Bank of America National Association v. Colonial Bank

604 F.3d 1239 (2010)

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Bank of America National Association v. Colonial Bank

United States Court of Appeals for the Eleventh Circuit
604 F.3d 1239 (2010)

  • Written by Robert Cane, JD

Facts

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (the financial-reform act) provided the Federal Deposit Insurance Corporation (FDIC) (defendant) broad powers and duties to serve as receiver for distressed banks. Bank of America N.A. (plaintiff) was the trustee for customers who owned interests in mortgage loans that were held in trust by Colonial Bank (defendant). The agreement between Bank of America and Colonial Bank provided that Colonial Bank was to facilitate sales of the loans to Freddie Mac, a government entity that purchased mortgage loans. Colonial Bank was to remit the proceeds of loan sales or return unsold loans to Bank of America within 15 days of receipt of the loans. However, soon after Bank of America transmitted loans to Colonial Bank, news of Colonial Bank’s poor financial condition began spreading. Bank of America requested that Colonial Bank return the loans and loan proceeds, but Colonial Bank refused. Bank of America sued Colonial Bank in the district court and filed a motion for a temporary restraining order and preliminary injunction. The district court granted the motion and issued a temporary restraining order, which enjoined Colonial Bank from disposing of the loans or loan proceeds. The next day, the FDIC was appointed as receiver for Colonial Bank. The FDIC was substituted for Colonial Bank in the suit. Then, the FDIC filed an emergency motion to dissolve the temporary restraining order, arguing that § 1821(j) of the financial-reform act stripped the court of jurisdiction over the FDIC in its capacity as receiver and that Bank of America could instead bring an administrative claim under the act. The district court denied the FDIC’s motion and converted the temporary restraining order into a preliminary injunction. The FDIC appealed.

Rule of Law

Issue

Holding and Reasoning (Anderson, J.)

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