National Enterprises, Inc. v. Smith

• Decision Date: 12 May 1997
• Docket Number: No. 96-1247,96-1247
• Parties: , 65 USLW 2745 NATIONAL ENTERPRISES, INC., Plaintiff-Appellee, v. Paul SMITH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 561

114 F.3d 561

1998 A.M.C. 601, 65 USLW 2745

NATIONAL ENTERPRISES, INC., Plaintiff-Appellee, v. Paul SMITH, Defendant-Appellant.

No. 96-1247.

United States Court of Appeals, Sixth Circuit.

Argued Feb. 4, 1997.

Decided May 12, 1997.

Morgan J.C. Scudi (briefed), Jeffrey D. Poindexter (argued), Huth, Lynett & Scudi, San Diego, CA, for Plaintiff-Appellee.

Stephen J. Safranek (argued and briefed), University of Detroit School of Law, Detroit, MI, for Defendant-Appellant, Paul W. Smith.

Before: SILER, COLE, and VAN GRAAFEILAND, ^* Circuit Judges.

COLE, Circuit Judge.

Defendant appeals the district court's denial of his motion to dismiss and its grant of summary judgment in favor of plaintiff on plaintiff's suit for breach of contract. For the following reasons, we REVERSE the district court's denial of defendant's motion to dismiss, VACATE its grant of summary judgment in favor of plaintiff, and REMAND the case to the district court with instructions to dismiss the suit for lack of subject matter jurisdiction.

I.

On June 29, 1987, Defendant-Appellant Paul Smith ("Smith"), while a resident of Michigan, entered into an Open End Vessel Lease ("the Lease") with First Federal Savings & Loan Association of Toledo, Ohio ("First Federal") for the lease of a new yacht. Pursuant to the Lease, First Federal purchased a yacht from a Detroit, Michigan boat dealer and leased that yacht to Smith for a period of fifteen years. Subsequently, First Federal failed and all of its assets (including the Lease) were taken over by the Resolution Trust Corporation ("the RTC") as receiver. ¹ On June 2, 1994, the RTC sold and assigned all of its rights, title and interest in the Lease to Plaintiff-Appellee National Enterprises, Inc. ("NEI").

Pursuant to the Lease, Smith was required to make monthly payments of $3074.30 for a period of 180 months. Smith made payments on the Lease until November 29, 1993, but has made no payments since that date. As a result of Smith's default, NEI took possession of the vessel and sold it.

On July 25, 1994, NEI filed the present suit in the United States District Court for the Eastern District of Michigan to recover damages for Smith's breach of contract, including the sum of the remaining payments, late charges, and interest. In the course of those proceedings, the district court issued two published opinions that form the bases for this appeal. ²

In the first opinion, on July 19, 1995, the district court denied Smith's motion to dismiss NEI's suit for lack of subject matter jurisdiction. Although the district court concluded that jurisdiction was not appropriate on the basis of admiralty law or diversity of citizenship, the court held that jurisdiction exists in this case because the suit arises under federal law. On January 11, 1996, the district court issued its second opinion, granting NEI's motion for summary judgment on its breach-of-contract claim.

Smith has timely appealed the decisions of the district court.

II.

"In reviewing the district court's determination concerning its jurisdiction, we review the court's findings of fact for clear error and conclusions of law de novo." Certain Interested Underwriters at Lloyd's, London, England v. Layne, 26 F.3d 39, 41 (6th Cir. 1994)(citing Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 326 (6th Cir. 1990)).

We also review de novo a district court's grant of summary judgment, using the same standard employed by the district court. Moore v. Philip Morris Cos., 8 F.3d 335, 339 (6th Cir. 1993); Kraus v. Sobel Corrugated Containers, Inc., 915 F.2d 227, 229 (6th Cir. 1990). Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding upon a motion for summary judgment, we must view the factual evidence and draw all reasonable inferences in favor of the non-moving party. See Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

III.

Smith contends that the district court erred in denying his motion to dismiss NEI's suit because the court lacked subject matter jurisdiction. The district court held that the RTC's assignment of all its rights, title and interest in the Lease included an assignment of its statutory right to sue in federal court, thus creating a federal question upon which subject matter jurisdiction could be based. Smith contends that the RTC's assignment of the Lease could not effectively transfer federal jurisdiction to NEI. We agree.

Pursuant to 12 U.S.C. § 1441a(l)(1), "any civil action, suit, or proceeding to which [the RTC] is a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction over such action, suit or proceeding." However, the statute itself does not confer jurisdiction on assignees of the RTC or state whether the RTC may assign the statutory rights conferred upon it. See 12 U.S.C. § 1441a(l)(1).

