Guaranty Sav. & Loan Ass'n v. Federal Home Loan Bank Bd.

• Decision Date: 09 July 1986
• Docket Number: No. 85-2500,85-2500
• Citation: 794 F.2d 1339
• Parties: GUARANTY SAVINGS & LOAN ASSOCIATION, Appellant, v. FEDERAL HOME LOAN BANK BOARD, Federal Savings and Loan Insurance Corporation, Beverly Bassett, Securities Commissioner for the State of Arkansas, and Guaranty Federal Savings and Loan Association, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1339

794 F.2d 1339

GUARANTY SAVINGS & LOAN ASSOCIATION, Appellant, v. FEDERAL HOME LOAN BANK BOARD, Federal Savings and Loan Insurance Corporation, Beverly Bassett, Securities Commissioner for the State of Arkansas, and Guaranty Federal Savings and Loan Association, Appellees.

No. 85-2500.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 14, 1986.

Decided July 9, 1986.

Larry W. Burks, Little Rock, Ark., for appellant.

Joanne P. Underhill, Washington, D.C., for appellees.

Before LAY, Chief Judge, and ROSS and WOLLMAN, Circuit Judges.

ROSS, Circuit Judge.

Guaranty Savings and Loan Association (Guaranty) appeals from the district court's dismissal of its action to remove a receiver appointed by the Federal Home Loan Bank Board (FHLBB). We find that the district court did not err in dismissing Guaranty's action and accordingly affirm the judgment of the district court.

FACTS

Guaranty is a federally insured savings and loan association chartered under the laws of the State of Arkansas. Its home office is in Harrison, Arkansas.

On December 5, 1985, the FHLBB appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver for Guaranty. The Board's appointment of a receiver was based on two separate statutory grounds: 1) Guaranty was insolvent, and 2) Guaranty had incurred a substantial dissipation of assets or earnings due to violations of law, rules, or regulations, or due to unsafe or unsound practices. 12 U.S.C. Sec. 1464(d)(6)(A)(i), (ii).

On December 9, 1985, Guaranty filed this action pursuant to 12 U.S.C. Sec. 1464(d)(6)(A), seeking an order requiring the FHLBB to remove the receiver. Guaranty also requested an injunction requiring the FHLBB to maintain the status quo until the removal matter could be decided. The court denied injunctive relief on December 10, 1985.

Between December 11th and 13th, Guaranty presented its case on the merits. On December 13th, after Guaranty rested its case, the FHLBB moved for an involuntary dismissal pursuant to FED.R.CIV.P. 41(b). The district court granted the motion from the bench and later entered an order dismissing the action "by reason of the failure of Guaranty Savings & Loan Association to sustain its burden of proving that the Federal Home Loan Bank Board was arbitrary or capricious in its determination that a receiver should be appointed for Guaranty Savings & Loan Association, based upon the administrative record made before the Board at the time of reaching its decision on December 5, 1985." Order, December 17, 1985.

This court denied Guaranty's motion for a preliminary injunction on January 16, 1986, and expedited Guaranty's appeal on the merits. On appeal, Guaranty makes the following arguments: 1) the receiver should have been removed because the receivership had not been properly approved by the Arkansas Savings and Loan Supervisor, 2) the scope of review applied by the district court was improper, and 3) the district court erred in failing to find that the FHLBB acted arbitrarily or capriciously in appointing a receiver for Guaranty. ¹

DISCUSSION

1. State Approval

The FHLBB's statutory authority to appoint the FSLIC as receiver for state chartered, federally insured savings and loan associations is contained in 12 U.S.C. Sec. 1729(c). The subparagraph applicable to this case states:

Notwithstanding any provision of the constitution or laws of any State, or of this section, in the event the Federal Home Loan Bank Board determines that any of the grounds specified in section 1464(d)(6)(A)(i), (ii), or (iii) of this title exist with respect to an insured institution, other than a Federal association, the Board shall have exclusive power and jurisdiction to appoint the Corporation as sole conservator or receiver of such institution.

* * *

* * * The authority conferred by this subparagraph shall not be exercised without the written approval of the State official having jurisdiction over the State-chartered insured institution that the grounds specified for such exercise exist.

12 U.S.C. Sec. 1729(c)(1)(B)(i)(I) and (ii)(I) (emphasis added). In sum, the FHLBB cannot impose a receivership under section 1729(c)(1)(B) unless it: 1) determines that one or more of the grounds specified in 12 U.S.C. Sec. 1464(d)(6)(A) exist, and 2) obtains a "written approval" from the proper state official stating that the specified grounds exist. ²

In this case, Beverly Bassett, the Arkansas Savings and Loan Supervisor, gave the FHLBB her "written approval" of the Guaranty receivership on December 5, 1985. Guaranty contends that the written approval was defective because Bassett did not comply with two Arkansas statutes: ARK.STAT.ANN. Sec. 67-857 and ARK.STAT.ANN. Sec. 67-1869.

