Schock v. U.S.

• Decision Date: 14 October 1998
• Docket Number: C.A. No. 97-530L.
• Citation: 21 F.Supp.2d 115
• Parties: Eleanor C. SCHOCK, Plaintiff, v. UNITED STATES of America; and Federal Deposit Insurance Corporation, in its capacity as deposit insurer, and in its capacity as Receiver of Old Stone Bank FSB, Defendants.
• Court: Rhode Island Supreme Court

21 F.Supp.2d 115

Eleanor C. SCHOCK, Plaintiff, v. UNITED STATES of America; and Federal Deposit Insurance Corporation, in its capacity as deposit insurer, and in its capacity as Receiver of Old Stone Bank FSB, Defendants.

C.A. No. 97-530L.

United States District Court, D. Rhode Island.

October 14, 1998.

COPYRIGHT MATERIAL OMITTED

John D. Deacon, Medeiros, Karmen & Sanford, Inc., Providence, RI, for Plaintiff.

Z. Scott Birdwell, Federal Deposit Insurance Corp., Washington, DC, Joseph F. Shea, David J. Lawson, Nutter, McClennen & Fish, LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

LAGUEUX, Chief Judge.

Eleanor C. Schock ("Plaintiff") is the daughter and only heir of Ragnar Miller, who died on May 6, 1993. Plaintiff is the assignee of all claims of the Estate of Ragnar Miller (the "Estate"). Attorney Pat Nero was Miller's attorney, and Miller, while living, had executed a broad power of attorney to Nero that included the power to withdraw money from Miller's bank accounts.

At the time of his death, Miller had money deposited in the Old Stone Federal Savings Bank ("Old Stone"), including $23,331.72 in a savings account. Old Stone was then a bank being run under the conservatorship of the Federal Deposit Insurance Corporation (the "FDIC"). The predecessor institution, Old Stone Bank, a Federal Savings Bank, had been closed by the FDIC on January 29, 1993. Old Stone, in turn, was closed and liquidated on July 8, 1994.

On August 27, 1993, Nero withdrew $23,331.72 from Miller's savings account to fund a bank check payable to himself. He, then, deposited the proceeds in his own account. On October 15, 1993, Nero was appointed executor of the Estate, but at the time of the withdrawal, he was neither an actual agent of Miller nor executor of the Estate.

Plaintiff's Amended Complaint alleges three counts: Count I against the United States under the Federal Tort Claims Act, 28 U.S.C. § 2674 (the "FTCA"); Count II against the FDIC ("FDIC-Receiver") as a conservator of Old Stone and operator of the bank on August 27, 1993; and Count III against the FDIC ("FDIC-Corporate") as the insurer of Old Stone's deposits.

This Court currently has before it four motions, and it will address each in turn. First, the United States moves to dismiss Count I because the claim is barred by the statute of limitations. This motion is denied. Second, plaintiff moves for summary judgment on Count II. This motion is denied. Third, FDIC-Corporate moves to dismiss Count III because there was no insured deposit in Old Stone when the bank closed. This motion is granted. Fourth, plaintiff moves to amend her complaint to add a negligence count against the United States, and the United States objects because plaintiff did not allege negligence in her administrative claim. This motion is granted.

I. United States Motion To Dismiss Count I

The issue before this Court is whether the discovery rule applies to a conversion claim brought under the FTCA.¹ The FTCA bars tort claims unless the claim is presented in writing to the appropriate federal agency within two years after such claim accrues. See 28 U.S.C. § 2401(b) (1998). The United States argues that the claim accrued in August 1993 when plaintiff alleges the money was improperly withdrawn from Miller's account by Nero. Plaintiff argues that the discovery rule delayed accrual of the statute of limitations until December 1996, when plaintiff discovered the alleged conversion.

A. Legal standard for a motion to dismiss

In ruling on a motion to dismiss, the Court construes the complaint in the light most favorable to the plaintiff, taking all well-pleaded allegations as true and giving the plaintiff the benefit of all reasonable inferences. See Negron-Gaztambide v. Hernandez-Torres, 35 F.3d 25, 27 (1st Cir.1994). Dismissal under Rule 12(b)(6) is appropriate only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

B. Discussion

Claims under the FTCA can only be brought under the terms and conditions of that Act. See McNeil v. United States, 508 U.S. 106, 111, 113 S.Ct. 1980, 1983, 124 L.Ed.2d 21 (1993). One such condition is that a claim must be filed within two years of accrual:

A tort claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues.

28 U.S.C. § 2401(b). Nero withdrew the $23,331.72 on August 27, 1993. Plaintiff filed her administrative claim under the FTCA on July 2, 1997. Thus, the only way for plaintiff's claim to survive is if the law allows a tolling of the statute of limitations and that tolling extended past July 2, 1995.

