FDIC v. Updike Bros., Inc.

• Decision Date: 08 February 1993
• Docket Number: No. 92-CV-0115-J.,92-CV-0115-J.
• Citation: 814 F. Supp. 1035
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, receiver for Guaranty Federal Bank, F.S.B., formerly known as Guaranty Federal Savings and Loan, Plaintiff, v. UPDIKE BROTHERS, INC., et al., Defendants.
• Court: U.S. District Court — District of Wyoming

814 F. Supp. 1035

FEDERAL DEPOSIT INSURANCE CORPORATION, receiver for Guaranty Federal Bank, F.S.B., formerly known as Guaranty Federal Savings and Loan, Plaintiff, v. UPDIKE BROTHERS, INC., et al., Defendants.

No. 92-CV-0115-J.

United States District Court, D. Wyoming.

February 8, 1993.

Bradley T. Cave, Patrick R. Day, Susan E. Laser-Bair, Holland & Hart, Cheyenne, WY, for F.D.I.C.

Douglas G. Madison, Dray, Madison & Thompson, Cheyenne, WY, for Updike Bros., Inc.

Fred W. Dilts, III, Douglas, WY, for Leon Towell.

Blair J. Trautwein, Hathaway, Speight, Kunz, Trautwein & Barrett, Cheyenne, WY, David L. Osborn, Wood, Herzog, Osborn & Bloom, P.C., Fort Collins, CO, for Lonetree Village Mobile Home Park, Betzing, Paterson and Paterson Inv. Co. Numbers 1 & 2, a general partnership, Robert B. Paterson and Arthur F. Paterson.

James A. Hardee, Douglas, WY, for CNI Inc.

Mary L. Scheible, Asst. Atty. Gen., Wyo. Atty. Gen., Cheyenne, WY, for intervenor Wyo. Atty. Gen.

ORDER DISMISSING THE DEFENDANTS' AFFIRMATIVE DEFENSES, AND DENYING DEFENDANTS' MOTIONS

ALAN B. JOHNSON, Chief Judge.

This matter comes before the Court on the following motions: plaintiff FDIC's motion for summary judgment against all defendants; a cross motion by defendant Updike Brothers, Inc., for partial summary judgment against the FDIC; and motions by defendants, Updike Brothers, Inc., Leon Towell, and Lone Tree Village, et al., (the joint venturers) to amend their answers by interlineation and for leave to file counterclaims; and finally, a motion by defendants Lonetree Village, et al., to dismiss or in the alternative to stay the pending action. A hearing was held on December 31, 1992.

I. GENERAL BACKGROUND

The plaintiff Federal Deposit Insurance Corporation ("FDIC"), as receiver for Guaranty Federal Bank ("Guaranty"), filed this lawsuit seeking to recover a deficiency on a promissory note and mortgage executed by Updike Brothers, Inc. ("Updike").

In 1976 Updike secured a loan from Guaranty in order to develop a mobile home park in Douglas, Wyoming. As security for a note evidencing the loan, Updike executed a mortgage which encumbered the development.

Updike sold the property to Lonetree Village Mobile Home Park (a joint venture comprised of C.N.I., Inc., and Betzing, Paterson and Paterson Investment Companies 1 and 2, general partnerships) (hereinafter, sometimes collectively referred to as "Lonetree"). Lonetree assumed the payments on the note. The assumption agreement was modified twice resulting in a reduction of the monthly payments and the joint venturers' joint and several liability for payments.

Lonetree sold the property to Leon Towell, who executed an assumption agreement without release. Lonetree remained liable for payments on the promissory note. Towell defaulted on the payments and the FDIC foreclosed and sold the property. Now the FDIC sues for the deficiency.

Defendant C.N.I., Inc. generally denies the FDIC's allegations and affirmatively alleges estoppel and laches. Additionally, C.N.I., Inc., cross-claims against Leon Towell and alleges that Towell is solely responsible for the obligations on the promissory note and mortgage.

Defendant Leon Towell generally denies the FDIC's allegations and affirmatively alleges breach of good faith and fair dealing, estoppel and defective foreclosure. Additionally, Towell moves to amend his answer to allege that the FDIC breached an implied covenant of good faith and fair dealing with respect to the defendant in mistakenly tendering its default letter and, further, that the FDIC violated its alleged duty of diligence, good faith and fair dealing in that the foreclosure was not conducted in a timely manner.

Defendant Updike generally denies the FDIC's allegations and affirmatively alleges limited liability as a surety, estoppel and that the plaintiff made drastic changes to the defendant's liability without its consent. Updike also has filed a cross-claim against the co-defendants seeking indemnification. Additionally, Updike moves to amend its answer to allege two additional affirmative defenses and to counterclaim based on substantially the same grounds alleged by Towell, e.g., breach of covenant of good faith and fair dealing and violation of duty of diligence, good faith and fair dealing.

