United States District Court, Central District of Illinois, Springfield Division
December 15, 1988
FEDERAL DEPOSIT INSURANCE CORPORATION, PLAINTIFF,
RUSSELL GREENWOOD, J. ELLIS HICKS, JOHN L. SPINNER, MYREL L. WHITMYER, AND WILLIAM A. YOUNG, DEFENDANTS.
The opinion of the court was delivered by: Richard Mills, District Judge:
Did the FDIC's cause of action accrue when it first acquired
the assets of the failed Coffeen National Bank or when
Defendants committed their allegedly negligent acts?
The latter: when the cause first could have been sued on.
On or about July 12, 1984, the Office of the Comptroller of
the Currency ("OCC") ordered that the Coffeen National Bank
(the "bank") be closed. The OCC took possession of the bank's
assets and tendered to the Federal Deposit Insurance
Corporation ("FDIC") the appointment as receiver of the bank.
Thereafter, the FDIC in its corporate capacity purchased the
assets of the bank from the FDIC in its capacity as receiver.
Included in the assets were all claims that the bank had
against its directors, officers, and employees for alleged
negligent performance or nonperformance of their duties.
Defendants were directors of the bank at relevant times herein.
Defendants allege as an affirmative defense that the FDIC's
action is time barred. Defendants allege that most of the
conduct on which Plaintiff's action is based occurred prior to
1979 and all of the acts occurred prior to August 1982.
Plaintiff filed its complaint July 10, 1987. Defendants moved
for partial summary judgment on October 17, 1988, and that
motion is now before the Court.
Under Fed.R.Civ.P. 56(c), summary judgment should be entered
"if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Unquestionably, in determining whether a genuine issue of
material fact exists, the evidence is to be taken in the light
most favorable to the moving party. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d
142 (1970). Nevertheless, the rule is also well established
that the mere existence of some factual dispute will not
frustrate an otherwise proper summary judgment. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509,
91 L.Ed.2d 202 (1986). Thus, the "preliminary question for the
judge [is] not whether there is literally no evidence, but
whether there is any upon which a jury could properly proceed
to find a verdict for the party producing it upon whom the onus
of proof is imposed." Id. at 251, 106 S.Ct. at 251 (quoting
Improvement Co. v. Munson, 81 U.S., (14 Wall.) 442, 448, 20
L.Ed. 867 (1872)); see also Celotex Corp. v. Catrett,
477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Applying
this standard, the Court now turns to the case at bar.
Pursuant to 28 U.S.C. § 2415:
(a) . . . Every action for money damages brought
by the United States or an officer
or agency thereof which is founded upon any
contract expressed or implied in law or fact,
shall be barred unless the complaint is filed
within six years after the right of action
accrues. . . .
(b) . . . Every action for money damages brought
by the United States or an officer or agency
thereof which is founded upon a tort shall be
barred unless the complaint is filed within three
years after the right of action first
accrues. . . .
Thus, whether Plaintiff's cause of action sounds in tort or
contract, the relevant time period for determining when an
untolled statute of limitations begins to run is the date on
which the right of action first accrued.
The parties cite no, and the Court was unable to discover
any, Seventh Circuit authority interpreting the language of
§ 2415. The case law appears to be split.
United States v. Cardinal, 452 F. Supp. 542 (D.Vt. 1978),
involved a promissory note assigned to the Federal Housing
Authority by a prior holder. The note became fully due and
payable on March 11, 1971, but was not assigned to the FHA
until April 1, 1971, and the FHA did not sue upon the note
until November 17, 1976. The defendant asserted that the cause
of action accrued when he defaulted on the note while the
Government asserted that the cause of action accrued when the
Government acquired the note. The district court found both
positions to be incorrect and held that the cause of action
first could have been sued upon, and thus accrued, when the
prior holder invoked an acceleration clause and demanded
payment. This occurred approximately one month before the FHA
acquired the note. The Court considered the legislative history
of § 2415 and found that holding that the cause of action
accrued when it first could have been sued upon, whether or not
the Government had acquired it at that time, better effectuates
the reasons behind § 2415. These reasons include making the
position of the Government more nearly equal to that of private
litigants, encouraging early trials so that necessary documents
and witnesses are available and memories are still fresh,
reducing the costs of keeping records of and collecting on
Government claims, encouraging agencies to refer their claims
promptly to the Department of Justice for collection, avoiding
judicial hostility towards stale claims and minimizing
collection problems arising with respect to defendants who have
died, disappeared or gone bankrupt. United States v. Cardinal,
452 F. Supp. at 545. See also S.Rep. No. 1328, 89th Cong., 2d
Sess., reprinted in U.S.Code Cong. & Admin.News, pp. 2502, 2513
Cardinal has been followed by courts in other jurisdictions.
