FIRST SAV., ETC. v. FIRST FED S. & L., ETC.

• Decision Date: 21 January 1982
• Docket Number: Civ. No. 81-0155.
• Citation: 547 F. Supp. 988
• Parties: FIRST SAVINGS & LOAN ASSOCIATION, a Hawaii savings and loan association; Federated Finance Co., Ltd.; Investors Finance Corp.; and Charter Financial Corp., Plaintiffs, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF HAWAII, a federal corporation; Federal Savings & Loan Insurance Corporation, an instrumentality of the United States, in its capacity as an insurance corporation, and in its capacity as Receiver of First Savings and Loan Association; United States of America; Federal Home Loan Bank Board, an instrumentality of the United States; Jay Janis, member of Federal Home Loan Bank Board; John H. Dolton, member of Federal Home Loan Bank Board; Andrew DiPrete, member of Federal Home Loan Bank Board; Lawrence Hayes, Gerald L. Reese; Tany S. Hong, individually and in his capacity as Director of Regulatory Agencies and Bank Examiner, State of Hawaii, and in his capacity as Receiver of First Savings and Loan Association; and Mary Bitterman, in her capacity as Director of Regulatory Agencies and Bank Examiner, State of Hawaii, and in her capacity as Receiver of First Savings and Loan Association, Defendants.
• Court: U.S. District Court — District of Hawaii

547 F. Supp. 988

FIRST SAVINGS & LOAN ASSOCIATION, a Hawaii savings and loan association; Federated Finance Co., Ltd.; Investors Finance Corp.; and Charter Financial Corp., Plaintiffs, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF HAWAII, a federal corporation; Federal Savings & Loan Insurance Corporation, an instrumentality of the United States, in its capacity as an insurance corporation, and in its capacity as Receiver of First Savings and Loan Association; United States of America; Federal Home Loan Bank Board, an instrumentality of the United States; Jay Janis, member of Federal Home Loan Bank Board; John H. Dolton, member of Federal Home Loan Bank Board; Andrew DiPrete, member of Federal Home Loan Bank Board; Lawrence Hayes, Gerald L. Reese; Tany S. Hong, individually and in his capacity as Director of Regulatory Agencies and Bank Examiner, State of Hawaii, and in his capacity as Receiver of First Savings and Loan Association; and Mary Bitterman, in her capacity as Director of Regulatory Agencies and Bank Examiner, State of Hawaii, and in her capacity as Receiver of First Savings and Loan Association, Defendants.

Civ. No. 81-0155.

United States District Court, D. Hawaii.

January 21, 1982.

COPYRIGHT MATERIAL OMITTED

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Randolph R. Slaton, Honolulu, Hawaii, for plaintiffs.

Steven H. Levinson, Diane D. Hastert, Honolulu, Hawaii, for First Federal Sav. & Loan of Hawaii, FSLIC and FHLBB.

James H. Dannenberg, Deputy Atty. Gen., Honolulu, Hawaii, for defendants Hong and Bitterman.

Jeffrey M. Werthan, Asst. U. S. Atty., Honolulu, Hawaii, for defendants U. S. A., Janis, Dolton, DiPrete, Hayes and Reese.

DECISION

CLAIBORNE, Chief Judge.

This is a suit initiated by the First Savings and Loan Association, two of its former shareholders, Investors Financial Corporation and Charter Financial Corporation, and a pledgee of First Savings stock, Federated Financial Company.

The Defendants are the United States, the Federal Savings and Loan Insurance Corporation, referred to hereinafter in this decision as FSLIC; and the Federal Home Loan Bank Board will be referred to throughout this decision as FHLBB; the former Bank Board Chairman Jay Janis; the Bank Board members John Dolton, Andrew DiPrete; the FSLIC Associate General Counsel Lawrence Hayes; Gerald Reese, the FSLIC Chief Asset Management Division; the Hawaii Attorney General Tany Hong; the Hawaii Regulatory Agency Director Mary Bitterman, and the First Savings and Loan Association of Hawaii.

The Defendants United States, Jay Janis, Dolton, DiPrete, Hayes and Reese have brought a motion to dismiss or, in the alternative, a motion to quash returns of service.

It appears on or about January 10, 1980, the State of Hawaii, through Tany Hong, the Director of Regulatory Agencies of Hawaii, imposed certain restrictions on First Savings in reference to the face amounts of the certificate accounts. On February 14, 1980, FSLIC took similar actions through a cease and desist order. On February 25, 1980, Hong and FSLIC Counsel Hayes secured a co-appointment of Hong as receiver for First Savings.

On the very same day, FHLBB, through members Janis, Dolton and DiPrete, appointed FSLIC as receiver of First Savings and Reese as a special representative. As co-receivers, Hong and FSLIC then sold the assets of First Savings to First Federal.

First Savings filed a complaint on February 26, 1980, alleging various state and federal violations stemming from alleged conspiratorial conduct of Hong and FSLIC. An amended complaint was then filed on February 28, 1980, and a second amended complaint was then filed and denied. On May 7, 1981, the present complaint was filed which added some new Plaintiffs and some new Defendants and several new causes of action.

