Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-03054/USCOURTS-ca10-90-03054-0/pdf.json

Parties Involved:
Gary L. Dinges
Not Party
Jay Ewing
Not Party
Federal Deposit Insurance Corporation
Appellee
Nickerson State Bank
Not Party
Paganica, Inc.
Not Party
G. R. Rains
Appellant

Document Text:

FILED 

Uoited Staffi Courc of Appeals 

UNITED STATES COURT OF APPEALS Tenth Circuit 

TENTH CIRCUIT FEB 2 5 1991 

G. R. RAINS, ) 

) 

Plaintiff-Appellant, ) 

) 

v. ) 

) 

FEDERAL DEPOSIT INSURANCE ) 

CORPORATION, ) 

) 

Defendant-Third-Party- ) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

JAY EWING, ) 

) 

Third-Party-Defendant, ) 

) 

and ) 

) 

GARY L. DINGES, NICKERSON ) 

STATE BANK, and PAGANICA, INC., ) 

) 

Defendants. ) 

.&OBERT L. HOECKER 

Clerk 

No. 90-3054 

(D.C. No. 87-1533-T) 

(D. Kan.) 

ORDER AND JUDGMENT* 

Before LOGAN, SBYIIOOR, and TACBA, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Ped. R. App. P. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 1 
34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

This appeal is from an order of the district granting summary 

judgment in favor of defendant Federal Deposit Insurance 

Corporation (FDIC). The Estate of G. R. Rains (the Estate) 

alleges on appeal that: (1) the district court did not have 

jurisdiction to decide whether the Estate had been properly 

substituted as a party, (2) the district court improperly 

concluded the Estate had been substituted as a party and thus FDIC 

could maintain its action against the Estate, and (3) summary 

judgment was inappropriate because discovery had not been 

completed on the fraud question raised by plaintiff. We affirm. 

This case arises out of an action filed by plaintiff G.R. 

Rains on April 29, 1985 in the state courts of Kansas. Plaintiff 

named Boulevard State Bank (BSB), Gary Dinges, and Nickerson State 

Bank (NSB) as defendants. Count II of the petition alleged BSB 

and Dinges conspired during the spring of 1984 to cause plaintiff 

to execute two notes, the first for $100,000 and the second for 

$150,000. Plaintiff asserted he did not receive these funds and 

was not aware of their disposition. BSB filed a counterclaim 

against plaintiff seeking judgment on the two notes. 

BSB was declared insolvent in February of 1987 and FDIC was 

appointed receiver. As receiver, FDIC transferred certain assets 

to FDIC in its corporate capacity, including the notes at issue in 

this case. After plaintiff's death on March 27, 1987, NSB filed a 

motion to dismiss or, in the alternative, for substitution of the 

Estate as a party. NSB also filed a suggestion of death at this 

-2-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 2 
A 

J 

' • time. The court granted NSB's motion to dismiss on April 24, 

1987. On April 28, 1987, plaintiff's counsel, Michael Friesen, 

filed a motion to vacate this order, claiming he had not received 

notice of the hearing on NSB's motion. 

On July 1, 1987, a telephonic hearing was conducted by State 

District Judge William Lyle on the motion to vacate. At that 

hearing, Judge Lyle ordered the action reinstated and ordered the 

Estate and FDIC be substituted as parties to the action. Friesen 

was directed by the court to draft the order substituting the 

Estate. He failed to do so until more than four months after the 

first published notice to creditors of the Estate. 

FDIC removed this action to federal court on September 1, 

1987. On November 20, 1987; FDIC moved for summary judgment on 

the two notes executed by plaintiff. The Estate replied, arguing 

FDIC's claim had not been properly revived because the Estate had 

not been substituted as a party. It also contended summary 

judgment was not proper at that time because discovery had not 

been completed on the fraud question raised by plaintiff. 

