EDUCATIONAL EMP. CREDIT UNION v. MUTUAL GUAR.

• Decision Date: 20 May 1993
• Docket Number: No. 4:92CV1016SNL.,4:92CV1016SNL.
• Citation: 821 F. Supp. 1294
• Parties: EDUCATIONAL EMPLOYEES CREDIT UNION, Plaintiff, v. MUTUAL GUARANTY CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

821 F. Supp. 1294

EDUCATIONAL EMPLOYEES CREDIT UNION, Plaintiff, v. MUTUAL GUARANTY CORPORATION, Defendant.

No. 4:92CV1016SNL.

United States District Court, E.D. Missouri, E.D.

May 20, 1993.

COPYRIGHT MATERIAL OMITTED

Henry F. Luepke, III, Associate, Peter T. Sadowski, Partner, Stolar Partnership, St. Louis, MO, for plaintiff.

John F. Arnold, Chairman, Terrance J. Good, Vice President, Carolyn M. Kopsky, Lashly and Baer, St. Louis, MO, for defendant.

MEMORANDUM

LIMBAUGH, District Judge.

Plaintiff, a Missouri credit union, has brought this multi-count complaint seeking the return of monies deposited with the defendant, a nonfederal Tennessee share guaranty membership corporation. Plaintiff seeks return of its capital contribution and special assessment, totalling approximately $2,000,000.00, pursuant to § 370.362 R.S.Mo. (1991). Defendant contends that its refusal to refund these monies is proper under the provisions of the membership contract and that § 370.362 is violative of the Contract Clause of the United States Constitution, U.S. Const. Art. 1, § 10, cl. 1, as well as the Missouri Constitution. This matter is before the Court on the parties' cross-motions for summary judgment, filed September 17 and October 27, 1992. Responsive pleadings have been filed.

Courts have repeatedly recognized that summary judgment is a harsh remedy that should be granted only when the moving party has established his right to judgment with such clarity as not to give rise to controversy. New England Mut. Life Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir.1977). Summary judgment motions, however, "can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those that really do raise genuine issues of material fact." Mt. Pleasant v. Associated Elec. Coop. Inc., 838 F.2d 268, 273 (8th Cir.1988).

Pursuant to Fed.R.Civ.P. 56(c), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that "there is no genuine issue as to material fact and the moving party is entitled to judgment as a matter of law." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). The burden is on the moving party. Mt. Pleasant, 838 F.2d at 273. After the moving party discharges this burden, the nonmoving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). Instead, the nonmoving party bears the burden of setting forth specific facts showing that there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

In passing on a motion for summary judgment, the court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.1983). The court is required to resolve all conflicts of evidence in favor of the nonmoving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207, 210 (8th Cir.1976). With these principles in mind, the Court turns to an examination of the facts.

The material facts are largely undisputed. Mutual Guaranty Corporation (MGC) is a mutual share guaranty association created by special statutory authority under the laws of the state of Tennessee. Tenn.Code Ann. § 45-4-1101(a). Its principal place of business is in Chattanooga, Tennessee. MGC's membership consists entirely of credit unions, both domestic and foreign. Its primary purpose is to guarantee the accounts of individual account holders of member credit unions. Under Tennessee law, any out-of-state credit union becoming a member of MGC "shall have the same privileges, benefits, and obligations of membership as those credit union members chartered under the laws the state of Tennessee." Tenn.Code Ann. § 45-4-1107.

On June 1, 1978 defendant was authorized to insure Missouri credit unions. This authorization is evidenced by an agreement among the State Credit Union Share Insurance Corporation¹, 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. Plaintiff's Exhibit G and Defendant's Exhibit C.² The 1978 Agreement recognizes that, for a temporary period of time, MGC 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. 1978 Agreement, Section J. However, upon the effective date of the enactment of an amended § 370.375 R.S.Mo., MGC 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. 1978 Agreement, Section K and Section M, subsection (1). In 1982, § 370.375 R.S.Mo. was enacted and clearly provided that corporations, such as MGC, would in fact be subjected 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, plaintiff entered into a contract of insurance with MGC. Plaintiff's Exhibit C and Defendant's Exhibit D. The 1984 Contract contained a "choice-of-law" provision stipulating that the contract would be subject to the provisions of the laws of Tennessee. 1984 Contract, paragraph 1. Plaintiff further agreed to "comply with the bylaws of the Corporation (MGC), as from time to time amended. The Credit Union (EECU) further agrees 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." 1984 Contract, paragraph 2.

Tennessee law provides for the collection of capital contributions, administrative fees, and special assessments by MGC from its credit union members. Tenn.Code Ann. 45-4-1108 and 1109. As a member, EECU was required to make and maintain during its membership period a capital contribution equal to 1% of the shares of its account holders. EECU was also subject to the payment of any special assessments. 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 such member in MGC and shall be considered as a part of the assets of said member. Plaintiff's Exhibit D and E. Upon joining MGC, plaintiff deposited with MGC, as its capital contribution, the sum of $1,486,558.17. On December 1, 1987 EECU paid to MGC, as a special assessment, an additional sum of $559,159.81. The sum total of funds deposited by EECU with MGC is $2,045,717.98.

At the time that EECU became a member of MGC, the By-Laws provided that upon withdrawal of a member credit union, "the 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." Plaintiff's Exhibit D, By-Laws, Article IV, Section 6(g)(2)(aa). On October 1, 1986 MGC's Board of Directors voted unanimously to amend the By-Laws by materially changing Article IV, Section 6(g)(2)(aa). Instead of allowing any return of capital and special assessment funds to a withdrawing credit union member, the amended By-Laws now provided that MGC would retain such funds in total. Plaintiff's Exhibit E, 1987 Amended By-Laws, Article IV, Section G(7)(b). On October 2, 1987 notice was mailed to all credit union members, including plaintiff, of the amendment. The notice informed members that the amendment was effective as of October 12, 1987 and that it was not applicable to any member terminating membership prior to the effective date of October 12, 1987. Defendant's Exhibit F. Plaintiff took no action regarding this amendment.

On March 7, 1991 the Missouri legislature enacted § 370.362 R.S.Mo. This statute repealed §§ 370.370 to 370.382 which pertained to credit union share guaranty corporations, including § 370.375 which authorized MGC to do business in Missouri.

Section 370.362 mandates that Missouri credit unions must be insured by the National Credit Union Share Insurance Fund (NCUSIF) in order to remain in operation. § 370.362(1). It specifically required all credit unions, not currently insured by NCUSIF, to apply for basis share insurance coverage with NCUSIF within ninety (90) days of March 7, 1991 (effective date of § 370.362). A certificate of insurance from NCUSIF was required within twenty-four (24) months of March 7, 1991. § 370.362(1) and (2). Although all Missouri credit unions were now required to obtain their basic share insurance coverage from NCUSIF, excess coverage could be obtained from a nonfederal insurer (such as MGC). § 370.362(9).

With regards to Missouri credit unions insured by a nonfederal insurer, Section 370.362(6) provides that upon conversion from a nonfederal insurer to NCUSIF, "the nonfederal insurer shall immediately return to such credit union the amount of unearned premiums, paid-in capital contribution 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 ...