Herbst v. Resolution Trust Corp. - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO
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Herbst et al., Appellees, v. Resolution Trust Corporation, as
Receiver for First Savings & Loan Company, Massilon, Ohio,
Appellant.
[Cite as Herbst v. Resolution Trust Corp. (1993), Ohio
St. 3d .]
Savings and loan associations -- Section 212(d) of Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
does not vest federal courts with exclusive subject-matter
jurisdiction over actions against Resolution Trust
Corporation as receiver of a failed financial institution
-- Former Sections 1821, 1441a and 1819, Title 12, U.S.
Code, construed.
---
Section 212(d) of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, does not vest
federal courts with exclusive subject-matter jurisdiction
over actions against the Resolution Trust Corporation as
receiver of a failed financial institution. (Former
Sections 1821, 1441a and 1819, Title 12, U.S. Code,
construed.)
---
(No. 91-2254 -- Submitted January 6, 1993 -- Decided
February 24, 1993.)
Appeal from the Court of Appeals for Stark County, No.
CA-8478.
On February 12, 1990, appellees, Ronald P. Herbst and
Andrea D. Herbst, filed a complaint in the Court of Common
Pleas of Stark County naming as defendants, First Savings &
Loan Company ("First Savings"), Midland Buckeye Federal Savings
& Loan Association, Smith Development Corporation and Stephen
S. Smith. Appellees' complaint was premised on fraud, breach
of contract, breach of warranty and deceptive trade practices,
arising from the purchase of a lot and construction of a
residence on the lot.
After this action was filed, First Savings became
insolvent and appellant, Resolution Trust Corporation ("RTC"),
was, on or about April 20, 1990, appointed receiver.
Thereafter, RTC published notices informing creditors of First

Savings of the appointment of RTC. It is undisputed the
notices established July 25, 1990 as the final date for
creditors to present their claims, and that appellees did not
file a claim with RTC.
On June 1, 1990, RTC moved to be substituted as a party
defendant, in appellees' cause of action, replacing First
Savings. The common pleas court granted this motion.
On October 3, 1990, RTC moved for summary judgment, urging
that it be dismissed as a party defendant because appellees had
failed to file a claim with RTC by the July 25, 1990 deadline.
The trial court granted RTC summary judgment.
Upon appeal, the court of appeals reversed the judgment of
the trial court and remanded the cause. The court of appeals
determined that pursuant to Section 1821(d)(5)(F)(ii), Title
12, U.S. Code, appellees' failure to file a claim with RTC did
not affect their right to continue their state-court action.
The cause is now before this court pursuant to the
allowance of a motion to certify the record.

Buckingham, Doolittle & Burroughs, Richard G. Reichel and
Todd S. Bundy, for appellees.
Porter, Wright, Morris & Arthur and Jennifer T. Mills;
James D. Snively, for appellant.

Douglas, J. RTC asserts that appellees' state-court
action against it as receiver of First Savings should be
dismissed for lack of subject-matter jurisdiction because: (1)
federal courts have exclusive jurisdiction over claims
involving a failed financial institution under receivership;
and (2) appellees did not pursue and exhaust administrative
procedures described in former Sections 1821(d)(3) through
(d)(10), Title 12, U.S. Code.
I
This appeal concerns the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA" or "the Act"),
Pub.L. 101-73, 103 Stat. 183.1 The Act is a response by
Congress to the evolving savings and loan crisis. As part of
its comprehensive framework for processing claims, FIRREA
created the RTC "* * * to contain, manage, and resolve failed
savings associations * * *." H.R. Rep. No. 101-54(I), 101st
Cong., 1st Sess. 1, 322, reprinted in 1989 U.S. Code Cong. &
Adm. News 86, 118. In support of their respective positions,
the parties in this appeal cite, and rely upon, various
sections of the Act. Having reviewed these sections, and the
Act as a whole, we believe Judge Selya in Marquis v. Fed.
Deposit Ins. Corp. (C.A.1, 1992), 965 F.2d 1148, 1151, was
accurate in stating that:
"FIRREA's text comprises an almost impenetrable thicket,
overgrown with sections, subsections, paragraphs,
subparagraphs, clauses, and subclauses -- a veritable jungle of
linguistic fronds and brambles. In light of its prolixity and
lack of coherence, confusion over its proper interpretation is
not only unsurprising -- it is inevitable."
Keeping this in mind, we turn our attention to RTC's
contentions.
II
In Elek v. Huntington Natl. Bank (1991), 60 Ohio St.3d

