Carlyle Towers Condominium Ass'n, Inc. v. F.D.I.C.

• Decision Date: 12 March 1999
• Docket Number: Docket No. 98-6001
• Citation: 170 F.3d 301
• Parties: CARLYLE TOWERS CONDOMINIUM ASSOCIATION, INC., Vincent Rigolosi, Chryss Chryssanthou, Richard Linde and Marsha Squires, individually and as representatives of the class of persons owning units at the Carlyle Towers Condominium, Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as receiver for Crossland Savings, FSB, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 301

170 F.3d 301

CARLYLE TOWERS CONDOMINIUM ASSOCIATION, INC., Vincent

Rigolosi, Chryss Chryssanthou, Richard Linde and Marsha

Squires, individually and as representatives of the class of

persons owning units at the Carlyle Towers Condominium, Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as

receiver for Crossland Savings, FSB, Defendant-Appellee.

Docket No. 98-6001.

United States Court of Appeals, Second Circuit.

Argued Nov. 18, 1998.

Decided March 12, 1999.

William D. Grand, Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, Woodbridge, NJ, for Plaintiffs-Appellants.

Sheila Kraft Budoff, Federal Deposit Insurance Corporation, Washington, DC (Ann S. DuRoss, Colleen J. Boles, Federal Deposit Insurance Corporation, Washington, DC, of counsel), for Defendant-Appellee.

Before: MINER, CALABRESI, and SACK, Circuit Judges.

MINER, Circuit Judge:

Plaintiffs-appellants the Carlyle Towers Condominium Association, Inc., Vincent Rigolosi, Chryss Chryssanthou, Richard Linde, and Marsha Squires, individually and as representatives of the class of persons owning units at the Carlyle Towers Condominium (collectively, "the Association") appeal from a judgment entered in the United States District Court for the Eastern District of New York (Block, J.) dismissing their claim for money damages against defendant-appellee Federal Deposit Insurance Corporation ("FDIC"). The district court entered judgment after granting a motion by the FDIC to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction. The court granted the motion after finding that the Association's claim was subject to administrative review under the Financial Institution Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") § 212(5), as amended, 12 U.S.C. § 1821(d) (1994), and that this claim should have been filed with the FDIC within 90 days of receipt of a notice letter. Because the Association had not submitted its claim to the FDIC within the allotted 90 days, the court found that the Association failed to exhaust administrative remedies. The court concluded that the failure to exhaust deprived it of subject matter jurisdiction to adjudicate the Association's claim and accordingly dismissed the action.

For the reasons that follow, we vacate the judgment and remand for further proceedings.

BACKGROUND

In May of 1988, co-developers Cross Cliff Corporation and Carlyle Associates of Cliffside Park, operating jointly under the name of Cliffside Park Associates, L.P. ("CPA"), established the Carlyle Towers Condominium (the "Condominium") pursuant to an offering statement and deed. In April of 1991, Crossland Savings, FSB ("Old Crossland"), the parent corporation of Cross Cliff Corporation, succeeded CPA as sponsor, owner and developer of the Condominium by virtue of a conveyance agreement.

On January 24, 1992, the Office of Thrift Supervision declared Old Crossland to be financially unsound and appointed the FDIC as its receiver (the "Receiver"). On the same day, a new banking institution, Crossland Federal Savings Bank ("New Crossland"), was chartered, and the FDIC was appointed as its conservator. Also on the same day, the FDIC, as Receiver for Old Crossland, transferred certain assets and liabilities, including the Condominium, to New Crossland, which became the sponsor, owner and developer of the Condominium. The transfer was effected pursuant to a "Fourth Amendment To The Offering Plan." The FDIC concluded its duties as conservator of New Crossland in August of 1993.

After it was appointed Receiver for Old Crossland, the FDIC published a notice for three consecutive months, pursuant to 12 U.S.C. § 1821(d)(3)(B)(i), stating that the creditors of Old Crossland were required to present their claims to the FDIC by May 8, 1992 (the "bar date"). The notice further provided that claims presented after that date may be time barred.

On June 23, 1995, the Association filed an action in New Jersey Superior Court (the "Underlying Action") against fifty-three defendants, including Old Crossland, New Crossland, CPA, Carlyle Associates, and Cross Cliff Corporation. The Association alleged that unit owners at the Condominium became aware of certain defects in their residences and in common areas in the Condominium sometime after May 8, 1992. A broad array of problems was recounted in the complaint, ranging from water seepage to freezing pipes and disturbingly loud elevators. Damages were sought as a remedy for the faulty design and construction of the Condominium units. The FDIC was not named as a defendant in the action.

