PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ELMCO PROPERTIES, INCORPORATED,

Plaintiff-Appellant,

v.

SECOND NATIONAL FEDERAL SAVINGS

ASSOCIATION; RESOLUTION TRUST

CORPORATION, as Receiver of and

Conservator of Second National

No. 95-3172

Federal Savings Bank, also known

as Second National Federal Savings

Association; RESOLUTION TRUST

CORPORATION, as Receiver of Second

National Federal Savings

Association,

Defendants-Appellees.

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

M. J. Garbis, District Judge.

(CA-95-1497-MJG)

Argued: July 17, 1996

Decided: September 3, 1996

Before MURNAGHAN, Circuit Judge, and BUTZNER and

PHILLIPS, Senior Circuit Judges.

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Reversed by published opinion. Senior Judge Phillips wrote the opinion, in which Judge Murnaghan and Senior Judge Butzner joined.

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COUNSEL

ARGUED: George Frederick Obrecht, III, OBRECHT &

OBRECHT, Severna Park, Maryland, for Appellant. Kathryn Ryan

Norcross, FEDERAL DEPOSIT INSURANCE CORPORATION,

Washington, D.C., for Appellees. ON BRIEF: Ann S. DuRoss,

Assistant General Counsel, Richard J. Osterman, Jr., Senior Counsel,

FEDERAL DEPOSIT INSURANCE CORPORATION, Washington,

D.C.; Marcell Solomon, SOLOMON & GREEN, P.C., Greenbelt,

Maryland, for Appellees.

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OPINION

PHILLIPS, Senior Circuit Judge:

Appellant Elmco Properties, Inc. sued Appellees Second National

Federal Savings Association (FSA) and the Resolution Trust Corporation (RTC)--acting in various capacities--seeking declaratory judgment that the RTC had misapplied certain of Elmco's funds to

discharge an outstanding loan. Elmco further sought repayment of

those funds. The RTC and FSA moved to dismiss, claiming that

Elmco's failure to first present its claim to the RTC for resolution, as

is required by the Financial Institutions Reform, Recovery and

Enforcement Act of 1989 (FIRREA) (codified as amended in 12

U.S.C.), divested the district court of jurisdiction. Elmco responded,

claiming that because it never received sufficient notice of the RTC's

administrative claims process, extinguishing its claim without first

allowing it an opportunity to present the claim to the RTC would violate due process. The district court agreed with the RTC and FSA and

dismissed Elmco's claim. Finding that Elmco was denied sufficient

notice of its opportunity to present its claim, hence was denied due

process, we reverse.

I.

In 1986, Elmco executed a guaranty in favor of Second National

Federal Savings Bank (FSB) securing the obligations of Joan and E.

Lee Meadows, Elmco's principal shareholders, under a $500,000 line

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of credit. This guaranty was further secured by an Indemnity Deed of

Trust on real property Elmco owned.

In 1988, FSB made two loans to Elmco totalling $1,625,196. These

loans were guarantied by the Meadows and were secured by Elmco's

real property. Later, Elmco established at FSB an escrow account,

into which Elmco transferred its rights under certain letters of credit;

this account further collateralized Elmco's obligations. In 1990,

Elmco and FSB entered into a "letter agreement" regarding these two

loans, but the terms of that agreement are not in the record.

In 1992, Elmco defaulted on the 1988 loans and the Meadows

defaulted on their line of credit; Elmco and the Meadows also refused

to honor their respective guaranties. Later that year, FSB failed and

the Office of Thrift Supervision (OTS) appointed the RTC as FSB's

receiver. It also chartered a new institution, FSA, which acquired substantially all of FSB's assets and liabilities, including the 1988 loans

to Elmco and Elmco's escrow account. OTS also appointed the RTC

as FSA's conservator.

In June of 1993, Elmco and the Meadows entered into a settlement

agreement with FSA and with the RTC in its capacity as FSA's conservator. Under this agreement, Elmco and the Meadows confirmed

their defaults on the two loans and the line of credit, agreed to a workout of the amounts owed under those loans, and agreed to allow FSA

to foreclose on some of Elmco's real property. The agreement also set

up certain conditions that, if fulfilled by Elmco and the Meadows,

would release those parties from their liabilities under the loans and

guaranties. One of those conditions was that "No event of Bankruptcy

or Avoidance Action shall have occurred." JA 21.