135, 573 N.E.2d 1056, relying on various United States Supreme
Court decisions, we observed that state courts presumptively
enjoy concurrent jurisdiction with federal courts over claims
arising under federal law. Id. at 138-139, 573 N.E.2d at
1059-1060. Quoting language from Gulf Offshore Co. v. Mobil
Oil Corp. (1981), 453 U.S. 473, 101 S.Ct. 2870, 69 L.Ed.2d 784,
we noted that the presumption of concurrent jurisdiction can be
rebutted, and that Congress may vest exclusive jurisdiction in
the federal courts only if (1) a federal statute explicitly
provides that federal courts have exclusive jurisdiction, (2)
the legislative history unambiguously indicates that
jurisdiction lies in federal courts, or (3) there is clear
incompatibility between state-court jurisdiction and federal
interests. Elek, 60 Ohio St.3d at 138, 573 N.E.2d at 1059.
RTC contends that Section 1821(d)(6)(A), Title 12, U.S.
Code (Section 212[d] of FIRREA) read in conjunction with
Section 1821(d)(13)(D), Title 12, U.S. Code, evidences an
explicit statutory directive that all actions against the RTC
be pursued exclusively in federal court, precluding the
exercise of concurrent state-court jurisdiction. We disagree.
Section 1821(d)(6)(A) provides that within sixty days
after the notice of disallowance of a filed claim, or the
expiration of the time period provided for in Section
1821(d)(5)(A)(i), Title 12, U.S. Code, whichever is earlier,
the claimant may:
"* * * [R]equest administrative review of the claim * * *
or file suit on such claim (or continue an action commenced
before the appointment of the receiver) in the district or
territorial court of the United States for the district within
which the depository institution's principal place of business
is located or the United States District Court for the District
of Columbia (and such court shall have jurisdiction to hear
such claim)."
Section 1821(d)(13)(D), entitled "Limitation on judicial
review," provides:
"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." (Emphasis added.)
When reading Sections 1821(d)(6)(A) and (d)(13)(D) in
isolation from other sections of FIRREA, it would appear that
RTC's position has merit. However, RTC's argument is based on
but two sections of a very detailed and comprehensive federal
scheme. RTC's narrow selection of only two parts of FIRREA is
inattentive to the language that begins Section
1821(d)(13)(D): "[e]xcept as otherwise provided in this
subsection * * *."
Section 1821(d)(2)(A)(i), Title 12, U.S. Code sets forth
RTC's "general powers," and establishes that the RTC succeeds
to "all rights, titles, powers, and privileges" of the failed
insured depository institution. In addition, under Section
1821(d)(2)(J), Title 12, U.S. Code, the RTC has "incidental

powers" and may "(i) exercise all powers and authorities
specifically granted * * * to receivers * * * under this Act *
* *; and (ii) take any action authorized by this Act, which the
Corporation determines is in the best interest of the
depository institution * * *." Pursuant to Section
1441a(b)(10)(F), Title 12, U.S. Code, entitled "Corporate
powers," the RTC has the authority "[t]o sue and be sued in its
corporate capacity in any court of competent jurisdiction."
Further, "[t]he Corporation may * * * remove any such action *
* * from a State Court to * * *" the appropriate federal court
within ninety days after the receiver is substituted as a
party, or thirty days after suit is filed. (Emphasis added.)
Section 1441a(l)(3)(A) and (B), Title 12, U.S. Code; see, also,
Section 1819(b)(2)(B), Title 12, U.S. Code, and Section
1821(d)(13)(B)(i), Title 12, U.S. Code.
As can be gleaned from the above, Congress intended the
RTC to step into the shoes of a failed financial institution.
It is apparent that Congress anticipated that at the time the
receiver is appointed, there may be litigation against a failed
financial institution pending in state court. However,
Congress did not mandate that all such actions be removed to
federal court. Rather, discretionary authority was provided.
Clearly, if Congress had intended federal jurisdiction to be
exclusive, it would not have used language giving the RTC
discretion to remove state actions, and any state action
involving the RTC would necessarily have to be dismissed for
lack of subject-matter jurisdiction.
Equally persuasive is the use of the verb "continue" in
numerous provisions of the Act. See, e.g., Section
1821(d)(5)(F)(ii), Title 12, U.S. Code (filing of a claim with
the RTC does not prejudice the claimant's right to continue any
action filed before receivership); Section 1821(d)(8)(E)(ii),
Title 12, U.S. Code (providing a similar disclaimer of
prejudice to parties who qualify under FIRREA's expedited
claims procedure); and Section 1821(d)(6)(A), Title 12, U.S.
Code (claimant has choice to file suit or seek administrative
review of a disallowed claim, or continue an action commenced
before the appointment of the receiver).
As stated in Marc Dev., Inc. v. Fed. Deposit Ins. Corp.
(D. Utah 1991), 771 F.Supp. 1163, 1168-1169:
"* * * The term 'continue' implies that a party is
proceeding forward in an ongoing case without an interruption
in the court's jurisdiction. A claimant could not 'continue'
an action over which the court has been deprived of subject
matter jurisdiction. The claimant would have to 'refile' such
a lawsuit because the suit would have been dismissed due to
lack of subject matter jurisdiction." (Emphasis added.)
Based on the foregoing, we believe that RTC's reliance on
Sections 1821(d)(6)(A) and 1821(d)(13)(D) for the proposition
that federal courts have exclusive jurisdiction over actions
against the RTC is simply not supported by other parts of
FIRREA. With respect to actions against the RTC, Congress did
not intend that state-court jurisdiction be preempted. Accord
Berke v. Resolution Trust Corp. (Minn. App. 1992), 483 N.W.2d
712, 715, and Armstrong v. Resolution Trust Corp. (1992), 234
Ill. App.3d 162, 170-172, 175 Ill. Dec. 195, 201-202, 599
N.E.2d 1209, 1215-1216.

