Summerhaze Company v. Federal Deposit Insurance Corporation

This opinion is subject to revision before
publication in the Pacific Reporter

2014 UT 28

IN THE
SUPREME COURT OF THE STATE OF UTAH

SUMMERHAZE COMPANY, L.C.; ANTION FINANCIAL, L.C.;
DURBANO PROPERTIES, L.C.; DURBANO DEVELOPMENT, L.C.;
DURBANO LAW FIRM, P.C.; and DOUGLAS M. DURBANO,
Petitioners and Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
as receiver for AMERICA WEST BANK,
Respondent and Appellee.

No. 20120461
Filed July 8, 2014

Second District, Farmington
The Honorable Rodney S. Page
No. 090700093

Attorneys:
George W. Pratt, Jessica P. Wilde, Salt Lake City,
L. Miles LeBaron, Layton, for appellants
George W. Pratt, Jessica P. Wilde, Salt Lake City,
Douglas M. Durbano, L. Miles LeBaron, Layton,
for appellant Douglas M. Durbano
Brent D. Wride, Salt Lake City, for appellee

ASSOCIATE CHIEF JUSTICE NEHRING authored the opinion of
the Court, in which CHIEF JUSTICE DURRANT, JUSTICE DURHAM,
JUSTICE PARRISH, and JUSTICE LEE joined.

ASSOCIATE CHIEF JUSTICE NEHRING, opinion of the Court:
INTRODUCTION
¶ 1 Plaintiffs Summerhaze Company, L.C.; Antion Financial,
L.C.; Mr. Douglas M. Durbano; Durbano Development, L.C.;
Durbano Law Firm, P.C.; and, Durbano Properties, L.C.
(collectively Plaintiffs) appeal from the entry of summary
 SUMMERHAZE v. FDIC
Opinion of the Court

judgment in favor of the Federal Deposit Insurance Corporation
(FDIC), successor to America West Bank, L.C. (Bank). We are
asked to decide whether the district court erred when it
concluded that it lacked subject matter jurisdiction over the
Plaintiffs‘ claims after determining that Plaintiffs failed to exhaust
the administrative claims review process made available to them
by the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA). Additionally, Plaintiffs claim that the
district court‘s dismissal for lack of subject matter jurisdiction
denied them due process of the law under both the United States
and Utah Constitutions. We affirm.
BACKGROUND
¶ 2 Mr. Durbano was the chief executive officer of the Bank.
Mr. Durbano was also the owner or manager of the other
plaintiffs in this appeal: Summerhaze Company, L.C.
(Summerhaze); Antion Financial, L.C. (Antion); Durbano
Properties, L.C.; Durbano Development, L.C.; and, Durbano Law
Firm, P.C. In 1985, Mr. Durbano hired Anna S. Padlo to work for
him at his various companies. Then, in 2001, Mr. Durbano hired
Ms. Padlo to work at the Bank. Between 2001 and 2007, Ms. Padlo
embezzled over $550,000 from the Bank.1 Plaintiffs filed
a complaint against the Bank on February 10, 2009. They
alleged (1) improper acceptance of unauthorized signatures,
(2) negligence, and (3) liability under a theory of respondeat
superior.
¶ 3 The Bank was insured by BancInsure, Inc. under a
Financial Institution Bond (Bond). The Bond was an indemnity
policy. Under its terms, the Bank would be indemnified in the
event of losses occasioned by employee dishonesty, forgery or
alteration of negotiable instruments, unauthorized signatures and
endorsements, and claims expenses, among other things. The
maximum coverage under the Bond was $2,000,000. Plaintiffs
filed their complaint ―in order to trigger the bond coverage of [the
Bank‘s] bonding company, BancInsure, Inc.‖ After receiving the
complaint, the Bank tendered the defense of the claim to

1Ms. Padlo ultimately pleaded guilty to felony embezzlement
of more than $1,000.

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BancInsure, under the terms of the Bond.2 The Bank filed an
answer to the complaint on April 6, 2009.
¶ 4 On January 9, 2009, before the Plaintiffs filed their
complaint, the Bank filed a declaratory judgment action against
BancInsure seeking to establish that the Bank was entitled to
coverage under the Bond for the losses claimed by the Plaintiffs.3
On March 23, 2009, the Bank and BancInsure agreed to stay the
declaratory judgment action because coverage under the Bond
would become an issue only if the Plaintiffs proved the damages
alleged in their complaint against the Bank.
¶ 5 On May 1, 2009, the Utah Department of Financial
Institutions (UDFI) closed the Bank and appointed the FDIC as
receiver, because the UDFI determined the Bank had failed and
was operating in an unsafe manner.4 On May 6, 2009, the FDIC
mailed notice of the Bank‘s receivership to all of the Bank‘s
recorded creditors. The FDIC published notice of the Bank‘s
receivership on May 7 and again on June 8 and July 8, 2009. The
notices were published in the two most prominent newspapers in
Utah, the Deseret News and The Salt Lake Tribune. Both the mailed
and published notices indicated that all claims against the Bank,
along with proof of the claims, had to be submitted to the FDIC

2 ―Tender of defense‖ describes a common-law practice in
which a person or entity against whom an action is brought gives
notice of the suit to a person or entity that may ultimately be liable
for payment of the judgment, by contract or implication of law.
59 AM. JUR. 2D Parties § 241 (2014). The purpose is to offer the
person who may ultimately be liable ―the opportunity to appear
and defend the action,‖ because the person or entity may be
bound by the judgment. Id.
3Mr. Durbano, due to his role as both CEO of the defendant
Bank, and as a plaintiff, is likely the reason the Bank filed this
seemingly prescient action.
4 After the Bank was closed, the Office of Inspector General
issued a Material Loss Review that concluded the Bank failed
because ―management deviated from the [B]ank‘s business plan
and did not effectively manage the risks associated with
[commercial real estate] and [acquisition, development, and
construction] loans.‖ The Bank‘s failure resulted in a $119 million
loss to the Deposit Insurance Fund.

