Court Opinion

ID: 160589
Source: CourtListenerOpinion
Date Created: 2010-08-14 06:47:42+00
Date Added: 2024-06-11T17:24:35.261410
License: Public Domain

236 F.3d 1246 (10th Cir. 2001)
In re OVERLAND PARK  FINANCIAL CORPORATION, Debtor,OFFICE OF THRIFT SUPERVISION,  Appellee and Cross-Appellant,v.OVERLAND PARK FINANCIAL  CORPORATION,  Appellant and Cross-Appellee.
Nos. 99-3176 &  99-3177
UNITED STATES COURT OF APPEALS TENTH CIRCUIT
January 05, 2001

Appeal from the United States District Court for the District of Kansas (D.C. No. 98-CV-2061 )[Copyrighted Material Omitted]
Benjamin F. Mann (Kathryn B. Bussing with him on the briefs) of Blackwell  Sanders Peper Martin LLP, Kansas City, Missouri, for Appellant and Cross-Appellee.
Martin Jefferson Davis (Carolyn J. Buck, Thomas J. Segal, Elizabeth R. Moore,  and Richard L. Rennert with him on the briefs), Office of Thrift Supervision,  Washington, D.C., for Appellee and Cross-Appellant.
Before BRORBY, POLITZ,* and BRISCOE, Circuit Judges.
BRORBY, Circuit Judge.

1
Before us is Overland Park Financial Corporation's appeal, and  the Office  of Thrift Supervision's cross-appeal, from a district court order that reversed the  bankruptcy court's holding.  These cases raises the issue, as a matter of first  impression, of this circuit's interpretation of 11 U.S.C. §365(o).

BACKGROUND

2
The facts of this case are well documented and not in dispute.  SeeOffice  of Thrift Supervision v. Overland Park Fin. Corp. (In re Overland Park Fin.  Corp.), 232 B.R. 215, 216-18 (D. Kan. 1999).  In 1978, Overland Park Financial  Corporation ("Overland Financial") incorporated for the purpose of acquiring  Overland Park Savings & Loan Corporation ("Overland Savings & Loan").  In  1979, Overland Financial applied to the Federal Savings and Loan Insurance  Corporation for approval of the acquisition.2  The Federal Home Loan Bank  Board, acting as the operating head of the Federal Savings & Loan Insurance  Corporation, conditionally approved the acquisition.

3
To satisfy one of the conditions, Overland Financial stipulated in writing  to the Federal Savings & Loan Insurance Corporation that Overland Financial  would maintain the net worth of Overland Savings & Loan, and, if necessary,  infuse sufficient additional capital.  Overland Financial's stipulation provided:

4
Overland Park Financial Corporation, a Missouri corporation,  hereby stipulates to the Federal Savings and Loan Insurance  Corporation (the "Corporation") that it will cause the net worth of  Overland Park Savings and Loan Association, Overland Park,  Kansas, to be maintained at a level consistent with that required by  Section 563.13(b) of the Rules and Regulations for Insurance of  Accounts, as now or hereafter in effect, and where necessary, that it  will infuse sufficient additional equity capital to effect compliance  with such requirement in a form satisfactory to the Corporation.

5
The stipulation was signed by Overland Financial's president.  Overland  Financial then acquired Overland Savings & Loan.

6
In June 1990, the Office of Thrift Supervision3 ("Thrift Supervision")  advised Overland Savings & Loan it would fail to meet its minimum capital  requirements.  In turn, Overland Savings & Loan requested Overland Financial to  make a capital contribution pursuant to the stipulation.  Overland Financial  refused to infuse capital at that time, but left open the possibility of future  contribution.  No such capital infusion has been made to date.

7
In November 1992, Thrift Supervision appointed Resolution Trust  Corporation as receiver for Overland Savings & Loan.4 At the time of  receivership, Overland Savings & Loan reported a risk-based deficiency of  $4,073,000.  Overland Financial manages the property and affairs of the  bankruptcy estate as debtor-in-possession.  See 11 U.S.C. § 1107  (stating a  debtor-in-possession, subject to certain limitations or exceptions, has the rights,  powers, and duties of a trustee serving under Chapter 11).

