[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________ FILED U.S. COURT OF APPEALS No. 97-5178 ________________________ ELEVENTH CIRCUIT 09/10/98 D. C. Docket No. 97-8434-cv-KLR THOMAS K. KAHN CLERK NATIONAL PARTNERSHIP INVESTMENT CORP., a California Corporation, as the managing general partner of National Corporate Tax Credit Fund V, a California limited partnership and National Tax Credit Management Corp. I, a California Corporation,
Plaintiff-Appellee,
versus
NATIONAL HOUSING DEVELOPMENT CORPORATION, a Florida non-profit corporation,
Defendant-Appellant. ________________________
Appeal from the United States District Court for the Southern District of Florida _________________________
(September 10, 1998)
Before HATCHETT, Chief Judge, BLACK, Circuit Judge, and KRAVITCH, Senior Circuit Judge.
BLACK, Circuit Judge: Defendant-Appellant National Housing Development Corp. (NHDC) appeals
the district court's order appointing a receiver pendente lite in this foreclosure action.
The appeal raises two narrow questions of law: (1) whether the appointment of a
receiver by a federal court exercising diversity jurisdiction is governed by state or
federal law; and (2) what standard of review this Court should apply in reviewing the
appointment of a receiver. We conclude that federal law governs the appointment of
a receiver and that the decision of the district court should be reviewed for an abuse
of discretion. Applying these principles to the present case, we affirm the order of the
district court.
I. BACKGROUND
NHDC is the operating general partner of Mangonia Residence I, Ltd. (“the
Partnership”). The Partnership is a Florida limited partnership that was organized in
1994 to build and lease a 252-unit apartment complex for low income elderly persons
in West Palm Beach, Florida.
Plaintiff-Appellee National Partnership Investment Corp. (NAPICO) is the
managing general partner of National Corporate Tax Credit Fund V (NCTCV).
NCTCV is a limited partner in the Partnership with a 98.9% ownership interest.
Plaintiff-Appellee National Tax Credit Management Corp. I (NTC) is a special limited
2 partner in the Partnership with a 0.1% interest. NHDC owns the remaining 1%
interest in the Partnership.
NAPICO and NTC (Appellees) brought this diversity action against NHDC to
foreclose their security interest in NHDC's 1% share of the Partnership. Appellees
also filed an emergency motion to oust NHDC as the operating general partner and to
appoint a receiver to take charge of the Partnership. The district court issued an
interlocutory order appointing a receiver pendente lite. NHDC appeals that order
pursuant to 28 U.S.C. § 1292(a)(2).
II. ANALYSIS
NHDC contends that the appointment of a receiver in a diversity case is
governed by state substantive law in accordance with Erie Railroad Co. v. Tompkins,
304 U.S. 64, 58 S. Ct. 817 (1938). NHDC favors application of Florida law in the
present case because the standards governing the appointment of a receiver under
Florida law are arguably more stringent than under federal law. Compare McAllister
Hotel, Inc. v. Schatzberg, 40 So. 2d 201, 202-03 (Fla. 1949) (emphasizing the need
to show insolvency or fraud before a receiver will be appointed), with Consolidated
Rail Corp. v. Fore River Ry. Co., 861 F.2d 322, 326-27 (1st Cir. 1988) (discussing six
factors federal courts may consider in determining whether to appoint a receiver).
3 NHDC further asserts that this Court should conduct a de novo review of the district
court's decision to appoint a receiver.
Appellees argue that federal law governs the appointment of a receiver in a
diversity case. Appellees also assert that this Court should review the decision to
appoint a receiver for an abuse of discretion.
A. What Law Governs
As the First Circuit noted in Chase Manhattan Bank, N.A. v. Turabo Shopping
Center, Inc., 683 F.2d 25, 26 (1st Cir. 1982), “[m]ost federal court decisions dealing
with the appointment of a receiver pendente lite appear to apply federal law without
discussion.” Of those circuits that have directly addressed the issue, each has held
that the appointment of a receiver in a diversity action is governed by federal law. See
Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.3d 314, 316 (8th Cir. 1993);
Turabo, 683 F.2d at 26; see also Resolution Trust Corp. v. Fountain Circle Assocs.
Ltd. Partnership, 799 F. Supp. 48, 50 (N.D. Ohio 1992); New York Life Ins. Co. v.
Watt West Inv. Corp., 755 F. Supp. 287, 289-90 (E.D. Cal. 1991). Commentators
generally approve of the conclusion reached by these courts. See 12 Charles Alan
Wright et al., Federal Practice and Procedure § 2983, at 33-35 (2d ed. 1997); 13
James Wm. Moore et al., Moore's Federal Practice ¶ 66.09 (3d ed. 1998).
4 The conclusion that federal law governs the appointment of receivers is based
on several considerations. First and foremost, the appointment of a receiver in equity
is not a substantive right; rather, it is an ancillary remedy which does not affect the
ultimate outcome of the action. Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 497,
43 S. Ct. 454, 456 (1923). The conclusion that federal law governs the appointment
of a receiver thus does not conflict with the Erie doctrine's requirement that state law
apply to matters of substance. New York Life, 755 F. Supp. at 291; 12 Wright § 2983,
at 34; 13 Moore ¶ 66.09; see also Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S.
