Home Mortg. Bank v. Ryan, s. 91-4152

• Decision Date: 17 February 1993
• Docket Number: Nos. 91-4152,91-4155,s. 91-4152
• Citation: 986 F.2d 372
• Parties: HOME MORTGAGE BANK, a Utah Chartered Commercial Bank, Plaintiff-Appellant, v. T. Timothy RYAN, Jr., Director, Office of Thrift Supervision; Office of Thrift Supervision; and The Resolution Trust Corporation, Defendants-Appellees. T. Timothy RYAN, Jr., Director, Office of Thrift Supervision, Plaintiff-Appellee, v. G. Edward LEARY, Commissioner, State of Utah Department of Financial Institutions, Defendant. T. Timothy RYAN, Jr., Director, Office of Thrift Supervision, Plaintiff-Appellee, v. G. Edward LEARY, Commissioner, State of Utah Department of Financial Institutions, Defendant-Appellant, HOME MORTGAGE BANK, a Utah Chartered Commercial Bank, Plaintiff, v. T. Timothy RYAN, Jr., Director, Office of Thrift Supervision; Office of Thrift Supervision, and The Resolution Trust Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 372

986 F.2d 372

HOME MORTGAGE BANK, a Utah Chartered Commercial Bank, Plaintiff-Appellant, v. T. Timothy RYAN, Jr., Director, Office of Thrift

Supervision; Office of Thrift Supervision; and

The Resolution Trust Corporation,

Defendants-Appellees.

T. Timothy RYAN, Jr., Director, Office of Thrift

Supervision, Plaintiff-Appellee, v. G. Edward LEARY, Commissioner, State of Utah Department of

Financial Institutions, Defendant.

T. Timothy RYAN, Jr., Director, Office of Thrift

Supervision, Plaintiff-Appellee, v. G. Edward LEARY, Commissioner, State of Utah Department of

Financial Institutions, Defendant-Appellant, HOME MORTGAGE BANK, a Utah Chartered Commercial Bank, Plaintiff, v. T. Timothy RYAN, Jr., Director, Office of Thrift

Supervision; Office of Thrift Supervision, and

The Resolution Trust Corporation,

Defendants-Appellees.

Nos. 91-4152, 91-4155.

United States Court of Appeals Tenth Circuit.

Feb. 17, 1993.

Jeffrey M. Jones (Kyle S. McKay, also of Allen Hardy Evans Rasmussen & Jones, with him on the brief), Salt Lake City, UT, for plaintiff-appellant Home Mortg. Bank.

Bryce H. Pettey, Asst. Atty. Gen. (Paul Van Dam, Atty. Gen., and Billy L. Walker, Deputy Comm'r of Fin. Institutions, with him on the brief), Salt Lake City, UT, for defendant-appellant G. Edward Leary.

Aaron B. Kahn, Asst. Chief Counsel (Harris Weinstein, Chief Counsel, Thomas J. Segal, Deputy Chief Counsel, and David H. Enzel, Sr. Trial Atty., with him on the brief), Office of Thrift Supervision, Washington, DC, for plaintiff-appellee T. Timothy Ryan, Jr. and Defendants-Appellees T. Timothy Ryan, Jr., Office of Thrift Supervision, and The Resolution Trust Corp.

Before LOGAN, LAY, ^* and BARRETT, Circuit Judges.

LOGAN, Circuit Judge.

Defendant G. Edward Leary, ¹ Commissioner of the Utah Department of Financial Institutions (the Commissioner), appeals the district court's grant of the Office of Thrift Supervision's (OTS's) motion for summary judgment and the denial of the Commissioner's cross-motion for summary judgment. Plaintiff Home Mortgage Bank (Home) appeals the concurrent dismissal of its complaint against OTS. The Commissioner and Home argue that OTS had no authority to declare Home insolvent and appoint a receiver, because Home had converted from a state-chartered thrift to a state-chartered bank. OTS contends that Home's conversion was null and void because Home failed to receive OTS approval, as required by regulation. Although the cases were not merged, because they raise identical questions of law, they have been consolidated for purposes of appeal.

I

The relevant facts are not in dispute, and are reported in more detail in Home Mortgage Bank v. Ryan, 768 F.Supp. 330 (D.Utah 1991). In late 1989, the FDIC determined that Home was not satisfying the tangible capital requirements for savings and loan associations and notified Home of the deficiency. Home submitted a plan to meet the requirements the following January, but withdrew it on March 14, 1990. On March 22, the FDIC informed Home by letter that its failure to satisfy the net capital requirements warranted its designation as a "problem institution." By May 18, 1990, OTS had determined that Home was unsafe, and sought to place it in receivership. OTS appointed the Resolution Trust Corporation (RTC) as receiver that same day. By operation of law, however, the receivership was not to become effective for thirty days. ²

The Commissioner received the order the day it was issued, but never responded to OTS. However, he did correspond with Home concerning the impending takeover and options Home might pursue to avoid such a result. On June 15, 1990, three days before the receivership of Home was to take effect, the Commissioner approved and made effective a conversion of Home's charter from that of a savings association to that of a commercial bank. This conversion did not affect Home's federal insurance, which was still provided by the Savings Association Insurance Fund (SAIF). For purposes of this appeal, we assume, without deciding, that the Commissioner's action was consistent with applicable Utah law. ³ Home did not seek OTS's approval before converting its charter.