PROCEDURAL HISTORY

8
In July 1994, twenty months after Thrift Supervision placed Overland  Savings & Loan into receivership, Overland Financial filed a Chapter 11  bankruptcy petition.  In response to Overland Financial's bankruptcy petition,  Thrift Supervision filed an unsecured priority proof of claim, alleging Overland  Financial breached its capital maintenance commitment, and asserting its rights  under 11 U.S.C. § 365(o) (1994) or 11 U.S.C. § 507(a)(8).5 Thrift Supervision  sought $4,073,000, the amount Overland Savings & Loan reported as its risk-based capital  deficiency on the date of receivership, in its proof of claim. Overland Financial filed an objection to Thrift Supervision's proof of claim, and  filed a proposed Plan of Reorganization.  The Plan of Reorganization proposed a  liquidation of the estate, with its assets to be distributed among the allowed  claims.  Subsequently, Thrift Supervision filed a motion for immediate cure and  for dismissal of the case under 11 U.S.C. §§ 365(o) and  1112(b)(2).

9
In December 1995, a Partial Pretrial Order was filed which consolidated  Thrift Supervision's proof of claim with its motion for immediate cure under 11  U.S.C. § 365(o).  The order set forth Overland Financial's defenses to Thrift  Supervision's motion for immediate cure.6

10
The bankruptcy court denied Thrift Supervision's motion for immediate  cure.  In re Overland Park Fin. Corp., 217 B.R. 879, 890-91 (Bankr. D. Kan.  1998).  The court held Overland Financial's informal capital maintenance  stipulation was not an enforceable executory contract, and therefore not subject  to 11 U.S.C. § 365(o).  Id. at 886, 890.  As a result of its holding, the  bankruptcy  court ruled on only the first of Overland Financial's defenses without further  considering the remaining defenses.  Thrift Supervision appealed to the district  court.

11
The district court reversed the bankruptcy court.7 In re Overland Park Fin.  Corp., 232 B.R. at 229.  The district court held Overland Financial's net worth  stipulation was a capital maintenance commitment subject to 11 U.S.C. § 365(o),  and ordered Overland Financial to cure the deficit immediately.  Id. at 229. Therefore, the district court reasoned all issues relating to Thrift Supervision's  proof of claim were moot.  Id. at 228.  In a footnote, the district court raised the  specter Thrift Supervision may lack standing to pursue its proof of claim.  Id. at  228 n.23.  The court reasoned Thrift Supervision was not the agency with which  Overland Financial entered into the agreement.  The district court suggested the  right properly belonged to Resolution Trust Corporation (now Federal Deposit  Insurance Corporation) as the "conservator" of Overland Savings & Loan.  The  district court remanded to the bankruptcy court for further proceedings consistent  with its opinion.  Id. at 229.  Both parties appealed.

12
Overland Financial raises two issues on appeal:  first, whether the net  worth maintenance stipulation is a capital maintenance commitment subject to 11  U.S.C. §365(o), and second, whether Overland Financial is obligated to  immediately cure the capital deficit.  Thrift Supervision, in its cross-appeal,  requests this court to order Overland Financial to effect the maximum cure  possible, using all the bankruptcy estate assets.  In addition, Thrift Supervision  argues it has standing to assert and enforce its proof of claim, and the district  court erred in holding Thrift Supervision's proof of claim moot.

JURISDICTION

13
We have jurisdiction over this matter, pursuant to 28 U.S.C.  §158(d), as a  final, appealable order from the district court.  "[A] decision of the district court  on appeal from a bankruptcy judge's final order is not itself final if the decision  remands the case to the bankruptcy judge for significant further proceedings." Homa Ltd. v. Stone (In re Commercial Contractors, Inc.), 771 F.2d 1373, 1375  (10th Cir. 1985) (quotation marks and citation omitted).

