Title: Schettler v. RalRon Capital Corp.

State: nevada

Issuer: Nevada Supreme Court

Document:

ee

 

428 Nev., Advance Opinion ZO
IN THE SUPREME COURT OF THE STATE OF NEVADA

VINCENT T, SCHETTLER; AND No, 66508
VINCENT T. SCHETTLER, TRUSTEE
OF VINCENT T. SCHETTLER LIVING
‘TRUST,
Appellants,

vs.
RALRON CAPITAL CORPORATION, A
NEVADA CORPORATION,
Respondent.

 

  

Appeal from a district court summary judgment in a contract
action. Eighth Judicial District Court, Clark County; Elissa F. Cadish,
Judge.

Reversed and remanded.

Feldman Graf and Rusty Graf, Las Vegas; White & Case, LLP, and

Roberto J. Kampfner, Los Angeles, California,
for Appellants.

Robison, Belaustegui, Sharp & Low and Mark G. Simons, Reno,
for Respondent.

 

BEFORE DOUGLAS, HARDESTY and PARRAGUIRRE, JJ.
OPINION
By the Court, HARDESTY, J.:
In this appeal, we consider whether the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. §
1821 (2006), an act that governs the disposition of failed financial

\2- 1387

 
nee

 

institutions’ assets, divests a court of jurisdiction to consider any defense
or affirmative defense not first adjudicated through FIRREA's claims
process. As part of our inquiry, we must determine an issue of first
impression in Nevada regarding whether FIRREA’s jurisdictional bar
extends to successors in interest to the Federal Deposit Insurance
Corporation (FDIC). We conclude that while FIRREA’s jurisdictional bar
divests a district court of jurisdiction to consider claims and counterclaims
asserted against a successor in interest to the FDIC not first adjudicated
through FIRREA’s claims process, it does not apply to defenses or

affirmative defenses raised by a debtor in response to the successor in

 

's complaint for collection.
FACTS AND PROCEDURAL HISTORY

On September 15, 2006, appellant Vincent T. Schettler and
Silver State Bank executed a Business Loan Agreement (the Loan) and a
Promissory Note (the Note), under which Silver State provided Schettler
with a $2,000,000 revolving line of credit. Schettler agreed to pay interest
on the loan monthly until the loan's maturity date, at which time he would
be required to pay all outstanding principal and any remaining unpaid
accrued interest. The original maturity date of the Loan and the Note was
September 15, 2007. On that date, Schettler and Silver State entered into
a Change in Terms Agreement that modified the maturity date to
September 15, 2008. That same day, Schettler also executed a
Commercial Guaranty in his capacity as Trustee for the Vincent T.
Schettler Living Trust, guaranteeing to pay all of the Loan obligations.! It

 

"Throughout this opinion, appellants Vincent ‘T.  Schettler
individually and Vincent T. Schettler as Trustee of the Vincent T.
Schettler Living Trust will be referred to collectively as Schettler.

 

 
nee

 

is undisputed that the Loan, the Note, and the Commercial Guaranty

 

(loan agreement) were valid and enforceable contracts at their inception,
According to Schettler, he and Silver State were in the process
of again modifying the maturity date when, on August 14, 2008, Silver
State notified Schettler by letter that it had frozen the remaining funds
available on the line of credit because of a material change in Schettler’s
financial condition or, in Silver State's belief, his prospect of performance
on the Note was impaired. Silver State also informed Schettler that it had
decided “to cancel any current commitments” until Schettler cured the
“{djefaults,” but that “{u)ntil that time, [Schettler was] responsible for

 

payment of interest on the loan.” At the time of the default notice,

however, Schettler ws

 

current on his payments, and the loan had an
outstanding principal balance of $1,114,000.

A few weeks later, on September 5, 2008, Silver State was
placed into receivership, and the FDIC was appointed as receiver. That
same day, the FDIC informed Schettler that it was the receiver for Silver
State and that it expected Schettler to continue to abide by the terms and
conditions of the Loan and the Note. ‘The FDIC subsequently published
notices in local Las Vegas newspapers that required all creditors having
claims against Silver State to submit their claims to the FDIC by
December 10, 2008, after which a creditor's claim would be barred.
Schettler did not pay the outstanding principal and interest by the
September 15 maturity date or file any administrative claims against
Silver State with the FDIC by December 10.

