Edwards v. Washington Mut. Sav. Bank
| Decision Date | 07 June 1994 |
| Docket Number | No. 12569-6-III,12569-6-III |
| Citation | 875 P.2d 643,74 Wn.App. 482 |
| Parties | George M. EDWARDS and Cora Edwards, husband and wife; Robert L. Ferguson and Catherine Ferguson, husband and wife, Respondents, v. WASHINGTON MUTUAL SAVINGS BANK, a corporation; The Resolution Trust Corporation, as Receiver for Frontier Federal Savings Corporation, Appellants. |
| Court | Washington Court of Appeals |
Edward G. Johnson, Perkins, Coie, Spokane, for appellants.
James K. Hayner, Minnick & Hayner, Walla Walla, for respondents.
Washington Mutual Savings Bank (Washington Mutual) and the Resolution Trust Corporation (RTC) appeal a judgment requiring them to return funds in certain trust accounts created for the benefit of George Edwards and Robert Ferguson (the Directors). The court also awarded attorney fees against RTC pursuant to the Equal Access to Justice Act and against both RTC and Washington Mutual pursuant to contract. Appellants contend: (1) the trial court lacked subject matter jurisdiction; (2) any rights the Directors may have had in the trust accounts terminated before they vested; and (3) there was no basis to award attorney fees. We reverse and remand.
In 1984, the directors of Frontier Federal Savings and Loan Association (Old Frontier) were given an option of participating in a deferred compensation plan which allowed them to defer receipt of their director's fee of $450 per month. Mr. Edwards and Mr. Ferguson did so. Other directors continued to receive their fees in taxable form. Pursuant to these compensation agreements, the fees were invested in insured certificates of deposit (CD's) with Old Frontier. To preserve their tax deferred status, these accounts were established as revocable trusts for the Directors' benefit with legal title held by Old Frontier. The Directors' right to receive compensation did not vest until their termination as board members. Prior to vesting, Old Frontier retained the right to revoke the trusts in which event the funds would be forfeited.
On February 22, 1990, RTC was appointed receiver for Old Frontier. The following day, RTC terminated the Directors. A charter was issued for a new savings association, Frontier Federal Savings Association (New Frontier) with RTC named as conservator. As receiver of Old Frontier, RTC transferred the assets and certain liabilities of Old Frontier to itself as conservator of New Frontier. The Directors submitted claims to RTC in June 1990 asserting entitlement to their trust accounts. The claims were rejected on the basis that because the Directors had not vested when RTC assumed receivership, their interest terminated by operation of law. 12 C.F.R. § 563.39(b) (1994). 1 On June 22, 1990, RTC entered into a purchase and assumption agreement (P & A Agreement) with Washington Mutual Savings Bank. The subject CD accounts were transferred to Washington Mutual as was the obligation to honor them.
The Directors then commenced this suit. RTC moved to dismiss for lack of jurisdiction. The motion was denied and the case proceeded to a bench trial. The court entered judgment in favor of the Directors, holding Washington Mutual liable for the accrued balance in the CD accounts under the terms of the P & A Agreement and enjoined RTC from interfering with the payout of funds. The court awarded attorney fees against both defendants jointly and severally. After entry of judgment, the Directors commenced an action in federal court as a protective maneuver in the event state court jurisdiction was found lacking on appeal.
Appellants contend that because the claim is for recovery of funds under the control of RTC as receiver for Old Frontier, jurisdiction is vested exclusively in federal court pursuant to 12 U.S.C. §§ 1821(d)(6)(A) 2 and (d)(13)(D). The Directors counter that appellants have simply assumed § 1821(d) applies. They characterize the claim as seeking recovery of insured deposits as defined in 12 U.S.C. § 1813 and urge that state courts have concurrent jurisdiction pursuant to 12 U.S.C. § 1821(f)(3). 3
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) created RTC for the purpose of restructuring or liquidating failed institutions and granted the agency the same receivership and conservator powers already held by the Federal Deposit Insurance Corporation (FDIC) under 12 U.S.C. §§ 1821-23. 4 12 U.S.C. § 1441a(b)(4)(A); Circle Indus., Div. of Nastasi-White, Inc. v. City Federal Sav. Bank, 749 F.Supp. 447, 451 (E.D.N.Y.1990), aff'd, 931 F.2d 7 (2nd Cir.1991).
Federal law governs claims against RTC. American Int'l Enters., Inc. v. Federal Deposit Ins. Corp., 3 F.3d 1263, 1268 (9th Cir.1993). This is consistent with the legislative prescription that a case to which RTC is a party is "deemed to arise under the laws of the United States ...". 12 U.S.C. § 1441a(l)(1). State law is displaced, but may be borrowed as a federal rule of decision (28 U.S.C. § 1652) and applied interstitially. American Int'l Enters., at 1268. The trial court declined to apply federal law in favor of Washington law.
