Meritage Homes of Nevada, Inc. v. Federal Deposit Insurance , 753 F.3d 819 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MERITAGE HOMES OF NEVADA, INC., No. 12-15663
FKA MTH-Homes Nevada Inc.,
Plaintiff-Appellant, D.C. No.
2:09-cv-01950-
v. PMP-RJJ
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for First OPINION
National Bank of Nevada,
Successor-in-Interest to First
National Bank of Arizona; INCA
CAPITAL FUND 37 LLC,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, Senior District Judge, Presiding
Argued and Submitted
March 11, 2014—San Francisco, California
Filed April 15, 2014
Before: J. Clifford Wallace, M. Margaret McKeown,
and Ronald M. Gould, Circuit Judges.
Opinion by Judge Wallace
2 MERITAGE HOMES OF NEVADA V. FDIC
SUMMARY*
Satisfaction of Judgment
The panel affirmed the district court’s orders in an appeal
brought by Meritage Homes of Nevada, Inc. challenging the
denial of its motion to strike or in the alternative issue a
summons to certain third parties to the action, and denying
Meritage’s motion for reconsideration.
Meritage obtained a default judgment against the Federal
Deposit Insurance Corporation (“FDIC”), and the FDIC
provided Meritage with a receiver’s certificate in the amount
of the judgment. Meritage sought to have the district court
strike the FDIC’s satisfaction of judgment and instead direct
the FDIC to pay the judgment “in cash.” Alternatively,
Meritage requested that the district court issue a summons to
a pair of third parties to the action, Rescon and Stearns.
The panel held that the district court did not abuse its
discretion in ruling that the receiver’s certificate satisfied the
judgment against the FDIC. The panel also held that the
district court did not commit clear error in declining to issue
a summons to third parties Rescon and Stearns.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MERITAGE HOMES OF NEVADA V. FDIC 3
COUNSEL
Alexander Arpad (argued) and Christopher H. Byrd,
Fennemore Craig Jones Vargas, P.C., Las Vegas, Nevada, for
Petitioner-Appellant.
Joseph Brooks (argued), Kathryn R. Norcross, and Lawrence
H. Richmond, Federal Deposit Insurance Corporation,
Arlington, Virginia, for Defendant-Appellee.
OPINION
WALLACE, Senior Circuit Judge:
Appellant Meritage Homes of Nevada, Inc. (Meritage)
appeals from the district court’s judgment and challenges
orders denying its motion to strike or, in the alternative, issue
a summons to certain third parties to this action and denying
its motion for reconsideration. The crux of the dispute is
whether the district court abused its discretion when it
allowed the Federal Deposit Insurance Corporation (FDIC) to
satisfy a judgment against it with a receiver’s certificate
rather than with cash. The district court had jurisdiction
under 12 U.S.C. § 1819(b)(2) & 28 U.S.C. § 1331, we have
jurisdiction under 28 U.S.C. § 1291, and we affirm.
I.
This case began in 2009, when Meritage submitted an
administrative claim to the FDIC in its capacity as receiver
for the First National Bank of Nevada (First National). In its
administrative claim, Meritage asserted that it had provided
certain services to INCA Capital Fund 37, LLC (Inca)
4 MERITAGE HOMES OF NEVADA V. FDIC
pursuant to agreements that also involved First National’s
predecessor bank, which had “agreed to timely perform and
cure all unfulfilled obligations of Inca” under the agreements.
As a result of these agreements, Meritage stated that First
National was “justly indebted” to it.
The FDIC disallowed Meritage’s administrative claim. It
explained its decision by stating that the documentation for
the claim had not provided “proof of a guarantee or promise
to fulfill the obligations of the borrower.” In response,
Meritage filed this action in the District of Nevada. In its
complaint, Meritage brought various claims against both Inca
and the FDIC. In particular, Meritage alleged that it had been
“damaged by [First National’s] breach of the [agreements
discussed above]”; that the FDIC, “as receiver for [First
National],” was “liable for breach of the covenant of good
faith and fair dealing due to [First National’s] failure to
satisfy all obligations of Inca under [one of the agreements];
and that the FDIC had been “unjustly enriched by Meritage’s
valuable, uncompensated work” as a “result of non-payment
by [First National] . . . for which the FDIC is now liable.”
