Educational Employees Credit Union v. Mutual Guar. Corp.
| Decision Date | 03 April 1995 |
| Docket Number | No. 94-2139,94-2139 |
| Citation | 50 F.3d 1432 |
| Parties | EDUCATIONAL EMPLOYEES CREDIT UNION, a Missouri Credit Union, Plaintiff-Appellee, v. MUTUAL GUARANTY CORPORATION, a Tennessee Corporation, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Appeal from the United States District Court for the Eastern District of Missouri.
Terrence Joseph Good, St. Louis, MO, argued (John Fox Arnold and Carolyn M. Kopsky, on the brief), for appellant.
Peter T. Sadowski, St. Louis, MO, argued (Henry F. Luepke, on the brief), for appellee.
Before McMILLIAN, Circuit Judge, BRIGHT and REAVLEY, * Senior Circuit Judges.
Mutual Guaranty Corporation (Tennessee Guaranty), a Tennessee mutual share guaranty association, appeals the district court's granting of summary judgment in favor of Educational Employees Credit Union (Missouri Credit Union), a Missouri credit union. Tennessee Guaranty agreed to provide Missouri Credit Union with basic share insurance, and, as a condition for its insurance, required Missouri Credit Union to deposit with Tennessee Guaranty a capital contribution and a special assessment, totaling $2,045,717.98, which the district court ordered returned to Missouri Credit Union.
The controversy in this case focuses on whether Tennessee Guaranty or Missouri Credit Union is entitled to the capital contribution and special assessment still held by Tennessee Guaranty. Relying on a Missouri statute, MO.REV.STAT. Sec. 370.362, which, among other things, requires insurers, such as Tennessee Guaranty, to refund to Missouri credit unions their capital contributions and special assessments, Missouri Credit Union brought suit seeking a refund of its capital contribution and special assessment. Tennessee Guaranty resisted recovery claiming that the Missouri statute was not enforceable over these funds but that Tennessee law controlled and provided for Tennessee Guaranty to retain the funds. Alternatively, Tennessee Guaranty contended that if Missouri law applies, Missouri law cannot deprive Tennessee Guaranty of all or part of the deposited fund by reason of the Contract Clauses of the Missouri and the United States Constitutions.
The district court granted summary judgment in favor of Missouri Credit Union requiring Tennessee Guaranty to return Missouri Credit Union's capital contribution and special assessment. On appeal, Tennessee Guaranty reasserted its claims that the district court erred in applying Missouri law, rather than Tennessee law, to the controversy, and that provisions of the Contract Clauses of the Missouri and the United States Constitutions bar the enforcement of the Missouri statute as applicable to this case.
For the reasons discussed below, we reverse the district court's granting of summary judgment in favor of Missouri Credit Union and remand for further proceedings to determine whether a Contract Clause violation exists.
We revisit the facts as set forth in the district court's opinion, reported at Educational Employees Credit Union v. Mutual Guaranty Corporation, 821 F.Supp. 1294 (E.D.Mo.1993). Tennessee Guaranty is a mutual share guaranty association created by special statutory authority under Tennessee law. Tennessee Guaranty's membership consists entirely of foreign and domestic credit unions. Its primary purpose is to guarantee the accounts of individual account holders of member credit unions.
On June 1, 1978, Tennessee Guaranty was authorized to insure Missouri credit unions, as evidenced by an agreement among the State Credit Union Share Insurance Corporation, 1 the Commissioner of the Department of Banking of the State of Tennessee, the Director of the Division of Insurance of the State of Missouri, and the Director of the Division of Credit Unions of the State of Missouri. The 1978 Agreement recognizes that, for a temporary period of time, Tennessee Guaranty would be considered as conducting the business of insurance in Missouri and that it would be subject to the provisions of Missouri's insurance laws. Tennessee Guaranty, however, would become subject to the exclusive jurisdiction, supervision, regulation, and examination of the Director of the Division of Credit Unions for the State of Missouri upon the effective date of the enactment of an amended MO.REV.STAT. Sec. 370.375. In 1982, Missouri enacted Sec. 370.375, providing that corporations, such as Tennessee Guaranty, would in fact be subject to the exclusive jurisdiction, supervision, regulation, and examination of the Director of the Division of Credit Unions for the State of Missouri.
