Federal Deposit Insurance v. First National Bank & Trust Co.

496 F. Supp. 294, 1980 U.S. Dist. LEXIS 17262
CourtDistrict Court, W.D. Oklahoma
DecidedJanuary 4, 1980
DocketNo. CIV-76-0247-D
StatusPublished

This text of 496 F. Supp. 294 (Federal Deposit Insurance v. First National Bank & Trust Co.) is published on Counsel Stack Legal Research, covering District Court, W.D. Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federal Deposit Insurance v. First National Bank & Trust Co., 496 F. Supp. 294, 1980 U.S. Dist. LEXIS 17262 (W.D. Okla. 1980).

Opinion

MEMORANDUM OPINION

DAUGHERTY, Chief Judge.

On August 10, 1973 the initial Plaintiff International City Bank and Trust Company of New Orleans, Louisiana (ICB) made a loan of $1,250,000.00 to Family Loan, Inc. of Springfield, Missouri (FLI). This loan was evidenced by a promissory note and was secured by installment land sales contracts (the collateral) between an FLI subsidiary, Horseshoe Development Corporation (HDC) and a large number of individual purchasers of residential lots in Arkansas and certain guarantees. These contracts were assigned by HDC to FLI and were pledged by FLI to ICB as security for said note. The loan agreement between ICB and FLI provided that the collateral would have a principal value of not less than $2,000,000.00.

ICB and FLI entered into an escrow agreement dated August 10, 1973 which the Defendant First National Bank and Trust Company of Oklahoma City, Oklahoma (FNB) accepted as escrow agent. The relevant portions of the escrow agreement are as follows:

“1. FLI shall deliver to Agent contracts having an unpaid balance of at least Two Million Dollars ($2,000,000). FLI shall deliver to Agent its certification as to the unpaid balance and the genuineness and validity of the contracts delivered to Agent.
2. Agent shall hold said contracts until directed by ICB to release the same; subject, however, to the following instruction number 3.
3. Agent shall deliver all contracts held twice a month to FLI on a trust receipt to be executed by an officer of FLI. FLI shall review the contracts so withdrawn for the purpose of removing contracts paid in full; contracts which are delinquent more than sixty (60) days; contracts traded in; and contracts which have become eligible for FLI’s Westinghouse Credit Corporation financing. FLI shall substitute other genuine and valid contracts for those removed. FLI may also record any contract while held by it on trust receipt. FLI shall promptly return the contracts to Agent certifying again the validity and genuineness of the contracts returned and that the unpaid balance of said contracts is Two Million Dollars ($2,000,000) or more.
4. Agent has no liability or responsibility as to the genuineness or validity of the contracts held or that the unpaid balance of the contracts held equals a minimum of Two Million Dollars ($2,000,000). Agent shall rely on the certification of FLI as to the status of any person signing on behalf of FLI. If FLI removes any contract on the grounds set forth in paragraph 3 above, Agent shall have the right to rely on the representation of FLI that it had the authority to make such substitution.
The following persons are authorized to sign trust receipts and substitute collateral held by Agent in accordance with paragraphs numbered 3 and 4 hereof, [listing four names]”

FLI withdrew and returned the collateral at regular intervals and no problem arose until approximately eight months after the escrow agreement was executed when FLI returned collateral with a value of less than $2,000,000.00. On February 1, 1974, FLI withdrew the collateral in the usual manner. It did not return the same until March 19,1974. When returned the collateral only amounted to $1,756,489.92 and $96,653.59 of that did not conform to the loan agreement [296]*296as it was more than 60 days delinquent and did not qualify as collateral. ICB brought this action to recover from FNB the value of this shortage of collateral as above reflected. During the pendency of this action ICB ceased operating and Federal Deposit Insurance Corporation (FDIC), the liquidator of ICB’s assets, was substituted as Plaintiff herein.

After the aforementioned escrow agreement was entered into ICB made a second loan (on October 16, 1973) to F.LI in the amount of $1,800,000.00. In connection with this additional loan FLI pledged (along with other collateral) the same collateral above mentioned as collateral for the loan of $1,250,000.00. FNB was never advised of this additional loan and cross collateralization. A separate escrow agreement was not entered into with reference to this second loan. Plaintiff not only seeks herein to recover the above mentioned shortage of collateral from FNB as to the 1.25 million dollar loan but also as to the additional 1.8 million dollar loan of which FNB had no knowledge.

In this action the Plaintiff complains of alleged breach of contract (the escrow agreement) by FNB and also of an alleged breach by FNB of its duty to ICB as an escrow agent and as a bailee for hire. In support of its contentions under one or more of the above theories as grounds of recovery herein, the Plaintiff alleges as follows:

1. Defendant did not get trust receipts from FLI when collateral was withdrawn.

2. When collateral computer lists were signed by FLI (in lieu of trust receipts) the signatures were not authorized signatures and in one instance no signature was obtained.

3. Defendant did not obtain certifications from FLI each time the collateral was returned to FNB certifying that the collateral was valid and genuine and that the unpaid balance of the installment land sales contracts constituting the collateral was in the amount of $2,000,000.00 or more.

4. In lieu of certifications Defendant failed to obtain properly signed transmittal letters to FNB when the collateral was returned.

5. Defendant permitted unauthorized persons on four occasions to withdraw the collateral on behalf of FLI.

6. The retention of the collateral by FNB in a clerk’s desk did not rise to the dignity of safekeeping.

7. The clerk of FNB handling this escrow account was not notified of the terms and provisions of the escrow agreement.

8. Defendant did not properly supervise the administration of this escrow account.

9. FNB (as well as ICB) had lent money to FLI (prior to the ICB- loan of $1,250,-000.00 and escrow agreement involved herein) and some part of the FNB loan was repaid by FLI from the proceeds of said ICB $1,250,000.00 loan to FLI.

10. Defendant failed to require the prompt return of collateral by FLI.

11. Defendant did not bill FLI for escrow fees on the prescribed quarterly basis.

12. Defendant failed to notify ICB of the above breaches of the escrow agreement.

The applicable law herein has to do with duties and liabilities under escrow agreements, the duty of an escrow agent and a bailee for hire and the interpretation of contracts (the escrow agreement involved).

28 Am.Jur.2d, Escrow, page 1, et seq., states in pertinent part as follows:

C. DUTIES AND LIABILITIES
§ 16. Generally.
Where a person assumes to and does act as the depositary in escrow, he is absolutely bound by the terms and conditions of the deposit and charged with a strict execution of the duties voluntarily assumed. He is held to strict compliance with the terms of the escrow agreement; and he may not perform any acts with reference to handling the deposit, or its disposal, which are not authorized by the [297]*297contract of deposit. It is not in his province to interpret or construe a contract where he has a duty to perform; he must be guided in his duty by what the contract says.

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Cite This Page — Counsel Stack

Bluebook (online)
496 F. Supp. 294, 1980 U.S. Dist. LEXIS 17262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/federal-deposit-insurance-v-first-national-bank-trust-co-okwd-1980.