When neither the FDIC nor Inca responded to the
complaint, Meritage moved for default judgment, which the
district court granted. The judgment entered by the district
court stated that Meritage had performed on its agreements
with Inca and First National, and that payment to Meritage
had become due for this work “no later than June 28, 2008.”
The judgment went on to state that “[o]n or about July 25,
2008, the FDIC was appointed receiver of [First National],
thereby assuming all assets and liabilities of [First National],
including the obligation to pay Meritage for the breach of [the
agreements].” Accordingly, judgment was entered in favor
of Meritage and “against the FDIC and [Inca], jointly and
MERITAGE HOMES OF NEVADA V. FDIC 5
severally, in the principal amount of $436,357.12,” along
with interest. The judgment did not specify how it should be
satisfied.
Subsequently, the FDIC provided Meritage with a
receiver’s certificate in the amount of the judgment. The
FDIC also filed with the district court a Satisfaction of
Judgment, in which it stated that it had “satisfied” the
judgment entered against it by delivering a receiver’s
certificate to Meritage. In response, Meritage filed a motion
styled as a “Motion to Strike Satisfaction of Judgment,
Impose Cash Payment Liability, or, in the Alternative Issue
Summons for Joint Obligors” (Motion to Strike). In its
Motion to Strike, Meritage sought to have the district court
strike the FDIC’s Satisfaction of Judgment and instead direct
the FDIC to pay the judgment “in cash.” In the alternative,
Meritage requested that the district court issue a summons to
a pair of third parties to this action (Rescon and Stearns).
Meritage made this request on the basis of its assertion that
Rescon and Stearns were “joint obligors” on the judgment.
Thus, Meritage contended that it was “entitled to pursue its
remedies” against Rescon and Stearns “pursuant to the
execution provisions of the Nevada Revised Statutes,” and
requested that a summons be issued to Rescon and Stearns
accordingly.
The district court denied Meritage’s Motion to Strike and
found that the receiver’s certificate had “effectively
satisfie[d]” the judgment. Meritage then moved for
reconsideration, which the district court also denied. This
appeal followed.
6 MERITAGE HOMES OF NEVADA V. FDIC
II.
We begin our analysis by considering the appropriate
standards of review. The present appeal is from the district
court’s denial of Meritage’s motion for reconsideration,
which we would normally review for abuse of discretion. See
Shalit v. Coppe, 182 F.3d 1124, 1126–27 (9th Cir. 1999). In
that motion for reconsideration, Meritage sought to have the
district court reconsider its ruling on the Motion to Strike
discussed above. Our precedent does not make clear the
standard of review for a district court’s ruling on such a
motion. Moreover, the legal basis for the Motion to Strike is
unclear. The motion itself does not identify the legal
authority under which it was brought, and the district court
denied the motion in a terse order that offers no explanation
of its ruling.
Without reaching the abstract question of the standard of
review for any motion to strike the satisfaction of a judgment,
we conclude that the appropriate standard of review for the
district court’s ruling on the particular motion before us is
abuse of discretion. Regardless of how it was captioned, the
motion brought by Meritage was effectively a motion to
amend the judgment. We construe the motion in that light
because it sought to require the FDIC to satisfy the judgment
with cash rather than a receiver’s certificate, even though the
judgment itself did not state such a requirement. Because a
district court’s decision “regarding a motion to amend the
judgment” is reviewed for abuse of discretion, Barber v. State
of Hawai’i, 42 F.3d 1185, 1198 (9th Cir. 1994), we conclude
that the proper standard of review for the ruling on the
Motion to Strike in this case is abuse of discretion.
