Urbanizadora Villalba, Inc. v. Banco Y Agencia De Financiamiento De La Vivienda De Puerto Rico, Third-Party Federal Deposit Insurance Corporation, Third-Party

Citations: 845 F.2d 1; 1988 U.S. App. LEXIS 5131Docket: 87-1437

Court: Court of Appeals for the First Circuit; April 21, 1988; Federal Appellate Court

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The Banco y Agencia de Financiamento de la Vivienda de Puerto Rico (Housing Bank) appeals the dismissal of its third-party complaint against the Federal Deposit Insurance Corporation (FDIC) by the district court. The Housing Bank was originally sued by Urbanizadora Villalba for breach of contract and negligence related to loan processing during a construction project. The Bank’s third-party complaint alleged that the FDIC was responsible for the actions of Girod Trust Co., the mortgage creditor for Villalba's project, which the Housing Bank insured.

The court affirmed the dismissal, concluding that the Housing Bank failed to properly name the FDIC as receiver in the complaint, which was crucial for the legal distinction between suing the FDIC in its corporate capacity versus its capacity as receiver for Girod. The court noted that the complaint did not indicate that the FDIC was being sued as receiver, which is necessary for establishing the correct legal context.

This distinction is significant; a favorable judgment against the FDIC in its corporate capacity would allow the Housing Bank to access federal funds, whereas a judgment against the FDIC as receiver would position the Bank as a creditor of Girod, limiting recovery to a pro-rata share with other creditors based on surplus from the sale of assets. The decision underscored the necessity of explicitly stating the capacity in which the FDIC was being sued to ensure appropriate legal remedies.

Counsel for the FDIC expressed concerns regarding the complaint that seeks to annul the Bank's responsibility for an $8 million loan under a certificate of insurance held by FDIC in its corporate capacity. The district court determined that clarity was needed, suggesting the Housing Bank should have explicitly named FDIC as receiver in its suit to prevent confusion. The Bank could have avoided dismissal by amending its complaint but failed to do so. 

The appeal was criticized as an inefficient use of resources, as the Bank could refile its complaint in Puerto Rico state courts simply by adding "as receiver," which would grant those courts exclusive jurisdiction. The Bank's counsel acknowledged that instead of extensive legal briefs, a simple amendment to the complaint would suffice. Both parties agreed that the case should proceed only against the FDIC as receiver, with any recovery limited to assets managed by FDIC as receiver from the loan. However, the court found that the complaint did not correctly name FDIC as receiver.

The legal basis for the district court's dismissal was established under 12 U.S.C. Sec. 1819 (fourth), which grants federal courts exclusive jurisdiction over FDIC in its corporate capacity, while state courts have exclusive jurisdiction over suits against FDIC as receiver based on state laws. The district court concluded that, since the state court had no jurisdiction over the case, the federal court derived no jurisdiction either.

Neither party contested the district court's ruling, which stated that if the complaint only alleged an action against the FDIC in its corporate capacity, the dismissal was appropriate. The affirmance is based on this concession. The case's timeline could have supported a challenge to the ruling, as the relevant legal standard allows a federal court to hear claims removed from a state court that lacked jurisdiction, according to 28 U.S.C. Sec. 1441 (effective June 19, 1986). The original complaint was filed and removed before this date, meaning it was subject to dismissal at that time, but the actual dismissal occurred after the effective date of Sec. 1441(e). However, since the parties have conceded, further examination of this subsection is unnecessary. The district court's dismissal of the third-party complaint against the FDIC in its corporate capacity is affirmed, but the Bank may refile a complaint in state court explicitly naming the FDIC as a receiver. The judgment is affirmed, with double costs assessed against the appellant. The appellant's argument regarding the Eleventh Amendment is deemed meritless and unnecessary to address further.