On May 3, 1988, the district court granted FDIC's motion for 

summary judgment. The court determined the Estate had been 

substituted as a party and thus FDIC could maintain its action 

against the Estate. It also concluded the Supreme Court's 

decision in Langley Y..!.. FDIC, 486 U.S. 86 (1987), disposed of all 

arguments raised by the Estate in opposition to FDIC's motion for 

summary judgment. The court awarded FDIC a judgment for $250,000 

against the Estate. 

-3-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 3 
We review a district court's grant of a motion for summary 

judgment under the same standard applied by that court. Burnette 

L. Dow Chemical Co., 849 F.2d 1269, 1273 (10th Cir. 1988). This 

standard asks whether there is a genuine issue of material fact. 

Id. In answering this question, we view all facts and inferences 

in the light most favorable to the non-moving party. Id. If we 

find there is no genuine issue of material fact, we affirm the 

district court unless it misapplied the law. Osgood Y..:.. State Farm 

Mut. Ins. Co., 848 F.2d 141, 143 (10th Cir. 1988). Our review of 

legal questions is de novo. Carey L. United States Postal Serv., 

812 F.2d 621, 623 (10th Cir. 1987). 

The district court had jurisdiction to determine whether the 

Estate had been properly substituted as a party pursuant to Kansas 

probate law. Although the federal courts cannot probate wills or 

enforce claims against an estate, they do "have jurisdiction to 

entertain suits 'in favor of creditors, legatees and heirs' and 

other claimants . so long as the federal court does not 

interfere with the probate proceedings or assume general 

jurisdiction of the probate or control of the property in the 

custody of the state court." Markham Y..:.. Allen, 326 U.S. 490, 494 

(1945) (citations omitted). This court has noted that: 

The standard for determining whether federal 

jurisdiction may be exercised is whether under state law 

the dispute would be cognizable only by the probate 

court. If so, the parties will be relegated to that 

court; but where the suit merely seeks to enforce a 

claim inter partes, enforceable in a state court of 

general jurisdiction, federal diversity jurisdiction 

will be assumed. 

-4-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 4 
McKibben Y.!.. Chubb, 840 F.2d 1525, 1529 (10th Cir. 1988) (quoting 

Lamberg Y.!.. Callahan, 455 F.2d 1213, 1216 (2d Cir. 1972)). 

In 1977, Kansas probate courts were unified with the district 

courts. See Quinlan Y.!.. Leech, 623 P.2d 1365, 1368 (Kan. App. 

1981). When a probate proceeding is pending in a Kansas district 

court, that court is the proper forum for actions which would have 

been in the exclusive province of the probate court before the 

courts were unified. See id. Thus, the question of whether the 

federal district court has jurisdiction turns on whether a state 

court not hearing the probate proceeding would have jurisdiction 

over the same action. 

The Kansas district court in which an action is pending may 

consider a revivor or substitution of parties motion upon the 

death of one of the parties even if it is not the court handling 

the probate. Livingston Y.!.. Bias, 640 P.2d 362, 364-65 (Kan. App. 

1982): Kan. Stat. Ann. S 60-225(a)(l). We therefore conclude the 

district court had jurisdiction to determine whether the Estate 

was properly substituted as a party. 

We agree with the district court that the Estate was properly 

substituted as a party and thus FDIC could maintain its action 

against the Estate. Parties wishing to maintain their claims 

against the estate of a deceased party must comply with the 

statutory prerequisites for substituting the estate as a party 

found in Kan. Stat. Ann. SS 59-2238(1), 58-2239(1), and 60-

225(a)(l). First, one of the parties to the action must file a 

suggestion of death. Second, a motion for substitution must be 

filed within a reasonable time after the suggestion of death. 

-5-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 5 
Third, the moving party must serve a copy of the motion for 

substitution and a notice of the hearing to each party and the 

proposed substitute party. Finally, the substitution must be 

accomplished within four months of the first published notice to 

creditors. 

These requirements were satisfied in this case. NSB's April 

8, 1987 motion properly suggested the death of plaintiff. NSB 

also filed a motion for substitution of the Estate as a party at 

that time. 

