RESNA ASSOCIATES v. FINANCIAL EQUITY MORTG. CORP., Civ. A. No. 87-933.

• Citation: 673 F. Supp. 1371
• Decision Date: 17 November 1987
• Docket Number: Civ. A. No. 87-933.
• Parties: RESNA ASSOCIATES, LTD., a Limited Partnership of the State of New Jersey, Plaintiff, v. FINANCIAL EQUITY MORTGAGE CORPORATION and Life Savings and Loan Association of America, Defendants.
• Court: U.S. District Court — District of New Jersey

673 F. Supp. 1371

RESNA ASSOCIATES, LTD., a Limited Partnership of the State of New Jersey, Plaintiff, v. FINANCIAL EQUITY MORTGAGE CORPORATION and Life Savings and Loan Association of America, Defendants.

Civ. A. No. 87-933.

United States District Court, D. New Jersey.

November 17, 1987.

Ira E. Weiner, Weiner & Hiebler, Montville, N.J., for plaintiff.

Robert G. Rose, Pitney, Hardin, Kipp & Szuch, Morristown, N.J., for defendant Life Sav. of America.

OPINION

LECHNER, District Judge.

This action was originally instituted by Resna Associates, Ltd. ("Resna") in the Superior Court of New Jersey, Law Division, Morris County, seeking damages resulting from the refusal of the Financial Equity Mortgage Corporation ("FEMC") to honor a mortgage commitment. Resna also asserted a claim against Life Savings and Loan Association of America ("Life Savings") because allegedly Life Savings was to underwrite the mortgage.

FEMC apparently has not made an appearance in this case. Life Savings filed its Answer, but later removed the action to this Court after the Federal Home Loan Bank Board ("Bank Board") appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") as receiver for Life Savings. FSLIC now moves to dismiss the action for lack of subject matter jurisdiction, asserting that upon the appointment of FSLIC as receiver subject matter jurisdiction rests with FSLIC and the Bank Board. Resna has not opposed the motion.¹ The matter is decided on the basis of the papers submitted, in accordance with Rule 78 of the Federal Rules of Civil Procedure.

Facts

Resna is a Limited Partnership of the State of New Jersey, with its offices located in New Jersey. (Complaint, Introduction.) FEMC is a mortgage company apparently doing business in New Jersey. (See id., First Count, ¶ 2.) Life Savings is a federally chartered savings and loan association with its offices located in Illinois. (Id., Second Count, ¶ 2.)

On or about December 28, 1984, Resna entered into a contract for the purchase of certain property located in New Jersey. Resna sought financing from FEMC, and on or about January 14, 1985, FEMC issued a loan commitment to Resna.² Resna executed the commitment letter and returned it to FEMC within the specified time period. (Id., First Count, ¶¶ 1-4.)

Resna then proceeded to complete all the other requirements of the mortgage commitment and made various payments to FEMC for application fees and processing costs which included inspections and appraisals of the property. Agents of FEMC appraised the property in question. (Id., First Count, ¶¶ 5-8.) On April 22, 1985, shortly before the closing was to occur, FEMC wrote to Resna advising it would not honor the commitment letter previously issued. (Id., First Count, ¶ 9.)

On February 3, 1986, Resna instituted this action in the Superior Court of New Jersey, Law Division, Morris County. The complaint contains eight counts. The first count is a breach of contract claim against FEMC. The second count is a breach of contract claim against Life Savings, alleging that FEMC was an agent of Life Savings which procured loans to be underwritten by Life Savings. The third count alleges the rejection of the loan and the failure to underwrite the loan transaction were based on racially discriminatory factors. The fourth count appears to be an implied contract claim, alleging detrimental reliance. The fifth count appears to be an equitable fraud claim. Finally, the sixth count alleges FEMC was an agent for Life Savings, and that Life Savings is responsible for all damages caused by FEMC.

The record does not reflect what proceedings took place in state court. According to FSLIC (receiver for Life Savings), FEMC has not made an appearance; Life Savings did file an Answer. (Defendant's Brief at 3.)

On February 13, 1987, the Bank Board appointed FSLIC as receiver for Life Savings, pursuant to 12 U.S.C. § 1464(d)(6)(A). (Herbert Aff., ¶ 3 and Ex. A at 1-2.) FSLIC was appointed receiver in part because Life Savings was insolvent. (Herbert Aff., Ex. A at 1.) Also on February 13, 1987, the Bank Board directed FSLIC to liquidate the assets of Life Savings. (Herbert Aff., ¶ 4 and Ex. B at 1.)