Defendants United States, Janis, Dolton, DiPrete, Hayes and Reese have filed motions to dismiss and to quash the service. The individual Defendants Dolton, DiPrete and Hayes were served by mail. Reese has filed an affidavit that he was not personally served, as stated during arguments on this motion. I believe that it was stated during arguments that Reese was not personally served. This position was vigorously maintained by counsel for Defendants, and I believe this statement is true. There is absolutely no basis for in personam jurisdiction by mail service. So the motion to quash service as to the individual Defendants is hereby granted.

Now, furthermore, were I to hold that mail service of these Defendants establishes in personam jurisdiction, the complaint nevertheless still fails to state a claim against these Defendants upon which any relief could be granted.

Paragraphs 4 and 7, which have been designated as nonconstitutional claims, do not allege diversity required by Section 1332(a) of Title 28. Furthermore, these Defendants would enjoy absolute immunities to such claims as alleged in paragraphs 3 and 7. The Count II claims of violation of antitrust laws are untenable.

The Count III claims of civil rights violations should be dismissed since it is clear on its face that the Defendants were acting under color of federal and not state law.

The conspiratorial claims, as alleged in I and III, are such broad conclusions that they could not with the wildest imagination, in my opinion, be said to state a claim upon which any relief could be granted.

The Defendants Federal Savings and Loan Insurance Corporation, Federal Home Loan Bank Board, First Federal Savings and Loan Association of Hawaii, pursuant to Federal Rules of Civil Procedure, rules 12(c) and 56, move this Court for an order granting judgment on the pleadings in their favor or, in the alternative, for summary judgment upon the following grounds:

One, that the complaint hereby constitutes a suit against the United States, to which the United States has not consented.

Two, that this Court lacks jurisdiction over the subject matter of the complaint.

Three, that the complaint is barred under the doctrine of res judicata and collateral estoppel.

And four, that the verified complaint fails to state a claim against the Defendants Federal Savings and Loan Insurance Corporation, Federal Home Loan Bank Board, and First Federal Savings and Loan Association of Hawaii upon which relief can be granted.

I will first take up the Defendants' claim that the claim is barred under the doctrine of res judicata and collateral estoppel.

On August 4, 1981, Judge King entered an order dismissing the claims against Federal Savings and Loan Insurance Corporation and First Federal Savings and Loan Association of Hawaii as well as a judgment in First Savings and Loan v. First Federal Savings and Loan Association, 531 F.Supp. 251 (D.Hawaii, 1981).

As a consequence of the order and judgment, Judge King ordered and adjudged dismissal of the damage claims against First Federal Savings and Loan Association of Hawaii for failure to state a claim upon which relief can be granted; and all claims against the Federal Savings and Loan Corporation and First Federal Savings and Loan Association of Hawaii were thereby dismissed.

The Defendants now argue that Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210, supports the proposition that collateral estoppel and res judicata are applicable to the case now before the Court. The obvious interpretation of Montana is that the doctrine of res judicata and collateral estoppel only applies to prior adjudications on the merits of the claim and where an issue has actually been determined; therefore, the instant case cannot be barred by the related action, that is, Civil No. 80-0090, because that case was dismissed for the failure to state a claim upon which relief can be granted.

I hold that a dismissal pursuant to Rule 12(b)(6) merely goes to the form of the pleadings and the adequacy and sufficiency of the complaint, and it stops there. The prior suit does not act as a bar to the instant case as it was neither an adjudication on the merits nor a determination of any legal issue. Rather, as I have said, the prior claim was dismissed for insufficiency in the pleadings which would render the doctrine of res judicata and collateral inapplicable.

The Defendants further argue that since Federated, Investors and Charter are privies of First Savings, the doctrine of res judicata and collateral estoppel attach. Defendants rely on Cramer v. General Telephone and Electronics, 582 F.2d 259 (3rd Cir. 1978). I find certain distinguishable features in Cramer to the case now before the Court. Primarily that, in Cramer, the first suit, the corporation prevailed, and, the second suit was a derivative action brought by one of the stockholders of the corporation.

The case of Blonder-Tongue v. University Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 I believe applies with equal force to the case now before the Court. There the Supreme Court held that some of the litigants — and they are speaking of those who never appeared in prior action — may not be collaterally estopped without litigating the issue. They never had a chance to present their evidence and arguments on the claim, and so, therefore, due process prohibits estopping them despite one or more existing adjudications of the identical issue which stand squarely against their position.

I therefore, conclude that Federated, Investors and Charter are not barred by res judicata nor collateral estoppel since they never appeared in the prior action and did not have a chance to litigate their claim.

The Defendants' argument that their alleged status as privies of First Savings bars their claim is, in my opinion, unreasonable. Privity is not established by the mere fact that persons may happen to be interested in the same question or in proving the same state of facts. A party privy is one who is directly interested in the subject matter and had a right to make a defense or to control in some way the proceedings and to appeal from the judgment.

True, all ...