York Bank & Trust Co. v. Federal Sav. & Loan Ins. Corp.

• Decision Date: 01 August 1988
• Docket Number: No. 87-5792,87-5792
• Citation: 851 F.2d 637
• Parties: YORK BANK & TRUST COMPANY, Appellant, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION in its corporate capacity and as receiver for Empire Savings & Loan Assoc. & The Federal Home Loan Bank Board First United Fund Limited, Inc. & P.V. Anderson, Inc.
• Court: U.S. Court of Appeals — Third Circuit

Page 637

851 F.2d 637

57 USLW 2045

YORK BANK & TRUST COMPANY, Appellant, v. FEDERAL SAVINGS & LOAN INSURANCE CORPORATION in its

corporate capacity and as receiver for Empire Savings & Loan

Assoc. & The Federal Home Loan Bank Board First United Fund

Limited, Inc. & P.V. Anderson, Inc.

No. 87-5792.

United States Court of Appeals, Third Circuit.

Argued March 17, 1988.

Decided June 29, 1988.

As Amended July 1 and July 18, 1988.

Rehearing and Rehearing In Banc Denied Aug. 1, 1988.

Arthur J. Murphy, Jr., David L. Haber (argued), Murphy, Taylor & Adams, P.C., Pittsburgh, Pa., for appellant.

Charlotte A. Reid, Dorothy L. Nichols (argued), Federal Home Loan Bank Bd., Washington, D.C., for appellee, Federal Home Loan Bank Bd., Federal Sav. and Loan Ins. Corp. in its corporate capacity and as receiver for empire.

Roy A. Powell, Edward C. Schmidt, Rose, Schmidt, Hasley & DiSalle, Pittsburgh, Pa., for appellee, First United Fund, Ltd.

Before STAPLETON, MANSMANN and HUNTER, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

This appeal by York Bank and Trust Company raises issues concerning the nature of a claim against the Federal Savings and Loan Insurance Corporation and the scope of judicial review available when the FSLIC is sued as an insurer. For the reasons discussed below we determine that the district court erred in construing York Bank's complaint against the FSLIC as a complaint against FSLIC as the receiver of a failed savings and loan institution. We conclude as well that judicial review of a determination by the FSLIC as insurer is subject to review by the district court under the standards enunciated in the Administrative Procedure Act. We will, therefore, remand for proceedings consistent with this opinion.

I.

In 1983 York Bank and Trust Company, a banking corporation chartered under the laws of Pennsylvania, purchased five certificates of deposit from Empire Savings and Loan of Mesquite, Texas. The total face value of these "jumbo CDs" was $1,241,000. ¹ Accounts at Empire were insured by the FSLIC.

On or about March 14, 1984 Empire was placed into receivership by the FSLIC. On March 15, 1984 York filed a claim with the FSLIC pursuant to 12 U.S.C. Sec. 1724 for the recovery of the insurance on these certificates. This claim was denied by the FSLIC except for an aggregate total of $100,000. At that time York was also provided with claim certificates enabling it to receive a pro-rata share of Empire's assets, upon final distribution of those assets. On November 16, 1984 York filed for reconsideration of the FSLIC's determination, and that petition was denied as well.

Thereafter, on March 12, 1986 York Bank brought an action in the United States District Court for the Middle District of Pennsylvania, seeking the full amount of the CDs plus interest and attorney's fees. The complaint named the FSLIC, First United Fund Limited, Inc. and P.V. Anderson, Inc. as defendants. ² The FSLIC then filed a Motion to Dismiss the federal defendants on the grounds that the district court had no subject matter jurisdiction in the case. The district court granted the motion and dismissed the case against the FSLIC 663 F.Supp. 1100. This appeal followed.

II.

We review the district court's dismissal of the complaint under a plenary standard of review. D.P. Enterprises, Inc. v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir.1984). We will first examine the existence vel non of subject matter jurisdiction over the federal defendants.

If York Bank's complaint is construed as an attempt to state a claim against the FSLIC and the Federal Home Loan Bank Board (FHLBB) as receiver of Empire Bank rather than as an insurer, then York's failure to exhaust its administrative remedies would result in a lack of subject matter jurisdiction. ³ We observe, however, that before this court, York Bank has not wavered from its position that the suit against the FSLIC was in the FSLIC's capacity as insurer. We therefore conclude that the district court misconstrued the nature and intent of York Bank's complaint.