1. The law of the Federal Tort Claims Act

Sovereign immunity is jurisdictional, so this Court's jurisdiction is defined by the United States' consent to be sued. See FDIC v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, 1000, 127 L.Ed.2d 308 (1994). However, the Supreme Court has ruled that the statute of limitations is not jurisdictional, and that statute is subject to equitable tolling. See Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96, 111 S.Ct. 453, 457, 112 L.Ed.2d 435 (1990) (holding that equitable tolling doctrine applies to suits against the United States); Schmidt v. United States, 498 U.S. 1077, 111 S.Ct. 944, 112 L.Ed.2d 1033 (1991) (applying Irwin to the FTCA), vacating 901 F.2d 680 (8th Cir.1990), on remand 933 F.2d 639 (8th Cir.1991).

The discovery rule under the FTCA is established federal law. See K.E.S. v. United States, 38 F.3d 1027, 1029 (8th Cir.1994). In medical malpractice cases, the Supreme Court has articulated the discovery rule to be that the claim does not accrue "until the plaintiff has discovered both his injury and its cause." United States v. Kubrick, 444 U.S. 111, 120, 100 S.Ct. 352, 358, 62 L.Ed.2d 259 (1979). The cause of action accrues at that time even if plaintiff does not know that the injury is legally redressable. See id., at 123-24, 100 S.Ct. at 360. If plaintiff fails to act despite knowledge of the harm, then plaintiff loses the claim. See id.

There is no reason to limit the discovery rule to FTCA medical malpractice cases. Although the First Circuit has not applied Kubrick's test to a conversion claim under the FTCA, it has done so in FTCA cases just as far afield from medical malpractice. See, e.g., Attallah v. United States, 955 F.2d 776, 778-780 (1st Cir.1992). The Attallahs sued under the FTCA, claiming the government negligently failed to provide adequate security for money stolen when Customs Service agents murdered a courier, and the First Circuit held they were protected by the discovery rule. See id.

In articulating the rule here, this Court relies on FTCA cases. See Attallah, 955 F.2d at 778-780; Nicolazzo v. United States, 786 F.2d 454, 455-57 (1st Cir.1986); Magdalenski v. United States, 977 F.Supp. 66, 68-71 (D.Mass.1997), but also notes similar First Circuit precedent on discovery rules both under federal law, see Oropallo v. United States, 994 F.2d 25, 28-32 (1st Cir.1993) (federal tax law), and state law, see Bernier v. Upjohn Co., 144 F.3d 178, 180 (1st Cir.1998) (Massachusetts law); Cambridge Plating Co., Inc. v. Napco, Inc., 991 F.2d 21, 25-30 (1st Cir.1993) (same); Tagliente v. Himmer, 949 F.2d 1, 4-6 (1st Cir.1991) (same); Marrapese v. Rhode Island, 749 F.2d 934, 937 & 943-944 (1st Cir.1984) (federal and Rhode Island law). The doctrine under non-FTCA claims is substantially similar, and the cases provide a framework through which to apply the law in this case.

This Court holds that the discovery rule applies in FTCA conversion cases. The rule protects plaintiffs who suffer from "blameless ignorance." See Kubrick, 444 U.S. at 120 n. 7, 100 S.Ct. at 358 n. 7. In order for the statute of limitations to be tolled, the factual basis for the cause of action must have been inherently unknowable at the time of the injury. See Attallah, 955 F.2d at 780; Tagliente, 949 F.2d at 4. The action accrues when the injured party knew or, in the exercise of reasonable diligence, should have known the factual basis for the cause of action. See Kubrick, 444 U.S. at 121-25, 100 S.Ct. at 359-61; Attallah, 955 F.2d at 780; Tagliente, 949 F.2d at 4.

There is an apparent conflict in the First Circuit as to whether this test is objective or subjective, whether courts ask "Was it possible to discover the injury and its cause?" or ask "Did this plaintiff act reasonably in trying to discover the injury and its cause?" Compare Attallah, 955 F.2d at 780 (holding that test is objective); Tagliente, 949 F.2d at 4 (same) with Cambridge Plating Co., 991 F.2d at 26-27 (holding that the test is subjective). This Court adopts the objective standard because it is the dominant view and because the Cambridge Plating Court explicitly applied Massachusetts law.

2. Applying the law to the facts of this case

The United States argues that Nero's withdrawal of money from Old Stone was not inherently unknowable because plaintiff, as sole heir, had immediate access to testamentary documents, bank statements and other financial records after Miller's death. Because plaintiff had the legal power to access her father's financial records, the United States argues, she must be presumed to know the facts that she would have discovered therein:

Certainly by October 1993, when Nero was named executor, she could have simply demanded a review of the pertinent financial records — or, she could have petitioned the Probate Court for these documents, as well as for an accounting.

(Reply of the United States to Pl.'s Opp'n to the United States' Mot. to Dismiss at 10.) The United States is correct that plaintiff cannot seek solace from the discovery rule if reasonable diligence would have discovered the loss.

However, the discovery rule does not require every...