Abbott Bldg. Corp. v. FEDERAL SAV. AND LOAN INS.

• Decision Date: 09 April 1990
• Docket Number: No. CV-N-89-603-ECR.,CV-N-89-603-ECR.
• Citation: 739 F. Supp. 532
• Parties: ABBOTT BUILDING CORPORATION, INC., and The Abbott Trust, Plaintiffs, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, as Receiver of Sierra Savings and Loan Association; and Western Title Company, a Nevada corporation, Defendants.
• Court: U.S. District Court — District of Nevada

739 F. Supp. 532

ABBOTT BUILDING CORPORATION, INC., and The Abbott Trust, Plaintiffs, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, as Receiver of Sierra Savings and Loan Association; and Western Title Company, a Nevada corporation, Defendants.

No. CV-N-89-603-ECR.

United States District Court, D. Nevada.

April 9, 1990.

George Abbott, Minden, Nev., for plaintiffs.

Richard J. Pocker, U.S. Atty., Reno, Nev., for defendants.

ORDER

EDWARD C. REED, Jr., Chief Judge.

Before this Court are two motions to dismiss, one filed by defendant Federal Savings and Loan Insurance Corporation ("FSLIC") (document # 3), and the other filed by defendant Western Title Company ("Western") (document # 4). Both defendants seek dismissal of the complaint, originally filed in state court, which was removed to this Court on September 19, 1989 (document # 1).

The facts of this case are straightforward. On November 11, 1985, plaintiff Abbott Building Corporation ("ABC") executed a promissory note in favor of Sierra Savings & Loan in the amount of $100,000.00. The trustee on the note was Lawyers Title of Northern Nevada, which later changed its name to Western Title Company ("Western"). The note was secured by certain real property owned by ABC, located in Douglas County, Nevada. On September 9, 1987, the note went into default. On October 22, 1987, the FSLIC was appointed Receiver for Sierra Savings & Loan, pursuant to an Order of the Federal Home Loan Bank Board ("FHLBB" or "the Board").

The foreclosure sale on the deed of trust was scheduled for 2:00 o'clock p.m., February 8, 1988. On February 8, 1988, ABC filed for bankruptcy under Chapter 11. It was determined by the Bankruptcy Court that the only asset of ABC was the real property named in the deed of trust, which had been used to secure the $100,000.00 loan from Sierra Savings & Loan. After a procedural false start,¹ and after United States Bankruptcy Judge James H. Thompson denied ABC's motion to reinstate the automatic stay of bankruptcy, the property was sold to the FSLIC at a foreclosure sale on June 9, 1989.

In their complaint, plaintiffs assert that the actions of the defendants in foreclosing on the deed of trust were unlawful, and that the foreclosure sale should be set aside. We will discuss plaintiffs' allegations against each defendant with more specificity when addressing each defendant's motion to dismiss.

I. MOTION TO DISMISS BY FSLIC

The FSLIC raises several grounds for dismissal. First, it claims that as an agency of the United States Government, it is immune from liability, except for the potential liability permitted by the Federal Tort Claims Act, 28 U.S.C. § 2671 et seq. (FTCA). The FSLIC claims that plaintiffs have failed to satisfy the requirements of the FTCA, and that the FSLIC is not a proper defendant in this action, but that the proper defendant is the United States of America.

The second ground for dismissal raised by the FSLIC is that there was inadequate process and defective service of process, thus warranting dismissal under Fed.R. Civ.P. 12(b)(4) and 12(b)(5).

A. FSLIC as Receiver

The FSLIC urges this Court to analyze this action within the rubric of the FTCA. However, as we point out below, the fact that the FSLIC has been sued in its capacity as Receiver obviates the need for an FTCA analysis.

Plaintiff's allegations are against the FSLIC in its capacity as Receiver of Sierra Savings and Loan. Nowhere in the complaint do plaintiffs refer to the FSLIC in its corporate or individual capacity. Plaintiffs claim that the FSLIC did not comply with "applicable law" prior to the trustee's sale, and breached unspecified duties imposed by federal law when it foreclosed on the deed of trust.²

Initially, it should be noted that the United States, as sovereign, is immune from suit unless it waives its sovereign immunity and consents to be sued. United States v. Mitchell, 463 U.S. 206, 212, 103 S.Ct. 2961, 2965, 77 L.Ed.2d 580 (1983). A court is without jurisdiction to entertain a suit unless it is brought within an act of Congress specifically authorizing the action. Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir.1985). Furthermore, the sovereign immunity of the United States extends to its agencies. Id. at 1460 n. 6. Accordingly, federal agencies are not subject to suit eo nomine unless Congress so consents. Blackmar v. Guerre, 342 U.S. 512, 515, 72 S.Ct. 410, 411, 96 L.Ed. 534 (1952); City of Whittier v. United States Dept. of Justice, 598 F.2d 561, 562 (9th Cir.1979).

