Anderson v. Federal Deposit Ins. Corp.

• Decision Date: 15 January 1991
• Docket Number: No. 89-1533,89-1533
• Citation: 918 F.2d 1139
• Parties: , 24 Collier Bankr.Cas.2d 151, 21 Bankr.Ct.Dec. 63, Bankr. L. Rep. P 73,678 Robert F. ANDERSON, as Trustee in Bankruptcy for Rodney L. Propps, Plaintiff-Appellant, and Rodney L. Propps, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellee, and William H. Alford; Mark C. Garner; Cephus W. Long; William O. Sweeny, Jr.; Robert N. Swiger; George D. Taylor, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1139

918 F.2d 1139

59 USLW 2371, 24 Collier Bankr.Cas.2d 151,

21 Bankr.Ct.Dec. 63,

Bankr. L. Rep. P 73,678

Robert F. ANDERSON, as Trustee in Bankruptcy for Rodney L.

Propps, Plaintiff-Appellant, and Rodney L. Propps, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellee, and William H. Alford; Mark C. Garner; Cephus W. Long;

William O. Sweeny, Jr.; Robert N. Swiger; George

D. Taylor, Defendants.

No. 89-1533.

United States Court of Appeals, Fourth Circuit.

Argued April 2, 1990.

Decided Nov. 14, 1990.

Rehearing Denied Jan. 15, 1991.

Henry Flynn Griffin, III, Anderson, Lowder & Strait, P.A., Columbia, S.C., for plaintiff-appellant.

Thomas Sinclair Rees, Civ. Div., U.S. Dept. of Justice, Washington, D.C., argued, (Stuart M. Gerson, Asst. Atty. Gen., Jeffrey Axelrad, Civ. Div., U.S. Dept. of Justice, Washington, D.C., E. Bart Daniel, U.S. Atty., Michelle A. Ligon, Asst. U.S. Atty., Columbia, S.C., Mary P. Davis, Sr. Atty., Rodney D. Ray, Legal Div., F.D.I.C., Washington, D.C., J. Randolph Pelzer, Charleston, S.C., Benjamin Allston Moore, Buist, Moore, Smythe & McGee, Charleston, S.C., on the brief), for defendant-appellee.

Before WIDENER and MURNAGHAN, Circuit Judges, and SMITH, United States District Judge for the Eastern District of Virginia, sitting by designation.

WIDENER, Circuit Judge:

Robert F. Anderson, trustee in bankruptcy for Rodney L. Propps, appeals an order of the district court dismissing for lack of subject matter jurisdiction his action against the Federal Deposit Insurance Corporation (FDIC). 114 B.R. 446. We vacate the judgment of the district court and remand for further proceedings not inconsistent with this opinion.

Because the district court granted the FDIC's motion to dismiss under Fed.R.Civ.P. 12(b)(1), we accept as true the following allegations in Anderson's First Amended Complaint. In 1984, Rodney L. Propps organized a federally chartered savings bank, SeaBank Savings, FSB (SeaBank). Propps served as chairman of the board of directors of SeaBank and owned over seventy percent of SeaBank's stock, most of which Propps pledged to secure an indebtedness he owed to Park Bank of Florida (Park Bank). In February 1986, Park Bank was declared insolvent and the FDIC was appointed receiver to receive and liquidate Park Bank's assets, including Propps' loans. The FDIC as receiver assigned Propps' loans to the FDIC in its corporate capacity, which demanded payment from Propps in the amount of $1,729,971.01. The FDIC later sold Propps' collateral the SeaBank stock, to certain members of SeaBank's board of directors for $1,200,000.00.

Propps then filed an action in the Court of Common Pleas for Horry County, South Carolina, against the directors of SeaBank, seeking a declaration that he was the owner of the stock. The FDIC was added as a party defendant, and the FDIC removed the action to the United States District Court for the District of South Carolina. Thereafter, Propps filed a petition under Chapter 7 of the Bankruptcy Code and Anderson, as Propps' trustee in bankruptcy, was substituted as plaintiff. The FDIC filed a proof of claim with the Bankruptcy Court for the District of South Carolina to recover the difference between the sale price of the stock and the amount of Propps' debt. ¹

The district court granted Anderson's motion to file and serve an amended complaint, which asserted additional causes of action against the FDIC and the directors of SeaBank. Anderson has settled his claims against the directors, and seeks to pursue his claims against the FDIC which include the avoidance of fraudulent transfers pursuant to 11 U.S.C. Sec. 548, equitable subordination of the FDIC's claims, and conversion. The district court found that the waivers of sovereign immunity in the Bankruptcy Code and the Federal Tort Claims Act, 28 U.S.C. Secs. 2671 et seq., conflicted and that the provisions of the Tort Claims Act controlled. Because Anderson admittedly had not complied with the Tort Claims Act, ² the district court then determined that it lacked subject matter jurisdiction and dismissed Anderson's complaint. We are of opinion that the waivers of sovereign immunity in the Bankruptcy Code and the Tort Claims Act are not irreconcilable, and therefore vacate the district court's judgment and remand for further proceedings.