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Opinion of the Court

for administrative claims review by August 5, 2009. Mr. Durbano,
Durbano Development, and Durbano Law Firm were listed as
creditors of the Bank and were mailed direct notice of the
August 5, 2009 claims deadline. Jones Waldo Holbrook &
McDonough and LeBaron & Jensen, P.C.—as counsel of record for
Plaintiffs on the February 10, 2009 complaint—were also listed as
creditors and received direct mailed notice from the FDIC.
¶ 6 On October 8, 2009, sixty-five days after the
administrative claims review deadline, Plaintiffs filed a proof of
claim with the FDIC ―out of an abundance of caution.‖ On
December 3, 2009, the FDIC disallowed the claims because they
were not filed by the deadline. On December 18, 2009, the district
court issued a Notice of Intent to Dismiss Plaintiffs‘ claims for
failure to prosecute. On January 10, 2010, Plaintiffs notified the
Bank and the FDIC that they intended to proceed with their suit to
recover the alleged damages. On January 21, 2010, Plaintiffs filed
their Notice of Intent to Prosecute. With the case revived and
apparently moving forward, the district court entered a
scheduling order and the parties exchanged initial disclosures.
On October 1, 2010, the FDIC informed Plaintiffs—in a letter that
accompanied its initial disclosures—that it was pursuing a motion
to dismiss.
¶ 7 Several weeks later, the FDIC filed a motion to dismiss
alleging that the district court lacked subject matter jurisdiction
because the Plaintiffs had failed to comply with FIRREA. The
district court granted the FDIC‘s motion to dismiss and ruled that
the court was deprived of subject matter jurisdiction because the
Plaintiffs failed to file a timely proof of claim, as mandated by
FIRREA. Plaintiffs filed a timely notice of appeal. We have
jurisdiction under Utah Code section 78A–3–102(3)(j).
STANDARD OF REVIEW
¶ 8 The primary issue before us is whether the district court
erred when it determined that it lacked subject matter jurisdiction.
―Whether a district court has subject matter jurisdiction is a
question of law‖ and we review the district court‘s determination
for correctness.5 The district court concluded it lacked subject
matter jurisdiction based on its reading of FIRREA. We review

5 Utah Div. of Consumer Prot. v. Flagship Capital, 2005 UT 76, ¶ 6,
125 P.3d 894.

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Opinion of the Court

the district court‘s interpretation of a statute for correctness and
give no deference to the district court‘s conclusions of law.6
Plaintiffs also argue that the dismissal of their claims was a
violation of due process. ―Constitutional issues, including
questions regarding due process, are questions of law,‖ and we
review the lower court‘s conclusions for correctness.7
ANALYSIS
¶ 9 Plaintiffs present three general challenges to the district
court‘s determination that it lacked subject matter jurisdiction
based on FIRREA. First, Plaintiffs contend that FIRREA is not
applicable to their claims against the FDIC or the Bank. Second,
Plaintiffs argue that even if FIRREA is applicable, they were not
required to file a proof of claim with the FDIC because the FDIC
did not ―trigger‖ the administrative claims review process. Third,
Plaintiffs argue that the dismissal of their complaint denied them
due process under the law.
¶ 10 Our decision regarding the subject matter jurisdiction of
the district court depends on the requirements of FIRREA. We
begin with a review of FIRREA. We conclude that exhaustion of
administrative remedies under FIRREA is a prerequisite to the
exercise of a district court‘s subject matter jurisdiction. We then
address each of the Plaintiffs‘ arguments.
I. FAILURE TO EXHAUST ADMINISTRATIVE
REMEDIES THROUGH FIRREA‘S CLAIMS
PROCESS DEPRIVES THE DISTRICT COURT
OF SUBJECT MATTER JURISDICTION
A. Overview of FIRREA
¶ 11 FIRREA was passed in response to the financial crisis of
the 1980s.8 The purpose of FIRREA was to ―revamp[ ] the deposit
insurance fund system in order to strengthen the country‘s
financial system.‖9 FIRREA abolished the Federal Savings and

6 State v. Ostler, 2001 UT 68, ¶ 5, 31 P.3d 528.
7Salt Lake City Corp. v. Jordan River Restoration Network, 2012
UT 84, ¶ 47, 299 P.3d 990 (internal quotation marks omitted).
8 Tellado v. IndyMac Mortg. Servs., 707 F.3d 275, 279 (3d Cir.
2013).
9 FDIC v. Am. Cas. Co., 975 F.2d 677, 681 (10th Cir. 1992).

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Opinion of the Court

Loan Insurance Corporation and created the Resolution Trust
Corporation (RTC).10 FIRREA assigned the functions of handling
failed financial institutions to the FDIC and RTC.11 FIRREA gave
the FDIC ―the authority to act as receiver or conservator for failed
institutions‖;12 and ―[a]s a receiver, the FDIC succeeds to ‗all
rights, titles, powers, and privileges‘ of the failed bank.‖13 The
goal of FIRREA is to expeditiously wind up the affairs of and
dispose of the bulk of claims against failed financial institutions.14
¶ 12 To aid in the winding up of and disposal of claims
against a failed financial institution, FIRREA created an
administrative claims review process for institutions in
receivership.15 The process allows a receiver to settle claims
against the institution in receivership and liquidate its assets.16
After being named, the receiver must promptly publish notice to
the institution‘s creditors, informing them that claims against the
bank must be presented by a deadline, which is at least ninety
days from the publication notice.17 The receiver must also publish
notice again at one month and two months after the initial
publication.18 The receiver is also required to review and pay any
claim received on or before the published deadline, provided that
the claim is proven to be legitimate to the satisfaction of the
receiver.19 The receiver has no discretion regarding claims filed
10 See id.; Thomas v. FDIC, 255 P.3d 1073, 1078 (Colo. 2011).
11 See Am. Cas. Co., 975 F.2d at 681; Rosa v. Resolution Trust
Corp., 938 F.2d 383, 388 (3d Cir. 1991); Thomas, 255 P.3d at 1078.
12 Tellado, 707 F.3d at 279.
13 Thomas, 255 P.3d at 1078 (quoting 12 U.S.C.
§ 1821(d)(2)(A)(i)).
14 See Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1141 (D.C. Cir.
2011); Thomas, 255 P.3d at 1078.
15 See 12 U.S.C. § 1821(d)(3)–(13). See also Am. Nat’l Ins. Co., 642
F.3d at 1141.
16 Elmco Props., Inc. v. Second Nat’l Fed. Sav. Ass’n, 94 F.3d 914,
919 (4th Cir. 1996).
17 12 U.S.C. § 1821(d)(3)(B)(i).
18 Id. § 1821(d)(3)(B)(ii).
19 Id. § 1821(d)(5)(B).

