California Housing Securities, Inc. v. U.S., 91-5092

• Decision Date: 24 March 1992
• Docket Number: No. 91-5092,91-5092
• Citation: 959 F.2d 955
• Parties: CALIFORNIA HOUSING SECURITIES, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 955

959 F.2d 955

60 USLW 2606

CALIFORNIA HOUSING SECURITIES, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 91-5092.

United States Court of Appeals Federal Circuit.

March 24, 1992.

Robert K. Huffman, Miller & Chevalier, Washington, D.C., argued, for plaintiff-appellant. With him on brief was Leonard Bickwit, Jr.

Shalom Brilliant, of the Dept. of Justice, Washington, D.C., argued, for defendant-appellee. With him on the brief were Stuart M. Gerson, Asst. Atty. Gen., and David M. Cohen, Director.

Before RICH, NEWMAN and CLEVENGER, Circuit Judges.

CLEVENGER, Circuit Judge.

California Housing Securities, Inc. (CHS) appeals from an order of the United States Claims Court, No. 90-467C (April 2, 1991), granting summary judgment to the United States. The Claims Court held that the appointment and subsequent actions of the Resolution Trust Corporation (RTC) as conservator and receiver of Saratoga Savings and Loan Association (Saratoga) were not a compensable taking under the fifth amendment to the United States Constitution. We affirm.

I

CHS became the sole owner of Saratoga, a federally-insured savings and loan association, one year after Saratoga became a California-chartered savings and loan association in 1983. California requires its state-chartered savings associations to participate in the federal deposit insurance program. Cal.Fin.Code § 5606(a) (West 1991).

In 1983, the federally-insured savings and loan industry was governed by three major statutes enacted in the 1930's: the Federal Home Loan Bank Act, Pub.L. No. 72-304, 47 Stat. 725 (1932) (codified as amended at 12 U.S.C. §§ 1421-1449 (1988)), the Home Owners' Loan Act of 1933, Pub.L. No. 73-43, 48 Stat. 128 (1933) (codified as amended at 12 U.S.C. §§ 1461-1468 (1988)), and the National Housing Act, Pub.L. No. 73-479, 48 Stat. 1246 (1934) (codified as amended at 12 U.S.C. §§ 1701-1750g (1988)). Saratoga applied for and received federal deposit insurance from the Federal Savings and Loan Insurance Corporation (FSLIC) which operated under the direction of the Federal Home Loan Bank Board. 12 U.S.C. §§ 1725(a), 1726(a)(2) (1988) (repealed by Pub.L. No. 101-73, 103 Stat. 363 (1989)).

As one of many operating conditions required of federally-insured associations, Saratoga pledged that it would "not carry on any sales plan or practices, or any advertising, in violation of regulations to be made by [FSLIC]." 12 U.S.C. § 1726(b) (1988) (repealed 1989). At that time, Saratoga understood that the Federal Home Loan Bank Board could appoint FSLIC as conservator or receiver of a federally-insured savings and loan association, 12 U.S.C. § 1729(c) (1988) (repealed 1989), when certain criteria were met, including:

substantial dissipation of assets or earnings due to any violation or violations of law, rules or regulations, or to any unsafe or unsound practice or practices[.]

12 U.S.C. § 1464(d)(6)(A)(ii) (1988) (amended by Pub.L. No. 101-73, 103 Stat. 282 (1989)). FSLIC had "the authority to liquidate such institution in an orderly manner or to make such other disposition of the matter as it deem[ed] to be in the best interests of the institution, its savers, and [FSLIC]." 12 U.S.C. § 1729(c)(3)(B) (1988) (repealed 1989).

In 1989, the structure of agency responsibility for governing federally-insured savings and loan associations was revised. Congress, acting in response to the crisis in the savings and loan industry, enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. No. 101-73, 103 Stat. 183 (1989). FIRREA abolished the Federal Home Loan Bank Board. Pub.L. No. 101-73, § 401(a)(2) (1989) (codified at 12 U.S.C. § 1437 note (Supp. II 1990)). At the same time, FIRREA provided federal insurance for associations like Saratoga through the Savings Association Insurance Fund. 12 U.S.C. §§ 1813(c)(2), 1814(a)(2) (Supp. II 1990). FIRREA created the Office of Thrift Supervision (OTS) in the Department of the Treasury, and made it responsible for the examination, supervision, and regulation of all federally insured savings associations. 12 U.S.C. §§ 1462a, 1463 (Supp. II 1990). FIRREA also created the RTC and charged it with resolving the cases of savings and loan associations closed between January 1989 and August 1992, taking over FSLIC's role as conservator or receiver. 12 U.S.C. § 1441a(b) (Supp. II 1990).

