Van Patten v. Jensen
| Decision Date | 18 May 1989 |
| Docket Number | No. 54502-2,54502-2 |
| Citation | 773 P.2d 62,112 Wn.2d 552 |
| Parties | , 57 USLW 2735 Lee T. VAN PATTEN, Respondent, v. Carl JENSEN and Jane Doe Jensen, husband and wife, and their marital community, et al., Petitioners. |
| Court | Washington Supreme Court |
Bogle & Gates, Guy P. Michelson, Michael P. Mirande, Davis, Wright & Jones, Bruce Lamka Hendricks & Lewis, O. Yale Lewis, Kathrine Hendricks, Christine Dinsdale, George, Hull & Porter, T. Dennis George, Howard I. Hall, Jeffrey B. Mahan, Helsell, Fetterman, Martin, Todd & Hokanson, William A. Helsell, Linda M. Roubik, Seattle, for petitioners.
Casey & Pruzan, Michael A. Larson, Seattle, for respondent.
Lee Van Patten deposited funds with Westside Federal Savings and Loan (Westside) before the Federal Home Loan Bank Board (the Board) declared Westside insolvent. After the insolvency, he filed a complaint under article 12, section 12 of the Washington Constitution (section 12), seeking to recover the amount of his alleged deposit exceeding the federally insured amount of $100,000, plus accrued interest, costs and attorney fees. Petitioners, defendants below (officers, directors, employees of Westside), in two groups, moved for summary judgment and dismissal on the grounds that Westside was not a banking institution within the meaning of section 12 and that federal law preempted applying section 12. The trial court denied both motions. We granted discretionary review and reverse, holding that federal law preempts applying our constitution in this case.
Section 12 imposes personal liability on officers, directors, and certain employees of "banking institutions" for accepting deposits knowing that the institution is insolvent or in failing circumstances. Arguing that savings and loans are not banking institutions, petitioners contend that section 12 does not apply to employees of federal savings and loan associations. Even if it did, they claim, federal law would preempt application either because Congress expressed an intent to preempt or because applying both federal and state law would result in actual conflict. Our determination is that federal law preempts applying section 12 to federal savings and loans because application would create actual conflict between state and federal law. Because we find that federal law preempts applying section 12 to federal savings and loan associations, we need not determine whether a savings and loan association is a banking institution within the meaning of section 12.
There are few significant facts. Westside was a federal institution, chartered under the Home Owners' Loan Act of 1933 (HOLA), 12 U.S.C. § 1461 et seq. The Board regulated its operations and conducted regular examinations of its activity. In the spring of 1985, the Board issued a Consent Order detailing corrective measures. On August 30, 1985, the Board declared Westside insolvent and appointed a receiver, the Federal Savings and Loan Insurance Corporation (FSLIC), to administer its affairs.
We recently summarized the law of federal preemption, noting that congressional intent governs and may be determined in three ways: (1) federal statutes or regulations may expressly preempt state law; (2) the comprehensive nature of federal regulation may imply intent to preclude state law; and (3) actual conflict may exist either because it is impossible to comply with both state and federal law or because "the state law is an 'obstacle' to the 'full purposes and objectives of Congress.' " Department of Labor & Indus. v. Common Carriers, Inc., 111 Wash.2d 586, 588, 762 P.2d 348 (1988) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)); see also California Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 280-81, 107 S.Ct. 683, 689-90, 93 L.Ed.2d 613 (1987); Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982).
Under the three-pronged test, analysis must begin by examining the state provision and the federal statute and regulations. Section 12 reads as follows:
Receiving Deposits by Bank After Insolvency. Any president, director, manager, cashier, or other officer of any banking institution, who shall receive or assent to the reception of deposits, after he shall have knowledge of the fact that such banking institution is insolvent or in failing circumstances, shall be individually responsible for such deposits so received.
Petitioners base their argument that federal law expressly preempts section 12 on 12 C.F.R. § 545.2:
The regulations ... are promulgated pursuant to the plenary and exclusive authority of the Board to regulate all aspects of the operations of Federal associations, as set forth in section 5(a) of the Home Owners' Loan Act of 1933, 12 U.S.C. 1464, as amended. This exercise of the Board's authority is preemptive of any state law purporting to address the subject of the operations of a Federal association.