The Directors concede if their claims arise under § 1821(d), federal jurisdiction is exclusive. Geris v. Piedmont Fed. Corp., 826 F.Supp. 165, 166-67 (W.D.Va.1993); Broken Arrow Sav. Ass'n v. Sublett, Sublett & Shafer, P.C., 849 P.2d 1103, 1105-06 (Okla.Ct.App.1993); Resolution Trust Corp. v. Shoreview Builders, Inc., 252 N.J.Super. 408, 599 A.2d 1291, 1295 (App.Div.1991). Contra, Resolution Trust Corp. v. Park Leasing Co., 855 S.W.2d 220, 222 n. 2 (Tex.Ct.App.1993). 5
Whether a demand for a CD deposit is a "claim" within the meaning of § 1821(d) presents a question of apparent first impression. The ordinary meaning of the term is "To demand as one's own or as one's right". Black's Law Dictionary 247 (6th ed. 1990). In the ordinary sense of the word, any demand upon RTC would be a claim. Section 1821(d)(13)(D) provides that:
Except as otherwise provided in this subsection, no court shall have jurisdiction over--
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver;
(Italics ours.)
The Directors urge this provision addresses only claims against assets and from a financial institution's perspective, a CD is a liability, not an asset. Peters v. Sjoholm, 95 Wash.2d 871, 875, 631 P.2d 937 (1981), appeal dismissed, cert. denied, 455 U.S. 914, 102 S.Ct. 1267, 71 L.Ed.2d 455 (1982). We disagree. The money represented by a CD is an asset belonging to the institution, Peters, at 875, 631 P.2d 937, and money is what the Directors seek. The claim therefore falls within subsection (d).
Even assuming the claim were founded on § 1821(f)(3), it still fails. If RTC has formulated a dispute resolution process, exhaustion of administrative remedies is required as a condition of judicial review. Section 1821(f)(3)(A). If dissatisfied with the result, a claimant may proceed under the Administrative Procedure Act pursuant to 5 U.S.C. §§ 701-06 with exclusive jurisdiction vested in the circuit court of appeals for the circuit in which the depository institution is located or in the Court of Appeals for the District of Columbia. Section 1821(f)(4). If the agency does not have a dispute resolution process, resort may be had directly to "a court of competent jurisdiction ...". Section 1821(f)(3)(B). The trial court found and concluded that "RTC has not proffered, proved or pled that it has prescribed regulations to establish procedures for resolving claims regarding accounts ...". RTC does not challenge this finding and it appears RTC has elected to resolve disputes on an informal basis rather than structure regulations. Nimon v. Resolution Trust Corp., 975 F.2d 240, 244 (5th Cir.1992).
The Directors urge there is a presumption in favor of concurrent jurisdiction. Rice v. Janovich, 109 Wash.2d 48, 51-52, 742 P.2d 1230 (1987). They argue the variance between Congress' firm resolve to place subsection (d) claims exclusively in the hands of federal courts and the relaxed manner in which subsection (f) claims were assigned to "a court of competent jurisdiction" is evidence of concurrent jurisdiction. This argument is inconsistent with the statute. The circuits are split, but the majority rule is that the only "courts of competent jurisdiction" for purposes of § 1821(f)(3) are those enumerated in § 1821(f)(4); i.e., federal circuit courts. Nimon, 975 F.2d at 244; Abrams v. Federal Deposit Ins. Corp., 938 F.2d 22, 24-25 (2nd Cir.1991). Contra Callejo v. Resolution Trust Corp., 17 F.3d 1497, 1499-1500 (D.C.Cir.1994). Even though RTC has not adopted formal dispute resolution regulations, the agency is nonetheless empowered under § 1821(f)(3)(B) to issue a final determination:
[B]y the statute, RTC may require a court determination--it does not require RTC to do so. That is, the statute permits RTC to itself render a final determination, even though there are no regulations formalizing its procedures.
Once RTC has made a final determination, § 1821(f)(4) becomes operative and federal appellate courts, not federal trial courts, are the courts of competent jurisdiction. Nimon, at 244; Abrams, 938 F.2d at 24-25. Whether state courts have concurrent jurisdiction was not at issue in these decisions, but any issue over concurrency would appear foreclosed by Nimon's holding that Congress intended "the courts of appeal will be the fora of these reviews." Nimon, 975 F.2d at 244.
This action involves a subsection (d) claim over which federal jurisdiction is exclusive. Even if viewed as a subsection (f) claim, it is in the wrong forum as to RTC.
The Directors contend the trial court had subject matter jurisdiction with respect to Washington Mutual: (1) under trust law...
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