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after the published deadline and must disallow and deny any
late-filed claims.20
¶ 13 The disallowance of late-filed claims is generally final,
subject to one exception: if the claimant did not receive notice of
the receivership in time to file a claim by the deadline and the
claim is filed in time to permit payment of the claim, it may be
paid.21 The receiver is required to decide the legitimacy of any
claim within 180 days of receipt and notify the claimant of its
determination of the claim.22 If the receiver denies the claim, it
must notify the claimant of the reason for the denial and the
procedures available for obtaining either administrative or
judicial review of the denial.23 Following denial, a claimant may
request a review of the claim within sixty days.24 This process for
a post claim denial review gives the claimant the option to seek an
administrative review, file a suit, or continue an action
commenced before the appointment of the receiver.25 If a

20 Id. § 1821(d)(5)(C)(i).
21 Id. § 1821(d)(5)(C)(i)–(ii).
22 Id. § 1821(d)(5)(A)(i).
23 Id. § 1821(d)(5)(A)(iv).
24Id. § 1821(d)(6)(A). This sixty-day deadline begins to run on
the earlier of the date the claim is denied or 180 days after the
claims deadline. See id.
25 Id. Section 1821(d)(6)(A) also states that a claimant should
file suit or continue an action already commenced in the district or
territorial court of the United States for the district that contains
the institution‘s principal place of business. However, ―state
courts have inherent authority, and are thus presumptively
competent, to adjudicate claims arising under the law of the
United States.‖ Tafflin v. Levitt, 493 U.S. 455, 458 (1990).
―Congress has the power to preclude state court jurisdiction over
federal claims if it so chooses,‖ Holmes Fin. Assocs., Inc. v.
Resolution Trust Corp., 33 F.3d 561, 564 (6th Cir. 1994), but the
presumption of state court authority ―can be rebutted by an
explicit statutory directive, by unmistakable implication from
legislative history, or by a clear incompatibility between state-
court jurisdiction and federal interests.‖ Gulf Offshore Co. v. Mobil
Oil Corp., 453 U.S. 473, 478 (1981). ―Because FIRREA does not
con‘t.
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Opinion of the Court

claimant fails to request review of a disallowed claim within sixty
days, the denial is final and the claimant forfeits all further rights
and remedies with respect to the claim.26 Finally, FIRREA states
that ―no court shall have jurisdiction over . . . any claim or action
for payment from, or action seeking a determination of rights with
respect to, the assets of any depository institution‖ that has been
placed in receivership or ―any claim relating to any act or
omission‖ of the failed institution or the receiver, unless
specifically provided for by FIRREA.27 Stated more plainly,
FIRREA precludes court jurisdiction over any claim relating to the
assets, acts, or omissions of the bank or the receiver, except as the
act permits.28
B. Administrative Exhaustion
¶ 14 The doctrine of administrative exhaustion generally
states that ―no one is entitled to judicial relief for a supposed or
threatened injury until the prescribed administrative remedy has
been exhausted.‖29 ―The doctrine is applied in a number of
different situations‖ and can be ―subject to numerous
exceptions.‖30 We must look to the purposes of the doctrine and
―the particular administrative scheme involved‖ to determine if
the doctrine is applicable to a particular claim.31 One purpose of
the doctrine is ―the avoidance of premature interruption of the

contain a clear and unequivocal withdrawal of state court
jurisdiction, . . . state courts retain jurisdiction over cases against
the [FDIC] which were pending when the [FDIC] was appointed
receiver.‖ Holmes Fin. Assocs., Inc., 33 F.3d at 562. In this case,
Plaintiffs filed suit in state court prior to the appointment of the
FDIC as receiver.
26 12 U.S.C. § 1821(d)(6)(B).
27 Id. § 1821(d)(13)(D).
28 Office & Prof’l Emps. Int’l Union, Local 2 v. FDIC, 962 F.2d 63,
66 n.7 (D.C. Cir. 1992); see also id.
29McKart v. United States, 395 U.S. 185, 193 (1969) (internal
quotation marks omitted).
30 Id.
31 Id.

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administrative process‖ where the relevant agency ―is created for
the purpose of applying a statute in the first instance.‖32 A closely
related purpose is that the ―administrative agency is created as a
separate entity and invested with certain powers and duties‖ and
courts ―should not interfere with an agency until it has completed
its action.‖33 ―Typically, exhaustion of administrative remedies is
required where Congress imposes such a requirement.‖34
¶ 15 The text of FIRREA creates ―a jurisdictional prerequisite
by expressly providing that ‗no court shall have jurisdiction‘ over
claims against the receiver outside the administrative claims
process set forth in section 1821(d).‖35 Thus, we conclude that
under the doctrine of administrative exhaustion, the failure to
exhaust administrative remedies available through FIRREA
deprives a court of subject matter jurisdiction over any action
seeking a determination of rights with respect to assets of a failed
bank that is in receivership. By tying timely claim application to
jurisdiction, we join an overwhelming majority of federal
circuits.36 This does not end our analysis, however, because the