The Commissioner notified OTS of his action on June 19, and OTS responded on July 5, simultaneously serving upon Home the order appointing RTC as receiver. The next day, OTS filed this action, seeking a declaratory judgment that the conversion was improper under federal law and therefore ineffectual. The complaint also sought injunctive relief forbidding the Commissioner from taking similar action in the future. The Commissioner counterclaimed, charging that OTS had no authority to forbid a state-chartered thrift from converting to a state-chartered bank. Subsequently, Home also filed suit against OTS and RTC, seeking a declaration that its conversion was valid notwithstanding its failure to obtain permission from OTS.

The district court consolidated the cases, and both OTS and the Commissioner moved for summary judgment. The court granted declaratory judgment for OTS, finding that OTS had the authority to place Home into receivership, and that the applicable regulations required Home to seek OTS approval before converting. ⁴ Consequently, the court found Home's conversion to be null and void, and affirmed the appointment of RTC as receiver. It dismissed Home's complaint, raising identical issues, based upon this decision.

We review the district court's grant of summary judgment de novo, applying the same standard used by the district court; i.e., summary judgment is appropriate if there are no genuine issues of material fact and if the moving party is entitled to judgment as a matter of law. Hatfield v. Burlington N.R.R., 958 F.2d 320, 321 (10th Cir.1992), petition for cert. filed, 60 U.S.L.W. 3860 (June 8, 1992) (No. 91-1977). "If no genuine issue of material fact exists, we determine if the substantive law was correctly applied." Id. Here, there is no dispute over the relevant facts, so a summary disposition is appropriate.

II

A

Under Article VI of the Constitution, the laws of the United States "shall be the supreme Law of the Land ..., any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. Art. VI, cl. 2. Thus, if a state law or regulation conflicts with an applicable federal law, the state provision is preempted. Preemption may be explicit or implicit, and may involve either complete occupation of a particular field by Congress, precluding all state regulation on the subject, or partial preemption only, when a state law or regulation actually conflicts with the federal statutes. Cipollone v. Liggett Group, Inc., --- U.S. ----, ----, 112 S.Ct. 2608, 2617, 120 L.Ed.2d 407 (1992). Preemption may occur through properly promulgated federal regulations as well as through duly enacted laws. "Federal regulations have no less pre-emptive effect than federal statutes." Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982).

Under Utah law, a state-chartered financial institution may convert its charter to a different form of state-chartered financial institution upon application to and approval by the Commissioner. Utah Code Ann. § 7-1-713(1). In the case of savings associations, however, federal regulations impose specific requirements. Under 12 C.F.R. § 563.22(b), "[n]o savings association may at any time make any ... transfer, as defined in § 571.5(a) of this subchapter, of assets or savings account liabilities without application to and approval by the Office [of Thrift Supervision]." Section 571.5(a) defines "transfers" as:

[T]ransfers in bulk not made in the ordinary course of business including, but not limited to, transfers of assets and savings account liabilities, purchases of assets, assumptions of savings accounts and other liabilities, and transfers of assets in bulk that are effected by operation of law pursuant to statutory conversions, mergers, consolidations, and other reorganizations and combinations; Provided, however, That the term "transfers" shall not include transfers in bulk that are effected by operation of law pursuant to statutory conversions, mergers, consolidations, reorganizations, and combinations, where the surviving entity is a savings association.

(First emphasis added). With respect to state-chartered savings associations that convert to state-chartered banks, then, the applicable federal regulations actually conflict with state law, in that the state law permits a conversion without approval from OTS. The surviving entity here was not a savings association, so the exception set out in § 571.5(a) is inapplicable. Thus, if the federal regulations are valid, they preempt the Utah state law.

B

The parties do not dispute that OTS has the congressionally-delegated authority to promulgate regulations concerning savings associations. See 12 U.S.C. § 1464(d)(3). The Commissioner and Home argue, however, that the regulations at issue exceed the scope of the savings association provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. No. 101-73, 103 Stat. 183, 277-354 (codified at 12 U.S.C. §§ 1461-1468c).

When a party brings a substantive challenge to otherwise properly promulgated regulations, the reviewing court follows the approach articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). ⁵ "First, if Congress has directly spoken to the precise question at issue and its intent is clear, 'that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.' " Rives v. ICC, 934 F.2d 1171, 1174 (10th Cir.1991) (quoting Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781), cert. denied, --- U.S. ----, 112 S.Ct. 1559, 118 L.Ed.2d 207 (1992). However, if Congress has not addressed the issue, "the...