Federal Deposit Insurance Corporation, a United States Corporation, Plaintiff v. Bank of Boulder, a Colorado Corporation

865 F.2d 1134, 1988 WL 146956

• Court: Court of Appeals for the Tenth Circuit
• Decided: December 5, 1988
• Docket: 86-1071
• Status: Published

Opinions

I.

McKAY, Circuit Judge.

On June 30, 1982, Bank of Boulder issued a standby letter of credit in the amount of $27,000.00 to Dominion Bank of Denver, a state-chartered commercial bank with deposits insured by the Federal Deposit Insurance Corporation (FDIC). On September 30, 1983, Dominion Bank was declared insolvent and ordered closed by the Colorado State Banking Commissioner pursuant to Colo.Rev.Stat. § 11-5-102 (1973). Receivership of Dominion Bank was tendered to and accepted by FDIC in accordance with Colo.Rev.Stat. § 11-5-105 (1973) and 12 U.S.C. § 1821(e) (1982). Also on that day, after obtaining court approval, FDIC as receiver (FDIC/Receiver) entered into a Purchase and Assumption transaction (P & A) whereby it sold Dominion Bank to an assuming bank. The assuming bank purchased the “acceptable” assets and assumed the liabilities of Dominion Bank; and FDIC in its capacity as a United States insurance corporation (FDIC/Corporation) purchased the remaining “unacceptable” assets.

One of the “unacceptable” assets acquired by FDIC/Corporation was the letter of credit issued by Bank of Boulder. When FDIC/Corporation subsequently attempted to draw on the letter, Bank of Boulder refused to honor the drafts. Thereafter, FDIC/Corporation brought this action in the United States District Court for the District of Colorado to obtain payment on the letter of credit.

Bank of Boulder filed a motion to dismiss, claiming that (1) the transfer of the letter of credit to FDIC/Corporation was invalid and therefore FDIC/Corporation could not bring an action enforcing the terms of the letter and (2) FDIC/Corporation is proceeding essentially as a receiver of a state bank and therefore can bring an action only in state court.¹ The district court granted Bank of Boulder’s motion, determining that the letter of credit, which transferred by operation of law to the state banking commissioner and to FDIC/Receiver, could not be validly transferred to FDIC/Corporation. 622 F.Supp. 288. Specifically, because the letter of credit did not expressly state that it was transferable or assignable, the district court determined that the right to draw on the letter could not be transferred under state law, Colo. Rev.Stat. § 4-5-116(1) (1973), which provides that “the right to draw under a credit can be transferred or assigned only when the credit is expressly designated as transferable or assignable.”² Also, by its terms, the letter of credit was made subject to the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 290 (1974 Revision) (UCP). Article 46 of the UCP provides that a letter of credit can be transferred only if it is expressly designated as transferable. Applying these transfer restrictions, the district court concluded that FDIC/Corporation could not acquire or enforce the letter of credit. Rather, FDIC/Receiver would have to bring suit on the letter and could do so only in state court.

On appeal, FDIC/Corporation contends that the district court erred in enforcing the transfer restrictions. According to FDIC/Corporation, federal statutory and common law governs the transfer of assets to FDIC/Corporation in a P & A and dictates that a failed bank’s otherwise nontransferable or nonassignable assets may be purchased and acquired by FDIC/Corporation.

The issue presented is whether FDIC/Corporation can purchase and acquire the right to draw on a letter of credit from FDIC/Receiver in the course of a P & A transaction, notwithstanding that the letter is nontransferable under state law or by its own terms.

II.

