Resolution Trust Corp. v. Foust

• Citation: 869 P.2d 183,177 Ariz. 507
• Decision Date: 18 March 1993
• Docket Number: No. 1,CA-CV,1
• Parties: RESOLUTION TRUST CORPORATION, as conservator of Western Savings and Loan Association, F.A., a federal savings and loan association, and as receiver of Western Savings and Loan Association, an Arizona corporation; and Western Savings and Loan Association, an Arizona corporation, Plaintiff-Appellant, Cross-Appellee, v. Kenneth A. FOUST, a single man, aka Ken Foust, Defendant-Appellee, Cross Appellant. 90-194.
• Court: Court of Appeals of Arizona

Page 183

869 P.2d 183

177 Ariz. 507

RESOLUTION TRUST CORPORATION, as conservator of Western Savings and Loan Association, F.A., a federal savings and loan association, and as receiver of Western Savings and Loan Association, an Arizona corporation; and Western Savings and Loan Association, an Arizona corporation, Plaintiff-Appellant, Cross-Appellee, v. Kenneth A. FOUST, a single man, aka Ken Foust, Defendant-Appellee, Cross Appellant.

No. 1 CA-CV 90-194.

Court of Appeals of Arizona,

Division 1, Department C.

March 18, 1993.

Reconsideration Denied April 30, 1993.

[177 Ariz. 509] Gust, Rosenfeld & Henderson by James G. Speer, Richard A. Segal, Patricia A. Sallen, Phoenix, for plaintiff-appellant, cross appellee.

Allen, Kimerer, LaVelle by Michael J. LaVelle, Merrick B. Firestone, Phoenix, for defendant-appellee, cross appellant.

OPINION

McGREGOR, Judge.

This action initially involved relatively straightforward disputes between Western Savings and Loan Association (Western Savings) and Kenneth Foust (Foust). When the Resolution Trust Corporation (RTC) became Western Savings' receiver near the end of a jury trial involving Western Savings and Foust, however, issues arose about the subject matter jurisdiction of the state courts and the continued viability of a counterclaim asserted by Foust. Because resolution of those issues on appeal requires consideration of the factual and procedural posture of this action, we discuss both in some detail.

I.

In 1985, Western Savings loaned Foust and Fred Andrews money pursuant to the terms of a promissory note (the note). That same year, Foust purchased property at Pinnacle Peak (the property), on which he later gave Western Savings a lien to secure the note. In February 1986, Foust hired a general contractor and in April 1986, he began construction of a house on the property. Foust listed the house for sale in July 1986. In the fall of 1986, Foust's general contractor withdrew from the project and Foust took over construction. Foust contracted to sell the house to Roger Trunkett (Trunkett) in January 1987.

Foust needed additional financing to complete construction of the house. His counterclaim arises from his allegation that Western Savings, through its agent Al Cameron (Cameron), made several loan commitments to him, none of which Western Savings honored. Foust alleged that he and Western Savings negotiated the terms and amounts of the loan commitments but conceded that neither party prepared written documentation of these agreements. Also, Western Savings' records revealed no documentation of the loan commitments. Trial testimony revealed that the various amounts Foust claimed Western Savings agreed to loan would have financed complete construction of the Pinnacle Peak house, paid off the note, and paid off the balance owed on the property. Foust's sale to Trunkett did not close, and another financing company eventually foreclosed on the property in August 1988.

In August 1987, Western Savings sued Foust for allegedly defaulting on the note. Foust filed a noncompulsory counterclaim that included various tort claims as well as claims for breach of contract and illegal filing of a lis pendens.

The trial court granted Western Savings summary judgment on its claim against Foust. Trial on Foust's counterclaim began on June 5, 1989. On June 14, 1989, the court granted a directed verdict for Western Savings on the bad faith claim and the claim for punitive damages. On June 15, the court submitted the claims for breach of contract, illegal lis pendens, intentional interference, negligent misrepresentation, and fraud to the jury. Later that day, the jury returned a special verdict in favor of Western Savings on the lis pendens claim. It also returned a general verdict awarding Foust damages of $252,000.00.

On June 14, 1989, the day before the jury returned its verdict, a series of events began that inserted additional issues into these proceedings. According to evidence to which the parties stipulated after trial, the Federal Home Loan Bank Board determined that Western Savings was insolvent and appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver of Western Savings on June 14, 1989. On that same date, Western Savings and Loan Association, F.A., was created and FSLIC was appointed its conservator.