32 Id. at 193–94.
33 Id. at 194.
34 Meliezer v. Resolution Trust Co., 952 F.2d 879, 882 (5th Cir.
1992) (citing Weinberger v. Salfi, 422 U.S. 749, 756–67 (1975)).
35 Thomas, 255 P.3d at 1080 (quoting 12 U.S.C. § 1821(d)(13)(D)).
FIRREA does provide an exception allowing for payment of late-
filed claims when a claimant does not receive notice of the
receivership. See 12 U.S.C. § 1821(d)(5)(C). However, that
exception still requires the claimant to file a claim through the
administrative review process. Id.
36 See Farnik v. FDIC, 707 F.3d 717, 721–23 (7th Cir. 2013)
(holding the administrative claims review process of FIRREA is
mandatory for all parties bringing claims against the FDIC or RTC
as receiver for a failed bank); accord Tellado, 707 F.3d at 279–80;
Vill. of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 386 (6th Cir.
2008); McMillian v. FDIC, 81 F.3d 1041, 1045 (11th Cir. 1996);
Freeman v. FDIC, 56 F.3d 1394, 1400 (D.C. Cir. 1995); Brady Dev. Co.
v. Resolution Trust Corp., 14 F.3d 998, 1006 (4th Cir. 1994);
Intercontinental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278, 1286 (9th
Cir. 1994); Bueford v. Resolution Trust Corp., 991 F.2d 481, 484 (8th
Cir. 1993); Marquis v. FDIC, 965 F.2d 1148, 1151 (1st Cir. 1992);
con‘t.
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Opinion of the Court

Plaintiffs‘ claim was pending in the district court at the time the
Bank was placed in receivership. We now answer the question of
whether exhaustion is required for a claim that is pursued before
a bank is placed in receivership.
C. Failure to Exhaust FIRREA’s Administrative Claims
Process Divests a Court of Jurisdiction Over
Prereceivership Claims
¶ 16 Plaintiffs filed their action against the Bank in the district
court in February 2009, nearly three months before the FDIC was
appointed receiver. Plaintiffs argue that FIRREA creates two
statutory schemes, one for prereceivership claims, and another for
postreceivership claims, and that administrative exhaustion is not
required for prereceivership claims. We disagree.
¶ 17 We agree with those federal circuits that hold FIRREA‘s
exhaustion requirements apply equally to both pre- and
postreceivership claims.37 FIRREA states that a claimant may
request administrative review, file suit, or ―continue an action
commenced before the appointment of the receiver.‖38 This
language reflects express statutory intent to conditionally
recognize the viability of claims filed before a receiver is
appointed. The condition for viability is that the claim must
conform to FIRREA‘s procedural mandates. FIRREA contains no
―language which could be construed to support [the] argument
that the claim procedures can be dispensed with in cases where
suit was filed prior to the appointment of the receiver.‖39
Nevertheless, Plaintiffs attempt to point to such language.

Meliezer, 952 F.2d at 883; Praxis Props., Inc. v. Colonial Sav. Bank,
S.L.A., 947 F.2d 49, 63 (3d Cir. 1991); Resolution Trust Corp. v.
Elman, 949 F.2d 624, 627 (2d Cir. 1991); Resolution Trust Corp. v.
Mustang Partners, 946 F.2d 103, 106 (10th Cir. 1991).
37 See, e.g., Brady Dev. Co., 14 F.3d at 1005–06 (holding
FIRREA‘s exhaustion requirement is mandatory for both pre- and
postreceivership claims); accord Intercontinental Travel Mktg., Inc.,
45 F.3d at 1282–84; Bueford, 991 F.2d at 485; Marquis, 965 F.2d at
1151; Mustang Partners, 946 F.2d at 106.
38 12 U.S.C. § 1821(d)(6)(A)(ii).
39 Mustang Partners, 946 F.2d at 106.

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¶ 18 Plaintiffs cite 12 U.S.C. § 1821(d)(5)(F)(ii) in support of
their argument that FIRREA contains two statutory schemes, one
for suits brought before a bank is placed in receivership and
another for after receivership. We disagree. Section
1821(d)(5)(F)(ii) states, ―the filing of a claim with the receiver shall
not prejudice any right of the claimant to continue any action
which was filed before the appointment of the receiver.‖ The
plain language of section 1821(d)(5)(F)(ii) forecloses Plaintiffs‘
argument, because it applies when a claimant has filed a claim,
thus presuming the administrative claims review process was
followed.40 Although section 1821(d)(5)(F)(ii) states that an
existing action is not prejudiced by the filing of an administrative
claim and may be ―continue[d],‖ it does not address the failure to
file a claim, nor does it imply the claims process need not be
followed.41 Instead, this provision is consistent with section
1821(d)(6), which permits a claimant to file suit or continue a
previously filed action after exhausting the administrative claims
process. ―Congress plainly intended the administrative claims
process to provide a streamlined method for resolving most
claims against failed institutions in a prompt and orderly fashion,
without lengthy litigation.‖42
¶ 19 FIRREA creates one scheme for both pre- and
postreceivership cases under which a court retains jurisdiction.
This is not to say that the mere appointment of a receiver divests a
court of jurisdiction. Rather, ―FIRREA expressly allows for
preexisting actions to be stayed‖ and states that ―such actions may
be ‗continue[d]‘ following completion of the administrative claims
process.‖43 Thus, FIRREA allows a court to suspend, rather than
dismiss, suits, ―subject to a stay of [the] proceedings as may be
appropriate to permit exhaustion of the administrative review
process as it pertains to the underlying claims.‖44 None of the
provisions diminish the importance of the statutory claim review

40 See Thomas, 255 P.3d at 1079.
41 Id. at 1079–80.
42 Id. at 1080 (internal quotation marks omitted).
43 Id. (alteration in original) (citing 12 U.S.C. §§ 1821(d)(12),
(d)(5)(F)(ii), (d)(6)(A)(ii)).
44 Id. (internal quotation marks omitted).

