Abbott Bldg. Corp., Inc. v. U.S., 90-15688

Decision Date22 August 1991
Docket NumberNo. 90-15688,90-15688
Citation951 F.2d 191
PartiesABBOTT BUILDING CORPORATION, INC., the Abbott Trust, Plaintiffs-Appellants, v. UNITED STATES of America, Western Title Company, Inc., a Nevada corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

George W. Abbott, Minden, Nev., for plaintiffs-appellants Abbott Bldg. Corp., Inc., and the Abbott Trust.

James M. Walsh, Henderson & Nelson, Reno, Nev., for defendant-appellee Western Title Co., Inc.

Valerie N. Strandell, McDonald, Carano, Wilson, McCune, Bergin, Frankovich & Hicks, Reno, Nev., for defendant-appellee Federal Deposit Ins. Corp.

Appeal from the United States District Court for the District of Nevada.

Before D.W. NELSON, HALL and FERNANDEZ, Circuit Judges.

FERNANDEZ, Circuit Judge:

Abbott Building Corporation (ABC) and the Abbott Trust (both referred to as appellants) brought this action to set aside the foreclosure sale of appellants' property to the Federal Savings and Loan Insurance Corporation (FSLIC) 1. The district court held that it had no jurisdiction over the action against FSLIC and that if it did appellants failed to state a claim. Appellants also sued Western Title Co. (Western), the trustee under the deed of trust. As to it, the district court found that no claim was stated.

We hold that the district court did have jurisdiction over the claim against FSLIC, but affirm because we agree that the complaint failed to state a claim against either FSLIC or Western.

BACKGROUND

In November of 1985, ABC executed a promissory note in favor of Sierra Savings & Loan Association (Sierra). Payment of the note was secured by a deed of trust on certain real property owned by ABC under which Sierra was the beneficiary and Western was the trustee. 2 By September of 1987, ABC had defaulted in its payments under the note, so foreclosure proceedings were commenced by Sierra and Western. In October of 1987, the Federal Home Loan Bank Board appointed FSLIC receiver of Sierra. ABC did not respond by paying the delinquency; it filed bankruptcy instead. That, of course, delayed the foreclosure proceedings. However, by May of 1989 ABC's bankruptcy action had been dismissed and Western proceeded to publish notice of a foreclosure sale of the property. In so doing it used the name by which it was designated in the deed of trust--Lawyers Title. The foreclosure sale was held on June 9, 1989, and FSLIC, as receiver, purchased the property with a credit bid of $124,193.05. Western then conveyed title to the property to the receiver. This action followed.

In their complaint appellants asserted that their rights had been violated because Western gave notice by using its former name, Lawyers Title. They also asserted that the sale should have been postponed because appellants had lenders ready to pay off the note. They sought to set aside Western's deed and to recover damages for the deed's interference with their title and business.

Both FSLIC and Western moved to dismiss. The district court dismissed the action against FSLIC on grounds of lack of jurisdiction, and opined that even if it had jurisdiction the appellants had failed to state a claim against FSLIC. Abbott Building Corp. v. FSLIC, 739 F.Supp. 532 (D.Nev.1990). The court also dismissed the action against Western for failure to state a claim. Id.

We disagree with the district court's determination that it lacked jurisdiction to adjudicate the claim against FSLIC, but agree with the district court that appellants' complaint wholly failed to state a claim against either FSLIC or Western.

DISCUSSION
A. Jurisdiction.

We must first determine whether the district court had subject matter jurisdiction to hear this action as it pertained to FSLIC. That court decided that it did not, but we disagree.

The existence of subject matter jurisdiction is a question of law which we review de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990).

We first underscore the fact that this action was not directed against the FSLIC based on its activities as an agency of the government. Rather, it is a claim against the FSLIC in its capacity as receiver of a savings and loan association, a claim that has its origins in obligations that bound the association. As a result, we need not consider questions related to the qualified immunity enjoyed by receivers for personal liability incurred through their receivership conduct. See Morrison-Knudsen Co., Inc. v. CHG Int'l, Inc., 811 F.2d 1209, 1222-23 (9th Cir.1987), cert. dismissed, 488 U.S. 935, 109 S.Ct. 358, 102 L.Ed.2d 349 (1988). For similar reasons, and also because Congress has explicitly provided that the FSLIC and the FDIC may "sue and be sued," we need not consider general questions about the sovereign immunity of federal agencies. See 12 U.S.C. § 1725(c)(4) (repealed); 12 U.S.C. § 1819(a)(Fourth). We can also lay aside exhaustion of remedy issues, for it is not claimed that there were any administrative remedies to be exhausted by the appellants. See Coit Independence Joint Venture v. FSLIC, 489 U.S. 561, 579-87, 109 S.Ct. 1361, 1371-76, 103 L.Ed.2d 602 (1989). 3 Hereafter, unless otherwise indicated, when we use the designation FSLIC, we refer to it in its receivership capacity only.

