United States District Court, D. New Mexico
PEOPLE'S TRUST FEDERAL CREDIT UNION, Plaintiff/Counterdefendant,
NATIONAL CREDIT UNION ADMINISTRATION BOARD, in its Capacity as Liquidating Agent for Chetco Federal Credit Union, Defendant/Counterclaimant, and ALLIANT CREDIT UNION, Defendant/Intervenor.
P. Burton Charles Hughson Rodey, Dickason, Sloan, Akin &
Robb, P.A. And Dennis E. Jontz Ryan M. Walters Lewis Roca
Rothgerber Christie, LLP Attorneys for
A. Glenn Moses, Dunn, Farmer & Tuthill, P.C. And Simon W.
Hendershot, III Christy L. Martin Benjamin L. Hisey Kerr,
Hendershot & Cannon, P.C. Attorneys for
William R. Keleher Tax, Estate & Business Law, Ltd.
Attorney for the Intervenor
MEMORANDUM OPINION 
MATTER comes before the Court on the Plaintiff
People's Trust Federal Credit Union's and Defendant
National Credit Union Administration Board's Motion. The
Court held a hearing on June 26, 2017. The primary issues
are: (i) whether the Court should vacate the preliminary
injunction hearing set for June 28, 2017, to allow for
additional settlement talks; (ii) whether the Court should
stay further proceedings in this case through the date of the
new preliminary injunction hearing; and (iii) whether the
Court should continue the temporary restraining order
(“TRO”) issued, see Memorandum Opinion
and Order at 26, 2016 WL 4491635, at *12, filed August 8,
2016 (Doc. 26)(“MOO”), until after the Court
holds the preliminary injunction hearing. The Court recorded
its decision in this matter in the Order. As the Court
promised in the Order, the Court now issues a Memorandum
Opinion to explain its order. The Court denied the request to
extend the stay, because, at the hearing, the intervenor
-Alliant Credit Union (“Alliant CU”) -- did not
agree to extend the stay, and, under rules 16 and 65 of the
Federal Rules of Civil Procedure, Alliant CU has a right to
have a preliminary injunction hearing or to refuse to modify
a scheduling deadline. Accordingly, the Court did not vacate
the scheduled preliminary injunction hearing and also denied
the request to continue the TRO for largely the same reasons.
The Court thus denied the Motion.
Court described the facts leading to this case and the early
procedural history in the MOO. See Moo at 2-14, 2-16
WL 4491635, at *1-5. The case involves several financial
institutions, loans, and contracts, which the Court described
in detail in the MOO. The Court, accordingly, incorporates
the “Factual Background” and part of the
“Procedural Background” from the MOO below.
case involves numerous financial institutions, the Court will
first describe the parties before describing their
interactions with each other. It will then explain the loans
and contracts over which the parties are litigating. Finally,
the Court describes the state foreclosure proceedings that
People's Trust now seeks to settle.
Trust is a federally chartered and federally insured credit
union with its principal place of business in Houston, Texas.
See Complaint for Declaratory Judgment and to Compel
Arbitration ¶ 1, at 1, filed June 20, 2016 (Doc.
1)(“Complaint”). Until December 28, 2012, Chetco
Federal Credit Union (“Chetco CU”) was a
federally chartered and insured credit union with its
principal place of business in Brookings, Oregon.
See Complaint ¶ 2, at 2. Until December, 2012,
Chetco CU owned one-hundred percent of a credit union service
organization, Commercial Lending Services, LLC, an Oregon
limited liability company. See Complaint ¶ 3,
at 2. The National Credit Union Administration
(“NCUA”) Board is a federal entity that Congress
authorizes pursuant to 12 U.S.C. § 1787(b)(1)(A) to
liquidate insolvent credit unions. See Complaint
¶ 4, at 2. Under 12 U.S.C. § 1787, once the NCUA
Board declares a credit union insolvent and names itself the
liquidating agent, it is vested “with all the right,
title, and interest” in the insolvent credit
union's operations, and “is placed in the shoes of
the board, officials, management, and members.”