14
The district court reversed the bankruptcy court, and remanded the case for  further proceedings consistent with its opinion.  In this case, the district court's  decision is final, despite the remand to the bankruptcy court, because the district  court left the bankruptcy court with no "significant further proceedings" to  conduct.  Id. at 1373.  We have recognized the district court's order of remand is  not final when the bankruptcy court is required to perform "more than a mere  ministerial duty" or it involves the "exercise of considerable judicial discretion.'" State Bank of Spring Hill v. Bucyrus Grain Co. (In re Bucyrus Grain Co.), 905 F.2d 1362, 1366 (10th Cir. 1990) (quotation marks and citations omitted).  As  both parties agree, the bankruptcy court's only task on remand was to order  Overland Financial to immediately cure the deficit under its capital maintenance  stipulation without considering Overland Financial's defenses.

DISCUSSION
11 U.S.C. § 365(o)

15
At the core of this case is the interpretation to be given to 11 U.S.C.  §365(o).  The section provides, in relevant part:

16
In a case under chapter 11 ..., the trustee shall be deemed to have  assumed, ... and shall immediately cure any deficit under, any  commitment by the debtor to the Federal Deposit Insurance  Corporation, the Resolution Trust Corporation, the Director of the  Office of Thrift Supervision ... or its predecessors ... to maintain the  capital of an insured depository institution, and any claim for a  subsequent breach of the obligations thereunder shall be entitled to  priority under section 507.  This subsection shall not extend any  commitment that would otherwise be terminated by any act of such  an agency.

17
Notably, Congress intended 11 U.S.C. §365(o) "'to prevent institution-affiliated  parties from using bankruptcy to evade commitments to maintain capital reserve  requirements of a Federally insured depository institution.'"  Resolution Trust  Corp. v. Firstcorp, Inc. (In re Firstcorp, Inc.), 973 F.2d 243, 246 (4th Cir. 1992)  (quoting H.R.Rep. No. 681(I), 101st Cong., 2d Sess. 179 (1990), reprinted in  1990 U.S.C.C.A.N. 6472, 6585).

18
Our review of the district court's interpretation of 11 U.S.C. §365(o) is de  novo.  Rushton v. State Bank of S. Utah (In re Gledhill), 164 F.3d 1338, 1340  (10th Cir. 1999).  When reviewing an issue that is a question of law, the standard  of review on appeal is the same as that applied initially by the trial court.  Id.  We  will not give deference to the district court's opinion.  Id.

A.  "Commitment" to maintain capital

19
In any case of statutory construction, the starting point of our analysis must  begin with the language of the statute itself.  Chickasaw Nation v. United States,  208 F.3d 871, 876 (10th Cir. 2000), petition for cert. filed, 69 U.S.L.W. 3269  (No. 00-507) (Oct. 3, 2000).  When interpreting statutory language, this court  "must look to the particular statutory language at issue, as well as the language  and design of the statute as a whole."  True Oil Co. v. Commissioner of Internal  Revenue, 170 F.3d 1294, 1299 (10th Cir. 1999) (quotation marks and citation  omitted).  The meaning of the words in the statute "must be construed in their  ordinary, everyday sense."  Chickasaw, 208 F.3d at 876 (quotation marks and  citation omitted).  With this framework of statutory construction in mind, we  must resolve whether Overland Financial's net worth maintenance stipulation  constitutes a capital maintenance "commitment" pursuant to 11 U.S.C. §365(o). We think it does.

20
The crux of Overland Financial's argument and the bankruptcy court's  decision is a "commitment" to maintain capital, under 11 U.S.C. §365(o), must  take the form of an enforceable contract.  Overland Financial argues, and the  bankruptcy court agreed, the stipulation is informal and unenforceable because it  pre-dates the 1984 regulation8 requiring "formal net worth agreements," lacks  consideration, and is "open-ended."  Overland Park, 217 B.R. at 884-85. According to Overland Financial, the pre-1984 stipulations were "merely  acknowledgement [sic] by the holding company of the regulatory requirement  that the savings association's capital must be maintained at a minimum level in  order for the holding company to continue its operation of the savings  association."  We disagree with Overland Financial's strained reading of the  statute and its attempt to re-characterize the stipulation as a "mere  acknowledgment."9