MERITAGE HOMES OF NEVADA V. FDIC 7
Meritage’s Motion to Strike in the alternative also
requested the district court to issue a summons to Rescon and
Stearns pursuant to “the execution provisions of the Nevada
Revised Statutes,” N.R.S. § 17.030. Again, our precedent
does not make clear the standard of review under which we
are to consider a district court’s ruling on such a request.
Indeed, in the Motion to Strike, Meritage acknowledged that
there “has been no case law interpreting” the relevant
provisions of the Nevada Revised Statutes.
In the absence of any such case law, we conclude that the
proper standard of review for the district court’s ruling here
is clear error. We reach this conclusion by analogizing to our
precedent dealing with summonses issued by the Internal
Revenue Service (IRS). See, e.g., United States v. Jose,
131 F.3d 1325, 1327–28 (9th Cir. 1997) (en banc) (discussing
generally the summons power of the IRS). The IRS is
“authorized by statute to inquire into tax liabilities” by
issuing summonses to third parties “in connection with a tax
liability investigation,” but must bring an action in district
court to enforce such a summons. United States v. Richey,
632 F.3d 559, 564 (9th Cir. 2011) (citation omitted).
Likewise, Meritage’s Motion to Strike was based on the
premise that Meritage was authorized by a statute—here,
section 17.030 of the Nevada Revised Statutes—to seek to
have a summons issued against third parties to this action. In
the IRS context, we “review the district court’s summons-
enforcement decisions for clear error.” Id. at 563 (citation
omitted). Thus, analogously, we hold that the district court’s
denial of Meritage’s request for a summons is to be reviewed
for clear error.
8 MERITAGE HOMES OF NEVADA V. FDIC
III.
Having established the standards of review, we turn to the
merits. We first consider whether the district court abused its
discretion by declining to strike the FDIC’s Satisfaction of
Judgment and instead finding that the receiver’s certificate
had satisfied the judgment against the FDIC. We then
consider whether the district court clearly erred when it
declined to issue a summons to Rescon and Stearns.
A.
As discussed above, we review the district court’s denial
of Meritage’s Motion to Strike for abuse of discretion. In
deciding whether the district court abused its discretion, we
“employ a two-part test.” Pimentel v. Dreyfus, 670 F.3d
1096, 1105 (9th Cir. 2012). First, we “determine de novo
whether the trial court identified the correct legal rule to
apply to the relief requested.” Id. (citation omitted). Second,
we determine whether the “district court’s application of the
correct legal standard was (1) illogical, (2) implausible, or
(3) without support in inferences that may be drawn from the
facts in the record.” Id. (citation omitted). “A decision based
on an erroneous legal standard or a clearly erroneous finding
of fact amounts to an abuse of discretion.” Id.
In this context, the “correct legal rule” is clear. We have
expressly held that “[t]here is no question that the FDIC may
pay creditors with receiver’s certificates instead of with
cash.” Battista v. FDIC, 195 F.3d 1113, 1116 (9th Cir. 1999).
As we explained in Battista, “[t]o require the FDIC to pay
certain creditors in cash would allow those creditors to ‘jump
the line,’ recovering more than their pro rata share of the
liquidated assets, if the financial institution’s debts exceed its
MERITAGE HOMES OF NEVADA V. FDIC 9
assets.” Id. We reached the same conclusion in Resolution
Trust Corp. v. Titan Financial Corp., the first case in which
we held that a receiver’s certificate may be used by the FDIC
“to pay creditors.” 36 F.3d 891, 892 (9th Cir. 1994). In
reaching that conclusion, we expressly “agree[d] with two
other courts which have addressed this issue.” Id. One of
those two cases was Midlantic National Bank/North v.