In November of 1993, Lee Meadows filed for bankruptcy. Three

months later, FSA notified Elmco that the escrow account had been

closed and the $132,762.29 in the account had been"applied to principal on [Elmco's] non-performing loan[s]." JA 28. Elmco later wrote

to request a refund of that money.

By September of 1994, FSA had failed and the RTC was changed

from its conservator to its receiver. In October, November, and

December, the RTC published notices in the Baltimore Sun and

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Washington Post announcing the receivership and explaining that all

creditors should submit proof of their claims against FSA to the RTC

by January 28, 1995.

Shortly after becoming FSA's receiver, the RTC also wrote to

Elmco and denied its request to return the funds. It explained that it

considered Meadows's filing for bankruptcy a default under the settlement agreement, and that, it believed, this default allowed the RTC

to seize the escrow funds. This letter erroneously identified the RTC

as receiver for FSB, instead of receiver for FSA. The letter also did

not mention the administrative claims process or the January 28 deadline. Elmco did not submit a claim to the RTC before this date.

In May of 1995, Elmco filed this suit in the United States District

Court for the District of Maryland, naming as defendants FSA, the

RTC as Conservator for FSA, and the RTC as Receiver for FSB. This

complaint sought declaratory judgment that (1) the settlement agreement was still in effect between FSA and Elmco, (2) the previous letter agreement regarding the escrow account was superseded by the

settlement agreement, (3) the RTC was not entitled to apply the

escrow funds to Elmco's debt, and (4) the RTC owed Elmco the

amount it had seized. Elmco also sought an order requiring the RTC

to refund the money.

But the Defendants responded with Rule 12 motions, claiming that

the district court lacked jurisdiction and that Elmco had failed to state

a claim. The motions claimed that, under FIRREA's administrative

exhaustion requirement, Elmco's failure to first file its claim with the

RTC divested the district court of jurisdiction. Elmco then amended

its complaint to add the RTC as Receiver for FSA as a defendant, and

also to seek declaratory judgment that the time for it to file its complaint with the RTC had not yet expired.

On the defendants' motions, the district court dismissed the claims

for lack of subject matter jurisdiction, holding that, because Elmco

had not first presented its claims to the RTC, FIRREA barred any

court from taking jurisdiction over those claims. It also rejected

Elmco's argument that the RTC's failure to mail it notice of the

administrative claims process had deprived it of any opportunity to

present its claim, thus had violated its due process rights.

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Elmco now appeals, claiming primarily that lack of mailed notice

did violate its due process rights.

II.

Elmco contends that the RTC's failure to mail it notice of FSA's

receivership and the accompanying administrative claims process rendered the ensuing extinguishment of its claim unconstitutional under

the Fifth Amendment's Due Process Clause. We conclude that failure

to mail notice, when coupled with Elmco's lack of sufficient knowledge to charge it with a duty to inquire further into the claims process,

did make discharge of Elmco's claim unconstitutional.

A.

A brief outline of FIRREA's relevant provisions is in order. FIRREA establishes an administrative process that allows the RTC, acting as receiver for a failed institution, to settle claims against that

institution and liquidate its assets. See 12 U.S.C. § 1821(d); Tillman

v. Resolution Trust Corporation, 37 F.3d 1032, 1035 (4th Cir. 1994);

Brady Dev. Co. v. Resolution Trust Corporation, 14 F.3d 998, 1003

(4th Cir. 1994). Upon becoming receiver, the RTC must promptly

publish notice to the institution's creditors that they must present their

claims before a certain date--the "bar date"--which is to be at least

ninety days after publication of the notice. § 1821(d)(3)(B)(i). Furthermore, the RTC must mail a similar notice to (1) creditors appearing on the institution's books, and (2) claimants 1 not appearing on the

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1 As the Third Circuit has pointed out, FIRREA unfortunately does not

define "claim," hence contains no definition of "creditor" or "claimant."

