Opinion ID: 734105
Heading Depth: 3
Heading Rank: 2

Heading: Reconciling the Transferability and Repudiation Provisions of FIRREA

Text: 18 We find that there is no conflict between the continued enforcement of pre-receivership purchase option and marketing agreements and 12 U.S.C. § 1821(d)(2)(G)(i)(II). We therefore reject the RTC's argument that 12 U.S.C. § 1821(d)(2)(G)(i)(II) preempts such agreements. Pre-receivership contracts are properly governed by section 1821(e), entitled Provisions relating to contracts entered into before appointment of conservator or receiver, which permits repudiation of such contracts and provides for the payment of damages. Section 1821(d)(2)(G)(i)(II), entitled Powers and duties of Corporation as conservator or receiver, addresses the scope of the RTC's authority as a conservator or receiver. 3 Section[323 U.S.App.D.C. 87] 1821(d)(2)(G)(i)(II) permits the RTC, in its capacity as a conservator or receiver, to sell assets in its possession without obtaining any prior approval. Section 1821(e) explains how this power works with regard to contracts entered into pre-receivership: if the RTC prefers to transfer an asset without pre-existing limitations, then the RTC can abrogate a contract containing limitations, such as a purchase option or marketing rights, but it must pay damages to the option holder. Understood this way, pre-receivership purchase option agreements do not implicate preemption doctrine because there simply is no conflict between the RTC's power to transfer the assets of a failed financial institution without consent and state law contract rights of the sort at issue in this case. 19 The structure of FIRREA compels this reading of the statute. FIRREA provides that when an agency acts as conservator or receiver, the agency succeeds to, 20 (i) all rights, titles, powers, and privileges of the insured depository institution, and of any stockholder, member, accountholder, depositor, officer, or director of such institution with respect to the institution and the assets of the institution;.... 21 12 U.S.C. § 1821(d)(2)(A)(i) (1994). As the conservator and receiver for HomeFed, the RTC thus stepped in the shoes of HomeFed in its relationship with Waterview. Cf. O'Melveny & Myers v. FDIC, 512 U.S. 79, 87, 114 S.Ct. 2048, 2054, 129 L.Ed.2d 67 (1994) ( § 1821(d)(2)(A)(i) places [the federal agency] in the shoes of the insolvent S & L.). If we adopted the RTC's argument in this case, we would effectively allow the agency to succeed to an interest greater than that held by the failed institution. Section 1821(d)(2)(A)(i), however, provides that the agency succeeds to only the assets of the institution. In other words, section 1821(d)(2)(G)(i)(II), consistent with section 1821(d)(2)(A)(i), does not permit the RTC to increase the value of the asset in its hands by simply preempting out of existence pre-receivership contractual obligations. 22 This construction of the statute accords with Congress's general directive to the RTC that it carry out its duties in a manner that minimizes the impact ... on local real estate and financial markets. 12 U.S.C. § 1441a(b)(3)(C)(ii) (1994). Ensuring that the RTC is bound by pre-receivership contracts promotes stability and security of contract. 23 Finally, and perhaps most importantly, this construction of the statute is compelled by the canon of statutory construction that statutes should be construed to avoid a possible unconstitutional result, United States v. Rumely, 345 U.S. 41, 45, 73 S.Ct. 543, 545, 97 L.Ed. 770 (1953) ( 'It is our duty in the interpretation of federal statutes to reach a conclusion which will avoid serious doubt of their constitutionality.'  (quoting Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 346, 48 S.Ct. 194, 198, 72 L.Ed. 303 (1928))). 24 In response to a question at oral argument, counsel for the RTC argued that, according to the agency's reading of section 1821(d)(2)(G)(i)(II), even an easement that existed prior to receivership would be preempted out of existence without any compensation to the holder, because such an interest impairs the government's ability to transfer the asset. This position is quite astonishing. To read the statute, as the RTC suggests, to permit a federal agency acting as conservator or receiver to sell assets in disregard of all pre-receivership rights, raises significant constitutional questions under the takings clause. 25 The takings clause prohibits the taking of private property ... for public use, without just compensation. U.S. CONST. amend. V. The Court has recognized that property includes, the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it. United States v. General Motors Corp., 323 U.S. 373, 378, 65 S.Ct. 357, 359, 89 L.Ed. 311 (1945). Whether an option to purchase land, [323 U.S.App.D.C. 88] like that at issue in this case, constitutes such a protected right is an open question, depending on state law. See, e.g., Pro-Eco, Inc. v. Board of Comm'rs of Jay County, IN, 57 F.3d 505, 509 (7th Cir.) (While California recognizes a compensable property right in unexercised options to purchase real estate, Indiana does not.), cert. denied, --- U.S. ----, 116 S.Ct. 672, 133 L.Ed.2d 522 (1995). It is certainly clear, however, that other interests that limit alienability--like an easement--almost invariably will constitute compensable property interests. See 26 AM.JUR. Eminent Domain 2d § 283 at 697 (1996). Such property interests cannot be regulated out of existence without compensation under the takings clause. We need not decide the constitutional status of an option, however, for our reading of the statute avoids this question. 26 While we find that the RTC should have repudiated the purchase option contract and note that damages are available for repudiated contracts, it is not at all clear to us that Waterview, in fact, has sustained any compensable damages. 4 Accordingly, we remand to the District Court the question whether Waterview is owed damages.