Approximately two months after the filing of the Underlying Action, on August 21, 1995, the FDIC sent the Association a letter, pursuant to 12 U.S.C. § 1821(d)(3)(C)(ii), entitled "Notice To Discovered Creditor or Claimant Proof of Claim" (the "Notice Letter"). The Notice Letter advised the Association that the FDIC had been appointed Receiver of Old Crossland and had established May 8, 1992 as the bar date. Tracking the language of 12 U.S.C. § 1821(d)(5)(C), the letter continued: the Receiver "must disallow claims ... not filed by the bar date," except that claims filed after the bar date may be considered "if it is shown that the claimant did not receive notice of the appointment of the Receiver in time to file such claim before the bar date, and such claim is filed in time to permit payment of the claim." (emphasis added)

The letter stated that claims falling within the exception must be filed with the FDIC within 90 days of the date or postmark of the Notice Letter, and that it was within the Receiver's sole discretion to consider such claims. The letter explained that the recipient could file a claim by completing and returning the enclosed Proof of Claim Form together with any information forming the foundation of the claim. Such supplemental information should include "a written statement specifying any facts or circumstances demonstrating that [the recipient] did not have knowledge of the appointment of the Receiver in time to file [its] claim by the bar date" if the recipient sought to fit within the exception. The letter concluded with the name and telephone number of a "Liquidation Specialist" at the FDIC to answer any of the recipient's questions.

After receiving the Notice Letter, counsel for the Association asserts that he attempted to clarify the FDIC's authority by analyzing the statute. After examining section 1821(d)(5)(C), counsel was satisfied that the letter was inapplicable to the Association's claim because the Association had knowledge of the appointment of the Receiver. Relying on 12 U.S.C. § 1821(d)(5)(C)(ii)(II), he was of the opinion that the Association need only file its claim "in time to permit payment of such claim," and therefore that the 90-day deadline imposed in the letter was inapplicable and contradictory to the statute. Counsel determined that the FDIC had not promulgated regulations to explain the claims procedure and was therefore satisfied that the statutory language set forth the parameters for administrative review.

In accordance with the opinion of counsel, the Association did not file a proof of claim with the FDIC within the allotted 90 days. The Association also justifies its failure to file a timely proof of claim with the FDIC because it believed that the Fourth Amendment to the Offering Plan provided that New Crossland, and not the FDIC, had assumed all the liabilities of Old Crossland, including those related to the Condominium.

Unbeknownst to the Association (and unexplained by the Notice Letter), the FDIC had adopted a procedure whereby it "permit[ted] consideration of claims [that] do not accrue or are not discoverable until after the bar date, even if the claimant had prior knowledge of the appointment of the receiver." The FDIC states that the Association's claim would have received full consideration had it been filed within the 90-day period set forth in the Notice Letter.

In November of 1995, New Crossland filed a third-party claim against the FDIC in the Underlying Action, claiming that the FDIC had assumed the liabilities of Old Crossland and thus that New Crossland was entitled to indemnification for any liability it incurred related to the Condominium. Additionally, in The FDIC responded in a letter (the "Denial Letter") dated March 19, 1996. The FDIC disallowed the Association's claim, articulating the following basis for denial:

December of 1995, the Association claims that it became aware of an action pending in the Eastern District of New York in which New Crossland contended that the FDIC retained the Condominium-related liabilities of Old Crossland. It was the FDIC's position in both the Underlying Action and the Eastern District action that New Crossland had assumed the liabilities related to the Condominium. The Association represents that these discoveries first made it aware that there was a dispute over who was responsible for the Condominium-related liabilities of Old Crossland. On February 6, 1996, the Association filed a proof of claim with the FDIC.

[T]he Receiver must disallow claims which are not filed by the bar date, except the Receiver may consider a claim filed after the bar date if it is shown that the claimant did not receive notice of the appointment of the Receiver in time to file such claim before the bar date, and such claim is filed in time to permit payment of the claim.... The Receiver rejects your request to file a claim after the bar date as your request does not establish that you did not have notice of the appointment of the Receiver in time to file your claim by the bar date. (second emphasis added).

The Association then initiated the action giving rise to this appeal against the FDIC in the Eastern District of New York on May 16, 1996, incorporating by reference the amended complaint filed in the Underlying Action. In September of 1996, the FDIC...