner attempts to create a conflict between the Opin-

ion below and two FDIC Advisory Opinions, Advisory Opin-

ions 91-70 and 90-44. However, the Advisory Opinions do not

provide Petitioner comfort. As is clear from the title of Advisory

Opinion 91-70 and from its first sentence, the Advisory Opinion

would only apply, if it applies at all, to depositors.® Petitioner has

presupposed its “depositor” status, despite the fact that the Fifth

Circuit correctly found that Petitioner was not a depositor. City of

Arlington, 963 F.2d at 81. Petitioner is in the insupportable posi-

tion of claiming the protections afforded a depositor when, in the

® Advisory Opinions are not FDIC policy. An Advisory Opinion is

nothing more than the statement of one staff attorney and is not binding

upon the FDIC. See Prefatory Note to Advisory Opinions (Addendum A).

21

first instance, it has failed to meet the threshold test establishing

depositor status.

Petitioner does not address the fact that Advisory Opin-

ion 91-70 applies only to depositors; instead, it glosses over this

distinction. It would have this Court assume that Petitioner is

entitled to the full protections afforded a depositor. However, it

is undisputed that those protections do not extend to non-depos-

itors, such as Petitioner; indeed, to extend such protections to

non-depositors like Petitioner “would have Gibraltar assume

liability for every depositor account transaction made by First

Texas, including those which resulted in the closure and deactiva-

tion of deposit accounts.” Jd. at 83. Such a construction of the

Acquisition Agreement between First Gibraltar and the FSLIC

is unworkable, illogical and contrary to the Nation’s banking

scheme.

Petitioner’s focus on the second paragraph of the Advisory

Opinion, which provides that “money belonging to a depositor

that is tendered to, and received by, an insured institution for

deposit . . . should be treated as a deposit in fact,” is self-defeat-

ing. See Advisory Opinion 91-70 (emphasis supplied). Indeed,

Petitioner has admitted that it never deposited money with First

Texas, and thus it cr .not claim that it tendered funds to First

Gibraltar as contemplated in the quoted language in Advisory

Opinion 91-70.

Even if Advisory Opinion 91-70 was somehow construed to

apply to non-depositors such as Petitioner, the Advisory Opinion

does not provide for claims against an acquiring institution, such

as First Gibraltar. Rather, the Advisory Opinion contemplates

the filing of claims against the insurer. See Advisory Opin-

ion 91-70 (aggrieved depositors may “include the amount of the

deficiency in a claim for deposit insurance”). It does not state or

otherwise imply that such a depositor may attempt to collect

from the acquiring institution, as Petitioner would have this

Court hold. It certainly does not support the specific perform-

ance of an escrow agreement entered into by a failed thrift

almost eighteen months before insolvency and failure. To the

iii aia aii

22

contrary, the Advisory Opinion is clear that an alleged deposit

liability is handled as an insurance claim. /d. (“the claim will be

allowed only in the amount recognized by the insurer. . .””) (Peti-

tion at page 63a).

Moreover, the Advisory Opinion provides that claims in

excess of the insured amount are asserted against the receiver-

ship estate of the failed institution. If there is a deficiency in the

claim for deposit insurance:

[t]his would leave the FDIC, as (insurer and) subrogee,

to seek reimbursement for the insurance payment from

the receivership, which presumably would ordinarily

have a bond claim based on the misconduct of the

failed institution’s employee. The deposit holder would

have no need or right to file a claim against the receiver

except for the portion of the deposit account adjusted, for

the deficiency, in excess of the insured amount, if any.

Id. (emphasis supplied) (Petition at 61a). The Advisory Opinion

refers to the assertion of claims against the insurance fund and/

or the receivership estate of the failed institution, not an acquir-

ing institution that bargained for and received a limited and specific

set of assets and liabilities.

Advisory Opinion 91-70 does nothing more than provide

depositors with certain rights and protections against the insurer

or perhaps, the receiver of the failed institution. Contrary to

Petitioner’s strained analysis, the Advisory Opinion does not

magically turn Petitioner into a depositor; nor does it give a non-

depositor, such as Petitioner, any rights against the acquiring

institution. It is clear that the Advisory Opinion does not apply

on any level to the facts of this case and is not in conflict with the

Fifth Circuit Opinion.

Advisory Opinion 90-44, also cited by Petitioner, is equally

inapplicable to this case. Advisory Opinion 90-44 provides that if

a depositor demonstrates that a depository institution was

directed to identify the depositor as the trustee for a trust but

instead merely placed the name of the depositor on the signature

23

card, the FDIC would treat the deposit account records of the

insured institution as having indicated the existence of the trust.

The principle applied in this Advisory Opinion assumes that the

depositor/trustee is in some capacity identified in the deposit

account records. However, in the instant case, the deposit

account records do not refer to Petitioner in any manner.

Because Petitioner’s interest is not apparent from the account

records, Advisory Opinion 90-44 is inapplicable to this case. As

was also true with the case law and the deposit insurance regula-

tions, the Advisory Opinions do not present a conflict of author-

ity, and they do not provide a basis for granting a petition for writ

of certiorari.’

