FILED
United States Court of Appeals
Tenth Circuit
November 4, 2014
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
SECURITY SERVICE FCU
(FEDERAL CREDIT UNION),
Plaintiff-Counterclaim-
Defendant - Appellant,
v.
No. 13-1133
FIRST AMERICAN MORTGAGE
FUNDING, LLC,
Defendant-Third Party Plaintiff-
Cross-Claimant-
Counterclaimant - Appellee,
KEVIN B. JORDAN;
CONSTRUCTION DISBURSEMENT
SERVICES, INC.; FIRST
AMERICAN MORTGAGE, INC.;
WILLIAM DOUGLAS DEPUY;
JEFFREY JORDAN; SHAUN
JORDAN; MARK CAMPBELL,
Defendants-Cross-Claimants-
Counterclaimants - Appellees,
STEWART TITLE OF CALIFORNIA,
INC.; LAWYERS TITLE COMPANY;
ORANGE COAST TITLE
COMPANY,
Defendants-Third-Party-
Defendants - Appellees,
TERRY ANDERSON; LINDA
ANDERSON; BRIAN L. BARKER;
SHARLENE P. BENTLEY; GERALD
CARLEO; SHARON CARLEO;
GLORIA DIXON; ROBIN
FREESTONE; MARGARET
FREESTONE; SHILOH GRIFFITHS;
DONALD GRUBB; SHARON
GRUBB; DAVID P. GUZY;
TERRANCE HAFLER; DONNA
HAFLER; RUSSELL E. HARDIMAN;
CHARLES HESS; BARBARA HESS;
KENNETH INGRAM; SIMON
KROON; JOANNA KROON; JOHN
LAING; SUSAN LAING; TRACY
LARSEN; THOMAS MITCHELL;
LOUISE HAYDEN; AKA Louise
Mitchell; DENNY NELSON; PETER
PASO; JULIE PASO; JAMES
PHILLIPS; JOANN PHILLIPS;
DOUG RANGLACK; LOUIS
SASSALI; JOANN MARGULIES
SMITH-SUGGS; SHELIAH A.
WILLIAMS; BENJAMIN B. WONG;
PUA’ALA WONG,
Third-Party-Defendants,
and
NEW CENTURY BUILDERS, INC.;
KENNETH E. NORTH; PARADISE
VIEW RANCH MIRAGE, LLC;
GILGER HOMES, LLC, KIRK
GILGER; SUNDANCE MORTGAGE;
THE ARTISAN GROUP, LLC, DBA,
Artisan Development Group; EHLINE
CO.,
Defendants-Cross-Claim
Defendants.
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NATIONAL CREDIT UNION
ADMINISTRATION, as liquidating
agent for New Horizons Community
Credit Union,
Amicus Curiae.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 08-CV-00955-WYD-CBS)
Austin D. Garner, Garner Law Office, Petaluma, California (Henry A. Cirillo and
Rachel M. Dollar of Smith, Dollar, PC, Santa Rosa, California, with him on the
briefs), for the Plaintiff-Appellant.
Alan D. Sweetbaum, Sweetbaum, Sands, Anderson, P.C., Denver, Colorado, and
Jeffrey M. Lippa, Greenberg Traurig, LLP, Denver, Colorado (Joshua D.
McMahon of Sweetbaum, Sands, Anderson, P.C., Denver, Coloardo, and William
Depuy, Denver, Colorado, with them on the brief), for the Appellees.
Donald D. Allen and Devi C. Yorty of Markus, Williams, Young & Zimmermann,
LLC, Denver, Colorado; John K. Ianno, Associate General Counsel, National
Credit Union Administration, Alexandria, Virginia; and Robert Roach, Senior
Trial Attorney, Asset Management and Assistance Center, National Credit Union
Administration, Austin, Texas, filed a brief for Amicus Curiae.
Before KELLY, BACHARACH, and PHILLIPS, Circuit Judges.
KELLY, Circuit Judge.
Plaintiff-Appellant, Security Service Federal Credit Union (“SSFCU”),
appeals from the district court’s summary judgment in favor of Defendants-
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Appellees, including First American Mortgage Funding, LLC (“FAM”) and First
American Mortgage, Inc., (together, the “FAM Defendants”); and Stewart Title of
California, Inc., Orange Coast Title Company of Southern California, and
Lawyers Title Company (together, the “Closing Agents”). 11 Aplt. App. 3003;
Sec. Serv. Fed. Credit Union v. First Am. Mortg. Funding, No.
