Sharpe v. F.D.I.C.

Decision Date19 September 1997
Docket NumberNo. 95-56291,95-56291
Parties97 Cal. Daily Op. Serv. 7482, 97 Daily Journal D.A.R. 12,075 Whitney F. SHARPE; Mona E. Sharpe, Plaintiffs-Appellants, v. FDIC, Receiver for Pioneer Bank, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

John T. Callan, The Buckley Firm, Mission Viejo, California, for plaintiffs-appellants.

Daniel Glenn Lonergan, Federal Deposit Insurance Corporation, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Central District of California; Linda H. McLaughlin, District Judge, Presiding. D.C. No. CV-94-00666-LHM.

Before FERGUSON, BEEZER and TASHIMA, Circuit Judges.

BEEZER, Circuit Judge:

Whitney and Mona Sharpe ("the Sharpes") appeal the district court's dismissal of their action for declaratory, injunctive and monetary relief against the Federal Deposit Insurance Corporation ("FDIC"). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and remand.

I

During early July 1994, a rather routine real estate foreclosure action, involving incidental real property legal description and recordation issues, was pending in the Superior Court of California for the County of Orange under cause No. 71-39-42. The parties to that action were: Whitney and Mona Sharpe; Pioneer Bank, a California corporation ("Pioneer" or "the Bank"); and DEV IX/Tustin Freeway Center Associates, a California Limited Partnership whose general partner was Cody M. Small ("the Debtor").

The parties to the state court action resolved to settle their differences amicably and entered into a written settlement agreement dated and signed by the Sharpes and the Bank on July 7, 1994. The agreement reflects the debtor-creditor status of the parties to the state court action as follows:

(a) Sharpes' loan to Debtor:

On April 4, 1990, the Debtors executed in writing and delivered to the Sharpes a Purchase Money Promissory Note ("the Note") dated April 4, 1990, secured by a Deed of Trust in favor of the Sharpes, whereby Debtors agreed to pay the Sharpes the principal sum of $542,500 together with additional payments, in the manner specified in the Note.

To secure performance of all obligations of Debtors to the Sharpes, Debtors gave the Sharpes, as beneficiary, a Purchase Money Deed of Trust dated April 4, 1990, and recorded in the official Records of Orange County, California on August 15, 1990 as Instrument No. 90-432965 (the "Sharpe Deed of Trust").

(b) Bank's loan to Debtor:

On August 9, 1990, the debtors gave the Bank a Construction Loan promissory note (the "Bank Note") wherein debtors promised, among other things, to pay to the Bank the principal amount of $4,375,000 together with the interest thereon, in the manner specified in the Bank Note.

To secure performance of all obligations of Debtors to the Bank, including the Bank Note, Debtors gave the Bank, as beneficiary, a Construction Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing dated August 9, 1990, and recorded in the official Records of Orange County, California on August 15, 1990 as Instrument No. 90-432970 (the "Bank Trust Deed").

The principal terms of the settlement required the bank to pay the Sharpes the sum of "$510,000 by wire transfer to the trust account [of an attorney] no later than 12:00 noon on July 8, 1994." (emphasis added). The Sharpes were required to deliver to the Bank the Debtor's note and deed of trust together with the Sharpes' request for reconveyance of the deed of trust. The agreement contemplated a simultaneous exchange of funds for documents. The agreement contained additional provisions involving title matters, release of parties, settlement and dismissal of the pending state court litigation and an attorney's fee provision if enforcement of the agreement required further action.

On July 8, 1994, the Sharpes executed the settlement agreement and delivered the required note, deed of trust and reconveyance documents to Pioneer. In exchange, Pioneer delivered the executed counterpart of the settlement agreement and, contrary to the express terms of the settlement agreement, two Pioneer cashier's checks for the total sum of $510,000.

State regulators seized Pioneer Bank after the close of business on July 8, and the FDIC was appointed receiver for Pioneer. The FDIC took possession of the documents delivered by the Sharpes to Pioneer.

On July 11, 1994, the FDIC, as receiver of Pioneer, notified counsel for the Sharpes that the Pioneer cashier's checks would not be honored. The FDIC furnished the Sharpes a proof of claim form which the Sharpes executed and returned to the FDIC.

