FDIC v. Davis

• Court: Court of Appeals for the Fifth Circuit
• Decided: June 6, 2002
• Docket: 01-40553
• Status: Unpublished

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 01-40553

FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Southwest Bank, Jennings, Louisiana; SOUTHWEST BANK,

Plaintiffs - Appellees,

versus

VIRGINIA DAVIS

Defendant - Appellant.

Appeal from the United States District Court For the Eastern District of Texas (No. 3:00-CV-32)

June 5, 2002

Before KING, Chief Judge, and PARKER and CLEMENT, Circuit Judges.

PER CURIAM:*

Defendant-Appellant Virginia Davis appeals the district

court’s granting summary judgment for the FDIC. For the

following reasons, we AFFIRM.

* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. This matter arises from Davis’s default on a loan guaranteed

by the Farmers Home Administration, now known as the Farm Service

Agency or FSA. Southwest Bank of Jennings, Louisiana (“the

bank”), acted as the lender, for which it received a 90%

guarantee from the FSA. Pursuant to the guarantee, FSA must

repurchase the guaranteed portion of the loan in the event of

Davis’s default if the bank or a holder of the note so requests.

In any event, the bank remains responsible for servicing the

loan.

The bank filed suit in state court following Davis’s

default. Davis had secured the note using farm equipment and

livestock as collateral. The state court enjoined Davis from

divesting any of it. Thereafter, FSA repurchased the guaranteed

portion of Davis’s loan, and after that, the bank was declared

insolvent. The Federal Deposit Insurance Corporation (“FDIC”)

was substituted for the bank as its receiver and removed the

action to federal court pursuant to 12 U.S.C. § 1819(b)(2)(A).

It then moved for summary judgment, which the district court

granted. The court awarded the FDIC the unpaid principal on the

note, $227,369.46, plus $75,358.64 in interest.

On appeal, Davis, now proceeding pro se, again argues that

the FDIC cannot be the holder or owner of the note because it was

repurchased by the FSA before the FDIC was substituted as the

bank’s receiver. In other cases, we have concluded that

uncertainty regarding a receiver’s status as holder or owner

-2- supports the debtor’s claim that it has a “legitimate fear” of

being subjected to double recovery. For example, in FDIC v.

Selaiden Builders, Inc., 973 F.2d 1249 (5th Cir. 1992), the FDIC

came into possession of a note apparently endorsed to another.

There, we held that the FDIC’s failure to offer evidence tending

to negate any third-party claim to the note in question created

an issue of fact regarding the FDIC’s rightful status. Id. at

1255. In another case, FDIC v. McCrary, 977 F.2d 192 (5th Cir.

1993), the evidence showed that the FDIC, acting as receiver, had

sold unspecified assets in an insolvent bank to a third party.

We there held that uncertainty regarding which assets the FDIC

divested itself of created a question of material fact whether

the FDIC was in fact the holder or owner of the note it was suing

on. Id. at 195.

In this case, there is no evidence that the FDIC sold any of

Southwest Bank’s assets or that another party was the endorsee to

Davis’s note. But more importantly, the FSA’s repurchasing the

guaranteed portion of the note is not an event that affects

Davis’s obligations to the bank, and now to the FDIC. As we

noted at the outset, Davis must continue paying the bank (or its

successor) whether the FSA reacquires the guaranteed portion of

Davis’s loan or not. Following repurchase, the bank retains the

note, as well as all other documentation evidencing the loan, the

note remains payable to the bank, and the bank continues to

service and collect on the loan. In this way, the FSA does not

-3- attain the status of a holder or owner of Davis’s note. A third-

party to a note cannot recover under it unless the same at least

has possession of it or the note has been endorsed over to him.

As neither of these conditions are met here--nor will they ever

be--Davis has not demonstrated a legitimate fear that she might

be subjected to double recovery, at least not as between the FSA

and FDIC. We therefore conclude that summary judgment for the

FDIC was proper.

AFFIRMED.

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