What we must decide is whether the provisions of 12 U.S.C. § 1464(d)(6)(C) 4 precluded the granting of any relief in this case. That section reads as follows:

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.

In particular, we must determine whether the appellants' request that the foreclosure sale be set aside would "restrain or affect" FSLIC's exercise of its powers as receiver. The real gravamen of the appellants' claim is that the foreclosure sale was not conducted in accordance with the requirements of state law, and that as a result the foreclosure cannot stand.

We are not entirely without guidance in this area, for although we have not found authorities dealing with foreclosure sales, other convergent lines of authority suggest that the district court did have jurisdiction to adjudicate this dispute.

In the first place, it can hardly be gainsaid that if a FSLIC receivership wishes to collect upon an alleged claim, it cannot simply seize assets of an alleged debtor, but must resort to an action at law. As the numerous collection actions demonstrate, FSLIC has regularly found it necessary to resort to the courts in order to establish and enforce its demands against third parties. See, e.g., FSLIC v. Gemini Management, 921 F.2d 241 (9th Cir.1990); FSLIC v. Musacchio, 695 F.Supp. 1044 (N.D.Cal.1988). It has never been thought that FSLIC's inability to simply directly enforce its claims against recalcitrant debtors somehow restrained or affected it in the use of its receivership powers.

The second line of authority is concerned with claims against a FSLIC receivership. In that group of cases, FSLIC has been known to explicitly claim that resort to the courts by third parties does affect or restrain it in the exercise of its powers. We decisively rejected that position in Morrison-Knudsen. In so doing we said that "[j]udicial adjudication ... does not restrain or affect a receivership; it simply determines the existence and amount of claims that a receiver is to honor in its eventual distribution of assets." 811 F.2d at 1217. As we also pointed out in Morrison-Knudsen, the fact that FSLIC was given authority to settle or compromise claims militated in favor of a determination that FSLIC cannot simply decide the merits of the controversies in which it is involved. 811 F.2d at 1218-19. We said: "Settlement and compromise strongly suggest the presence of the power of the other party to take the dispute to court. Settlement and compromise are to avoid that result. A body with the power to say 'yes' or 'no' with the force of law has much less need to settle or to compromise." Id. at 1219. While Morrison-Knudsen dealt with claims against the receivership, the statute under consideration applied to settlement and compromise of claims "in favor of or against the insured institutions." 12 U.S.C. § 1729(d). Our positions in Morrison-Knudsen were approved in Coit, 489 U.S. 561, 109 S.Ct. 1361, 103 L.Ed.2d 602. Cf., Rosa v. Resolution Trust Corp., 938 F.2d 383, 397-400 (3d Cir.1991), where after a lengthy and careful discussion of other jurisdictional problems the court went on to apply the descendant of § 1464(d)(6)(C) 5, without reference to any further jurisdictional concerns.

The case at hand involves a confluence of these lines of authority because FSLIC's actions partake of both of them. FSLIC had a receivership claim against appellants based upon a loan secured by a deed of trust. If the State of Nevada had required judicial foreclosure proceedings, FSLIC would have been forced to commence an action to assert and realize upon the claimed debt and security. Instead, FSLIC purported to have Western proceed under a non-judicial foreclosure statute, but, appellants claim, Western did not follow state law in so doing. As a result of those actions, it is said, FSLIC obtained a rump deed from the foreclosure trustee, Western. Appellants therefore acquired a claim against the receivership to resist ouster from their own property.

It would be rather inconsistent to hold that the courts do have authority to adjudicate claims by and claims against receiverships, but that courts are precluded from adjudicating claims where assets belonging to another have purportedly been deeded to the receivership by someone without any right to do so. Nothing in the law requires that result. While the activities of the receiver...

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