In March 2009, respondent RalRon Capital Corporation
acquired ownership of Schettler’s loan agreement. The terms of RalRon's
acquisition are not clear from the record. Shortly thereafter, RalRon

 
ae

 

notified Schettler that it owned the Loan and Note and “demandled] that
payment of the full amount of principal, interest, and late fee:
within 10 days.” After nonpayment from Schettler, RalRon filed a
complaint in the district court,

be made

 

 

sserting claims for breach of contract,

 

contractual breach of the implied covenant of good faith and fair dealing,
unjust enrichment, and breach of personal guaranty. Schettler filed an
answer to RalRon’s complaint, denying liability, and asserting several
affirmative defenses and counterclaims against RalRon for breach of
contract, breach of the implied covenant of good faith and fair dealing, and
estoppel.

RalRon moved for summary judgment on its breach of contract
and breach of personal guaranty claims? and on Schettler’s counterclaims.
RalRon argued that there was no genuine issue of material fact for trial,
that Schettler’s counterclaims and “alleged defenses” wore barred because
Schettler failed to file any administrative claims with the FDIC as
required by FIRREA, and that RalRon was a holder in due course immune
from Schettler’s defenses. Schettler opposed the motion and disputed
RalRon’s FIRREA argument. He also argued that there existed questions
of fact for trial, that the FDIC's failure to mail Schettler notice of the bar
date should have “allow(ed] the administrative process to begin anew,”
and that Silver State anticipatorily breached the loan agreement before
any default by Schettler. After a hearing, the district court granted
summary judgment in favor of RalRon on its claims for breach of contract
and breach of personal guaranty. In so doing, the district court barred

*RalRon did not pursue its claims for breach of the implied covenant

of good faith and fair dealing or unjust enrichment. It later characterized
them as “moot.” Thus, we do not discuss them further in this opinion.

 

 
 

Schettler’s affirmative defenses and dismissed his counterclaims,
reasoning that, because they were all essentially claims against the FDIC
and Schettler had failed to follow the claims administration process, they
were barred by FIRREA. The court further determined that Schettler
received adequate notice of the bar date. Schettler filed a motion for
reconsideration, which the district court denied, The district court
subsequently entered judgment against Schettler for the outstanding
principal and intorest on the loan and for RalRon’s attorney fees and costs.
‘This appeal followed.
DISCUSSION

‘We begin with an overview of FIRREA and examine whether a
successor in interest to a failed financial institution is entitled to benefit
from FIRREA’s jurisdictional bar. We conclude that the bar applies to
claims or counterclaims asserted by a debtor who failed to file an
administrative claim with the FDIC. We next address whether FIRREA’s
jurisdictional bar precludes a court's consideration of the debtor's
assertion of defenses and affirmative defenses in response to a complaint
for collection. After concluding that the bar does not apply to affirmative
defenses, we address whether Schettler’s answer raised affirmative
defenses or, as RalRon argues on appeal, “claims” that the district court
correctly refused to consider. Because we conclude that Schettler raised
affirmative defenses not barred by FIRREA, we reverse the district court's
grant of summary judgment in favor of RalRon precluding Schettler's
affirmative defenses.

Because our analysis involves questions of law pertaining to
statutory construction and a district court's subject matter jurisdiction, de

novo review applies. See Hardy Companies, Inc. v. SNMARK, LLC, 126
Nev. __, __, 245 P.3d 1149, 1153 (2010) (explaining that statutory
5

 
construction issues are “question{s] of law that this court reviews de
novo” (quoting A.F. Constr. Co. v. Virgin River Casino, 118 Nev. 699, 703,
56 P.3d 887, 890 (2002))); Ogawa v, Ogawa, 125 Nev. 660, 667, 221 P.3d
699, 704 (2009) (“Subject matter jurisdiction is a question of law subject to
de novo review.”). Additionally, “{tJhis court reviews a district court's
grant of summary judgment de novo, without deference to the findings of
the lower court.” Wood v, Safeway, Inc,, 121 Nev. 724, 729, 121 P.3d 1026,
1029 (2005). “Summary judgment is appropriate... when the pleadings
and other evidence on file demonstrate that no ‘genuine issue as to any
material fact [remains] and that the moving party is entitled to a
judgment as a matter of law.” Id, (second alteration in original) (quoting
NRCP 56(¢)).
Overview of FIRREA

