Resolution Trust Corp. v. Love, 93-8051

• Decision Date: 26 September 1994
• Docket Number: No. 93-8051,93-8051
• Citation: 36 F.3d 972
• Parties: RESOLUTION TRUST CORPORATION as Receiver for First Federal Savings Bank of Diamondville, Wyoming, Plaintiff/Appellee, v. William Kimbrough LOVE, Defendant/Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 972

36 F.3d 972

63 USLW 2201

RESOLUTION TRUST CORPORATION as Receiver for First Federal Savings Bank of Diamondville, Wyoming, Plaintiff/Appellee, v. William Kimbrough LOVE, Defendant/Appellant.

No. 93-8051.

United States Court of Appeals Tenth Circuit.

Sept. 26, 1994.

Donna S. Sears, Casper, WY (Thomas M. Hogan and Camille A. Shillenn, with her on the brief), for plaintiff/appellee.

James P. Castberg, Sheridan, WY, for defendant/appellant.

Before MOORE and McWILLIAMS, Circuit Judges, and ROSZKOWSKI, ^* Senior District Judge.

ROSZKOWSKI, Senior District Judge.

This is an appeal from a Summary Judgment granted in favor of Plaintiff-Appellee, Resolution Trust Corporation (RTC), in a suit for deficiency judgment against Defendant-Appellant, William Kimbrough Love. On appeal, Love raises two arguments: 1) the RTC is not entitled to recover on the note because it cannot produce the original and 2) affirmative defenses do not require administrative exhaustion under FIRREA. For the reasons that follow, we hold that production of the original note is not essential and affirmative defenses do not require administrative exhaustion under FIRREA.

On February 5, 1985, Defendant Love executed and delivered to First Guaranty Savings and Loan Association an Installment Note and Security Agreement for $200,000.00. The note was due and payable on or before February 1, 1988. To secure payment of the note, Love mortgaged to First Guaranty Savings and Loan Association of Gillette, Wyoming, two parcels of land in Sheridan County, Wyoming. The mortgage was recorded on February 14, 1985.

On November 29, 1989, the Office of Thrift Supervision (OTS) declared First Guaranty Savings and Loan Association (now known as First Savings Bank, FSB of Diamondville, Wyoming) insolvent and appointed RTC as Receiver. On the same day, First Federal Savings Bank of Diamondville, Wyoming, (a "bridge bank" created by RTC) purchased Love's note and mortgage from RTC as Receiver for First Savings Bank, FSB of Diamondville, Wyoming. Then, OTS declared First Federal Savings Bank of Diamondville, Wyoming, insolvent and appointed RTC as Conservator. On June 14, 1990, OTS appointed RTC as Receiver for First Federal Savings Bank of Diamondville, Wyoming.

Thereafter, the note was accelerated due to default. The mortgage was foreclosed, and on July 26, 1990, the property was sold. The parcels were offered for sale as a unit, and sold for $132,489.24 to the RTC as Receiver for First Federal Savings Bank of Diamondville, Wyoming.

The proceeds of sale left a deficiency of $69,855.71, plus interest due on the note, and the RTC filed suit in the district court to recover that deficiency. Love raised several affirmative defenses to that action which the district court refused to consider, holding that it lacked jurisdiction because the defenses were not first presented to the RTC.

The original note was lost by the RTC. However, a copy of the note was produced, and Love acknowledged the execution and delivery of the original. The RTC has agreed to indemnify Love against future liability on the note.

I. The Lost Promissory Note

Plaintiff RTC cannot produce the original promissory note. Defendant Love contends that since RTC cannot produce the original note to be merged into judgment, it is not entitled to recover on that note. In support of his position, Love cites several cases, but ignores Wyoming Statutes Annotated Sec. 34.1-3-309. That section of the code, an adoption of the U.C.C. position, clearly provides for recovery on a note that has been lost. Section 34.1-3-309 states in part:

A person not in possession of an instrument is entitled to enforce the instrument if (1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (2) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

W.S.A. Sec. 34.1-3-309(a).

Plaintiff has proven satisfaction of these three requirements by the Affidavit of Ross Kroeber in Support of Plaintiff's Motion for Summary Judgment and Plaintiff's Affidavit of Lost Promissory Note. Defendant offered no contrary evidence.

The statute further states that: "A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. If the proof is made, section 34.1-3-308 applies to the case as if the person seeking enforcement had produced the instrument." W.S.A. Sec. 34.1-3-309(b).

