Woodbridge Plaza v. Bank of Irvine

• Citation: 815 F.2d 538
• Decision Date: 17 April 1987
• Docket Number: No. 85-5997,85-5997
• Parties: WOODBRIDGE PLAZA, a general partnership, Plaintiff-Appellant, v. BANK OF IRVINE, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 538

815 F.2d 538

55 USLW 2638

WOODBRIDGE PLAZA, a general partnership, Plaintiff-Appellant, v. BANK OF IRVINE, et al., Defendants-Appellees.

No. 85-5997.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted April 9, 1986.

Submission vacated Dec. 16, 1986.

Resubmitted April 10, 1987.

Decided April 17, 1987.

Richard D. Keys, Newport Beach, Cal., for plaintiff-appellant.

Rex E. Lee, Howard Gest, Los Angeles, Cal., for defendant-appellee.

Jack T. Kerry, Los Angeles, Cal., for amicus curiae (defendants-appellees).

Appeal from the United States District Court for the Central District of California.

Before SCHROEDER and FLETCHER, Circuit Judges, and VOORHEES, ^* District Judge.

SCHROEDER, Circuit Judge:

The principal issue in this appeal is a question of California state law. Appellant contends that the Federal Deposit Insurance Corporation (FDIC), acting pursuant to California law as receiver of a state-chartered bank, violated California statutes requiring equal treatment of bank creditors. Appellant's claim against the bank was not included in a purchase and assumption agreement executed by the FDIC as receiver of an insolvent bank, and no provision was made for satisfaction of the claim. Appellant seeks a declaratory judgment and eventual damages against the FDIC.

Appellant, Woodbridge Plaza, originally filed this action in Orange County Superior Court, and the FDIC removed the action to United States District Court pursuant to 12 U.S.C. Sec. 1819 (Fourth), which provides:

[T]he Corporation shall ... have power ... To sue and be sued, complain and defend, in any court of law or equity, State or Federal. All suits of a civil nature ... to which the Corporation shall be a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction thereof, without regard to the amount in controversy; and the Corporation may, without bond or security, remove any such action ... from a state court to the United States district court ..., except that any such suit to which the Corporation is a party in its capacity as receiver of a State bank and which involves only the rights or obligations of depositors, creditors, stockholders, and such State bank under State law shall not be deemed to arise under the laws of the United States.

12 U.S.C. Sec. 1819 (Fourth). The district court dismissed the action, holding that the FDIC had not violated California law. We have jurisdiction over this appeal pursuant to 28 U.S.C. Sec. 1291.

The panel requested supplemental briefs on the issue of federal jurisdiction in light of the last phrase of the statute quoted above. Both sides responded that federal jurisdiction exists because the suit seeks to impose liability on the corporation and therefore involves alleged obligations of the corporation. We agree.

FACTS

In 1978, Woodbridge Plaza entered into a written lease agreement with the Bank of Irvine in which Woodbridge as landlord agreed to lease real property to the bank to be used as a bank office. In 1984, a dispute arose between Woodbridge and the bank, giving rise to a lawsuit filed in Orange County Superior Court. In that suit Subsequently, on May 18, 1984, the Superintendent of Banks for the State of California closed the Bank of Irvine and assumed control of its property and affairs pursuant to Cal.Fin.Code Sec. 3100 (West Supp.1986). The Superintendent appointed the FDIC as receiver of the bank pursuant to Cal.Fin.Code Sec. 3221 (West 1968).

the Bank of Irvine claimed that Woodbridge improperly terminated the lease, and Woodbridge's cross-claim alleged that the bank had breached the lease by abandoning the premises. That suit is pending in state superior court.

The FDIC, as receivor, entered into a purchase and assumption agreement with the Security Pacific State Bank ("Security Pacific"), under which Security Pacific purchased certain assets of the Bank of Irvine ("the bank") and assumed liabilities to various bank creditors, including depositors, trade creditors, and two other real property leases. Simultaneously, the FDIC as receiver sold the remaining assets of the bank (including the bank's claim against Woodbridge) to the FDIC for cash, which then was included in the assets purchased by Security Pacific. The agreement and the sale were approved by the Superintendent and the Superior Court of California. See Cal.Fin.Code Secs. 3110.1, 3225.

Woodbridge's claim was not among the liabilities assumed by Security Pacific. Woodbridge asserts, and the FDIC does not here dispute, that because the proceeds of all assets purchased by the corporation were paid to Security Pacific, virtually no assets remain in the receivership from which Woodbridge's claim could be satisfied.