FIRREA authorizes the director of OTS, in place of the now defunct Federal Home Loan Bank Board, to appoint the RTC as conservator or receiver of a federally-insured state savings association (such as Saratoga) if one or more statutory ground exists, including:

substantial dissipation of assets or earnings due to any violation or violations of law or regulations, or to any unsafe or unsound practice or practices[.]

12 U.S.C. § 1464(d)(2)(C)(ii) (Supp. II 1990). The RTC has authority to resolve an association's problems by merging it with another insured depository association or transferring any asset or liability of the association. 12 U.S.C. §§ 1441a(b)(4), 1821(d)(2)(G) (Supp. II 1990). After the RTC pays all claims and administrative expenses, the remaining funds are transferred to the depository association's shareholders. In this case such a transfer would be to CHS as sole shareholder. 12 U.S.C. § 1821(d)(11)(B) (Supp. II 1990).

On November 8, 1989 OTS appointed the RTC conservator for Saratoga. Saratoga challenged the validity of the RTC's appointment as conservator in the U.S. District Court for the District of Columbia pursuant to 12 U.S.C. § 1464(d)(2)(E), (G) (Supp. II 1990). Saratoga Savings and Loan Ass'n v. Ryan, Civ. Action No. 89-3305. The district court has not yet issued a judgment in that case. On November 9, 1989 the RTC entered and took possession of Saratoga's offices in California. On May 24, 1990 OTS appointed the RTC as receiver of Saratoga. The RTC liquidated most of Saratoga's assets and liabilities on June 1, 1990.

II

CHS filed a complaint in the Claims Court on May 30, 1990 alleging that OTS and the RTC had taken Saratoga's property in violation of the fifth amendment of the United States Constitution which commands that "private property [shall not] be taken for public use, without just compensation." The Claims Court determined that the appointment of the RTC as conservator, and then receiver, of Saratoga and the RTC's subsequent transfer of Saratoga's assets to a new association did not constitute a fifth amendment taking. California Hous.Sec., Inc. v. United States, No. 90-467C, Order of Judge Andewelt (Cl.Ct. Apr. 2, 1991). The Claims Court's judgment relied on the reasoning articulated in American Continental Corp. v. United States, 22 Cl.Ct. 692 (1991), which concerned the government's seizure and liquidation of Lincoln Savings and Loan Association. In American Continental, the Claims Court determined that the government's actions did not constitute a compensable regulatory taking because these actions promoted the public interest in a sound banking system and because they did not interfere with the investment-backed expectations of the savings and loan association or of its corporate parent, American Continental. The court also rejected American Continental's attempt to characterize the government's actions as a taking of property by permanent physical occupation, under Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982), because the association and its parent lacked any historically rooted expectation of compensation for the regulatory action taken. "To the contrary, plaintiffs' expectations could only be that regulators would exert physical control over Lincoln's assets if the Board made a finding that Lincoln was in 'an unsafe or unsound condition to transact business.' " American Continental, 22 Cl.Ct. at 700.

III

The sole contention of CHS on appeal is that the actions of OTS, in appointing the RTC as conservator and receiver of Saratoga, and the RTC's subsequent actions as conservator and receiver of Saratoga resulted in a permanent occupation and physical taking of Saratoga's property in violation of the fifth amendment's taking clause. ¹ CHS's legal theory thus relies on Loretto. ² In that case, the Supreme Court held that a New York statute requiring a landlord to permit installation of cable television facilities on her property at a government-fixed rate was a fifth amendment taking because it constituted a permanent physical occupation of her property. Loretto, 458 U.S. at 438-41, 102 S.Ct. at 3177-79. In particular, the Supreme Court stated that "a permanent physical occupation authorized by [the] government is a taking without regard to the public interests that it may serve." Id. at 426, 102 S.Ct. at 3171. Consequently, "a permanent physical occupation is a government action of such a unique character that it is a taking without regard to other factors that a court might ordinarily examine." Id. at 432, 102 S.Ct. at 3174. In sum, "when the 'character of the governmental action,' [Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978) ], is a permanent physical occupation of property, [the Supreme Court's] cases uniformly have found a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner." Id. at 434-35, 102 S.Ct. at 3175-76.

CHS urges us to follow the language of Loretto simply because the government entered and took possession of Saratoga's property when acting as conservator and receiver of that association. CHS, however, does not come to grips with the distinction between the property rights Saratoga possessed at the time of its occupation and seizure and those with which the state interfered in Loretto. The ground for that distinction is unmistakably identified in Loretto:

Our holding today is very narrow. We affirm...