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Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 

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PUBLISH 

. PlLEr, Umted States Court of Appeal 

Tenth Circuit 5 

NOV 15 7990 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

.ROBERT L. HOECKER. 

Clerk 1 

BANK OF OKLAHOMA, N.A., Grove Branch, 

formerly Bank of Oklahoma Grove, 

Plaintiff, 

v. 

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) 

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) 

) 

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THE ISLANDS MARINA, LTD., an Oklahoma ) 

corporation; CHARLES GARY JAMES; ) 

PATRICIA K. JAMES; BANK OF THE LAKES OF) 

LANGLEY, OKLAHOMA; CHRYSLER FIRST ) 

WHOLESALE CREDIT, INC.; DONZI CREDIT ) 

CORPORATION; FIRST OKLAHOMA SAVINGS ) 

BANK; GUARANTY NATIONAL BANK; ROBERT ) 

WILLIAMS; ROBERT MONTGOMERY; FIRST STATE) 

BANK OF KETCHUM, OKLAHOMA; WELLCRAFT ) 

MARINE, a division of Genmar, Inc., ) 

Defendants, 

and 

FIRST NATIONAL BANK, AND TRUST COMPANY 

OF VINITA, 

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) 

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Defendant-Appellee, 

JERRY COURTNEY, 

Defendant-Appellant. 

BANK OF OKLAHOMA, N.A., Grove Branch, 

formerly Bank of Oklahoma Grove, 

Plaintiff, 

v. 

THE ISLANDS MARINA, LTD., an Oklahoma 

corporation; CHARLES GARY JAMES; 

PATRICIA K. JAMES; BANK OF THE .LAKES 

LANGLEY, OKLAHOMA; CHRYSLER FIRST 

) 

) 

) 

) 

) 

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) 

) 

) 

OF) 

)' 

No. 89-5143 

No. 89-5189 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 1 
WHOLESALE CREDIT, INC.; DONZI CREDIT 

CORPORATION; FIRST OKLAHOMA SAVINGS 

) 

) 

BANK; GUARANTY NATIONAL BANK; ROBERT ) 

WILLIAMS; ROBERT MONTGOMERY; FIRST STATE) 

BANK OF KETCHUM, OKLAHOMA; EMERY URFER; ) 

HARRIS-KAYOT, INC.; WELLCRAFT MARINE, ) 

a division of Genmar, Inc. ) 

Defendants, 

and 

FIRST NATIONAL BANK, AND TRUST COMPANY 

OF VINITA, 

Defendant-Appellee, 

JERRY COURTNEY, 

Defendant-Appellant. 

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) 

) 

) 

) 

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APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. No. 88-C-1335-E) 

Submitted on the briefs: 

David R. Frensley and Douglas E. Micheel of Frensley & Towerman, 

P.C., Kansas City, Missouri, and Richard James of Wallace, Owens, 

Landers, Gee, Morrow, Wilson, Watson, James & Coiner, P.C., Miami, 

Oklahoma, for Defendant-Appellant. 

Richard w. Lowry and Donna L. Smith of Logan, Lowry, Johnston, 

Switzer-, West & McGeady, Vinita, Oklahoma, for Defendant-Appellee. 

Before McKAY, McW!LLIAMS, and EBEL, Circuit Judges 

PER CURIAM. 

2 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 2 
After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of these appeals. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The cases are therefore ordered 

submitted without oral argument. 

This action arises from the efforts of appellee First 

National Bank and Trust of Vinita (FNBV) to recover proceeds paid 

to appellant Jerry Courtney following the sale of a boat in the 

inventory of Island Marina, Ltd. (Marina), in Ketchum, Oklahoma. 

FNBV claimed a superior interest in the inventory of the Marina. 

On cross motions for summary judgment, the district court held in 

favor of FNBV. Courtney now appeals that decision, as well as the 

district court's assertion of sμbject matter jurisdiction. We 

affirm. 

I. 

FNBV held perfected security interests in all Marina 

inventory and proceeds as of April 7, 1987. 

proceeds were collateral securing a $500,000 

1988, Courtney loaned the Marina $150,000 .. 

The inventory and 

loan. In January 

As security, he 

received the manufacturer's statement of origin on a fifty-foot 

Meteor boat in the Marina's inventory. The Marina later sold the 

Meteor. The purchaser wrote a check made payable jointly to the 

Marina and Courtney as payment. The Marina signed the check and 

gave it to Courtney, who deposited it in his personal checking 

account. 

3 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 3 
The complex action underlying this appeal began in June 1988 

when Bank of Oklahoma, N.A., filed a petition in state court 

claiming interests in Marina property and seeking foreclosure. 

