Jugum v. Federal Sav. and Loan Ins. Corp., C86-211C.

• Decision Date: 24 June 1986
• Docket Number: No. C86-211C.,C86-211C.
• Citation: 637 F. Supp. 1045
• Parties: Jo Anne JUGUM and Martin and Anne Jugum, Plaintiffs, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Washington

637 F. Supp. 1045

Jo Anne JUGUM and Martin and Anne Jugum, Plaintiffs, v. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Defendant.

No. C86-211C.

United States District Court, W.D. Washington.

June 24, 1986.

Robert D. Duggan, David W. Soukup, Levinson, Friedman, Vhugen, Duggan, Bland & Horowitz, Seattle, Wash., for plaintiffs.

William K. Black, David A. Felt, Mark Gabrellian, Federal Home Loan Bank Bd., Office of Gen. Counsel, Washington, D.C., Richard S. Twiss, Cheryl A. Smith, Perkins, Coie, Stone, Olsen & Williams, Seattle, Wash., for defendant.

ORDER DENYING CROSS MOTIONS FOR SUMMARY JUDGMENT

COUGHENOUR, District Judge.

THIS MATTER comes before the Court on cross motions for summary judgment. Neither side has requested oral argument.

On August 30, 1985, the Federal Home Loan Bank Board appointed the Federal Savings and Loan Insurance Corporation (FSLIC) to be the receiver for Westside Federal Savings and Loan Association of Seattle, Washington (Westside). The plaintiffs in this action, Anne Jugum, Martin Jugum, and their daughter, Jo Anne Jugum, held two accounts at Westside.¹ Account X-XX-XXXXXXXX contained $69,926.61; account D-01-90017335 contained $95,821.65. On the basis of Westside's records, the FSLIC determined that both of these accounts were jointly owned by the plaintiffs: the accounts listed all three plaintiffs as "joint tenants with right of survivorship," all of the plaintiffs had signed the signature cards for both accounts, and the terms of the account agreements permitted any of the plaintiffs to make withdrawals. Under 12 C.F.R. § 564.9(d) (1985), jointly owned accounts "owned by the same combination of individuals" must be aggregated before applying the $100,000 limit on deposit insurance contained in 12 U.S.C. § 1728(a). For this reason, the FSLIC determined that a total of $64,926.61 from the two accounts was uninsured, and so informed the plaintiffs on September 9, 1985.

The plaintiffs submitted a written request for reconsideration to the FSLIC on November 6, 1985. In their request, the plaintiffs contended that the accounts were actually single-owner accounts: account X-XX-XXXXXXXX was owned solely by Martin Jugum, and account D-01-90017335 was owned solely by Jo Anne Jugum. In support of their contentions, the plaintiffs stated that each had made all deposits into, and withdrawals from, his or her own account, that each had paid taxes only on the interest from his or her own account, and that the other plaintiffs had been added to the accounts so that they would have rights of survivorship in the accounts. The plaintiffs also asserted that they had relied on the representations of Westside employees that both accounts would be fully insured.

On November 27, 1985, the FSLIC denied the plaintiffs' request for reconsideration on the ground that it failed to meet the test of "substantiality" set forth in 12 C.F.R. § 564.1(d)(3) (1985).² The FSLIC noted that Westside's records established that the accounts were joint tenancies with rights of survivorship and that the FSLIC was not bound by the representations of employees of Westside. The FSLIC also denied the request because it failed to include citations to applicable statutes and regulations, as required by 12 C.F.R. § 564.1(d)(3)(iii)(b) (1985) (amended 1986). The FSLIC's denial of reconsideration exhausted the plaintiffs' administrative remedies. See 12 C.F.R. § 564.1(d)(3)(iv) (1985) (amended 1986).

This action was filed on February 18, 1986, to recover the uninsured amount of the plaintiffs' accounts. Jo Anne Jugum claims $37,722.08; the marital community of Martin and Anne Jugum claim $27,204.53. Both sides have moved for summary judgment.

I

The plaintiffs' complaint is for enforcement of their claims for FSLIC deposit insurance. Under 12 U.S.C. § 1728(b), the FSLIC is required to pay holders of insured accounts of financial institutions in default. This Court has subject matter jurisdiction of the plaintiffs' claims by virtue of 12 U.S.C. § 1730(k)(1)(B) and 28 U.S.C. § 1331.

The FSLIC argues that this Court has no power to award the monetary relief that the plaintiffs seek. Rather, it argues, the plaintiffs' only basis for relief is under the judicial review provisions of the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-706. Thus, the denial of the plaintiffs' request for payment of insurance would have to be upheld unless the Court could conclude that the FSLIC's findings and conclusions were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" on the record before the FSLIC. See 5 U.S.C. § 706(2).