Ill.

THE OPINION DOES NOT HAVE THE EFFECT OF

PERMITTING AN INSTITUTION TO DEPRIVE AN

INSURED DEPOSITOR OF ITS RIGHTS

Petitioner has improperly described the anatomy of the

Fifth Circuit’s decision by stating that “[a]t its heart, the Fifth

Circuit’s decision below stands for the unprecedented proposi-

tion that once a deposit relationship has been established, a

financial institution may by its unilateral acts of omission or

commission deprive the insured depositor of his status as such.”

Petition at 17-18. This is nothing more than a “strawman” argu-

ment, a type of artificial parade of horrors, which was created for

the purposes of distorting the actual holding of the Fifth Circuit

7 Petitioner cites certain dictum in Abdulla Fouad & Sons v. FDIC, 898

F.2d 482 (Sth Cir. 1990), which is consistent with the principles applied in

Advisory Opinion 90-44. The account in Abdulla Fouad was styled “Allied

International/General Account Allied International Sales Corp.” 898 F.2d

at 483. The court implies in the dictum relied upon by Petitioner that

Fouad may have recovered had the bank “erred in recording Allied’s

capacity on the deposit cards when Allied opened the account.” /d. at 485.

However, the court never strays from the threshold requirement that a

party’s interest, even in the wrong capacity, must appear on the deposit

account records.

os

and of attempting to appear “writ worthy.” Contrary to Peti-

tioner’s representations to this Court, the Fifth Circuit Opinion

does not even purport to address the case of a financial institu-

tion depriving the insured depositor of its depositor status. In

fact, even Petitioner has conceded that it is implying such a

holding into the Opinion. See Petition at 18 (referring to the

“proposition suggested by the Fifth Circuit”) (emphasis sup-

plied); see also Petition at 23 (“the Fifth Circuit’s implicit deci-

sion”) (emphasis supplied).

Despite Petitioner’s protestations, the Fifth Circuit Opin-

ion is consistent with the deposit insurance scheme, the deposit

insurance enactments, the underlying regulations and federal

case law. The Fifth Circuit has not held, nor has it implied, that

the alleged wrongful acts of bank personnel will deprive a deposi-

tor of its status as a depositor. Rather, the Fifth Circuit Opinion

simply holds that the alleged wrongful acts of officers of a failed

institution do not expand the scope of liabilities assumed by First

Gibraltar and do not modify or alter the terms of the Acquisition

Agreement.

IV.

THE D’OENCH DOCTRINE BARS

PETITIONER’S CLAIMS

The D’Oench, Duhme® doctrine independently confirms

that the decision of the Fifth Circuit is proper. As this Court is

well aware, the D’Oench doctrine is a broad-based rule of estop-

pel which has been applied expansively in recent years in order to

effectuate critical federal policies. Bowen v. FDIC, 915 F.2d 1013,

1015 (Sth Cir. 1990). The applicable test for establishing whether

D’Oench applies is whether a party “lent himself to a scheme or

arrangement whereby the banking authority on which [the

FDIC] relied in insuring the bank was or was likely to be misled.”

Buchanan v. FSLIC, 935 F.2d 83 (Sth Cir. 1991). The failure of

* D’Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942).

25

Petitioner to assure proper documentation of the transaction

with First Texas made the First Texas records misleading to bank

examiners. A bank examiner, looking at the records of First

Texas on the date of insolvency, would have seen that the

Account securing the Shady Valley loan was offset against the

loan without any reference to any interest other than First Texas

and Shady Valley. Because the examiner could not have been

aware of the unrecorded side agreement upon which Petitioner

relies, the examiner could not have known that the Account was

“intended” to be “Escrow Account-Arlington.” Unaware of

these various other undisclosed agreements, the bank examiner

would have been misled by the records. Such is the stuff of

D’Oench.

Additionally, the findings of fact of the district court bring

this case squarely under the reach of the doctrine and bar Peti-

tioner’s claims. The district court found that:

[T]he intent of the parties was that the Account would be

the “Escrow Account-Arlington” that was contem-

plated by the escrow agreement; and, once the agree-

ment was made, the parties considered that the Account

was the “Escrow Account-Arlington....” In other

words, the placement by First Texas of $2,100,000.00 in

a separate account was accomplished by allowing the

Account to remain in existence at First Texas, and all

parties viewed the Account to be the “Escrow Account-

Arlington,” and as satisfying the requirements of the

escrow agreement.... At or about the time plaintuff

executed the escrow agreement, an officer of First

Texas told the attorney for plaintiff that the account

contemplated by the escrow agreement was

established.

