Court Opinion

ID: 9633599
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:54:00.170736+00
Date Added: 2024-06-11T18:08:38.291921
License: Public Domain

Williams, J.
(dissenting) — Four Star Investments built condominia under a contract with South Terrace Corporation. Financing was provided by Westside, with the loan being secured by a deed of trust on the real property, including fixtures. Modern Supply Company furnished appliances for the units, securing payment therefor by filing a financing statement with the appropriate agencies of the state. When neither Westside nor Modern Supply was paid in full each sought to foreclose its lien on the appliances/ fixtures, with the trial court, on cross motions, declaring that Westside's lien claim was superior. After Modern Supply appealed to this court, Westside, being insolvent, was taken over by the Federal Savings and Loan Insurance Corporation as receiver, which moved to dismiss the appeal, contending that it has exclusive jurisdiction to adjudicate the lien claims against the appliances/fixtures. The majority agrees and grants the motion.
I disagree with that result primarily because the federal statutes do not give the FSLIC that power. The agency was formed in 1934 to guard against and deal with future failures in savings and loan associations and has two essential functions:
first, to monitor savings and loan associations for compliance with federal regulations; second, in cases of insolvency, to act as conservator or receiver. In the latter instances, the Board and FSLIC oust the officers previously in charge and take control of the association's assets and liabilities. FSLIC may attempt to set the association's affairs on a sound footing, to merge it with a solvent concern, or in extreme cases to liquidate the assets entirely.
*207Morrison-Knudsen Co. v. CHG Int'l, Inc., 811 F.2d 1209, 1215 (9th Cir. 1987), petition for cert. filed sub nom. Federal Sav. & Loan Ins. Corp. v. Stevenson Assocs., 56 U.S.L.W. 3249 (U.S. Oct. 6, 1987) (No. 87-451).
In its capacity as receiver, the FSLIC is protected from outside interference by 12 U.S.C. § 1464(d)(6)(C), which provides:
Except as otherwise provided in this subsection, no court may take any action for or toward the removal of any conservator or receiver, or, except at the instance of the [Federal Home Loan Bank] Board, restrain or affect the exercise of powers or functions of a conservator or receiver.
This statute does not grant adjudicatory power to the FSLIC. Rather, 12 U.S.C. § 1729 grants to the FSLIC, as receiver, the power:
(b) . . .
(i) to take over the assets of and operate such association;
(ii) to take such action as may be necessary to put it in a sound solvent condition;
(iii) to merge it with another insured institution;
(ivj to organize a new Federal association to take over its assets;
(v) to proceed to liquidate its assets in an orderly manner; or
(vi) to make such other disposition of the matter as it deems appropriate;
whichever it deems to be in the best interest of the association, its savers, and the Corporation;. . .
... to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith,. . .
These two sections give to the FSLIC the normal and *208customary duties of a receiver; they do not invest that administrative agency with U.S. Const, art. 3 authority to adjudicate a property interest in litigation in which it is a party.
Common law receivers have never in ordinary practice had the power to adjudicate claims; that power remains vested in the courts.
Morrison-Knudsen Co., at 1219.
The agency can settle, compromise and release claims, but that is not to say that it can adjudicate those claims if it cannot reach agreed dispositions. A regulation authorizes the FSLIC to allow or disallow claims presented to it by creditors of the failed savings and loan association.
Paying or refusing to pay, however, is not an adjudication of a claim. The language of the regulation does not purport to give FSLIC the power to enter conclusive factual and binding legal findings. FSLIC is no more an adjudicator under this regulation than is an insurance company authorized to "disallow" any claim not proved to its satisfaction and required to notify claimants thereof.
Morrison-Knudsen Co., at 1218. Moreover,
Settlement and compromise are to avoid that result. A body with the power to say "yes" or "no" with the force of law has much less need to settle or to compromise.
Morrison-Knudsen Co., at 1219.
The type of action Congress anticipated the FSLIC would be a party to in state courts is stated in 12 U.S.C. § 1730(k)(l).
The statute expressly includes an action against FSLIC "in its capacity as . . . receiver . . . which involves only the rights ... of .. . creditors." There is no intimation that Congress intended to treat differently federally-chartered and state-chartered associations. Instead, there is every indication that Congress intended the agency's powers to he identical in both situations. See, e.g., 12 U.S.C. § 1729(c) (granting FSLIC the "same powers" as receiver for state associations as it has for federal ones, and making applicable the same restrictions on judicial review). Thus we conclude that Congress clearly expected *209creditors' suits against FSLIC as receiver to be heard and adjudicated in court.
Morrison-Knudsen Co., at 1221.
The principal argument in the majority opinion and the cases cited in support thereof is that adjudication of creditors' claims would "restrain or affect" the exercise of the receivership powers by delaying the distribution of assets. This pragmatic approach is equally applicable to many other insolvency proceedings. The only thing special about the FSLIC is that depositors' savings are involved, but those are immediately reimbursed out of its insurance fund. Morrison-Knudsen Co., at 1215.
There is no reason to believe that the scheme proposed by the FSLIC is any faster than the general course of insolvency. An initial adjudication of creditors' claims by a court is every bit as fast as the procedure approved by the majority opinion, whereby creditors' claims, including secured ones, must be adjudicated by the FSLIC, with an appeal to the FHLBB and then to the courts.
I agree with the summation in Morrison-Knudsen Co., at 1217:
The rock upon which FSLIC's arguments break is that a receiver's ordinary functions do not include adjudication. Judicial adjudication, to repeat, does not restrain or affect a receivership; it simply determines the existence and amount of claims that a receiver is to honor in its eventual distribution of assets. Cf. Morris v. Jones, 329 U.S. 545, 549, 67 S. Ct. 451, 454, 91 L. Ed. 488 (1947) ("The establishment of the existence and amount of a claim against the debtor in no way disturbs the possession of the liquidation court, in no way affects title to the property, and does not necessarily involve a determination of what priority the claim should have."). FSLIC's basic contention is that Congress intended the agency's receivership powers to go beyond those of an ordinary receiver. It has not established its case. [North Miss. Sav. & Loan Ass'n v.] Hudspeth [756 F.2d 1096 (5th Cir. 1985), cert. denied, 106 U.S. 790 (1986)] in effect permitted section 1464(d)(6)(C) to expand FSLIC's receivership authority. We decline to do so.
*210I therefore dissent.