“Congress enacted [FIRREA] to enable the federal government
to respond swiftly and effectively to the declining financial condition of the
nation’s banks and savings institutions. The statute grants the FDIC, as
receiver, broad powers to determine claims asserted against failed banks.”
Henderson v. Bank of New England, 986 F.2d 319, 320 (th Cir. 1993)
(citing 12 U.S.C. § 1821(4)(3)(A)). To enable the FDIC's powers, “Congress
created a claims process for the filing, consideration[,] and determination

 

of claims against insolvent banks” that encourages the FDIC to quickly
resolve claims without overburdening the courts. 1d, (citing 12 U.S.C.
§ 1821(4)(3)-(0)._ Accordingly, “{iJf [a] financial institution has
failed, .. . subsequent claims must be presented first to the FDIC for an

administrative determination on whether they should be paid.” Aber:

Shukofsky v, JPMorgan Chase & Co., 755 F. Supp. 24 441, 445 (E.D.N.Y.
2010),

 

 
‘To begin the administrative claims process, the FDIC must
publish notice to creditors of the claims process and the date by which
creditors must file their claims against the financial institution—the bar
date, 12 U.S.C. § 1821(4)(3)(B). The FDIC must also mail such notice to
any creditor shown on the institution's books and records or any creditor
that the FDIC later discovers. Id. § 1821(4)(8)(C). “Once a claim is filed,
the FDIC has 180 days to determine whether to allow or disallow the
claim.” Henderson, 986 F.2d at 320 (citing 12 U.S.C. § 1821(4(5)(A)G).
“If the claim is disallowed, or if the 180 days expire without a
determination by the FDIC, then the claimant may request further
administrative consideration of the claim, or seek judicial review.” Id,
(citing 12 U.S.C. § 1821(4)6).

Importantly, “fa] claimant must .... first complete the claims
process before seeking judicial review.” Id, at 321. If the claims process is
not followed, then FIRREA bars judicial jurisdiction:

Except as otherwise provided in this subsection,
no court shall have jurisdiction over—

(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, including
assets which the [FDIC] may acquire from
itself as such receiver; or

(ii) any claim relating to any act or

‘omission of such institution or the [FDIC] as
receiver.

12 US.C. § 1821(4)(13)(D); see also 9 CJ.S. Banks and Banking § 743,
(2008) (“A party who has been notified of the appointment of the [FDIC] as
receiver, and who fails to initiate an administrative claim within the filing

 

 
ome

 

 

period, forfeits any right to pursue a claim against the institutior

in any court.").
‘The applicability of FIRREA to thi

Schettler argues on appeal that FIRREA does not apply here
because the proceedings below involved RalRon rather than the FDIC and
because the FDIC failed to mail him notice of the specified bar date for
filing his claims against Silver State. RalRon argues that because it is a
successor in interest to the FDIC, it is entitled to benefit from FIRREA’s
jurisdictional bar. RalRon further argues that because Schettler was not
creditor, he was not entitled to notice, and, even if he were entitled to
notice, the FDIC's failure does not excuse Schettler’s duty to comply with
FIRREA.

from FIRREA’s jurisdictional bar of claims
FIRREA's jurisdictional bar applies to “any claim or action for

payment from... or... seeking a determination of rights with respect to,
the assets of any depository institution for which the [FDIC] has been
appointed receiver” and to “any claim relating to any act or omission of
such institution or the [FDIC] as receiver.” 12 U.S.C. § 1821(@)(13)(D).
Schettler argues that the underlying action, which was filed “by a third
party” instead of the FDIC, “cannot possibly affect Silver State's
receivership estate, and FIRREA should be inapplicable.” Conversely,
RalRon maintains that its successor status entitles it to benefit from
FIRREA's jurisdictional bar. In determining whether the statute allows a

 

successor in interest to a failed financial institution to benefit from
FIRREA's jurisdictional bar, we examine the rationale from other
jurisdictions that have addressed the issue,

