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Resolution Trust Corp. v. W.W. Development & Management

January 16, 1996

RESOLUTION TRUST CORPORATION IN ITS CAPACITY AS CONSERVATOR FOR BELL FEDERAL SAVINGS BANK

v.

W.W. DEVELOPMENT & MANAGEMENT, INC. APPELLANT W.W. DEVELOPMENT & MANAGEMENT, INC.

v.

THE RESOLUTION TRUST CORPORATION, IN ITS CAPACITY AS RECEIVER FOR BELL SAVINGS BANK, PASA APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania

(D.C. Civil Action Nos. 91-3788 and 93-4210)

Before the end of the 60-day period beginning on the earlier of-

GREENBERG, Circuit Judge.

Argued December 5, 1995

(Filed: January 16, l996)

OPINION OF THE COURT

This case requires us to consider the application of the jurisdictional bar in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") to the judicial adjudication of claims when the claimant has not complied with FIRREA's claims procedures. *fn1 Bell Savings Bank, PaSA ("Bell") confessed judgment in a Pennsylvania state court against W.W. Development and Management Company ("W.W.") following W.W.'s default on a $500,000 loan. After the Director of the Office of Thrift Supervision, Department of the Treasury, declared Bell insolvent and appointed the Resolution Trust Corporation ("RTC") its conservator and then its receiver, W.W. filed: (1) a petition to open the judgment, offering defenses and a counterclaim in the state court action which the RTC subsequently removed to a federal court and, after the administrative claims period passed, (2) a separate action restating the same claims in federal court. The district court denied the petition in the first case and granted summary judgment to the RTC in the second case, as it held that it lacked subject matter jurisdiction over W.W.'s claims in both cases as a result of FIRREA's jurisdictional bar. For reasons that we explain below, we will affirm the district court's order as to its conclusion that it lacked subject matter jurisdiction over the second lawsuit and over W.W.'s counterclaim in the first. We, however, will vacate the district court's order to the extent that it rejected jurisdiction over W.W.'s defenses to liability in W.W.'s petition to open judgment.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The two cases arose from a loan and a loan commitment agreement between Bell and W.W. for financing W.W.'s development of a medical office condominium in Philadelphia, Pennsylvania. W.W.'s App. 54. Initially, Bell loaned W.W. $500,000 on August 20, 1987. Id. at 45. In the loan documents, W.W. authorized Bell to confess judgment against it in the amount of the loan plus interest if W.W. defaulted. Id. at 43. On September 6, 1988, Bell agreed to loan W.W. $3,314,000 for further development of the property. This commitment was valid until October 30, 1988. Id. at 121-28. W.W. planned to use part of this loan to pay off the earlier loan of $500,000. Id. at 91. On October 3, 1988, the parties extended the commitment date on the $3,314,000 loan until April 30, 1989. Id. at 95. Bell, however, did not make this additional loan to W.W. which then defaulted on the earlier $500,000 loan. Bell then confessed judgment against W.W. in the amount of $529,883.43 on June 13, 1990, in the Court of Common Pleas of Philadelphia County. Id. at 40-50.

On March 15, 1991, the Director of the Office of Thrift Supervision found that Bell was likely to incur losses as a result of unsafe and unsound practices and appointed the RTC its conservator. *fn2 As a result, under 12 U.S.C. Section(s) 1821(d)(2)(A)(i), the RTC succeeded to "[a]ll rights, titles, powers and privileges" of Bell. Four days later, on March 19, 1991, the director appointed the RTC Bell's receiver. The RTC then published notice that all creditors having claims against Bell must submit them by June 22, 1991, but it later extended this time, at least as to W.W., until September 27, 1991.

On March 26, 1991, W.W. filed a petition to open the confessed judgment in the Philadelphia County Court of Common Pleas, alleging that Bell's breach of its commitment on the proposed $3,314,000 loan caused W.W. to default on the $500,000 loan. In addition, W.W. sought to assert a counterclaim for damages from Bell's breach. W.W.'s App. 51-60. *fn3

On April 24, 1991, the RTC removed the state court proceedings, including the judgment and the petition to open the judgment, to the United States District Court for the District of Columbia pursuant to 28 U.S.C. Section(s) 1331 and 1441(a) and 12 U.S.C. 1441a(l)(3). *fn4 W.W.'s App. 96. Thus, we will refer to this case as the removed case. On May 18, 1991, the District of Columbia court transferred the removed case to the Eastern District of Pennsylvania. W.W.'s App. 101.