National Union Fire Ins. Co. v. City Sav., F.S.B. , 28 F.3d 376, 386 (3d

Cir. 1994). But that court, relying on analogous provisions of the Bankruptcy Code, defined "claim" as "an action asserting a right to payment,"

in contrast to a mere request for declaratory judgment. Id. at 387. Here,

the district court concluded that, although Elmco's complaint technically

requested declaratory judgment that it owned the funds and an order

requiring RTC to refund them, it was in essence a claim for monetary

relief. See JA 79. The Third Circuit itself has treated such actions, though

"dressed in injunctive garb," as requests for monetary damages. See Rosa

v. RTC, 938 F.2d 383, 393 (3d Cir. 1991). Accordingly, we have no trouble treating Elmco's facially declaratory and injunctive action as what it

genuinely is, i.e., a "claim" against the assets of FSA.

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books but whose names and addresses the RTC later discovers.

§ 1821(d)(3)(C).

The RTC may allow any claim filed before the bar date that is

"proved to [its] satisfaction." § 1821(d)(5)(B). But, with one limited

exception, the RTC has no such discretion as to claims filed after the

bar date: "[C]laims filed after the [bar date] shall be disallowed and

such disallowance shall be final." § 1821(d)(5)(C)(i). The one exception is that the RTC may, in its discretion, hear late-filed claims when

the claimant "did not receive notice of the appointment of the receiver

in time to file such claim before [the bar date]." § 1821(d)(5)(C)(ii);

see F.D.I.C. v. diStefano, 839 F. Supp. 110, 117 (D.R.I. 1993) (as

written, FIRREA makes receiver "sole gatekeeper" of such late-filed

claims).

One whose claim the RTC denies on its merits or fails to rule on

within 180 days may seek judicial or administrative review of that

claim. § 1821(d)(6)(A). But, unless a claim is first presented to the

RTC for resolution, no court has jurisdiction over it. § 1821(d)(13)(D).2

These provisions combine to create an exhaustion requirement that,

we have concluded, is "absolute and unwaivable." Brady, 14 F.3d at

1007 (quoting Glenborough New Mexico Assoc. v. Resolution Trust

Corporation, 802 F. Supp. 387, 392-93 (D.N.M. 1992)). Importantly,

FIRREA does not allow waiver of the exhaustion requirement even

for claimants to whom the RTC failed to mail the required notice of

the claims process and bar date. Freeman v. F.D.I.C., 56 F.3d 1394,

1402 (D.C. Cir. 1995); Intercontinental Travel Mktg., Inc. v. F.D.I.C.,

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2 Section 1821(d)(13)(D) provides:

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 [RTC] has been

appointed receiver, including assets which the [RTC] may

acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such institution or [RTC] as receiver.

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45 F.3d 1278, 1285 (9th Cir. 1994); Meliezer v. Resolution Trust

Corporation, 952 F.2d 879, 882-83 (5th Cir. 1992).3

B.

To prove its due process claim, Elmco must of course show that it

was deprived of a protected interest without due process of law.

Board of Regents v. Roth, 408 U.S. 564, 571 (1972). Here, Elmco

points to a property interest, namely its claim against the RTC for

refund of its seized escrow account. See Logan v. Zimmerman Brush

Co., 455 U.S. 422, 428 (1982) (cause of action is a constitutionally

protected property interest). Elmco has been deprived of that interest.

Specifically, the statute's administrative claims process and jurisdictional bar apply directly to Elmco's claim; Elmco is a claimant who

failed to file any claim before the bar date, and, under FIRREA, its

failure to timely file requires the denial of its claim4 --unless the RTC

allows the late filing, which it admits it would not--and withdraws

jurisdiction over that claim from all courts.5 Accordingly, Elmco has

been deprived of the property interest it had in its claim.

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3 Of course, FIRREA does, as discussed above, make a partial exception for late claims filed by claimants who lacked timely notice of the

receivership. § 1821(d)(5)(C)(ii). But the fact that the receiver has discretion to allow even these claims--and that review of those claims will be

jurisdictionally barred if the receiver denies them as untimely--strongly

suggests that Congress did not intend a full waiver of the exhaustion

requirement as to claimants who did not receive the required mailed

notice, regardless of whether they had independent knowledge of the

receivership. E.g., Freeman, 56 F.3d at 1402.