The FDIC is an instrumentality created by Congress to promote stability and restore and maintain confidence in the nation’s banking system. See FDIC v. Philadelphia Gear Corp., 476 U.S. 426, 432-35, 106 S.Ct. 1931, 1935-1936, 90 L.Ed.2d 428 (1986); S.Rep. No. 1269, 81st Cong., 2d Sess. 2-3, reprinted in, 1950 U.S.Code Cong. Serv. 3765, 3765-66 (FDIC’s purpose is to bring depositors sound, effective, and uninterrupted operation of banking system with resulting safety and liquidity of bank deposits). To achieve this objective, FDIC insures bank deposits. One of its primary duties as insurer is to pay depositors when an insured bank fails. Gunter v. Hutcheson, 674 F.2d 862, 865 (11th Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982), overruled on other grounds, Langley v. FDIC, 484 U.S. 86, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987); FDIC v. Godshall, 558 F.2d 220, 221 (4th Cir.1977). In fulfilling this duty, FDIC has various options available to it. One option is to close the failed bank, liquidate its assets, and pay the depositors their insured amounts, covering any shortfall with insurance funds. This procedure, however, has several disadvantages. The sight of a closed bank does not promote stability or confidence in the banking system. “Accounts are frozen, checks are returned unpaid, and a significant disruption of the intricate financial machinery results.” Gunter, 674 F.2d at 865; accord FDIC v. Merchants National Bank, 725 F.2d 634, 637 (11th Cir.) (lost jobs, checks returned unpaid, interruption of banking services in community, erosion in public confidence, adverse impact on affiliated or independent banks), cert. denied, 469 U.S. 829, 105 S.Ct. 114, 83 L.Ed.2d 57 (1984). Additionally, paying the | deposit liabilities of the failed bank may result in a substantial loss to FDIC’s insurance fund; and depositors may have to wait for some time to recover even the insured portion of their deposits. Uninsured funds may be irretrievably lost since uninsured deposit liabilities and debts owed to other creditors are paid on a pro rata basis only after the receivership liquidates all of the assets and covers all costs of liquidation. Merchants National Bank, 725 F.2d at 637.

To avoid the significant problems associated with full-scale liquidation, FDIC whenever feasible employs a P & A transaction, a dramatically effective and cost-efficient way to protect depositors, the banking system, and the resources of the insurance fund. Generally, a P & A involves three entities: the receiver, the assuming bank, and FDIC as insurer. When FDIC is appointed as receiver, it acts simultaneously in two separate capacities: as receiver of the failed bank and as insurer of the deposits. See Gunter, 674 F.2d at 865; FDIC v. Ashley, 585 F.2d 157, 160 (6th Cir.1978); Godshall, 558 F.2d at 222 n. 4, 223; Freeling v. Sebring, 296 F.2d 244, 245 (10th Cir.1961); FDIC v. Hudson, 643 F.Supp. 496, 498 (D.Kan.1986).

In a P & A, the assuming bank purchases the failed bank, assuming deposit and other liabilities, and immediately reopens the failed bank with no interruption in vital banking operations and no loss to depositors. Merchants National Bank, 725 F.2d at 638; Gunter, 674 F.2d at 865. The possibility that depositors will not receive their full deposit is averted since the assuming bank is able to pay deposits upon demand. FDIC v. Wood, 758 F.2d 156, 160-61 (6th Cir.), cert. denied, 474 U.S. 944, 106 S.Ct. 308, 88 L.Ed.2d 286 (1985). The insurance fund is also protected and the risk of loss to FDIC is generally reduced.

A P & A “must be consummated with great speed, usually overnight.” Gunter, 674 F.2d at 865, cited in Langley, 108 S.Ct. at 401; see Wood, 758 F.2d at 160; Gilman v. FDIC, 660 F.2d 688, 694 (6th Cir.1981). Indeed, because speed is the essential predicate and most striking advantage of a P & A, FDIC is able to preserve and realize upon a valuable asset that would otherwise be lost — the going concern value of the failed bank. Also, as mentioned, FDIC is able to avoid interrupting banking services for even one day.