The Estate contends it was not served with a copy of the 

motion and notice of the hearing. The district court properly 

concluded NSB substantially complied with the service requirement 

of section 60-225(a)(l). The Kansas Code of Civil Procedure 

authorizes the use of the substantial compliance doctrine in 

reviewing the sufficiency of the service of notice "if the court 

finds that, notwithstanding some irregularity or omission, the 

party served was made aware that an action or proceeding was 

pending in a specified court in which his or her person, status or 

property were subject to being affected." Kan. Stat. Ann. S 60-

204. The affidavits of Friesen and Judge Lyle establish the fact 

that Friesen participated in the July 1, 1987 hearing. Based on 

this, the district court properly determined the Estate "was made 

aware" of that hearing. Friesen's argument that he was not 

representing the Estate at this hearing is contradicted by his 

activities on its behalf both before and after July 1, 1987. 

Friesen himself filed the motion to vacate the order dismissing 

the case. Further, the state district court records show Friesen 

-6-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 6 
was active in litigating this action both before and after 

plaintiff's death. The third prerequisite for substituting a 

party was satisfied in this case. 

Finally, the district court correctly determined the 

substitution of the Estate as a party was accomplished prior to 

the four month deadline. Under the circumstances of this case, 

Judge Lyle's oral order at the July 1, 1987 hearing was sufficient 

to effectively substitute the Estate as a party prior to this 

deadline. The Estate's ability to defend this action was not 

prejudiced by the lack of a written order substituting it as a 

party. The Estate was aware of NSB's motion to substitute as 

early as April 8, 1987. Further, the affidavits of Judge Lyle and 

Friesen indicate Friesen was directed by the court to enter the 

written order substituting the Estate as a party. He cannot now 

use his failure to do so in a timely manner as a bar to effective 

substitution. We conclude the district court properly held the 

statutory prerequisites for substituting a party were satisfied in 

this case and thus FDIC could maintain its action against the 

Estate. 

We agree with the district court that FDIC is entitled to 

summary judgment on the two notes executed by plaintiff under the 

Supreme Court's decision in Langley~ FDIC, 484 U.S. 86 (1987). 

In that case the Court held misrepresentations and oral conditions 

of the kind asserted by plaintiff in his petition and at his 

deposition are "agreements" within the meaning of 12 u.s.c. 

S 1823(e). 484 U.S. at 91. The Estate thus cannot raise 

fraudulent inducement as a defense against FDIC's claim. FDIC's 

-7-

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 7 
knowledge of this defense is irrelevant to the application of this 

section. Id. at 95. 

On appeal, the Estate argues additional discovery may have 

allowed it to show fraud in the factum. Section 1823(e) does not 

prevent a party from raising this defense against a claim by FDIC. 

Id. at 93. This issue was not raised to the district court and 

therefore cannot be considered on appeal. See Mattingly, Inc. Y..:.. 

Beatrice Foods. Inc., 835 F.2d 1547, 1558 (10th Cir. 1987). 

Even if this issue had been raised properly in the trial 

court, this defense would not be successful in this case. 

Plaintiff testified in his deposition that he executed the notes 

involved, made interest payments, endorsed a cashier's check 

representing loan payments, and negotiated with the bank regarding 

who was responsible for repayment. There is no suggestion 

plaintiff did not have an opportunity to read the notes or was 

unable to determine their character and essential terms. See FDIC 

Y..:.. Culver, 640 F. Supp. 725, 728 (D. Kan. 1986). Because no 

material issues remained, the district court properly concluded 

FDIC was entitled to sUDDDary judgment on the two notes executed by 

plaintiff. All pending motions in this case are granted. The 

order of the district court is AFFIIUIED. The mandate shall issue 

forthwith. 

-8-

ENTERED FOR THE COURT 

Deanell Reece Tacha 

Circuit Judge 

Appellate Case: 90-3054 Document: 010110028848 Date Filed: 02/25/1991 Page: 8