[ROA V 9, P 2242-43] (emphasis supplied). The uncontroverted

evidence demonstrates that the “intent of the parties” was

entirely oral. No writing memonalizes this alleged “intent”, or the

fact that “all parties viewed the Account to be the “Escrow

Account-Arlington” and “as satisfying the requirements of the

26

escrow agreement.” The Escrow Letter Agreement does not

refer to the pre-existing Account. The Account does not refer to

the Escrow Letter Agreement or to any interest of Petitioner. To

the contrary, the Account signature card shows that the deposit

was held by First Texas as trustee for Shady Valley. [ROA V 4,

P 866]. Moreover, the Shady Valley loan documents demonstrate

that the Account was held as security for the loan. [ROA V 4,

P 887]. The bank examiner could not have pieced all of this

together, and thus, the D’Oench principles are clearly brought

into play. See Buchanan, 935 F.2d at 86, n.5. (“(p]romoting the

government’s ability to rely upon the financial institution’s

records is the prime purpose of D’Oench Duhme doctrine”). The

well-established D’Oench doctrine is clearly applicable to the

facts of this case and warrants denial of the writ.

CONCLUSION

The Fifth Circuit fully considered and correctly decided the

issues before it. The Opinion below turns on its own specific

facts, and in addition, is in keeping with well-established author-

ity regarding the scope of liability of acquiring banks and the

conclusiveness of deposit account records. Moreover, policy con-

siderations support the decision below. In sum, there is no justifi-

cation for this Court to review the Fifth Circuit Opinion issued

on June 17, 1992, and consequently, the petition for writ of

certiorari should be denied.

27

Respectfully submitted,

/s/ CHARLES M. MOORE

Charles M. Moore

Counsel of Record

Elizabeth E. Mack

LOCKE PURNELL RAIN HARRELL

(A Professional Corporation)

2200 Ross Avenue

Suite 2200

Dallas, Texas 75201-6776

Telephone: (214) 740-8000

Telecopy: (214) 740-8800

ATTORNEYS FOR RESPONDENT,

FIRST GIBRALTAR BANK, F.S.B.

CERTIFICATE OF SERVICE

I, Charles M. Moore, a member of the Bar of the Supreme

Court of the United States and counsel of record for Respon-

dent, First Gibraltar Bank, F.S.B., hereby certify that on Novem-

ber __, 1992, pursuant to Supreme Court Rule 33, I served three

copies of foregoing Brief in Opposition to Petition for Writ of

Certiorari on each of the parties as follows:

George F. Christie

Lee F. Christie

POPE, HARDWICKE, CHRISTIE,

HARRELL, SCHELL & KELLY

306 W. 7th Street, Suite 901

Fort Worth, Texas 76102-4995

ATTORNEYS FOR THE CITY OF

ARLINGTON, TEXAS

All parties required to be served have been served.

/s/ CHARLES M. MOORE

Charles M. Moore

ADDENDUM A

4-28-89 FDIC Advisory Opinions 4017

FDIC ADVISORY STAFF OPINIONS

Note: As a public service, and in an effort to help bankers,

lawyers, and others having an interest in federal banking law to

better understand the statutes and regulations administered by

the Federal Deposit Insurance Corporation (including the

FDIC’s rules for determining deposit insurance coverage), the

FDIC’s legal staff has selected for publication a representative

sampling of FDIC staff legal advisory opinions, interpretative

letters, and general informational letters. The FDIC has not

attempted to identify or publish all, or even most, letters on a

particular subject, and there may well be other letters that have

not been selected for publication. Similarly, the FDIC does not

plan to review letters, once they have been published, for the

purpose of flagging or removing those that may have become

outdated, superseded or discredited, or that may have been

revised, modified, revoked or suspended.

The letters express the views and opinions of individual

FDIC staff lawyers and are not binding on the FDIC, its Board of

Directors, or any board member; any representation to the con-

trary is expressly disclaimed. The letters should only be consid-

ered advisory in nature, and the reader bears the responsibility

for relying on them.

The FDIC has deleted from the letters certain personal,

confidential, or identifying information (e.g., names and

addresses of persons and organizations, names of banks and

bank customers, amounts of deposit, financial data, etc.). Dele-

tions are marked with asterisks.

No. 92-653

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1992

CITY OF ARLINGTON, TEXAS,

Petitioner,

V.

FIRST GIBRALT/ R BANK, F.S.B.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit

CERTIFICATE OF SERVICE

I. Charles M. Moore, a member of the Bar of the Supreme Court of the United

States and Counsel of Record for Respondent, First Gibraltar Bank, F.S.B., hereby certify

that on November 11, 1992, pursuant to Supreme Court Rules 29.5 and 33, I served three

(3) copies of the accompanying Brief in Opposition to Petition for a Writ of Certiorari by

placing the Briefs in an envelope, first class postage prepaid, properly addressed to each of

the following:

Sg : i Sea Elie

‘Pi fiat pea il eS DDE LISS

George F. Christie

Lee F. Christie

POPE, HARDWICKE, CHRISTIE,

HARRELL, SCHELL & KELLY

306 W. 7th Street, Suite 901

Fort Worth, Texas 76102-4995

Telephone: (817) 332-3245

Alan Wilson

SIMON, ANISMAN, DOBY, WILSON

& SKILLERN

303 W. 10th Street, Suite 400 :

Fort Worth, Texas 76102

Telephone: (817) 335-6133

Attorneys for the City of Arlington, Texas

All parties required to be served have been served.

heer les Ay. | Neve a

Charles M. Moore,

Counsel of Record for Respondent

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