Fidelity Sav. and Loan Ass'n v. Federal Home Loan Bank Bd.

Decision Date02 September 1982
Docket Number82-4354,Nos. 82-4337,s. 82-4337
Citation689 F.2d 803
PartiesFIDELITY SAVINGS AND LOAN ASSOCIATION, Plaintiff-Appellee, Cross-Appellant, v. FEDERAL HOME LOAN BANK BOARD, Federal Savings and Loan Insurance Corporation, et al., Defendants-Appellants, Cross-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Barry D. Hovis, Angell, Homes & Lea, San Francisco, Cal., argued, for Fidelity Sav.; Stephen L. Kostka, Van Voorhis & Skaggs, Walnut Creek, Cal., on brief.

Thomas P. Vartanian, Washington, D.C., argued, for Fed. Home Loan Bank Bd.; Jeffrey M. Werthan, Fed. Home Loan Bank Randall P. Borcherding, Deputy Atty. Gen., San Francisco, Cal., argued, for amicus curiae State of Cal.; Joseph G. Passaic, Jr., Federal Deposit Ins. Corp., Washington, D.C., on brief.

Bd., Washington, D.C., Alan Clark, Latham & Watkins, Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Northern District of California.

Before CHOY, SNEED, and FARRIS, Circuit Judges.

SNEED, Circuit Judge:

This appeal has its origin in a dispute over the appointment of the Federal Savings and Loan Insurance Corporation (FSLIC) as federal receiver for a state-chartered association, Fidelity Savings and Loan Association (Fidelity). The Savings and Loan Commissioner for the State of California (Commissioner) seized Fidelity for the purpose of liquidation and appointed the FSLIC state receiver. Subsequently, the Federal Home Loan Bank Board (Bank Board) appointed the FSLIC federal receiver pursuant to 12 U.S.C. § 1729(c)(2). The Bank Board and the FSLIC, defendants below and appellants here, appeal from the district court's holding that they improperly seized Fidelity and from that court's order for the return of certain assets held by the federal receiver to Fidelity. Jurisdiction in the district court was based on 12 U.S.C. § 1464(d) (6)(A). Our jurisdiction is based on 28 U.S.C. § 1292(b). Because we find that appellants satisfied the statutory requirements for the appointment of a federal receiver, 12 U.S.C. § 1729(c)(2)(A), (C), we reverse and remand for further proceedings.

I. FACTS AND BACKGROUND

In 1979 Fidelity began experiencing severe financial difficulties as a result of its prior speculative loan commitment practices. Gambling that interest rates would fall, Fidelity had sold large amounts of short-term paper in order to obtain the funds to make long-term mortgage loans at then current market rates. When interest rates rose sharply, Fidelity suffered substantial operating losses and a decrease in net worth because the earnings on its low-yielding portfolio were less than the increasing cost of its short-term borrowing.

To meet its financial obligations, Fidelity borrowed in excess of $1.3 billion from the Federal Home Loan Bank of San Francisco by March 1982. 1 Fidelity's decline caused its depositors to withdraw nearly $70 million in deposits during the week of April 5, 1982. On April 9 the Bank advised the FSLIC that no further loans would be advanced to Fidelity unless the FSLIC guaranteed the loans. The FSLIC declined to advance the loan guarantees, and informed the California Savings and Loan Commissioner of its decision.

In light of Fidelity's precarious financial posture, the Commissioner decided to place the ailing institution in receivership and appoint the FSLIC as receiver for the state. At the close of business on April 13, 1982, state officials physically seized Fidelity by entering its offices in Oakland at approximately 4:40 p.m. and serving Fidelity with papers ordering its liquidation. 2 The Commissioner On April 19, 1982, Fidelity filed this action pursuant to 12 U.S.C. § 1464(d) (6)(A) for removal of the federal receiver and for such equitable relief as necessary to return Fidelity to the position it occupied prior to the appointment. Fidelity argued that the Bank Board had failed to satisfy the three preconditions for federal intervention under 12 U.S.C. § 1729(c)(2). The district court ordered the trial bifurcated. The first issue to be addressed was whether the Bank Board had satisfied the preconditions for the appointment of a federal receiver set forth in 12 U.S.C. § 1729(c)(2)(A) and (C). The second issue, not yet reached by the district court, is whether the Bank Board satisfied the requirement of 12 U.S.C. § 1729(c)(2)(B) before it appointed the FSLIC as federal receiver. 5

subsequently appointed the FSLIC as state receiver pursuant to California Financial Code §§ 9009, 9102 (West 1981). 3 At approximately 5:00 p.m., the Bank Board made an independent appointment of the FSLIC as federal receiver pursuant to 12 U.S.C. § 1729(c)(2). This appointment abrogated the Commissioner's ability to control or terminate the receivership. 12 U.S.C. § 1464(d)(6)(A); 12 C.F.R. § 569a.4 (1982). Fidelity's assets were then transferred to a newly created federal mutual association, Fidelity Federal Savings and Loan Association of San Francisco (Fidelity Federal). 4 The entire operation took less than thirty minutes. Fidelity's business was not significantly disrupted.