 
‘The federal courts, by and large, that have considered the
issue have concluded that a successor in interest is entitled to benefit from
FIRREA's jurisdictional bar against claims falling within the statute's
terms that have not been administratively pursued. For example, the
Ninth Circuit Court of Appeals has explained that FIRREA’s jurisdictional
bar, with respect to claims relating to acts or omissions of the failed bank
or receiver, “distinguishes claims on their factual bases rather than on the
identity of the defendant,” and “does not make any distinction based on
the identity of the party from whom relief is sought.” Benson v, JPMorgan
Chase Bank, 673 F.3d 1207, 1212 (9th Cir. 2012). Thus, “FIRREA’s
jurisdictional bar applies to claims asserted against a purchasing bank
when the claim is based on the conduct of the failed institution.” Id, at
1214-15 (also explaining that FIRREA’s jurisdictional bar applied because
“[t]he bulk of plaintiffs’ claims plainly qualiffied] as ‘functionally, albeit
not formally,’ against a failed bank” (quoting American Nat. Ins. Co, v.
EDLC, 642 F.3d 1187, 1144 (D.C. Cir. 2011).

‘The Eastern District of New York has explained that
Successors in interest can benefit from FIRREA’s jurisdictional bar
because the jurisdictional bar “refers to ‘any claim relating to any act or
omission’ of a failed institution and does not make its application

contingent upon whom the claim is against. Thus, the statutory provision,

by its plain language, applies with equal force to a successor in interest to
the failed institution.” Aber-Shukofskv, 755 F. Supp. 2d at 447 (quoting
12 U.S.C. § 1821(@)(13)(D){i)). ‘The court concluded that, “given the plain
language of FIRREA,” the plaintiffs could not “evade FIRREA’s mandatory

exhaustion requirement simply by asserting claims against [the]

 

 
defendants, as third-party purchasers of the failed bank's assets, for acts
or omissions that relate to (the failed bank].” Id,

‘The Sixth Circuit and Eleventh Circuit Courts of Appeals have
also applied the jurisdictional bar to claims made against a successor in
interest to the FDIC. Village of Oakwood v. State Bank and ‘Trust Co.
539 F.3d 373, 386 (6th Cir. 2008) (concluding that to allow claimants to
circumvent the provisions of FIRREA’s jurisdictional bar “by bringing
claims against the assuming bank . . . would encourage the very litigation
that FIRREA aimed to avoid” (alteration in original) (quoting Village of
Oakwood v. State Bank and ‘Trust Co., 519 F. Supp. 2d 730, 738 (N.D.
Ohio 2007); American First Federal v, Lake Forest Park, 198 F.3d 1259,
1263 n.3 (11th Cir. 1999) (AFF, having purchased the note from the
[receiver], stands in the shoes of the [receiver] and acquires its protected
status under FIRREA. Thus, if Lake Forest is barred from asserting this
claim against the [receiver], it is similarly barred from asserting it against
AFF.” (internal citations omitted). We agree with the reasoning of these
federal courts and similarly conclude that, with respect to claims relating
to acts or omissions of the failed bank, a successor in interest is entitled to
benefit from FIRREA's jurisdictional bar.

‘The FDIC's failure to mail Schettler the required notice does not

wrecluc judgment
‘The parties do not dispute that the FDIC failed to mail

Schettler the required notice. Schettler maintains on appeal that because
the FDIC did not mail him notice of the bar date, “applying [FIRREA’s

 

 
om ae

 

jurisdictional bar] to the facts of this case would violate due process.” We
disagree and conclude that Schettler’s due process argument lacks merit.?
\co Properties v. Sex Federal Savi
the Fourth Circuit Court of Appeals held that the denial “as untimely the
claim of one who never—via formal mailed notice or otherwise—is given
constitutionally sufficient notice of the requirement that he file his claim
before the bar date . .. violates due process.” 94 F.3d 914, 920 (4th Cir.
1996), However, the court also explained that a claimant “may not
complain of its lack of formal notice if it actually knew enough about the
situation to place it on ‘inquiry notice’ as to the details of the
administrative process.” 1d, at 921. Importantly, the court explained that
“if [a claimant] had timely, actual knowledge that [the bank] had entered
receivership, its due proce

