In re Parker North American Corp.
| Decision Date | 08 May 1992 |
| Docket Number | Adv. No. SA 89-0589.,No. SACV 91-691-GLT,Bankruptcy No. SA 89-01647JR,SACV 91-692-GLT,SACV 91-691-GLT |
| Parties | In re: PARKER NORTH AMERICAN CORPORATION, Debtor. PARKER NORTH AMERICAN, a Delaware corporation, aka PNA Corporation, Appellant, v. THE RESOLUTION TRUST CORPORATION, as Receiver for Sooner Federal Savings and Loan Association, Appellee. |
| Court | U.S. District Court — Central District of California |
Marc J. Winthrop, Todd C. Ringstad, Alan J. Friedman, Lobel, Winthrop & Broker, Irvine, CA, for Parker North American Corp.
Jeffery D. Hermann, Susan B. Hall, Brobeck, Phleger & Harrison, Los Angeles, CA, Theodore Q. Eliot, John Henry Rule, Gable & Gotwals, Tulsa, OK, for Resolution Trust Corp. as Receiver for Sooner Federal Savings & Loan Assoc.
The Court holds that, despite the normal jurisdictional prerequisite of an administrative demand, the bankruptcy court has an independent ground for jurisdiction over a claimed preferential transfer because the RTC filed its own affirmative claim.
On March 17, 1989, Parker North American ("PNA") filed its Chapter 11 petition for bankruptcy relief. One of the primary motivations for filing was the opportunity to attack preferential transfers in the amount of $4.6 million that were paid by PNA to Old Sooner Savings and Loan.1 PNA commenced a preference action against Sooner on June 1, 1989.
In November 1989, Sooner was taken over by the FDIC, and the RTC became the receiver. Pursuant to the Financial Institution Reform, Recovery and Enforcement Act of 1989, 12 U.S.C. sec. 1821 et seq. ("FIRREA"), the RTC was substituted in place of Sooner in this preference action. Soon after becoming a party to the bankruptcy, the RTC instigated an action in the bankruptcy court against PNA for $14 million.
FIRREA requires that any entity with a claim against a failed Savings and Loan, and hence against the RTC, follow proper administrative procedures. As part of this process, the RTC allegedly sent PNA a notice setting out the administrative process for filing a claim against Sooner, including the last date by which to file an administrative claim. This notice was sent to PNA's former address. PNA never received this notice and never complied with proper administrative procedures.
In June 1991, PNA and the RTC prepared to litigate whether a preferential transfer had occurred under 547(b) of the bankruptcy code. However, the Bankruptcy court raised sua sponte the issue of subject matter jurisdiction. The judge ruled that FIRREA requires a party to exhaust its administrative remedies prior to bringing a preference action against the RTC. Because PNA had failed to comply with the administrative procedures contained in FIRREA, the bankruptcy court held it no longer had subject matter jurisdiction over the proceeding. Accordingly, the judge dismissed the action. 131 B.R. 452. The judge further stated that, even if the Court had jurisdiction, PNA would not prevail on its preference action.
PNA appeals this ruling, contending the bankruptcy court did have jurisdiction.
This Court holds that FIRREA generally requires a party to exhaust its administrative remedies. However, an exception exists when a court has an independent ground for jurisdiction. Because the RTC filed a claim against PNA for $14 million, the bankruptcy court has an independent ground for jurisdiction. Therefore, the matter will be reversed, and remanded to determine if PNA can prevail on its preference action.
In enacting FIRREA, Congress created a process by which claims against insolvent financial institutions could be resolved. This claims review process is found at 12 U.S.C. sec. 1821(d)(3). The Claims process requires that the RTC, within a short time after its appointment as receiver, send out notice to all potential claimants of the date by which said claimant must file a proof of claim against the failed institution.
After a proof of claim is filed, the RTC has 180 days to either allow or disallow the claim. In the event that a claim is disallowed, the adversely effected party has the right to invoke a number of administrative review procedures, or commence an action in the District Court. 12 U.S.C. sec. 1821(d)(6).
