Modern Supply Co. v. Federal Sav. & Loan Ins. Corp., 17061-9-I

• Citation: 748 P.2d 251,50 Wn.App. 194
• Decision Date: 30 December 1987
• Docket Number: No. 17061-9-I,17061-9-I
• Court: Court of Appeals of Washington
• Parties: MODERN SUPPLY COMPANY, a Washington corporation, Appellant, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, Respondent.

Page 194

50 Wn.App. 194

748 P.2d 251

MODERN SUPPLY COMPANY, a Washington corporation, Appellant, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION, Respondent.

No. 17061-9-I.

Court of Appeals of Washington Division 1.

Dec. 30, 1987.

Suzanne Kelly Michael, Tewell Thorpe & Findlay, Inc., P.S., Seattle, for Modern Supply Co.

John D. Alkire, Joseph E. Bringman, Perkins Coie, Seattle, for Federal Sav. & Loan Ins. Co.

SWANSON, Judge.

Modern Supply Company (Modern Supply) commenced an action in the superior court for money due, lien foreclosure and replevin against, among others, Four Star Investments (Four Star) and South Terrace Corporation (STC), Washington corporations; and Westside Federal Savings and Loan Association (Westside), now replaced in this appeal by the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver for Westside.

Following the entry of an order granting Westside's summary judgment motion and denying Modern Supply's cross-motion for summary judgment, Modern Supply appeals, claiming that the merchandise that it sold to Four Star is personalty, not fixtures, so that the trial court erred in declaring that Westside's security interest in the subject collateral is superior to Modern Supply's interest in the same collateral and that Westside is the owner of the collateral. The FSLIC moves for dismissal of this appeal, without prejudice to Modern Supply's pursuit of administrative remedies, based upon sovereign immunity, ¹ lack of subject matter jurisdiction, and failure to exhaust administrative remedies.

Westside entered into a loan agreement with STC for the construction of condominiums on STC-owned real property. The $1,520,000 loan to STC was evidenced by a note secured by a deed of trust, assignment of rents and leases, and security agreement. On February 28, 1983, Westside recorded the deed of trust, which granted Westside a security interest in both the real estate and all present and future improvements, fixtures and articles of property attached to or used or adapted for use in the operation of the premises, including but not limited to such things as ranges, refrigerators, cooking apparatus and mechanical kitchen equipment which, according to the deed of trust, were deemed to be part of the realty.

On February 28, 1983, Westside filed with the King County Auditor a Uniform Commercial Code (UCC) financing statement covering fixtures, and on March 18, 1983, it filed with the Department of Licensing in Olympia a UCC financing statement covering personal property. Both financing statements name STC as the debtor.

On June 8, 1983, Four Star entered into a contract with Modern Supply whereby for $45,166.24, Modern Supply was to furnish upon certain premises, which were STC's condominiums, drop-in ranges, dishwashers, refrigerators, 30-inch canopy hoods, ductless filter kits, and trash compactors. On April 22, 1983, Four Star had executed a security agreement granting Modern Supply a security interest in all goods sold by Modern Supply to Four Star. Delivery of the goods began on September 8, 1983, and was completed by October 20, 1983.

On January 13, 1984, Modern Supply filed a claim of lien upon Four Star's nonpayment. On March 28, 1984, Modern Supply filed with the King County Auditor a UCC financing statement covering the goods sold to Four Star, and on November 15, 1984, Modern Supply filed with the Department of Licensing a UCC financing statement covering the same goods. When STC defaulted on its loan, Westside commenced nonjudicial foreclosure under the deed of trust, purchased the real property at the trustee's sale, and filed the trustee's deed on October 2, 1984.

On September 11, 1984, Modern Supply filed this action. The trial court granted summary judgment in Westside's favor and denied Modern Supply's cross-motion for summary judgment and subsequent motion for reconsideration. Following Modern Supply's appeal of the summary judgment order, the Federal Home Loan Bank Board appointed the FSLIC as Westside's receiver upon Westside's insolvency, and the FSLIC was substituted for Westside as the respondent in this appeal. A commissioner's ruling referred the FSLIC's motion to dismiss this appeal for lack of jurisdiction to the panel hearing the case on the merits.

The dispositive issue is whether this appeal must be dismissed without prejudice due to a lack of subject matter jurisdiction. We so hold.

12 U.S.C. § 1464(d)(6)(C) (1982), which was made applicable in receiverships of state thrift institutions by the Bank Protection Act of 1968, 12 U.S.C. §§ 1729, 1881-84 (1982), states:

Except as otherwise provided in this subsection, no court may take any action for or toward the removal of any conservator or receiver, or, except at the instance of the [Federal Home Loan Bank] Board, restrain or affect the exercise of powers or functions of a conservator or receiver.

North Miss. Sav. & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1101 (5th Cir.1985),cert. denied, 474 U.S. 1054, 106 S.Ct. 790, 88 L.Ed.2d 768 (1986); Keller v. Antioch Sav. & Loan Ass'n, 143 Ill.App.3d 278, 97 Ill.Dec. 278, 280, 492 N.E.2d 937, 939 (1986).

