Global Financial Services, Inc. v. Duttenhefner, 970215

• Decision Date: 05 March 1998
• Docket Number: No. 970215,970215
• Parties: GLOBAL FINANCIAL SERVICES, INC., as assignee for Midwest Federal Savings Bank, Plaintiff and Appellant, v. Michael DUTTENHEFNER, Defendant and Appellee. Civil
• Court: North Dakota Supreme Court

Page 667

575 N.W.2d 667

1998 ND 53

GLOBAL FINANCIAL SERVICES, INC., as assignee for Midwest

Federal Savings Bank, Plaintiff and Appellant, v. Michael DUTTENHEFNER, Defendant and Appellee.

Civil No. 970215

Supreme Court of North Dakota.

March 5, 1998.

Dean F. Bard (argued), Mandan, and Richard G. Hurdelbrink (on brief), of Hurdelbrink Law Firm, Mandan, for plaintiff and appellant.

Patrick A. Donovan (argued), of Richardson, Lange & Donovan, Hazen, for defendant and appellee.

MESCHKE, Justice.

¶1 Global Financial Services, Inc. (Global) appealed a summary judgment dismissing its action to collect $5,786.56 from Michael Duttenhefner for the balance due on an installment loan. We conclude Global's action is not barred by the state statute of limitations. We reverse the summary judgment and remand for trial.

¶2 On August 6, 1988, Duttenhefner entered into a retail installment contract with Dan Porter Motors, Inc. to finance the purchase of a car. Porter assigned the contract to Midwest Federal Savings Bank of Minot. After making nine of the monthly installment payments, Duttenhefner defaulted and returned the car to Midwest on September 7, 1989. On October 26, 1989, Midwest sold the car but received less than the debt owed by Duttenhefner.

¶3 On September 21, 1990, Resolution Trust Corporation (RTC) was appointed receiver for Midwest. On January 1, 1991, Global purchased a number of notes from RTC, including the Duttenhefner installment contract. On September 3, 1996, Global sued Duttenhefner for the deficiency on the installment contract.

¶4 Both litigants moved for summary judgment. Duttenhefner argued Global's action was barred because the state six-year statute of limitations in NDCC 28-01-16(1) governs and the claim accrued at least by September 7, 1989, when Midwest could have sued for breach of the installment contract. Global argued its action is not barred because the federal six-year statute of limitations, applicable to RTC under 12 U.S.C. 1441a(b)(4)(A) and 1821(d)(14), governs and this suit was brought within six years from the date RTC was appointed receiver. The trial court agreed with Duttenhefner and dismissed Global's action. Global appealed.

¶5 Summary judgment is a procedure for the prompt and expeditious disposition of a controversy without trial if either litigant is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving disputed facts would not alter the result. Ohio Farmers Ins. Co. v. Dakota Agency, 551 N.W.2d 564, 565 (N.D.1996). As Jensen v. North Dakota Workers Comp. Bureau, 1997 ND 107, p 9, 563 N.W.2d 112, explained, interpretation of a statute presents a question of law fully reviewable by this Court.

¶6 Congress enacted the federal statute of limitations relevant here as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. 101-73, 103 Stat. 183 (1989). The relevant part of the statute, 12 U.S.C. 1821(d)(14), says:

(14) Statute of limitations for actions brought by conservator or receiver

(A) In general

Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be--

(i) in the case of any contract claim, the longer of--

(I) the 6-year period beginning on the date the claim accrues; or

(II) the period applicable under State law;

* * * * * *

(B) Determination of the date on which a claim accrues

For purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in such subparagraph shall be the later of--

(i) the date of the appointment of the Corporation as conservator or receiver; or

(ii) the date on which the cause of action accrues.

Although the statute refers to claims by "the Corporation," defined in FIRREA as the Federal Deposit Insurance Corporation (FDIC), 12 U.S.C. 1441a(b)(4)(A) makes this statute of limitations applicable also to RTC.

¶7 Although NDCC 28-01-16(1), like the federal statute of limitations, sets a six-year limitation for bringing an action, the difference between the statutes lies in when the claim accrues. Under the federal statute, the limitation period is extended beyond the six years allowed under state law because the six years begin to run when RTC became receiver. In this case, if the state statute governs, Global's action was barred. Conversely, if the federal statute governs, Global's action was timely.

¶8 FIRREA does not expressly say whether an assignee of FDIC or RTC acquires the right to rely on the federal statute of limitations. However, a body of caselaw has developed on this question. Although the vast majority of the cases have concluded an assignee does acquire the right to rely on the federal statute of limitations, the reasoning used to reach that conclusion has varied.