On December 28, 1984, Woodbridge brought this action in the Superior Court of California against the Bank of Irvine, the FDIC in its corporate insurer capacity, and the FDIC as receiver of the bank. It claimed that the FDIC improperly distributed the assets of the bank in violation of the California Financial Code. Woodbridge named the FDIC in its corporate capacity to ensure recovery of a judgment, because the receiver is only liable to the extent that there are assets in the receivership. The FDIC removed the action to the United States District Court pursuant to 12 U.S.C. Sec. 1819, and moved to dismiss Woodbridge's claims against it.

The district court granted the motion. It found that the purchase and assumption agreement did not violate California law, and alternatively, that Woodbridge's claim was not yet ripe. After dismissing Woodbridge's claims against the Corporation, it remanded the remainder of the action to state court. Woodbridge then brought this appeal.

DISCUSSION

California law authorizes its Superintendent of Banks to appoint the FDIC as receiver of FDIC-insured banks. Cal.Fin.Code Secs. 3220, 3221. If the FDIC accepts the appointment, "the rights of depositors and other creditors of the insured bank shall be determined in accordance with ... the laws of this State." Cal.Fin.Code Sec. 3222. Conversely, the FDIC is authorized to act as the receiver of insured banks where the appropriate state official tenders appointment in accordance with state law, 12 U.S.C. Sec. 1821(e), and as receiver, the FDIC possesses the rights, powers and privileges granted by state law to such a receiver. Id.

Thus, we look to California state law in evaluating Woodbridge's claim. Woodbridge argues that California law requires equal treatment of all creditors of a closed state bank as well as pro rata distribution of the assets of the bank among its creditors. Woodbridge therefore argues that because California law requires equal treatment of creditors of an insolvent state bank, the FDIC acted unlawfully in failing to make any provision for Woodbridge's claim.

California Financial Code Sec. 857 provides that "[n]o bank, bank officer, director, employee, or agent shall give a preference to any depositor or creditor except as expressly authorized by law." More specifically, in the section of the Financial Code dealing with closed state banks, the California statute provides that to the extent provided in the purchase and assumption agreement, the purchasing bank succeeds to the rights and obligations of the selling bank (Sec. 3110.1). The receiver is required to give notice to creditors to present their claims within four months (Sec. 3117); and, with court approval, the receiver is to pay pro rata dividends upon all approved claims out of funds remaining after payment of expenses and depositors' claims (Sec. 3119). If the bank is liquidated, the receiver must petition the court for an order declaring, inter alia, that all known liabilities "have been paid or adequately provided for ... so far as the bank's assets permitted" (Sec. 3126). These statutes manifest a strong underlying policy to give equal treatment to all creditors of a closed state bank, and to prohibit arbitrary distributions.

The receiver is authorized to "sell any part or the whole of the business of the bank to any other bank" with approval of the court and the Superintendent (Sec. 3110.1). The FDIC argues that this authorization validates the purchase and assumption agreement, including its ultimate exclusion of Woodbridge's claim. However, the FDIC gives no reasons why Woodbridge's claim was excluded. Section 3110.1 does not allow the receiver to pick and choose which creditors will have their claims assumed. Such an interpretation would seriously undermine the law and policy in the California provisions, particularly Cal.Fin.Code Secs. 857 and 3119, which anticipate orderly and equitable treatment of all claims. Thus, the FDIC either should have required that Woodbridge be included in the purchase and assumption agreement with Security Pacific, or it should have retained sufficient assets in the receivership to cover its claim. We conclude that the FDIC violated California law by excluding Woodbridge's claim from any meaningful opportunity for recovery.

The FDIC emphasizes that Financial Code section 3110.1 authorizes a purchase and assumption agreement as to "part" of the bank's assets. The FDIC contends that the legislative history of that provision shows that the legislature intended to authorize a receiver to enter into arrangements which fail to make provision for all claims on a ratable basis. The legislative history does not, however, indicate any such purpose. The legislative counsel's digest of Assembly Bill 4086, for example, stated that the purpose of section 3110.1 was to authorize the superintendent "to sell all or part of the commercial banking or trust business of a bank ... and for the succession by operation of law of the deposits and fiduciary obligations of the seller to the buyer as provided in the terms of sale." This and other statements of legislative intent show only that the California legislature felt the...