The claims process severely limits the jurisdiction of other courts to review claims other than through the appellate process established in sec. 1821(d)(6). Specifically, 1821(d)(13)(D), provides:
Judge Ryan relied upon this section to dismiss the preference action. According to Judge Ryan, PNA was compelled to file an administrative claim prior to obtaining judicial action. PNA contests this determination.
Before addressing the jurisdiction issue, the RTC puts forth two different arguments why this Court need not address the merits of PNA's case.
The RTC argues that PNA cannot raise arguments for the first time on appeal. The RTC contends that the arguments raised by PNA on this appeal were not presented to the bankruptcy court.
PNA concedes that it did not make these arguments before the bankruptcy court. Nonetheless, PNA correctly asserts that it can now make these arguments because the bankruptcy judge made a sua sponte ruling.
The RTC argues that the bankruptcy judge made two rulings. First, the court ruled that it did not have subject matter jurisdiction. Second, it ruled that PNA would still lose even if the Court had jurisdiction and reached the merits. The RTC asserts that PNA's failure to appeal this second ruling bars its ability to contest the judge's ruling.
The RTC is incorrect. The judge's statement must be construed as dicta. Upon making the first ruling, the bankruptcy court was without power to rule on the substantive issues involved in the case. From the moment the court ruled that it did not have subject matter jurisdiction, it lost the power to issue substantive rulings. See MacKay v. Pfeil, 827 F.2d 540 (9th Cir.1987) ().
Having addressed the RTC's procedural barriers to adjudication on the merits, this Court now examines PNA's arguments that the bankruptcy court had jurisdiction.
The claims process severely limits the jurisdiction of other courts to review claims other than through the appellate process established in sec. 1821(d)(6). Specifically, 1821(d)(13)(D), provides that no court shall have jurisdiction over a claim against the RTC until that claimant exhausts its administrative remedies.
However, 12 U.S.C. sec. 1821(d)(5)(F)(ii) provides that "... the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver." PNA refers to this provision to argue that the limitation on judicial review does not apply to this preference action. PNA brought the action prior to the RTC's appointment as receiver. According to PNA, this fact allows the preference suit to continue.
PNA relies upon Marc Development v. Federal Deposit Insurance Corporation, 771 F.Supp. 1163 (D.Utah 1991). In this case the plaintiff had brought an action against a failed Savings and Loan prior to the RTC's involvement in the case. The Court allowed the action to proceed. The Court held that, when an action is commenced prior to RTC involvement, the claim should be allowed to continue. PNA urges the same result as the Marc Court reached.
PNA is correct that FIRREA creates an exception to exhaustion for cases filed prior to the RTC's involvement. However, the law is clear that this exception only governs when the claimant files in compliance with FIRREA procedures. In this case PNA never filed a claim. Therefore PNA does not qualify for the exception.
This result is supported by the language of FIRREA. 12 U.S.C. sec. 1821(d)(5)(F)(ii) provides that "... the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver." (emphasis added). As the language makes clear, a party can only continue an action previously instituted if the party files a claim with the receiver. In this case PNA admittedly did not file a claim with the receiver. Accordingly, 1821(d)(5)(F)(ii) does not apply.
Moreover, Resolution Trust Corporation v. Mustang Partners, 946 F.2d 103 (10th Cir.1991), supports this conclusion. In that case the claimant argued that the exception contained in 1821(d)(5)(F)(ii) applies whenever the claimant has a suit already pending. Mustang Partners rejected this result. The Court held that 1821(d)(5)(F)(ii) only serves as an exception to 1821(d)(13)(D) () when the claimant actually files a claim with a receiver. Because the claimant in Mustang Partners failed to file, the Court dismissed the claim. This Court reaches the same result.2 PNA's failure to file a claim prevents the use of 1821(d)(5)(F)(ii).
In response to the RTC's position that PNA failed to file, PNA argues that this Court should excuse PNA's actions because filing would have been...
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