21
The plain language of 11 U.S.C. §365(o) reads "any commitment by the  debtor ... to maintain the capital ...."  Based on our reading of this particular  statutory language, in the context of the statute as a whole, it is apparent that  nowhere in 11 U.S.C. § 365(o) does Congress mention the commitment must be  contractual, executory, formal, or post-1984.  Congress undisputedly knew how  to include "executory" or other limiting language, but Congress did not do so in  § 365(o).  Compare 11 U.S.C. § 365(a)-(n) with 11 U.S.C. § 365(o).  Based on  the plain language, we refuse to import Overland Financial's constrictive  requirements into the statute's express language.  It is well recognized by this  circuit that in drafting legislation, we assume Congress says what it means. Sundance Assoc., Inc. v. Reno, 139 F.3d 804, 808 (10th Cir. 1998).  In 11 U.S.C.  § 365(o), Congress clearly said "any commitment."

22
"When Congress does not define a word, its common and ordinary usage  may be obtained by reference to a dictionary."  True Oil, 170 F.3d at 1299  (quotation marks and citation omitted).  The common definition of "commitment"  is an "'[a]greement or pledge to do something.'"  Firstcorp, 973 F.3d at 249 n.5  (quoting Black's Law Dictionary 248 (5th ed. 1979)).  The facts of this case  show Overland Financial's stipulation is well within the boundaries of this  definition, and unequivocally constitutes a "commitment."  First, the language  employed in the stipulation is mandatory and evinces Overland Financial's  understanding it is obligated to maintain, and if necessary infuse, capital in order  to ensure Overland Financial's compliance with federal regulatory code. Overland Financial even admits it understood, at the time of the signing, the  stipulation was an integral condition precedent to the Federal Home Loan Bank  Board's approval of the acquisition.  In other words, Overland Financial could  not have acquired Overland Savings & Loan without the stipulation, and the  President of Overland Financial personally signed the stipulation.  Thereafter,  Overland Financial had the privilege of operating Overland Savings & Loan from  1979 to 1992.  In reviewing this aggregated evidence, we hold Overland  Financial provided, in its stipulation, a unilateral pledge to maintain Overland  Savings & Loan's capital.  Therefore, Overland Financial's stipulation is a  binding commitment.  We see no reason why Overland Financial should not be  held to its commitment absent a defense.

B.  Assumption of cure

23
Our second issue of statutory interpretation requires us to determine the  time in which Overland Financial's duty to assume the cure matures and attaches. Again, we find Firstcorp well-reasoned and persuasive.  In Firstcorp, the  acquisition of a savings and loan was conditioned on the holding company's  maintenance of capital at or above a specified level. 973 F.2d at 244.  The  holding company ultimately refused to infuse capital to cure the savings and loan  subsidiary's capital deficiency.  Id. at 245.  Thrift Supervision served the holding  company with a notice of charges and hearing and with a temporary order to  cease and desist.  Id.  Shortly after the agency's action, the holding company  filed a Chapter 11 bankruptcy petition.  Id.  Two days after filing for bankruptcy,  Thrift Supervision appointed Resolution Trust Corporation as receiver for the  savings and loan.  Id.  The Fourth Circuit held:

24
[A]ssumption and cure under § 365(o) are prerequisites to obtaining  Chapter 11 protection.  If a debtor cannot "immediately" cure a  deficit under a capital maintenance commitment that exists at the  time of a bankruptcy filing, then § 365(o) requires that debtor to  proceed not under Chapter 11 but under Chapter 7, to which  § 365(o) does not apply.

25
Id. at 247.  Consistent with the Fourth Circuit, we hold before a debtor may  proceed with Chapter 11, and acquire Chapter 11 protection, the debtor's  commitment to assume and cure its capital deficit must be satisfied.