Because time constraints often prohibit an assuming bank from fully evaluating its risks, and so that P & A’s are an attractive deal, the assuming bank need only purchase those assets which are of the highest banking quality, i.e., the “acceptable” assets. Consequently, when the assumed liabilities exceed the value of the assets purchased, FDIC/Receiver agrees to pay the assuming bank the difference in cash, less a credit for the going concern value of the failed bank. The cash is paid from FDIC/Corporation’s insurance fund in consideration for which FDIC/Corporation acquires the assets not transferred to the assuming bank, i.e., the “unacceptable” assets. As a critical part of the P & A, FDIC/Corporation thereby finances the P & A and facilitates its implementation by providing FDIC/Receiver with the cash needed to consummate the P & A. See Langley, 108 S.Ct. at 401 (Court recognizes FDIC/Corporation’s important role in financing P & A’s); Merchants National Bank, 725 F.2d at 637-38.

FDIC/Corporation’s purchase of the failed bank’s “unacceptable assets” is authorized under 12 U.S.C. § 1823(c)(2)(A) (1982) (emphasis added), which provides: “In order to facilitate ... the sale of assets of such insured bank and the assumption of such insured bank’s liabilities by an insured institution ... [FDIC/Corporation] is authorized ... to purchase any such assets [of the failed bank],...” Additionally, 12 U.S.C. § 1823(d) (1982) states that a receiver of a failed state bank is “entitled to offer the assets of [the failed bank] for sale to [FDIC/Corporation]” upon receiving permission from the appropriate state authority. See FDIC v. Abraham, 439 F.Supp. 1150, 1151-52 (E.D.La.1977). Also under section 1823(d), FDIC/Corporation is entitled to “purchase ... any part of the assets of [a failed bank].”

The transfer of FDIC/Receiver’s right, title, and interest in the “unacceptable” assets to FDIC/Corporation for an amount that the assuming bank accepts in lieu of the “unacceptable” assets is a bona fide transfer of assets, not a sham transaction as Bank of Boulder contends. See Gunter, 674 F.2d at 874; Ashley, 585 F.2d at 160-63; Godshall, 558 F.2d at 222-23; see also FDIC v. Braemoor Associates, 686 F.2d 550, 553 (7th Cir.1982) (it is unlikely that a state court which approves transfer would have allowed FDIC/Corporation to acquire assets without conveying value), cert. denied, 461 U.S. 927, 103 S.Ct. 2086, 77 L.Ed.2d 297 (1983). After the transfer, FDIC/Corporation attempts to enforce and liquidate the “unacceptable” assets to recoup its cash outlay and thereby minimize i the loss to the insurance fund. In doing so, FDIC/Corporation may bring actions and prosecute claims in its own right; and, contrary to Bank of Boulder’s contention, FDIC/Corporation properly acts in its corporate capacity, not as a receiver of the failed bank. See Braemoor Associates, 686 F.2d at 552; Ashley, 585 F.2d at 159-64; Godshall, 558 F.2d at 222-23; Hudson, 643 F.Supp. at 497. Indeed, if no recovery is realized on an asset, FDIC/Corporation generally bears the-loss; the failed bank and its depositors, creditors, and stockholders are unaffected. Godshall, 558 F.2d at 223 & n. 7 (recovery flows into FDIC’s corporate treasury, not to receivership estate; excess recovery, if any, does not change characterization of suit).

For a P & A to be financed by FDIC/Corporation and thereby implemented, the P & A must be less costly than liquidating the failed bank.³ Specifically, 12 U.S.C. § 1823(c)(4)(A) (1982) states: “No assistance shall be provided ... in an amount in excess of that amount which [FDIC/Corporation] determines to be reasonably necessary to save the cost of liquidating, including paying the insured accounts of, such insured bank....” This determination must be made by FDIC/Corporation with as much speed as the assuming bank’s decision to purchase the failed bank. Consequently, before deciding whether or not to finance a P & A, FDIC/Corporation must be able to rely on and quickly review the failed bank’s books and records to estimate which assets will be considered “unacceptable” by the assuming bank and which of those assets ultimately will be collectible, thus estimating the cost of the P & A and comparing that to the expected loss from straight liquidation. The cost of a P & A is obviously increased when FDIC/Corporation is not able to acquire or enforce an “unacceptable” asset because it is determined to be nontransferable.

III.

A.