In its denial of Smith's motion to dismiss, the district court held that the RTC could assign its right to sue in federal court, just as it may assign several other statutory rights, under the so-called "D'Oench, Duhme doctrine." The D'Oench, Duhme doctrine takes its name from the decision of the United States Supreme Court in D'Oench, Duhme & Co., Inc. v. Federal Deposit Ins. Corp., 315 U.S. 447, 456-62, 62 S.Ct. 676, 678-82, 86 L.Ed. 956 (1942), wherein the Court emphasized the strong public policy considerations for protecting the assets of failed banking institutions. To that end, the Supreme Court held that a debtor is estopped from asserting any defense based on an unwritten "side agreement" between the debtor and the original lender that would alter the terms of a debtor's note. Id. at 461-62, 62 S.Ct. at 681-82. This holding was subsequently codified in 12 U.S.C. § 1823(e).

Relying upon the public policy considerations expressed in D'Oench, Duhme and the common law of assignments, ³ several federal courts have extended to the FDIC's assignees the same rights as the FDIC possesses in enforcing the obligations of a failed institution. Thus, these courts have held that a private entity that purchases the assets of a failed institution from the FDIC is protected against side agreements between a debtor and original lender to the same extent as the FDIC, even though the literal language of section 1823(e) and D'Oench, Duhme does not so provide. See, e.g., Porras v. Petroplex Sav. Ass'n, 903 F.2d 379, 381 (5th Cir. 1990); Bell & Murphy & Assocs., Inc. v. Interfirst Bank Gateway, 894 F.2d 750, 754-55 (5th Cir. 1990). Similarly, courts relying on the policy espoused in D'Oench, Duhme have held that the FDIC and RTC may assign several other substantive rights under FIRREA. See, e.g., Federal Deposit Ins. Corp. v. Bledsoe, 989 F.2d 805, 810 (5th Cir. 1993) (applying D'Oench, Duhme to allow assignment of the FDIC's six-year extended statute of limitations under 12 U.S.C. § 1821(d)(14)(A)); Federal Sav. and Loan Ins. Corp. v. Cribbs, 918 F.2d 557, 559-60 (5th Cir. 1990) (extending the status of a federal holder in due course to private assignees of the FDIC and FSLIC); Federal Deposit Ins. Corp. v. Newhart, 892 F.2d 47, 50 (8th Cir. 1989) (extending the status of a holder in due course to private parties who acquire notes from the FDIC); Mountain States Fin. Resources Corp. v. Agrawal, 777 F.Supp. 1550, 1552 (W.D.Okla. 1991) (allowing assignment of the six-year statute of limitations).

No court, however, has yet extended to a private entity the FDIC and RTC's statutory right to sue in federal court, and we do not do so in this case. Indeed, only two federal courts have addressed the subject in published opinions and both have held that the RTC cannot contractually assign federal jurisdiction to another party absent statutory authorization. See S1 IL304 Ltd. Liability Co. v. ANB Cust. for LG, 950 F.Supp. 242, 245 (N.D.Ill. 1996) (holding that no policy justification existed for extending subject matter jurisdiction for private assignee that could enforce its claim in state court); RTC Commercial Loan Trust 1995-NP1A v. Winthrop Management, 923 F.Supp. 83, 88 (E.D.Va. 1996) (holding that the right to sue in federal court is "purely personal" and cannot be assigned absent statutory authorization). The statutory provision granting the RTC the right to sue in federal court applies, by its plain language, solely to the RTC and not to its assignees. If Congress had wished to extend the right to sue in federal court to the RTC's assignees, it could have explicitly done so in the statutory language. See, e.g., 40 U.S.C. § 270b(b) (the "Miller Act") ("Every suit instituted under this section shall be brought in the name of the United States for the use of the person suing, in the United States District Court..."). Indeed, rather than drastically broaden the jurisdiction of the federal courts under FIRREA, Congress has narrowly defined the scope of federal jurisdiction under that act by preventing the FDIC itself from litigating in federal court in certain circumstances. See, e.g., 12 U.S.C. § 1819(b)(2)(D)(i)-(iii) (withdrawing federal jurisdiction in any case (1) to which the FDIC is "is a party other than as a plaintiff..."; (2) which involves only the preclosing rights against the failed institution or obligations owing to depositors, creditors or stockholders in the failed institution; and (3) in which the only issue is the interpretation of state law).

Thus, we believe that the district court erred in holding that subject matter jurisdiction existed in this case on the basis of a federal question. Because 12 U.S.C. § 1441a(l)(1) applies solely to the RTC, a suit in which an assignee of the RTC is a party does not...