Guaranty's contention is meritless, as neither of these statutes has anything to do with Bassett's authority to give the FHLBB written approval of a receivership pursuant to 12 U.S.C. Sec. 1729(c)(1)(B)(ii)(I). Section 67-857 deals with Bassett's authority to ask the FSLIC to be receiver in a state receiveship, while this case involves a federal receivership. Section 67-1869 is even further off the mark. It deals with Bassett's authority to enforce cease and desist orders by obtaining injunctions, restraining orders, and writs of mandamus in state court.

2. Scope of Review

Guaranty next challenges the scope of review applied by the district court. In the proceedings below, the district court permitted Guaranty to submit a great deal of testimonial and physical evidence. But when the court ruled on the FHLBB's motion to dismiss, it restricted its review to the administrative record made by the FHLBB. ³ Also, the court applied the arbitrary or capricious standard of review set forth in the Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(A), and placed the burden of proof on Guaranty.

Guaranty argues that the court should have held a trial de novo and should have required the FHLBB to prove, by a preponderance of the evidence, that the statutory grounds for the appointment of a receiver existed. Guaranty's argument is based on the premise that the phrase "upon the merits", as it is used in 12 U.S.C. Sec. 1464(d)(6)(A), means "trial de novo".

Section 1464(d)(6)(A) provides, in pertinent part, as follows:

In the event * * * [a receiver is appointed], the association may, within thirty days thereafter, bring an action in the United States district court for the judicial district in which the home office of such association is located * * * for an order requiring the Board to remove such * * * receiver, and the court shall upon the merits dismiss such action or direct the Board to remove such * * * receiver. (Emphasis added).

This statute authorizes judicial review of the FHLBB's decision to appoint a receiver but "does not expressly define the scope of judicial review." Alliance Federal Savings and Loan Association v. Federal Home Loan Bank Board, 782 F.2d 490, 493 (5th Cir.1986); Biscayne Federal Savings and Loan Association v. Federal Home Loan Bank Board, 720 F.2d 1499 1503 (11th Cir.1983). We reject Guaranty's contention that the phrase "upon the merits" implicitly defines the scope of judicial review. To us, the "upon the merits" language of section 1464(d)(6)(A) merely means that the district court's decision to either dismiss the action or remove the appointed receiver should be based upon the merits of the action (i.e., whether statutory grounds for a receivership exist) rather than on procedural or policy oriented grounds. ⁴ In short, the "upon the merits" language of section 1464(d)(6)(A) means just what it says and nothing more.

"[I]n cases where Congress has simply provided for review, without setting forth the standards to be used or the procedures to be followed, [the Supreme] Court has held that consideration is to be confined to the administrative record and that no de novo proceeding may be held." United States v. Carlo Bianchi & Co., 373 U.S. 709, 715, 83 S.Ct. 1409, 1413, 10 L.Ed.2d 652 (1963). ⁵ This is such a case. Accordingly, we conclude that the district court correctly restricted its review to the administrative record.

We also conclude that the court was correct in applying the arbitrary or capricious standard of the Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(A), and in placing the burden of proof on Guaranty. First, section 1464(d)(6)(A) does not define the type of review to be used in examining the FHLBB's appointment decision. Thus, the court properly looked to the Administrative Procedure Act for guidance on this issue. See, e.g., San Marino Savings and Loan Association v. Federal Home Loan Bank Board, 605 F.Supp. 502, 508 (C.D.Cal.1984) (reviewing the FHLBB's appointment decision under the arbitrary or capricious standard); Washington Federal Savings and Loan Association v Federal Home Loan Bank Board, 526 F.Supp. 343, 350 (N.D.Ohio 1981) (same). Second, Guaranty brought this action challenging the FHLBB's appointment decision. That decision is entitled to a "presumption of regularity." Citizens to Preserve Overton Park v. Volpe, supra, 401 U.S. at 415, 91 S.Ct. at 823. Thus, the burden of proof was properly placed on Guaranty. See e.g., Telegraph Savings and Loan Association v. Federal Savings and Loan Insurance Corp., 564 F.Supp. 862, 870 (N.D.Ill.1981), aff'd sub. nom Telegraph Savings and Loan Association v. Schilling, 703 F.2d 1019 (7th Cir.), cert. denied, 464 U.S. 992, 104 S.Ct. 484, 78 L.Ed.2d 681 (1983) (burden of proof is on the association in an action under section 1464(d)(6)(A)).

3. Arbitrary or Capricious

To determine whether the FHLBB's decision to appoint a receiver was arbitrary or capricious, we "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. * * * Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. [We are] not empowered to...