FEDERAL SAV. & LOAN INS. v. Florida 100 Dev. Group

• Decision Date: 07 October 1987
• Docket Number: No. 86-10006-Civ-King.,86-10006-Civ-King.
• Citation: 670 F. Supp. 1577
• Parties: FEDERAL SAVINGS AND LOAN INSURANCE CORP., as receiver for Sunrise Savings and Loan Association, a Federal Savings and Loan Association, Plaintiff, v. FLORIDA 100 DEVELOPMENT GROUP, INC., etc., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

670 F. Supp. 1577

FEDERAL SAVINGS AND LOAN INSURANCE CORP., as receiver for Sunrise Savings and Loan Association, a Federal Savings and Loan Association, Plaintiff, v. FLORIDA 100 DEVELOPMENT GROUP, INC., etc., et al., Defendants.

No. 86-10006-Civ-King.

United States District Court, S.D. Florida, Miami Division.

October 7, 1987.

Squire, Sanders & Dempsey, Miami, for plaintiff.

David M. Wells, Miami, Fla., Alfred K. Firgola, Marathon, Fla., Bernard T. Moyle, Fort Lauderdale, Paul G. Fletcher, Homestead, Fla., for defendants.

ORDER GRANTING, IN PART, AND DENYING, IN PART, MOTION TO DISMISS COUNTERCLAIMS AND AFFIRMATIVE DEFENSES.

JAMES LAWRENCE KING, Chief Judge.

This action centers around a July 1983 loan in the amount of $3,380,000 made by Sunrise Savings and Loan Association of Florida ("Old Sunrise") to Florida 100 Development Group, Inc. ("Florida 100"). The loan was secured by a mortgage, and by the personal guarantees of defendants King and Liberti. The other defendants have various liens on the same property. Florida 100 failed to make any payments after May 1, 1986.

On July 18, 1985 the Federal Home Loan Bank Board ("FHLBB") declared Old Sunrise insolvent, and appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") as Old Sunrise's receiver. The FSLIC organized a new Sunrise Savings and Loan ("New Sunrise") and transferred to New Sunrise substantially all of Old Sunrise's assets, deposits, and liabilities, including the Florida 100 loan.

New Sunrise initiated an action in the Circuit Court of the Sixteenth Judicial Circuit in and for Monroe County, Florida against these defendants seeking to foreclose the mortgage. On September 12, 1986, the FHLBB declared New Sunrise insolvent and appointed the FSLIC as receiver for purposes of liquidation. Pursuant to 12 U.S.C. § 1730(k)(1)(C), FSLIC timely removed this action to this court.

In the instant motion, the FSLIC contends that this court lacks subject matter jurisdiction over the counterclaims of the defendants Marathon Building and Materials, Inc., Bracewell, Jenkins, Ruwell, and Patent Scaffolding Company, as well as over the affirmative defenses of these defendants and Florida 100, King and Liberti. After examining the statutes and FHLBB regulations, this court agrees with the FSLIC's position with respect to the defendants' counterclaims, but rejects the FSLIC's argument regarding the defendants' affirmative defenses.

DISCUSSION

This case turns upon an interpretation of 12 U.S.C. § 1464(d)(6)(C). This section provides:

Except as otherwise provided in this subsection, no court may take any action for or toward the removal of any conservator or receiver, or, except at the instance of the Board, restrain or affect the exercise of powers or functions of a conservator or receiver.

Within the circuits two different interpretations of this statute exist with respect to claims against the FSLIC as a receiver. In North Mississippi Savings & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1102 (5th Cir.1985), cert. denied, 474 U.S. 1054, 106 S.Ct. 790, 88 L.Ed.2d 768 (1986), the Fifth Circuit found that "resolution of even the facial merits of claims ... would delay the receivership function of distribution of assets." The Hudspeth court found such a delay to be a "`restraint' within the scope of the statute," and held that federal courts lack subject matter jurisdiction over these claims. Id.; see also Chupik Corporation v. FSLIC, 790 F.2d 1269, 1270 (5th Cir.1986); Godwin v. FSLIC, 806 F.2d 1290, 1292 (5th Cir.1987). The Seventh Circuit agrees with the Fifth, see Lyons Saving & Loan Ass'n v. Westside Bancorporation, Inc., 828 F.2d 387 (7th Cir.1987) (available on LEXIS, Genfed lib., USAPP file), as have the majority of district courts, see, e.g., FSLIC v. Hall Whispertree Assoc., 653 F.Supp. 148 (N.D.Tex.1986); First Financial Savings & Loan of El Dorado v. FSLIC, 651 F.Supp. 1289 (E.D.Ark.1987); FSLIC v. Quality Inns, Inc., 650 F.Supp. 918 (D.Md.1987); Sunrise Savings & Loan Ass'n v. LIR Development Co., 641 F.Supp. 744 (S.D.Fla.1986).

The Fifth Circuit's concern, however, is misplaced. The Fifth Circuit's emphasis on delay is well-founded, Hudspeth, 756 F.2d at 1101, but its holding requiring exhaustion of administrative remedies before judicial review, id. at 1102-03, actually results in a longer delay of the liquidation process than initial court resolution of a creditor's claim. See Morrison-Knudsen Co. Inc. v. CHG Intern, Inc., 811 F.2d 1209, 1216 (9th Cir.1987) (noting this inconsistency). If claims against the FSLIC as a receiver are to be heard in an administrative process, and not in a federal court, some other indicator of congressional intent must be found.

