Marc Development, Inc. v. FDIC

Decision Date15 August 1991
Docket NumberNo. 91-C-619A.,91-C-619A.
Citation771 F. Supp. 1163
PartiesMARC DEVELOPMENT, INC., an Illinois corporation, and Keith-Marc Properties, Ltd., and Illinois limited partnership, Plaintiffs, v. The FEDERAL DEPOSIT INSURANCE CORP., as Receiver for The Cosmopolitan National Bank of Chicago, Defendant.
CourtU.S. District Court — District of Utah

Rodney G. Snow, Neil A. Kaplan, Ted Boyer, Clyde, Pratt & Snow, Salt Lake City, Utah, for plaintiffs.

James W. Stewart, Jerome Romero, Jones, Waldo, Holbrook & McDonough, Salt Lake City, Utah, for defendant.


ALDON J. ANDERSON, Senior District Judge.

The above captioned case is now before the court on Defendant Federal Deposit Insurance Corporation's ("FDIC") motion for a stay of these proceedings. The court has received the briefs of the parties, the responses to the court's letter requesting further information, and the arguments of the parties at the hearing. Having reviewed these submissions and the relevant law, the court is prepared to rule.

Plaintiffs instituted this action on April 19, 1991, in state court to enforce certain loan agreements and to obtain clear title to the property securing those loans. Plaintiffs allege that they entered loan agreements with the Cosmopolitan Bank of Chicago (the "Bank") and provided first deeds of trust as security. Plaintiffs further claim they have paid the loan obligations in full and are entitled to reconveyance of the land.

The original defendant in this lawsuit was the Bank. On May 17, 1991, subsequent to the commencement of this suit,1 the FDIC became the receiver for the Bank pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). FDIC then removed the case to this court from state court. FDIC now seeks to stay these proceedings for 180 days2 because, FDIC argues, this court is without subject matter jurisdiction for that period of time under 12 U.S.C. § 1821(d)(13)(D) as amended by FIRREA. Motion for Stay at Docket No. 2 ¶ 7. Plaintiffs counter by asserting that FIRREA expressly provides FDIC with a 90 day stay under 12 U.S.C. § 1821(d)(12)(A)(ii) and that FIRREA does not provide any additional implied stay of greater length.

FDIC bases its request for a stay on subsection 1821(d)(13)(D) as amended by FIRREA which limits the court's subject matter jurisdiction. FDIC asserts this jurisdictional limit deprives the court of jurisdiction in this case for 180 days and thereby entitles it to a stay of these proceedings. An apparent inconsistency in FDIC's request is that if the court has no subject matter jurisdiction, as FDIC initially asserts, the court cannot stay these proceedings but must dismiss them. The FDIC, however, appears to use the term "jurisdiction" in a less technical and more practical sense. Under the FDIC position, the court would retain technical subject matter jurisdiction in that the file would remain open. The court would, however, lose practical "jurisdiction" in that it would be powerless to proceed until the administrative processes were completed.

Stated in another form, FDIC asserts that the statutory provision denying the court "jurisdiction" over the case should not be read literally in the current context. The section should be read to simply provide a stay for 180 days representing the duration of the administrative procedures established by FIRREA. The FDIC's position finds some support in the language of FIRREA and case precedent. See Tuxedo Beach Club Corp. v. City Federal Savings Bank, 737 F.Supp. 18 (D.N.J.1990) (district court implied a 180 day stay from the purpose and language of the statute). In essence, the position adopted by the Tuxedo Beach court finds that inconsistencies and possible oversights exist in the language of FIRREA. Here, FDIC asserts that poor and inartful drafting led to the apparently incongruous language in the statute. The Tuxedo Beach opinion turned to legislative history to resolve the perceived difficulties with the statute.

This court appreciates the guidance provided by the Tuxedo Beach opinion. This court, however, must decide the case before it based on the issues and arguments as formed by the present counsel. Based on the arguments made to the court, this court finds that FDIC's starting premise is incorrect. The relevant FIRREA provisions are not inconsistent nor erroneous. Since FDIC's position in this case is apparently a matter of policy in some FDIC offices,3 the court first examines the interpretation of FIRREA as proposed by FDIC. In the second part of this opinion the court explains the court's understanding of the statute.

