Federal Deposit Insurance Corporation, As Receiver of Franklin National Bank v. Jean M. Grella, Jean M. Grella, 553 F.2d 258, 2d Cir. (1977)
Federal Deposit Insurance Corporation, As Receiver of Franklin National Bank v. Jean M. Grella, Jean M. Grella, 553 F.2d 258, 2d Cir. (1977)
Federal Deposit Insurance Corporation, As Receiver of Franklin National Bank v. Jean M. Grella, Jean M. Grella, 553 F.2d 258, 2d Cir. (1977)
2d 258
the jurisdictional issues of whether FDIC has standing to sue upon the
facts of this case.
The facts are not in dispute. On April 4, 1961, Grella as fee owner of a
plot of land in Mineola, New York, leased the premises ("ground lease")
to Franklin for a term of twenty years with four, twenty-year options to
renew, at an annual rental of $21,000. The exercise of two of the renewal
options has extended the present term to the year 2021. The ground lease
granted Franklin the right to assign or sublet the premises without Grella's
consent with Franklin remaining liable for the rent and all other
obligations. Paragraph 10 of the ground lease provides:
"If the Tenant * * * shall file or there shall be filed against the Tenant a
petition in bankruptcy or arrangement, or Tenant be adjudicated a
bankrupt or make an assignment for the benefit of creditors or take
advantage of any insolvency act, the Landlord may, if the Landlord so
elects, at any time thereafter terminate this lease and the term hereof, on
giving to the Tenant five days notice in writing of the Landlord's intention
so to do * * *."
In 1962 Franklin subleased the premises to Lever and as a result of several
subsequent transactions Lever became the assignee of Franklin's interest in
the ground lease. Thereafter, Lever constructed an office building on the
site, with a present value in excess of $2 million, and Franklin leased
space until 1981 in the building for use as a branch banking office
("branch lease"). Since 1965 Lever has paid the rent on the ground lease,
and there is no claim by Grella of default for non-payment.
On October 8, 1974, the Comptroller of the Currency of the United States
declared Franklin insolvent and as required by statute appointed FDIC as
its receiver pursuant to 12 U.S.C. 191 & 1821(c). On the same date
European-American Bank & Trust Co. ("EAB") entered into a Purchase
and Assumption Agreement with FDIC to purchase certain of Franklin's
assets and assume certain of its liabilities, see In Re Franklin Nat'l Bank,
381 F.Supp. 1390 (E.D.N.Y.1974); and since then EAB has occupied the
branch office covered by the branch lease. Accordingly, there was no
interruption of banking services at Franklin's office following the
declaration of insolvency by the Comptroller.
Asserting that the declaration of insolvency by the Comptroller constituted
a default under paragraph 10 of the lease, Grella on February 3, 1975
notified Franklin as well as others that the ground lease would terminate
on February 11, 1975. On February 21, 1975, FDIC as receiver of
plaintiff has standing to sue. This is a concept which is "among the most
amorphous in the entire domain of public law."3 Standing depends upon
whether the plaintiff has " 'alleged such a personal stake in the outcome of
the controversy' to warrant (its) invocation of federal court jurisdiction
and to justify exercise of the court's remedial powers on (its) behalf."
Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2205, 45 L.Ed.2d
343 (1975), citing Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7
L.Ed.2d 663 (1962). The Supreme Court in Warth further elaborated:
"Essentially, the standing question in such cases is whether the
constitutional or statutory provision on which the claim rests properly can
be understood as granting persons in the plaintiff's position a right to
judicial relief." 422 U.S. at 500, 95 S.Ct. at 2206. While standing does not
depend on the merits of the party's contention that certain conduct is
illegal, standing does require an injury to the party arising out of a
violation of a constitutional or statutory provision or other legal right.
