("FDIC") is liable in its capacity as Receiver of Capital National Bank ("CNB") for failure to use assets plaintiff Jose Betancourt made available in accordance with his instructions.
Defendant FDIC moves for summary judgment, contending that this Court lacks subject matter jurisdiction due to plaintiffs' failure to exhaust administrative remedies set forth in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), Pub. L. 101-73, § 212 (d) (codified at 12 U.S.C. § 1821 (d)). In addition to opposing defendant FDIC's motion, plaintiffs cross-move for an Order granting plaintiffs leave to file a late proof of claim with the FDIC as Receiver of CNB.
For the reasons stated below, defendant FDIC's motion for summary judgment is granted (and the plaintiffs' cross-motion is denied) with regard to plaintiffs Jose Betancourt and Lourdes Betancourt only insofar as she sues on behalf of shareholders of Betancourt Realty Corp. By contrast, the plaintiffs' cross-motion for relief is granted (and the FDIC's motion is denied) with regard to Lourdes Betancourt insofar as she sues on behalf of shareholders of the named corporations other than Betancourt Realty. The Court hereby orders the FDIC to accept and process proofs of claim as timely from the named corporations other than Betancourt Realty if filed within twenty days of the date of this Opinion. This action is dismissed with regard to Jose Betancourt and Betancourt Realty and is otherwise stayed for a period of ninety days pending the FDIC's determination of the other corporations' claims.
Plaintiff Lourdes Betancourt, who sues on behalf of herself and others, is a shareholder of Renewal Arts Supply Corp. ("Supply"), 76 Wadsworth Ave. Operating Corp. ("76 Wadsworth"), Renewal Arts Realty Corp. ("Realty"), and Betancourt Realty Corp. ("Betancourt Realty"). Plaintiff Jose Betancourt, who sues only on behalf of himself as an individual, is in fact also a shareholder and a director of Supply, 76 Wadsworth, and Realty. Defendant's Mem. of Law at 12. Jose Betancourt and the named corporations transacted business with CNB. From October 8, 1986 to March 8, 1990, the various plaintiffs borrowed funds from CNB pursuant to various promissory and mortgage notes. It is undisputed that on August 4, 1989, Jose Betancourt delivered a check payable to CNB to pay down some or all of plaintiffs' loans. Def. Mem. of Law at 2; Plaintiffs' Mem. of Law at 3. It is also undisputed that the amount of the check was left blank, but was later filled in as $ 842,857.56, possibly by an employee of CNB, and that Mr. Betancourt's checking account was debited for this amount. Id.1
Plaintiffs allege that Jose Betancourt specifically directed CNB to use these assets to satisfy a $ 300,000 loan he took out on July 28, 1989. Amended Complaint at P 19. Plaintiffs further contend that Mr. Betancourt directed CNB to apply the balance to the other outstanding loans at the bank in order to reduce the principal on these obligations. Id. at P 20. In an affidavit, Mr. Betancourt claims to have made attempts to confirm that he be given credit for the payment to offset the loans. See letters from Jose Betancourt to CNB attached to Mr. Betancourt's Affidavit. The defendant FDIC concedes that the assets made available through Mr. Betancourt's check were never used to offset plaintiffs' various loans. Def. Mem. of Law at 2. Plaintiffs also allege that CNB and the FDIC failed to adjust the applicable interest rates in accordance with the terms of the mortgage notes. Amended Complaint at P 46.
On July 6, 1990, the Office of the Comptroller of the Currency declared CNB insolvent and appointed the FDIC as receiver. On July 12, 1990, pursuant to its statutory obligations, the FDIC mailed Jose Betancourt and Betancourt Realty notice of CNB's insolvency and of plaintiffs' rights as creditors to file claims against CNB, with proof, by October 16, 1990.
