Lloyd v. FDIC, Civ. A. No. 92-0262L.

• Decision Date: 17 February 1993
• Docket Number: Civ. A. No. 92-0262L.
• Citation: 812 F. Supp. 293
• Parties: William Bart LLOYD, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as Receiver for Capitol Bank and Trust Company, Inc., Defendant.
• Court: U.S. District Court — District of Rhode Island

812 F. Supp. 293

William Bart LLOYD, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as Receiver for Capitol Bank and Trust Company, Inc., Defendant.

Civ. A. No. 92-0262L.

United States District Court, D. Rhode Island.

February 17, 1993.

COPYRIGHT MATERIAL OMITTED

William Bart Lloyd, pro se.

Sherry A. Giarrusso, Michael A. Kelly, Adler, Pollock & Sheehan, Providence, R.I., J. Kendall Rathburn, Franklin, MA, for defendant.

MEMORANDUM AND ORDER

LAGUEUX, Chief Judge.

This matter is presently before the Court on the motion of defendant Federal Deposit Insurance Corporation ("FDIC") to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). Plaintiff brought this action seeking injunctive relief restraining defendant from foreclosing on a mortgage held by it, and equitable relief regarding a purchase and sale contract between plaintiff and Capitol Bank and Trust Company, Inc. ("Capitol Bank") which plaintiff claims was based on mutual mistake. Defendant argues (1) that this Court lacks subject matter jurisdiction because plaintiff has failed to exhaust his administrative remedies and has brought suit in the wrong court; (2) that plaintiff's claim is barred by the D'Oench doctrine, 12 U.S.C. § 1823(e); and (3) that this Court has no power to grant the requested injunctive relief. For the reasons explicated below, the Court concludes that it does not have subject matter jurisdiction of this action, and therefore grants the motion to dismiss.

I. Background

The underlying transaction on which plaintiff seeks to sue is described by plaintiff as follows.

On or about June 9, 1990, Capitol Bank published a Notice of Foreclosure and Sale regarding an abandoned six-unit apartment building located at 11-13 Steere Avenue in Providence, Rhode Island ("the property"). Plaintiff commenced negotiations with Capitol Bank for the purchase of the property.

On November 30, 1990, Capitol Bank acquired the property for $30,000 at a publicly held foreclosure auction. Immediately thereafter, Capitol Bank and plaintiff executed a contract for the sale and financing of the property for $125,000 including renovation funding. Plaintiff signed a promissory note in favor of Capitol Bank, which was secured by a mortgage on the property. The property transfer and mortgage were recorded on December 4, 1990.

The contract in question has not been provided to the Court, but plaintiff states that it provided that the $125,000 in funding was to be apportioned as $80,000 for the purchase of the property, $40,000 in renovation funding, and $5,000 in capitalized interest payments. Capitol Bank disbursed $10,000 in renovation funding when the transfer was made.

On December 28, 1990, the Massachusetts Commission of Banks declared Capitol Bank insolvent and appointed the FDIC as receiver. A few days thereafter plaintiff contacted the bank to request disbursement of the balance of the funding, as the renovations were complete. He was informed at that time that Capitol Bank had failed and that the FDIC would not be disbursing any funds.

Plaintiff engaged in correspondence with the FDIC regarding the renovation funding in the first half of 1991. On June 13, 1991 he received the FDIC's official disaffirmance of his loan, by letter from Phil Crutchfield, Account Officer. The notice noted that the FDIC, by statute, has the power to disaffirm agreements, and stated:

In your case the records of the bank substantiate that you are a party to an unfunded loan agreement dated November 30, 1990. The FDIC, as receiver of the bank, has elected to disaffirm and does hereby disaffirm the said agreement.

The notice stated that plaintiff had until August 13, 1991 to file his proof of claim. Mr. Crutchfield also suggested a meeting to discuss refinancing of the outstanding principal balance of $86,944.65.

Plaintiff filed a proof of claim, although the timeliness of that filing is in dispute. Plaintiff's claim requested the $30,000 balance due under the contract for renovations, as well as $1,956.32 held in escrow and $1,005 for a water bill owed by Capitol Bank and paid by plaintiff. Plaintiff's accompanying letter offered to deed his interest in the property to Capitol Bank upon payment of the $32,956.32 total.¹ Alternatively, he offered to purchase the FDIC's interest for $50,000. Plaintiff's claim has since been denied, and plaintiff has brought suit to challenge that denial in the United States District Court for the District of Massachusetts.