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process. A district court acquires or retains jurisdiction only after
claimants avail themselves of the administrative claims review
process.
¶ 20 There is no dispute that Plaintiffs failed to file a claim by
the August 5, 2009 deadline. Plaintiffs submitted their claim on
October 8, 2009, sixty-five days after the deadline. The Plaintiffs‘
failure to file a claim by the administrative claims review deadline
deprived the district court of subject matter jurisdiction.
¶ 21 We now turn to Plaintiffs‘ alternative arguments that
(1) they are excused from the mandatory administrative claims
review process and (2) the dismissal of their claims violates due
process of the law.
II. NO EXCEPTION TO ADMINISTRATIVE EXHAUSTION
EXISTS FOR PLAINTIFFS, THUS THEIR CLAIMS ARE
SUBJECT TO THE REQUIREMENTS OF FIRREA
¶ 22 Plaintiffs argue that they were excused from
administrative exhaustion, and alternatively, FIRREA is not
applicable to its claims against the FDIC. First, Plaintiffs argue
that the FDIC failed to provide notice or otherwise manifest its
intent to follow the administrative claims review process, thus
fitting into an exemption from FIRREA. Second, Plaintiffs argue
that FIRREA is inapplicable because they do not seek payment
from any assets of the FDIC or the Bank, and thus they do not
present a ―claim‖ as contemplated by the statute. Third, Plaintiffs
argue that their claims are not susceptible to resolution through
FIRREA‘s administrative claims review process because the FDIC
tendered defense of the claim to BancInsure, and thus the FDIC
did not have the authority to resolve Plaintiffs‘ claims.45 We
address each argument in turn.

45Plaintiffs also assert that under Utah Code section 31A–22–
201, BancInsure cannot use the insolvency of the Bank as a
defense to liability. Utah Code section 31A–22–201 states:
Every liability insurance policy shall provide that
the bankruptcy or insolvency of the insured may not
diminish any liability of the insurer to third parties,
and that if execution against the insured is returned
unsatisfied, an action may be maintained against the
insurer to the extent that the liability is covered by
the policy. (Emphasis added).
con‘t.
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A. Plaintiffs Had Notice of the Administrative Claims
Review Process and Thus FIRREA Applies
¶ 23 Plaintiffs argue that they were excused from
administrative exhaustion because the FDIC failed to provide
notice or otherwise manifest its intent to follow the administrative
claims review process. Plaintiffs also assert that the FDIC was
required to (1) stay the pending litigation to allow exhaustion of
administrative remedies and (2) substitute itself as a party.
¶ 24 Section 1821(d)(12)(A) states that a ―receiver may request
a stay . . . in any judicial action or proceeding‖ not to exceed
ninety days, and that a request for a stay by a receiver must be
granted.46 The term ―may‖ is permissive; thus the statute does
not require that the receiver request a stay. Rather, the purpose of
the stay provision is to give the receiver time to familiarize itself
with any pending litigation and decide how best to proceed.47
The FDIC was not required to stay any pending litigation, and we
need not inquire as to the reason for its decision to not request a
stay.
¶ 25 Nor is the FDIC required to substitute itself as a party to
a prereceivership lawsuit. When a receiver is appointed, it is
granted all the powers conferred and duties imposed by federal
and state law.48 A receiver may take over the assets of and
operate the failed institution with all the power of members,

Plaintiffs have not obtained a judgment against either the Bank or
the FDIC, let alone had such judgment returned unsatisfied.
Thus, Utah Code section 31A–22–201 is simply inapplicable.
46 12 U.S.C. § 1821(d)(12)(A)–(B) (emphasis added).
47 Praxis Props., Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49, 68
(3d Cir. 1991); see also FDIC v. Lacentra Trucking, Inc., 157 F.3d
1292, 1303 (11th Cir. 1998) (―[T]he purpose of the stay [is to] give[]
the [receiver] a chance to analyze pending matters and [to] decide
how best to proceed‖ (alterations in original) (internal quotation
marks omitted)); Armstrong v. Resolution Trust Corp., 599 N.E.2d
1209, 1214 (Ill. App. Ct. 1992) (―This stay is designed to give the
[receiver] some breathing room to get up-to-speed with the
ongoing litigation.‖) aff’d, 623 N.E.2d 291 (Ill. 1993).
48 12 U.S.C. § 1821(c)(3)(B).

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shareholders, directors, or officers of the institution, and may
conduct all business of the institution.49 The receiver also
―perform[s] all functions of the institution in the name of the
institution which are consistent with the appointment as . . .
receiver.‖50 By operation of law, the FDIC may perform any
functions, including bringing or being named as a party in legal
proceedings, in the name of the receiver. Accordingly,
substituting the FDIC as a party was not required.
¶ 26 Finally, Plaintiffs assert that the FDIC failed to provide
notice of the FIRREA administrative claims review process. We
disagree. Plaintiffs‘ argument focuses on the narrow exception
to the rejection of an untimely administrative claim under
12 U.S.C. § 1821(d)(5)(C)(ii). This section‘s narrow exception
states that a claim submitted after the published deadline may be
considered by the receiver only if ―the claimant did not receive
notice‖ in time to file a claim by the deadline and ―such claim is
filed in time to permit payment of such claim.‖51
¶ 27 However, in this case, the record is replete with
references to both published and mailed notices.52 The FDIC

49 Id. § 1821(d)(2)(B)(i).
50 Id. § 1821(d)(2)(B)(iii) (emphasis added).
51 Id. § 1821(d)(5)(C)(ii).
52 The notice mailed to creditors stated that any creditor ―must
present the properly completed Proof of Claim Form and the
supporting documentation to the Receiver on or before the Claims
Bar Date referenced in the above subject caption. If you do not file
your claim on or before the Claims Bar Date, the Receiver will
disallow your claim.‖ The notice then outlined the process
available to a creditor should the receiver disallow the claim,
including filing or continuing a lawsuit. The notice concluded
with a statement that a claimant who fails to file or continue a
lawsuit within sixty days ―will have no further rights or remedies
with respect to [their] claim.‖ The published notice also stated
that ―all creditors having claims against the Failed Institution
must submit their claims in writing, together with proof of the
claims, to the Receiver by August 05, 2009.‖ The notice continued,
―with certain limited exceptions, failure to file such claims by the
Bar Date [August 5, 2009] will result in disallowance by the
Receiver, the disallowance will be final, and further rights or
con‘t.
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Opinion of the Court