08–cv–00955–WYD–CBS, 2013 WL 1151617 (D. Colo. Mar. 20, 2013). The
district court held that SSFCU was not a proper plaintiff to assert the claims set
forth in its Fourth Amended Complaint and dismissed those claims with
prejudice. Sec. Serv., 2013 WL 1151617 at *6. Our jurisdiction arises under 28
U.S.C. § 1291, 1 and we reverse.
Background
In August 2003, SSFCU’s predecessor in interest, New Horizons
Community Credit Union (“New Horizons”), entered into a Funding Service
Agreement with FAM, under which FAM originated 26 loans to individual
borrowers for the purchase and construction of residential properties in Colorado
1
Although we asked for briefing on the finality of the district court’s
amended final judgment, we agree with the parties that the district court intended
to and did dismiss the underlying case in its entirety. See Sarkar v. McCallin,
636 F.3d 572, 574–75 (10th Cir. 2011) (treating the judgment as if it were
amended to reflect the district court’s clearly expressed intention). Certain claims
which the district court did not address were wholly contingent upon SSFCU
prevailing in the district court.
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and California. The Closing Agents performed closing procedures. Briefly,
SSFCU contends that the FAM Defendants and Closing Agents, through a variety
of acts and omissions, wrongfully induced New Horizons to fund these loans to
straw borrowers. SSFCU further contends that the loan transactions were a
vehicle to misappropriate some $14 million in loan proceeds.
This appeal concerns whether SSFCU has the right to pursue those claims
pursuant to a 2007 Purchase and Assumption Agreement (“PAA”) between
SSFCU and the National Credit Union Administration (“NCUA”), as the
liquidating agent for New Horizons. 5 Aplt. App. 1281–92. Both the NCUA and
SSFCU contend that under the terms of the PAA, the NCUA transferred the
“right, title and interest,” 5 Aplt. App. 1285, ¶ 5, in the loans and various other
assets to SSFCU, and this includes the claims at issue. As the parties to the
agreement, the NCUA and SSFCU are united in their understanding that a transfer
of “the right, title and interest” in the loans was intended to transfer any and all
claims relating to those loans. 5 Aplt. App. 1317–18, ¶ 4; Aplt. Br. 28–30;
Amicus (NCUA) Br. 12–13.
On the other hand, the PAA also provides that “except as otherwise
specifically provided” the NCUA retained the “the sole right to pursue
claims . . . and to recover any and all losses incurred by the Liquidating Credit
Union prior to liquidation.” 5 Aplt. App. 1285, ¶ 6. According to the
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Defendants, absent a valid assignment from the NCUA, SSFCU cannot sue on the
claims contained in its Fourth Amended Complaint. Aplee. Br. 16.
The district court agreed with the Defendants. Relying upon the titles of
various provisions in the PAA, 2 the district court reasoned that the “right, title
and interest” language dealt exclusively with the transfer of assets, and the “sole
right to pursue claims” language dealt exclusively with the retention of claims
arising prior to liquidation. Sec. Serv., 2013 WL 1151617 at *3. In response to
SSFCU’s contention that the PAA transferred to it all the books and records
necessary to pursue these “claims,” the district court noted that it also granted the
NCUA unconditional access to such documents, and required SSFCU to cooperate
in any investigation of New Horizons and assist with any bond claims. Id., 2013
WL 1151617 at *4–5. According to the district court, the NCUA retained all
claims associated with New Horizons’ losses, it could rely upon the cooperation
of SSFCU in pursuing those claims, and, therefore, SSFCU was not a proper party
to pursue those claims. Id., 2013 WL 1151617 at *5. The district court did not
address an affidavit from the NCUA (through its agent) that cast considerable
doubt on its interpretation. 5 Aplt. App. 1317–18.
Discussion
2
The PAA provides that section headings are for convenience and are not
to affect the “meaning or interpretation” of the PAA. 5 Aplt. App. 1291, ¶ 17(b).
6
On appeal, we review de novo the district court’s grant of summary
judgment to determine whether any disputed material facts existed and whether
the Defendants were entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a); Holmes v. Colo. Coal. for the Homeless Disability Plan, 762 F.3d 1195,
1199 (10th Cir. 2014). In this case, the PAA clearly provides that federal
statutory, case and common law controls, and, in its absence, Colorado law. 5
Aplt. App. 1292, ¶ 19(a). Although the Defendants contend that California’s law
of assignment applies, Defendants must rely upon the PAA in support of their
theory, and the PAA should be interpreted in conformity with its choice-of-law
provision. See 11 Aplt. App. 2889.
