TELEGRAPH S & L ASS'N v. Federal S & L Ins. Corp.
Decision Date | 19 February 1982 |
Docket Number | No. 80 C 2792.,80 C 2792. |
Parties | TELEGRAPH SAVINGS AND LOAN ASSOCIATION, et al., Plaintiffs, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, et al., Defendants. |
Court | U.S. District Court — Northern District of Illinois |
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Baker & McKenzie, Chicago, Ill., for plaintiffs.
Roger Flahaven, Michael J. Hayes, Jerome Webb, Asst. Attys. Gen., William J. Scott, Atty. Gen., Chicago, Ill., for Schilling.
Jeremiah Marsh, Robert W. Patterson, Michael F. Duhl, John L. Rogers, III, Peter F. Lovato, III, Hopkins, Sutter, Mulroy, Davis & Cromartie, U.S. Atty. Thomas P. Sullivan, Asst. U.S. Atty. Mary Ann Mason, Chicago, Ill., for FSLIC and Federal Home Loan Bank Bd.
This is an action brought by Telegraph Savings & Loan Association ("Telegraph" or the "Association") to remove the Federal Savings & Loan Insurance Corporation ("FSLIC") as receiver of its assets and to obtain equitable and monetary relief for harm suffered as a result of the sale of those assets. The complaint is in ten counts and alleges causes of action under a variety of state and federal statutes and constitutional provisions. On June 9, 1981, 564 F.Supp. 862, this court ordered that Count III (which contained the claim that the FSLIC was unlawfully appointed receiver of its assets) be severed from other counts and set for expedited trial.
Trial of Count III began on September 10, 1981, and ran with interruptions through January 7, 1982. The court heard nearly a dozen witnesses, most of them experts in the fields of finance, savings and loan associations, and accounting. Having considered the testimony and exhibits offered, the court is of the opinion that the FSLIC was lawfully appointed receiver of Telegraph's assets. For the reasons set forth below, we therefore deny the Association's application to remove that agency as receiver.
As we discussed in our summary judgment opinion filed June 9, 1981, pursuant to 12 U.S.C. § 1729(c)(2) (1980), the Bank Board has "exclusive power and jurisdiction" to appoint the FSLIC receiver for the assets of an insured state savings and loan association in the event that the Bank Board determines:
In our opinion of June 9, 1981, we held that subsections (A) and (C) of § 1729(c)(2) had been satisfied and therefore granted the Bank Board summary judgment. We held, however, that there was an issue of material fact as to whether Telegraph was insolvent within the meaning of § 1464(d)(6)(A). That issue of fact was as follows: Telegraph had been placed into receivership by the Bank Board on May 22, 1980, on the ground that it was insolvent. The Bank Board had based its determination of insolvency on monthly financial reports filed by the Association with the Bank Board at the end of every month. On April 30, 1980, Telegraph's monthly statement showed that its net worth had fallen to $450,000.00. On May 19, Telegraph's comptroller projected that between May 1 and May 19 the Association had lost over $590,000.00 and that it would lose nearly $1 million for the entire month. On the basis of the comptroller's projections, the Bank Board determined that the Association was insolvent within the meaning of § 1464(d)(6)(A)(i) on May 22, 1981, and that it was therefore eligible for receivership on that day. In opposition to the motion for summary judgment, Telegraph submitted affidavits indicating that the Board's projections were speculative and arbitrary. Although we thought there were strong indications that the defendants' projections were reasonable, we held nonetheless that plaintiffs' were entitled to present evidence at trial on the question.
At trial, defendants took a different, and surprising, tack. Rather than dispute the reasonableness of the Bank Board's projections, plaintiffs chose to dispute, by way of an attack on the Board's interpretation of § 1464(d)(6)(A)(i), the method by which the Board computed insolvency. When, for reasons set forth below, these challenges to the Bank Board's interpretation of the statute ran into difficulty, plaintiffs mounted a constitutional attack on the statute. Plaintiffs now rely chiefly on this constitutional challenge.
We first address the challenges to the Bank Board's interpretation of the insolvency statute and then the constitutional issues.
12 U.S.C. § 1464(d)(6)(A) (1980).
The Bank Board has consistently interpreted this statute as defining insolvency in terms of negative net worth based on a valuation of assets at book value. Thus, in determining whether an association is insolvent, the Bank Board merely subtracts all liabilities from the book value of all the assets. If the result is less than zero, the association is considered insolvent within the meaning of the statute.
Plaintiffs asserted that the statute contains certain ambiguities. Specifically, they argued that the terms "assets" and "obligations" are susceptible to interpretations other than the Board has given them and that these other constructions are more consistent with the intent of the statute.
Section 1464(d)(1) also gives the Bank Board the "power to enforce this section and the rules and regulations made hereunder."1
We decide questions of statutory construction in this case with due respect for the "venerable principle that the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong, especially when Congress has refused to alter the administrative construction." Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1801, 23 L.Ed.2d 371 (1969); Espinoza v. Farah Manufacturing Co., 414 U.S. 86, 94-95, 94 S.Ct. 334, 339, 38 L.Ed.2d 287 (1973). The degree of deference is enhanced where the agency participated in the development of the statute it administers, Miller v. Youakim, 440 U.S. 125, 144, 99 S.Ct. 957, 968, 59 L.Ed.2d 194 (1979), where the agency has applied the challenged construction consistently over a number of years, United States v. National Association of Security Dealers, 422 U.S. 694, 719, 95 S.Ct. 2427, 2442, 45 L.Ed.2d 486 (1975); N.L.R.B. v. Boeing Co., 412 U.S. 67, 75, 93 S.Ct. 1952, 1957, 36 L.Ed.2d 752 (1973), and where N.L.R.B. v. Bell Aerospace Co., 416 U.S. 267, 275, 94 S.Ct. 1757, 1762, 40 L.Ed.2d 134 (1974). Finally, we note that "we need not find that the construction is the only reasonable one, or even that it is the one we would have reached had the question arisen in the first instance in judicial proceedings." Unemployment Compensation Commission of Alaska v. Aragon, 329 U.S. 143, 153, 67 S.Ct. 245, 250, 91 L.Ed. 136 (1946). See also Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 75, 95 S.Ct. 1470, 1479, 43 L.Ed.2d 731 (1975).
Before evaluating plaintiffs' statutory construction arguments, we briefly describe the legislative history of § 1464(d)(6)(A)(i). This section was added to Title 12 in 1954 with the advice of the Bank Board itself.2 Despite the fact that Congress generally revised § 1464(d)(6) in 1966 and made smaller revisions of § 1464(d) in 1978,3 it has never revised the subsection giving the Bank Board the power to appoint a receiver when an association is insolvent. Further, evidence presented at trial indicated that the Bank Board has at least since 1954 consistently based its evaluation of the financial status of associations on financial data contained in so-called "Monthly Reports."4 These reports contain entries for the total book value of an association's assets and its total liabilities. In view of the legislative history of § 1464(d)(6)(A)(i), the Bank Board's interpretation of that statute carries with it a very great presumption of validity.
We now examine each of plaintiffs' statutory construction arguments. Plaintiffs' first theory exploited an asserted ambiguity in the statutory term "obligations." An...
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