Defendant's Opposed Motion for Temporary Restraining
Order and Preliminary Injunction and Motion to Consolidate
Preliminary Injunction Hearing with Trial on the Merits, at
4, filed July 15, 2016 (Doc. 6)(“Motion for
Saddleback Ranch is real property located near Galisteo, New
Mexico. See Complaint ¶ 6, at 2-3. Saddleback
Ranch Estates, LLC, is a New Mexico limited liability company
that Dan Silvestri, a Texas resident, managed. See
Complaint ¶ 6, a 2-3. Alliant CU became the successor in
interest to Continental Federal Credit Union
(“Continental CU”) when Continental Airlines and
United Airlines merged. See Motion for TRO at 3.
The People's Trust Loans.
17, 2008, People's Trust originated two loans. Saddleback
Ranch executed a promissory note, which Silvestri guaranteed,
to support the first loan for $12, 406, 250.00, which
Saddleback Ranch secured (the “SRE Loan”).
Complaint ¶ 6, at 2-3. See Motion for TRO at 2-
3. People's Trust then issued a $3, 600, 000.00 loan for
which William P. Verkin executed a promissory note, which the
properties located in New Mexico secured (the “Verkin
Loan”). Complaint ¶ 7, at 3. See Motion
for TRO at 2-3.
The Master Loan Participation Agreement.
Trust sold ninety percent of its interests in the SRE Loan
and the Verkin Loan to Commercial Lending, a CU service
organization (“CUSO”), which was a wholly owned
subsidiary of Chetco CU until December 28, 2012. See
Complaint ¶ 8, at 3-4; Motion for TRO ¶ 2, at 3.
People's Trust contracted with Commercial Lending to dole
out participation shares among interested CUs and service the
loans. See Complaint ¶¶ 8-9, at 3-4. This
arrangement between Commercial Lending and People's Trust
was effectuated through the Master Loan Participation
Agreement dated January 28, 2009 (“Master
Agreement”). See Complaint ¶¶ 8-9,
at 3-4. See Motion for TRO at 3. The Master
Agreement contains an arbitration clause under which
Commercial Lending and People's Trust agree to submit all
disputes to arbitration with the American Arbitration
Association ("AAA"). See Complaint ¶
10, at 4.
21, 2008, Commercial Lending sold, assigned, and/or
transferred its interests in the loans to Chetco CU, but
remained the servicer on the loans. See Motion for
TRO at 3. On June 24, 2008, Chetco CU sold a 36.27% interest
in the SRE Loan to Continental CU. See Complaint
¶ 8, at 3-4; Motion for TRO at 3. As the successor in
interest to Continental CU, Alliant CU now holds that 36.27%
interest. See Motion for TRO at 3. Chetco CU retains
a 53.73% interest in the SRE Loan and a ninety-percent
interest in the Verkin Loan, with People's Trust holding
a ten-percent interest in both loans. See Complaint
¶ 8, at 3-4; Motion for TRO at 3.
The Insolvency and Foreclosure Proceedings.
around September 23, 2010, the debtor stopped making payments
on the SRE Loan. See Motion for TRO at 4. Similarly,
on or around November 1, 2010, the debtor ceased payments on
the Verkin Loan. See Motion for TRO at 4. On
September 23, 2011, the NCUA Board named itself Chetco
CU's conservator pursuant to its statutory authority
under 12 U.S.C. § § 1783-86. See Motion
for TRO at 4.
the SRE Loan and the Verkin Loan went into default,
People's Trust filed an action on October 11, 2011 in the
First Judicial Court, Santa Fe County, New Mexico. No.
D-0101-CV-2011-003141 (the “Foreclosure Action”).
See Complaint ¶ 11, at 4. People's Trust
sought to foreclose its mortgages and to recover its loans.