In Federal Deposit Insurance Corp. v. Former Officers &
Directors of Metropolitan Bank, 705 F. Supp. 505 (D.Or. 1987),
the FDIC asserted claims against former bank officers and
directors for alleged negligence in the making of loans. The
court, in holding that the claims accrued when they could have
first been sued upon, stated that such a holding "eliminates
uncertainty about how long defendants may be subject to suit
and makes the government more nearly equal to private
litigants." Id. at slip op. 12. In a similar case, the same
court stated that "[t]here is no basis for favoring the
government by holding that claims accrue only when they are
assigned to the government, as opposed to when the original
holder of the claims could have sued." Federal Deposit
Insurance Corp. v. Compton, No. 87-6413-E, slip op. at 9, ___
F. Supp. ___ (D.Or. Apr. 19, 1988). See FDIC v. Petersen,
565 F. Supp. 1007 (D.Colo. 1983) (citing United States v. Cardinal,
452 F. Supp. 542 (D.Vt. 1978)), aff'd, 770 F.2d 141 (10th Cir.
1985); FDIC v. Galloway, 856 F.2d 112 (10th Cir. 1988). See
also United States v. Sellers, 487 F.2d 1268 (5th Cir. 1973)
(cause of action on note assigned to Small Business Association
accrued when original maker defaulted); United States v. Vicon
Construction Co., 575 F. Supp. 1578 (S.D.N.Y. 1983) (cause of
action based on payments made to landowners under flood
insurance program accrued at time Defendant's negligence
allegedly caused the flooding).
Not every court to have considered the question, however, has
followed the reasoning
in Cardinal. In FDIC v. Cardona, 723 F.2d 132 (1st Cir. 1983),
the court stated in dicta that the Plaintiff's cause of action
accrued when the FDIC in its corporate capacity purchased the
assets of a failed bank from the FDIC in its capacity as
receiver. Similarly, in FDIC v. Hinkson, 848 F.2d 432 (3d Cir.
1988), the court held the statute of limitations for a cause of
action upon a promissory note began to run when the FDIC
received an assignment of the note. See also FDIC v. Buttram,
590 F. Supp. 251 (N.D.Ala. 1984) (statute of limitations did not
begin to run until FDIC's appointment as receiver because until
that time FDIC had no authority to sue); FDIC v. Berry,
659 F. Supp. 1475 (E.D.Tenn. 1987) (cause of action based on
director negligence did not accrue until assignment to FDIC);
FDIC v. Hudson, 673 F. Supp. 1039 (D.Kan. 1987) (cause of action
based on director negligence did not accrue until FDIC accepted
appointment as receiver).
We believe that the Cardinal rationale is the better view.
This Court holds that the FDIC's cause of action accrued when
the cause first could have been sued upon, whether or not the
FDIC had acquired it at that time. We find that interpreting
the statute in this manner better effectuates the purposes of §
2415. Plaintiff asserts that even interpreting the statute in
this manner, the cause could not accrue until assignment to the
FDIC because until that time Plaintiff had no authority to sue.
This, however, begs the question. Congress could have provided
that the United States or an agency thereof has six years from
acquiring a claim sounding in contract in which to sue and
three years from acquiring a claim sounding in tort. This they
did not do. Thus, the Court believes that the general rule is
applicable. A cause of action accrues when it first could be
sued upon by a plaintiff.
The Court has jurisdiction over this matter pursuant to
12 U.S.C. § 1819 Fourth. That statute provides that "[a]ll suits
of a civil nature at common law or in equity to which the [FDIC
in its corporate capacity] shall be a party shall be deemed to
arise under the laws of the United States and the United States
district courts shall have original jurisdiction thereof." Id.
This language expressly provides for the application of federal
as opposed to state law. D'Oench, Duhme & Co. v. FDIC,
315 U.S. 447, 455-56, 62 S.Ct. 676, 678-79, 86 L.Ed. 956 (1942). The
parties have not brought to the Court's attention any federal
court opinion on the issue of when a party can first sue upon a
cause of action based on a director's or officer's negligent
performance of his duties. Under Illinois law, however, where a
tort arises out of a breach of a contractual duty, the period
of limitations begins to run at the time the contract is
breached. Rock Island Bank v. Aetna Casualty & Surety Co.,
692 F.2d 1100 (7th Cir. 1982). Thus, were this case decided under
state law, the statute of limitations would begin to run at the
time of Defendants' alleged misconduct. The Court will assume
that the federal rule is the same.
While the Court has found that Plaintiff's cause of action
accrued when it first could have been sued upon whether or not
Plaintiff had acquired it at that time, the Court expresses no
opinion as to whether any time period exists in which the
statute of limitations was tolled. While both sides raise this
issue in their briefs, neither side has sought summary judgment
on this issue.
Ergo, for the reasons discussed above, the motion for partial
summary judgment filed on behalf of Defendants is ALLOWED.
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