§ 2.2 is clearly inconsistent with an intent to part with ownership of the trust assets, and makes the trusts revocable.
C. Beneficiary vs. Settlor Coverage
The Court must now determine the amount of deposit insurance coverage due the plaintiffs under the FDIC regulations governing revocable trusts found at 12 C.F.R. § 330.8.
The defendant refers to the conditions for separate beneficiary coverage and makes two arguments that the conditions are not met here. First, the defendant maintains that the beneficiaries are not named in the deposit account records of the ACNB. Second, the defendant claims that the beneficiary interests are too contingent to qualify for separate coverage. Because the trusts fail to meet either one of the conditions, the defendant asserts, the plaintiffs are entitled to only $ 100,000 worth of coverage.
The 1985 deposit account documents of the ACNB indicating the initial deposit by the settlor do not identify the beneficiaries of each trust. (Stip. Ex. E, F, and G.) They are signed only by the settlor and her son Robert Tantleff, the trustee, and the accounts are held in the trust names. After reviewing the record in this case, it appears that the only bank record which could be construed to identify the beneficiaries is the June 1985 letter from the ACNB bank official to Robert Tantleff. It is not immediately clear whether the letter is a "deposit account record": the FDIC regulations define those records as "account ledgers, signature cards, certificates of deposit, passbooks, corporate resolutions authorizing accounts in the possession of the insured depository institution and other books and records of the insured depository institution . . . ." 12 C.F.R. § 330.1(d). The letter may fit within the "other books and records" clause under a rather broad reading of the regulation.
In any case, assuming arguendo that the letter would qualify as a deposit account record, the actual wording of the letter is ambiguous as to the beneficiaries' names. It states that the trusts would "do some estate planning for the long term benefit of Martin Judick and yourself" (Stip. Ex. H.) Suzan Tantleff's children, the life beneficiaries named in the trusts, are Martin, Judith and Robert. In the letter, the words "Martin Judick" look like an individual's first and last name since it is not separated by a comma and because Judith Tantleff's first name presumably is misspelled as "Judick."
Even allowing a liberal interpretation of the above phrase, at best, the letter indicates only the first names of Robert Tantleff's siblings and the recipient of the letter, Robert Tantleff, as beneficiaries of the three trusts. That reading would require supplementary materials such as the trust instruments themselves, which are not part of the bank records, to conclusively identify the three life beneficiaries. On its face, then, the letter does not identify the life beneficiaries. Likewise, and perhaps more importantly, the settlor's grandchildren are mentioned nowhere in the ACNB's records. The Court finds the relationship between the reference in the letter and the life beneficiaries too attenuated to show that the life beneficiaries were "specifically named in the deposit account records of the insured depository institution" as required by § 330.8(a).
Because the trust accounts do not meet the requirement of § 330.8(a) that the beneficiaries be named in the deposit records, the Court finds that the plaintiffs are not entitled to separate coverage for each beneficiary under that section. Hence, the Court need not reach the defendant's second argument concerning the contingency of the beneficiary interests.
As an alternative to their argument on the merits, the plaintiffs contend that the FDIC should be estopped from asserting that the trusts are revocable. They ground this assertion in two interrelated theories. Both theories conclude that the FDIC should be bound by the ACNB's representation in the June 1985 letter that the trusts were irrevocable. First, plaintiffs argue that they relied on the letter, and that the FDIC is bound by the contents of the ACNB's records. Second, the plaintiffs allege that the government wrongly seized the ACNB in April 1993, thereby prejudicing plaintiffs' rights and creating a duty to abide by the ACNB's representation. Each of these theories will be discussed in turn.
In examining the plaintiffs' first theory, the Court must determine whether the FDIC can be bound by bank representations upon which the plaintiffs relied. The plaintiffs urge the Court to follow the holding of FDIC v. Harrison, 735 F.2d 408 (11th Cir. 1984). In that case, the FDIC was estopped from seeking a judgment against two guarantors of a note who had relied to their detriment on an FDIC agent's representation that they were not liable on the note. Id. at 408-09. Plaintiffs do not address explicitly the most glaring distinction between Harrison and this case--the fact that, prior to insolvency, the bank official was not an FDIC agent. There is no reason why the FDIC would be considered to be in an agency relationship with a private party like the ACNB, at least with respect to pre-receivership representations made by the bank. In the plaintiffs' other cited cases, the agency relationship between the defendant and the entity making the representation was clear. See, e.g., Trout v. Garrett, 780 F. Supp. 1396, 1425 (D.D.C. 1991) (representations made by Department of Justice attorneys); Meister Bros., Inc. v. Macy, 674 F.2d 1174 (7th Cir. 1982) (representations made by claims adjustor for the Federal Emergency Management Agency). The plaintiffs do not allege that either the FDIC or one of its agents made a misrepresentation to Tantleff
In spite of the lack of any agency relationship between the ACNB and the FDIC, the plaintiffs rely upon FDIC regulations and case law to suggest that the FDIC should nevertheless be bound by the June 1985 letter. The pertinent regulations state that the "FDIC shall presume that deposited funds are owned in the manner indicated on deposit account records of the insured depository institution." 12 C.F.R. § 330.4(a)(1). Congress authorized the FDIC to make "clear and unambiguous" records binding on the depositors "in its sole discretion," even when the records turn out to be incorrect. Id; In re Collins Securities Corp., 998 F.2d 551 (8th Cir. 1993); Fletcher Village Condominium Ass'n. v. FDIC, 864 F. Supp. 259 (D.Mass. 1994).
