Federal Deposit Ins. Corp. v. Nichols

• Citation: 885 F.2d 633
• Decision Date: 15 September 1989
• Docket Number: No. 88-6040,88-6040
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff-Appellant, v. Jerrie R. NICHOLS, individually and dba: Bay Business, King & I Shoppe, Defendant, and Downey Savings & Loan Association, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 633

885 F.2d 633

58 USLW 2225

FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff-Appellant, v. Jerrie R. NICHOLS, individually and dba: Bay Business, King & I Shoppe, Defendant and Downey Savings & Loan Association, Defendant-Appellee.

No. 88-6040.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 3, 1989.

Decided Sept. 15, 1989.

John J. Wessling, Federal Deposit Ins. Corp., Legal Div., Irvine, Cal., for plaintiff-appellant.

Mark E. Aronson, Anderson, McPharlin & Conners, Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before WALLACE and FLETCHER, Circuit Judges, and MUECKE, ^* District Judge.

WALLACE, Circuit Judge:

The Federal Deposit Insurance Corporation (FDIC) appeals from a judgment of dismissal in favor of defendant Downey Savings and Loan Association (Downey). The district court's subject matter jurisdiction, which is disputed in this case, was invoked under 12 U.S.C. Sec. 1819 (Fourth). We have jurisdiction over this timely appeal pursuant to 28 U.S.C. Sec. 1291. We reverse and remand.

I

The procedural backdrop to this case is somewhat complicated. On January 27, 1983, Heritage Bank (Heritage), the FDIC's predecessor in interest, filed an action in California state court against various defendants: Nichols, both individually and doing business as King & I Shoppe and Bay Business; Downey, Nichols's employer; Citibank; and ten Does. Heritage sought to recover $198,121.23 it had allegedly advanced in October 1982 to Nichols, Bay Business and King & I Shoppe on checks drawn upon Downey. According to Heritage, the checks subsequently were dishonored and returned to Heritage unpaid and marked "undue enrichment."

Heritage's state complaint alleged that Downey had failed adequately to supervise its employee Nichols, thereby allowing her to take possession of bank checks payable to Downey, Nichols, Bay Business, and King & I Shoppe and to present these checks for payment to Heritage. The complaint also alleged that Downey and Citibank had wrongfully dishonored the checks. On the basis of these allegations, Heritage asserted claims for breach of a drawer's contract, wrongful dishonor, negligence, and a common count.

On March 16, 1984, the California Superintendent of Banks, acting pursuant to state law, ordered Heritage closed and took possession of its assets and affairs. See Cal.Fin.Code Secs. 3100 et seq. (West 1989). The Superintendent tendered to the FDIC the appointment as receiver of Heritage, which the FDIC, as required by statute, accepted. See 12 U.S.C. Sec. 1821(e); Cal.Fin.Code Sec. 3221 (West 1989). The FDIC as receiver held all of Heritage's assets, including the asset which is the subject of this lawsuit--Heritage's claims against defendants. On August 28, 1985, the FDIC's legal division substituted as Heritage's attorneys of record.

Discovery proceeded in the state action. Under California law, a case which is not brought to trial within five years of its commencement is subject to mandatory dismissal. Cal.Civ.Proc.Code Sec. 583.310 (West Supp.1989). With the five-year deadline drawing close, Heritage filed two motions to set the case for trial. Both motions were denied. Heritage's motion to substitute the FDIC as plaintiff was also denied.

On December 23, 1987, Downey filed a motion to dismiss for failure to bring the case to trial within five years. The five-year period would elapse on January 27, 1988. The motion was scheduled to be heard on February 9, 1988. On January 7, 1988, Heritage sought from the California Court of Appeal a writ of mandamus requiring the trial court to set a trial date. The appellate court declined to issue the writ on January 14, 1988.

On February 2, 1988, after the expiration of the five-year period but before the hearing on Downey's motion to dismiss, the FDIC in its capacity as receiver sold the claims to the FDIC in its corporate capacity. This procedure is authorized by statute. See 12 U.S.C. Sec. 1823(d), (e). As a result of this transaction, Heritage and the FDIC as receiver no longer held any interest in the asset and therefore voluntarily dismissed the state case without prejudice on February 5, 1988.

On the same day that the dismissal was entered in state court, the FDIC in its corporate capacity filed this action in federal court. The FDIC's complaint contained claims for wrongful dishonor of checks, negligence, and money had and received. The defendants were the same as in Heritage's state court action with the exception of Citibank and the Does, which were omitted from the federal complaint. The district court's subject matter jurisdiction was invoked under 12 U.S.C. Sec. 1819 (Fourth), which grants original jurisdiction of "[a]ll suits of a civil nature at common law or in equity to which the [FDIC as] Corporation shall be a party."

