Federal Sav. & Loan Ins. Corp. v. Huff, Civ. A. No. 83-2169-S.

• Decision Date: 02 April 1986
• Docket Number: Civ. A. No. 83-2169-S.
• Parties: FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, as Receiver For North Kansas Savings Association, Plaintiff, v. Howard D. HUFF, et al., Defendant.
• Court: U.S. District Court — District of Kansas

631 F. Supp. 1350

FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, as Receiver For North Kansas Savings Association, Plaintiff, v. Howard D. HUFF, et al., Defendant.

Civ. A. No. 83-2169-S.

United States District Court, D. Kansas.

April 2, 1986.

B.J. Hickert, Morrison, Hecker, Curtis, Kuder & Parrish, Wichita, Kan., for Federal Sav. & Loan Ins.

Charles E. Patterson, Daniel Bukovac, Watson, Ess, Marshall & Enggas, Kansas City, Mo., R. Kent Sullivan, Payne & Jones, Overland Park, Kan., Harvey L. Kaplan, Richard E. McLeod, W. Woody Schlosser, Shook, Hardy & Bacon, Kansas City, Mo., Jeffrey S. Nelson, Thomas R. Buchanan, Shook, Hardy & Bacon, Overland Park, Kan., Rolland J. Exon, Watson, Ess, Marshall & Enggas, Olathe, Kan., Martin J. Purcell, P. John Owen, Nancy L. Shelledy, J. Emmett Logan, Reggie C. Giffin, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., A. Bradley Bodamer, Morrison, Hecker, Curtis, Kuder & Parrish, Shawnee Mission, Kan., for other defendants.

Julia L. Young, Asst. Atty. Gen., Topeka, Kan., for Sav. & Loan Com'r for the State of Kan.

Gregory J. Bien, Myron L. Listrom, Sloan, Listrom, Eisenbarth, Sloan and Glassman, Topeka, Kan., for Fidelity & Deposit Co. of Maryland.

Charles White Hess, Charles W. Smiley, Linde Thomson Fairchild, Langworthy Kohn & Van Dyke, Overland Park, Kan., Albert Thomson, Linde Thomson Fairchild, Langworthy Kohn & Van Dyke, Kansas City, Mo., for Howard D. Huff.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on defendant Fidelity and Deposit Company of Maryland hereinafter F & D and defendant Huff's motions to dismiss for lack of subject matter jurisdiction and F & D's second motion for summary judgment. This action has been brought by the Federal Savings & Loan Insurance Corporation hereinafter FSLIC in its receivership capacity against Mr. Huff, the former Chairman of the Board of North Kansas Savings Association, for fraud, and against F & D, the Association's fidelity bonding company, for breach of its blanket bond. The FSLIC contends that this court has jurisdiction over this case for four reasons: (1) the FSLIC is a federal agency; (2) this action does not involve only the rights and obligations of North Kansas Savings Association and its investors, creditors and stockholders; (3) this action involves rights and obligations under federal law; and (4) the FSLIC is acting as a federal receiver. Specifically, plaintiff states that this court has subject matter jurisdiction pursuant to 12 U.S.C. §§ 1725(c) and 1730(k)(1), and by virtue of 28 U.S.C. §§ 1331 and 1345. The court has been advised that Counts I through V have been settled; thus, the court will review this court's jurisdiction based on Count VI of the First Amended Complaint for fraud against Mr. Huff and Count VII against F & D for breach of the blanket bond. Counts VI and VII incorporate the allegations relating to violations of federal regulations cited in Counts I-V.

Obviously, this is a late date at which to address the question of subject matter jurisdiction. However, "a court lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the proceedings in which it becomes apparent that jurisdiction is lacking." Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir.1974); See e.g., Gross v. Federal Deposit Insurance Corp., 613 F.Supp. 79, 81 (D.Kan.1985). The court will first address plaintiff's claim of jurisdiction pursuant to 12 U.S.C. § 1730(k)(1). Section 1730(k) provides:

Notwithstanding any other provision of law, (A) the corporation shall be deemed to be an agency of the United States within the meaning of § 451 of Title 28; (B) any civil action, suit, or proceeding to which the corporation shall be a party shall be deemed to arise under the laws of the United States, and the United States District Courts shall have original jurisdiction thereof, without regard to the amount in controversy; and (C) the corporation may without bond or security; remove any such action, suit, or proceeding from a state court to the United States District Court for the district and division embracing the place where the same is pending by following any procedure for removal now or hereafter in effect: Provided, that any action, suit or proceeding to which the corporation is a party in its capacity as conservator, receiver, or other legal institution and which involves only the rights or obligations of investors, creditors, stockholders, and such institution under state law shall not be deemed to arise under the laws of the United States.

