State ex rel. Arnold v. Egnor
Citation | 275 S.E.2d 15,166 W.Va. 411 |
Decision Date | 10 February 1981 |
Docket Number | No. 15086,15086 |
Parties | STATE ex rel. Phyllis Huff ARNOLD, Commr., etc. and State ex rel. FDIC v. The Hon. L. D. EGNOR, Jr. |
Court | West Virginia Supreme Court |
Syllabus by the Court
1. The provisions of 12 U.S.C. § 1823(d), requiring approval of a court of competent jurisdiction, when read in light of 12 U.S.C. § 1819, cannot be found to create any additional jurisdiction in a state court to supervise a state bank receiver other than what is conferred on the court under our state bank liquidation statutes. W.Va.Code, 31A-7-1, et seq.
2. "Under Code 1931, 31-8-32, (now W.Va.Code, 31A-7-1, et seq.) the commissioner of banking has exclusive authority to administer the assets of an insolvent bank." Syllabus Point 5, Timmons v. People's Trust Co., 114 W.Va. 618, 173 S.E. 79 (1934).
3. "The general rule is that where an administrative remedy is provided by statute or by rules and regulations having the force and effect of law, relief must be sought from the administrative body, and such remedy must be exhausted before the courts will act." Syllabus Point 2, Bank of Wheeling v. Morris Plan Bank & Trust Co., 155 W.Va. 245, 183 S.E.2d 692 (1971).
Denny & Caldwell, P. Thomas Denny and Susan Cannon-Ryan, Charleston, Campbell, Woods, Bagley, Emerson, McNeer & Herndon, E. M. Kowal, Jr. and Milton T. Herndon, Huntington, for relators.
L. D. Egnor, Jr., pro se.
In this original proceeding in prohibition, the Commissioner of Banking of the State of West Virginia (Banking Commissioner) and the Federal Deposit Insurance Corporation (FDIC), as state receiver of the Metro Bank of Huntington, Inc., (Metro Bank), contend that the Circuit Court had no jurisdiction to enter its order of December 12, 1980. This order set a hearing and directed the petitioners to appear before the court and answer certain issues raised in a report prepared by a court-appointed Commissioner. This Commissioner had questioned the way in which the FDIC was administering the Metro Bank's receivership. 1
The petitioner take the position that our earlier cases, Charter v. Kump, 109 W.Va. 33, 152 S.E. 780 (1930), and Picklesimer v. Morris, 101 W.Va. 127, 132 S.E. 372 (1926), which dealt with the Banking Commissioner's powers under W.Va.Code, Chapter 34, Section 81(a)(7) (1925), 2 preclude the Circuit Court from exercising jurisdiction over the administration of the Metro Bank by the receiver, FDIC. Additionally, petitioners contend that absent exhaustion of administrative remedies under Bank of Wheeling v. Morris Plan Bank & Trust Co., 155 W.Va. 245, 183 S.E.2d 692 (1971), judicial intervention is not warranted.
The respondent judge asserts that once petitioners invoked his jurisdiction to approve the transfer of assets of the Metro Bank, he had jurisdiction to inquire into the subsequent activities of the receiver.
The factual background may be briefly summarized. The Metro Bank is a state-chartered bank that experienced considerable financial difficulty. This led to an investigation of its financial condition by the Banking Commissioner and the FDIC. The investigation culminated in an order by the Board of Banking and Financial Institutions (Board) under W.Va.Code, 31A-3-3(e), that extraordinary circumstances existed which required immediate action. 3 Among the Board's findings was "(t)hat a recent financial analysis attached hereto as Exhibit A shows that Bank is insolvent."
The Board ordered that the withdrawal of deposits be prohibited after the close of business on September 12, 1980, pursuant to its powers under W.Va.Code, 31A-3-2(b)(1). 4 It also authorized the Banking Commissioner, if deemed necessary, to appoint a receiver for the Metro Bank under W.Va.Code, 31A-7-2. 5
It appears from the record that the precarious condition of the Metro Bank was known for some period of time since the FDIC, with the approval of the Banking Commissioner, had let bids on the Metro Bank and arranged to enter into a written Purchase and Assumption Agreement with a newly chartered national bank, Heritage National Bank (Heritage). The purpose of the agreement was to have the FDIC as state receiver transfer the assets and deposit liabilities of the Metro Bank to Heritage. In addition, the FDIC and Heritage executed an Indemnity Agreement. The FDIC's authority to make these agreements is found in 12 U.S.C. § 1823 and is not challenged in this proceeding. It also appears that the FDIC as a state receiver retained control over certain other assets and liabilities of the Metro Bank which it planned to liquidate.
Under 12 U.S.C. § 1823(d), there is a requirement that, if the FDIC sells assets of a state bank or makes loans in connection with the purchase of such assets, it must obtain "the approval of a court of competent jurisdiction." 6 It was this statutory provision that caused the FDIC to petition the Circuit Court of Cabell County to obtain the court's approval of the various agreements surrounding the sale of the Metro Bank's assets to the newly created Heritage National Bank.
The petition for approval was filed September 12, 1980, a Friday, and it is obvious that there was a great deal of urgency in the situation as evidenced by the testimony of the Banking Commissioner. Immediate approval of the transaction was sought so that the new bank could open on Monday, September 15, 1980. This would provide continuity for the Metro Bank's business and hopefully maintain the confidence of the depositors of the Metro Bank whose accounts were transferred to the new bank.