The Ninth Circuit discovered that indicator. The Morrison-Knudsen court first looked at the nature of court adjudication. Morrison-Knudsen, 811 F.2d at 1217. The court next compared judicial adjudication with the court's own non-descriptive understanding of an ordinary receiver's powers and functions, and concluded that court adjudication does not affect the powers and functions of an ordinary receiver. Id. The Ninth Circuit reasoned, therefore, that unless Congress gave the FSLIC powers greater that those of an ordinary receiver, court adjudication of claims against the FSLIC as a receiver would not restrain or affect the powers and functions of the FSLIC. Id.

The Morrison-Knudsen court believed the only receiver power different from that of an ordinary receiver which court adjudication would restrain or affect would be the power to adjudicate claims. Id. at 1217. If Congress gave the FSLIC this authority, the Ninth Circuit reasoned, then § 1464(d)(6)(C) prevents a federal court from hearing claims against the FSLIC as a receiver. Id. at 1217-18. The court perused the entire banking statutory schema and found that Congress did not give the FSLIC this authority. Id. at 1222. Thus, the Morrison-Knudsen court held that court adjudication of claims against the FSLIC as a receiver does not affect or restrain the powers and functions of the FSLIC. Id. After examining the Morrison-Knudsen framework, this court disagrees.

I. THE QUESTION OF WHETHER CONGRESS GAVE THE FSLIC THE POWER TO ADJUDICATE CLAIMS NECESSARILY NEEDS TO BE RESOLVED.

The FSLIC maintains that this case can be resolved without reaching the issue of whether Congress intended to allow the FSLIC to adjudicate claims. This argument centers around the distinction between the powers of a court appointed receiver and a non-court appointed receiver. While a court-appointed receiver cannot distribute the assets of the receivership without court approval, Am Jur 2d, Receivers, § 2, a non-court appointed receiver, one who is appointed by a government agency, often does have this power, id., § 185. The FSLIC maintains, therefore, that any court adjudication of claims against a non-court appointed receivership necessarily restrains or affects the receiver's power to utilize it discretion in distributing the receivership's assets.

The FSLIC notes that in this case it is a non-court appointed receiver with the discretionary power to distribute assets. The FHLBB put the FSLIC in charge of this failed bank. See 12 U.S.C. § 1464(d)(6); 12 C.F.R. §§ 547.1-547.3. Congress authorized the FSLIC to utilize its discretion in functioning as a receiver, directing the FSLIC to liquidate the failed bank or to proceed as it deems appropriate and in the best interests of the association, its depositors and the FSLIC itself. 12 U.S.C. § 1729(b).

Because the FSLIC is a non-court appointed receiver with the discretionary authority to distribute the receivership's assets, the FSLIC maintains that court adjudication of claims will restrain or affect this FSLIC receivership power. The FSLIC notes that it, like any litigant, could not disobey a court order. They argue that in deciding the existence and amount of a claim, a court in essence tells the receiver (the FSLIC) either to utilize some of the bank's assets to pay the claim or to use the assets elsewhere because it is not to pay this claim. They further maintain that this would impinge upon the FSLIC's power to use its discretion in distributing the bank's assets, thus restraining a FSLIC receivership power in violation of § 1464(d)(6)(C). Thus, the FSLIC believes the issue of whether the FSLIC has authority to adjudicate claims need not be reached.

While seeing some merit in this argument, this court still finds the need to address the adjudicative authority issue. Even if the FSLIC has complete discretion in distributing a failed bank's assets, the validity of claims asserted against the FSLIC as a receiver still would need to be determined. Congress authorized the FSLIC only to pay valid creditor claims. 12 U.S.C. § 1729(b). For obvious constitutional reasons, the FSLIC in exercising its discretion cannot indiscriminately decide which claims are valid. Thus, before the FSLIC can pay any claim, some determination of its validity must be made. The question of whether the FSLIC or a court makes this determination, therefore, is necessarily before this court.

II. CONGRESS INTENDED TO CHANNEL CLAIMS AGAINST A BANK IN RECEIVERSHIP THROUGH AN ADMINISTRATIVE PROCESS OVER WHICH THE FSLIC AND FHLBB PRESIDE.

This court finds that Congress vested subject matter jurisdiction in the FSLIC to hear all claims against that agency in its capacity as a receiver. See Lyons Savings and Loan Ass'n v. Westside Bancorporation, Inc., 636 F.Supp. 576, 580 (N.D.Ill. 1986), aff'd, 828 F.2d 387 (7th Cir.1987); Sunrise Savings and Loan Ass'n v. L.I.R. Development Company, 641 F.Supp. 744, 746 (S.D.Fla.1986). This conclusion is reached through an examination of the statutory language, legislative history, and the FHLBB regulations surrounding the FSLIC's creation.

Through 12 U.S.C. § 1729(d) Congress gave the FSLIC plenary power to act as a receiver. The powers enumerated in this section include the...