FDIC/Corporation’s first contention is that 12 U.S.C. § 1823(c)(2)(A), which authorizes it to purchase any assets of a failed bank in the course of a P & A, contemplates the unrestricted transferability of assets to FDIC/Corporation in a P & A. Thus, according to FDIC/Corporation, section 1823(c)(2)(A) permits it to purchase and acquire assets that are otherwise nontransferable under state law or by their own terms.

In support of its contention, FDIC/Corporation cites FDIC v. Rectenwall, 97 F.Supp. 273 (N.D.Ind.1951), a case dealing with the insolvency of a state bank. In Rectenwall, the court determined that although an action for personal torts is not assignable under state law, the statutory scheme embodied in the predecessor of section 1823(c)(2)(A) “contemplates the unrestricted transferability of every asset of an insured bank, at least where necessary to accomplish the assumption of its deposit liabilities by another insured bank.” Rectenwall, 97 F.Supp. at 274; see also Chatham Ventures, Inc. v. FDIC, 651 F.2d 355, 358 (5th Cir.1981), cert. denied, 456 U.S. 972, 102 S.Ct. 2234, 72 L.Ed.2d 845 (1982); Hudson, 643 F.Supp. at 498. The court reasoned: “If this were not so, the usefulness of [the P & A] would largely be de-feated_” Rectenwall, 97 F.Supp. at 274. The court then concluded that the phrase “purchase any such assets” adequately expresses an intention to make otherwise nonassignable assets transferable to FDIC/Corporation. Id. at 275; accord FDIC v. Main Hurdman, 655 F.Supp. 259, 267-68 (E.D.Cal.1987) (congressional purpose in creating FDIC would be inhibited by application of state-law strictures).

FSLIC v. Fielding, 309 F.Supp. 1146 (D.Nev.1969), cert. denied, 400 U.S. 1009, 91 S.Ct. 567, 27 L.Ed.2d 621 (1971), also supports FDIC/Corporation’s contention. In Fielding the defendants argued that because a chose in action for fraud could not be assigned under state law, an assignment of that asset to FSLIC was invalid. In determining that the validity of the assignment was not controlled by state law, the court stated: “The [FSLIC’s] right under [a statute similar to section 1823(c)(2)(A) ] to purchase assets of a state-chartered insured savings and loan company requires the application of federal law to determine the transferability of the assets.” Id. at 1151. Concluding that the assignment was valid, the court reasoned that it was reasonably necessary that the powers granted to FSLIC to “purchase assets of an insured institution and otherwise to protect the depositors and its own position as insurer be construed impliedly to support the acceptance of an assignment of assets to secure repayment of loans made.” Id.

Although section 1823(c)(2)(A) has considerable force in our concluding that the letter of credit in this case was validly acquired by FDIC/Corporation, we do not rely on this statutory authorization alone but consider FDIC/Corporation’s argument! regarding the application of federal common law.

B.

FDIC/Corporation’s second contention is that federal common law should be developed to allow it to purchase the nontransferable assets of a failed state bank in order to facilitate P & A’s. To fashion a rule that supercedes conflicting state law,⁴ overrides transfer restrictions, and allows for the transferability of otherwise nontransferable assets, we must conclude that (1) a uniform federal rule allowing FDIC/Corporation to acquire nontransferable assets in P & A’s is needed to effectuate the interests of the federal deposit insurance program; (2) application of transfer restrictions frustrates specific objectives of the federal deposit insurance program; and (3) application of a fpderal rule will not disrupt commercial rélationships predicated on state law. See United States v. Kimbell Foods, Inc., 440 U.S. 715, 728-29, 99 S.Ct. 1448, 1458-59, 59 L.Ed.2d 711 (1979); Wood, 758 F.2d at 159.

