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August 10, 1992

LB CREDIT CORPORATION, a California Corporation, Plaintiff, -vs- RESOLUTION TRUST CORPORATION as Receiver for Concordia Federal Bank for Savings, Defendant.


The opinion of the court was delivered by: GEORGE W. LINDBERG


 On June 10, 1987, Concordia Federal Bark for Savings ("Concordia") and Unisys Financial Corporation ("Unisys") entered into a lease agreement pursuant to which Unisys leased data processing equipment to Concordia. Concordia pledged certain securities as security for performance of its obligations under the lease. Unisys subsequently sold and assigned its rights under the lease to Wells Fargo Leasing Company ("WFLC"), which changed its name to LB Credit Corporation ("LB Credit").

 On May 29, 1990, the Office of Thrift Supervision declared Concordia insolvent and appointed the Resolution Trust Corporation ("RTC") as receiver. On August 23, 1990, the RTC repudiated Concordia's lease with LB Credit pursuant to 12 USC § 1821(e)(1) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Section 1821(e)(1) of FIRREA permits a receiver to repudiate contracts or leases which it finds burdensome or a hinderance to the administration of the RTC's affairs. At the time of the repudiation, all rental payments under the lease were current.

 On October 11, 1990, LB Credit took possession of the equipment covered by the lease and enforced its security interest in the equipment by a private sale pursuant to section 9-504 of the Uniform Commercial Code. LB Credit subsequently filed a claim with Concordia for the future rental payments owed under the lease less the money received from the private sale. On May 13, 1991, the RTC disallowed LB Credit's claim. LB Credit subsequently brought a two-count complaint seeking damages in excess of $ 591,165.06 for repudiation of the lease agreement and a declaration that the pledged securities would be available to satisfy Concordia's outstanding obligations to LB Credit.

 To prevail on a motion for summary judgment, the movant must show that no genuine issue of material fact is in dispute and that it is entitled to summary judgment as a matter of law. Celotex Corp. v Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Where genuine issues of material fact exist, summary judgment should not be granted. Anderson v Liberty Lobby, Inc, 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Because the parties are in agreement as to the essential facts of this case, *fn1" the court must decide whether defendant is entitled to judgment as a matter of law.

 This case involves the interpretation of section 1821(e) of FIRREA which permits the RTC to repudiate leases by banks in receivership which it finds burdensome or whose repudiation will promote the orderly administration of the bank's affairs. 12 USC § 1821(e)(1). According to section 1821(e)(4), a receiver that repudiates a lease is neither liable for any damages for its repudiation nor liable for damages under any acceleration clause in the lease; the receiver is liable only for unpaid lease payments owed prior to the date of repudiation. *fn2" 12 USC § 1821(e)(4)(A) and (B). Because the rental payments under the lease were current, defendant argues that LB Credit has suffered no compensable damages and has no claim to the pledged securities. In response, plaintiff contends that section 1821(e)(11) *fn3" precludes the RTC from avoiding LB Credit's perfected security interest in the pledged securities.

 When interpreting a statute, the court should look to "the provisions of the whole law and to its object and policy", rather than emphasizing a single clause. Offshore Logistics, Inc. v Tallentire, 477 U.S. 207, 220-21, 91 L. Ed. 2d 174, 106 S. Ct. 2485 (1986), quoting Mastro Plastics Corp. v NLRB, 350 U.S. 270, 285, 100 L. Ed. 309, 76 S. Ct. 349 (1956). Judge Grady of this court has interpreted the statutory provisions in question in a similar case involving many of the same parties. First National Bank v Unisys Finance Corp., 779 F. Supp. 85 (ND Ill 1991). In First National Bank, Unisys brought an action against the RTC to recover future payments from a repudiated lease agreement with Concordia. Id at 85-86. Unisys argued that it held a perfected security interest in the pledged securities which could not be defeated by the RTC's repudiation of the lease. Judge Grady held that FIRREA allows the receiver to repudiate secured leases and preclude payment of future damages from the security. Judge Grady reasoned as follows:

 "The securities were pledged 'to secure the payment and performance of all of [Concordia's] obligations under the lease. . . .' Complaint (91 C 1884), Exhibit "B". When RTC repudiated the lease on August 23, 1990, it had performed all of its lease obligations up to that point. Had RTC been in default at the time it exercised its power to disaffirm the lease, the security agreement would have provided for payment of any arrearage. As it stands, however, there was no default to secure. Plaintiff's interpretation of § 1821(e)(11) would permit the recovery of future rent payments in contravention of the express limitation of damages in § 1821(e)(4)(B).

