Dalton v. F.D.I.C.

Decision Date14 April 1993
Docket NumberNo. 91-6372,91-6372
PartiesDoug DALTON, et al., Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Houston Commerce Bank f/k/a Western Bank-Downtown, Defendant-Appellee. Doug DALTON, et al., Plaintiffs-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Etc., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Grant J. Harvey, J. Christopher Reynolds, Gibbs & Ratliff, Houston, TX, for plaintiffs-appellants.

Robert A. Axelrad, Elizabeth M. Bruman, Webb, Zimmerman, Beck, Blaum & Axelrad, Houston, TX, J. Scott Watson, Senior Atty., Washington, DC, for defendant-appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before REAVLEY, KING, and WIENER, Circuit Judges.

WIENER, Circuit Judge:

In this appeal we review one district court's grants of summary judgment in two separate cases, consolidated for trial and for appeal, involving several of the same parties; namely, Plaintiffs-Appellants Doug Dalton and various associated individuals and partnerships (collectively, Dalton), and Defendant-Appellee the Federal Deposit Insurance Corporation (FDIC). Both summary judgments were granted in favor of the FDIC. Finding that the district court improperly denied Dalton's motion to remand one of the two cases (the primary case) to state court, we reverse and remand that action to the district court with instructions to remand it to the state court. But finding no reversible error in the district court's grant of summary judgment in the other case (the secondary case) we affirm that ruling.

A. The Primary Case--the Dalton Note

In March 1986, Dalton as maker signed a promissory note (the Dalton note) to evidence an initial loan and future advances contracted for with Western Bank-Downtown (the Bank). 1 The proceeds of the loan were to be used to construct an office building. The Bank was obligated to advance Dalton funds for the project in accordance with a construction loan agreement that was one of the documents in the loan package.

During the course of construction, the Bank's parent bank failed. The Bank was thus unable to advance the funds needed by Dalton to continue with construction. As a consequence of the Bank's inability to continue the funding of the construction loan, asserts Dalton, he was unable to continue with construction. That in turn caused him to lose potential tenants and made it impossible for him to repay his accrued obligations on the Dalton note.

In January 1988, Dalton filed a breach of contract suit against the Bank in Texas state court for failing to provide funding for the construction project. Before it answered the lawsuit, however, the Bank was declared insolvent by the Texas Banking Commissioner, and the FDIC (which insured the Bank) was appointed receiver. The FDIC-Receiver filed an answer in the state court proceedings on April 20, 1988. In addition to answering Dalton's complaint, the FDIC counterclaimed for the indebtedness on the Dalton note. Dalton filed an amended complaint on April 25, 1988, naming FDIC-Receiver as the proper party defendant.

In December 1989--more than a year-and-a-half after the FDIC entered the state court litigation--FDIC-Receiver assigned its interest in the Dalton note (and thus its interest in the litigation) to FDIC-Corporate. Then, in January 1990, FDIC-Corporate removed the case to federal court.

                Dalton sought to have the case remanded to state court as untimely removed, asserting that the period during which the FDIC could have removed the case to federal court had expired thirty days after FDIC-Receiver had been appointed and received notice of the lawsuit.   The district court denied Dalton's remand motion, holding that the case had again become subject to removal when FDIC-Corporate was substituted as a party for FDIC-Receiver

In April 1991, the primary lawsuit was consolidated with the secondary lawsuit, which we discuss below. In October 1991, the district court granted summary judgment in favor of FDIC-Corporate on the Dalton note indebtedness. The judgment was in the principal amount of $2,833,755.28, plus accrued interest of $1,117,930.69 and future interest to accrue at $1,397.47 per day. At the same time, the court dismissed all of Dalton's claims connected with the Dalton note, holding that they were barred by § 1823(e) of FIRREA. 2

B. The Secondary Case--the Ten Park Ten Note

In September 1986, Dalton as a general partner of two limited partnerships in which some of the limited partners were also investors in the first group (Dalton and the two new limited partnerships are hereafter referred to collectively as Dalton), executed another promissory note (the Ten Park Ten note). This note evidenced funds loaned and to be loaned by the Bank for a development project unrelated to the office building. The Ten Park Ten note was secured by an "assignment of profits agreement" and the personal guarantees of Dalton and a Mr. Lightfoot who was a participant in both the office building venture and the Ten Park Ten venture.

