Fahey v. Mallonee, No. 687

CourtUnited States Supreme Court
Writing for the CourtJACKSON
Citation332 U.S. 245,91 L.Ed. 2030,67 S.Ct. 1552
PartiesFAHEY et al. v. MALLONEE et al
Docket NumberNo. 687
Decision Date23 June 1947

332 U.S. 245
67 S.Ct. 1552
91 L.Ed. 2030
FAHEY et al.

v.

MALLONEE et al.

No. 687.
Argued and Submitted April 30, 1947.
Decided June 23, 1947.

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

Page 246

Oscar H. Davis, of Washington, D.C., for appellants.

Wyckoff Westover, of Los Angeles, Cal., for appellees Paul Mallonee et al.

Charles K. Chapman, of Long Beach, Cal., for appellee Long Beach Federal Savings & Loan Ass'n.

Everett W. Mattoon, of Los Angeles, Cal., for State of California, as amicus curiae, by special leave of Court.

[Argument of Counsel from page 246 intentionally omitted]

Page 247

Louis W. Myers, Pierce Works, and Richard Fitzpatrick, all of Los Angeles, Cal., for appellee Federal Home Loan Bank of Los Angeles.

Robert H. Wallis, pro se, and Raymond Tremaine, of Los Angeles, Cal., for appellee, Robert H. Wallis.

Harry O. Wallace, of Long Beach, Cal., for appellee Title Service Co.

Mr. Justice JACKSON delivered the opinion of the Court.

A specially constituted three-judge District Court has summarily, without trial, entered final judgment ousting a Conservator who, on orders of the Federal Home Loan Bank Commissioner, had taken pssession o f the Long Beach Federal Savings and Loan Association. It granted this and other relief on the principal ground that § 5(d) of the Home Owners' Loan Act of 1933, as amended, 12 U.S.C.A. § 1464(d), violates Article I, §§ 1 and 8 of the Constitution.

The Federal Home Loan Administration on May 20, 1946, without notice or hearing, appointed Ammann conservator for the Association and he at once entered into possession. The grounds assigned were that the Association was conducting its affairs in an unlawful, unauthorized and unsafe manner, that its management was unfit and unsafe, that it was pursuing a course injurious to, and jeopardizing the interests of, its members, creditors and the public. Plaintiffs at once commenced this class action in the right of the Association against the Conservator and Fahey, Chairman of the Federal Home Loan Bank Board, the Association as a nominal defendant, and several others not important to the issue here. The complaint alleged that the Conservator and the Chairman had seized the property without due process of law, motivated by malice and ill will, and that the seizure for various reasons was in

Page 248

violation of the Constitution. It asked return of the Association to its former management, permanent injunction against further interference, and other relief. Other parties in interest intervened. Temporary restraining orders issued and a three-judge court was duly convened.

Personal service was secured upon Ammann, the Conservator, but Fahey, the Federal Home Loan Bank Commissioner officially an inhabitant of the District of Columbia, could not be served in California. A motion for substituted service, therefore, was granted and process was served upon him in the District of Columbia. It was believed that this was authorized by Judicial Code, § 57, 28 U.S.C. § 118, 28 U.S.C.A. § 118. Ammann moved to dismiss the complaint on the ground that it failed to state a cause of action. Fahey appeared specially to move dismissal or quashing return of service on him upon the ground that he could not, in his official capacity, be sued in California and had not been served properly with process. Neither had answered the complaint, nor had their time to do so expired, when final judgment was granted against them.

The three-judge court set a variety of pending motions for argument and, after argument mainly on the constitutionality of § 5(d), with only pleadings and motion papers before it, held the section unconstitutional, ordered removal of the Conservator, permanently enjoined the authorities from holding an administrative hearing on the matter, permanently enjoined an apprehended merger, restored the institution to its former management, ordered the Conservator to account and enjoined these authorities 'from ever asserting any claims, right, title or interest' in or to the Association's property. The case is here on direct appeal. 50 Stat. 752—753, 28 U.S.C. §§ 349a, 380a, 28 U.S.C.A. §§ 349a, 380a.

It is manifest that whatever merit there may be in various subsidiary and collateral questions, this drastic decree can stand only if the section, as applied here, is unconstitutional.

Page 249

Its defect is said to consist of delegation of legislative functions to the supervising authority without adequate standards of action or guides to policy. Section 5(d) of the Act gives to the Board 'full power to provide in the rules and regulations herein authorized for the reorganization, consolidation, merger, or liquidation of such associations, including the power to appoint a conservator or a receiver to take charge of the affairs of any such association, and to require an equitable readjustment of the capital structure of the same; and to release any such association from such control and permit its further operation.' 48 Stat. 133, 12 U.S.C. § 1464(d), 12 U.S.C.A. § 1464(d). This, the District Court held, was unconstitutional delegation of the congressional function. It relied on Panama Refining Co. v. Ryan, 293 U.S. 388, 5 S.Ct. 24 1, 79 L.Ed. 446, and Schechter Poultry Corporation v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947.

Both cited cases dealt with delegation of a power to make federal crimes of acts that never had been such before and to devise novel rules of law in a field in which there had been no settled law or custom. The latter case also involved delegation to private groups as well as to public authorities. Chief Justice Hughes emphasized these features, saying that the Act under examination was not merely to deal with practices 'which offend against existing law, and could be the subject of judicial condemnation without further legislation, or to create administrative machinery for the application of established principles of law to particular instances of violation. Rather, the purpose is clearly disclosed to authorize new and controlling prohibitions through codes of laws which would embrace what the formulators would propose, and what the President would approve or prescribe, as wise and beneficent measures for the government of trades and industries in order to bring about their rehabilitation, correction, and development, according to the general declaration of policy in section one.' Schechter Poultry Corporation v. United States, 295 U.S. 495, 535, 55 S.Ct. 837, 845, 79 L.Ed. 1570, 97 A.L.R. 947.