Linda R. S. v. Richard D., 410 U.S. 614, 617 n.3, 93 S.Ct. 1146, 35
L.Ed.2d 536 (1973); Sierra Club v. Morton, 405 U.S. 727, 732 & n.3, 92
S.Ct. 1361, 31 L.Ed.2d 636 (1972); Flast v. Cohen, 392 U.S. 83, 99, 88
S.Ct. 1942, 20 L.Ed.2d 947 (1969). The question is thus posed whether
FDIC will sustain an injury sufficient to give it standing in the event
Grella is successful in terminating the lease.
Under the relevant provisions of the National Bank Act (12 U.S.C.
191-200) and the Federal Deposit Insurance Act (12 U.S.C. 1811-32)
Congress has established a complete system for the administration and
liquidation of insolvent national banks for the benefit of creditors with the
receiver acting as the administrative agent of the Comptroller of the
Currency. Cook Co. Nat'l Bank v. United States, 107 U.S. 445, 448, 25
S.Ct. 561, 27 L.Ed. 537 (1883); In Re Liquidation of American City Bank
& Trust Co., N. A., 402 F.Supp. 1229, 1231 (E.D.Wis.1975); District of
Columbia v. Wardell, 32 F.Supp. 769, 771-72 (D.D.C.1940), rev'd on
other grounds, 74 U.S.App.D.C. 184, 122 F.2d 202, cert. denied, 314 U.S.
673, 62 S.Ct. 137, 86 L.Ed. 539 (1941). The Acts constitute a complete
plan for the establishment and government of national banks, Texas &
Pac. Ry. v. Pottorff, 291 U.S. 245, 253, 54 S.Ct. 416, 78 L.Ed. 777
(1934); Dinan v. First Nat'l Bank of Detroit, 117 F.2d 459, 461 (6th Cir.
1941), cert. dismissed, 315 U.S. 824, 62 S.Ct. 622, 86 L.Ed. 1220 (1942),
under which the receiver has no more powers than those provided by the
statute. 12 U.S.C. 1821(c) & (d); 12 C.F.R. 4.10(a)(1) & 306.2
(1976).FDIC's Interest in the Ground Lease
Numerous authorities have held that the receiver of an insolvent national
bank appointed by the Comptroller is not an officer of the court but is an
however, the immediate threat to FDIC's occupancy does not come from
Lever who joins FDIC in maintaining that the ground lease is in full force
and effect. The real threat to FDIC's occupancy under the branch lease is
Grella's potential ability to eliminate the same by cancellation if she is
successful under the ground lease. To offset this possibility Grella has
tendered to FDIC a non-disturbance agreement as to the branch lease
which is the equivalent to a covenant of quiet enjoyment in the event
Grella is successful in terminating the ground lease.
This offer was promptly rejected. The reason given for the rejection was
that Grella alone could not guarantee FDIC's continued occupancy since
paragraph 11 of the branch lease required approval by Lever of any
assignment of the branch lease. This seems to us to be circular and selfdefeating reasoning since the non-disturbance agreement is predicated
upon Grella's success in terminating the ground lease, in which event
Lever's interest in the branch lease would be completely eliminated.5
Assuming that such a non-disturbance agreement is unconditional and in
all respects protects the interest of FDIC and its potential assignee EAB
from any disturbance in continuation of banking business at the premises
covered by the branch lease, it would follow that the interest of FDIC in
the continuation of such banking services at the locus is in no way
threatened by Grella.
Finally, FDIC argues that it would have standing to sue even if the
termination of the ground lease posed no threat to its pecuniary interest
because of its responsibilities as a government agency to protect its
interests, citing Federal Deposit Insurance Corp. v. Sumner Financial
Corp., 451 F.2d 898, 904 (5th Cir. 1971); United States v. Arlington
County, 326 F.2d 929, 931 (4th Cir. 1964); United States v. City of Glen
Cove, 322 F.Supp. 149, 152 (E.D.N.Y.), aff'd, 450 F.2d 884 (2d Cir.