The respondent trial judge was not only confronted with this emergency but also had several lawyers who appeared to complain about the sale. All of the attorneys conceded that they had little law to guide the court. The trial court, after hearing testimony concerning the insolvency of the Metro Bank, the details relating to the appointment of the FDIC as its receiver by the Banking Commissioner under W.Va.Code, 31A-7-2, and its arrangements to sell the assets of the Metro Bank to Heritage, approved the sale.
In its order approving the sale, the court appointed a Commissioner "for the purpose of obtaining for this Court a report from the parties hereto, within 60 days, on all matters the Commissioner may deem necessary to protect the best interests of the public, the stockholders, the depositors and other creditors of the Metro Bank of Huntington, Inc., and to keep this Court advised as to all matters in issue among said parties." 7
The court-appointed Commissioner filed a report with the court on December 12, 1980, that resulted in the court's ordering the petitioners to appear for a hearing and gave rise to this original proceeding in prohibition. The Commissioner's report contained five general grounds which the court was asked to review: (1) the principals in the old Metro Bank and the receiver disagreed as to the value of certain assets of the Metro Bank; (2) there were third parties who wished to purchase certain property on which the Metro Bank had security interests and although they were willing to pay the total lien indebtedness, the receiver had not acted; (3) the receiver was acting in a peremptory fashion in collecting on the accounts owed Metro Bank including debts owed by its principal officers; (4) the receiver was employing too many persons and incurring too many legal costs all of which created unnecessary expenses; and (5) there was a question as to directors' and officers' liability insurance coverage.
The threshold inquiry is whether the requirement in 12 U.S.C. § 1823(d), that a court of competent jurisdiction approve the transfer of assets, expands the jurisdiction of our state court beyond what is provided in our state bank liquidation statutes. W.Va.Code, 31A-7-1, et seq.
We observe that under 12 U.S.C. § 1819, where the FDIC "is a party in its capacity as a receiver of a State bank and which (suit) involves only the rights or obligations of depositors, creditors, stockholders (of) such State Bank under State law (such suit) shall not be deemed to arise under the laws of the United States." Thus, where, as here, the FDIC is a party in its capacity as "a receiver of a State bank," there is an explicit statutory recognition that, where the litigation involves rights of creditors, depositors and stockholders, the substantive law of the State is applicable on receivership matters and not federal law. FDIC v. Sumner Financial Corp., 602 F.2d 670 (5th Cir. 1979); Freeling v. Sebring, 296 F.2d 244 (10th Cir. 1961); FDIC v. Ashley, 408 F.Supp. 591 (D.C.Mich.1976).
We have not found any case where a court has construed 12 U.S.C. § 1823(d) in the context of what type of hearing is required before court approval can be obtained. 8 Nor have we found any case where a state court has construed the court-approval provision of 12 U.S.C. § 1823(d) as it relates to its own state bank liquidation statute. There also does not appear to be any congressional legislative history in regard to this particular provision. 9
The same paucity of authority exists as to a case where the court-approval provision of 12 U.S.C. § 1823(d) has been construed to broaden a state court's jurisdiction in regard to a state bank liquidation. As noted above, 12 U.S.C. § 1819 recognizes that where the FDIC acts as a state receiver, its action in the receivership is tested by the state banking law. Logic would seem to dictate that there is a difference in the issues involved between court approval under a § 1823(d) transfer and the more complex administrative problems relating to the liquidation of assets in a state receivership. The latter must obviously be done under state law and this may well account for the recognition in 12 U.S.C. § 1819 of state law supremacy in this area.
We, therefore, conclude that the provisions of 12 U.S.C. § 1823(d), requiring approval of a court of...
To continue reading
Request your trial-
State ex rel. Atkinson v. Wilson
...under the statute may be awarded in such action."2 Our traditional test for prohibition is stated in State ex rel. Arnold v. Egnor, 166 W.Va. 411, 422, 275 S.E.2d 15, 22 (1981): "Our law is settled that a writ of prohibition will lie where the trial court does not have jurisdiction or, havi......
-
Hechler v. Casey
...v. Traders Federal Savings & Loan Association, 143 W.Va. 674, 104 S.E.2d 320 (1958). Citing syl. pt. 3, State ex rel. Arnold v. Egnor, 166 W.Va. 411, 275 S.E.2d 15 (1981); syl. pt. 3, State ex rel. Gooden v. Bonar, 155 W.Va. 202, 183 S.E.2d 697 (1971); syl. pt. 2, Bank of Wheeling v. Morris......
-
State ex rel. Bd. of Educ. of Kanawha County v. Casey
...175 W.Va. 434, 333 S.E.2d 799 (1985); Syl. pt. 1, Cowie v. Roberts, 173 W.Va. 64, 312 S.E.2d 35 (1984); Syl. pt. 3, State ex rel. Arnold v. Egnor, 166 W.Va. 411, 275 S.E.2d 15 (1981); Syl. pt. 3, State ex rel. Gooden v. Bonar, 155 W.Va. 202, 183 S.E.2d 697 (1971); Syl. pt. 2, Bank of Wheeli......
-
Collins v. Elkay Min. Co.
...... S.E.2d 270 (1978), was barred by the plaintiff's failure to pursue State and federal administrative remedies, and that the plaintiff's independent ... liberally in favor of their intended beneficiaries, State ex rel. Perry v. Miller, 171 W.Va. 509, 300 S.E.2d 622 (1983)." 178 W.Va. at ...Arnold v. Egnor, 166 W.Va. 411, 421-22, 275 S.E.2d 15, 22 (1981); 3 K. Davis, ......