 

argument might be defeated by its own
failure to act on that knowledge to protect its rights.” Id, at 922, Here, on
the day the FDIC became the receiver for Silver State, the FDIC notified
Schettler that it was the receiver and that “{his} loan [was] now held by
the [rJeceiver.” The FDIC also published notice of the claims process and
the bar date in local Las Vegas newspapers. As such, we conclude that
Schettler received constitutionally sufficient notice of the bar date,

regardless of his creditor status. Accord RTC Mortg, Trust 1994-N2 v,

‘We note that FIRREA mandates only that the FDIC mail the
required notice “to any creditor shown on the institution's books,” or to any
creditor not on the books that the FDIC later discovers. 12 U.S.C. §
1821(d)(3)(C); see also Tri-State Hotels, Ine, v. F.D.LC,, 79 F.3d 707, 716
(8th Cir. 1996) (explaining that when a claimant “is not a creditor, and is
not listed on the books . . . as a creditor, it {is] not entitled to receive notice
by mail’). Schettler admits that he does not know whether he became a
known creditor. Thus, we make no determination as to whether the FDIC
was required to mail Sehettler notice.

 

 

u

 
co ae

 

‘Haith, 133 F.3d 574, 579 (8th Cir. 1998) (explaining that the FDIC is not
required to mail notice “to claimants who are aware of the appointment of

a receiver but who do not receive notice of the filing deadline” (quoting

Reierson v. Resolution Trust Corp,, 16 F.3d 889, 891-92 (8th Cir, 1994))).
In addition, the FDIC's failure to mail Schettler notice of the
administrative claims bar date does not excuse Schettler from having to
exhaust his administrative remedies to pursue claims pursuant to
FIRREA’s claims process. See Intercontinental Travel Marketing_v.
EDLC, 45 F.3d 1278, 1284-85 (9th Cir, 1994) (stating that as long as the

 

FDIC does not engage in affirmative misconduct, its failure to notify a
creditor or claimant by mail does not excuse that creditor or claimant from
having to exhaust the FIRREA administrative remedies and noting that
while FIRREA “seems to make the mailing requirement imperative for the
FDIC, the statute imposes no consequence on the FDIC for failure to do
80"); see also Tri-State, 79 F.3d at 716 (‘[Tyhe FDIC's failure to provide
proper notice [of the administrative claims bar date] ‘does not relieve the

 

claimant of the obligation to exhaust administrative remedies, because the
statute does not provide for a waiver or exception under those
circumstances.” (quoting Freeman v. F.D.LC,, 56 F.3d 1394, 1402 (D.C.
Cir. 1995))). ‘Thus, we conclude that the FDIC's failure to mail Schettler
the required notice does not negate FIRREA’s applicability to an
evaluation of Schettler’s claims against RalRon in this case.

In sum, we conclude that RalRon, as a successor in interest to
the FDIC, is entitled to benefit from FIRREA’s jurisdictional bar for
claims made against it, despite the FDIC's failure to mail Schettler the
required notice. We now turn our attention to whether FIRREA's
Jurisdictional bar of claims also bars defenses and affirmative defenses

12

 
asserted by a debtor and whether, here, the district court erred when it
rejected Schettler’s affirmative defenses,

ru bar_does_ni fenses_or

Convincingly, a majority of courts addressing this issue have
held that while FIRREA’s jurisdictional bar applies to claims and
counterclaims, it does not apply to defenses and affirmative defenses.«
See. e.g., American First Federal v. Lake Forest Park, 198 F.3d 1259, 1264
(Lith Cir, 1999) (noting that the “circuit courts that have addressed the
question have held that affirmative defenses are not subject to the
requirements of exhaustion under (FIRREA’s jurisdictional bar’); Bolduc
v. Beal Bank, SSB, 167 F.3d 667, 671 (Ist Cir. 1999); Tri-State Hotels, Inc.
v ED.LC,, 79 F.3d 707, 715 (8th Cir. 1996); Resolution Trust Corp. v.
Love, 36 F.3d 972, 977 (10th Cir. 1994) (Significantly, the statute never