That institution joined various other banks in the action, 

including First Oklahoma Savings Bank (FOSB). On August 31, 1988, 

the Federal Savings and Loan Insurance Corporation (FSLIC) was 

named as receiver for FOSB and became the owner of any assets it 

held. 1 

Two days later, Courtney was brought into the lawsuit as a 

result of FNBV's claim for return of the proceeds noted above. On 

September 30, 1988, FSLIC filed a removal petition asserting 

federal jurisdiction pursuant to 12 U.S.C. § 1730(k)(l). There 

was no objection. Approximately seven months later, the court 

dismissed all claims against FOSB pursuant to stipulation of the 

parties. As a result, FSLIC was no longer· involved in the 

lawsuit. At that time, the court requested briefing on whether to 

· retain federal jurisdiction. With the agreement of the parties, 

the court determined it would retain jurisdiction of the remaining 

state law claims. 

Courtney did not object to jurisdiction at any time prior to 

the court's decision on the cross motions for summary judgment. 

The order granting FNBV's motion issued on August 1, 1989. 

However, due to a disagreement regarding prejudgment interest, 

judgment on the order was not entered until October 12, 1989. 

1 The FSLIC was abolished following enactment of the 

Institutions Reform Recovery and Enforcement Act of 

Pub. L. No. 101-73, 103 Stat. 183 (1989). The statutes 

this order and judgment are those in effect at the 

events occurred. 

4 

Financial 

1989. See 

cited in 

time these 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 4 
Courtney raised the jurisdictional issue in a pretrial order filed 

September 15, as well as at a status conference later in the 

month. Because the issue of subject matter jurisdiction may be 

raised at any time, we will consider it here. See Kain v. Winslow 

Mfg., Inc., 736 F.2d 606, 609 (10th Cir. 1984)(issue of subject 

matter jurisdiction may be raised at any time), cert. denied, 470 

U.S. 1005 (1985). We consider this threshold issue first. 

II. 

The basis of FSLIC's jurisdiction is found in 12 U.S.C. 

§ 1730(k)(l). That statute states: 

(k) Jurisdiction and enforcement 

(1) Notwithstanding any other provision of law, 

(A) the Corporation shall be deemed to be an agency of 

the United States within the meaning of section 451 of 

Title 28; (B) any civil action, suit, or proceeding to 

which the Corporation shall be a party shall be deemed 

to arise under the laws of the United States, and the 

United States district courts shall have original 

jurisdiction thereof, without regard to the amount in 

controversy; and (C) the Corporation may, without bond 

or security, remove any such action, suit, or proceeding 

from a State court to the United States district court 

for the district and division embracing the place where 

the same is pending by following any procedure for 

removal now or hereafter in effect: Provided, That any 

action, suit, or proceeding to which the Corporation is 

a party in its capacity as conservator, receiver, or 

other legal custodian of an insured State-chartered 

institution and which involves only the rights or 

obligations of investors, creditors, stockholders, and 

such institution under State law shall not be deemed to 

arise under the laws of the United States.2 ... 

(Emphasis added.) Courtney asserts that because FSLIC was never 

formally made a party to the litigation, the district court could 

2 The parties do not dispute that FOSB is a federally chartered 

institution and therefore does not fall under the restrictions set 

forth in section 1730(k)(l)(C). 

5 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 5 
not derive jurisdiction from section 1730(k)(l)(B). 

consequence, Courtney asserts FSLIC's removal was improper. 

As a 

The majority of courts addressing this issue have rejected 

the argument that a receiver must formally intervene prior to 

removing the case pursuant to section 1730(k)(l)(C). See Henry v. 

Independent Am. Sav. Ass'n, 857 F.2d 995, 998 (5th Cir. 1988); 

North Miss. Sav. & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1100 

(5th Cir. 1985), cert. denied, 474 U.S. 1054 (1986), overruled in 

part on other grounds, Coit Independence Joint Venture v. FSLIC, 

489 U.S. 561, 109 S. Ct. 1361 (1989); Oreto Assocs., Ltd. v. Otero 

Sav. & Loan Ass'n, 723 F. Supp. 559, 561, (D. Colo. 1989). We 

agree with the majority that requiring formal substitution or 

joinder would render federal pleadings excessively technical and 

would run counter to the liberal posture espoused in 

Fed. R. Civ. P. 8(e)(l) and 8(f). 3 Hudspeth, 756 F.2d at 1100. 

Fed. R. Civ. P. 8(f) directs that ''all pleadings shall be so 

construed as to do substantial justice." In this case, FSLIC's 

removal petition can be treated as a motion to intervene. See 

Farina v. Mission Inv. Trust, 615 F.2d 1068, 1075 (5th Cir. 

1980)(it was within the discretion of the trial judge to treat 

removal petition as a motion to intervene pursuant to 12 u.s.c. 