RTC further argues that the legislative history of Section
1821(d) implies that Congress intended to provide federal
courts with exclusive jurisdiction over all matters involving
the RTC. In support, RTC cites a portion of FIRREA's
legislative history and references the United States Supreme
Court's decision in Coit Independence Joint Venture v. Fed. S.
& L. Ins. Corp. (1989), 489 U.S. 561, 109 S.Ct. 1361, 103
L.Ed.2d 602. However, the legislative history cited to us by
RTC does not evidence a Congressional intent to preclude
state-court jurisdiction when an action is commenced against a
failed financial institution prior to the time the institution
undergoes receivership. In fact, a review of the Act's history
belies RTC's argument. See H.R. Rep. No. 54(I), 101st Cong.,
1st Sess. 1, 419, reprinted in 1989 U.S. Code Cong. & Adm. News
86, 215 ("There shall be no judicial review of the
administrative determination not to allow a claim. [See
Section 1821(d)(5)(E).] Rather, the claimant must file suit or
continue a previously filed suit to establish a disallowed
claim."). It is evident that Congress was indeed aware of, and
did take into account, the possible situation where an action
could be brought in state court against a failed or failing
institution prior to the filing of a claim with RTC as receiver.
Moreover, upon a thorough reading of Coit, we find no
support for RTC's position. In Coit, the court interpreted
former Section 1464(d)(11), Title 12, U.S. Code. The thrust of
the court's decision was that the Federal Savings & Loan
Insurance Corporation ("FSLIC") did not have the authority to
adjudicate certain claims against failed savings and loan
associations. The court also determined that the regulations
adopted under the former statute were infirm because they did
not contain time limits with regard to the period of
adjudication. Congress obviously took into consideration the
Coit decision when drafting Section 1821(d). See H.R. Rep. No.
101-54(I), 101st Cong., 1st Sess. 1, 418-419, reprinted in 1989
U.S. Code Cong. & Adm. News 86, 214-215. The court in Coit did
not specifically rule on the propriety of concurrent state and
federal jurisdiction over actions commenced against a
receiver. However, a close reading of Coit leads us to
conclude that the United States Supreme Court assumed that
state and federal courts could possess concurrent jurisdiction
over such matters.
We also reject RTC's argument that there is a clear
incompatibility between state-court jurisdiction and federal
interests. As is evident, Congress enacted FIRREA in order to
facilitate claims against insolvent savings and loan
associations. Such claims were intended to be resolved in an
expeditious and fair manner. This objective, however, would be
thwarted if, upon appointment of a receiver of a failed
institution, state courts are immediately divested of
subject-matter jurisdiction and forced to dismiss pending
litigation. "It is difficult to conceive of anything less
efficient than dismissing a suit that has been, say, two years
in process * * *." Marquis, supra, 965 F.2d at 1154.
Therefore, having considered the principles set forth in
Elek, as applied to this case, and upon a thorough review of
FIRREA, we hold that Section 212(d) of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 does