4 Although Elmco never has actually filed a claim with the RTC, the

statute itself requires the RTC to deny the claim as untimely, unless it

concludes that Elmco lacked timely notice of FSA's receivership. The

RTC has argued in its brief that Elmco did have such notice, Appellee's

Br. at 21, and stated at argument that, if Elmco did now file a claim, it

would treat the claim as time-barred. Accordingly, there is no question

that Elmco's claim has been extinguished under FIRREA.

5 Elmco briefly argues that, because FSA never had a right to seize its

account, those funds never became FSA's "assets"; from this it concludes

that its claim seeking repayment of those funds really does not affect

FSA's assets, hence is not subject to FIRREA's jurisdictional bar. See

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Elmco claims this deprivation of its property occurred without due

process. As mentioned above, the claim is extinguished under FIRREA even though the RTC failed to give the statutorily required

notice. See Meliezer, 952 F.2d at 882-83. Although the statute

attaches no consequences to the RTC's failure to mail Elmco notice,

several courts have recognized that depriving a claimant of its property interest under such circumstances may raise serious constitutional

problems. See Freeman, 56 F.3d at 1403 n.2 (where requisite notice

lacking, FIRREA claims process raises "serious due process concerns"); Greater Slidell Auto Auction, Inc. v. American Bank & Trust

of Baton Rouge, 32 F.3d 939, 942 (5th Cir. 1994) (due process

requires mailing of notice to known claimants); National Union, 28

F.3d at 391 (probable due process violation if insufficient notice

given); diStefano, 839 F. Supp. at 118 (as applied, FIRREA may raise

"grave constitutional concerns").

We agree. If the RTC denies 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, such a denial, which is final and unreviewable, deprives

that claimant of his claim without ever affording him notice of the

deprivation or an opportunity to defend against it. Such a deprivation

without appropriate notice or any opportunity to protest--either preor post-deprivation6 --violates due process. E.g., Boley v. Brown, 10

F.3d 218, 222 (4th Cir. 1993) (citing Mullane v. Central Hanover

Bank & Trust Co., 339 U.S. 306, 314 (1950)).

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§ 1821(d)(13)(D)(i) (withdrawing from all courts jurisdiction over claims

seeking "payment from . . . or a determination of rights with respect to"

a failed institution's assets). This claim is meritless because, even if

Elmco's claim to the funds succeeds on the merits, satisfaction of the

claim must necessarily be paid out of FSA's assets. Accordingly,

Elmco's claim seeks "payment from" FSA's assets and is subject to the

jurisdictional bar.

6 The failure to give notice of the bar date, of course, denies the claimant an opportunity for pre-deprivation procedures, while FIRREA's elimination of any judicial review of denied, late-filed claims prevents postdeprivation remedy.

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The question then becomes whether Elmco was given constitutionally adequate notice that its claim would be extinguished if not timely

filed. That notice is that which is "reasonably calculated, under all the

circumstances, to apprise interested parties of the pendency of the

action and afford them an opportunity to present their objections."

Mullane, 339 U.S. at 314; accord Mennonite Board of Missions v.

Adams, 462 U.S. 791, 795 (1983). Under Mullane, a party with an

identified, present property interest whose address is known or reasonably ascertainable is entitled to mailed notice of proceedings

affecting his property right. Mullane, 339 U.S. at 317-20; see Greater

Slidell, 32 F.3d at 942 ("Mailing of notice to claimants known to the

receiver is constitutionally required"). As to such parties, mere constructive notice by publication is insufficient. Mullane, 339 U.S. at

318. As Mullane plainly put it, "The means [of notice] employed must

be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it." 339 U.S. at 315.