§ 1819(4)). Doing so comports with both the spirit and letter of 

3 Courtney's reliance on Continental Ill. Nat'l Bank & Trust 

Co. of Chicago v. Four Ambassadors, 599 F. Supp. 534 (S.D. Fla. 

1984) is misplaced. In that case, the federal agency involved was 

not a receiver. 

6 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 6 
the rules of civil procedure and advances the goal of judicial 

economy.

4 

Review of the role of the receiver bolsters our assessment 

that FSLIC is contemplated as a party under the statute. Here, 

FSLIC owned all the assets of the failed bank. It was standing in 

the shoes of FOSB for all purposes. 12 u.s.c. 

§ 1729(b)(l)(describing the functions of the receiver). We hold 

that under these circumstances, the FSLIC was a party contemplated 

under 12 u.s.c. § 1730(k)(l)(B). Therefore, federal jurisdiction. 

attached and the case was properly removed. 

However, this holding does not end our analysis, as Courtney 

also argues that pursuant to United Mine Workers of America v. 

Gibbs, 383 U.S. 715 (1966), the district court should have 

remanded the case when FSLIC was dismissed. In Gibbs, the Supreme 

Court held a federal court can retain jurisdiction following 

dismissal of all federal claims if the remaining state claims 

derive from the same common nucleus of operative facts and a 

plaintiff would ordinarily be expected to try all of them in one 

proceeding. 5 Id. at 725. Although the claim involved here is 

ancillary, rather than pendent, the same analysis can be applied. 6 

4 Although FIRREA abolished 12 

does preserve the language of the 

§ 501, 103 Stat. 363, 367 (1989). 

in the future. 

u.s.c. § 1730(k), the new Act 

section. See Pub. L. No. 101-73 

Therefore, the issue may arise 

5 This assumes the federal claim was substantial. See Carey v. 

Continental Airlines, Inc., 823 F.2d 1402, 1404 (10th Cir. 1987). 

Here, FSLIC had substantial claims based on the jurisdiction 

derived from section 1730(k)(l). 

6 Although the distinction is subtle, pendent claims are 

generally those brought by the original plaintiff, while ancillary 

(continued on next page) 

7 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 7 
See United States v. Zima, 766 F.2d 1153, 1157 (7th Cir. 1985)(and 

cases cited therein). Considerations regarding whether to retain 

jurisdiction must also include "judicial economy, convenience, 

fairness and comity." Carnegie-Mellon Univ. v. Cohill, 108 S. Ct. 

614, 618 (1988). The ultimate decision rests in the discretion of 

the trial judge. See Gibbs, 383 U.S. at 726. 

Here, all the claims in the underlying action involve the 

Marina's inventory and claims to that inventory. The various 

creditors' ability to foreclose on their secured interests is 

dependent upon the success or failure of the other defendants in 

the litigation. The common nucleus of facts test is, therefore, 

satisfied. It was sensible, if not mandatory, for all the 

claimants to be joined in one action. 

Moreover, judicial economy and fairness required retaining 

federal jurisdiction. Hundreds of pleadings involving multiple 

parties were filed prior to FSLIC's dismissal. Settlements were 

reached. Both the various parties and the court spent an enormous 

amount of time resolving the issues presented. Fairness, 

convenience, and judicial economy pointed to retaining federal 

jurisdiction. Therefore, we hold the district court did not abuse 

its discretion in retaining jurisdiction after FSLIC was 

dismissed. 

meri ·t 7 s. 

Consequently, we must review Courtney's claims on the 

(continued from previous page) 

claims are asserted by a defendant against a plaintiff or 

codefendant. See generally 13 C. Wright, A. Miller & E. Cooper, 

Federal Practice and Procedure,§ 3523 (1984). 

7 We recognize FNBV's argument that Courtney's timing in 

(continued on next page) 

8 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 8 
III. 

We review the granting of FNBV's motion for summary judgment 

in the same manner as the district court. Abercrombie v. City of 

Catoosa, 896 F.2d 1228, 1230 (10th Cir. 1990). Summary judgment 

is appropriate where there are no genuine issues of fact and one 

party is entitled to judgment as a matter of law. 

Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). 

Anderson v. 

Courtney's argument is twofold. First, he asserts the loan 

repayment he received did not constitute proceeds pursuant to the 

Oklahoma Uniform Commercial Code. As a result, he asserts FNBV 

had no security interest in the cash which resulted from the boat 

sale. Second, he argues he is free from any security interest 

because he was a buyer in the ordinary course of business. We 

review each argument in turn. 

