Swygert, Chief Judge, Castle, Senior Circuit Judge, and Pell, Circuit Judge.
This appeal presents two issues: one concerning jurisdiction of a suit brought by the Federal Savings and Loan Insurance Corporation as the receiver of a state-chartered, defunct savings and loan association; the other concerning the application of the doctrine of abstention.
In April 1968 Lawn Savings and Loan Association, located in Chicago and organized under the laws of Illinois, found itself in serious financial difficulty and unable to continue operations. The Commissioner of Savings and Loan Associations for the State of Illinois immediately took custody of the association pursuant to the authority granted him under state statute. After the appointment and resignation of an interim receiver, Federal Savings and Loan Insurance Corporation (FSLIC) was appointed receiver of the association in a liquidation proceeding ordered by the Circuit Court of Cook County under the applicable Illinois statute.
In July 1969 FSLIC filed this action in the district court as receiver of Lawn Savings, demanding several million dollars damages from the defendants who are either former officers, directors or employees of Lawn Savings or borrowers or contractors connected with construction loans made by the association. The complaint, after reciting that FSLIC had been appointed receiver of Lawn Savings and had paid in excess of $65,000,000 to the association's depositors after its failure, charged that the association had been defrauded because of a conspiracy among the defendants and others which had been carried out in violation of the Federal Home Loan Bank Board's "single borrower" regulation, 12 CFR § 563.9-3, and the standards of conduct required by 18 U.S.C. § 657 (misapplication of funds of an association insured by FSLIC) and 18 U.S.C. § 1006 (conflicts of interest within, and false statements to, an association insured by FSLIC). The complaint also alleged misconduct in violation of the common law of Illinois.
The district court, initially and sua sponte, ordered the case transferred to the Circuit Court of Cook County, but subsequently and also sua sponte, dismissed the action on the ground that the federal court should abstain from exercising jurisdiction so as to avoid interfering with the orderly expedition of the state court liquidation proceeding. From the dismissal FSLIC appeals.
Although the district court denied motions to dismiss for want of jurisdiction, defendants reassert their jurisdictional challenge in this appeal. Since this is the more basic issue, it shall be treated first.
In determining whether the district court may properly exercise jurisdiction over the subject matter of this suit, consideration must first be given to 28 U.S.C. § 1345 which provides:
Except as otherwise provided by Act of Congress, the district court shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress. (Emphasis added.)
The term "agency" is defined in 28 U.S.C. § 451 as including "any corporation in which the United States has a proprietary interest." Thus the question is narrowed to whether FSLIC has expressly been authorized to sue by Congress. Such authorization is found in two sections of the statute governing the powers and operations of this federal agency. Title 12 U.S.C. § 1725(c) (4) provides that the corporation "shall have power * * * to sue and be sued * * in any court of competent jurisdiction in the United States * * *." More specifically, 12 U.S.C. § 1730(k) (1) provides in part, "Notwithstanding any other provision of law, (A) the Corporation shall be deemed to be an agency of the United States within the meaning of section 451 of Title 28."*fn1
With these statutory provisions in mind, there should be little question that the district court had original jurisdiction under section 1345 to entertain this action. It might be argued that the proviso contained in the latter portion of section 1730(k) (1) is applicable. We are of the view, however, that subsections (B) and (C) of section 1730(k) (1), including the proviso, relate solely to removal proceedings from state courts in actions wherein the corporation has been made a party. See Federal Savings and Loan Insurance Corp. v. Quinn, 419 F.2d 1014 (7th Cir. 1969).
In arriving at our conclusion that the district court has original jurisdiction of this suit, we recognize there is a fundamental distinction between the receivership proceeding in the state court and the present action. First of all, the receivership proceeding is largely administrative in character. Under the Illinois Savings and Loan Act, Ill.Stat.Ann. ch. 32 §§ 921-927 (Smith-Hurd, 1970), the receiver is not an officer of the court; he and not the court has custody and title to the assets of the receivership. People ex rel. Knight v. O'Brien, 40 Ill.2d 354, 240 N.E.2d 686 (1968). Secondly, the receivership is an in rem or quasi in rem proceeding, concerned primarily with the liquidation and distribution of the assets of the association. On the other hand, the suit brought by FSLIC in the district court is a plenary, in personam action seeking to recapture assets allegedly siphoned off through fraudulent conduct.
The preceding paragraph is an appropriate prelude to a consideration of the second issue before us, whether the district court properly invoked the doctrine of abstention in dismissing the suit.
It appears from the record that the district judge was under the erroneous belief that an identical case was pending in the state court at the time of the dismissal. It is unclear, however, whether he had in mind the receivership proceedings as such or the appeal then pending in the Illinois Appellate Court which questioned the validity of the state court decree ordering the dissolution and liquidation of Lawn Savings. (The Illinois Appellate Court has since affirmed the decree. Hulman v. Lawn Savings and Loan Association, 122 Ill.App.2d 363, 259 N.E.2d 324 (1970).) In any event and for the ...