¶9 Most of the cases that have applied the federal statute of limitations used federal common law rules of assignment and a public policy favoring the broadest possible market for the assets of failed banks and federally insured depository institutions. Use of federal common law stems from Justice Jackson's concurrence in D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447, 468, 62 S.Ct. 676, 684, 86 L.Ed. 956 (1942) (Jackson, J., concurring), where he suggested courts use common law principles to fill inevitable statutory gaps: "we may make our own law from materials found in common-law sources." Because the Restatement (Second) of Contracts § 336 (1981) embraced the common law principle that an assignee stands in the shoes of the assignor, courts have reasoned this principle, combined with public policy, justifies extending the benefit of the federal statute of limitations to assignees. See FDIC v. Bledsoe, 989 F.2d 805, 809-11 (5th Cir.1993); Mountain States Financial Resources v. Agrawal, 777 F.Supp. 1550, 1552-53 (W.D.Okl.1991); Tivoli Ventures, Inc. v. Bumann, 870 P.2d 1244, 1248-49 (Colo.1994); Twenty First Century Recovery, Ltd. v. Mase, 279 Ill.App.3d 660, 216 Ill.Dec. 513, 516-18, 665 N.E.2d 573, 576-78 (1996); Cadle Co. II, Inc. v. Lewis, 254 Kan. 158, 864 P.2d 718, 720-24 (1993), cert. denied, 511 U.S. 1053, 114 S.Ct. 1613, 128 L.Ed.2d 340 (1994); Central States Resources v. First Nat., 243 Neb. 538, 501 N.W.2d 271, 277-78 (1993); Investment Co. of the Southwest v. Reese, 117 N.M. 655, 875 P.2d 1086, 1089-95 (1994); National Enterprises, Inc. v. Caccia, 172 Misc.2d 857, 662 N.Y.S.2d 164, 165 (Sup.App.1997); Jon Luce Builder, Inc. v. First Gibraltar Bank, 849 S.W.2d 451, 453-55 (Tex.Ct.App.1993). This extensive line of precedents holds the extended federal limitation benefits assignees of FDIC and RTC.

¶10 One notable decision rejects that reasoning. In WAMCO, III, Ltd. v. First Piedmont Mortg., 856 F.Supp. 1076 (E.D.Va.1994), the court held an assignee could not use the federal statute of limitations because it conferred a right personal to RTC that was not transferable to RTC's assignee. The court reasoned the plain language of the statute made the limitations period applicable only to RTC in its status as a receiver, thus defining the right as "personal" to RTC. WAMCO, 856 F.Supp. at 1086. The court further relied on what it described as the "fundamental circumscribing principle" of the common law of assignment that " 'an assignment ordinarily carries with it all rights, remedies and benefits which are incidental to the thing assigned, except those which are personal to the assignor and for his benefit only.' " WAMCO (quoting 6A C.J.S. Assignments § 76 (1975)). The court opined that this principle "would apply with even greater force where the limitation is imposed by statute and where, as here, the statute makes clear that the incidental right, remedy or benefit is in fact personal in nature and for the benefit of the assignor when acting in a certain capacity." WAMCO. The WAMCO reasoning has generally been rejected by the courts that have considered its view.

¶11 Recently, the United States Supreme Court decided a different case with an opinion that raises serious questions about the usual reasoning in the assignee-benefits line of decisions. In O'Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994), the FDIC, as receiver, sued a law firm that had been counsel to a failed California savings and loan association, asserting malpractice and breach of fiduciary duties. The law firm raised a defense under California law that the knowledge of the bank's officers was imputed to the bank, and thus to the FDIC, thereby estopping the FDIC from recovery because it stood in the shoes of the failed bank. The FDIC argued FIRREA required the development of federal common law for the issue and similar ones because of the important federal interest in regulating financial institutions. A unanimous Supreme Court flatly rejected this argument.

¶12 " 'There is no federal general common law,' " the Court declared. O'Melveny, 512 U.S. at 83, 114 S.Ct. at 2053 (quoting Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938)). The Court pointed out cases needing federal rules of decision are " 'few and restricted,' " and courts should create federal rules only "where there is a 'significant conflict between some federal policy or interest and the use of state law.' " O'Melveny, 512 U.S. at 86, 114 S.Ct. at 2055 (internal citations omitted). The Court held the desire for uniformity of law, the possible depletion of the deposit insurance fund, or disservice to the federal insurance program were unsatisfactory reasons to create a federal rule of decision in that case. According to the Court, the proper law to decide the question raised by the O'Melveny defense was the law of California.

¶13 Thus, O'Melveny overruled Justice Jackson's suggestion in D'Oench, Duhme that courts make free use of federal common law...