Praxis Properties, Inc. v. Colonial Sav. Bank, S.L.A., 90-5589
| Decision Date | 29 April 1991 |
| Docket Number | No. 90-5589,90-5589 |
| Citation | 947 F.2d 49 |
| Parties | PRAXIS PROPERTIES, INC.; and Praxis Properties, Inc. for the State of New Jersey v. COLONIAL SAVINGS BANK, S.L.A.; the Resolution Trust Corporation, Colonial Federal Savings Bank v. DYNAMIC INDUSTRIES COMPANY, INC.; Angelo M. Gregos; Nicholas Poulous; and Sharp Construction Company, Inc. Resolution Trust Corporation, as Receiver of Colonial Federal Savings Association, Appellant. . Submitted Under Third Circuit Rule 12(6) |
| Court | U.S. Court of Appeals — Third Circuit |
Harold J. Cassidy, Roger J. Foss, Gregory R. Milne, Cassidy, Foss & San Filippo, Red Bank, N.J., for appellant.
Susan Block-Lieb, Asst. Professor, Seton Hall Law School, Newark, N.J., Court-appointed Advocate for Legal Position of appellee.
Before BECKER, HUTCHINSON, Circuit Judges and ATKINS, District Judge. *
This appeal, set in the context of the recent crisis in the savings and loan industry, presents the important question whether and for how long a federal district court must grant a receiver of an insured depository institution a stay after its appointment, under the stay provision of the the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C.A. § 1821(d)(12)(A)(ii) (West 1989). The district courts are sharply divided on the issue, and the only court of appeals to consider the provision did so only tangentially.
Before grappling with this question, however, we must clear three preliminary hurdles, appellate jurisdiction, justiciability, and exhaustion of administrative remedies. We conclude, on those points: (1) that there is jurisdiction over this appeal under the collateral order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949); (2) that the instant controversy is not moot, despite the passing of the 90 days during which the receiver claims that it was entitled to a stay and even though the underlying action has settled, because the issue is "capable of repetition, yet evading review," see Murphy v. Hunt, 455 U.S. 478, 102 S.Ct 1181, 71 L.Ed.2d 353 (1982); and (3) that for all practical purposes, Praxis exhausted its administrative remedies. On the merits, we hold that if the receiver of a depository institution makes its request under section 1821(d)(12)(A)(ii) within 90 days of its appointment, the district court then must stay the litigation until those 90 days after appointment have expired. That is, the district court has no discretion to decline a section 1821(d)(12) stay request based on alleged irreparable harm to other parties, but the court should not grant a section 1821(d)(12) stay lasting beyond 90 days after the receiver's appointment.
The material facts in this case are few and basically undisputed. On March 23, 1988, Colonial Savings Bank ("Colonial Savings"), a savings and loan institution, loaned $1.8 million to Praxis Properties, Inc. ("Praxis") and Dynamic Industries, Inc. ("Dynamic"). 1 As partial security for this loan, Praxis gave Colonial Savings a $1 million mortgage on property it owned in West Long Branch, New Jersey. Sometime later, Praxis and Dynamic began to negotiate with Colonial Savings to modify the loan transaction and to release the collateral owned by Praxis. During those negotiations, but before a modification agreement was consummated, Colonial Savings failed.
On November 8, 1989, the Office of Thrift Supervision ("OTS") declared Colonial Savings insolvent and chartered Colonial Federal Savings Association ("Colonial Federal") as a federal "bridge" savings association under sections 301 and 501 of FIRREA. The next day, OTS appointed the Resolution Trust Corporation ("RTC") as receiver of Colonial Savings and conservator of Colonial Federal. RTC in its capacity as receiver of Colonial Savings then reached a "purchase and assumption" agreement with Colonial Federal whereby Colonial Federal purchased Colonial Savings's assets and assumed certain Colonial Savings liabilities. Among the assets that Colonial Federal purchased was Praxis's mortgage note.
Shortly after RTC's appointment as receiver and conservator, Praxis demanded that RTC release the mortgage note encumbering its property in West Long Branch. This demand precipitated extensive negotiations and discussions between RTC and Praxis, which proved unfruitful. On March 27, 1990, because RTC refused to relinquish Praxis's mortgage note, Praxis brought an action in the Superior Court of New Jersey to enforce its putative right to obtain the release. RTC then removed the action to the district court for the District of New Jersey under 12 U.S.C.A. § 1819(b)(2)(B) (West 1989). 2 In its capacity as both receiver of Colonial Savings and conservator of Colonial Federal, RTC also requested that the district court stay the action pursuant to 12 U.S.C.A. § 1821(d)(12) for 90 days running from the date of removal.