In its complaint ⁴ filed in the district court York specifically refers to Empire as an "insured institution" pursuant to National Housing Act, Subchapter IV. Insurance of Savings and Loan Accounts, 12 U.S.C. Secs. 1724-1730a (1982 & Supp. IV 1986). York also specifically refers to its claim against the FSLIC as being the same claim for insurance proceeds that York had previously pressed before that agency. We note as well that the communications between York Bank, the FSLIC and the FHLBB prior to the commencement of suit all refer to the underlying problem as involving the insurance of York's deposits at Empire Bank. In addition, the pleadings do not allege an attempt to reach the assets of Empire either through a claim in receivership or by any other means.

The district court essentially assumed that York sued the FSLIC solely as receiver of Empire Bank's assets and not as the insurer of the certificate of deposit. The court founded this assumption on assertions in York Bank's brief, filed in the district court, opposing the federal defendant's Motion to Dismiss. This district court brief, although alluded to in appellant's brief, was not among the papers presented to this court. Even if it were, we consider the allegations and averments of the complaint more fundamentally important in that the complaint alerts and informs the defendant as to the nature of the claims being asserted. In this case, FSLIC understood from the complaint that it was being sued for insurance proceeds. Responding to the complaint, FSLIC admitted that a claim for insurance proceeds had been presented to it, and FSLIC tendered to the court for review the administrative record pertaining to that claim.

In this case, we find that the complaint stated with sufficient precision that York Bank sued the FSLIC in its corporate capacity as insurer of funds deposited with Empire Bank. Therefore, the district court erred in its determination that the FSLIC was being sued in its receivership capacity and we will remand for proceedings consistent with this opinion.

III.

Given our determination that York Bank stated a claim against the FSLIC as insurer and our remand for a determination on the merits, we next assess the standard of review under which the district court will evaluate the claim.

The FSLIC, as an agency of the United States, adjudicates claims through an administrative procedure pursuant to regulations promulgated by the FHLBB. Lyons Sav. & Loan Assoc. v. Westside Bancorporation, Inc., 828 F.2d 387, 390 (7th Cir.1987). The FSLIC insists that its decisions on the claims are subject to review in a district court under the Administrative Procedure Act, 5 U.S.C. Secs. 551-559, 701-706 (1982 & Supp. IV 1986), utilizing the arbitrary and capricious standard of review, 5 U.S.C. Sec. 706(2). The FSLIC asserts that, absent a congressional directive to conduct de novo review, consideration must be confined to the administrative record.

To support its position the FSLIC cites Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971). In that case the Supreme Court found that when a district court reviews federal agency action subject to the provisions of the APA, the arbitrary and capricious standard applies. When agency action is taken pursuant to a rule-making provision of the APA or when agency action is based on a public adjudicatory hearing, the reviewing court utilizes the substantial evidence test. De novo review is authorized for review of an adjudicatory action in which the agency fact-finding procedures are inadequate.

York Bank relies principally on Jugum v. FSLIC, 637 F.Supp. 1045 (W.D.Wa.1986), which upheld the right of a depositor to enforce a claim against the FSLIC but did not limit that right to review under the provisions of the APA. The court in Jugum noted that under 12 U.S.C. Sec. 1725(c)(4), the FSLIC has the authority to sue or be sued in any court of competent jurisdiction. Id. at 1047. Under 12 U.S.C. Sec. 1728(b), the FSLIC must pay insurance on insured accounts, but it may require the judicial determination of liability before paying claims. Moreover, 12 U.S.C. Sec. 1728(c) provides a statute of limitations for actions against FSLIC as insurer. Id. The district court evaluated these provisions and determined that it had the authority to decide such actions on the merits. The district court also reasoned that no statutory provision required the exhaustion of administrative remedies prior to judicial action and that the statute of limitations provision in Sec. 1728(c) implied that administrative action need not be taken. Id. The court in Jugum concluded by noting that limitations on administrative procedures available to FSLIC claimants "suggest that Congress intended that those claimants would have access to an independent judicial determination of their entitlement to insurance." Id. at 1048.

Although the court in Jugum relied heavily on the provisions of 12 U.S.C. Sec. 1728(b) and (c) to support its position that an aggrieved depositor was not limited to judicial review under the APA, we find no language in those provisions which authorizes review under a different standard.

We begin our own analysis with the regulations promulgated by the FHLBB, Amendment of Part 564--Settlement of Insurance, 50 Fed.Reg. 49,527 (1985) (codified at 12 C.F.R. Sec. 564.1). In general 12 C.F.R. Sec. 564.1 (1988) provides for the payment of insurance to accountholders of insured institutions. If the Director of the Insurance Division determines that all or a portion of an account is not insured, the Director shall notify the accountholder and provide the accountholder with a certificate of claim in liquidation to enable the accountholder to share in the proceeds, if any, of liquidation. Id. at Sec. 564.1(d)(2). The accountholder may request reconsideration of the...