Page 250

The savings and loan associations with which § 5(d) deals, on the other hand, are created, insured and aided by the federal government. It may be that explicit standards in the Home Owners' Loan Act would have been a desirable assurance of responsible administration. But the provisions of the statute under attack are not penal provisions as in the case of Lanzetta v. State of New Jersey, 306 U.S. 451, 59 S.Ct. 618, 83 L.Ed. 888, or United States v. Cohen Grocery Co., 255 U.S. 81, 41 S.Ct. 298, 65 L.Ed. 516, 14 A.L.R. 1045. The provisions are regulatory. They do not deal with unprecedented economic problems of varied industries. They deal with a single type of enterprise and with the problems of insecurity and mismanagement which are as old as banking enterprise. The remedies which are authorized are not new ones unknown to existing law to be invented by the Board in exercise of a lawless range of power. Banking is one of the longest regulated and most closely supervised of public callings. , it is one in which accumulated experience of supervisors, acting for many states under various statutes, has established well-defined practices for the appointment of conservators, receivers and liquidators. Corporate management is a field, too, in which courts have experience and many precedents have crystallized into well-known and generally acceptable standards. A discretion to make regulations to guide supervisory action in such matters may be constitutionally permissible while it might not be allowable to authorize creation of new crimes in uncharted fields.

The Board adopted rules and regulations governing appointment of conservators. They provided the grounds upon which a conservator might be named,1 and they

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are the usual and conventional grounds found in most state and federal banking statutes.2 They are sufficiently explicit, against the background of custom, to be adequate for proper administration and for judicial review if there should be a proper occasion for it.

It is complained that these regulations provide for hearing after the conservator takes possession instead of before. This is a drastic procedure. But...

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309 practice notes
  • Am. W. Bank Members, L.C. v. State, No. 20120456.
    • United States
    • Supreme Court of Utah
    • October 24, 2014
    ...incapable of stating a claim as a matter of law. See supra ¶ 26. We see the matter differently. Granted, in Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947), the Supreme Court held that seizure of a financial institution under the Home Owners' Loan Act of 1933 was approp......
  • South Puerto Rico Sugar Co. Trad. Corp. v. United States, No. 378-61.
    • United States
    • Court of Federal Claims
    • July 17, 1964
    ...American Power & Light Co. v. Securities & Exchange Comm'n, 329 U.S. 90, 105-106, 67 S.Ct. 133, 91 L.Ed. 103 (1946); Fahey v. Mallonee, 332 U.S. 245, 249-250, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947); Yakus v. United States, 321 U.S. 414, 426-427, 64 S.Ct. 660, 88 L.Ed. 834 (1944); New York Cent......
  • Baer v. Abel, No. C85-1581R.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Western District of Washington)
    • March 21, 1986
    ...States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935). However, this case clearly falls within the rationale of Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947), in which the Supreme Court ruled that congressional delegation of powers to the FHLBB under HOLA was not a......
  • Columbian Fin. Corp. v. Stork, Case No. 14-2168-SAC
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • November 18, 2014
    ...that bank seizures, given their exigency, have long been excused from any notice or pre-hearing seizure requirement (Fahey v. Mallonee, 332 U.S. 245, 91 L.Ed.2030 (1947)). However, such is not necessarily the case post-seizure. Some substantive post-deprivation review is required in order t......
  • Request a trial to view additional results
308 cases
  • Am. W. Bank Members, L.C. v. State, No. 20120456.
    • United States
    • Supreme Court of Utah
    • October 24, 2014
    ...incapable of stating a claim as a matter of law. See supra ¶ 26. We see the matter differently. Granted, in Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947), the Supreme Court held that seizure of a financial institution under the Home Owners' Loan Act of 1933 was approp......
  • South Puerto Rico Sugar Co. Trad. Corp. v. United States, No. 378-61.
    • United States
    • Court of Federal Claims
    • July 17, 1964
    ...American Power & Light Co. v. Securities & Exchange Comm'n, 329 U.S. 90, 105-106, 67 S.Ct. 133, 91 L.Ed. 103 (1946); Fahey v. Mallonee, 332 U.S. 245, 249-250, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947); Yakus v. United States, 321 U.S. 414, 426-427, 64 S.Ct. 660, 88 L.Ed. 834 (1944); New York Cent......
  • Baer v. Abel, No. C85-1581R.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Western District of Washington)
    • March 21, 1986
    ...States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935). However, this case clearly falls within the rationale of Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947), in which the Supreme Court ruled that congressional delegation of powers to the FHLBB under HOLA was not a......
  • Columbian Fin. Corp. v. Stork, Case No. 14-2168-SAC
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • November 18, 2014
    ...that bank seizures, given their exigency, have long been excused from any notice or pre-hearing seizure requirement (Fahey v. Mallonee, 332 U.S. 245, 91 L.Ed.2030 (1947)). However, such is not necessarily the case post-seizure. Some substantive post-deprivation review is required in order t......
  • Request a trial to view additional results
1 books & journal articles
  • Administrative Justice: Formal Prescription and Informal Adjudication
    • United States
    • Political Research Quarterly Nbr. 14-3, September 1961
    • September 1, 1961
    ...U.S. 373 (1908); Phillips v. Commissioner, 283 U.S. 589 (1931); U.S. v. IllinoisCentral R. R. Co., 291 U.S. 457 (1934); Fahey v. Mallonee, 332 U.S. 245 (1947). 50 Report of the Committee on Ministers’ Powers, Cmd. 4060, April 1932.51 Ibid., p. 76.52 This distinction may be observed in F.T.C......

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