Okla. Stat. tit. 12A, § 9-306 governs a secured party's right 

to proceeds. 8 In pertinent part, it states: 

§ 9-306. "Proceeds"; Secured 

Disposition of Collateral 

Party's Rights on 

(1) "Proceeds" includes whatever is received upon 

the sale, exchange, collection or other disposition of 

collateral or proceeds .... 

(2) Except where this article 

a secu~ity interest continues 

notwithstanding sale, exchange or 

thereof, unless the disposition was 

(continued from previous page) 

otherwise provides, 

in collateral, 

other disposition 

authorized by the 

objecting to jurisdiction was somewhat curious. However, we need 

not reach that issue in light of our disposition. As a 

consequence, FNBV's motion for sanctions is denied. 

8 The parties do not dispute that FNBV 

prerequisites for perfecting its security 

inventory and proceeds. 

9 

met all 

interest in 

the 

the 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 9 
secured party in the security agreement or otherwise, 

and also continues in any identifiable proceeds 

including collections received by the debtor. 

(3) The security interest in proceeds is a 

continuously perfected security interest if the interest 

in the original collateral was perfected, but it ceases 

to be a perfected security interest and becomes 

unperfected ten (10) days after receipt of the proceeds 

by the debtor unless: 

(a) a filed financing statement covers the 

original collateral and the proceeds are 

collateral in which a security interest may be 

perfected by filing in the office or offices 

where the financing statement has been filed 

and, if the proceeds are acquired with cash 

proceeds, the description of collateral in the 

financing statement indicates the types of 

property constituting the proceeds; or 

(b) a filed financing statement 

original collateral and the 

identifiable cash proceeds; 

covers 

proceeds 

the 

are 

Okla. Stat. tit. 12A, § 9-306. Courtney argues this statute 

requires the monies involved to be received by the debtor in order 

t t . t t d d th · d · · 9 o cons i u e procee sun er is co e provision. We disagree. 

In Oklahoma, a debtor need not receive the proceeds in order for 

them to be subject to the security interest. See Farmers & 

Merchants Nat'l Bank v. Fairview State Bank, 766 P.2d 330, 334 

(Okla. 1988)(party retained secured interest in proceeds even 

though debtor never received them directly). Moreover, these 

proceeds were directly traceable from the Marina to Courtney. 

Therefore, the security interest in the proceeds continued. See 

Anderson, Clayton & Co. v. First Am. Bank of Erick, 614 P.2d 1091, 

9 We note that 

version of the 

reference to the 

the paragraph. 

Courtney's opening brief cites to a previous 

statute. In the current version, the only 

debtor in section 9-306(2) comes at the end of 

10 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 10 
1094 (Okla. 1980). 

this issue. 

Consequently, Courtney's argument fails on 

Courtney also asserts, however, that he is a buyer in the 

ordinary course of business who takes free of any security 

interest. See Okla. Stat. tit. 12A, § 9.306, comment 2(c). 

Comment 2(c) to section 9-306 of the Uniform Commercial Code 

states that recipients of cash proceeds paid out in the ordinary 

course of the debtor's business take free of any security 

interest. A buyer in the ordinary course of business is defined 

as a "person who [acts] in good faith and without knowledge that 

the sale to him is in violation of the ownership rights or 

security· interest of a third party " Okla. Stat. tit. 12A, 

§ 1-201(9); See also Anderson, Clayton, 614 P.2d at 1094 (applying 

this definition to section 9-306 transaction). 

Courtney's argument fails for several reasons. First, the 

loan repayment was not paid out of the debtor's checking account 

nor was it a payment to Courtney for services rendered in the 

course of the Marina business. Further, FNBV's filed financing 

statement should have put Courtney on notice of the perfected 

security interest. See Fairview, 766 P.2d at 334; see also 

Farmers & Merchants Nat'l Bank v. Sooner Co-op., Inc., 766 P.2d 

325, 330 (Okla. 1988)(filed financing statement is sufficient to 

put third party on inquiry notice). This constructive knowledge 

was enough to deny Courtney "buyer in the ordinary course" status. 

See Fairview, 766 P.2d at 334. It is undisputed that Courtney is 

a business person well versed in the business of financing and has 

handled many manufacturers' statements of origin. We agree with 

11 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 11 
the district court that Courtney does not qualify as a transferee 

in the ordinary course of business as contemplated in the comments 

to section 9-306. 

Finally, we briefly review Courtney's arguments that FNBV 

waived its security interest in the cash proceeds or is estopped 

from asserting that interest. After reviewing all the arguments 

and law presented, we agree with the district court that the 

record reveals no evidence in support of these arguments. 

Consequently, the judgment of the United States District 

Court for the Northern District of Oklahoma is AFFIRMED. 

12 

Appellate Case: 89-5189 Document: 01019953159 Date Filed: 11/15/1990 Page: 12