On August 1, 1994, the Sharpes filed suit against the FDIC in the United States District Court, seeking to enjoin the FDIC from recording the reconveyance and requesting enforcement or rescission of the settlement agreement. On August 7, 1994, the parties appeared in district court to consider a stay of the proceedings. The court urged the parties to agree to a stay. The FDIC recorded the reconveyance of the Sharpes' deed of trust in the Recorder's Office of Orange County, California, on August 15, 1994. On September 15, 1994, the court approved a stipulation of the parties which contained the following provisions:

It is hereby stipulated by and among the parties, Whitney and Mona Sharpe (the "Sharpes") and the Federal Deposit Insurance Corporation, receiver for Pioneer Bank ("FDIC"), through their respective counsel, that the litigation in the above-entitled action before the Honorable Linda H. McLaughlin shall be stayed pending the conclusion of the FDIC administrative claims process.

The parties further agree that the submittal of a Proof of Claim form in the amount of $510,000.00 on behalf of the Sharpes shall not constitute a waiver of any of the Sharpes' claims to enforce or rescind the Settlement Agreement and Mutual Release which is the subject of this action. The parties agree that this action shall become moot if Sharpes' claim is paid in full through the receivership claims process and that a dismissal will be filed by the Sharpes within fifteen (15) days of receipt of full cash payment.

Finally, the parties agree that the FDIC's tender to the Sharpes' [sic] of a Receiver's Certificate on their Proof of Claim, and the Sharpes' retention of same, shall not constitute Sharpes' acceptance of the certificate as payment of the Settlement Agreement and Mutual Release nor of satisfaction of the Sharpe Note and Deed of Trust. Instead, the parties agree that this issue shall be preserved for future litigation, in the event the FDIC tenders a Receiver's Certificate on the Sharpes' claim.

The FDIC considered the Sharpes' claim in an administrative proceeding. The FDIC "allowed" the claim and on September 27, 1994, tendered to the Sharpes $100,000 in cash and a receiver's certificate for $380,000. The Sharpes have since also received a 50 percent advance dividend on the receiver's certificate.

On June 30, 1995, the district court lifted the stay. The Sharpes moved for summary judgment, and the FDIC moved to dismiss and, in the alternative, for summary judgment. The district court denied the summary judgment motions and dismissed the action for lack of jurisdiction. The district court held that the Financial Institutions Reform, Recovery and Enforcement Act of 1989, P.L. 101-73, 103 Stat. 183, 12 U.S.C. § 1811 et seq., ("FIRREA"), provides no basis for judicial review of claims "allowed" by the FDIC, citing 12 U.S.C. §§ 1821(j), 1821(d)(10)(4) and 1821(d)(13)(D). The court held that the Sharpes were effectively depositors, and therefore creditors, of Pioneer because 12 U.S.C. § 1813(l )(4) defines a "deposit" as any outstanding draft, including a cashier's check. As such, the court found that the Sharpes were subject to the exhaustion requirement. The court further held that the bank complied with the settlement agreement by payment with a cashier's check.

II

We review de novo the dismissal of a complaint for lack of subject matter jurisdiction. Sahni v. American Diversified Partners, 83 F.3d 1054, 1057 (9th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 765, 136 L.Ed.2d 712 (1997). We also review de novo the Sharpes' administrative claim against the FDIC. 12 U.S.C. § 1821(d)(5)(E). 1

Resolution of this appeal involves a determination of (1) the nature of the Sharpes' state law cause of action; (2) whether 12 U.S.C. § 1821(j) bars the Sharpes' claims; and (3) whether the Sharpes' complaint pleads a "claim" for the purposes of FIRREA. "Claims" under the statute are subject to an administrative exhaustion requirement. Throughout our opinion we will refer either to the Sharpes' cause of action, which is comprised of their state law claims, or to their administrative claim, which is comprised of the issues that must be initially resolved by the FDIC's claims process.

The Sharpes assert that the district court failed to accept the breach of contract nature of their cause of action and improperly applied FIRREA requirements as if the Sharpes were creditors of Pioneer. The FDIC seeks affirmance of the district court's dismissal on jurisdictional grounds, arguing that the Sharpes were creditors of Pioneer because they held Pioneer cashier's checks and that 12 U.S.C. § 1821(j) deprives the district court of jurisdiction over claims for equitable relief.

First we discuss the nature of the Sharpes' cause of action against the FDIC and then whether the Sharpes have stated a claim which requires pursuit of the administrative claims process under FIRREA.

III

At the outset, we note that as receiver the FDIC "steps into the shoes" of the failed financial institution, assuming all the rights and obligations of the defunct bank. O'Melveny & Myers v. FDIC, 512 U.S. 79, 86-87, 114 S.Ct. 2048, 2054-55, 129 L.Ed.2d 67 (1994); see also United States v....

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