The FSLIC is a federal agency protected by sovereign immunity. See 12 U.S.C. § 1725(c); Jugum v. Federal Sav. and Loan Ins. Corp., 637 F.Supp 1045, 1047 (W.D.Wash.1986); Federal Sav. and Loan Ins. Corp. v. Quinn, 419 F.2d 1014, 1016-17 (7th Cir.1969). As such, it may only be sued upon its consent. Although the FSLIC is subject to a limited waiver of sovereign immunity by virtue of 12 U.S.C. § 1725(c)(4), that provision does not authorize this type of challenge to the actions of the FSLIC as receiver. Rather, section 1725(c)(4) generally is intended to permit judicial actions against the FSLIC for payment of insurance. Jugum, 637 F.Supp. at 1047.

When a court is asked to review an action taken by the receiver of a failed savings and loan, 12 U.S.C. § 1464(d)(6)(C) provides that:

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 (emphasis added).

This unqualified language does not provide any exception for suits brought by disgruntled borrowers who default on loans. Only by including the FHLBB in this action would this Court have jurisdiction to review the foreclosure on the deed of trust.³ First Sav. & Loan Ass'n v. First Fed. Sav. & Loan Ass'n, 531 F.Supp. 251, 253-54 (D.Haw.1981) (First Sav. I).

As receiver of the failed Sierra Savings & Loan, the FSLIC has broad authority to liquidate the association and sell its assets.⁴ See First Sav. & Loan Ass'n v. First Fed. Sav. & Loan Ass'n, 547 F.Supp. 988, 996 (D.Haw.1982) (First Sav. II). As receiver of a failed savings and loan institution, the FSLIC is authorized to:

(i) take over the assets of and operate the institution;

(ii) take such action as may be necessary to put it in a sound solvent condition;

(iii) to merge it with another insured institution;

(iv) to organize a new Federal association to take over its assets;

(v) to proceed to liquidate its assets in an orderly manner; or

(vi) to make such other disposition of the matter as it deems appropriate;

whichever it deems to be in the best interests of the association, its savers, and the FSLIC....

12 U.S.C. § 1729(b)(1)(A) (1989). See Carrollton-Farmers Branch Indep. School Dist. v. Johnson & Cravens, 858 F.2d 1010, 1014 n. 14 (5th Cir.1988), amended, 867 F.2d 1517 (5th Cir.1989) (noting authority of FSLIC as receiver to foreclose on deed of trust).

Regulations governing the FSLIC in its role as a receiver specifically provide that:

The Receiver shall have power to: (1) Sell for cash or on terms, exchange, or otherwise dispose of, in whole or in part, any or all of the assets and property of the institution, real, personal and mixed, tangible and intangible, of any nature, including any mortgage, deed of trust, chose in action, bond, note, contract, judgment or decree, share or certificate of share of stock or debt, owing to such institution or the Receiver (emphasis added).

12 C.F.R. § 569a.6(c) (1980).

Congress intended that the FSLIC's authority would be "subject only to the regulation of the Federal Home Loan Bank Board" when carrying out its receivership responsibilities. S.Rep.No. 1263, 90th Cong., 2d Sess. 10, reprinted in 1968 U.S. Code Cong. & Admin.News 2530, 2539. The FSLIC was intended to be able to move quickly, and is authorized to take whatever actions are necessary in reorganizing or dissolving a failing institution, without hindrance by the judiciary. This Congressional intent is revealed in section 1464(d)(6)(C).

In requesting that the foreclosure sale be set aside, plaintiffs are asking this Court to interfere with the powers and functions of the FSLIC. "Issuing such an order would amount to reversing the decision made by the FSLIC to sell the assets of Sierra Savings & Loan. This would directly interfere with the power of the FSLIC to dispose of the assets of an association in receivership." First Sav. I, 531 F.Supp. at 253-54. Such an act would impermissibly "affect the exercise of powers or functions of ... a receiver." This Court is without subject matter jurisdiction to so act. See Fidelity Fin. Corp. v. Federal Sav. & Loan Ins. Corp., 834 F.2d 741, 745 (9th Cir.1987).

We note that this case is distinguishable from Morrison-Knudsen Co. v. CHG Int'l, Inc., 811 F.2d 1209 (9th Cir.1987), cert. denied, 488 U.S. 935, 109 S.Ct. 358, 102 L.Ed.2d 349 (1988). There, the Ninth Circuit held that 12 U.S.C. § 1464(d)(6)(C) does not empower the FSLIC to adjudicate claims of creditors against a failed institution in receivership, disagreeing with North Mississippi Sav. & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1101 (5th Cir. 1985). Recently, the United States Supreme Court agreed with the Ninth Circuit's interpretation of section 1464(d)(6)(C) in Coit Indep. Joint Venture v. Federal Sav. & Loan Ins. Corp., 489 U.S. 561, 109 S.Ct. 1361, 103 L.Ed.2d 602 (1989). In these cases, the courts considered claims asserted by creditors against failed thrifts, and held that, because section 1464(d)(6)(C) does not vest adjudicatory authority in the FSLIC, the federal courts do have subject matter jurisdiction to adjudicate creditor claims.

Both cases point out that section 1464(d)(6)(C) does not confer additional powers on the FSLIC in its receivership capacity, but merely prohibits courts from interfering with those powers obtained by the FSLIC from...