originally published notice on May 7, 2009, and again on June 8
and July 8, 2009, in the two most widely circulated newspapers in
Utah, The Salt Lake Tribune and the Deseret News. These notices
complied with the requirements of FIRREA.53 The published and
mailed notices are clear; a claimant must submit a proof of claim
form, after which the FDIC will allow or disallow the claim. Only
after disallowance may a claimant seek judicial remedies or
continue a previously filed action.
¶ 28 Plaintiffs claim that not all of them received notice. We
find this argument without merit. A failure to mail notice ―does
not relieve the [creditor] of the obligation to exhaust
administrative remedies,‖ provided the creditor had actual notice
of the FDIC‘s appointment as receiver.54 The FDIC mailed notice
to Mr. Durbano, Durbano Development, and Durbano Law Firm
because they were parties listed as creditors of the Bank due to the
litigation filed prior to receivership. Mr. Durbano and Durbano
Law Firm were listed as the manager and servicing agent,
respectively, for Summerhaze, Antion, Durbano Properties, and
Durbano Development. Mr. Durbano was listed as both the
manager and servicing agent for Durbano Law Firm.
Mr. Durbano testified that he personally received notice of the
administrative claims review process. Although Mr. Durbano
testified that he believed the notice of the administrative claims
review process was in relation to a separate matter, he was also
the CEO of the Bank and was personally aware of the Bank‘s

remedies with regard to the claims will be barred.‖ Both the
published and mailed notices reference 12 U.S.C. §§ 1821(d)(5)(C)
and –(d)(6).
53 12 U.S.C. § 1821(d)(3)(B)–(C).
54 Freeman v. FDIC, 56 F.3d 1394, 1402 (D.C. Cir. 1995); see also
Intercontinental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278, 1285 (9th
Cir. 1994) (noting that a merely negligent failure to mail actual
notice to a creditor does not relieve a creditor from exhausting
administrative remedies); Marketplace/Ken Caryl Partners, Ltd. v.
Vitorio Inv. Co., 778 F. Supp. 29, 30 (D. Colo. 1991) (noting that
receiver‘s alleged failure to publish notice to creditors did not rise
to the level of affirmative misconduct warranting an excusal from
the administrative claims review process).

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Opinion of the Court

receivership status. Mr. Durbano also filed a claim for Durbano
Law Firm through the administrative claims review process for
$162,500 in legal fees by the claims review deadline.
¶ 29 Furthermore, ―when the [receiver] knows that a claimant
is represented by counsel with regard to a claim, and especially
when litigation is pending, it is entirely proper for the [receiver] to
notify the claimant of the receivership via [his or her] attorney.‖55
―Indeed, to do otherwise might be an improper communication
with a represented party, and could well be a breach of
professional ethics.‖56 The FDIC mailed notice to Plaintiffs‘
counsel of record due to the litigation pending at the time the
Bank was placed in receivership.
¶ 30 The district court correctly found that Plaintiffs had
actual notice of the August 5, 2009 administrative claims review
process deadline. It is undisputed that Plaintiffs filed a claim on
October 8, 2009—more than two months after the claims deadline.
Based on our review of the record, we conclude the district court
properly concluded that Plaintiffs had notice of the August 5, 2009
deadline to submit claims under the administrative claims review
process.
B. Plaintiffs Sought Payment from the Bank’s Assets
and Thus Presented a Claim Regulated by FIRREA
¶ 31 Plaintiffs assert that FIRREA is inapplicable to their
claim. Specifically, Plaintiffs argue that, under 12 U.S.C.
§ 1821(d)(13)(D), the Bond is not an asset of the Bank or the FDIC,
and thus FIRREA is inapplicable to their claim. We disagree. The
threshold question is not whether Plaintiffs would ultimately
collect from the Bond; rather, it is whether the Bond is an asset of
the Bank.57 FIRREA states that no court has jurisdiction over any
claim to or action against the assets of a bank in receivership.58
55 Bueford v. Resolution Trust Corp., 991 F.2d 481, 486–87 (8th
Cir. 1993).
56 Id. at 487; see also UTAH R. CIV. P. 5(b)(1) (―If a party is
represented by an attorney, service shall be made upon the
attorney unless service upon the party is ordered by the court.‖).
57 See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. City Sav.,
F.S.B., 28 F.3d 376, 384 (3d Cir. 1994).
58 12 U.S.C. § 1821(d)(13)(D).

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Opinion of the Court

―The term ‗asset‘ is not defined in the statute.‖59 However, the
ordinary meaning of ―asset‖ is broad. It is defined as ―[a]n item
that is owned and has value‖ or ―[a]ll the property of a person . . .
available for paying debts or for distribution.‖60 ―Insurance
policies which a bank has purchased and under which it is an
insured fall neatly within this definition of assets.‖ 61 An
insurance policy is valuable to the owner of the policy even
though the owner of the policy may never be entitled to recover
under the policy.62 Additionally, the broad meaning of ―asset‖
can include liability insurance, as one purpose of liability
insurance is to protect other assets against tort claims. 63 For these
reasons, we conclude the plain meaning of ―asset‖ contained in
section 1821(d)(13)(D)(i) includes the insurance policy purchased
by the Bank from BancInsure.64
¶ 32 We further hold that Plaintiffs were required to present a
―claim‖ as contemplated by FIRREA. Section 1821(d)(13)(D)(ii)
―explicitly bars jurisdiction over any claim relating to any act or
omission of [a] failed financial institution.‖65 There is no
qualification of the terms ―act or omission,‖66 and the statutory
provision should be given ―the full scope that [the] text
demands.‖67 The statute applies to creditors‘ claims,68 consumer

59 Samuels v. Acme Mkt., 845 F. Supp. 292, 294 (E.D. Pa. 1994).
60 BLACK‘S LAW DICTIONARY 134 (9th ed. 2009).
61 Nat’l Union Fire Ins. Co., 28 F.3d at 384.
62 See id.
63 Samuels, 845 F. Supp. at 294.
64 See Nat’l Union Fire Ins. Co., 28 F.3d at 384–85; see also
Holloway v. State, 566 A.2d 1177, 1180 (N.J. Super. Ct. Law Div.
1989) (rejecting a claim that insurance policies are not assets).
65 Demelo v. U.S. Bank Nat’l Ass’n, 727 F.3d 117, 122 (1st Cir.
2013) (internal quotation marks omitted).
66 Decrosta v. Red Carpet Inns Int’l, Inc., 767 F. Supp. 694, 696
(E.D. Pa. 1991).
67 Demelo, 727 F.3d at 123.
68 Id.