The FSLIC's argument appears to be that it is protected by sovereign immunity, and that Congress has waived its immunity only to the extent provided in the APA. See 5 U.S.C. §§ 702-703. Although it is true that the FSLIC is protected by sovereign immunity by virtue of its status as a federal agency, see 12 U.S.C. § 1725(c); Federal Savings & Loan Insurance Corp. v. Quinn, 419 F.2d 1014, 1019 (7th Cir. 1969), the FSLIC's argument ignores several provisions of the National Housing Act, as amended, that permit the plaintiffs to bring this action to enforce their claim for payment of insurance. Moreover, such an action is not confined to judicial review of the FSLIC's refusal to pay insurance.

As a general matter, the FSLIC has the power to "sue and be sued ... in any court of competent jurisdiction in the United States." 12 U.S.C. § 1725(c)(4). Since the FSLIC is in the insurance business, it may be assumed to have accepted the ordinary incidents of suits in that business. North New York Savings Bank v. Federal Savings & Loan Insurance Corp., 515 F.2d 1355, 1364 (D.C.Cir.1975) (allowing claim for interest on funds held by the FSLIC). More specifically, 12 U.S.C. § 1728(b) requires the FSLIC to pay insurance on insured accounts and provides that the FSLIC may require a judicial determination of liability before paying insurance claims:

In the event of a default by any insured institution, payment of each insured account ... shall be made by the Corporation ... Provided, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured accounts, and ... may require the final determination of a court of competent jurisdiction before paying such claim.

(Emphasis in original.) In addition, 12 U.S.C. § 1728(c) provides:

No action against the Corporation to enforce a claim for payment of insurance ... shall be brought after the expiration of three years from the date of default unless, within such three-year period, ... the claim for payment of insurance shall have been presented to the Corporation and its validity denied, in which event the action may be brought within two years from the date of such denial.

These provisions clearly indicate that Congress intended to permit judicial actions to enforce claims against the FSLIC for payment of insurance.

Moreover, in an action for payment of insurance, Congress does not appear to have limited courts to reviewing the FSLIC's denial of insurance. Rather, in enacting 12 U.S.C. § 1728(b)-(c), Congress appears to have contemplated that a court would decide the merits of the action on its own record. A number of considerations favor this interpretation.

The first consideration is that subsections 1728(b) and (c) do not require exhaustion of administrative remedies before an action may be filed for payment of insurance. Under subsection 1728(b), the FSLIC has a duty to pay insurance "as soon as possible," though it may require a court to determine the validity of a claim with which it is not satisfied. No administrative procedure for determining the validity of claims is specified.³ Subsection (c) tolls the running of the period within which actions for payment of insurance must be brought if a claim has been presented to the FSLIC; the implication is that an action for payment of insurance may be brought within three years of an institution's default without first presenting the claim to the FSLIC for payment. Exhaustion of administrative remedies may well be required as a matter of judicial policy, but since the statute does not even require presentation of a claim to the FSLIC, Congress could not have intended to limit courts to review under the APA of the FSLIC's denial of a claim.

A second consideration is that subsection 1728(c) uses the term "action" instead of "review" and provides for a three-year limit on bringing the action, rather than the more limited period of time commonly provided for seeking judicial review of administrative actions. Other provisions of the Act use the word "review" or otherwise clearly indicate that an action of the Federal Home Loan Bank Board or the FSLIC is at issue, and the time for seeking judicial review is short. See, e.g., 12 U.S.C. §§ 1464(d)(6)(A) (30 days); 1464(d)(7)(A) (explicit reference to APA); 1725(j)(4) (30 days); 1730(f)(2) (10 days); 1730(j)(1) (30 days; explicit reference to APA); 1730(k)(3)(D) (10 days); 1730a(k) (30 days). Compare also the provision for judicial relief under the Social Security Act: "Any individual, after any final decision of the Secretary ..., may obtain a review of such decision by a civil action commenced within sixty days...." 42 U.S.C. § 405(g) (emphasis added). In contrast, original actions against the Commodity Credit Corporation and for war-risk insurance contain much longer statutes of limitation comparable to those for civil actions between private parties. See 15 U.S.C. § 714b(c) (6 years); 46 U.S.C. § 1292 (2 years).

Finally, the limited administrative procedures for relief available to FSLIC claimants suggest that Congress intended that those claimants would have access to an independent judicial determination of their entitlement to insurance. Section 1728 does not require the FSLIC to conduct a hearing on claims for insurance or to follow any other procedure in evaluating such claims. The...