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Resolution Trust Corp. v. Shoreview Builders Inc.

Decided: December 17, 1991.

RESOLUTION TRUST CORPORATION, AS RECEIVER FOR CITY SAVINGS, F.S.B., PLAINTIFF-APPELLANT,
v.
SHOREVIEW BUILDERS, INC., A GENERAL PARTNERSHIP IN THE STATE OF NEW JERSEY, AND HUBERT P. SCHREURS AND JOSEPH STRZALKA, INDIVIDUALLY, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court, Law Division, Somerset County.

Michels, Havey and Conley. The opinion of the court was delivered by Havey, J.A.D.

Havey

Plaintiff Resolution Trust Corporation (the RTC), as receiver for City Savings Bank, F.S.B., filed suit in the Law Division against defendants Shoreview Builders, Inc. (Shoreview), Hubert P. Schreurs and Joseph Strzalka, to recover on two promissory notes given by Shoreview to City Federal Savings Bank (City Federal), and guaranteed by the individual defendants. The RTC appeals, by leave granted, from the denial of its motion to dismiss defendants' counterclaim which seeks money damages against the RTC for City Federal's purported unfair dealing and breach of fiduciary duty owed to defendants. The RTC argues that the Law Division had no subject matter jurisdiction over the counterclaim because defendants did not exhaust their administrative remedies provided for under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). 12 U.S.C.A. § 1821(d) (West 1989). We agree and reverse.

In November 1987, Shoreview executed and delivered to City Federal two notes in the principal amounts of $385,500 and $2,111,880. In January 1989, City Federal gave Shoreview a line of credit in the amount of $250,000 as evidenced by a third note executed by Shoreview. All three notes were guaranteed by Schreurs and Strzalka.

On December 8, 1989, the Office of Thrift Supervision (OTS) declared City Federal insolvent and appointed the RTC as receiver. The RTC then assigned its right to defendants' notes to City Savings Bank, F.S.B., which was in conservatorship under the RTC. In September 1990, the OTS closed City Savings Bank and appointed the RTC as receiver, and on the same day the RTC assigned the notes to City Savings, F.S.B., a newly-created federal mutual association.

Because defendants had defaulted on the note payments, on November 9, 1990, the RTC, as conservator for City Savings, F.S.B., filed a complaint in the Law Division against defendants to recover the amounts advanced by City Federal to defendants.

On January 11, 1991, City Savings, F.S.B. was placed in receivership under the RTC. On March 13, 1991, defendants filed an answer and counterclaim asserting that City Federal and City Savings Bank, F.S.B., as predecessors to City Savings, F.S.B., had breached their obligation to fund fully defendants' building project. Specifically, defendants claimed that City Federal had advanced only $1,950,321.20 on the $2,111,880 note, and the RTC's and its predecessors' refusal to disburse the remaining balance of the loan prevented Shoreview from paying contractors and continuing the sale of residential units. Defendants sought "actual damages, punitive damages, costs of suit, attorney's fees and such other relief as the court may deem just and equitable on this counterclaim." On March 7, 1991, the RTC amended its complaint to reflect that it had been appointed receiver for City Savings, F.S.B. as of January 11, 1991.

The RTC moved to dismiss defendants' counterclaim arguing that the Law Division lacked subject matter jurisdiction, see R. 4:6-2(a), because defendants had failed to comply with the comprehensive federal administrative claims procedure under FIRREA. The trial judge denied the motion, reasoning that defendants' counterclaim was in reality an affirmative defense which was not a "claim" subject to the administrative procedure under FIRREA. In denying the RTC's motion for reconsideration, the judge found it significant that the RTC had in the first instance filed an action in the state court against defendants. As a consequence, the judge reasoned, defendants should not be precluded from raising what he deemed a "defense" in a "collection action" in the state court proceeding.

I

Congress's passage in 1989 of FIRREA was intended to address the recent savings and loan crisis. H.R.Rep. No. 54(I), 101st Cong., 1st Sess., 1, 302-12, reprinted in 1989 2 U.S.C.C.A.N. 86, 98-108. The act provides a detailed regulatory framework so as to "restore the financial integrity of the

thrift industry's deposit insurance fund and to 'provide funds from public and private sources to deal expeditiously with failed depository institutions.'" Circle Indus. v. City Fed. Sav. Bank, 749 F. Supp. 447, 451 (E.D.N.Y.1990), (quoting P.L. 101-73, 103 Stat. 183, § 101[8]), aff'd o.b., 931 F.2d 7 (2nd Cir.1991). Thus, the RTC was established "to contain, manage and resolve failed savings associations[,]" acting in a capacity of conservator or receiver of the failed depository institution. Circle Indus., 749 F. Supp. at 451 (quoting § 101[7]); see also 12 U.S.C.A. § 1821(c). The RTC was given authority to determine claims against a failed institution, 12 U.S.C.A. § 1821(d)(3), as well as the power to liquidate the institution's assets in order to pay depositors and other claimants. 12 U.S.C.A. § 1821(d)(2)(E).

FIRREA carefully circumscribes the scope and form of judicial review of the agency's disallowance of a claim asserted against the RTC in its capacity as receiver. The act creates a comprehensive administrative procedure for adjudicating claims asserted against a failed depository institution. As receiver, the RTC initiates the process by giving prompt notice to creditors of the failed institution by advising them they have (at least) 90 days from publication of notice to present their claims against the assets of the institution. 12 U.S.C.A. § 1821(d)(3). The RTC then has 180 days from the date the claim is filed to allow or disallow the claim. 12 U.S.C.A. 1821(d)(5)(A), (B) and (D). If the claim is disallowed, the claimant may either seek administrative review or file suit in the federal district court. 12 U.S.C.A. § 1821(d)(6)(A). The judicial proceeding in the federal district court is a de novo determination of the claim, not a review of the administrative disallowance of the ...


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