Plaintiff RTC has proven the terms of the instrument by producing a copy of the note, and Defendant Love acknowledges the execution and delivery of the note. RTC has proven its right to enforce the note through the Affidavit of Ross Kroeber in Support of Plaintiff's Motion for Summary Judgment. Therefore, RTC has satisfied these conditions of the statute.

Finally, the statute requires that the person seeking enforcement of the note adequately protect the payor against loss from a claim by a third party to enforce the instrument. Id. Protection may be by any adequate means. Id.

Here, the RTC has agreed to indemnify Love against further liability on the note from a claim by any person who may become a holder of the note. The note was never endorsed, sold, assigned, transferred, or otherwise negotiated, and is not likely to have been stolen, so a third party is unlikely to come into possession of the note. Thus, indemnification is more than adequate to protect Defendant Love.

The RTC has satisfied the requirements of Sec. 34.1-3-309 and, therefore, is entitled to enforce the note even though it cannot produce the original.

II. The District Court's Jurisdiction Over Affirmative Defenses

In the district court, Defendant Love raised several affirmative defenses which sought to defeat the claim against him for a deficiency judgment. He contended that the RTC failed to comply with the statutory requirements for foreclosure of mortgages as mandated by W.S.A. Secs. 34-4-101 et seq. (1977 as amended). Specifically, he contended that the RTC failed to offer the mortgaged tracts of land for sale separately and failed to record all assignments of the mortgage. He also asserted collateral estoppel and laches. The District Court held that since Love did not first present the defenses to the RTC pursuant to 12 U.S.C. Sec. 1821(d), it lacked jurisdiction to consider those defenses.

Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA" or "the act"), 12 U.S.C. Sec. 1821, in response to the precarious financial condition of the nation's banks and savings and loan institutions. Henderson v. Bank of New England, 986 F.2d 319, 320 (9th Cir.1993) (citing H.R.Rep. No. 101-54(I), 101st Cong., reprinted in 1989 U.S.C.C.A.N. 86, 215). The act gives broad powers to the Resolution Trust Corporation to deal expeditiously with failed financial institutions, and establishes administrative procedures for adjudicating claims asserted against them. Id.

The act requires that the RTC give notice to creditors of the financial institution upon appointment of the receivership. 12 U.S.C. Sec. 1821(d)(3)(B). ¹ Creditors then have a limited amount of time to file a claim with the RTC. Id. The agency has 180 days to rule on the claim. 12 U.S.C. Sec. 1821(d)(5)(A)(i). ² If the claim is disallowed or not ruled upon within 180 days, then the claimant can seek judicial review of that claim. 12 U.S.C. Sec. 1821(d)(6)(A). ³

Pursuant to Sec. 1821(d)(13)(D) of the act, a court does not have jurisdiction over a claim unless it has first been presented to the agency. See, e.g., Henderson v. Bank of New England, 986 F.2d at 321; Office & Professional Employees International Union, Local 2 v. FDIC, 962 F.2d 63, 66 (D.C.Cir.1992); Meliezer v. RTC, 952 F.2d 879, 882 (5th Cir.1992); Rosa v. RTC, 938 F.2d 383, 391 (3rd Cir.1991). That subsection states:

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, 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.

12 U.S.C.A. Sec. 1821(d)(13)(D). At issue in this case is the interpretation of the words "claim" and "action" as used in this subsection, and whether these terms encompass affirmative defenses.

Plaintiff RTC contends that these terms include affirmative defenses, and thus, Sec. 1821(d)(13)(D) precluded district court jurisdiction over Love's non-exhausted affirmative defenses. In support of its position, Plaintiff relies upon RTC v. Mustang Partners, 946 F.2d 103 (10th Cir.1991), but such reliance is misplaced. That case holds that a defendant must present his counterclaims to the RTC even when the suit is pending at the time of appointment of the receivership. Id. at 106. However, the court expressly declined to determine whether affirmative defenses were also covered by the exhaustion requirements of the act because the question was moot in that case. Id. at 105. Therefore, this issue has not yet been decided by this Court.

To interpret the statute, the Court must look to the language of the statute itself. Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S.Ct. 1570, 1575, 108 L.Ed.2d 842 (1990). A statute must be construed as "mandated by the grammatical structure." United States v. Ron Pair Enterprises, 489 U.S. 235, 241, 109...