Federal Reserve Bank of New York, 814 F. Supp. 1195
(S.D.N.Y. 1993). In Midlantic, the court considered a
“money judgment” that had been entered in favor of the
plaintiff by another court. Id. at 1196. That plaintiff received
a receiver’s certificate from the FDIC for the “full amount of
the money judgment” rather than cash. Id. The court
concluded that the plaintiff was “not entitled to any relief
beyond” the receiver’s certificate it had received, and that to
conclude otherwise would be to “effectively circumvent the
statutory procedures established in order to allow equitable
distribution of an insolvent bank’s assets.” Id. at 1197. In
Resolution Trust, we endorsed the holding of Midlantic and
concluded that the plaintiff was entitled only to a receiver’s
certificate, and not “cash or its equivalent.” Resolution Trust,
36 F.3d at 892–93.
Battista and Resolution Trust hold that a party with a
“money judgment” against the FDIC is a creditor of the
FDIC, and thus is entitled only to a receiver’s certificate, and
not to cash. Accordingly, we hold that the district court did
not abuse its discretion when it ruled that the receiver’s
certificate provided to Meritage by the FDIC satisfied the
judgment in this case.
Meritage’s argument to the contrary is premised on our
decision in Sharpe v. FDIC, 126 F.3d 1147 (9th Cir. 1997).
However, Sharpe is not controlling. In Sharpe, we
10 MERITAGE HOMES OF NEVADA V. FDIC
considered an action that arose following a settlement
agreement between the plaintiffs and a bank. Id. at 1150.
Although the settlement agreement’s “express terms”
required the bank to make a payment to the plaintiffs via a
wire transfer of funds, in exchange for certain documents, the
bank instead provided two cashier’s checks after receiving the
documents. Id. at 1150–51. The same day, state regulators
seized the bank, and the FDIC was appointed as the bank’s
receiver. Id. at 1151. The FDIC “took possession of the
documents” delivered by the plaintiffs to the bank, but then
notified the plaintiffs that the cashier’s checks “would not be
honored.” Id. Instead, the FDIC instructed the plaintiffs to
file an administrative claim, which led to the FDIC giving the
plaintiffs a receiver’s certificate in partial satisfaction of their
claim. Id.
On appeal, we held that the plaintiffs were “not creditors
of the FDIC.” Id. at 1156. We explained that the plaintiffs
“cannot be considered creditors of the FDIC” because they
were “a party to a pre-receivership contract breached by the
FDIC.” Id. at 1157 (emphasis added). This distinction was
critical to our holding. As we stated, it was “only as a
consequence of the FDIC’s breach [of the pre-receivership
contract] that the FDIC [could attempt to] construe the
[plaintiffs] as creditors of the FDIC.” Id. at 1156. We
rejected that argument, explaining that if we were to “endorse
the FDIC’s assertion that the [plaintiffs were] creditors,” then
the “FDIC would be free to breach any pre-receivership
contract, keep the benefit of the bargain, and then escape the
consequences by hiding behind the [administrative] claims
process.” Id.
Thus, our holding in Sharpe was predicated on our
conclusion that the plaintiffs in that case were not creditors of
MERITAGE HOMES OF NEVADA V. FDIC 11
the FDIC. Instead, we stated that the plaintiffs had a pre-
receivership contract that had been breached by the FDIC in
its role as receiver. As we pointed out, the FDIC is not
allowed to breach contracts and then “hid[e] behind” its
administrative claims process. Id. That is, the FDIC may not
breach a contract and then compel the other party to the
contract to accept a receiver’s certificate, as the result of the
FDIC’s claims process, rather than the “benefit of the
bargain” provided for in the contract itself. Id.
Therefore, Sharpe does not control the outcome of this
case. That is because Meritage, unlike the plaintiffs in
Sharpe, is a creditor of the FDIC. Here, unlike in Sharpe, it
was First National, rather than the FDIC, that breached the
relevant agreements with Meritage. See supra at 4. Thus,
because the FDIC did not breach any pre-receivership
contract, Sharpe is inapposite.
We find further support for this view in our decision in
McCarthy v. FDIC, 348 F.3d 1075 (9th Cir. 2003). In
McCarthy, we explained that Sharpe “was an unusual case.”