Here, the RTC was aware of Elmco's claim against FSA's assets

and knew Elmco's address. RTC's awareness is clear on the record;

after becoming FSA's receiver, the RTC responded in writing to

Elmco's request for refund of the escrow account and, after discussing its reasoning, concluded, "In view of the foregoing, we cannot

accept your claim for refund." JA 29 (emphasis added). Given that the

RTC, soon after becoming receiver, was aware of Elmco's identity,

address, and asserted interest in FSA's assets, the RTC was constitutionally required to mail Elmco notice that, unless it asserted its claim

in an administrative complaint filed before the bar date, its claim

would be finally, unappealably denied. See Greater Slidell, 32 F.3d

at 942. Under Mullane, then, mere publication of the bar date in local

newspapers was insufficient as to Elmco.

The district court read our opinion in Tillman as, in effect, making

constructive notice by publication sufficient in all cases. But such a

holding would fly in the face of Mullane, and an analysis of the facts

of Tillman shows that it is consistent with Mullane's teachings.

Unlike Elmco, the claimant in Tillman was not one that the RTC discovered before its bar date. In fact, Tillman did not assert his claim

against the failed bank until 30 months after that bank entered receivership. 37 F.3d at 1034. Also, his claim was not based on a standard

creditor-debtor arrangement, but on an alleged contract under which

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the bank had promised to reimburse him for expenses he incurred in

the course of unrelated litigation. As a result, Tillman's interest

appears not to have been known to RTC or to have been of a type that

RTC should be required to discover on its own, and thus he fell within

a class of claimants for whom notification by publication is sufficient.

See Mullane, 339 U.S. at 317 (under those facts, notice by publication

sufficient for those whose interests are contingent, future, or not likely

to come to trustee's attention in normal course of business). Accordingly, Tillman's approval of notice to that claimant solely by publication is consistent with Mullane and may not be read as suggesting that

notice by publication is constitutionally sufficient as to all claimants.

Nevertheless, Elmco 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. Some courts

have held that a claimant's knowledge that a bank has entered receivership triggers such inquiry notice. See Intercontinental Travel Mktg.,

45 F.3d at 1285 (citing Greater Slidell, 38 F.3d at 182 (Aldisert, J.,

dissenting)); Flagler Fed. Sav. & Loan Ass'n v. Greenview Apartments, Ltd., 897 F. Supp. 1431, 1436 (S.D. Fla. 1995) (actual knowledge that bank was in receivership put claimant on inquiry notice). In

a similar context, our sister circuits have rejected bankruptcy creditors' arguments that, absent formal notice of the deadline for contesting the dischargeability of their debtors' obligations, their interest in

those obligations could not constitutionally be discharged. See In re

Medaglia, 52 F.3d 451 (2d Cir. 1995); In re Alton, 837 F.2d 457 (11th

Cir. 1988). Those courts have held that, once creditors actually learn

that their debtors have filed for bankruptcy, they have a duty to

inquire as to what they might be required to do to protect their interests, and, failing such inquiry, cannot claim lack of due process when

those debts are discharged. See id.7

Accordingly, if Elmco had timely, actual knowledge that FSA had

entered receivership, its due process argument might be defeated by

its own failure to act on that knowledge to protect its rights. But nothing in the record suggests that Elmco had such knowledge. The par-

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7 Significantly, the Altoncourt acknowledged that, if a creditor had no

notice of the bankruptcy proceeding--formal or otherwise--Mullane

would prohibit discharge of its debts. 837 F.2d at 461 n.4.

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ties' brief correspondence contains nothing alerting Elmco that the

RTC had become FSA's receiver. FSA's letter of February 7, 1994,

in which it informed Elmco that the account had been seized, does not

mention the RTC at all, although earlier negotiations informed Elmco

that the RTC was then acting as FSA's conservator. The RTC's October 6, 1994--thus, post-receivership--letter denying Elmco's request

for return of its funds was mistakenly sent on letterhead identifying

the RTC as receiver for FSB, not FSA. But, given what Elmco

already knew, the nature of this mistake was not obvious on the face

of the letter. Although Elmco perhaps should have known that the

RTC erred in writing as FSB's receiver, it might well have thought

the appropriate letterhead would have identified the RTC as FSA's

conservator, not its receiver.

