Bruce v. First Federal Sav. and Loan Ass'n of Conroe, Inc.

• Decision Date: 17 February 1988
• Docket Number: No. 87-2417,87-2417
• Parties: , 1988-1 Trade Cases 67,901 Wilburn S. BRUCE, Plaintiff-Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CONROE, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 712

837 F.2d 712

56 USLW 2486, 1988-1 Trade Cases 67,901

Wilburn S. BRUCE, Plaintiff-Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CONROE, INC.,

Defendant-Appellee.

No. 87-2417.

United States Court of Appeals, Fifth Circuit.

Feb. 17, 1988.

Michael L. Atkinson, Atkinson & Associates, P.C., Conroe, Tex., for plaintiff-appellant.

Brian T. Hanlon, Phillips, King, Smith & Wright, P.C., Houston, Tex., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, GEE and RUBIN, Circuit Judges.

CLARK, Chief Judge:

This case involves a question of statutory construction. We hold that the word "and" in the antitying provision of 12 U.S.C.A. Sec. 1464(q)(1) should be given a disjunctive rather than a conjunctive meaning. We also hold that the district court erred by dismissing the complaint for failure to state a claim upon which relief can be granted.

I. Facts

When reviewing a case dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6), the court accepts the nonmoving party's well pleaded allegations as true and construes them in a light most favorable to that party. Deubert v. Gulf Fed. Sav. Bank, 820 F.2d 754, 756 (5th Cir.1987). A dismissal will be affirmed only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Guided by these principles, we recount the facts of this case.

First Federal Savings and Loan Association of Conroe, Inc. (First Federal) made three secured loans to Seven Coves Timeshare, Ltd. (Seven Coves) in the amounts of $850,000, $4,400,000 and $950,000. Wilburn S. Bruce, the general partner of Seven Coves, guaranteed each loan. The loans were structured so that Seven Coves would pay interest in installments and principal in a balloon payment at maturity. The May 20, 1983 loan of $4.4 million matured on November 20, 1984. First Federal granted Seven Coves a 180-day extension on the $850,000 loan and the $950,000 loan prior to their maturity. Bruce contends that from the time the $4.4 million loan was consummated an understanding existed between Seven Coves and First Federal that the $4.4 million loan would be similarly extended.

On October 25, 1984, Seven Coves made a $200,000 principal payment on the $850,000 loan. In December 1984, with the $4.4 million loan in default, three officers of First Federal met with Bruce and the vice president of Seven Coves. Bruce alleges that the officers expressed a concern about a year end audit by the Federal Banking Examiners and disclosure of the default. Bruce maintains that the officers offered to extend the $4.4 million loan after the first of the year if additional interest was paid through the end of 1984.

On December 28, 1984, a First Federal officer told the vice president of Seven Coves to send a letter signed by Bruce advising First Federal that a "bookkeeping error" had been made and that the October 25 payment should have been applied to the $4.4 million loan. Seven Coves complied. The ensuing transfer of funds was sufficient to cover the interest due on the $4.4 million loan through the end of 1984.

After January 1, 1985, First Federal refused to execute a written extension of the $4.4 million loan. First Federal officers allegedly stated that they would not negotiate a written extension because they had been forced to "take out" all original participating lenders on the $4.4 million loan which put First Federal above the legal lending limit under federal law. When the parties discussed how to regain compliance with federal banking statutes and regulations, First Federal's officers suggested that if Seven Coves found a participating lender to finance $1 million of the outstanding $4.4 million loan a written extension would be consummated. First Federal later raised the amount of requested participation to $2 million.

Seven Coves secured the cooperation of a lender which agreed to participate with First Federal to the extent of $2 million. On April 10, 1985, Seven Coves notified First Federal's executive vice president who allegedly acknowledged that this participation would enable First Federal to extend or renew the $4.4 million loan. The next day, First Federal allegedly informed Seven Coves of its decision not to participate in the extension or to cooperate in the refinancing of the loan.

On November 18, 1986, Bruce filed this suit against First Federal in district court seeking damages in excess of $30 million. In addition to several state law causes of action, Bruce alleges that First Federal violated the antitying provision of the Thrift Institutions Restructuring Act, 12 U.S.C.A. Sec. 1464(q)(1). The district court held that since the word "and" connects the three subsections of section 1464(q)(1), set out in Part II below, Bruce's failure to allege a violation of subsection (1)(A) required dismissal. In the alternative, the district court held that Bruce failed to state a claim under either subsection (1)(B) or (1)(C). Bruce appeals.