On August 5, 1991, shortly before the deadline for the filing of claims under FIRREA against the RTC as receiver for Bell, counsel for W.W. wrote a letter to the RTC's counsel advising him of the pending petition to open judgment and of W.W.'s claims against the RTC. The letter stated:

As you are aware, . . . the Motion to Open Judgment that is presently pending, in addition to setting forth grounds to open the judgment and defenses against that judgment, includes claims for damages incurred as a result of the subject breach by Bell of its Agreement to loan sufficient funds to W.W. Development. . . .

I assume that, given the fact that RTC is in receipt of these claims, no further filings are required by my client in order to permit RTC to determine these claims pursuant to 12 U.S.C. Sec. 1821(d)(5). If this assumption is incorrect, I would appreciate your prompt advice and would further appreciate your providing me with any forms which should be completed by my client in order to obtain review and determination by RTC of these claims. Your prompt advice would be most appreciated and in the event I do not hear from you to the contrary, I will assume that the presentation of the claims of my client in the Motion to Open Judgment are sufficient to permit the RTC to administratively determine such claims. W.W.'s App. 156-157.

There is some dispute as to whether the RTC responded to this letter but we will assume in accordance with W.W.'s contention that it did not. *fn5 In any event, W.W. did not file a formal claim with RTC within the period for filing claims even as extended to September 27, 1991.

On September 15, 1992, almost one year after the time to file a formal claim had expired, and after counsel suggested that the proceedings in the removed case be postponed, the court referred that case to a magistrate judge to explore settlement. Upon joint request of the parties, the district court suspended the proceedings on the petition to open the judgment for five months on September 22, 1992. Id. at 108. Finally, on October 7, 1992, W.W. filed a formal proof of claim with the RTC. On June 8, 1993, the RTC denied W.W.'s October 7, 1992 administrative claim on the ground that W.W. did not return an official claim form before the deadline for filing claims. In the letter denying the claim and explaining the bar, the RTC stated that W.W. could file suit within 60 days from the date of the letter. Id. at 174-75.

On August 5, 1993, within that 60-day period, W.W. filed the second action, which we will call the federal case, against the RTC in its capacity as receiver for Bell, alleging that Bell's failure to adhere to its loan commitment caused W.W. damages of $2,996,150. This federal case essentially restated W.W.'s claims in its petition to open judgment. On June 20, 1994, the court transferred the petition to open judgment in the removed case to its current docket. Id. at 109.

The RTC then moved for summary judgment in the federal case, arguing that the district court lacked subject matter jurisdiction under 12 U.S.C. Section(s) 1821(d)(5)(C)(i) *fn6 since W.W. did not file an official claim form until after the bar date of September 27, 1991. W.W.'s App. 136. W.W. filed a cross-motion for partial summary judgment declaring that it had filed a timely administrative claim. The district court rejected the RTC's argument, reasoning that the petition to open, filed on March 26, 1991, and served on the RTC in April 1991, coupled with W.W.'s letter of August 5, 1991, requesting notification if its administrative claim was incomplete, constituted a sufficient and timely administrative claim. Id. at 22-25. As a result, the district court on July 15, 1994, denied the RTC's motion for summary judgment and granted W.W.'s cross-motion for partial summary judgment establishing that its claim was timely. Id. at 26.

The RTC then filed a motion for reconsideration on the grounds that if W.W's claim was considered filed by August 5, 1991, as the district court had held, then under 12 U.S.C. Section(s) 1821(d)(5)(A)(i), *fn7 the claim was deemed denied as a matter of law on February 3, 1992, the end of the 180-day period in which the RTC should have acted on the claim. Thus, in the RTC's view, W.W. was required to have filed its district court action within 60 days of February 3, 1992 (i.e., on or before April 4, 1992) under 12 U.S.C. Section(s) 1821(d)(6)(B). *fn8 The RTC argued that since W.W. did not file the federal case until August 5, 1993, the district court lacked subject matter jurisdiction over it. W.W.'s App. 31-34. The district court agreed and granted the RTC's motion for summary judgment on November 17, 1994. Id. In the same order, the district court denied W.W.'s petition to open judgment in the removed case on the grounds that W.W. filed the petition after Bell was placed in receivership. Consequently, the court held that it lacked jurisdiction ...


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