Following the court's interpretation in FSLIC v. I-Tex Energy Corporation, No. 83C 3994, slip op. at 3 (N.D.Ill., unpublished, Jan. 9, 1984), a suit in which the FSLIC is a party shall be deemed to arise under the laws of the United States if any one of the following factors is present:

(1) the FSLIC is suing it its corporate capacity; (2) the suit involves the rights of others than ... its investors, creditors, and stockholders, and (3) the suit involves the rights of any party under federal law. A simple reading of the statutory language reveals that if any one of these factors is present, the underlying proviso is not called into play, and subject matter jurisdiction would exist, at least under 28 U.S.C. § 1331.

Id. at 3-4.

The plaintiff FSLIC concedes that it is suing solely in its capacity as receiver of a state-chartered institution. Therefore, the first factor is not present in this circumstance.

The plaintiff in this case argues that this suit involves the rights of others besides that of its investors, creditors and stockholders. Plaintiff cites the decision in FSLIC v. Forde, No. CV 85-774-WMB, slip op. at 5 (C.D.Cal., unpublished, July 3, 1983) for the proposition that this action does not involve only the rights or obligations of investors, creditors and stockholders, thus making the proviso inapplicable to the case at hand.

In FSLIC v. Forde, the court stated "if the action involves the rights or obligations of any third party, even though the rights or obligations of investors, creditors, stockholders and the institution are also involved, the proviso, by its express terms, is inapplicable and federal jurisdiction exists. Id. In FSLIC v. Forde, the rights and obligations of investors, creditors, stockholders and the institution itself were involved. The court found, however, that the case involved the obligations of certain officers and directors of the failed institution, as well as certain borrowers and appraisers utilized by the failed institution. Accordingly, the court found that the proviso was inapplicable and that that court had subject matter jurisdiction over the action. In FSLIC v. Forde, the FSLIC was claiming damages for breach of fiduciary duty, negligence, fraud, negligent misrepresentation and professional negligence.

The defendant F & D cites case law which reaches the opposite conclusion. In Federal Deposit Insurance Corp. v. National Surety Corp., 345 F.Supp. 885 (S.D. Iowa 1972), the FDIC, as receiver for the state bank of Prairie City, Iowa, filed suit against the National Surety Corporation. The FDIC alleged that employees of the Prairie City Bank were bonded by the National Surety Corporation to provide payment to the Bank for losses sustained through fraudulent activities. Defendant National Surety Corporation removed the action to federal court invoking jurisdiction under 28 U.S.C. § 1332, 12 U.S.C. § 1819, and 28 U.S.C. § 1331. FDIC then filed a motion to remand, stating that there was no diversity of citizenship and the provision of 12 U.S.C. § 1819 bars federal jurisdiction over the claims of the FDIC. Title 12 U.S.C. § 1819 similarly states that there shall be a federal question of jurisdiction in suits by or against the FDIC:

Except that such suit to which the Corporation is a party in its capacity as receiver of a State bank and which involves only the rights or obligations of depositors, creditors, stockholders, and such State banks under State law shall not be deemed to arise under the laws of the United States.

In National Surety Corporation the court found that the FDIC was suing in its capacity as receiver to enforce the rights of depositors, creditors and stockholders in such state bank under state law. The language in § 1819 is almost identical to the language in the proviso of § 1730 which is at issue in this case. The court in National Surety Corporation found that while the FDIC may be an ultimate recipient of the possible recovery in the suit, the FDIC was still only asserting claims of depositors, stockholders and the state bank as receiver of this bank and thus falls within the meaning of the exception to federal question jurisdiction under 12 U.S.C. § 1819.

In Federal Deposit Insurance Corp. v. Sumner Financial Corp., 602 F.2d 670 (5th Cir.1979), the Federal Deposit Insurance Corporation sued as a receiver of insolvent Michigan State Bank, bringing action against the defendants alleging that they conspired to fraudulently convert some bank funds. Counts I and II of plaintiff's amended complaint alleged that certain defendants had conspired to defraud the bank and convert its funds. Two and one-half years after the Sumner case was filed, the FDIC brought to the court's attention the decision in FDIC v. National Surety Corp., 345 F.Supp. 885 (S.D.Iowa 1972) which called into serious question the court's subject matter jurisdiction. The 5th Circuit Court of Appeals found that the district court did lack jurisdiction. In Sumner Financial Corp. the court first addressed the issue, as stated in FSLIC v. Krueger, 435 F.2d 633 (7th Cir.1970), of whether subsection (A) of § 1730(k)(1) grants original jurisdiction under 28 U.S.C. § 1345 of any suit brought by the FSLIC. In Krueger, the 7th Circuit held that subsections (B) and (C) of § 1730(k)(1) related solely to removal proceedings from state courts in actions where the corporation has...