First, we are convinced that there is a need for a nationally uniform rule allowing FDIC/Corporation to acquire the nontransferable assets of a failed bank in the course of a P & A. Without such a rule, FDIC/Corporation is subjected to any and all transfer restrictions and varying laws and is faced with an enormous administrative burden in trying to determine whether or not to finance a P & A. Specifically, FDIC/Corporation would have to determine the transferability status of every asset. Because the terms of one asset inevitably differ from the terms of another, and because state laws vary, FDIC/Corporation would not be able to limit its evaluation of the failed bank’s assets to a quick review of the bank’s records. Instead, FDIC/Corporation would be forced to examine in detail the terms of every asset to determine which state law applies, whether the asset itself restricts transferability, and whether the asset refers to other laws that may impact the asset’s transferability. FDIC/Corporation would then have to locate, review, and interpret varying state laws and all laws referenced in the asset to find every possible transfer restriction. To require FDIC/Corporation to do all this under the stringent time constraints of a P & A is asking the impossible. Hence, the P & A method of handling bank failures would be effectively foreclosed. Such a result runs directly counter to the policies behind the creation of the FDIC — promoting stability and confidence in the banking system.

The difficulty with determining, under the time constraints of a P & A, whether or not an asset is transferable is evident in this case. Nothing on the face of the letter of credit indicated that the letter was nontransferable. As mentioned above, under Colorado law, the letter of credit was deemed nontransferable because it did not expressly state otherwise. Also, although the letter was made subject to the UCP, the letter did not state that the UCP limited or even affected transferability. FDIC would have had to review Colorado law, the provisions of the UCP, and all other laws referenced in the letter to conclude that the letter was nontransferable.⁵ Additionally, even if the letter of credit had stated on its face that it was nontransferable, FDIC/Corporation still would have had to study the letter in detail, along with every other asset, to determine whether or not the letter could be validly transferred to it. The need for expeditious implementation of a P & A suggests that the FDIC, in either of its capacities, cannot be expected to examine all the assets to locate all possible transfer restrictions. See Gilman, 660 F.2d at 694-95; FDIC v. Stone, 578 F.Supp. 144, 146 (E.D.Mich.1983) (in rehabilitating a failing bank, FDIC/Corporation “must act quickly and must purchase all of the unacceptable assets of the bank”; FDIC/Corporation cannot be expected to carefully examine the assets before deciding to facilitate the P & A).

A uniform rule permitting FDIC/Corporation to acquire otherwise nontransferable assets in a P & A would eliminate the need for detailed examination of the failed bank’s assets and of varying laws. Cost estimates could be made quickly and with greater accuracy, and P & A’s could thereby be implemented with fewer risks and the necessary speed. Because the P & A is an extremely valuable tool, such a uniform rule furthers the obvious advantages of P & A’s and the interests of the federal deposit insurance program. Indeed, the “free assignability of assets from failing insured banks to the FDIC realistically addresses the frequent need of the FDIC to operate under emergency conditions in rescue situations. A need by the FDIC to determine assignability on an asset-by-asset basis would surely slow a rescue operation down, when dispatch was required.” Main Hurdman, 655 F.Supp. at 268. Moreover, P & A’s would be more cost effective since transfer restrictions would not preclude recovery to the insurance fund.

Second, we are convinced that application of transfer restrictions frustrates and significantly interferes with the specific objectives of the federal deposit insurance program. As indicated above, a cost-effective P & A is clearly preferred to full-scale liquidation and best serves the interests of the public, the insurance fund, and the depositors and other creditors of the failed bank. If transfer restrictions are enforced against FDIC/Corporation, P & A’s become that much more expensive since FDIC/Corporation is not able to collect on the nontransferable assets, reducing recovery to the insurance fund.⁶ In light of the congressional mandate that P & A’s be less costly than liquidation, increasing the cost of the P & A could very well prevent P & A’s in many cases. This adverse consequence results in a potentially enormous cost to the banking system as a whole.

