Court Opinion

ID: 4635925
Source: CourtListenerOpinion
Date Created: 2020-11-24 21:48:43.231828+00
Date Added: 2024-06-11T07:58:27.405387
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 19-1845

                FEDERAL DEPOSIT INSURANCE CORPORATION,
                      as Receiver for Doral Bank,

                         Plaintiff, Appellant,

                                  v.

                      CONSTRUCTORA JAPIMEL, INC.,

                         Defendant, Appellee,

              MAPFRE PRAICO INSURANCE CO. OF PUERTO RICO,
              Defendant, Third-Party Plaintiff, Appellee,

                                  and

 ECHANDI GUZMAN & ASSOCS., INC., Echandi, Inc.; EFRAIN ECHANDI-
                    OTERO; ACE INSURANCE CO.,
                  Third-Party Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

       [Hon. Carmen Consuelo Cerezo, U.S. District Judge]

                                Before

                       Lynch, Selya, and Lipez,
                            Circuit Judges.

     Duncan N. Stevens, with whom Colleen J. Boles and J. Scott
Watson were on brief, for appellant.
     Manuel Sosa, with whom Ian P. Carvajal and Saldaña, Carvajal
& Vélez-Rivé, P.S.C. were on brief, for appellee Constructora
Japimel, Inc.

                      November 24, 2020
                  LYNCH, Circuit Judge.               The Federal Deposit Insurance

Corporation ("FDIC") appeals from a March 2019 order remanding

this removed case to Puerto Rico's Court of First Instance.                                    We

hold that the district court erred when, contrary to the text of

12 U.S.C. § 1819(b)(2)(B), it remanded to the local Puerto Rico

court       a     suit    asserting       claims     by    Constructora         Japimel,      Inc.

("Japimel") against Doral Bank ("Doral"), a failed bank, after the

FDIC        had    become          Doral's   receiver,       had       filed    a    notice     of

substitution in state court to become a party to the suit, and had

timely removed the suit to federal court.

                              I.    Facts and Procedural History

                  On February 14, 2007, Pórtico del Sol, Inc. ("Pórtico")

contracted with Japimel to build a housing project in Carolina,

Puerto          Rico.          Mapfre      Praico     Insurance         Company      ("Mapfre")

guaranteed Japimel's performance.                         Pórtico financed the project

through Doral.             The project was never finished.

                  In October 2009, Doral1 sued Japimel and Mapfre in Puerto

Rico's       Court       of     First     Instance    alleging         breach   of    contract.

Japimel counterclaimed, alleging that Doral breached the contract,

acted in bad faith, and violated Article 1802 of the Puerto Rico

Civil       Code,        P.R.      Laws    Ann.    tit.    31,     §    5141.        It   sought

        1 Through contracts entered into in March 2007 and May
2009, Pórtico assigned Doral its rights and obligations related to
the project.

                                                  - 3 -
$6,317,865.67 in damages plus costs and attorneys' fees.                       Mapfre

also       counterclaimed        for     breach      of   contract      and    sought

$4,317,865.67 in damages plus costs and attorneys' fees.                          The

contract contained an arbitration clause.                    In February 2012, the

Court of First Instance stayed the case pending arbitration.

              Three years later, on February 27, 2015, Puerto Rico's

Office of the Commissioner of Financial Institutions determined

that Doral had failed and appointed the FDIC as Doral's receiver.

In March 2015, the FDIC sold Doral's Pórtico loan to Bautista REP

PR Corp. ("Bautista").           Japimel sent a Proof of Claim to the FDIC

on June 4, 2015, describing Japimel's claim against Doral.                        The

FDIC disallowed this claim on December 2, 2015.                    It told Japimel

that Doral's obligation had been assumed by Bautista.                         It also

told Japimel that if it did not agree with the disallowance of its

claim, it could dispute the disallowance pursuant to 12 U.S.C.

§ 1821(d)(6).

              Meanwhile,     on        June   15,    2015,    Bautista    moved    to

substitute      itself     for     Doral      in    the   arbitration    proceeding

involving Doral, Japimel, and Mapfre. Japimel opposed this motion.