See Complaint ¶ 11, at 4. On December 28, 2012,
the NCUA Board named itself Chetco CU's liquidating
agent. See Complaint ¶ 4, at 2; Motion for TRO
The State Court Litigation and the Settlement
current litigation involves the underlying state court
action. Accordingly, the Court will describe the state
litigation and the proposed settlement agreement. The Court
will then describe the earlier federal litigation involved in
this case. Since 2012, both Chetco CU's liquidation and
the Foreclosure Action have progressed. In July, 2015, as
trial approached in the Foreclosure Action, disagreements
arose between the interest holders. Specifically, shortly
before the August 17, 2015, trial setting of the Foreclosure
Action, People's Trust asked the NCUA Board and Alliant
CU to approve the proposed settlement agreement in the
underlying foreclosure action between People's Trust and
the debtors in the Foreclosure Action (the “Settlement
Agreement”). See Complaint ¶¶ 12-13,
at 4-5. See Motion for TRO at 4-5. Both the NCUA
Board and Alliant CU declined. See Complaint
¶¶ 12-13, at 4-5; Motion for TRO at 4-5.
People's Trust asserted that the Settlement Agreement was
“subject either to the approval of the other
participants in the loans (NCUA Board and Alliant),
or a determination, in arbitration,
that People's has the right, pursuant to the provisions
of the Master Agreement, to settle without the approval of
the NCUA Board and Alliant.” Complaint ¶ 12, at 4
(emphasis added). See Motion for TRO at 5 (noting
that “the Settlement Agreement stated that it was
contingent upon approval of Liquidating Agent and Alliant,
or the determination that
People's Trust had the authority to enter the agreement
and bind Liquidating Agent and Alliant to the Settlement
Agreement without their approval” (emphasis in
The AAA and Oregon Proceedings.
April 4, 2016, People's Trust filed a demand for
arbitration with AAA seeking a declaratory judgment that
People's Trust -- without the other interest holders'
approval -- has the power and authority to settle the
Foreclosure Action and to perform its obligations under the
Settlement Agreement. See Complaint ¶ 13, at 5;
Motion for TRO at 5-6. People's Trust also sought a
declaration that the Settlement Agreement is reasonable.
See Motion for TRO at 5-6.
April 19, 2016, the NCUA Board filed an objection to the
arbitration with the AAA. See Motion for TRO at 6.
It objected to the arbitration on the basis that “there
is no contract with an arbitration provision by or among
all of the parties, none of the relevant contracts
provide for an arbitration administered by the AAA Denver,
Colorado office, and none set the venue in New Mexico or
Arizona.” Motion for TRO at 6-7 (emphasis in original).
April 19, 2016, the NCUA Board informed People's Trust
that it must submit the dispute regarding the authority to
settle the Foreclosure Action for resolution under the
administrative claims process pursuant to the Federal Credit
Union Act, 12 U.S.C. § § 1751-1795k
(“FCUA”), and Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, 12 U.S.C. §
§ 506, 1422a, 1422b, 1441a, 1441a-1, 1441a-2, 1441b,
1462a, 1463, 1468a to 1468c, 1790a to 1790c, 1831e to 1831k,
1833a to 1833c, 1833e, 2906, 3309, 3310, 3331 to 3356; 18
U.S.C. § § 3293, 3322; 31 USCA § 309
(“FIRREA”). In an effort to adjudicate the
arbitrability of People's Trust's claims, the NCUA
Board filed an action in the United States District Court for
the District of Oregon on May 17, 2016. See
Complaint ¶ 14, at 5; Motion for TRO at 8. The NCUA
Board sought a temporary restraining order and a preliminary
injunction preventing People's Trust from arbitrating the
dispute. See Complaint ¶ 16, at 6. The
Honorable Michael W. Mosman, Chief Judge for the District of
Oregon, dismissed the action for lack of personal
jurisdiction on June 13, 2016. See Complaint ¶
14, at 5.
Judge Mosman dismissed the Oregon case, People's Trust
preemptively filed an action in the United States District
Court for the District of New Mexico. The Court will
summarize the initial filings in this case and leading to the
TRO as background for the issues raised in this Memorandum
Opinion. The Court will then discuss the Motion and describe
the issues before the Court in this matter.