The district court, 540 F.Supp. 1374, held that the Bank Board had not met the statutory

prerequisites for the appointment of a federal receiver. The court found that there had not been a closing under state law and that no depositor had been unable to withdraw his funds. The court ordered the Bank Board to remove the federal receiver and return to Fidelity certain assets in the possession of the federal receiver. 6 This appeal followed.

II. ISSUES TO BE RESOLVED

The issues before us are legal; therefore, our review is de novo. First Charter Financial Corp. v. United States, 669 F.2d 1342, 1345 (9th Cir. 1982). Substantial deference, however, is ordinarily due a contemporaneous interpretation of the statute by the agency responsible for its administration, as we have before us here. Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965); Sierra Pacific Power Co. v. EPA, 647 F.2d 60, 65 (9th Cir. 1981). That interpretation by the Bank Board is that the closing and withdrawal requirements of section 1729(c)(2)(A) and (C) are satisfied whenever the FSLIC is appointed as state receiver for the purpose of liquidation.

The statutory setting in which these requirements appear is as follows. The Home Owners' Loan Act, 12 U.S.C. §§ 1461-1468 (1976 & Supp. I 1977), and the National Housing Act, 12 U.S.C. §§ 1701-1750g (1976 & Supp. I 1977), give the Bank Board and the FSLIC regulatory authority over federal savings and loan associations and, to a lesser extent, over state-chartered associations whose accounts are insured by the FSLIC. The FSLIC may become the receiver for a state-chartered savings and loan by one of two means. Section 1729(c)(1) authorizes the FSLIC to accept an appointment by a state to act as state receiver for the purpose of liquidation if a state-chartered association is in default. "Default" is defined by section 1724(d) to mean an adjudication or determination by a proper authority "pursuant to which a conservator, receiver, or other legal custodian is appointed for an insured institution for the purpose of liquidation." Under these circumstances section 1729(c)(1) vests the FSLIC with the same powers given it by section 1729(b) over federally chartered savings and loans, subject to the regulation of the public authority that appointed it. See 12 U.S.C. § 1729(d); Hancock Financial Corp. v. Federal Savings & Loan Insurance Corp., 492 F.2d 1325, 1327 (9th Cir. 1974). Section 1729(c)(2) authorizes the Bank Board to "federalize" the receivership of a state-chartered association by appointing the FSLIC receiver (and thus ending state control of the receivership) provided that the section's three statutory preconditions have been satisfied: (1) that either a state receivership has been in place for at least fifteen days or an insured institution has been closed under state law; (2) that at least one ground specified in 12 U.S.C. § 1464(d)(6)(A) exists with respect to such institution; and (3) that a depositor has been unable to make a withdrawal of his account. 7 The exclusive means for contesting the appointment of the FSLIC as federal receiver under section 1729(c)(2) is provided by 12 U.S.C. § 1464(d)(6)(A), made applicable by 12 U.S.C. § 1729(c)(3)(A). 8 This section authorizes the district court to conduct a hearing "upon the merits" concerning the propriety of the appointment of the federal receiver under 12 U.S.C. § 1729(c) (2). Upon a finding that one or more of the conditions for appointment of the federal receiver have not been satisfied, the district court shall order the Bank Board to remove the FSLIC as federal receiver.

This case, therefore, turns on whether the "closing" and the "withdrawal" requirements of sections 1729(c)(2)(A) and (C) were satisfied. We hold that each should be resolved by finding that the requirement has been satisfied.

III. CLOSING OF FIDELITY UNDER CALIFORNIA LAW
A. Power To Close Under California Law

The district court held that no closure occurred within the meaning of section 1729(c)(2)(A). It reasoned that the Commissioner had no express or implied power to close Fidelity under California law. In addition, the district court found that even if it were to imply the power to close Fidelity from California Financial Code § 9010, the Commissioner, under California law, was stayed from exercising the power for ten days following seizure in order to allow the association to seek judicial review. We disagree.

The Commissioner may take possession of a savings and loan association operating in an unsafe or injurious manner and conduct its business until control is returned to the association or the association's affairs are liquidated. Cal. Fin. Code §§ 9001, 9002, 9011 (West 1981); Pacific States Savings & Loan Co. v. Hise, 25 Cal.2d 822, 835-36, 155 P.2d 809 (1945) (en banc). Admittedly, no provision in the ...

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