II. Conjunctive versus Disjunctive

The antitying provision of the Thrift Institutions Restructuring Act (TIRA) provides as follows:

(1) An association shall not in any manner extend credit, lease, or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement--

(A) that the customer shall obtain additional credit, property, or service from such association, or from any service corporation or affiliate of such association, other than a loan, discount, deposit, or trust service;

(B) that the customer provide additional credit, property, or service to such association, or to any service corporation or affiliate of such association, other than those related to and usually provided in connection with a similar loan, discount, deposit, or trust service; and

(C) that the customer shall not obtain some other credit, property, or service from a competitor of such association, or from a competitor of any service corporation or affiliate of such association, other than a condition or requirement that such association shall reasonably impose in connection with credit transactions to assure the soundness of credit.

12 U.S.C.A. Sec. 1464(q)(1) (Supp.1987) (emphasis added). TIRA expressly creates a private cause of action for those injured by violations of section 1464(q)(1). Id. Sec. 1464(q)(3). Bruce alleges violations of subsections (1)(B) and (1)(C) which prohibit reciprocal and exclusive dealing arrangements. First Federal contends that Bruce's failure to allege a violation of subsection (1)(A), the prohibition of tying arrangements, is fatal to the complaint because the statute is written in the conjunctive. ¹ Bruce maintains that the statute should be read in the disjunctive despite the use of the word "and."

When we construe a statute, "[o]ur objective ... is to ascertain the congressional intent and give effect to the legislative will." Philbrook v. Glodgett, 421 U.S. 707, 713, 95 S.Ct. 1893, 1898, 44 L.Ed.2d 525 (1975).

A basic canon of statutory construction is that words should be interpreted as taking their ordinary and plain meaning. Although in interpretation of statutory language reference should first be made to the plain and literal meaning of the words, the overriding duty of a court is to give effect to the intent of the legislature. A statute should ordinarily be interpreted according to its plain language, unless a clear contrary legislative intention is shown.

United States v. Scrimgeour, 636 F.2d 1019, 1022-23 (5th Cir.1981) (citations omitted). Although "[t]he Supreme Court has given somewhat inconsistent instructions concerning the propriety of use of legislative history where the meaning of the words is plain on the face of the statute," it has looked to the statute's purpose where such meaning "produced an unreasonable result 'plainly at variance with the policy of the legislation as a whole.' " Id. at 1023 (quoting United States v. American Trucking Ass'ns, 310 U.S. 534, 543-44, 60 S.Ct. 1059, 1063-64, 84 L.Ed.2d 1345 (1940)). The word "and" is therefore to be accepted for its conjunctive connotation rather than as a word interchangeable with "or" except where strict grammatical construction will frustrate clear legislative intent. ² Peacock v. Lubbock Compress Co., 252 F.2d 892, 894-95 (5th Cir.1958). See generally 1A N. Singer, Sutherland on Statutes and Statutory Construction Sec. 21.14 (4th ed. 1980).

Prior to the adoption of TIRA, savings and loan associations were subject to 12 U.S.C.A. Sec. 1972(1) (1980), the antitying provision of the Bank Holding Company Act Amendments of 1970 (BHCA). ³ Section 1972(1) was "intended to provide specific statutory assurance that the use of the economic power of a bank will not lead to lessening of competition or unfair competitive practices." S.Rep. No. 1084, 91st Cong., 2d Sess. 16, reprinted in 1970 U.S.Code Cong. & Admin.News 5519, 5535 [hereinafter S.Rep. No. 1084, reprinted in 1970 Cong. & Admin.News]. To achieve this end, section 1972(1) "proscribes tying, reciprocity, and exclusive dealing arrangements." Id. at 45, reprinted in 1970 Code Cong. & Admin.News 5558 (supplementary view of Sen. Brooke). Such arrangements have been traditional targets of antitrust law because of their potentially anticompetitive effects. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 10 & n. 15, 104 S.Ct. 1551, 1557 & n. 15, 80 L.Ed.2d 2 (1984); Freidco, Ltd. v. Farmers Bank 499 F.Supp. 995, 1000 (D.Del.1980). ⁴ The wording of section 1972(1) and its legislative history indicates that Congress intended the statute to be read in the disjunctive. ⁵ Thus, a complaint states a claim under section 1972(1) by alleging violation of one or more subsections. See, e.g., Swerdloff v. Miami Nat'l Bank, 584 F.2d 54,...