The arbitration panel did not substitute Bautista for Doral.2

       2  The arbitrators could not decide whether substitution
was appropriate. They stated that, without more information, they
did not know if Bautista's purchase of Doral's loan to Pórtico
also included Pórtico's contractual claims against Japimel. They
demanded that Bautista provide details of its transaction with the
FDIC.    Instead of complying, Bautista filed a motion for

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              Bautista also moved to substitute itself for Doral in

the Court of First Instance on June 23, 2015. The court determined

that it lacked jurisdiction to substitute Bautista for Doral

because of the pending arbitration.            Doral remained a party to the

suit.

              On   February   22,    2018,    the   FDIC   filed   a   notice   of

substitution to substitute itself for Doral in Doral's action

against Japimel and Mapfre in the Court of First Instance.3                     The

next day, it removed the case to the U.S. District Court for the

District of Puerto Rico under 12 U.S.C. § 1819(b)(2)(B) and 28

U.S.C. § 1442(a)(1).

              On March 16, 2018, Japimel moved to remand the case to

the Court of First Instance.              The FDIC opposed Japimel's motion

and moved to dismiss all of Japimel's claims against it.

              The district court granted Japimel's remand motion and

denied      the    FDIC's   motion   to    dismiss    as   moot.       The   court

acknowledged that the plain language of § 1819(b)(2)(B) says that

reconsideration. It later sought injunctive relief from the Court
of First Instance to stay the arbitration panel's discovery
request, but the court refused to consider Bautista's motion
because Bautista was not a party to Doral's suit against Japimel
and Mapfre.
        3 At oral argument, the FDIC explained that it waited to
substitute itself for Doral and remove the case because it
originally expected Bautista and Japimel to work out the terms of
Bautista's substitution for Doral on their own. It took action
only after Bautista and Japimel had reached an impasse.

                                      - 5 -
the FDIC has the right to remove a case to federal court if the

FDIC is a party to it.         It also acknowledged that other courts

have held that whether a state court has approved the FDIC's

substitution    is    irrelevant     to   removal    under   §   1819(b)(2)(B)

because a state court is "statutorily 'compelled' to grant [the]

FDIC's substitution request."

             Nonetheless, the district court granted the motion to

remand over the objection of the FDIC.              As for its reasons, the

court said that the plain language of § 1819(b)(2)(B) and the

precedent     the    FDIC   cited   "presuppose[]     that   the   underlying

substitution    request     triggering    the   FDIC’s   removal    right   was

appropriate."       It held that the FDIC "has no standing to remove in

2018 a case that involves [a loan] . . . it had already sold to

Bautista."    It remanded the case to the Court of First Instance on

March 22, 2019. The FDIC filed a motion for reconsideration, which

the district court denied.

             The FDIC timely appealed the remand order4 and the denial

of its motion to dismiss.

                             II.    Legal Analysis

             Our review of the district court's remand order, which

turned on the interpretation of a statute, is plenary.              See Fayard

     4    While remand orders are generally not reviewable, see 28
U.S.C. § 1447(c), 12 U.S.C. § 1819(b)(2)(C) allows the FDIC to
"appeal any order of remand entered by any United States district
court."

                                      - 6 -
v. Ne. Vehicle Servs., LLC, 533 F.3d 42, 45 (1st Cir. 2008);

F.D.I.C. v. Keating, 12 F.3d 314, 316 (1st Cir. 1993).

          The   FDIC    argues    that     the   district   court    erred   by

remanding the case to the Court of First Instance.                It says that

the FDIC is a party to the case and that the text of § 1819(b)(2)(B)

forbids the district court from remanding to state court a case

the FDIC has removed.     Japimel argues that the FDIC, having sold

Doral's loan and associated liabilities to Bautista, is not a real

party in interest and had no right to remove the case to federal

court under § 1819(b)(2)(B).