4Although some federal district courts have extended FIRREA’s
jurisdictional bar to also apply to affirmative defenses, see, e.g., Federal
Sav. v. McGinnis, Juban, Bevan et al., 808 F. Supp. 1263, 1280 (B.D. La.
1992) (noting that under FIRREA’s jurisdictional bar, a court “does not
have jurisdiction to adjudicate the defenses arising out of the FDIC's fault,
because the defenses have not been through the administrative process”),
others have explained that applying FIRREA’s jurisdictional bar to
affirmative defenses contravenes the plain language of the statute and
would require parties “who have no independent basis for bringing an
action against the [FDIC] and against whom the [FDIC] has not brought
suit, to present to the [FDIC] as receiver any potential defenses that they
might have to any claims that the [FDIC] . .. might one day assert against
them, which are as yet unknown.” Resolut Corp. v. Conner, 817
F, Supp. 98, 102 (W.D. Okla, 1993); see also Resolution Trust v. Midwest
Fed. Sav, Bank, 36 F.3d 785, 793 (9th Cir. 1993) (“Having reviewed the
reasoning behind the holdings on both side(s} of the debate, we are
persuaded that [FIRREA’s jurisdictional bar] does not divest a district
court of jurisdiction over an affirmative defense.”).

 

 

 
om

 

uses the term ‘defense’, ‘affirmative defense’ or ‘potential affirmative
defense.”); National Union Fire Ins. v. City Sav,, F.S.B., 28 F.3d 376, 393,

(8d Cir. 1994); Resolution Trust v. Midwest Fed, Sav. Bank, 36 F.3d 785,
798 (9th Cir, 1993).

‘The Third Circuit Court of Appeals, which has examined this
issue in detail, has explained that FIRREA’s jurisdictional bar only

 

applies to four categories of actions:

@) claims for payment from assets of any
depository institution for which the [FDIC] has
been appointed receiver; (2) actions for payment
from assets of such depository institution;
(3) actions seeking a determination of rights with
respect to assets of such depository institution;
and (4) a claim relating to any act or omission of
such institution or the [FDIC] as receiver.

National Union, 28 F.3d at 393, The court held that these categories did
not include a defense or an affirmative defense because those are “neither
an ‘action’ nor a ‘claim,’ but rather . . . a response to an action or a claim.”
Id. ‘Therefore, it held, “{t}he jurisdictional bar contained in §
1821(d)(13)(D) . . . does not apply to defenses or affirmative defenses.” Id.
‘To support its conclusion, the court explained that interpreting FIRREA’s
jurisdictional bar to include defenses and affirmative defenses “would, in a
substantial number of cases, . . . result in an unconstitutional deprivation
of due process.” Id. at 394. Specifically, “{iJf parties were barred from
presenting defenses and affirmative defenses to claims which have been
filed against them, they would not only be unconstitutionally deprived of
their opportunity to be heard, but they would invariably lose on the merits
of the claims brought against them.” Id. Beyond constitutional concerns,
the court also explained that because a defendant is unable to know what
his or her defense will be before hearing the claim, “it seems that it would

4

 
be nearly impossible for a party to submit future hypothetical defenses to
the administrative claims procedure—defenses to lawsuits which may not
yet have [been] brought against [a party] or which may never be brought
at all.” Id, at 395. We join in the majority's reasoning and conclude that
while FIRREA's jurisdictional bar applies to claims and counterclaims, it
does not apply to defenses or affirmative defenses, We now turn our
attention to whether the district court was precluded from considering
‘Schettler’s affirmative defenses on the basis that they are more accurately
viewed as counterclaims barred by § 1821(4)(13)(D).
Schettler’s affirmative defenses:
At the outset, we note that Schettler asserted numerous

affirmative defenses below in response to RalRon’s complaint. On appeal,

 

its

 

however, Schettler i irgument to the affirmative defense based on
breach of contract, claiming that it is allowed under FIRREA. The
disputed affirmative defense states as follows: “To the extent that any
contract between these parties is supported by adequate consideration,
Plaintiffs have failed to fulfill and perform their obligations and duties to
Defendant under that contract and is therefore barred from enforcing the
same against the Defendants.” On appeal, Schettler asserts that this
affirmative defense is based on allegations that Silver State wrongfully
defaulted Schettler. Similar assertions are made in Schettler's
counterclaims.

True affirmative defenses, under NRCP 8(c), include those
encompassing “new facts and arguments that, if true, will defeat the
plaintiff's... claim, even if all allegations in the complaint are true.”