Before the court instructed the jury on June 15, 1989, the court heard arguments on Western Savings' motion for mistrial. At that time, Western Savings' attorney raised the issue of the possible application of the D'OENCH, DUHME ¹ doctrine to the case. The attorney informed the court that he had neither received formal notification of receivership nor consulted with Western Savings about its change in status. The court denied the motion for mistrial without addressing the possible impact of D'Oench.

On October 2, 1989, Western Savings moved to allow admission of additional evidence related to Western Savings' conservatorship and receivership status. In that motion, Western Savings argued the D'Oench doctrine applied and precluded Foust's counterclaim. On December 28, 1989, Western Savings and Foust stipulated to the admission of additional evidence needed to consider the impact of the D'Oench doctrine upon Foust's claims, although Foust does not agree the doctrine applies. The trial court did not rule on Western Savings' motion.

On December 22, 1989, Western Savings filed its objections to the form of judgment, again raising the D'Oench doctrine. The trial court overruled Western Savings' objections in part and entered final judgment in favor of Foust on his counterclaim, in accord with the jury verdict.

Western Savings timely appealed. Foust cross-appealed from summary judgment entered in favor of Western Savings and from the trial court's order denying him an award of prejudgment interest. By order of May 22, 1990, this court added RTC as appellant and cross-appellee, in its role as conservator/receiver of Western Savings. On May 31, 1990, the Office of Thrift Supervision formally appointed RTC as receiver for Western Savings and Loan Association, F.A.

While this appeal was pending, Foust twice filed administrative claims with RTC based on his judgment. By letter dated July 27, 1990, RTC notified Foust of the formal claims procedure required to assert his claims against Western Savings, and Foust complied with that procedure. Foust received notice that RTC had disallowed his claim by letter dated October 17, 1990.

In its current posture, therefore, this action presents several issues. To resolve RTC's appeal, this court must determine whether RTC's appointment as receiver automatically divests state courts of subject matter jurisdiction over state cases pending prior to RTC receivership. If we retain jurisdiction, this court must then decide whether RTC may assert the D'Oench doctrine for the first time on appeal to bar any or all of Foust's claims against Western Savings. If Foust's claims are not barred, we must determine whether the trial court erred in denying Foust prejudgment interest on his verdict against Western Savings. Finally, to resolve the remainder of Foust's cross-appeal, we consider whether the trial court erred in granting summary judgment in favor of RTC.

We have jurisdiction to hear this appeal pursuant to Ariz.Rev.Stat.Ann. ("A.R.S.") §§ 12-120.21 and 12-2101.

II. RTC'S APPEAL

A.

The threshold question we address is whether the federal statutes governing RTC's authority give designated federal courts exclusive jurisdiction over all claims against failed financial institutions to which RTC becomes a party and thus deprive state courts of subject matter jurisdiction in cases filed prior to RTC's appointment as receiver. ² We hold that they do not.

Resolution of this issue hinges upon our interpretation of the relevant provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. No. 101-73, 103 Stat. 183. The central provision is 12 U.S.C. § 1821(d)(6)(A) (West 1989), which outlines the procedure a claimant must follow to obtain review of an RTC decision denying a claim made against RTC in its role as receiver of a failed financial institution. A claimant

may request administrative review of the claim ... or file suit on such claim (or continue an action commenced before the appointment of the receiver ) in the district or territorial court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia (and such court shall have jurisdiction to hear such claim).

12 U.S.C. § 1821(d)(6)(A) (emphasis added). ³ Other relevant provisions include section 1821(d)(13)(D), which provides:

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, including assets which the Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such institution or the Corporation as receiver.

Finally, section 1821(d)(5)(F)(ii) provides that, subject only to a 90-day stay authorized by section 1821(d)(12)(A),

the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver.

B.

State courts have jurisdiction concurrent with that of federal courts to enforce federal causes of action unless Congress specifically provides otherwise. New Times, Inc. v. Arizona Bd. of Regents, 20 Ariz.App. 422, 426, 513 P.2d 960, 964 (1973), vacated on other grounds, 110 Ariz. 367, 519 P.2d 169 (1974) (citing Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 508, 82 S.Ct. 519, 523, 7 L.Ed.2d 483 (1962)). Additionally,...