Legal Document

332 U.S. 245 67 Supreme Court Reporter 1552 91 L.Ed. 2030 FAHEY et al.v.MALLONEE al. Number 687. Argued and Submitted April 30, 1947. Decided June 23, Appeal from the District of United States for Southern California. Oscar or Haw. Hawai‘i Reports KFH45 A2 Davis, Washington, D.C., appellants. Wyckoff Westover, Los Angeles, Cal., appellees Paul Mallonee Charles K. Chapman, Long Beach, appellee Beach Federal Savings & Loan Ass'n. Everett W. Mattoon, State California, as amicus curiae, by special leave Court. [Argument Counsel page 246 intentionally omitted] Louis Myers, Pierce Works, Richard Fitzpatrick, all Home Bank Angeles. Robert Wallis, pro se, Raymond Tremaine, appellee, Wallis. Harry O. Wallace, Title Service company Mr. Justice JACKSON delivered opinion 1 A specially constituted three-judge has summarily, without trial, entered final judgment ousting a Conservator who, on orders Commissioner, had taken pssession o f Association. It granted this other relief principal ground that § 5(d) Owners' Act 1933, amended, 12 Code Annotated KF65 U5 1464(d), violates Article I, §§ 8 Constitution. 2 The Administration May 20, 1946, notice hearing, appointed Ammann conservator Association he at once into possession. grounds assigned were was conducting its affairs in an unlawful, unauthorized unsafe manner, management unfit unsafe, it pursuing course injurious to, jeopardizing interests of, members, creditors public. Plaintiffs commenced class action right against Fahey, Chairman Board, nominal defendant, several others not important to issue here. complaint alleged seized property due process law, motivated malice ill will, seizure various reasons violation asked return former management, permanent injunction further interference, relief. Other parties interest intervened. Temporary restraining issued court duly convened. 3 Personal service secured upon Ammann, Conservator, but Commissioner officially inhabitant Columbia, could be served motion substituted service, therefore, him Columbia. believed authorized Judicial Code, 57, 28 KF62 118, 118. moved dismiss failed state cause action. Fahey appeared move dismissal quashing not, his official capacity, sued California been properly with process. Neither answered complaint, nor their time do so expired, when them. 4 set variety pending motions argument and, after mainly constitutionality 5(d), only pleadings papers before it, held section unconstitutional, ordered removal permanently enjoined authorities holding administrative hearing matter, apprehended merger, restored institution account these 'from ever asserting any claims, right, title interest' Association's property. case is here direct appeal. 50 Statutes-at-Large 752—753, 349a, 380a, 380a. 5 manifest whatever merit there may subsidiary collateral questions, drastic decree can stand if section, applied here, unconstitutional. 6 Its defect said consist delegation legislative functions supervising authority adequate standards guides policy. Section gives Board 'full power provide rules regulations herein reorganization, consolidation, liquidation such associations, including appoint receiver take charge association, require equitable readjustment capital structure same; release association control permit operation.' 48 133, 1464(d). This, held, unconstitutional congressional function. relied Panama Refining versus Ryan, 293 388, 24 1, 79 446, Schechter Poultry Corporation States, 295 495, 55 837, 1570, 97 American Law 947. 7 Both cited cases dealt make federal crimes acts never devise novel law field which no settled custom. latter also involved private groups well public authorities. Chief Hughes emphasized features, saying under examination merely deal practices 'which offend existing subject judicial condemnation legislation, create machinery application established principles particular instances violation. Rather, purpose clearly disclosed authorize new controlling prohibitions through codes laws would embrace what formulators propose, President approve prescribe, wise beneficent measures government trades industries order bring about rehabilitation, correction, development, according general declaration policy one.' 535, 845, savings loan associations deals, hand, are created, insured aided government. explicit have desirable assurance responsible administration. But provisions statute attack penal Lanzetta New Jersey, 306 451, 59 618, 83 888, Cohen Grocery Co., 255 81, 41 298, 65 516, 14 1045. regulatory. They unprecedented economic problems varied industries. single type enterprise insecurity mismanagement old banking enterprise. remedies ones unknown invented exercise lawless range power. Banking one longest regulated most closely supervised callings. , accumulated experience supervisors, acting many states statutes, well-defined appointment conservators, receivers liquidators. Corporate field, too, courts precedents crystallized well-known generally acceptable standards. discretion guide supervisory matters constitutionally permissible while might allowable creation uncharted fields. 