Present: All the Justices
UNION RECOVERY LIMITED PARTNERSHIP
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
v. Record No. 960329 November 1, 1996
THOMAS E. HORTON, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
M. Langhorne Keith, Judge
In this appeal we consider whether an assignee of a
promissory note from the Resolution Trust Corporation (RTC) is
entitled to the benefit of the statute of limitations available
under federal law to RTC as receiver of the insured depository
institution which originally held the note. Adhering to the
common law rule that an assignee acquires the rights of the
assignor, we hold that the federal statute controls the
limitations period.
BACKGROUND
The facts of the case are not in dispute. On June 8, 1989,
Thomas E. Horton executed a promissory note in favor of Federal
Savings Bank of Virginia, F.S.B. (Federal) in the principal
amount of $80,000. A variable rate of interest was payable
monthly on the note from August 1, 1989, and the principal was
due "ON DEMAND, BUT IF NO DEMAND IS MADE THEN ON JULY 1, 1990."
Robert J. Leipzig executed a partial guaranty of the note in the
amount of $20,000.
Sometime prior to April, 1992, Horton defaulted on the note
and Leipzig defaulted on the guaranty. On April 10, 1992, RTC
was appointed receiver for Federal and assumed control of its
assets, including the note and guaranty at issue. On June 26,
1995, RTC assigned the note and guaranty to Union Recovery
Limited Partnership (Union Recovery).
On August 30, 1995, Union Recovery filed a motion for
judgment against Horton and Leipzig to recover on the note and
guaranty. Within the motion for judgment, Union Recovery
asserted the applicability of the six-year statute of limitations
afforded to RTC under the Financial Institutions Reform, Recovery
and Enforcement Act (FIRREA). 12 U.S.C. § 1821(d)(14)(A)(i).
Both Horton and Leipzig filed pleas in bar contesting the
application of the federal limitations period and asserting that
any action on the note was barred by the running of the five-year
statute of limitations provided for under Code § 8.01-246(2),
which they alleged was the applicable state statute of
limitations.
The parties filed briefs in support of their respective
positions and presented argument to the trial court. By order
entered November 17, 1995, the trial court sustained the pleas of
the statute of limitations and dismissed the motion for judgment
with prejudice.
Union Recovery filed a motion for reconsideration. In an
opinion letter dated December 5, 1995 and adopted by reference in
a subsequent order denying the motion for reconsideration, the
trial court set forth the grounds for its decision. Citing
WAMCO, III, Ltd. v. First Piedmont Mortgage Corp., 856 F.Supp.
1076 (E.D. Va. 1994), the trial court held that the statute of
limitations provided for in FIRREA was a right applicable only
for suits brought by government chartered corporations. As such,
the trial court reasoned, the right was personal to RTC, and
Union Recovery could acquire only those rights RTC had under the
note and guaranty instruments, not those which RTC had by virtue
of its status as a receiver under FIRREA. We awarded Union
Recovery an appeal.
APPLICATION OF STATE AND FEDERAL STATUTE OF LIMITATIONS PERIODS
Virginia Statute of Limitations
The note and its associated guaranty were executed in 1989
prior to the enactment of Title 8.3A, and, accordingly, this case
is governed by the rules found in superseded Title 8.3. The
parties have consistently treated the note as a pure demand note
although it provided for a specific payment date if no demand was
made. Under the provisions of Code § 8.3A-108(c), absent a
demand, a note of this type becomes payable at a definite time on
the fixed date with the cause of action accruing on that date.
Because the issue is not relevant to the ultimate determination
of this appeal, we will assume, without deciding, that the
parties have correctly applied the rules of superseded Title 8.3
in their treatment of the note as a pure demand note. Under
former Code § 8.3-122(1)(b), the cause of action on a pure demand
note accrued upon its execution. Formerly, demand notes were
subject to the five-year statute of limitations applicable to
*
contracts generally. Code § 8.01-246(2). Accordingly, Federal
was required to sue on the note before June 8, 1994 to avoid an
effective plea in bar of the statute of limitations.
*
Title 8.3A now provides for a six-year statute of
limitations on most forms of negotiable instruments.
Code § 8.3A-118.
Federal Statute of Limitations under FIRREA
FIRREA, Pub. L. No. 101-72, 103 Stat. 277 (1989)(codified in
disconnected sections of Titles 12 and 15 of the U.S. Code),
governs the procedures under which federally chartered
corporations acting as agents of the United States become
receivers or conservators of failed federally insured financial
institutions. Its principal application is to the Federal
Deposit Insurance Corporation (FDIC). However, when acting as
receiver of an insured depository institution, RTC is deemed to
be an agent of the United States. 12 U.S.C. § 1441a(b)(1)(A).
As such, RTC, as receiver, has the same rights and powers as does
FDIC under FIRREA. 12 U.S.C. § 1441a(b)(4)(A). Thus, although
created for different purposes, RTC and FDIC are in all respects
identically situated when acting as receivers in the name of the
United States under FIRREA.
The relevant portions of FIRREA applicable to this appeal
are found at 12 U.S.C. § 1821(d)(14)(A) and (B):
(A) In general. Notwithstanding any provision of any
contract, the applicable statute of limitations with
regard to any action brought by the Corporation as
conservator or receiver shall be--
(i) in the case of any contract claim, the longer of--
(I) the 6-year period beginning on the date the claim
accrues; or
(II) the period applicable under State law;
. . . .
