Herbst v. Resolution Trust Corp.

• Decision Date: 24 February 1993
• Docket Number: No. 91-2254,91-2254
• Parties: , 61 USLW 2567 HERBST et al., Appellees, v. RESOLUTION TRUST CORPORATION, as Receiver for First Savings & Loan Company, Massillon, Ohio, Appellant.
• Court: Ohio Supreme Court

Page 8

66 Ohio St.3d 8

607 N.E.2d 440, 61 USLW 2567

HERBST et al., Appellees, v. RESOLUTION TRUST CORPORATION, as Receiver for First Savings & Loan Company, Massillon, Ohio, Appellant.

No. 91-2254.

Supreme Court of Ohio.

Submitted Jan. 6, 1993.

Decided Feb. 24, 1993.

SYLLABUS BY THE COURT

Section 212(d) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 does not vest federal courts with exclusive subject-matter jurisdiction over actions against the Resolution Trust Corporation as receiver of a failed financial institution. (Former Sections 1821, 1441a and 1819, Title 12, U.S.Code, construed.)

On February 12, 1990, appellees, Ronald P. Herbst and Andrea D. Herbst, filed a complaint in the Court of Common Pleas of Stark County naming as defendants First Savings & Loan Company ("First Savings"), Midland Buckeye Federal Savings & Loan Association, Smith Development Corporation and Stephen S. Smith. Appellees' complaint was premised on fraud, breach of contract, breach of warranty and deceptive trade practices, arising from the purchase of a lot and construction of a residence on the lot.

After this action was filed, First Savings became insolvent and appellant, Resolution Trust Corporation ("RTC"), was, on or about April 20, 1990, appointed receiver. Thereafter, RTC published notices informing creditors of First Savings of the appointment of RTC. It is undisputed that the notices established July 25, 1990 as the final date for creditors to present their claims, and that appellees did not file a claim with RTC.

On June 1, 1990, RTC moved to be substituted as a party defendant in appellees' cause of action, replacing First Savings. The common pleas court granted this motion.

On October 3, 1990, RTC moved for summary judgment, urging that it be dismissed as a party defendant because appellees had failed to file a claim with RTC by the July 25, 1990 deadline. The trial court granted RTC summary judgment.

Upon appeal, the court of appeals reversed the judgment of the trial court and remanded the cause. The court of appeals determined that pursuant to Section 1821(d)(5)(F)(ii), Title 12, U.S.Code, appellees' failure to file a claim with RTC did not affect their right to continue their state-court action.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Buckingham, Doolittle & Burroughs, Richard G. Reichel and Todd S. Bundy, Massillon, for appellees.

Porter, Wright, Morris & Arthur and Jennifer T. Mills, Columbus, James D. Snively, Massillon, for appellant.

DOUGLAS, Justice.

RTC asserts that appellees' state-court action against it as receiver of First Savings should be dismissed for lack of subject-matter jurisdiction because: (1) federal courts have exclusive jurisdiction over claims involving a failed financial institution under receivership; and (2) appellees did not pursue and exhaust administrative procedures described in former Sections 1821(d)(3) through (d)(10), Title 12, U.S.Code.

I

This appeal concerns the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA" or "the Act"), Pub.L. 101-73, 103 Stat. 183. ¹ The Act is a response by Congress to the evolving savings and loan crisis. As part of its comprehensive framework for processing claims, FIRREA created the RTC " * * * to contain, manage, and resolve failed savings associations * * *." H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess. 1, 322, reprinted in 1989 U.S.Code Cong. & Adm.News 86, 118. In support of their respective positions, the parties in this appeal cite, and rely upon, various sections of the Act. Having reviewed these sections, and the Act as a whole, we believe Judge Selya in Marquis v. Fed. Deposit Ins. Corp. (C.A.1, 1992), 965 F.2d 1148, 1151, was accurate in stating that:

"FIRREA's text comprises an almost impenetrable thicket, overgrown with sections, subsections, paragraphs, subparagraphs, clauses, and subclauses--a veritable jungle of linguistic fronds and brambles. In light of its prolixity and lack of coherence, confusion over its proper interpretation is not only unsurprising--it is inevitable."

Keeping this in mind, we turn our attention to RTC's contentions.