          The text of 12 U.S.C. § 1819(b)(2)(B) says:

          [T]he Corporation may, without bond or
          security,   remove    any   action,   suit,  or
          proceeding from a State court to the
          appropriate United States district court
          before the end of the 90-day period beginning
          on the date the action, suit, or proceeding is
          filed   against    the    Corporation   or  the
          Corporation is substituted as a party.

          The statute defines "state" to include Puerto Rico.                12

U.S.C. § 1813(a)(3).     There is an exception to the FDIC's ability

to   remove   cases    under     certain    conditions,     see     12   U.S.C.

§ 1819(b)(2)(D), but they are not present here.             Japimel does not

argue that § 1819(b)(2)(D) applies.

          When interpreting a statute, "courts must presume that

a legislature says in a statute what it means and means in a

statute what it says."    Barnhart v. Sigmon Coal Co., 534 U.S. 438,

                                    - 7 -
461–62 (2002) (quoting Conn. Nat'l. Bank v. Germain, 503 U.S. 249,

253–54 (1992)).        When a statute's text is unambiguous, "judicial

inquiry is complete."         Id. at 462 (quoting Conn. Nat'l. Bank, 503

U.S.    at    254).     The    text   of    §   1819(b)(2)(B)   is   clear   and

unambiguous: When the FDIC is substituted as a party to a case in

state court, it can remove the case to federal court within ninety

days.   The failure of the district court to adhere to the text was

obvious error.        The statute does not permit it to act as it did.

              A district court has no discretion to remand a case

removed under § 1819(b)(2)(B) provided the statute's requirements

are satisfied.        Nothing in the statute's text permits the district

court to inquire into whether the FDIC should be a party to the

case or whether the FDIC's notice of substitution was appropriate

under the circumstances. The fact that the FDIC has become a party

to the case is sufficient for removal.               This court stated this

proposition clearly in 1992.               See F.D.I.C. v. Cabral, 989 F.2d

525,    526   (1st    Cir.    1992)   ("Section    1819(b)(2)(B)     authorizes

removal by the FDIC whenever it is a party."); see also Castleberry

v. Goldome Credit Corp., 408 F.3d 773, 784 (11th Cir. 2005) ("[T]he

plain language of § 1819 requires that the action be 'filed'; it

does not require that an action be properly filed."); Mizuna, Ltd.

v. Crossland Fed. Sav. Bank, 90 F.3d 650, 655 (2d Cir. 1996) ("12

U.S.C. § 1819(b)(2)(B) . . . provides for removal solely by virtue

of the fact that the FDIC is a party.").

                                      - 8 -
              The parties to the state court case immediately prior to

the FDIC's substitution of itself for Doral were Doral, Japimel,

and Mapfre.      The FDIC succeeded to "all rights, titles, powers,

and privileges" of Doral when it became Doral's receiver.                          12

U.S.C.      § 1821(d)(2)(A).       The    Court    of    First   Instance       never

substituted Bautista for Doral.           Doral was still a party when the

FDIC filed its notice of substitution in the Court of First

Instance on February 22, 2018.

              Contrary to Japimel's argument that the FDIC cannot be

a   party    because   it   sold   Doral's      loan    to   Bautista,    the     FDIC

immediately      became     a   party    when     it    filed    its     notice     of

substitution.      See F.D.I.C. v. N. Savannah Properties, LLC, 686

F.3d 1254, 1260 (11th Cir. 2012) ("[T]he FDIC is automatically

substituted for the failed institution as a matter of federal law

the moment that it files a notice of substitution in court.");

Allen v. F.D.I.C., 710 F.3d 978, 982 (9th Cir. 2013) ("Substitution

of the FDIC for a failed bank is essentially a ministerial matter

. . . . The FDIC is appointed receiver when a bank has failed and

the FDIC, upon substitution, immediately becomes the real party in

interest."). As a party, the FDIC could remove the case to federal

court under § 1819(b)(2)(B).         The district court erred by ignoring

§ 1819(b)(2)(B)'s clear language and remanding the case to the

Court of First Instance.

                                        - 9 -
                               III.

          Reversed.   We remand for further proceedings, including

the resolution of the FDIC's motion to dismiss.   Costs are awarded

to the FDIC.

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