Before delving into the specific provisions of FIRREA and their interpretation, some basic principles of statutory construction should be reviewed. First, the starting point of any statutory interpretation is the language of the statute. See Donovan v. Southern California Gas Co., 715 F.2d 1405, 1407 (9th Cir.1983). The court's object, however, is always to give effect to the intent of Congress as expressed through the statute. See United States v. DiSantillo, 615 F.2d 128, 134 (3rd Cir.1980). The cardinal rule in statutory construction is that the statute should be read so as to give meaning to every provision and phrase. See In re Borba, 736 F.2d 1317, 1320 (9th Cir.1984). Courts must avoid an interpretation that renders any part of the statute superfluous, erroneous, or fails to give effect to the words chosen by Congress. See Beisler v. C.I.R., 814 F.2d 1304, 1307 (9th Cir.1987). A court, however, is not bound by the plain meaning of the statute if such would thwart the obvious purpose of the statute. See Suburban Transit Corp. v. I.C.C., 784 F.2d 1129, 1130 (D.C.Cir.1986). The court has examined FDIC's assertions under the guidance of these principles.


FDIC cites 12 U.S.C. § 1821(d)(13)(D)4 as the primary basis for an administrative claims processing stay and as the provision in need of liberal judicial interpretation. Paragraph (d)(13)(D) states:

(D) Limitation on judicial review
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....

12 U.S.C. § 1821(d)(13)(D) (1984). The meaning of this paragraph is clear, the court has no jurisdiction to hear the type of claim presented except as otherwise provided. In this case, however, FDIC in effect asks this court to rewrite this "jurisdiction" limit so as to provide a 180 day stay. FDIC would read this paragraph, without regard to some other provisions of FIRREA, to state that this court should stay all proceedings in a qualifying lawsuit for 180 days, if the FDIC so requests, for the purpose of permitting the FDIC to pursue its administrative decision-making process.

The court is not persuaded by the logic of FDIC's interpretation of the statute. The logic of FDIC's position as presented by counsel fails upon a closer examination of the express language of the statute. FDIC's position is contradictory to the language and spirit of other paragraphs in subsection (d).

An initial observation is that the stay as defined by FDIC is insufficient to accomplish the purpose for which FDIC proposes it. FDIC asserts the 180 day stay is necessary to permit FDIC to follow the decision-making process outlined in subsection (d). The 180 day length derives from 12 U.S.C. § 1821(d)(5)(A)(i) which provides that FDIC has only 180 days from the filing of any administrative claim with it in which to allow or disallow a claim. This 180 day period has not begun to run in the present case. No claim has yet been filed nor has FDIC established a deadline for the filing of such a claim as required under FIRREA. See description of claims process infra. At the end of the requested 180 day stay, therefore, a decision would not yet be due from FDIC. The purpose of the stay would probably not be fulfilled but the stay would still expire.

Additionally, a 180 day stay does not accommodate the time period for FDIC decision-making contemplated by FIRREA and likely to be necessary in most cases. FDIC must first publish notice that provides a window of not less than 90 days during which claimants can file administrative claims. 12 U.S.C. § 1821(d)(3)(B).5 Once the claim is filed, FDIC has 180 days in which to make a decision. Once the 180 day period has run or the claimant receives notice of disallowance, the claimant has 60 days in which to file, or continue a previously filed, action in district court if the claimant so chooses. 12 U.S.C. § 1821(d)(6)(A). Therefore, subsection (d) provides approximately 330 days6 for the completion of the decision-making process. See Figure. See Appendix. Though a stay need not last the full 330 days, a stay of 180 days is patently inadequate for a case where no claim has been filed with the FDIC and the time limit for filing claims has not even begun to run.

The implied stay proposed by FDIC is also inconsistent with the spirit and effect of the stay that is expressly provided in subsection (d). Paragraph (d)(12)(A)(ii) grants the FDIC as receiver a 90 day stay in any judicial action or proceeding. Why would Congress expressly grant only a 90 day stay if Congress intended that proceedings be stayed for 180 days during the FDIC's decision making? Or, to pose the question in the phrasing of FDIC, why grant a 90 day stay if the court is without "jurisdiction" to act while the FDIC makes a decision? The purpose of the 90 day stay is concisely expressed in the legislative history. The 90 day stay is intended to provide FDIC with a breathing space to analyze a case into which it is placed as a party upon being appointed as a receiver. H.R.Rep. No. 54, 101st Cong., 1st Sess. 331, reprinted in 1989 U.S.Code Cong. & Admin.News 86, 127. Such a...

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