 

NRCP 8(0)'s stated permissible affirmative defenses include “accord
and satisfaction, arbitration and award, assumption of risk, contributory
continued on next page

 

 

 
Clark Cty. Sch. Dist, v. Richardson Constr, 123 Nev. 382, 392-93, 168,
P.3d 87, 94 (2007) (alteration in original) (quoting Saks v. Franklin Covey
Co,, 316 F.3d 337, 350 (2d Cir. 2003)) @escribing NRCP 8(¢)'s “eatchall”
provision, which states that a plaintiff must affirmatively set forth “any
other matter constituting an avoidance or affirmative defense”). Thus, in
actions based on a contract, one type of “affirmative defense impliedly
admits the sufficiency of the underlying contract, but offers an excuse for
the defendant's failure to perform.” 17B C.J.S. Contracts § 891 (2011); see
also Durell v. Sharp Healthcare, 108 Cal. Rptr. 8d. 682, 697 (Ct. App.
2010); Richardson, 123 Nev. at 394 n.21, 168 P.3d at 95 n.21. Here, based
‘on his general breach of contract allegation, Schettlor may be able to
demonstrate that Silver State's prior breach of the contract has rendered
the contract unenforceable. See Restatement (Second) of Contracts § 237
emt. a (1981); 17A Am. Jur. 2d Contracts § 685 (2004). This allegation

negligence, discharge in bankruptcy, duress, estoppel, failure of
consideration, fraud, illegality, injury by fellow servant, laches, license,
payment, release, res judicata, statute of frauds, statute of limitations,
[and] waiver.”

“In its complaint, RalRon alleged that “RalRon has fully performed
any and all obligations owed of it under said agreements,” as is generally
required to plead a claim for breach of contract. See 17B C.J.S. Contracts
§ 879 (2011); see also Durell v. Sharp Healthcare, 108 Cal. Rptr. 3d. 682,
697 (Ct. App. 2010). In its answer, Schettler alleged that both “Silver
State and its successor-in-interest, [RalRon], breached th{e] agreement.”
To the extent that Schettler argues that RalRon breached, this is not a
new fact or argument because Schettler already generally denied RalRon’s
allegation as part of his complaint, and thus, is properly asserted as a
defense. Clark Cty. Sch. Dist. v. Richardson Constr., 123 Nev. 382, 392-
93, 168 P.3d 87, 94 (2007); National Union, 28 F.3d at 393 (“The defense
may be as simple as a flat denial of the other party's factual
allegations . . ..” (quoting Black’s Law Dictionary 419 (6th ed. 1990)))..

 

 

 
constitutes a true affirmative defense. Further, the affirmative defense,
especially when viewed in light of Schettler’s counterclaims, inherently
raises recoupment.?

Recoupment is “{a] right of the defendant to have a deduction

from the amount of the plaintiff's damages, for the reason that the

 

plaintiff has not complied with the ero

 

obligations or independent
covenants arising under the same contract.” Black's Law Dictionary 1275
(6th ed. 1990). Recoupment must arise out of the same transaction and
involve the same parties; thus, it does not apply when the defendant's
allegations arise out of a transaction “extrinsic to the plaintiff's cause of
action.” [d,; see also Bolduc v. Beal Bank, SSB, 167 F.3d 667, 672 n.4 (Ist
Cir. 1999). While the defendant may thus defend against the plaintiffs

 

NRCP 8() requires the court to treat Schettler’s counterclaims as
affirmative defenses; “When a party has mistakenly designated
a... counterclaim as a defense, the court on terms, if justice so requires,
shall treat the pleading as if there had been a proper designation.”
Although Schettler did not specifically allege that he was entitled to
“recoupment” in his answer to RalRon’s complaint, when construed as a
whole, his answer sufficiently encompassed the concept of recoupment.
See, e.g, Carlund Corp. v. Crown Center Redev., 849 S.W.2d 647, 651 n.3
(Mo. Ct. App. 1993) (noting that although a defendant “in its answer did
not specifically plead ‘recoupment’ as an affirmative defense, its
counterclaim inherently plead[ed} the defense of recoupment’).
“Recoupment must be pleaded affirmatively, and if it is not raised it is
ordinarily deemed waived.” Federal Deposit Ina, Corp. v. Notis, 602 A.2d
1164, 1165 (Me. 1992). However, “if [a] plaintiff had notice that [a]
defendant was relying on recoupment, the affirmative defense will be
allowed.” Td,; see also Williams v, Cottonwood Cove Dev. Co,, 96 Nev. 857,
860, 619 P.2d 1219, 1221 (1980) (pleadings “must give fair notice of the
nature and basis” for the defense). Fair notice was given because it was
specifically raised on reconsideration, which is a part of the issues on
appeal. Accordingly, we will not treat recoupment as waived.