On or about March 4, 1992, while that claim was pending, the FDIC sent to plaintiff a Notice of Intention to Foreclose the mortgage on the property on April 23, 1992. Plaintiff then instituted this action in Rhode Island Superior Court, seeking an injunction restraining the FDIC from proceeding with the foreclosure, and an order of equitable reformation or equitable cancellation of the contract, note and mortgage, on the grounds that they were the result of a mutual mistake of the parties as to the actual value of the property plaintiff received.

Plaintiff's mutual mistake claim is based on the theory that both parties to the contract, plaintiff and Capitol Bank, were mistaken as to the solvency of Capitol Bank, and Capitol Bank's ability to provide the promised renovation funding. Plaintiff asserts that without the renovation funding the property was not worth $80,000, and that therefore the parties were both mistaken as to the value of the consideration received by plaintiff.

The FDIC removed the action to the United States District Court for the District of Columbia, and immediately secured transfer of the action to this Court. Defendant then moved to dismiss the case pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The FDIC argued that this Court lacks subject matter jurisdiction because plaintiff failed to exhaust his administrative remedies, in that he did not file his proof of claim by the bar date, and because he filed suit in the wrong court. Defendant also argued that plaintiff's complaint fails to state a claim because it is barred by 12 U.S.C. § 1823(e), and that this Court, under 12 U.S.C. § 1821(j), lacks the power to issue the injunctive relief requested.

The parties engaged in oral argument on October 2, 1992, and the matter was taken under advisement. Subsequently the FDIC withdrew its argument that plaintiff failed to file a proof of claim by the bar date, and asked that the Court decide this motion on the other grounds asserted in its memorandum.

The matter is now in order for decision.

II. Discussion

Defendant has moved for dismissal of this action under both Rule 12(b)(1) for lack of subject matter jurisdiction, and Rule 12(b)(6) for failure to state a claim. The FDIC first asks this Court to find that it lacks subject matter jurisdiction over the action because plaintiff has not complied with the administrative claims procedure. If the Court finds that it has no jurisdiction over this action, it need not reach the Rule 12(b)(6) motion. See Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946).

A. Lack of subject matter jurisdiction

1. Timeliness of motion

Plaintiff has objected that defendant's motion is not timely, because the time for further pleading had elapsed at the time the motion was made. Insofar as defendant's motion is based on lack of jurisdiction that objection is irrelevant. The lack of subject matter jurisdiction may be raised at any time. Business Buyers of New England, Inc. v. Gurham, 754 F.2d 1 (1st Cir.1985).

2. Statutory provisions

Title 12 of the United States Code sets forth a number of jurisdictional provisions for actions to which the FDIC is a party. Section 1819, which sets forth the general powers of the FDIC, contains a general jurisdictional subsection providing:

(b)(2) Federal court jurisdiction

(A) In general Except as provided in subparagraph (D) governing certain state law claims, all suits of a civil nature at common law or in equity to which the Corporation, in any capacity, is a party shall be deemed to arise under the laws of the United States.

(B) Removal

Except as provided in subparagraph (D), the Corporation may, without bond or security, remove any action, suit, or proceeding from a State court to the appropriate United States district court.

12 U.S.C. § 1819(b)(2) (1988 & Supp. II 1990). The exception referred to is pertinent to the instant case and provides:

any action —

(i) to which the Corporation, in the Corporation's capacity as receiver of a State insured depository institution by the exclusive appointment by State authorities, is a party other than as a plaintiff;

(ii) which involves only the preclosing rights against the State insured depository institution, or obligations owing to, depositors, creditors, or stockholders by the State insured depository institution; and

(iii) in which only the interpretation of the law of such State is necessary,

shall not be deemed to arise under the laws of the United States.

12 U.S.C. § 1819(b)(2)(D).

The FDIC is also authorized to act for the Resolution Trust Corporation ("RTC") under 12 U.S.C. § 1441a(b)(1)(C). Actions against the RTC are governed by the jurisdictional provisions of § 1441a, which provide that any civil action to which the RTC is a party, without exception, is deemed to arise under federal law. 12 U.S.C. § 1441a(l)(1). That section also authorizes removal from state courts, but the FDIC may remove only to the United States District Court for the District of Columbia, or if the action arises with respect to a receivership, to the United States district court for the district where the institution's principal business is located.²

In the instant case, the FDIC is being sued in its capacity as the receiver of Capitol Bank, a failed banking institution. The general jurisdictional provisions are supplemented by a statutory procedure for making claims against the FDIC when it is sued in its capacity as receiver for a failed...