Nichols failed to answer the complaint and her default was entered. On March 15, 1988, Downey moved for a judgment on the pleadings, and in the alternative for dismissal on several grounds. In support of its motion to dismiss, Downey argued that the intra-FDIC transaction was a "sham" meant solely to circumvent the state-law time limits, and that the FDIC had engaged in improper forum shopping. Alternatively, Downey argued that the FDIC's claims should be dismissed because the statute of limitations had run. A hearing on the motion was held on April 11, 1988.

On April 29, 1988, the district court granted Downey's motion to dismiss. The court reasoned that the FDIC's "actions in voluntarily dismissing an identical lawsuit in State Court only to bring it in Federal Court indicates improper forum shopping." The court concluded that under these circumstances, it would "decline[] to exercise its jurisdiction."

II

Downey moved for dismissal on two alternative grounds: (1) lack of subject matter jurisdiction, Fed.R.Civ.P. 12(b)(1); and (2) failure to state a claim for which relief could be granted, Fed.R.Civ.P. 12(b)(6). Simultaneously, Downey also moved pursuant to Fed.R.Civ.P. 12(c) for a judgment on the pleadings. The district court acted upon Downey's "Motion to Dismiss." The key to its order is the statement that it "declined to exercise its jurisdiction" since the FDIC's action's constituted "improper forum shopping." The district court apparently concluded that it had subject matter jurisdiction, but declined to exercise it. We interpret the order, therefore, as a decision to abstain from jurisdiction despite the presence of proper subject matter jurisdiction. We will address the issues of subject matter jurisdiction and abstention in turn.

A.

We review independently the district court's assertion of subject matter jurisdiction. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 1312, 103 L.Ed.2d 581 (1989). When considering a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the district court "is not restricted to the face of the pleadings but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." Id. Here, however, the district court apparently considered only the pleadings. Under these circumstances, where the district court did not put the FDIC to its full proof on the jurisdictional issue, we need only consider whether the FDIC made out a prima facie case for the existence of subject matter jurisdiction. Societe de Conditionnement en Aluminium v. Hunter Engineering Co., 655 F.2d 938, 941-42 (9th Cir.1981).

"The FDIC is an instrumentality created by Congress to promote stability and restore and maintain confidence in the nation's banking system." FDIC v. Bank of Boulder, 865 F.2d 1134, 1136 (10th Cir.1988) (Bank of Boulder ). To achieve these goals, the FDIC acts in its corporate capacity to insure bank deposits, undertaking an obligation to pay depositors when an insured bank fails. Id.; see also FDIC v. Sumner Financial Corp., 602 F.2d 670, 679 (5th Cir.1979) (Sumner ). In addition, the FDIC is authorized by statute to act as a receiver for an insolvent state bank under certain circumstances. 12 U.S.C. Sec. 1821(e). When acting as a receiver for an insolvent state bank, the FDIC possesses "all the rights, powers and privileges granted by State law to a receiver of a State bank." Id. Thus, under federal law, the FDIC is empowered to act in " 'two entirely separate and distinct capacities' in proceedings involving an insured state bank." Sumner, 602 F.2d at 679, quoting FDIC v. Abraham, 439 F.Supp. 1150, 1151 (E.D.La.1977); see also FDIC v. Glickman, 450 F.2d 416, 418 (9th Cir.1971) (recognizing FDIC's "dual capacity as federal insurer of deposits and as liquidating agent for the bank"); FDIC v. de Jesus Velez, 678 F.2d 371, 374 (1st Cir.1982) (Velez ) ("It seems apparent that the FDIC must be permitted to operate in a dual capacity simultaneously, as a receiver and an insurer, to carry out its functions as a receiver, liquidator, and insurer.").

Under 12 U.S.C. Sec. 1819 (Fourth), Congress has granted the FDIC the power "[t]o sue and be sued, complain and defend, in any court of law or equity, State or Federal." 12 U.S.C. Sec. 1819 (Fourth). Section 1819 (Fourth) further provides that "[a]ll suits of a civil nature at common law or in equity to which the [FDIC as] Corporation shall be a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction thereof, without regard to the amount in controversy...." Id. Section 1819 (Fourth)'s grant of subject matter jurisdiction is "very expansive ..., evidencing Congress' desire that cases involving FDIC should generally be heard and decided by the federal courts." Sumner, 602 F.2d at 678.

Section 1819 (Fourth)'s "unrestricted grant of jurisdiction over civil actions to which the FDIC is a...