667, 674, 70 S. Ct. 876, 880 (1950) (noting that, in a diversity case, a declaratory
remedy may be given by a federal court even if that remedy is unavailable in state
court); Guaranty Trust Co. of New York v. York, 326 U.S. 99, 65 S. Ct. 1464 (1945)
(stating that the equity power of a federal court exercising diversity jurisdiction cannot
be equated with state law under the Erie doctrine).
5 Second, Federal Rule of Civil Procedure 661 and the accompanying Advisory
Committee's Note2 assert the primacy of federal law in the practice of federal
receiverships. New York Life, 755 F. Supp. at 289-90, 12 Wright § 2983, at 35. Thus,
to the extent Rule 66 dictates what principles should be applied to federal
receiverships, courts must comply with the Rule even in the face of differing state law.
See Hanna v. Plumer, 380 U.S. 460, 471, 85 S. Ct. 1136, 1144 (1965) (stating that in
a diversity case, “[w]hen a situation is covered by one of the Federal Rules, . . . the
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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________ FILED U.S. COURT OF APPEALS No. 97-5178 ________________________ ELEVENTH CIRCUIT 09/10/98 D. C. Docket No. 97-8434-cv-KLR THOMAS K. KAHN CLERK NATIONAL PARTNERSHIP INVESTMENT CORP., a California Corporation, as the managing general partner of National Corporate Tax Credit Fund V, a California limited partnership and National Tax Credit Management Corp. I, a California Corporation,
Plaintiff-Appellee,
versus
NATIONAL HOUSING DEVELOPMENT CORPORATION, a Florida non-profit corporation,
Defendant-Appellant. ________________________
Appeal from the United States District Court for the Southern District of Florida _________________________
(September 10, 1998)
Before HATCHETT, Chief Judge, BLACK, Circuit Judge, and KRAVITCH, Senior Circuit Judge.
BLACK, Circuit Judge: Defendant-Appellant National Housing Development Corp. (NHDC) appeals
the district court's order appointing a receiver pendente lite in this foreclosure action.
The appeal raises two narrow questions of law: (1) whether the appointment of a
receiver by a federal court exercising diversity jurisdiction is governed by state or
federal law; and (2) what standard of review this Court should apply in reviewing the
appointment of a receiver. We conclude that federal law governs the appointment of
a receiver and that the decision of the district court should be reviewed for an abuse
of discretion. Applying these principles to the present case, we affirm the order of the
district court.
I. BACKGROUND
NHDC is the operating general partner of Mangonia Residence I, Ltd. (“the
Partnership”). The Partnership is a Florida limited partnership that was organized in
1994 to build and lease a 252-unit apartment complex for low income elderly persons
in West Palm Beach, Florida.
Plaintiff-Appellee National Partnership Investment Corp. (NAPICO) is the
managing general partner of National Corporate Tax Credit Fund V (NCTCV).
NCTCV is a limited partner in the Partnership with a 98.9% ownership interest.
Plaintiff-Appellee National Tax Credit Management Corp. I (NTC) is a special limited
2 partner in the Partnership with a 0.1% interest. NHDC owns the remaining 1%
interest in the Partnership.
NAPICO and NTC (Appellees) brought this diversity action against NHDC to
foreclose their security interest in NHDC's 1% share of the Partnership. Appellees
also filed an emergency motion to oust NHDC as the operating general partner and to
appoint a receiver to take charge of the Partnership. The district court issued an
interlocutory order appointing a receiver pendente lite. NHDC appeals that order
pursuant to 28 U.S.C. § 1292(a)(2).
II. ANALYSIS
NHDC contends that the appointment of a receiver in a diversity case is
governed by state substantive law in accordance with Erie Railroad Co. v. Tompkins,
304 U.S. 64, 58 S. Ct. 817 (1938). NHDC favors application of Florida law in the
present case because the standards governing the appointment of a receiver under
Florida law are arguably more stringent than under federal law. Compare McAllister
Hotel, Inc. v. Schatzberg, 40 So. 2d 201, 202-03 (Fla. 1949) (emphasizing the need
to show insolvency or fraud before a receiver will be appointed), with Consolidated
Rail Corp. v. Fore River Ry. Co., 861 F.2d 322, 326-27 (1st Cir. 1988) (discussing six
factors federal courts may consider in determining whether to appoint a receiver).
3 NHDC further asserts that this Court should conduct a de novo review of the district
court's decision to appoint a receiver.
Appellees argue that federal law governs the appointment of a receiver in a
diversity case. Appellees also assert that this Court should review the decision to
appoint a receiver for an abuse of discretion.