Furthermore, even if a P & A is estimated to be less costly than full-scale liquidation notwithstanding application of transfer restrictions, the fact that FDIC/Corporation is forced to examine every asset in detail and review and analyze varying laws to locate possible restrictions would delay implementation of the P & A, thereby diluting its advantages. Since speed is the essence of P & A’s, FDIC/Corporation may have to forgo an exhaustive examination and enter P & A’s at a substantial risk of loss of recovery to the insurance fund. Or, FDIC/Corporation may be forced to choose not to implement P & A’s because a reasonably accurate cost estimate cannot be made within the limited time demand. “[Djeci-sions concerning the appropriate method of dealing with a bank failure must be made with extraordinary speed.... Subjecting the FDIC to the additional burden of considering the impact of possibly variable state law on the rights involved could significantly impair the FDIC’s ability to choose between the liquidation and [P & A] alternatives in handling a bank failure.” Gunter, 674 F.2d at 869.

Third, we are convinced that application of a federal rule permitting FDIC/Corporation to acquire nontransferable assets in the course of a P & A does not disrupt commercial relationships predicated on state law. The rule would come into effect only after an insured bank has failed. Parties cannot reasonably expect to carry on normal commercial relationships at that point, and it is doubtful that the eventuality of bank failure plays a significant role in the ordinary commercial expectations of the parties. Indeed, the potential damage to parties’ expectations is far outweighed ¡ by the interference with the federal goals' of stability and confidence in the national banking system that would result if FDIC/Corporation is not allowed to acquire nontransferable assets in a P & A.

Moreover, application of the rule in this case simply means that FDIC/Corporation, not FDIC/Receiver, is entitled to enforce the terms of the letter of credit. Although the issuer of a nontransferable letter of credit under normal circumstances is only obligated to honor demands for payment made by the beneficiary specifically named in the letter, the issuer certainly may be required to honor a receiver’s drafts when the beneficiary bank fails and is put into receivership. Since the issuer must go beyond the letter itself to honor the receiver’s drafts or other demands for payment, the mere transfer of the letter to FDIC/Corporation as a part of a P & A, requiring the issuer to pay FDIC/Corporation rather than the receiver, does not place a substantial burden on the issuer. Bank of Boulder contends, however, that the issuer is prejudiced when it must look beyond the letter itself to assess the validity and propriety of FDIC/Corporation’s acquisition of the letter. We do not agree that the issuer is put in a difficult situation, especially in view of the fact that the transfer of the “unacceptable” assets is approved by the state receivership court and is statutorily authorized, and relevant documents are a matter of public record.

Bank of Boulder also contends that when FDIC is appointed receiver of a failed state bank, it can skirt the jurisdictional limitation in 12 U.S.C. § 1819 (Fourth) by transferring assets to itself in its corporate capacity. Our holding, however, is limited to the assets that FDIC/Corporation acquires in the course of financing a P & A. Allowing FDIC to come into federal court in that instance, in view of the overriding benefits of a P & A, does not conflict with the limited jurisdictional exception applicable to suits involving FDIC in its capacity as receiver of a state bank.

As a final point, if the transfer restrictions are recognized in this case, we are persuaded that Bank of Boulder will get an unjustified windfall. Although FDIC/Corporation financed the P & A of Dominion Bank, it will not be able to collect on the letter of credit simply because of the insolvency of Dominion Bank and the nature of the statutorily authorized transaction under which Dominion Bank’s assets were liquidated. This loss of recovery to the insurance fund is detrimental to the federal deposit insurance program, frustrates the public policies behind the scheme of national banking insurance, and cannot be justified.

We conclude that a rule allowing FDIC/Corporation to purchase and acquire otherwise nontransferable assets in a P & A is appropriate and necessary to give effect to FDIC/Corporation’s statutory authorization to finance and facilitate the implementation of P & A’s. FDIC/Corporation is properly proceeding in its corporate capacity, not as a receiver, and can enforce the letter of credit in its own right and bring suit against Bank of Boulder in federal court pursuant to 12 U.S.C. § 1819 (Fourth). The district court erred in enforcing the transfer restrictions against FDIC/Corporation. Accordingly, the district court’s order dismissing this action is REVERSED.