 First National Bank, 779 F. Supp. at 87 . This court agrees with Judge Grady's reasoning. To adopt LB Credit's interpretation of section 1821(e)(11) and permit recovery of the pledged collateral to satisfy future rent payments would nullify section 1821(e)(4)(B), which limits damages to rent payments accrued prior to repudiation and prohibits recovery of damages under any acceleration clause or other penalty provision of the lease. Section 1821(e)(11) protects a creditor's security interest, but only to the extent a creditor has a claim under FIRREA. Plaintiff's interpretation of section 1821(e)(11) ignores the policy behind the Act and "the unprecedented costs of dealing with the hundreds of insolvent thrifts and the orderly disposition of the assets of these failed institutions." H Rep No 101-54(I), 101st Cong, 1st Sess 308 (1989).

 Plaintiff argues that First National Bank does not control this case because the decision failed to address the constitutional issues arising from retroactive application of FIRREA. Plaintiff argues that retroactive application of FIRREA constitutes a taking of private property for public use without just compensation and due process in violation of the Fifth Amendment. In support of this argument, plaintiff attempts to analogize this case to decisions which held that retroactive application of the Bankruptcy Code violated the Fifth Amendment. See Louisville Joint Stock Land Bank v Radford, 295 U.S. 555, 79 L. Ed. 1593, 55 S. Ct. 854 (1935), rehearing denied 296 U.S. 661, 80 L. Ed. 471, 56 S. Ct. 82 (1936); United States v Security Industrial Bank, 459 U.S. 70, 74 L. Ed. 2d 235, 103 S. Ct. 407 (1982), affirming Rodrock v Security Industrial Bank, 642 F.2d 1193 (10th Cir 1981).

 The court finds these arguments unpersuasive. The Seventh Circuit and other circuits have consistently applied FIRREA retroactively. See Greenberg v Comptroller of the Currency, 938 F.2d 8, 11 (2nd Cir 1991); Federal Deposit Ins. Corp. v Wright, 942 F.2d 1089, 1095 (7th Cir 1991); North Arkansas Medical Center v Barrett, 962 F.2d 780 (8th Cir 1992). The Supreme Court established a presumption of retroactivity for legislative enactments and instructed courts "to apply the law in effect at the time it renders its decision, unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary." Bradley v Richmond School Board, 416 U.S. 696, 711 94 S. Ct. 2006, 2016, 40 L. Ed. 2d 476 (1974). The court adopts the Wright court's retroactivity analysis in this case. In Wright, the Seventh Circuit determined that a "retroactive application of FIRREA would further congressional intent." The Seventh Circuit found nothing in the legislative history or in the statute itself to indicate that FIRREA should not be applied retroactively. Id In fact, the court determined that a retroactive application would not result in manifest injustice but assist in "dealing with the mounting bank failures in this country." Id at 1096.

 The bankruptcy cases cited by LB Credit to show that the RTC's repudiation of the lease was an unconstitutional taking are distinguishable. These cases involved government interference with security interests for money that had already been loaned. In Louisville Joint Stock Land Bank, supra, the bank obtained a mortgage to secure repayment of a loan. The Supreme Court determined that retroactive application of the bankruptcy statute, which would have taken away the bank's mortgage rights, resulted in an unconstitutional taking of property. In Security Industrial Bank, supra, creditors had loaned a debtor money and had obtained and perfected a lien on the debtor's household furnishings and appliances. The Supreme Court affirmed the Tenth Circuit's holding that retroactive application of the Bankruptcy Reform Act of 1978, which invalidated such liens acquired prior to the enactment date, violated the takings clause of the Fifth Amendment. In the present case, the RTC was not in debt to LB Credit. No rent was in arrearage when the RTC repudiated the lease. Had any back rent been owed to LB Credit prior to the lease's repudiation, plaintiff would have had a claim under FIRREA, which could have been satisfied from the pledged securities. The RTC has not interfered with LB Credit's interest in the pledged securities. It is the claim which defines the extent of the security interest; because LB Credit has no claim, LB Credit has no interest. When the RTC repudiated the lease, LB Credit lost its right to future payments under the lease. LB Credit has presented no authority that the loss of future profits constitutes an unconstitutional taking. The Supreme Court has held that the disruption of private expectations does not constitute a taking. Penn Centr. Transp. Co. v New York City, 438 U.S. 104, 131, 57 L. Ed. 2d 631, 98 S. Ct. 2646 (1978); Omnia Commercial Co. v United States, 261 U.S. 502, 67 L. Ed. 773, 43 S. Ct. ...

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