(Italics ours.) If the Board has acted within its authority in promulgating regulations, the regulations preempt state law. de la Cuesta, at 152, 102 S.Ct. at 3022. Section 5(a) of HOLA describes the authority:
[T]he board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as Federal savings and loan associations ...
(Italics ours.) 12 U.S.C. § 1464(a).
Comments of the United States Supreme Court support a conclusion that the Board acted within its authority in promulgating these regulations. Congress enacted HOLA as " 'a radical and comprehensive response to the inadequacies of the existing state systems [of saving and loan associations].' " de la Cuesta, at 160, 102 S.Ct. at 3026, (quoting Conference of Fed Sav. & Loan Ass'ns v. Stein, 604 F.2d 1256, 1257 (9th Cir.1979), aff'd, 445 U.S. 921, 100 S.Ct. 1304, 63 L.Ed.2d 754 (1980)). Section 5(a) of HOLA gave the Board "plenary authority" to regulate the operations of federal savings and loans; "[n]owhere [in the legislative history] is there a suggestion of any intent somehow to limit the Board's authority." de la Cuesta, 458 U.S. at 164, 102 S.Ct. at 3028. " '[I]t would have been difficult for Congress to give the Bank Board a broader mandate.' " de la Cuesta, at 161, 102 S.Ct. at 3026, (quoting Glendale Fed. Sav. & Loan Ass'n v. Fox, 459 F.Supp. 903, 910 (C.D.Cal.1978)). 1
The Court noted that the Board's ability to preempt state requirements "may not be boundless," but found it unnecessary to determine the limits of the Board's discretion because lending practices are a "critical aspect" of operation. de la Cuesta, 458 U.S. at 167, 102 S.Ct. at 3029. In her concurring opinion, Justice O'Connor explains that in her view, the powers granted by § 5 of HOLA do not permit the Board to "displace local laws, such as tax statutes and zoning ordinances, not directly related to savings and loan practices." de la Cuesta, at 172, 102 S.Ct. at 3032. By implication, all laws directly relating to savings and loan practices are preempted.
Although de la Cuesta dealt with lending practices, deposit practices are an equally critical aspect of savings and loan operations. By stating when an employee may accept deposits without civil liability, section 12 attempts to regulate operations.
Respondent contends that such a general statement of preemption will not suffice; an express statement of intent must be analogous to the statement found in de la Cuesta. There, the federal regulations specifically stated that due- on-sale practices are governed "exclusively by federal law" and that federal savings and loan associations " 'shall not be bound by or subject to any conflicting State law ...' " de la Cuesta, at 147, 102 S.Ct. at 3019.
However, in Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), the Court found that an equally broad provision expressly preempted state laws. There, a provision in the Employment Retirement Income Security Act (ERISA) preempted " 'any and all State laws insofar as they may now or hereafter relate to any employee benefit plan' covered by ERISA," subject to a few specified exemptions. Shaw, at 91, 103 S.Ct. at 2896. Focusing on the plain language, legislative history, and the structure of the Act, the Court broadly interpreted "relate to," finding that the term easily encompassed the state laws. Shaw, at 100, 103 S.Ct. at 2901. The focus then shifted to determining whether the State laws fell within the terms of the exemptions. 2
A similar analysis may support finding express preemption in this case. However, we need not resolve that issue. This decision rests on the narrower grounds of "actual conflict." 3 The statute and regulations give the Board discretion to maintain or close an association.
A federal association may exercise all authority granted by HOLA, whether or not implemented by regulations, subject to Board interpretations in the regulations. 12 C.F.R. § 545.1. Neither HOLA nor the regulations prohibit receipt of deposits when an institution is in failing circumstances or insolvent. On the contrary, HOLA defines insolvency, 12 U.S.C. § 1464(d)(6)(A)(i), and authorizes the Board to issue cease and desist orders and to require affirmative action by employees to prevent insolvency or dissipation of funds, 12 U.S.C. § 1464(d)(3)(A). The Board has the power to declare an association insolvent and exclusive power to appoint a conservator or receiver. See 12 U.S.C. § 1464(d)(6)(A). Grounds for appointing a conservator or receiver include not only insolvency, but also substantial loss of assets or earnings due to "unsafe or unsound" practices. 12 U.S.C. § 1464(d)(6)(A). The Board may make rules and regulations for the reorganization, consolidation, liquidation, and dissolution of associations, and for merger with other institutions insured by FSLIC. 12 U.S.C. §...
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