A. What Law Governs
As the First Circuit noted in Chase Manhattan Bank, N.A. v. Turabo Shopping
Center, Inc., 683 F.2d 25, 26 (1st Cir. 1982), “[m]ost federal court decisions dealing
with the appointment of a receiver pendente lite appear to apply federal law without
discussion.” Of those circuits that have directly addressed the issue, each has held
that the appointment of a receiver in a diversity action is governed by federal law. See
Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.3d 314, 316 (8th Cir. 1993);
Turabo, 683 F.2d at 26; see also Resolution Trust Corp. v. Fountain Circle Assocs.
Ltd. Partnership, 799 F. Supp. 48, 50 (N.D. Ohio 1992); New York Life Ins. Co. v.
Watt West Inv. Corp., 755 F. Supp. 287, 289-90 (E.D. Cal. 1991). Commentators
generally approve of the conclusion reached by these courts. See 12 Charles Alan
Wright et al., Federal Practice and Procedure § 2983, at 33-35 (2d ed. 1997); 13
James Wm. Moore et al., Moore's Federal Practice ¶ 66.09 (3d ed. 1998).
4 The conclusion that federal law governs the appointment of receivers is based
on several considerations. First and foremost, the appointment of a receiver in equity
is not a substantive right; rather, it is an ancillary remedy which does not affect the
ultimate outcome of the action. Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 497,
43 S. Ct. 454, 456 (1923). The conclusion that federal law governs the appointment
of a receiver thus does not conflict with the Erie doctrine's requirement that state law
apply to matters of substance. New York Life, 755 F. Supp. at 291; 12 Wright § 2983,
at 34; 13 Moore ¶ 66.09; see also Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S.
667, 674, 70 S. Ct. 876, 880 (1950) (noting that, in a diversity case, a declaratory
remedy may be given by a federal court even if that remedy is unavailable in state
court); Guaranty Trust Co. of New York v. York, 326 U.S. 99, 65 S. Ct. 1464 (1945)
(stating that the equity power of a federal court exercising diversity jurisdiction cannot
be equated with state law under the Erie doctrine).
5 Second, Federal Rule of Civil Procedure 661 and the accompanying Advisory
Committee's Note2 assert the primacy of federal law in the practice of federal
receiverships. New York Life, 755 F. Supp. at 289-90, 12 Wright § 2983, at 35. Thus,
to the extent Rule 66 dictates what principles should be applied to federal
receiverships, courts must comply with the Rule even in the face of differing state law.
See Hanna v. Plumer, 380 U.S. 460, 471, 85 S. Ct. 1136, 1144 (1965) (stating that in
a diversity case, “[w]hen a situation is covered by one of the Federal Rules, . . . the
court has been instructed to apply the Federal Rule, and can refuse to do so only if the
Advisory Committee, this Court, and Congress erred in their prima facie judgment
that the Rule in question transgresses neither the terms of the Enabling Act nor
constitutional restrictions.”); see also 12 Wright § 2983, at 34 (stating that the
1 Federal Rule of Civil Procedure 66 provides: An action wherein a receiver has been appointed shall not be dismissed except by order of the court. The practice in the administration of estates by receivers or by other similar officers appointed by the court shall be in accordance with the practice heretofore followed in the courts of the United States or as provided in rules promulgated by the district courts. In all other respects the action in which the appointment of a receiver is sought or which is brought by or against a receiver is governed by these rules. 2 The Advisory Committee's Note indicates that “[t]he last sentence added to Rule 66 assures the application of the rules in all matters except actual administration of the receivership estate itself.”
6 conclusion that federal law governs the appointment of a receiver is consistent with
Hanna).3
We therefore hold that federal law governs the appointment of a receiver by a
federal court exercising diversity jurisdiction.
B. Standard of Review
Courts and commentators agree not only that federal law governs the
appointment of a receiver, but also that a court of appeals should review a district
court's decision to appoint a receiver for an abuse of discretion. See Aviation Supply
Corp, 999 F.3d at 317; Lyman v. Spain, 774 F.2d 495, 497 (D.C. Cir. 1985); Turabo,
683 F.2d at 27; Mintzer v. Arthur L. Wright & Co., 263 F.2d 823, 825 (3d Cir. 1959);
13 Moore ¶ 66.07[3]; 12 Wright § 2983, at 30-31. We agree with these authorities
and hold that the decision to appoint a receiver should be reviewed for an abuse of
discretion.
After reviewing the record and briefs in this case, we conclude that the district
court did not abuse its discretion in appointing a receiver pendente lite.
III. CONCLUSION
3 NHDC contends that in Strickland v. Peters, 120 F.3d 53, 56 (5th Cir. 1941), this Court concluded state law should govern the appointment of a receiver. The Strickland Court, however, never directly addressed whether state or federal law applies to the appointment of a receiver. Any such statement or implication drawn from Strickland is therefore dicta and not controlling.
7 The appointment of a receiver by a federal court exercising diversity
jurisdiction is governed by federal law. This Court reviews the decision to appoint a
receiver for an abuse of discretion. In this case, the district court did not abuse its
AFFIRMED.