1 . When FDIC brings suit in its capacity as receiver of a state bank, asserting the rights of the state bank and its depositors, creditors, or stockholders, FDIC is required to bring suit in state court. This jurisdictional limitation is found in 12 U.S.C. § 1819 (Fourth) (1982), which states in pertinent part: “[A]ny such suit to which the [FDIC] is a party in its capacity as receiver of a State bank and which involves only the rights or obligations of depositors, creditors, stockholders, and such State bank under State law shall not be deemed to arise under the laws of the United States.”

2 . Although section 4-5-116(1) restricts the transferability of the right to draw on the letter of credit, we . note that Colo.Rev.Stat. § 4-5-116(2) (1973) allows the beneficiary (and, we believe, the receiver who steps into the beneficiary’s shoes) to assign its right to the proceeds under the letter. Moreover, as confirmed in Colo.Rev.Stat. § 4-5-116(3) (1973), a beneficiary (or its receiver) is entitled to transfer or negotiate drafts or demands properly drawn on the letter. We do not decide, inasmuch as the parties did not address the issues on appeal, whether or not FDIC/Receiver assigned its right to the proceeds under the letter to FDIC/Corporation or whether FDIC/Receiver transferred or negotiated drafts or demands drawn on the letter to FDIC/Corporation.

3 . A P & A may also be approved in the extraordinary case when FDIC/Corporation determines that the continued operation of an insured bank is "essential to provide adequate banking services in [the] community.” 12 U.S.C. § 1823(c)(4)(A) (1982); see Wood, 758 F.2d at 161.

4 . We start from the premise that the transferability of the letter of credit in this case is restricted if Colorado law is applied, as the district court determined. We note, however, that although Colorado law places transfer restrictions on letters of credit under normal commercial situations, an argument could be made that Colorado law provides for the transferability of otherwise nontransferable assets to FDIC/Corporation once a state bank fails. In this regard, Colo.Rev.Stat. § 11-5-105(4) (1973) specifies that if FDIC accepts appointment as liquidator of a failed state bank, FDIC/Receiver "has all the powers and privileges provided by the laws of [Colorado] with respect to liquidation of a banking institution, its depositors, and other creditors.” Among the statutory provisions granting powers and privileges to a receiver of a state bank, Colo.Rev.Stat. § 11-5-106(1) (1973) provides that "all or any part of the assets of [the failed bank] may be sold to [FDIC/Corporation].” Because section 11-5-106(1) does not expressly state that even the nontransferable assets can be sold to FDIC/Corporation, and because the district court and the parties did not rely on or refer to section 11-5-106(1), we do not make any determinations with regard to the application of section 11-5-106(1) to the specific circumstances of this case.

5 . In view of our holding in this case, we need not decide whether the restrictions under state law or the UCP were disclosed, apparent, or known to FDIC at the time of the P & A transaction, or whether FDIC should have known about the restrictions or been familiar with the laws making the letter nontransferable.

6 . That FDIC/Receiver could retain and liquidate nontransferable assets and accordingly reduce the amount that FDIC/Corporation would have to pay in a P & A defeats the purpose behind FDIC/Corporation's participation in P & A’s. FDIC/Receiver must obtain sufficient funds from FDIC/Corporation in exchange for the assets that are not purchased by the assuming bank since the acquired funds are turned over to the assuming bank as part of the P & A agreement. Without sufficient funds, the P & A cannot be adequately financed. Likewise, that FDIC/Receiver — without reducing the cost of the P & A to FDIC/Corporation and thereby obtaining sufficient funds to finance the P & A — could retain or later reacquire the nontransferable assets and subsequently liquidate those assets defeats the advantages and structure of P & A’s. For example, FDIC/Corporation must have the right to enforce the "unacceptable” assets in its own right so that payments are made for the benefit of the insurance fund, not the receivership estate. Further, one of the resulting advantages of a P & A is eliminating the need for constant court supervision that is necessary for a receiver to act. See Ashley, 585 F.2d at 163. Also, it would place a burden on the receivership estate and defeat the advantages of P & A’s if, after a P & A has been consummated, FDIC/Receiver must attempt to enforce the terms of all nontransferable assets.