Furthermore, defendant Updike asserts that Wyo.Stat. § 34-4-103(a)(iv), which requires that the written notice of the intent to foreclose the mortgage be mailed only to the record owner and the person in possession, is unconstitutional in that it violates the due process clauses of the 5th and 14th Amendments of the United States Constitution and Article 1 § 6 of the Wyoming Constitution. Accordingly, this Court has allowed the State of Wyoming to intervene and become a party in this action.

The defendants Lonetree Village Mobile Home Park; Betzing, Paterson and Paterson Investment Companies 1 and 2; Robert B. Paterson and Arthur F. Paterson generally deny the plaintiff's allegations and affirmatively allege lack of good faith at foreclosure sale, that the foreclosure sale was not "commercially reasonable" under the U.C.C., ambiguity, failure to provide proper notice of foreclosure, failure to mitigate damages and that individual partners are not jointly and severally liable for debts of a partnership. Additionally, they join in Updike's motion to amend their answer and to file a counterclaim.

The FDIC has filed a motion for summary judgment against all of the defendants. Among other things, the FDIC asserts that this Court lacks subject matter jurisdiction over the defendants' counterclaims and affirmative defenses under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). The FDIC directs our attention to three recent orders of this Court. In those orders we found that certain claims against the FDIC¹ are expressly exempted from the Court's subject matter jurisdiction until the administrative claims procedure prescribed in FIRREA is completed. See relevant orders in Resolution Trust v. Love, 92-CV-1018-J, 1992 WL 455432 (D.Wyo. November 25, 1992); Nepstad v. FDIC, 92-CV-200-J, 1992 WL 455434 (D.Wyo. November 17, 1992); FDIC v. Coulter, 91-CV-1047-J, 1992 WL 455433 (D.Wyo. September 22, 1992).

The defendants assert that FIRREA cannot bar this Court's consideration of their affirmative defenses and counterclaims because FIRREA does not apply retroactively. Alternatively, the defendants contend that their various affirmative defenses and counterclaims are not "claims" subject to the exhaustion requirement of FIRREA. In the event that FIRREA is found to be applicable, the defendants contend that the FDIC has waived the exhaustion requirement by failing to provide them with actual notice of the need to present claims pursuant to FIRREA's claims procedure. Should the Court find that it has no jurisdiction over the defendants' claims and affirmative defenses, they move for a dismissal or, alternatively, for a stay of the FDIC's deficiency action pending exhaustion of administrative review.

Additionally, Updike has filed a cross-motion for partial summary judgment against the FDIC.

The Court will first address FIRREA's applicability to this case, because the arguments pertaining thereto address issues relating to the existence of subject matter jurisdiction. We will address the motions for summary judgment in a separate order.

II. FIRREA

In addressing the defendants' various contentions we turn to the language of the Financial Institutions Reform, Recovery, and Enforcement Act itself. The Court is guided by the law of this circuit pertaining to statutory construction. We have a duty to construe FIRREA consistent with the intent of Congress as expressed in the plain meaning of its language. When the terms of the statute are unambiguous, the court's analysis will generally go no further. Aulston v. U.S., 915 F.2d 584, 589 (10th Cir.1990). Specific words within the statute are not to be read in isolation of the remainder of the entire statutory scheme; rather, we look to the provisions of the whole law, and to its object and policy. Id. Additionally, the Court may consult legislative history as a secondary source of a statute's meaning. State of Colo. v. Idarado Min. Co., 916 F.2d 1486, 1494 (10th Cir.1990).

Congress enacted FIRREA in 1989 as a response to massive losses which were occurring in the nation's thrift industry and its deposit insurance fund. H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess. 1, 302, reprinted in 1989 U.S.Code Cong. & Admin.News 86, 98. Congress recognized that consumer confidence in the nation's savings and loan system was diminishing as a result of the crisis and that immediate resolution of the situation was imperative. Id. at 305, reprinted at 101. In order to achieve this vital objective, Congress granted the receivers of failed institutions broad powers to enable them to address all problems posed by a failing financial institution. Id. at 330-31, reprinted at 126-27; see also 12 U.S.C. § 1821(d) (specifying the powers of the corporation as conservator or receiver).

Congress projected that the full thirty year cost of cleaning up the thrift industry would be $335 billion and put that cost in perspective by noting that the entire Marshall Plan to rebuild Europe after World War II cost only $13.3 billion. H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess. 1, 514, reprinted in 1989 U.S.Code Cong. & Admin.News 86, 308. Congress also noted that several factors could serve to increase this amount, including higher than expected costs for case resolutions. Id. at 515, reprinted at 309. Therefore, Congress enacted a scheme whereby the FDIC was empowered to administer a streamlined claims procedure designed to dispose of the bulk of claims against failed financial institutions expeditiously and fairly. Id. at 419, reprinted at 215. Congress sought to tailor the FIRREA claims procedure to be consistent with the reasoning and concerns...