not vest federal courts with exclusive subject-matter
jurisdiction over actions against the Resolution Trust
Corporation as receiver of a failed financial institution.
III
Appellees urge that pursuant to Section 1821(d)(5)(F)(ii),
Title 12, U.S. Code, failure to pursue and exhaust
administrative procedures described in FIRREA does not require
dismissal of their action filed in the common pleas court. We
agree.
Section 1821(d)(5)(F)(ii) provides that:
"No prejudice to other actions
"Subject to paragraph (12), the filing of a claim with the
receiver shall not prejudice any right of the claimant to
continue any action which was filed before the appointment of
the receiver." (Emphasis added.)
The provision to which Section 1821(d)(5)(F)(ii) refers is
entitled "Suspension of legal actions." The relevant portions
of Section 1821(d)(12), Title 12, U.S. Code provide that after
the receiver is appointed, it may request a stay for a period
not to exceed ninety days. Section 1821(d)(12)(A)(ii).
Further, such stays, if requested, must be granted by any court
with jurisdiction. Section 1821(d)(12)(B).
RTC urges that appellees cannot avail themselves of
Section 1821(d)(5)(F)(ii), since that provision is available
only to those litigants who have, in fact, filed an
administrative claim with a receiver. RTC further urges that
Section 1821(d)(5)(F)(ii) was enacted solely as a tolling
provision, protecting claimants from time bars pending
completion of the administrative-claims process.
RTC's narrow interpretation of Section 1821(d)(5)(F)(ii)
ignores the essence of the provision. By explicit terms, this
provision states that the filing of an administrative claim
with a receiver cannot adversely affect ("prejudice") the
continuation of a pending action. The right to continue an
action is subject only to the right of RTC to seek a ninety-day
stay. Section 1821(d)(12)(A)(ii). As expressed in the
legislative history, Congress intended to give the RTC adequate
time to familiarize itself with a suit to which it has become a
party, "* * * and decide how best to proceed." H.R. Rep. No.
101-54(I), 101st Cong., 1st Sess. 1, 331, reprinted in 1989
U.S. Code Cong. & Adm. News 86, 127. Equally important,
Section 1821(d)(5)(F)(ii) does not condition the continuation
of a pending suit on whether the litigant files a claim with a
receiver. Therefore, in reading Section 1821(d)(5)(F)(ii) in
combination with Section (d)(12)(A)(ii), we believe that
Congress intended to allow courts to retain jurisdiction over
pending lawsuits whether or not the litigant files a claim with
a receiver.
We also note that in support of its position that
appellees' failure to file an administrative claim is grounds
for dismissal of the state-court proceedings, RTC relies
heavily on Resolution Trust Corp. v. Mustang Partners (C.A.10,
1991), 946 F.2d 103. Not only is Mustang distinguishable, but
if that decision stands for the proposition that failure to
file an administrative claim is grounds for dismissal of a
pending action against a receiver of a failed financial
institution, we would disagree with that proposition.

Notwithstanding possible constitutional ramifications, if
Congress had intended to deprive a court of established
subject-matter jurisdiction, it could have so stated. Neither
FIRREA nor the Act's legislative history explicitly or
implicitly indicates that the intention of Congress was to
divest the common pleas court of its subject-matter
jurisdiction. Thus, we find that appellees' state-court action
should not be dismissed for failure to file an administrative
claim with RTC.
In reaching our conclusions today, we are further
persuaded by Justice O'Connor's observations in Coit, wherein
she stated that:
"In cases where suit has already been filed against a
savings and loan association before FSLIC is appointed
receiver, FSLIC will receive notice of those claims when it
steps into the shoes of the failed savings and loan and takes
control of its assets. Trial courts can then determine, in
their discretion, whether to stay the proceedings for a limited
time, based on such factors as the stage of the litigation and
FSLIC's need to assess the possibility of settling the claims.
* * *" (Citations omitted.) Coit, 489 U.S. at 585, 109 S.Ct.
at 1374-1375, 103 L.Ed.2d at 622.
Finally, we are also aware of Justice Scalia's concurrence
in Coit where he joined the court's judgment "* * * on the more
categorical ground that FSLIC's claim procedures cannot
pre-empt the filing of suits under state law." Coit, 489 U.S.
at 592, 109 S.Ct. at 1378, 103 L.Ed.2d at 627.
Accordingly, we affirm the judgment of the court of
appeals.
Judgment affirmed.
Moyer, C.J., A.W. Sweeney, Wright, Resnick, F.E. Sweeney
and Pfeifer, JJ., concur.

FOOTNOTE:
1 The references to the Act in this opinion are construed as
enacted on August 9, 1989.