The plaintiffs contend that because the FDIC is entitled to rely on the bank records, they as depositors are entitled to the same right of reliance with respect to the June 1985 letter.
Assuming again, as above, that the June 1985 letter would qualify as a "deposit account record" under the regulations, the FDIC is not bound by it. The policies supporting the binding records rule, when exercised by the FDIC on its own behalf; do not necessarily apply with equal force to depositors. In addition, the FDIC, in its sole discretion, may look behind the records of the failed institution. 12 C.F.R. § 330.4(a)(1). Thus, when the FDIC looked behind the June 1985 letter to the trust instruments themselves to determine whether the deposit accounts were revocable or irrevocable, it was acting within its statutory and regulatory authority. Moreover, case law supports the defendant's assertion that an institution's representations to a depositor do not bind the FDIC as insurer. Waukesha State Bank v. Nat'l Credit Union Admin., 296 U.S. App. D.C. 335, 968 F.2d 71, 73-74 (D.C. Cir. 1992); Nimon, 975 F.2d at 246; Kershaw v. RTC, 987 F.2d 1206, 1210 (5th Cir. 1993).
In advancing their second estoppel theory, the plaintiffs argue that "the government" prejudiced plaintiffs' rights by seizing the bank when it was solvent, thereby creating a unique situation which imposed a duty on the FDIC to abide by the ACNB's statements to the plaintiffs. This claim lacks merit. There is no evidence that the OCC acted outside its statutory authority when it seized the bank and appointed the FDIC as receiver. 12 U.S.C. §§ 191, 1821(c)(5). Section 1821(c)(5) lists thirteen alternative grounds for appointment of a receiver by the OCC, including some that make no reference to solvency. See, e.g., 12 U.S.C. § 1821(c)(5)(H)(ii) (statutory or regulatory violations which would weaken institution's condition); 12 U.S.C. § 1821(c)(5)(E) (concealment of institution's records). The plaintiffs themselves allege that the ACNB was seized because of the "continuing wrongful conduct of bank officials." (Plaintiffs' Memorandum in Support of Motion for Summary Judgment, Affidavit at P14.) There is no evidence that the seizure and receivership were improper in either substance or form. Cf. House Center, Inc. v. FDIC, 788 F. Supp. 1309 (S.D.N.Y. 1992) (no duty to inform depositors of impending seizure). Consequently, the Court finds that the plaintiffs have not asserted a cognizable estoppel argument against the defendant. Neither the allegations of wrongful seizure nor the plaintiffs' arguments of reliance and agency demonstrates that the FDIC should be bound by the representations of the ACNB.
The plaintiffs are undoubtedly frustrated that they were denied the more expansive insurance coverage to which they would have been entitled had the instruments in fact carried out the alleged intent of Suzan Tantleff. If indeed she intended to part irrevocably with ownership of the funds, the trust instruments should not have provided her with unconditional access to the funds absent a limiting provision. For example, under New York law, trusts can be irrevocable if they are properly drafted to allow the settlor limited access to the principal for her support and maintenance. Merely inserting boilerplate irrevocability language into the trust instruments will not erase the effect of substantive provisions to the contrary. For these reasons, and because the plaintiffs cannot prevail on their equitable estoppel argument, the Court will deny the plaintiffs' motion for summary judgment and grant the defendant's motion for summary judgment. An order will accompany this opinion.
July 11th, 1996
Thomas F. Hogan
United States District Judge
In accordance with the Memorandum Opinion issued today, it is hereby ORDERED that the plaintiffs' motion for summary judgment is DENIED and the defendant's motion for summary judgment is GRANTED.
July 11th, 1996
Thomas F. Hogan
United States District Judge