In October 1984, Missouri Credit Union entered into an insurance contract with Tennessee Guaranty, which contained a "choice-of-law" provision stipulating that the contract would be subject to Tennessee law. Missouri Credit Union agreed to:
comply with the bylaws of the Corporation [Tennessee Guaranty], as from time to time amended. The Credit Union [Missouri Credit Union] further agree[d] that this contract may be amended by an amendment to the bylaws of the Corporation, provided the Corporation shall mail written notice of such amendment to the Credit Union at least ten (10) days prior to the effective date of such amendment.
As a credit union member, Missouri Credit Union was required to make and maintain during its membership period a capital contribution equal to 1% of the shares of its account holders. Missouri Credit Union was also subject to the payment of any special assessment. During the relevant time period, the by-laws in effect provided that the aggregate of the capital contributions and any special assessment paid by a member credit union constitute the equity interest of the member in Tennessee Guaranty and shall be considered as a part of the assets of the member. Upon joining Tennessee Guaranty, Missouri Credit Union deposited with Tennessee Guaranty $1,486,558.17 as its capital contribution.
At the time that Missouri Credit Union became a member of Tennessee Guaranty, Tennessee Guaranty's by-laws provided that upon withdrawal of a member credit union:
[t]he member credit union shall be entitled to a return of paid-in capital contributions. Provided, however, the Board of Directors of the Corporation, in the exercise of its sole discretion, may assess a penalty ("withdrawal penalty") against the withdrawing member credit union in an amount not to exceed thirty (30%) percent of the withdrawing member credit union's paid-in and due capital contributions and special assessments.
By-Laws, Article IV, Sec. 6(g)(2)(aa).
On October 1, 1986, Tennessee Guaranty's Board of Directors voted unanimously to amend the by-laws by materially changing the withdrawal provision. Instead of allowing any return of capital and special assessment funds to a withdrawing credit union member, the amended by-laws now provided that Tennessee Guaranty would retain the funds in total. In addition, the Board of Directors unanimously adopted a resolution which levied a special assessment to its capital fund in the amount of one-half of one percent of the shares, accounts, and certificates of its member credit unions. On October 2, 1987, Tennessee Guaranty mailed notice of the amendment to all credit union members. On December 1, 1987, after the effective date of the by-law amendment, Missouri Credit Union paid Tennessee Guaranty an additional $559,159.81 as a special assessment, bringing the total amount of money deposited by Missouri Credit Union with Tennessee Guaranty to $2,045,717.98.
On March 7, 1991, the Missouri legislature enacted MO.REV.STAT. Sec. 370.362, repealing Secs. 370.370 to 370.382 which pertained to credit union share guaranty corporations. The Missouri legislature declared that its enactment of the new credit union statute was an "emergency act within the meaning of the constitution." 1991 MO.LAWS 875. In the Emergency Clause, the Missouri legislature states:
Because of the need to insure that credit unions in this state remain solid and financially strong and that the assets of citizens of this state remain safe and secure, this act is deemed necessary for the immediate preservation of the public health, wealth, peace and safety, and is hereby declared to be an emergency act within the meaning of the constitution, and this act shall be in full force and effect upon its passage and approval.
Section 370.362(1) of Missouri's new credit union statute requires that Missouri credit unions must be insured by the National Credit Union Share Insurance Fund (NCUSIF) a federal insurer, in order to remain in operation. Specifically, the section mandates that all credit unions, not currently insured by the NCUSIF, apply for basic share insurance coverage with NCUSIF within ninety days of the effective date of the section, March 7, 1991. Sections 370.362(1) and (2) require a credit union to obtain a certificate of insurance from NCUSIF within twenty-four months of March 7, 1991.
Missouri's new credit union statute also requires non-federal share insurers, no longer insuring credit union risks in Missouri, to return to those credit unions that converted to NCUSIF all paid-in capital contributions and special assessments. Section 370.362(6) provides:
When a credit union that has been insured by a nonfederal insurer, converts its share insurance to [NCUSIF] the nonfederal insurer shall immediately return to such credit union the amount of unearned premiums, paid-in capital contributions and special assessments that the credit union has paid to such nonfederal insurer, unless the credit unions, which are members of such nonfederal insurer subsequent to March 7, 1991, agree otherwise.
Finally, section 370.362(7) provides that "[n]o bylaw amendment of any nonfederal insurer shall be binding upon any Missouri credit union unless and until approved by the Missouri division of credit unions."...
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