FDIC v. DiStefano

• Decision Date: 14 December 1993
• Docket Number: C.A. No. 92-461L.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of New Bank of New England, Plaintiff, v. Theodore F. diSTEFANO, Defendant.
• Court: U.S. District Court — District of Rhode Island

839 F. Supp. 110

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of New Bank of New England, Plaintiff, v. Theodore F. diSTEFANO, Defendant.

C.A. No. 92-461L.

United States District Court, D. Rhode Island.

December 14, 1993.

COPYRIGHT MATERIAL OMITTED

Matthew Thomas Oliverio, Edwards & Angell, Providence, RI, for plaintiff.

Michele A. Theroux, Charles J. McGovern, Philip W. Noel, Providence, RI, for defendant.

MEMORANDUM AND ORDER

LAGUEUX, Chief Judge.

This matter is presently before the Court on the motion of plaintiff Federal Deposit Insurance Corporation ("FDIC") to dismiss defendant's counterclaims pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Also before the Court is the motion of defendant diStefano to join the United States as a third party defendant. For the reasons set forth herein, both motions are denied.

FACTUAL BACKGROUND

Defendant is the former President and Chairman of the Board of Directors of Colonial Savings Bank ("Colonial"), a federally insured savings and loan association in Rhode Island. In 1988, defendant borrowed $1,525,000 from Bank of New England Old Colony, N.A. ("Old Colony"). He secured this note with a mortgage of the same amount on a building and property along Pontiac Avenue in Cranston, Rhode Island. In addition to the mortgage, defendant gave Old Colony and its assigns the power to collect rents from this property should defendant default on the note. Seacoast Mortgage Corporation ("Seacoast") and Colonial became tenants in this building.

In January of 1991, the Bank of New England, N.A. ("BNE"), and its subsidiary, Old Colony, were declared insolvent. The FDIC became BNE's receiver, established the New Bank of New England ("NBNE"), and then later became NBNE's receiver. NBNE became the holder of the $1,525,000 note and mortgage. In accordance with 12 U.S.C. § 1821(d)(3)(B)(i), the FDIC set a "bar date" of November 14, 1991 for the filing of claims against the receiver or receivership estate. In April 1991, defendant defaulted on the note. In May 1991, the FDIC demanded full repayment.

In the meantime, Resolution Trust Corporation ("RTC") became conservator of Colonial and Seacoast at the end of May 1991. Defendant then became caught in a "bureaucratic whipsaw". The FDIC demanded the rents from the Pontiac Avenue property from RTC, but RTC insisted on placing the rents in escrow until it could determine who was entitled to the money. Defendant postulates that this maneuver cost him a chance to cure the default. In November 1991, the FDIC sought to foreclose on the property. Defendant then filed suit in this Court seeking injunctive relief and making damage claims. The Court issued a temporary restraining order barring foreclosure on November 13, 1991. That order was vacated on November 21, 1991 when the Court determined that 12 U.S.C. § 1821(j) prohibited the requested injunction. Foreclosure occurred in December of 1991 and FDIC as receiver for NBNE ended up acquiring the Pontiac Avenue property. Defendant (as plaintiff in that case) asserted damage claims against the FDIC and RTC for breach of contract, violation of due process and equal protection, and conspiracy to defraud, but those claims were dismissed as to the FDIC on June 25, 1992 for lack of jurisdiction pursuant to Fed. R.Civ.P. 12(b)(1) based on 12 U.S.C. § 1821(d)(13)(D). diStefano v. The Resolution Trust Corporation and Federal Deposit Insurance Corporation, C.A. No. 91-600L (D.R.I. June 25, 1992). Later, those claims as asserted against RTC were dropped, so the whole case was dismissed.

On August 25, 1992, the FDIC filed this suit against defendant seeking to recover a deficiency resulting from the foreclosure and subsequent sale of the property. On October 16, 1992 defendant answered and filed counterclaims against the FDIC for breach of contract, violation of equal protection, violation of due process, and conspiracy to defraud. Plaintiff filed a motion to dismiss the counterclaims, and later, defendant filed a motion to implead the United States as a third-party defendant contending that the United States is liable for the wrongful conduct of the FDIC. After hearing oral arguments in March, 1993, the Court took the matter under advisement. This phase of the case is now in order for decision.