OVERLAND FINANCIAL'S DEFENSES

26
Despite the five years of litigation in this case, Overland Financial has  not  had the opportunity to be heard by a court on each of its defenses.  As we  previously stated, the bankruptcy court ruled in favor of Overland Financial,  thereby obviating the need to consider further defenses.  Subsequently, the  district court declined to address the remaining defenses because the bankruptcy  court did not address the defenses in the first instance.  On appeal, Thrift  Supervision believes Overland Financial's remaining defenses should be resolved  simply because Thrift Supervision briefed the defenses.  However, as a general  rule, we do not consider issues not passed upon below.  R. Eric Peterson Constr.  Co. v. Quintek, Inc. (In re R. Eric Peterson Constr. Co.), 951 F.2d 1175, 1182  (10th Cir. 1991).  We hold the bankruptcy court is the appropriate initial forum to  hear and address Overland Financial's remaining defenses not addressed in this  opinon.  Based on our resolution at this time, we decline Thrift Supervision's  invitation to fashion an immediate cure remedy using all the bankruptcy estate  assets.

STANDING

27
We must determine whether Thrift Supervision has standing to pursue  its  unsecured priority claim, filed pursuant to 11 U.S.C. § 365(o) or  § 507(a)(9). "We review de novo issues such as standing that are prerequisites to this court's  jurisdiction."  Kansas Health Care Ass'n, Inc. v. Kansas Dep't of Soc. & Rehab.  Servs., 958 F.2d 1018, 1021 (10th Cir.1992).

28
In order to understand Thrift Supervision's standing to pursue its capital  maintenance claim, it is necessary to reiterate briefly its statutory authority.  In  FIRREA, Congress vested Thrift Supervision with broad federal regulatory and  enforcement authority over savings and loans.  See Franklin Sav. Ass'n v.  Director, Office of Thrift Supervision, 934 F.2d 1127, 1136 (10th Cir. 1991), cert. denied, 503 U.S. 937 (1992).  In particular, the Director of Thrift  Supervision "shall provide for the examination, safe and sound operation, and  regulation of savings associations."  12 U.S.C. §§ 1462(1), 1463(a)(1). Congress  vested Thrift Supervision with the powers formerly charged to the Federal Home  Loan Bank Board, and provided Thrift Supervision with the Federal Savings &  Loan Insurance Corporation's enforcement powers.  See 12 U.S.C.  §§ 1462a(e), 1818(b).  Thus, Thrift Supervision  succeeded the two prior  agencies, and became the new bank regulatory agency responsible for the  supervision and oversight of all thrift institutions.  12 U.S.C. §§ 1462a(e),  1463(a)(1).

29
Based on Thrift Supervision's statutory succession to the two agencies  involved with the stipulation, we hold Thrift Supervision is entitled, if not  obligated, to pursue its capital maintenance claim.10  It seems only logical an  agency endowed with regulatory and enforcement power to ensure the safety,  soundness and compliance of the thrift industry would be rendered virtually  impotent without its ability to pursue and, perhaps, rectify a thrift's capital  deficit.  See generally Cohen v. De La Cruz, 523 U.S. 213, 218 (1998)  (explaining "debt" is a "liability on a claim"; "claim" is defined as a "right to  payment"; and a "right to payment ... is nothing more nor less than an enforceable  obligation.") (quotation marks and citation omitted).

MOOTNESS

30
The district court concluded at the end of its opinion that Overland  Financial's duty to immediately cure renders Thrift Supervision's proof of claim  moot.  In re Overland Park Fin. Corp., 232 B.R. at 228.  We review the issue of  mootness de novo.  Boullioun Aircraft Holding Co. v. Smith Mgmt. (In re  Western  Pac. Airlines, Inc.), 181 F.3d 1191, 1194 (10th Cir. 1999) (quoting Anderson v.  United States Dep't of Health & Human Serv., 3 F.3d 1383, 1384 (10th Cir.  1993)).  In general, "a federal court cannot give opinions absent a live case or  controversy before it."  In re Western Pac., 181 F.3d at 1194 (citing Mills v.  Green, 159 U.S. 651, 653 (1895)).  A case is moot when it is "impossible for the  court to grant 'any effectual relief whatever' to a prevailing party."  Church of  Scientology v. United States, 506 U.S. 9, 12 (1992) (quoting Mills, 159 U.S.  at  653).  A live controversy continues to exist in this case because, as we have  already discussed, the bankruptcy court must consider Overland Financial's  remaining defenses, and until such time as cure is rendered, if at all, Thrift  Supervision's proof of claim is not moot.