On March 13, 1987, FSLIC, as receiver for Life Savings, petitioned this court to remove the action from state court, asserting jurisdiction under 12 U.S.C. § 1730(k)(1)³. On October 2, 1987, FSLIC moved to dismiss Resna's complaint for lack of subject matter jurisdiction, or in the alternative, for failure to state a claim upon which relief may be granted. FSLIC argues that after its appointment as receiver, subject matter jurisdiction over any claims against Life Savings, now in receivership, rests exclusively with FSLIC and its supervisory authority, the Bank Board. FSLIC asserts all such claims must be brought through a comprehensive administrative claims procedure established by federal statute and regulations. FSLIC's determination on such claims is then subject to administrative review by the Bank Board, and finally, to judicial review under the Administrative Procedure Act, 5 U.S.C. § 701 et seq. (the "APA"). As indicated, Resna has not opposed FSLIC's motion.

Discussion

1. Question Presented

The question posed by defendant's motion to dismiss is whether Congress intended, in its broad grant of administrative powers to the Bank Board and FSLIC, to give these entities exclusive jurisdiction over creditor claims against insolvent institutions in receivership, subject only to judicial review under the APA.

2. Statutory Framework

The Bank Board and FSLIC are part of a network of regulatory bodies established by Congress to guard against and to deal with future failures in the nation's banking institutions. The Home Owners' Loan Act of 1933 ("HOLA"), as amended, 12 U.S.C. §§ 1461-1470, created the Federal Savings and Loan Association System, and subchapter IV of the National Housing Act of 1934 ("NHA"), as amended, 12 U.S.C. §§ 1724-1730, created FSLIC.

Through the HOLA, Congress placed the savings and loan system under the control of the Bank Board. 12 U.S.C. § 1464(a). The HOLA gave the Bank Board broad discretionary powers, including the discretion to appoint a receiver for any institution if the Bank Board determined that one of the statutory grounds, such as insolvency, existed. 12 U.S.C. § 1464(d)(6). The HOLA also authorized the Bank Board to promulgate rules and regulations governing the liquidation of an association and the conduct of receiverships. 12 U.S.C. § 1464(d)(11).

Through the NHA, Congress created FSLIC as a corporation, agency, and instrumentality of the United States, and placed it under the direction of the Bank Board. 12 U.S.C. §§ 1725(c), 1730(k)(1). FSLIC's purpose is to maintain the financial stability of the savings and loan system and to protect depositors and creditors of savings institutions. 12 U.S.C. §§ 1726, 1729(f), 1730. Under the Bank Board's supervision, FSLIC has two essential functions: (1) to monitor savings and loan institutions for compliance with the federal regulations; and (2) to act as a receiver or conservator in cases of insolvency.

As receiver, FSLIC can settle, compromise or release claims against the institution, subject to the regulation of the Bank Board. 12 U.S.C. § 1729(d). In the event of liquidation, FSLIC must promptly reimburse depositors out of its insurance fund. It then satisfies nondepositor creditors' claims to the extent that the institution's assets so permit.

The Bank Board has promulgated regulations establishing an administrative procedure for initially adjudicating claims against the assets of a savings and loan institution in receivership. See 12 C.F.R. §§ 549.1-549.8. FSLIC must give notice to all claimants of the assets of the institution and specify a date by which claims must be filed. Id. § 549.4(a). FSLIC is authorized to "allow any claim seasonably received and proved to its satisfaction," but "may wholly or partly disallow" any claim not proved to its satisfaction. FSLIC must notify the claimant of the disallowance and the reasons for it. Id. § 549.4(b). This determination is appealable to the Bank Board. See id. § 549.4(c)-(d). While courts may not "restrain or affect the exercise of powers or functions" of a receiver, 12 U.S.C. § 1464(d)(6)(C), the final determinations by the Bank Board are subject to judicial review under the APA, 5 U.S.C. §§ 701-706.

3. FSLIC's Exclusive Jurisdiction Over Claims Against Institutions in Receivership

a. Statutory Provisions

FSLIC bases its assertion of exclusive jurisdiction principally on two statutory provisions, 12 U.S.C. § 1729(d) and 12 U.S. C. § 1464(d)(6)(C). Section 1729(d), as amended in 1982, provided that in liquidating insured institutions, 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 any 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, or, in cases where FSLIC has been appointed conservator, receiver, or legal custodian solely by a public authority having jurisdiction over the matter other than said Board, subject only to the regulation of such public authority.

(emphasis added.) Because of a sunset provision in the 1982 amendments, in 1986, section 1729(d) automatically reverted to its pre-1982 form⁴:

In connection with the liquidation of insured institutions in default, 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 court or other public authority having jurisdiction over the matter.

(emphasis added.)

Before the 1982 amendments, section...