(B) Determination of the date on which a
claim accrues. For purposes of
subparagraph (A), the date on which
the statute of limitations begins
to run on any claim described in
such subparagraph shall be the
later of--
(i) the date of the appointment of the Corporation as
conservator or receiver; or
(ii) the date on which the cause of action accrues.
When RTC acquired the note and guaranty as receiver, it was
entitled under FIRREA to institute actions on them under the
longest period provided by the combined application of
subsections A and B of 12 U.S.C. § 1821(d)(14). Under the
provisions of subsection B, RTC was permitted to advance the date
of accrual of the causes of action to April 10, 1992, the date of
its appointment as receiver. It was further permitted to take
the six-year statute of limitations of subsection A over the
five-year statute of limitations available under state law.
Accordingly, RTC had until April 9, 1998 to sue upon the note and
guaranty.
DISCUSSION
It is well established law in Virginia that an assignee
obtains his rights from the assignor, and, thus, he is said to
"stand in the shoes" of the assignor when pursuing an action on
the contract or instrument assigned. See, e.g., National Bank
and Trust Company at Charlottesville v. Castle, 196 Va. 686,
692-93, 85 S.E.2d 228, 232 (1955). Thus, the sole question in
this appeal is whether the statute of limitations contained in 12
U.S.C. 1821(d)(14)(A) and (B) applies to assignees of RTC, or do
these assignees take their assignments subject only to the rights
which would have accrued to the failed institution for which RTC
is acting as receiver, thus becoming de facto assignees of the
institution.
In Mountain States Financial Resources Corp. v. Agrawal, 777
F.Supp. 1550 (W.D. Okla. 1991), the first reported case to
address the application of FIRREA's statute of limitations
provisions to an assignee of an agent corporation of the United
States, the court held that the federal statute of limitations
applied to an assignee of FDIC. Id. at 1552. The court reasoned
that:
An assignee stands in the shoes of the assignor, and
acquires all of the assignor's rights and liabilities
in the assignment. This general principle and a strong
public policy require that the FDIC's assignee acquire
the six-year limitations period provided by
§ 1821(d)(14)(A).
Id.
Several courts have relied on the reasoning in Mountain
States to extend to assignees of FDIC the six-year statute of
limitations provided by 12 U.S.C § 1821(d)(14)(A)(i). See, e.g.,
F.D.I.C. v. Bledsoe, 989 F.2d 805 (5th Cir. 1993); Remington
Investments, Inc. v. Kadenacy, 930 F.Supp. 446 (C.D. Cal. 1996);
White v. Moriarty, 19 Cal. Rptr. 2d 200 (Cal. Ct. App. 1993);
Tivoli Ventures, Inc. v. Bumann, 870 P.2d 1244 (Colo. 1994);
Cadle Co. II, Inc. v. Lewis, 864 P.2d 718 (Kan. 1993), cert.
denied, ___ U.S. ___, 114 S.Ct. 1613 (1994); Central States
Resources Corp. v. First National Bank, 501 N.W.2d 271 (Neb.
1993). In addition, a recent decision of the Appellate Court of
Illinois has applied this same reasoning to a suit brought by an
assignee of RTC. Twenty First Century Recovery, Ltd. v. Mase,
665 N.E.2d 573 (Ill. Ct. App. 1996).
Disagreeing with the majority view, the court in WAMCO, the
decision relied on by the trial court in this case, held that the
five-year Virginia statute of limitations applied to a demand
note assigned by RTC to WAMCO. WAMCO, 856 F.Supp. at 1088. In
its analysis the court found that the statute plainly conferred
the benefit of the six-year limitation on RTC in its status as
receiver. As such, the court reasoned that the benefit is
personal and, therefore, does not transfer to an assignee under
existing common law rule. Id. at 1086. The court further found
that public policy alone could not supply the right where the
statute was silent. Id.
We do not concur in the view expressed in WAMCO and adopt
the view taken by the majority of other federal and state
jurisdictions. We find that application of the common law, even
without reference to the public policy this would promote,
mandates the application of the longer limitations period. As
expressed by the United States Court of Appeals for the Fifth
Circuit in Bledsoe, we hold that where "statutes are absolutely
silent on [a] matter[, i]t is an axiomatic principle of statutory
construction that in effectuating Congress' intent courts are to
fill the inevitable statutory gaps by reference to the principles
of the common law." Bledsoe, 989 F.2d at 810.
The extended statute of limitations is merely a mechanism
for providing the receiver with an adequate time to pursue those
claims which the financial institution could not successfully
pursue prior to its failure. As such, the receiver's right to
sue within the statute of limitations period is inherent in its
possession of the instruments at issue and would thus be among
the "'rights, remedies and benefits which are incidental to the
thing assigned,'" WAMCO, 856 F.Supp. at 1086, and not merely a
right "'personal to the assignor and for [its] benefit only.'"
Id. (citation omitted).
For these reasons, we will reverse the order of the trial
court dismissing the motion for judgment and remand the case for
further proceedings.
Reversed and remanded.