See Affidavit of Frank J. Recca (July 12, 1990) (hereinafter "Recca Aff.") (attached as Exhibit G to Wieman Aff.). In addition, on July 13, 1990, August 12, 1990, and September 12, 1990, the FDIC published a general notice to creditors in the New York Times, alerting them to the insolvency and to an October 10, 1990 deadline for filing claims against CNB. Wieman Aff., Ex. F. None of the plaintiffs ever filed a claim with the FDIC.
Standard of Review
Summary judgment is appropriate where the moving papers and affidavits submitted by the parties "show that there is no genuine issue as to any material facts and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the burden of showing the absence of a genuine issue as to any material fact, and the court must view the evidence in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970).
The court's role in such a context is not to resolve disputed factual issues, but rather to determine whether the record, taken as a whole, supports any issues that require a trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Nevertheless, the very language of the summary judgment standard provides that "the mere existence of some alleged factual dispute will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (emphasis in original). Materiality is determined by reference to the substantive law applicable to the case at hand, and factual disputes irrelevant to its outcome "will not be counted." Id. at 248.
As its basis for summary judgment, the FDIC maintains that this Court lacks subject matter jurisdiction to review plaintiffs' claims. Specifically, the FDIC argues that plaintiff has forfeited its right to judicial review by failing to adhere to the mandatory administrative claim procedure set forth in FIRREA's section 1821(d).
The Administrative Claim Procedure Established in FIRREA
As we explained in another case which also involved claims against the FDIC as receiver to CNB, Capital Data Corp. v. Capital Nat. Bank, 778 F. Supp. 669, 673 (S.D.N.Y. 1991), Congress enacted FIRREA in 1989 in response to the growing crisis in the financial industry. Its goal was to provide "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 Industries, Div. of Nastasi-White, Inc. v. City Federal Sav. Bank, 749 F. Supp. 447, 451 (E.D.N.Y. 1990), aff'd, 931 F.2d 7 (2d Cir. 1991) (citing P.L. 101-73, 103 Stat. 183, § 101). In furtherance of that goal, FIRREA granted the FDIC broad powers in its capacity as receiver to determine claims against the failed institutions, and established a comprehensive administrative claim process, adherence to which is a prerequisite to judicial review of those claims. Since an understanding of that administrative structure is essential to the resolution of the instant cross-motions, its relevant aspects are set forth below.
After the FDIC is appointed receiver of a failed institution, the claims process begins with a directive that the FDIC "promptly publish a notice to . . . creditors to present their claims, together with proof, to the receiver" by a specified date no less than 90 days from the date of publication. 12 U.S.C. § 1821(d)(3)(B). In addition to this generalized notice obligation, the Act requires the FDIC to "mail a notice similar to the notice" described above to all known creditors of the institution at their last address appearing on the institution's books. § 1821(d)(3)(C).
Once a claim is submitted with the requisite proof, the FDIC is permitted 180 days to determine whether to allow or disallow it. § 1821(d)(5)(A)(i). Upon disallowance, or in the event that the FDIC fails to make a determination within the 180 day period, claimants have the right to seek either administrative or judicial review in a district court, provided they do so within 60 days of the disallowance or end of the 180 day period (whichever is earlier). § 1821(d)(6)(A).
While de novo judicial review is therefore available to a diligent claimant, those who fail to adhere to the statute's requirements may forfeit their right to that procedure. If a claimant does not submit his claim until after the date specified in the FDIC notice to creditors, section 1821(d)(5)(C)(i) directs that the untimely claim "shall be disallowed and such disallowance shall be final." Similarly, where a claimant fails to seek review of an FDIC disallowance within the allotted 60 day period, section 1821(d)(6)(B) directs that the claim "be deemed to be disallowed . . . , such disallowance shall be final, and the claimant shall have no other rights and remedies with respect to such claim." Finally, the statute expressly limits the jurisdiction of the district courts to claims that have first been presented to the receiver:
Limitation on Judicial Review
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 [FDIC] has been appointed receiver . . .