Dalton defaulted on the Ten Park Ten note on October 1, 1987. Over three years later, on October 19, 1990, FDIC-Receiver filed suit (the secondary case) in federal court on this indebtedness. In April, 1991, the secondary case was consolidated with the primary case. In the secondary case, summary judgment was granted in favor of the FDIC at the same time that judgment was granted in the primary case on the Dalton note. The judgment in the secondary case was in the principal amount of $454,719.52, plus accrued interest of $185,698.17 and future interest to accrue at $112.12 per day.

C. Common Elements of the Two Cases

Two of individuals who participated in both ventures--Dalton and Lightfoot--were personal guarantors of both loans. Also, several of the assets initially pledged as security for the Dalton note, and later cross pledged to secure the Ten Park Ten note, 3 were foreclosed on by the Bank. It credited the entire proceeds of foreclosure to the outstanding balance on the then-delinquent Dalton note, applying those proceeds first to accrued interest and then to principal. Dalton now asserts that these funds should have been applied to the Ten Park Ten deficiency instead.

In addition to granting summary judgment on the indebtednesses under the two notes, the district court granted the FDIC's motion for attorneys' fees on the notes. The court awarded the FDIC $27,000 in attorneys' fees and costs, but made no attribution of that sum between the two indebtedness.



A. Standard of Review

As we have reiterated ad nauseam, we review the district court record on appeal from a grant of summary judgment "under the same standards which guided the district court." 4 The standards we apply are set out in the Supreme Court trilogy of

                Anderson v. Liberty Lobby, Inc., 5 Celotex Corp. v. Catrett, 6 and Matsushita Electric Industrial Co. v. Zenith Radio Corp. 7  Summary judgment is proper when no issue of material fact exists and the moving party is entitled to judgment as a matter of law. 8  In determining whether summary judgment was proper, all fact questions are viewed in the light most favorable to the non-movant.   Questions of law are reviewed here, as they are in other contexts, de novo. 9
B. The Primary Case--the Dalton Note

When the provisions of FIRREA and the applicable jurisprudence of this and other circuits are analyzed, no doubt remains that the FDIC enjoys a unique and powerful right to remove to federal court virtually any case to which it is or becomes a party, irrespective of the stage or posture of the litigation when the FDIC's substitution or intervention occurs. 10 Nevertheless, the FDIC's right to remove, like that of any other litigant, must be exercised in a timely manner.

It was not a matter of timeliness, however, that prevented FDIC-Receiver from removing the primary case to federal court when--in April 1988--it became a party. Rather, a jurisdictional exception to the FDIC's statutory removal power barred such removal. Section 1819 of the Federal Deposit Insurance Act created federal jurisdiction for disputes involving the FDIC, thereby providing the statutory basis for the FDIC's right to remove cases from state court to federal court pursuant to 28 U.S.C. § 1441. Section 1819 creates federal jurisdiction in all civil cases in which "the [FDIC] shall be a party" except in "any such suit to which the [FDIC] is a party in its capacity as receiver of a State bank and which involve[s] only the rights or obligations of depositors, creditors, stockholders, and such State bank under State law." 11 Dalton's breach of contract claim and the FDIC's counterclaim on the indebtedness fell squarely within the then-current version of the "state law exception" to § 1819's grant of federal jurisdiction. 12 Thus, no federal question jurisdiction existed on which the FDIC could predicate removal.

Subsequently, however, on August 9, 1989--more than a year after FDIC-Receiver became a party to the state court litigation--the primary case did become removable by the FDIC. Effective that date, an amended version of § 1819 was enacted as part of FIRREA. 13 That new version has been interpreted to limit the "state law exception" to cases in which only the interpretation of the law of a particular state is necessary. 14 Ever since the amended Most cases concerning removal by the FDIC after FIRREA's removal rules were enacted (and subsequently modified) involve the question whether the FDIC's time to remove began to run when it became receiver or when it was substituted as a party to the litigation. We have held that the time for removal begins to run "from the date the FDIC 'is substituted as a party' (i.e. intervenes)." 16 In the instant case, however, the FDIC was already a party when the amendment to the jurisdictional statute was enacted.

                version of § 1819 became

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