The district court correctly stated the general rule that the "United States, as sovereign, 'is immune from suit save as it consents to be sued, ... and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit.' " Lehman v. Nakshian, 453 U.S. 156, 160, 101 S.Ct. 2698, 2701, 69 L.Ed.2d 548 (1981) (quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941)). The FDIC, as an agency of the United States, enjoys the same protection. See Blackmar v. Guerre, 342 U.S. 512, 515, 72 S.Ct. 410, 411, 96 L.Ed. 534 (1952); FDIC v. Citizens Bank & Trust Co., 592 F.2d 364, 369 n. 5 (7th Cir.1979).

To support jurisdiction, Anderson relies upon the bankruptcy statutes, first upon 28 U.S.C. Sec. 1334(b), which states:

Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

Because 28 U.S.C. Sec. 1334 contains no waiver of sovereign immunity, Anderson also relies upon Sec. 106 of the Bankruptcy Code, the catchline of which in the Statutes at Large is "Waiver of sovereign immunity."

(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.

(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.

(c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity--

(1) a provision of this title that contains "creditor," "entity," or "governmental unit" applies to governmental units; and

(2) a determination by the court of an issue arising under such a provision binds governmental units.

11 U.S.C. Sec. 106. The district court correctly found that "the instant action is a civil proceeding related to a title 11 case." Thus, the district court assumed that 28 U.S.C. Sec. 1334 and 11 U.S.C. Sec. 106 otherwise would apply, but, because the action also implicated the Tort Claims Act, the district court determined that the Tort Claims Act took precedence. By contrast, the FDIC is unwilling to concede that 28 U.S.C. Sec. 1334 and 11 U.S.C. Sec. 106 would apply even if the Tort Claims Act did not. Rather than rely solely upon the district court's reasoning, the FDIC argues that this is not a bankruptcy case and therefore 28 U.S.C. Sec. 1334 and 11 U.S.C. Sec. 106 are inapplicable; or, if this is a bankruptcy case, the case should be in bankruptcy court and 28 U.S.C. Sec. 1334 and 11 U.S.C. Sec. 106 cannot apply in the district court.

The FDIC offers nothing to contradict the district court's express finding that this proceeding relates to a bankruptcy case. Instead, the FDIC questions the manner in which the district court asserted jurisdiction and cites the district court's local rule which, pursuant to 28 U.S.C. Sec. 157(a), refers all bankruptcy cases and related proceedings to the bankruptcy judges for the district. Although the argument on this technical point possesses some facial attractiveness because such blanket orders of reference operate automatically, Norton Bankr. L. & Prac. Sec. 5.10, at 65-66, we do not believe the local rule precluded the district court from exercising jurisdiction. District courts may withdraw reference to the bankruptcy court of a bankruptcy case or related proceeding, in whole or in part under 28 U.S.C. Sec. 157(d). Because the district court retained jurisdiction of the case after the trustee was substituted as plaintiff, we conclude that "[b]y allowing trustee intervention, the district court effectively withdrew this matter from the bankruptcy judge to whom it otherwise would have been automatically referred for disposition by the blanket order. The district court was then free to exercise section 1334 jurisdiction of this case." Carlton v. BAWW, Inc., 751 F.2d 781, 788 (5th Cir.1985). Also, and just as importantly, the bankruptcy judge to whom Propps' petition was referred in the first place could just as easily have required Anderson, the trustee, to proceed against the FDIC in the bankruptcy court as authorized him to intervene in the district court, which was done. See Carlton, 751 F.2d at 786. Even the government describes the claims asserted by the trustee as claims of fraudulent transfer, breach of fiduciary duty and conversion, claims which might well have been asserted by an adversary proceeding in the bankruptcy proceeding, especially since the FDIC had filed its claim there. See Carlton, 751 F.2d at 781-88; 1 Collier on Bankruptcy, p 3.01; 4 Collier on Bankruptcy, p 550.02; Ginsberg, Bankruptcy, p 1501; 6 Norton, part VII. Indeed, 11 U.S.C. Sec. 106 does not condition its waiver of sovereign immunity upon the court in which such waiver may be effective. To argue, as does the FDIC, that the waiver of 11 U.S.C. Sec. 106, whatever its extent, must be asserted only in the bankruptcy court rather than also in the district court of which the bankruptcy court is a unit, is preferring form over substance, in our opinion. And that by inference, no such requirement appearing in the statute. ³

The FDIC next contends that 28 U.S.C. Sec. 1334 cannot be the basis for jurisdiction because it contains no waiver of sovereign immunity. As noted above, however,...