31
Accordingly, we hold Thrift Supervision has standing to enforce its proof  of claim, we AFFIRM the district court's holding the stipulation is a binding  commitment subject to 11 U.S.C. § 365(o) cure, REVERSE the  district court's  mootness determination, and REMAND to the district court with instructions  to  remand to the bankruptcy court to further consider Overland Financial's defenses  not addressed in this opinion.

Notes:

*
 The Honorable Henry Politz, United States  Circuit Judge for the Fifth  Circuit, sitting by designation.

2
 The Federal Savings & Loan  Insurance Corporation's approval was  required because it insured Overland Savings & Loan's deposits at that time.

3
 The Financial Institutions Reform,  Recovery, and Enforcement Act of  1989 ("FIRREA") abolished the Federal Home Loan Bank Board, and transferred  to Thrift Supervision and its Director the role of primary federal regulator of  federally insured savings associations.  See 12 U.S.C. § 1462a(e). Congress also  transferred the Federal Savings & Loan Insurance Corporation's enforcement  powers to Thrift Supervision.  See 12 U.S.C.  § 1818(b).  Title 12 U.S.C.  § 1464(s)(1)(B) mandates the Director of Thrift Supervision to require all savings  and loans to achieve and maintain adequate capital by "using such other methods  as the Director determines to be appropriate."

4
 Congress established Resolution Trust  Corporation, a federally chartered  corporation, to act as conservator or receiver for federally insured thrifts that  failed between 1989 and 1995.  12 U.S.C. § 1441a(b)(1),(3).  After the  Resolution Trust Corporation terminated at the end of 1995, the Federal Deposit  Insurance Corporation assumed the role of conservator or receiver in Resolution  Trust Corporation's remaining cases.  12 U.S.C. § 1441a(m)(1).

5
 Thrift Supervision's proof of claim was filed  pursuant to 11 U.S.C.  § 507(a)(8), now amended as 11 U.S.C. § 507(a)(9).  We will refer to  the current  11 U.S.C. § 507(a)(9) provision.

6
 Overland Financial's defenses, articulated in  the bankruptcy proceedings  and in appellant's brief, are:  (1) the stipulation is not an enforceable contract;  (2) the stipulation terminated when Overland Savings & Loan was seized by  Thrift Supervision; (3) Thrift Supervision cannot maintain a private right of  action for damages to enforce a regulatory requirement; (4) Section 365(o) does  not apply in a Chapter 11 liquidation.  Overland Financial raises the additional  defenses of estoppel and unclean hands due to Thrift Supervision's lack of good  faith in dealing with Overland Financial's efforts to recapitalize Overland  Savings & Loan and because its arbitrary change of allowed accounting practices  contributed to the existence of a capital deficiency.

7
 The district court limited the issue on appeal  to Thrift Supervision's 11  U.S.C. § 365(o) claim, and struck Overland Financial's attempt to raise  additional issues on appeal due to its failure to file a cross-appeal.  The district  court also declined to consider Overland Financial's defenses because the  bankruptcy court did not reach those issues.

8
 In 1984, the Federal Home Loan Bank  Board promulgated a final rule  requiring an individual or group of individuals, applying for a de novo savings  and loan institution, to sign an agreement personally guaranteeing the net worth  maintenance of the savings and loan.  49 Fed. Reg. 41237 (Oct. 22, 1984). Overland Financial draws a line between pre- and post-1984 stipulations.  Overland Financial argues pre-1984 stipulations are informal and unenforceable,  but in contrast, post-1984 stipulations are "formal" net worth maintenance  agreements "which look[] like real contracts or agreements."  Overland Financial  asserts its "informal stipulation" pre-dates 1984.

9
 Overland Financial candidly acknowledges  courts will reject an  interpretation of a statute that produces an absurd result.  See United States v.  Brown, 333 U.S. 18, 27 (1948) (statutory interpretation should not lead to  "patently absurd consequences").

10
 Neither Resolution Trust Corporation  nor Federal Deposit Insurance  Corporation is a party to this litigation.  We therefore will not address their  standing, as Overland Savings & Loan's receiver, to pursue a proof of claim.