Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

An anonymous commenter left this question on a past post about the FDIC extending statutes of limitations:

What if the FDIC sells the loan to another bank (not FDIC)? When the purchaser wants to sue to enforce the note, does the statute of limitations for the subsequent note-purchaser begin running on: (a) the the ordinary starting date under state law or (b) the date the FDIC is appointed as receiver for the failed bank?

According to several judicial decisions in the wake of the last financial crisis of the late 80s and early 90s, the answer is: whichever is later. And that's almost always the date the FDIC is appointed as receiver.

 

The FDIC's transfer of a loan to a private purchaser doesn't change the LP Start Date. The purchaser may defer the LP Start Date just as the FDIC can. The purchaser may also postpone expiration of the limitations period the same as the FDIC can.

 

With so many banks failing recently, and the FDIC selling so many of their loans, this has become a compelling question. Thanks to our anonymous reader for asking it!

 

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In the last bank insolvency post we talked about what kinds of things are considered "agreements" that the Federal Deposit Insurance Corporation (the "FDIC") can ignore under the D'Oench, Duhme doctrine and Section 13(e) of the Federal Deposit Insurance Act ("FDI Act"), a/k/a 12 U.S.C. §1823. I also promised to tell you about who else, besides the FDIC, may use D'Oench, Duhme and its companions against borrowers and guarantors.

The answer: the FDIC's assignees - the people who buy loans from the FDIC out of a failed bank's receivership estate.

Assets The FDIC Transfers

After getting appointed as receiver for a failed bank, the FDIC usually transfers the bank's assets. The primary assets are:

• Promissory notes and other loan documents the bank holds, along with
• The accompanying borrower obligations to repay the principal, plus interest and fees (wrapped-up together, "loans")

Continue Reading...

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Most prime construction contracts - the ones between owner and contractors - say that neither the owner nor the contractor may assign the contract without the other's consent. More often then not, the contract says that neither side will "unreasonably withhold, condition, or delay" their consent. One example is Section 13.2 of the American Institute of Architects's A201 General Conditions of the Contract For Construction.

The underlying reason for these kinds of restrictions is usually to preserve identity of the parties operating under the contract. When making the contract the owner and the contractor know each other, and to some degree, decided to enter in to the contract because of the identity of the party on the other side. These restrictions are the parties' attempt to ensure that the party on the other side at the beginning is still the party on the other side at the end. But these restrictions lack in at least two big areas:

• What happens if one side assigns the contract without the other's consent?
• What is withholding, conditioning, or delaying consent unreasonably?
• Should there be exceptions that allow one side to assign without the other's consent?

First, they often don't usually do a very good job of ensuring continuity. What happens if one side assigns without the other's consent? Usually this kind of defiance is considered a breach of the contract. But that usually doesn't stop the assignment and it usually doesn't allow the non-assigning party to suspend or stop their own performance.  The non-assigning party may sue for damages.But usually that is about all they can do. Continue Reading...

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