Meritage Homes of Nevada, Inc. v. Federal Deposit Insurance

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.