We think this case is easily resolved on the basis that the Defendants, who
are neither parties to nor third-party beneficiaries of the PAA, lack standing to
impose their interpretation of it on the parties who are in agreement as to its
meaning.
JP Morgan Chase Bank, N.A. v. First American Title Insurance Company,
795 F. Supp. 2d 624 (E.D. Mich. 2011), aff’d 750 F.3d 573 (6th Cir. 2014),
considered an analogous situation. There, the Federal Deposit Insurance
Corporation (“FDIC”), as receiver for Washington Mutual (“WaMu”), sold the
majority of WaMu’s assets, including a residential loan, to JPMorgan Chase Bank
(“Chase”) pursuant to a PAA. Chase sued First American for breach of contract
and fraud on the underlying title policy it had acquired under the PAA. The FDIC
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intervened and sued First American to enforce a related closing protection letter
(“CPL”) issued to WaMu. The FDIC and Chase stipulated that, under the PAA,
Chase had not acquired the CPL claim. First American argued that the FDIC
lacked standing to assert a claim under the CPL because the FDIC ostensibly sold
the CPL claim to Chase when it conveyed the title policy. Based upon its reading
of state law and the stipulation between the FDIC and Chase, the district court
held that First American could not escape “the well-established rule that a
stranger to a contract has no standing to challenge the parties’ mutual
understanding of their own contract.” Id. at 632.
On appeal, a Sixth Circuit panel concluded that the district court should
have relied upon federal law to reach the same result because the PAA had a
federal choice-of-law provision. JP Morgan Chase Bank, N.A. v. First Am. Title
Ins. Co., 750 F.3d 573, 580–81 (6th Cir. 2014). The PAA also prohibited any
construction that gave non-parties rights, remedies, or claims under the PAA. Id.
at 581. Under federal law, a plaintiff or intervenor who is not a party to, or a
third-party beneficiary of, such a PAA lacks prudential standing to enforce its
terms as part of the plaintiff or intervenor’s claim. Id. (citing Hillside Metro.
Assocs. v. JP Morgan Chase Bank, Nat’l Assoc., 747 F.3d 44, 48–50 (2d Cir.
2014) (applying federal common law)). The Sixth Circuit applied this reasoning
“to a defendant who attempts to defend against a claim by asserting a legal right
belonging to a third party.” Id. at 580–81. “Because First American is neither a
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party to nor a third-party beneficiary of the [PAA], it lacks prudential standing to
challenge the FDIC’s and Chase’s understanding of their own contract.” Id. at
582.
We agree with that rationale. The Defendants are neither parties to (or in
privity with any party to) nor third-party beneficiaries of the PAA. The PAA
provides that “[n]othing expressed or referred to herein is intended or shall be
construed to give any person other than the Assuming Credit Union [SSFCU] and
the Liquidating Agent [NCUA] any legal or equitable right, remedy, or claim.” 5
Aplt. App. 1292, ¶ 18. It further provides that “[a]ll conditions and provisions of
this Agreement are for the sole benefit of the Assuming Credit Union [SSFCU]
and the Liquidating Agent.” Id. The PAA reflects no intent to benefit the
Defendants, let alone allow them to enforce it. Essentially, the Defendants are
seeking to enforce a right they contend the NCUA has—an exclusive right to the
claims asserted by SSFCU 3—which is contrary to the doctrine of prudential
standing. JP Morgan Chase, 750 F.3d at 581; Deutsche Bank Nat’l Trust Co. v.
FDIC, 717 F.3d 189, 194 (D.C. Cir. 2013).
Urging us to reject the Sixth Circuit’s holding, Defendants argue that (1)
the NCUA is not a party to this action, (2) there is no stipulation between SSFCU
and the NCUA concerning the right to pursue claims, (3) the FDIC and the NCUA
3
As noted, the NCUA through its agent and amicus brief, rejects such an
interpretation of the PAA.
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are regulated under different statutory schemes, (4) SSFCU bears the burden of
demonstrating standing, and (5) this court is not bound by precedent of other
circuits.
We are not persuaded. Our result does not turn on the NCUA’s status as a
party to the underlying action. SSFCU and the NCUA are in agreement
concerning the right to pursue claims under the PAA; no evidence or argument
suggests otherwise. The fact that the FDIC and NCUA are regulated under
different statutory schemes is not relevant given the language of the PAA and
prudential standing. Finally, though we are not bound by the precedent of the
Sixth Circuit, we are persuaded that it has analyzed this point correctly.
REVERSED.
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