1971). We nevertheless believe that the responsibilities of FDIC as set
forth in the Act, including the protection and enforcement of its policies to
which we have previously alluded, is amply taken care of by the nondisturbance agreement if delivered. We do not believe that these
responsibilities and policies can be elaborated or enhanced by vague and
amorphous generalities. The above cited cases are simply not applicable
to the factual framework of this case, particularly since there is no policy
or program of FDIC which is threatened other than those previously
enunciated.6
II
There remains Grella's charge of mootness which apparently is predicated
upon the hypothesis that FDIC has standing. This concept arises from the
Article III limitation on the federal judicial power to decide "cases" and
"controversies." The focus is on the issues and subject matter of the
controversy and not upon the parties. Mootness on Appeal in the Supreme
Court,83 Harv.L.Rev. 1672 (1970). While the protection offered by Grella
to FDIC removes any collateral consequences harmful to FDIC if Grella is
successful, it does not eliminate or moot the controversy between Grella
and Lever. It simply deprives FDIC of standing.
As Chief Justice Warren said in Flast v. Cohen, supra, 392 U.S. at 99, 88
S.Ct. at 1952:
1
"The
fundamental aspect of standing is that it focuses on the party seeking to get his
complaint before a federal court and not on the issues he wishes to have
adjudicated."
And again:
2 other words, when standing is placed in issue in a case, the question is whether
"In
the person whose standing is challenged is a proper party to request an adjudication
of a particular issue and not whether the issue itself is justiciable." Id. at 99-100, 88
S.Ct. at 1952.
3
So the issue here is not one of mootness but is one of standing. The controversy
was originally initiated in the state court and would have proceeded to
adjudication had not FDIC brought suit in the federal court to prevent any
disturbance of the continuation of banking services in the community. While
FDIC's access to the federal courts under 12 U.S.C 1819 should be liberally
construed, see Franklin Nat'l Bank Sec. Litigation v. Andersen, 532 F.2d 842
(2d Cir. 1976), we question whether it was necessary for FDIC to persist in
interrupting the progress of the state court in deciding a matter of state law by
application to the federal court after one of the parties has offered to remove the
only collateral consequences or harm to FDIC arising from the controversy.
We therefore reverse the district court and remand the case to determine if
Grella will deliver a viable non-disturbance agreement, for further examination
of the parameters, wording and enforceability of the same with instructions that
if the district court finds that this agreement in all respects protects FDIC in its
occupation of the branch premises, then upon delivery of the same to dismiss
the complaint of FDIC for lack of standing and to permit Grella and Lever as
the real parties in interest to thrash out this issue which is a matter of state law
in the state court. Absent such a finding and dismissal, this court retains
jurisdiction for the purpose of proceeding to consideration of the merits.
This provision of the lease provides that the tenant in case of termination shall
remain liable for the difference between the rent reserved thereunder and the
rent subsequently collected by the landlord for the remainder of the unexpired
term, payable monthly as "such differences shall from time to time be
ascertained . . . ."
Indeed, Grella has admitted that she has no claim against Franklin for future
rent in the event of a rental deficiency. (Grella's Brief at 13)
As a matter of fact in other Franklin locations FDIC and EAB are apparently
satisfied with a best efforts agreement by the landlord to obtain a nondisturbance agreement from the landlord's mortgagee in the event of
foreclosure. See Joint Appendix A65-70
Though the parties have not so argued, an examination of the record reveals
that one concern of FDIC and Lever is that in the event Grella is successful in
terminating the ground lease, FDIC may lose the parking spaces owned and
provided by Lever under the branch lease. This issue is independent of the
alleged dispute here between Grella and FDIC as set forth in the pleadings
which arises from the lease between Grella and Lever and it cannot provide
FDIC with standing in this case. If FDIC or EAB needs additional protection
from Lever, that would be an issue separate and apart from the present lease
controversy between Lever and Grella