STATUTORY BACKGROUND

As this Court noted in the prior suit between these parties, jurisdiction of the district courts is strictly controlled by statute. In 1989, Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), Pub.L.No. 101-73, 101 Stat. 183 (1989) (codified into 12 U.S.C.). The legislation includes an administrative claims procedure for asserting claims against the FDIC or RTC as receiver of a seized institution. Those with claims against the failed institution or the receiver must submit them to the receiver within a certain time frame. The receiver then adjudicates the claims in accordance with the procedures set forth in the statute. 12 U.S.C. § 1821(d)(3)(10). If the receiver denies the claim or fails to timely act on the claim, the claimant may file suit. Id. § 1821(d)(5)-(6). The district courts lack jurisdiction over claims against assets of the failed institution or claims for damages for acts and omission of the receiver unless the claims procedure has been complied with. Id. § 1821(d)(13)(D). Thus, normally, in order for a claim to be brought in this Court, it must first be submitted to the receiver through the claims procedure. See Marquis v. Federal Deposit Ins. Corp., 965 F.2d 1148, 1151-2 (1st Cir.1992).

DEFENDANT'S PREVIOUS SUIT

The claims that defendant has brought as counterclaims in this case were also asserted by defendant when he sued the FDIC and RTC. In that case, this Court held that it had no jurisdiction over those claims until the administrative procedure detailed in FIRREA had been followed. diStefano v. Resolution Trust Corp. and FDIC, C.A. No. 91-600L, p. 1-3 (D.R.I. June 25, 1992). The only difference between the claims in the first suit and the ones that defendant now avers is that the present claims are counterclaims. The Court concludes that claims filed as counterclaims must also follow the administrative procedures of section 1821(d). The Court also determines that those counterclaims fall within the type of claims covered by the jurisdictional bar of section 1821(d)(13)(D).

I. FIRREA JURISDICTIONAL ISSUES

A. Counterclaims are Claims

A counterclaim is a claim brought by a defendant in opposition to the plaintiff. Black's Law Dictionary 315 (5th ed. 1979). There is no provision of FIRREA that exempts counterclaims from the jurisdictional bar of section 1821(d)(13)(D). Other courts that have examined the issue have ruled that counterclaims are treated the same as claims for the purposes of the jurisdictional bar. Resolution Trust Corp. v. Mustang Partners, 946 F.2d 103, 106 (10th Cir.1991); Federal Deposit Insurance Corp. v. Updike Brothers, Inc., 814 F.Supp. 1035, 1040 (D.Wyo.1993); Resolution Trust Corp. v. Wayne Coliseum Ltd. Partnership, 793 F.Supp. 900, 904 (D.Minn.1992); Federal Sav. and Loan Ins. Corp. v. Shelton, 789 F.Supp. 1367, 1372-73 (M.D.La.1992); New Maine Nat. Bank v. Reef, 765 F.Supp. 763, 767 (D.Me.1991). The Court in Shelton noted:

The Court recognizes the jurisdictional void presented by its interpretation of FIRREA since it is possible to find subject matter jurisdiction over a case while not being able to adjudicate affirmative defenses and counterclaims which arise in the same law suit. However, this anomaly does not allow the Court to create jurisdiction where Congress has expressly forbidden the Court to exercise such authority.

789 F.Supp. 1367, 1373. Therefore, the fact that defendant makes his claims as counterclaims has no bearing on the applicability of the mandatory claims procedure.

B. The Jurisdictional Bar

There is a great deal of confusion amongst the courts on how broadly to interpret the jurisdictional bar of section 1821(d)(13)(D) and the claims procedure of section 1821(d)(3-10). Some courts have read the language as a bar to any suit that would result in a claim being satisfied out of the failed institution's assets, regardless of the timing or source of the claim, see e.g. Rosa v. Resolution Trust Corp., 938 F.2d 383, 393-4 (3rd Cir.1991), while others have limited the coverage of those sections to creditors of the failed institution before it entered receivership. See e.g. Rechler Partnership v. Resolution Trust Corp., 1990 U.S.Dist. LEXIS 18734 at *4-5 (D.N.J. September 21, 1990). A recent First Circuit decision may indicate a preference for a more narrow approach. Heno v. Federal Deposit Insurance Corp., 996 F.2d 429, 434 (1st Cir.1993) (Although the decision is hardly conclusive on the point, the Court seems to favor the Rechler court's view that the administrative claims procedure is directed to claims existing before the appointment of the receiver).

An extremely well reasoned approach to this problem has recently been published by Judge Leif M. Clark of the Western District of Texas Bankruptcy Court. In Re Scott, 157 B.R. 297 (Bankr.W.D.Tex.1993). This Court finds that reasoning sound and consistent with the statute as well as the First Circuit's language in Heno. The decision is one of the first to make an in depth examination and interpretation of the jurisdictional bar which complies with the expressed Congressional mandate to resolve claims quickly through the claims procedure, while at the same time protecting against possible constitutional infirmities.

Although drafted in two paragraphs, the jurisdictional bar breaks down into three distinct provisions.¹ The first provision covers "any claim ... from ... the assets of any depository institution for which the Corporation has been appointed receiver...." 12 U.S.C. § 1821(d)(13)(D)(i); the second includes "any action seeking a determination of rights with respect to the...