The district court heard oral argument concerning RTC's entitlement under section 1821(d)(12) to a 90-day stay. RTC argued that section 1821(d)(12) imposed on the district court an obligation to grant a stay for a full 90 days once requested by a receiver of an insured depository institution. In contrast, Praxis asserted that the district court was not bound to grant the requested stay. The stay provision, Praxis contended, was included in FIRREA to afford an appointed receiver (or conservator) "breathing room" to determine how best to proceed with litigation pending at the time of the receiver's appointment. In this case, Praxis observed, RTC was appointed receiver of Colonial Savings a full four months before the state-court litigation was initiated, and discussions between the parties concerning RTC's supposed obligation to release Praxis's mortgage note had been ongoing for months. Therefore, Praxis argued, the stay was not mandatory and should not be granted.
The district court was impressed equally by both parties' arguments:
[T]he legislative history makes clear that the purpose of the stay is to enable the RTC to familiarize itself with the factual and legal controversy into which it has been drawn. In the instant case the RTC was aware of the controversy before the instant litigation was filed. However, this court takes seriously the mandatory language of the statute.
The court thus opted to split the difference between the parties' positions. It granted RTC's motion for a stay, but limited the stay to 45 days:
[W]hile the court will grant [RTC's] motion for entry of a stay[,] [t]he stay ... will be limited for a period of 45 days. This appears to be consistent with the relevant statutory language and sufficiently protective of both parties.
Believing that it was entitled to a 90-day stay under section 1821(d)(12), RTC appealed the district court's order insofar as it limited the stay to 45 days.
While RTC's appeal was pending before this court, two noteworthy events occurred. First, the district court's 45-day stay lapsed, causing the litigation between RTC and Praxis to resume. Although RTC filed a brief with this court, Praxis, which no longer had any practical interest in RTC's entitlement to a 90-day stay under section 1821(d)(12), did not. We felt, however, that the issue presented by this appeal was difficult, and that its resolution by a court of appeals was extremely important to the efficient administration of Congress's Thrift Recovery Program, one of whose most expensive components is litigation. We accordingly appointed Susan Block-Lieb, Assistant Professor of Law at Seton Hall Law School in Newark, New Jersey, as amicus curiae to review the record and submissions thus far and to act as an advocate for the legal position previously advanced by Praxis. 3
Second, after the appointment of Professor Block-Lieb, RTC and Praxis settled the underlying lawsuit and stipulated to dismissal. According to the terms of the stipulation, Praxis agreed to pay RTC as receiver for Colonial Savings approximately $1.8 million in exchange for a discharge of Praxis's mortgage note. The parties, however, specifically excluded from the stipulation the issues raised in this appeal.
Before examining the merits of RTC's appeal, we must work our way through a complex jurisdictional maze. Although the issue was not flagged by the parties, we early on expressed concerns about the appealability of the district court's order. In response, RTC has advanced two alternative bases for our jurisdiction. It contends, initially, that the district court's order is immediately appealable under 28 U.S.C. § 1291 (1988) via the "collateral order doctrine." See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). 4 RTC also asserts that we have jurisdiction pursuant to 28 U.S.C. § 1292(a)(2) (1988), which affords the courts of appeals jurisdiction over appeals from:
Interlocutory orders appointing receivers, or refusing orders to wind up receiverships or to take steps to accomplish the purposes thereof, such as directing sales or other disposals of property....
For the reasons that follow, we find that the district court's order granting a limited 45-day stay and thereby rejecting the claimed mandatory 90-day stay is appealable under the collateral order doctrine. We therefore will not comment on the applicability of section 1292(a)(2) to this appeal. 5
In Cohen, the Supreme Court held that a "small class" of collateral orders are final and appealable under section 1291 even though they do not terminate the underlying litigation. 337 U.S. at 546, 69 S.Ct. at 1225. For an order to be appealable under Cohen 's collateral order doctrine, it must satisfy a three-pronged test:
First, the order must "conclusively determine the disputed question." Second, the order must "resolve an...
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