 

 

 
on ae

 

claim by asserting competing rights arising out of the same transaction
and thereby extinguish or reduce any judgment awarded to the plaintiff,
recoupment “does not allow the defendant to pursue damages in excess of
the plaintiff's judgment award.” Nevada State Bank v. Jamison
Partnership, 106 Nev. 792, 797 n.2, 801 P.2d 1377, 1981 n.2 (1990). Thus,
by its very nature and regardless of whether the same facts could
constitute a separate claim for damages, recoupment seeks to challenge
the foundation of the plaintiff's claim and, consequently, we recognize
recoupment as an affirmative defense not barred by FIRREA. Jamison
Partnership, 106 Nev. at 797, 801 P.2d at 1981; Boldue, 167 F.3d at 672;
E.D.LC. v. Modular Homes, Inc, 859 F. Supp. 117, 123 (D.NJ. 1994)

Here, based on his allegations, Schettler may be able to demonstrate that

 

he is entitled to recoup against any amount awarded RalRon on its claims,
up to the amount awarded.®

*RalRon argues that even if FIRREA does not bar the district court
from considering Schettler’s disputed affirmative defense, RalRon is
immune from Schettler’s defenses because it is a holder in due course
under Nevada law and federal common law. We reject this argument.
RalRon cannot be a holder in due course pursuant to state law. See St,
James v. Diversified Commercial Fin., 102 Nev. 23, 25, 714 P.2d 179, 180
(1986) (citing NRS 104.3302(1)) (outlining the requirements for a holder in
due course). “A holder is not a holder in due course when the note is
purchased after maturity and while in default, unless the shelter rule
applies.” 11 Am. Jur. 2d Bills and Notes § 271 (2009) (footnotes omitted).
Here, Schettler was in default when RalRon purchased the loan
documents. Additionally, the shelter rule, which gives a transferee of an
instrument the rights of a holder in due course, NRS 104.3203(2), does not
apply because the FDIC as receiver is not a holder in due course. See
Cagle Co,, Ine. v. Wallach Concrete, Ine., 897 P.2d 1104, 1107 (N.M. 1996).
RalRon is also not a holder in due course under any federal law. While
circuit courts are split on the issue, F.D.LC. v. Deglau, 207 F.3d 158, 170-
71 (3d Cir. 2000), “most federal and state courts agree that the United

continued on next page...

18.

 
Because Schettler's affirmative defense raised unresolved
questions of material fact, and because affirmative defenses are not barred
by FIRREA, the district court erred in granting summary judgment in
favor of RalRon on its breach of contract and breach of personal guaranty
claims, Soe generally First Interstate Bank v. Shields, 102 Nev. 616, 619-
20, 780 P.2d 429, 431 (1986) (“As a general rule, the payment or other

 

isfaction or extinguishment of the principal debt or obligation by the

principal or by anyone for him discharges the guarantor.”) Accordingly,

 

wwe reverse the district court’s summary judgment, and we remand this
matter to the district court for further proceedings.

(Antes, 5

Hardesty

 

States Supreme Court has recently rejected supplementing federal
statutory law with federal common law to determine whether federal or
state law governs holder-in-due-course status.” Cadle Co, v, Patoine, 772
A.2d 544, 547 (Vt. 2001). At least some courts reaching this conclusion
have relied on language from the United States Supreme Court's opinion
in O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994). “The receiver is
required to ‘work out its claims under state law, except where some
provision in... FIRREA provides otherwise. To create additional “federal
common-law” exceptions is not to “supplement” this scheme, but to alter
it.” Bisson v. Eck, 720 N.E.2d 784, 789 (Mass. 1999) (second alteration in
original) (quoting O'Melveny, 512 U.S. at 87), We conclude that this
rationale is persuasive and that, accordingly, RalRon is not entitled to
federal holder-in-due-course status.