12 U.S.C. § 1729(d) (1982) provides in part:

In connection with the liquidation of insured institutions, the [FSLIC] shall have power ... to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith, subject only to the regulation of the Federal Home Loan Bank Board ...

North Miss. Sav. & Loan Ass'n v. Hudspeth, supra; Keller v. Antioch Sav. & Loan Ass'n, supra.

The FSLIC has moved to dismiss the instant appeal based upon this court's lack of subject matter jurisdiction in light of the above federal statutes and the case law which, the FSLIC contends, require Modern Supply to exhaust its administrative remedies before seeking relief from a court. Modern Supply argues that the state court has jurisdiction here under 12 U.S.C. § 1730(k)(1), which vests in the federal district courts, with an exception not applicable here, original jurisdiction over disputes involving the FSLIC, and that section 1464(d)(6)(C) is limited to an action challenging the validity of a receiver's appointment or a receiver's actions in discharging its duties, which is not the case here.

The federal circuit courts of appeals which have addressed the question are divided as to whether the FSLIC has exclusive jurisdiction to adjudicate claims against the assets of an insolvent savings and loan association placed in a FSLIC receivership. The Fifth Circuit has held that it does, the Ninth Circuit has held that the FSLIC has no power to adjudicate creditor claims, ² and the Seventh Circuit, which did not decide whether the FSLIC is empowered to adjudicate claims since the question had neither been argued nor briefed in that case, proceeded on the assumption that the FSLIC has such power and essentially adopted the Fifth Circuit's reasoning and conclusions. Lyons Sav. & Loan Ass'n v. Westside Bancorporation, Inc., 828 F.2d 387 (7th Cir.1987); Morrison-Knudsen Co., Inc. v. CHG Int'l, Inc., 811 F.2d 1209, 1212 (9th Cir.1987), petition for cert. filed sub nom. Federal Sav. & Loan Ins. Corp. v. Stevenson Assocs., 56 U.S.L.W. 3249 (U.S. Oct. 6, 1987); North Miss. Sav. & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1102 n. 5, 1103 (5th Cir.1985), cert. denied, 474 U.S. 1054, 106 S.Ct. 790, 88 L.Ed.2d 768 (1986).

Where the lower federal courts are divided on a federal question such as the interpretation of federal statutes and the United States Supreme Court has not resolved the conflict, the state courts are free to decide the question for themselves. 21 C.J.S. Courts § 206, at 377-78 (1940 & Supp.1987); Home Ins. Co. of N.Y. v. Northern Pac. Ry. Co., 18 Wash.2d 798, 808, 140 P.2d 507, 147 A.L.R. 849 (1943); accord, Tropic Builders, Ltd. v. United States, 52 Haw. 298, 475 P.2d 362, 365 (1970); Robertson Lumber Co. v. Progressive Contractors, Inc., 160 N.W.2d 61, 69 (N.D.1968), app. dismissed, cert. denied, 394 U.S. 714, 89 S.Ct. 1451, 22 L.Ed.2d 671 (1969); but see Fleming v. Smith, 64 Wash.2d 181, 184-85, 390 P.2d 990 (1964). We find the reasoning of the Hudspeth line of cases to be persuasive and adopt that reasoning as our own.

In North Miss. Sav. & Loan Ass'n v. Hudspeth, supra at 1101-03, the Fifth Circuit Court of Appeals held that under sections 1464(d)(6)(C) and 1729(d), a claimant against a failed savings and loan association which had been placed within the FSLIC's receivership must first present its claims to the FSLIC, subject to initial review by the Federal Home Loan Bank Board (FHLBB), and judicial review under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701-706 (1982 & Supp.1986). Accord, Coit Independence Joint Venture v. Firstsouth, 829 F.2d 563 (5th Cir.1987); York Bank & Trust Co. v. Federal Sav. & Loan Ins. Corp., 663 F.Supp. 1100 (M.D.Pa.1987); Acquisition Corp. of Am. v. Sunrise Sav. & Loan Ass'n, 659 F.Supp. 138 (S.D.Fla.1987); Federal Sav. & Loan Ins. Corp. v. Oldenburg, 658 F.Supp. 609 (D.Utah 1987); First Fin. Sav. & Loan of El Dorado v. Federal Sav. & Loan Ins. Corp. (FSLIC), 651 F.Supp. 1289, 1291 (E.D.Ark.1987); Federal Sav. & Loan Ins. Corp. (FSLIC) v. Quality Inns, Inc., 650 F.Supp. 918 (D.Md.1987); Keller v. Antioch Sav. & Loan Ass'n, supra, 97 Ill.Dec. at 281, 492 N.E.2d at 940; Federal Sav. & Loan Ins. Corp. (FSLIC) v. Superior Ct., 180 Cal.App.3d 336, 225 Cal.Rptr. 422, 425 (1986), cert. denied, --- U.S. ----, 107 S.Ct. 949, 93 L.Ed.2d 998 (1987).

In North Miss. Sav. & Loan Ass'n v. Hudspeth, supra at 1099-1100, the savings and loan association had filed an action in state court seeking a declaratory judgment that a deferred compensation agreement with its former president, Joseph Hudspeth, either did not exist or was terminable, and Hudspeth...