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 SUMMERHAZE v. FDIC
Opinion of the Court

protection claims,69 and ―claims which are or should be covered
by insurance.‖70 This provision also ―distinguishes claims on
their factual bases‖ and ―does not make any distinction based on
the identity of the party from whom relief is sought.‖71
¶ 33 In Tellado v. IndyMac Mortgage Services, the plaintiffs
brought a claim against a bank that had purchased a failed
institution in receivership.72 Although the suit was filed against
the purchasing bank, the claims related to an act or omission of
the bank that was the target of FDIC receivership.73 The Third
Circuit Court of Appeals held that because the plaintiffs‘ claims
were wholly dependent upon the wrongdoing of the financial
institution that was in receivership, the plaintiffs‘ claims fell
within the ambit of FIRREA.74
¶ 34 In the present case, Plaintiffs filed claims against the
Bank. The claims included allegations of improper acceptance of
unauthorized signatures, negligence, and liability under a theory
of respondeat superior. These claims stemmed from losses
suffered due to embezzlement by a Bank employee. Thus, the
claims relate to an ―act or omission‖ of the Bank—an institution
for which the FDIC was appointed receiver—or the Bank‘s
employee. The fact that Plaintiffs sought payment from the Bond
is irrelevant. The Plaintiffs‘ claims are squarely within the ambit
of FIRREA.
C. The Bank’s Tender of Defense did not Deprive
the Bank or FDIC of the Authority to
Resolve Plaintiffs’ Claims
¶ 35 Plaintiffs next argue that their claims are not susceptible
to resolution through FIRREA‘s administrative claims review
process because the FDIC tendered defense of the claim to

69Tellado v. IndyMac Mortg. Servs., 707 F.3d 275, 279–81 (3d Cir.
2013).
70 Decrosta, 767 F. Supp. at 696.
71 Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1212 (9th
Cir. 2012).
72 707 F.3d at 277–78.
73 Id. at 280.
74 Id. at 281.

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Opinion of the Court

BancInsure and thus lost authority to resolve the claims.
Plaintiffs assert that their ―claims are in reality against BancInsure,
which made itself the real party in interest by accepting the tender
of AWB‘s defense.‖ We disagree and hold that the tender of
defense did not deprive the Bank or the FDIC of the ability to
resolve Plaintiffs‘ claims through the administrative claims review
process.
¶ 36 Under the typical liability insurance policy, the insurer
has two duties.75 The sole source of these duties is the insurance
contract.76 First, an ―insurer has a duty to indemnify the insured,
up to the limits of the policy, for the payment of a judgment based
on a liability claim which is covered.‖77 Second, the insurer ―has a
duty to defend the insured against a liability claim which is
covered or which is potentially covered.‖78 These are two distinct
duties, with ―an insurer‘s duty to defend [being] broader than its
duty to indemnify.‖79 This is because ―[t]he duty to indemnify [is]
determined by the underlying facts of the case, [while] the duty to
defend [is] controlled by the allegations in the complaint against
the insured.‖80 The duty to defend is a continuing duty81 that ―is
triggered when the insured tenders the defense of an action
against it which is potentially within the policy coverage.‖82 If the

75 Mesmer v. Md. Auto. Ins. Fund, 725 A.2d 1053, 1061 (Md.
1999).
76 Id.
77 Id.
78 Id.
79Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 133
(Utah 1997).
80 Fire Ins. Exchange v. Estate of Therkelsen, 2001 UT 48, ¶ 23, 27
P.3d 555 (first and third alterations in original) (internal quotation
marks omitted).
81 Montrose Chem. Corp. v. Superior Court, 861 P.2d 1153, 1157
(Cal. 1993).
82 Solo Cup Co. v. Fed. Ins. Co., 619 F.2d 1178, 1183 (7th Cir.
1980) (noting the contrast with the indemnity obligation, which
―matures only when the insured becomes obligated to pay by
reason of liability imposed by law‖); see also Montrose Chem. Corp.,
con‘t.
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 SUMMERHAZE v. FDIC
Opinion of the Court

―underlying complaint alleges any facts or claims that might fall
within the ambit of the policy,‖ the insurer must offer a defense.83
¶ 37 One of the purposes of tendering a defense is notice. A
tender of defense allows an insurer to appear and defend the
insured on claims where the insured may ultimately seek to hold
the insurer liable.84 Although a tender of defense allows the
insurer to appear and defend the insured, a tender of defense does
not change the real party in interest,85 and Plaintiffs have
provided no authority to the contrary. If an insurer has notice of a
claim against an insured, and ―has been afforded an opportunity
to appear and defend,‖ regardless of whether the insurer actually
appears, any judgment against the insured will also conclusively
bind the insurer.86 Failure to tender a defense ―simply changes
the burden of proof and imposes on the [insured] the necessity of
again litigating and establishing‖ that it is entitled to indemnity
from the insurer. 87 Thus, without a tender of defense, an insurer
may challenge its liability for the judgment, contest the amount of

861 P.2d at 1157 (noting the duty to defend ―aris[es] on tender of
defense and last[s] until the underlying lawsuit is concluded‖);
Hill v. Okay Constr. Co., 252 N.W.2d 107, 121 (Minn. 1977) (noting
that tender of defense is generally a condition precedent to
obtaining indemnification for fees incurred in the defense of a
claim which is the responsibility of another party).
83 Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294,
301 (Colo. 2003) (en banc); see also Ledford v. Gutoski, 877 P.2d 80,
83 (Or. 1994) (en banc) (―The insurer has a duty to defend if the
complaint provides any basis for which the insurer provides
coverage.‖ (emphasis in original)).
84 See 42 C.J.S. Indemnity § 48 (2014).
85 See Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 164
(Minn. 1986); Hermes v. Markham, 60 N.W.2d 267, 272 (N.D. 1953)
(holding that an insured was the real party in interest despite the
fact that the insured had assigned his claim to his insurer).
86Hill v. Joseph T. Ryerson & Son, Inc., 268 S.E.2d 296, 301–02
(W. Va. 1980) (internal quotation marks omitted).
87 42 C.J.S. Indemnity § 48 (2013).