II

In Elek v. Huntington Natl. Bank (1991), 60 Ohio St.3d 135, 573 N.E.2d 1056, relying on various United States Supreme Court decisions, we observed that state courts presumptively enjoy concurrent jurisdiction with federal courts over claims arising under federal law. Id. at 138-139, 573 N.E.2d at 1059-1060. Quoting language from Gulf Offshore Co. v. Mobil Oil Corp. (1981), 453 U.S. 473, 101 S.Ct. 2870, 69 L.Ed.2d 784, we noted that the presumption of concurrent jurisdiction can be rebutted, and that Congress may vest exclusive jurisdiction in the federal courts only if (1) a federal statute explicitly provides that federal courts have exclusive jurisdiction, (2) the legislative history unambiguously indicates that jurisdiction lies in federal courts, or (3) there is clear incompatibility between state-court jurisdiction and federal interests. Elek, 60 Ohio St.3d at 138, 573 N.E.2d at 1059.

RTC contends that Section 1821(d)(6)(A), Title 12, U.S.Code (Section 212[d] of FIRREA) read in conjunction with Section 1821(d)(13)(D), Title 12, U.S.Code, evidences an explicit statutory directive that all actions against the RTC be pursued exclusively in federal court, precluding the exercise of concurrent state-court jurisdiction. We disagree.

Section 1821(d)(6)(A) provides that within sixty days after the notice of disallowance of a filed claim, or the expiration of the time period provided for in Section 1821(d)(5)(A)(i), Title 12, U.S.Code, whichever is earlier, the claimant may:

" * * * [R]equest administrative review of the claim * * * or file suit on such claim (or continue an action commenced before the appointment of the receiver) in the district or territorial court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia (and such court shall have jurisdiction to hear such claim)."

Section 1821(d)(13)(D), entitled "Limitation on judicial review," provides:

"Except as otherwise provided in this subsection, no court shall have jurisdiction over--

"(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or "(ii) any claim relating to any act or omission of such institution or the Corporation as receiver." (Emphasis added.)

When reading Sections 1821(d)(6)(A) and (d)(13)(D) in isolation from other sections of FIRREA, it would appear that RTC's position has merit. However, RTC's argument is based on but two sections of a very detailed and comprehensive federal scheme. RTC's narrow selection of only two parts of FIRREA is inattentive to the language that begins Section 1821(d)(13)(D): "[e]xcept as otherwise provided in this subsection * * *."

Section 1821(d)(2)(A)(i), Title 12, U.S.Code sets forth RTC's "general powers," and establishes that the RTC succeeds to "all rights, titles, powers, and privileges" of the failed insured depository institution. In addition, under Section 1821(d)(2)(J), Title 12, U.S.Code, the RTC has "incidental powers" and may "(i) exercise all powers and authorities specifically granted * * * to receivers * * * under this Act * * *; and (ii) take any action authorized by this Act, which the Corporation determines is in the best interest of the depository institution * * *." Pursuant to Section 1441a(b)(10)(F), Title 12, U.S.Code, entitled "Corporate powers," the RTC has the authority "[t]o sue and be sued in its corporate capacity in any court of competent jurisdiction." Further, "[t]he Corporation may * * * remove any such action * * * from a State Court to * * *" the appropriate federal court within ninety days after the receiver is substituted as a party, or thirty days after suit is filed. (Emphasis added.) Section 1441a(l )(3)(A) and (B), Title 12, U.S.Code; see, also, Section 1819(b)(2)(B), Title 12, U.S.Code, and Section 1821(d)(13)(B)(i), Title 12, U.S.Code.

As can be gleaned from the above, Congress intended the RTC to step into the shoes of a failed financial institution. It is apparent that Congress anticipated that at the time the receiver is appointed, there may be litigation against a failed financial institution pending in state court. However, Congress did not mandate that all such actions be removed to federal court. Rather, discretionary authority was provided. Clearly, if Congress had intended federal jurisdiction to be exclusive, it would not have used language giving the RTC discretion to remove state actions, and any state action involving the RTC would necessarily have to be dismissed for lack of subject-matter jurisdiction.

Equally persuasive is the use of the verb "continue" in numerous provisions of the Act. See, e.g., Section 1821(d)(5)(F)(ii), Title 12, U.S.Code (filing of a claim with the RTC does not prejudice the claimant's right to continue any action filed before receivership); Section 1821(d)(8)(E)(ii), Title 12, U.S.Code (providing a similar disclaimer of prejudice to parties who qualify under FIRREA's expedited claims procedure); and Section 1821(d)(6)(A), Title 12 U.S.Code (claimant has choice to file suit or seek administrative review of a disallowed claim, or continue an action commenced before the appointment of the receiver).

As stated in Marc Dev., Inc. v. Fed. Deposit Ins. Corp. (D.Utah 1991), 771 F.Supp. 1163, 1168-1169:

" * * * The term 'continue' implies that a party is proceeding forward in an ongoing case without an interruption in the court's jurisdiction. A claimant could not 'continue' an action over which the court had been...