9 adopted governing conservators. provided named,1 they usual conventional found statutes.2 sufficiently explicit, background custom, proper administration review should occasion it. 10 complained takes possession instead before. This procedure. delicate nature impossibility preserving credit during investigation made almost invariable custom apply summary manner. heavy responsibility exercised disinterestedness restraint, light history customs we cannot say unconstitutional.3 11 In demanded specifications charges statement complaints furnished. causes therein forth included withdrawals president voucher therefor; payment salaries fees commensurate services rendered; director's unlawful cashier's check amount $50,000 examiners; leasing properties twenty-year period terms consideration Association; use personal gain more officers directors; failure maintain accounts reports; falsification records. charged certain manipulations another te presiden t institution. 13 plaintiffs nevertheless obtained prevent therefore cut off making record whether well-founded. Nor did trial evidence subject. We must assume able sustain statements fact justify conclusions determining trial. unable agree below invalid hence regardless free go undisciplined unchecked. even defective, think constitutional sense, obstacle stands way conservator. 15 organized 1934 subsection (d) now sought declared present charter 'shall times providing amendments thereof, valid thereunder same amended time,' 'liquidated, merged, consolidated, reorganized, associations.' 1937, request, likewise powers thereunder. 16 stockholder's derivative sue elementary rule 'retain benefits attacking conditions.' City County San Francisco, 310 16, 29, 60 749, 756, 84 1050. As formulated Brandeis, concurring Ashwander Tennessee Valley Authority, 297 288, 348, 56 466, 483, 80 688, 'The will pass instance who availed himself benefits.' 17 name being existence struck down particulars, hardly severable those grant exist. challenge validity provision proceedings liquidate conserve protection members If hold strike terminating conserving assets, perpetually on, notwithstanding abuses perpetrate. intolerable Congress endow conduct business limitations behest took advantage privilege remove intended protection. difficult imagine appropriate situation doctrine utilizes advantages corporate estopped questioning vital conditions. estopped, be, challenging prescribe conditions named. 18 There questions raised becomes unnecessary decide. 19 Objection preferred chrges hat expected, fair impartial does Board's determination hearing. advance fairly conducted. decide proceeding manner review. absence sometimes foreclose Stark Wickard, 321 64 559, 88 733; Governors Reserve System Agnew, 329 441, 411; Administrative Procedure Act, 10, 1009. mean understood maliciously, wantonly destroy financial institution, remedies. 20 One allegations merged institutions injury shareholders. allegation seems based different connected highly objectionable some shareholders aroused concern find threat merge finding below. Government assured us bar plan merger contemplation. Nevertheless, enjoined. view one, accept Government's follow hence, consider necessary discuss legality hypothetical mergers. 21 Since rendered process, reversed, indispensable party brought service. 22 obvious litigation than meets eye pleadings. plaintiffs' actuated authorities, defendants mismanaged unfit, alike undetermined below, intimation concerning merits issues us. 23 Our decision error oust enjoin prejudice warranted law. reversed. Reversed. 25 DOUGLAS concurs result. 26 RUTLEDGE result Court's insofar rests statute, Rules Regulations part follows: Part 206. Appointment Receiver. 206.1. Receiver conservator; appointment. (a) Whenever, Administration, association: Footnote 1. - Continued. (1) Is unauthorized, manner; (2) unsound condition, manage association; (3) Cannot safety continue business; (4) impaired assets donot n aggregate value (in Administration) least equal liabilities creditors, persons; (5) imminent danger becoming impaired; (6) public; (7) Has suspended obligations; (8) refused submit books, papers, records, inspection examiner lawful agent Administration; (9) refusal officers, directors, employees examined oath representative affairs; (10) observe Insurance shall liquidation, disposition affairs. order, above based. Any furnish bond employees, form surety Governor System, Deputy Assistant Governor, required receiver. forthwith demand possession, notify officer employee any, home office appear office, Administration. Secretary shall, adoption mail certified copy address records each director known such, last appointing received offices taking receiver, hand therefor. 206.2. Hearing Within fourteen days (Sundays holidays included) hands conservator, board consented requested file answer serve written sent. Upon receipt mailing stated therefor place show why discharging Such either district member determine, unless otherwise consents writing. officer, determine. may, within seven appointment, telegraphic demand, definite purposes 206.4. Discharge An returning restore rights, privileges specified except provide. mangagement operation conveyance instrument, act deed, privileges, revest property, Cum. Supp. 206.1 seq., 1943 Conservation March 9, 203, 3, 203; 31, 194, 71a, 71a; National Housing 406, 1259—1260, 1729, 1729; E.g., York Laws, 606, McKinney's Consolidated Laws York, chapter 2; Page's Ohio General Ann. 687; Deering's 986, 13.11; Massachusetts 167, 22; 170B, 4; Jones Illinois Stat.Ann., 14.40, Ill.Rev.Stat. 1945, 32, 250. See note 2.

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