Id. at 1078. We emphasized that our holding in Sharpe was
predicated on the fact that the plaintiffs in that case “were not
creditors” of the FDIC, and that the FDIC’s own breach of
contract could not render those plaintiffs “creditors subject to
the claims process.” Id. Thus, in McCarthy, we held that
Sharpe is not controlling outside of its limited context. Id. at
1077–78. We reach the same conclusion here.
Finally, Meritage argues in its opening brief that the
receiver’s certificate cannot satisfy the judgment in this case,
because such a certificate “does not avoid a security interest.”
Subsequently, however, Meritage has backed away from this
position. In its reply brief, Meritage qualified this position by
12 MERITAGE HOMES OF NEVADA V. FDIC
stating that it “does not claim to have a . . . common security
interest.” Moreover, at oral argument, counsel for Meritage
flatly asserted that Meritage “do[es] not claim that we had a
security interest.” Regardless, Meritage did not present this
argument before the district court, which precludes Meritage
from raising it on appeal. See United States v. Robertson,
52 F.3d 789, 791 (9th Cir. 1994) (explaining that “[i]ssues not
presented to the district court cannot generally be raised for
the first time on appeal”). Accordingly, we reject this
argument.
In sum, we hold that the district court did not abuse its
discretion in ruling that the receiver’s certificate satisfied the
judgment against the FDIC.
B.
We now turn to the district court’s denial of Meritage’s
request for a summons to Rescon and Stearns. As stated
above, we review this decision for clear error. Under the
clear error standard, “[a]s long as the district court got the law
right, it will not be reversed simply because the appellate
court would have arrived at a different result if it had applied
the law to the facts of the case.” Shell Offshore, Inc. v.
Greenpeace, Inc., 709 F.3d 1281, 1286 (9th Cir. 2013)
(citation omitted).
Here, the question is whether the district court committed
clear error in not issuing a summons pursuant to section
17.030 of the Nevada Revised Statutes, which provides that
“[w]hen a judgment is recovered against one or more of
several persons jointly indebted upon an obligation . . . those
who were not originally served with the summons and did not
appear to the action may be summoned to show cause why
MERITAGE HOMES OF NEVADA V. FDIC 13
they should not be bound by the judgment in the same
manner as though they had been originally served with the
summons.” N.R.S. § 17.030 (emphasis added). As pointed
out above, Meritage asserted before the district court that
there has been “no case law interpreting” this section of the
Nevada Revised Statutes. Likewise, we are not aware of any
such law. In general, however, it is a principle of statutory
construction that the “word ‘may,’ when used in a statute,
usually implies some degree of discretion.” Sauer v. U.S.
Dep’t of Educ., 668 F.3d 644, 651 (9th Cir. 2012) (citation
omitted). Here, the statute clearly says that parties who were
not originally served with the summons “may be summoned,”
not that they “shall be summoned.” In light of the principle
that the word “may” implies “some degree of discretion,” and
in the absence of any cases interpreting this statute, we hold
that the statute leaves it to the discretion of the trial court
whether to issue such a summons. Thus, we conclude that the
district court “got the law right,” Shell Offshore, Inc.,
709 F.3d at 1286, insofar as it implicitly determined that the
decision whether to issue a summons was within its
discretion. Under clear error review, that is the end of our
inquiry, as this “significantly deferential” standard does not
permit us to reverse even if we were “convinced [we] would
have found differently.” United States v. Torlai, 728 F.3d
932, 937 (9th Cir. 2013) (citations omitted).
Accordingly, we hold that the district court did not
commit clear error in declining to issue a summons to Rescon
and Stearns. In so holding, we express no conclusion
regarding the possible liability of either Rescon or Stearns.
14 MERITAGE HOMES OF NEVADA V. FDIC
IV.
In conclusion, we hold that the district court did not abuse
its discretion in ruling that the receiver’s certificate satisfied
the judgment against the FDIC. We also hold that the district
court did not commit clear error in declining to issue a
summons to Rescon and Stearns.
AFFIRMED.