Bank of New England, NA v. Callahan, Civ. No. 91-62-D.
Decision Date | 13 March 1991 |
Docket Number | Civ. No. 91-62-D. |
Citation | 758 F. Supp. 61 |
Parties | BANK OF NEW ENGLAND, N.A. v. Michael F. CALLAHAN, et al. |
Court | U.S. District Court — District of New Hampshire |
Jonathan S. Springer, Portsmouth, N.H., for plaintiff.
William H. Barry III, Nashua, N.H., for defendants.
In this civil action, plaintiff Bank of New England, N.A. ("BNE"), seeks injunctive and monetary relief for the alleged default of defendants Callahan and Kopka on two promissory notes.
Presently before the court are: (1) a Motion to Substitute, pursuant to Rule 25(c), Fed.R.Civ.P., filed by New Bank of New England, N.A. ("New BNE"), and the Federal Deposit Insurance Corporation as Receiver for BNE in liquidation ("FDIC as Receiver"); and (2) FDIC as Receiver's Motion for Stay of Proceedings regarding all counterclaims until defendants have completed the claims process set forth in 12 U.S.C. § 1821(d)(3)(5). For the foregoing reasons, the court grants the motion to substitute and stays all proceedings pending completion of the claims process.1
This action was originally filed in Hillsborough County (New Hampshire) Superior Court in August 1990. On January 6, 1991, the Comptroller of the Currency of the United States determined that BNE was insolvent and that FDIC should be appointed receiver of BNE.
Also on January 6, 1991, FDIC, pursuant to 12 U.S.C. § 1821(n), established New BNE as a "bridge bank". New BNE then purchased certain assets, including the main claim in this action, from FDIC as Receiver. New BNE did not purchase any of BNE's liabilities, which include the instant counterclaim; these were retained by FDIC as Receiver. On February 5, 1991, FDIC as Receiver removed this action to federal court pursuant to 12 U.S.C. § 1819(b)(2)(A), (B).
Rule 25(c), Fed.R.Civ.P., provides:
(c) Transfer of Interest. In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party. Service of the motion shall be made as provided in subdivision (a) of this rule.
In this action, FDIC as Receiver succeeded to all assets and liabilities of BNE when appointed by the Comptroller of the Currency. New BNE purchased some assets and none of the liabilities, which remain with FDIC as Receiver. Accordingly, the court hereby grants the Motion to Substitute filed by New BNE and FDIC as Receiver. New BNE shall be substituted for BNE as plaintiff, and FDIC as Receiver shall be substituted for BNE as counterclaim defendant.
FDIC as Receiver asks the court to stay the counterclaim pending the counterclaim plaintiff's compliance with 12 U.S.C. § 1821(d). Until such compliance, FDIC argues, this court has no subject matter jurisdiction over the counterclaim.
The Financial Institution Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, created a comprehensive system for handling claims against failed financial institutions. Under 12 U.S.C. § 1821(d)(3), FDIC as Receiver must give notice setting forth a date after which claims against it are barred. The bar date must not be less than 90 days after the first date notice is published.
Section 1821(d)(5)(A) gives FDIC as Receiver 180 days from the date the claim is filed to allow the claim, § 1821(d)(5)(B), or disallow it, § 1821(d)(5)(D). If the claim is disallowed, the claimant may either seek administrative review or file suit in a district court or continue an action commenced before the appointment of a receiver. 12 U.S.C. § 1821(d)(6)(A). The judicial proceeding is a de novo determination of the claim, not a review of the administrative disallowance of the claim. 12 U.S.C. § 1821(d)(5)(E). Also in reference to district court jurisdiction, 12 U.S.C. § 1821(d)(13)(D) provides:
FDIC as Receiver argues that the provisions of 12 U.S.C. § 1821(d) combine to mandate a stay of judicial proceedings unless and until the claimant has completed the administrative claims process. Although Congress enacted FIRREA as "the most efficient way to resolve the hundreds of claims with which a receiver might be confronted," Tuxedo Beach Club Corp. v. City Fed. Savings Bank, 737 F.Supp. 18, 19 (D.N.J.1990), section 1821(d) contains "various provisions which are difficult to reconcile." Id. at 20; Rexam Limited Partnership, S.E. v. Resolution Trust Co., 754 F.Supp. 245 (D.P.R.1990). Judge Cohen's analysis in Tuxedo Beach addressed the conflicting provisions:
Judge Cohen went on to review the legislative history of FIRREA, noting that the House Report "clearly states that only `after exhaustion of streamlined administrative procedures a claimant has a choice to bring the claim de novo in the District Court.'" Id. at 19 (quoting H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess., reprinted in 1989 U.S.Code Cong. & Admin.News 86, 214). Moreover, "resort to either the District Courts or administrative process is available only after claimant has first presented its claim to the FDIC." Id.
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