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 Cite as: 2014 UT 28
Opinion of the Court

damages, or set forth any other available defense that the insured
neglected to make.88
¶ 38 Once presented with a tender of defense, an insurer that
believes it is not liable for coverage has two options. The insurer
may either ―protect its interests through a declaratory judgment
proceeding‖ asking the court to determine coverage under an
insurance policy,89 or it may ―defend the suit under a reservation
of its right to seek repayment later.‖90 However, an insurer ―may
not refuse the tendered defense of an action unless a comparison
of the policy with the underlying complaint shows on its face that
there is no potential for coverage.‖91 An insurer ―that refuses a
tender of defense by its insured takes the risk not only that it may
eventually be forced to pay the insured‘s legal expenses but also
that it may end up having to pay for a loss that it did not insure
against.‖92
¶ 39 In the present case, the Bank and the FDIC triggered
BancInsure‘s duty to defend by tendering the defense of Plaintiffs‘
complaint to BancInsure. The Bank and the FDIC sought a
declaratory judgment regarding coverage under the Bond for the
embezzlement by Ms. Padlo. The declaratory judgment action
was stayed because coverage would not be required unless
Plaintiffs received a judgment against the Bank or the FDIC. The
tender of defense did not affect the rights of the Bank or the FDIC,
nor did it change the real party in interest. The tender of defense
merely triggered the duty of defense under the Bond. The Bank

88 See Joseph T. Ryerson & Son, Inc., 268 S.E.2d at 302.
89Hartford Accident & Indem. Co. v. Gulf Ins. Co., 776 F.2d 1380,
1382 (7th Cir. 1985); see also Gen. Agents Ins. Co. of Am., Inc. v.
Midwest Sporting Goods Co., 828 N.E.2d 1092, 1102 (Ill. 2005)
(―Where the insurance carrier is uncertain over insurance
coverage for the underlying claim, the proper course is for the
insurance carrier to tender a defense and seek a declaratory
judgment as to coverage under the policy.‖ (internal quotation
marks omitted)).
90 Gulf Ins. Co., 776 F.2d at 1382.
91 Solo Cup Co., 619 F.2d at 1183.
92 Hamlin Inc. v. Hartford Accident & Indem. Co., 86 F.3d 93, 94
(7th Cir. 1996).

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 SUMMERHAZE v. FDIC
Opinion of the Court

and the FDIC were still actively involved in the defense of the
claims. Therefore, the Bank and the FDIC retained authority to
resolve the claims.
III. THE DISMISSAL OF PLAINTIFFS‘ LAWSUIT
DOES NOT VIOLATE DUE PROCESS UNDER THE
UNITED STATES OR UTAH CONSTITUTION
¶ 40 Plaintiffs argue that the dismissal of their complaint
denied them due process of law under both the United States and
Utah Constitution. Plaintiffs claim that the FDIC sought to
―ambush‖ them by ―awaiting expiration of the administrative
deadline‖ in order to dispose of their claim ―without
consideration of the merits,‖ and deprive them of their
opportunity to be heard.
¶ 41 The Due Process Clause prevents ―denying potential
litigants use of established adjudicatory procedures, when such an
action would be the equivalent of denying them an opportunity to
be heard upon their claimed right[s].‖93 Essentially, due process
requires ―notice and an opportunity to be heard.‖94 FIRREA
clearly spells out when and how judicial review is available.95 It
expressly provides for de novo judicial review, but only after
exhaustion of the administrative procedures.96 ―Since the
language of the statute expressly provides for judicial review after
exhaustion of the administrative procedures, [Plaintiffs] cannot
prevail on [their] claim that FIRREA‘s administrative procedures
deny [them] due process by making judicial review unavailable,‖
because it does not.97

93Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. City Sav., F.S.B.,
28 F.3d 376, 394 (3d Cir. 1994) (alteration in original) (internal
quotation marks omitted).
94 Utah Cnty. v. Ivie, 2006 UT 33, ¶ 22, 137 P.3d 797.
95 Bueford v. Resolution Trust Corp., 991 F.2d 481, 486 (8th Cir
1993).
96 See Rosa v. Resolution Trust Corp., 938 F.2d 383, 391–92 (3d
Cir. 1991); Bueford, 991 F.2d at 486; Resolution Trust Corp. v.
Shoreview Builders, Inc., 599 A.2d 1291, 1294 (N.J. Super. Ct. App.
Div. 1991).
97 See Bueford, 991 F.2d at 486.

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Opinion of the Court

¶ 42 We recognize that the FDIC‘s denial of a claim of one
who never received notice of the administrative claims review
process would present due process concerns.98 However,
Plaintiffs did receive notice. 99 Because Plaintiffs had notice of the

claims review process, they were not deprived of due process.100
Plaintiffs failed to avail themselves of the available claims review
process, and this failure to act to protect their rights does not
amount to a violation of due process.101
CONCLUSION
¶ 43 We hold that compliance with FIRREA‘s administrative
claims review process is mandatory to vest the district court with
subject matter jurisdiction. Plaintiffs‘ claims were subject to
FIRREA‘s administrative claims review, they were required to
exhaust their administrative remedies, and no exception applied.
Plaintiffs failed to comply with the administrative exhaustion
requirements of the statute, and failure to comply with the statute
deprived the district court of subject matter jurisdiction. Finally,
we hold that the Plaintiffs were not deprived due process of the
law as it was their failure to comply with the requirements of
FIRREA that deprived them of their opportunity to be heard on
their claims. Accordingly, we affirm the decision of the district
court to dismiss Plaintiffs‘ claims for lack of subject matter
jurisdiction.

98 See Elmco Props., Inc. v. Second Nat’l Fed. Sav. Ass’n, 94 F.3d
914, 920 (4th Cir. 1996); Campbell v. FDIC, 676 F.3d 615, 621 (7th
Cir. 2012).
99 See supra Part II.A.
100 See Freeman v. FDIC, 56 F.3d 1394, 1405–06 (D.C. Cir. 1995).
101 See id. at 1406; Elmco Props., Inc., 94 F.3d at 922.

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