The pleadings further suggest that, at the relevant times, Elmco did

not know that the RTC was FSA's receiver. In its complaint, Elmco

admits it knew that, in 1992, the RTC had been appointed receiver for

FSB and conservator of FSA; but the complaint mentions nothing of

the RTC's receivership of FSA. Indeed, Elmco did not originally sue

the RTC as receiver for FSA, but only as receiver for FSB and conservator of FSA. It did not add the RTC as receiver for FSA to its list

of defendants until it filed its amended complaint, by which time the

RTC had put its receivership of FSA on record.

Nor could Elmco's knowledge that the RTC was FSA's conservator be held to put it on inquiry notice. Unlike its role as receiver, the

RTC as conservator cannot initiate the administrative claims process

or liquidate a failed bank. Instead, the conservator's function is to

restore the bank's solvency and preserve its assets. Compare

§ 1821(d)(2)(D) (setting forth conservator's powers) with § 1821(d)

(2)(E) (authorizing receiver to liquidate bank's assets) and § 1821(d)

(3)(A) (authorizing RTC or FDIC "as receiver" to determine claims

against failed bank).

Because nothing in the record suggests that Elmco had actual

knowledge that FSA had entered receivership, nor that it had actual

knowledge of the administrative claims process or bar date, Elmco

was never placed on inquiry notice of the claims process. The RTC's

failure to mail the required notice to Elmco thus is not excused by any

actual knowledge Elmco had, and, under such circumstances, it would

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violate the Due Process Clause of the Fifth Amendment to allow the

RTC to treat Elmco's claim as untimely, hence permanently denied.

Put another way, Congress has established FIRREA's administrative claims process as the sole door through which a claimant against

a failed bank may enter. The RTC may not constitutionally close that

door and shut off the exclusive opportunities for review to which it

leads without giving the claimant appropriate notice of its closing.

Here, no such notice was given and the district court erred in rejecting

Elmco's due process objection to dismissal of its action.

III.

There remains the question of the appropriate remedy for the district court's error. We approach it by asking what the district court

should have done had it recognized the due process violation we have

found. Had it done so, it should have rejected the RTC's jurisdictional

defense, declined to dismiss the action, and entered a decree entitling

Elmco to process its claim with the RTC free of the bar of

§ 1821(d)(5)(C)(i). That is the remedy most suited to correcting the

specific constitutional violation, see Freeman 56 F.3d at 1404 n.2 (so

suggesting), and to preserving the statutory scheme's requirement of

first resort to the administrative claim process. We may order it in

exercise of our appellate jurisdiction. 28 U.S.C.§ 2106.

The RTC points out that the necessary effect of such a remedy is

to enjoin action by the RTC, and it contends that this is forbidden by

FIRREA's anti-injunction provision, § 1821(j). We disagree.

That subsection does generally bar courts from enjoining the

RTC's exercise of its statutory "powers or functions . . . as a conservator or receiver." § 1821(j); see In re Landmark Land Co., 973 F.2d

283, 290 (4th Cir. 1992) (Congress gave RTC "full rein to exercise

its statutory authority without injunctive restraints"). But § 1821(j)

does not immunize the RTC from all injunctions:

By its terms, § 1821(j) shields only "the exercise of powers

or functions" Congress gave to the FDIC; the provision does

not bar injunctive relief when the FDIC has acted or pro-

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poses to act beyond, or contrary to, its statutorily prescribed,

constitutionally permitted, powers or functions.

National Trust for Historic Preservation v. FDIC , 995 F.2d 238, 240

(D.C. Cir.), vacated, 5 F.3d 567 (D.C. Cir. 1993), and restored in relevant part, 21 F.3d 469 (D.C. Cir. 1994) (en banc). Because Congress

could not authorize the RTC to act unconstitutionally, enjoining the

RTC from doing so cannot infringe on its statutorily granted powers.

Accordingly, FIRREA's anti-injunction provision does not prohibit

the remedy identified.

IV.

For the reasons above stated, we vacate the district court's grant of

summary judgment dismissing the action for lack of jurisdiction and

remand to that court for entry of a decree in accordance with this

opinion. In doing so, the court may in its discretion require Elmco to

process its claim in accordance with applicable RTC procedures and

may impose a reasonable time limit for filing of the claim.

SO ORDERED

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